KDIC KOREA DEPOSIT INSURANCE CORPORATION Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation Korea Deposit Insurance Corporation KDIC Annual Report 2003 PUBLISHER In-Won Lee President and Chairman EDITOR Gi Don Kim Director Research Department Tel : 82-2-758-0114 Fax : 82-2-758-0220 http : //www.kdic.or.kr OPERATIONS APPENDIX KDIC KOREA DEPOSIT INSURANCE CORPORATION Chairman’s Statement The year 2003 will be remembered for many crises, namely the US-Iraq Crisis on the international front, and domestically, soaring credit card debts that brought with it a period of high unemployment, decreasing domestic demand and a slower pace of growth in the Korean economy. Meanwhile, continuing low interest rates in the financial market enabled stock prices to rise gradually. In this time of economic difficulties, the KDIC extended its efforts toward finalizing its ongoing financial restructuring initiated following the financial crisis of 1997. It also launched the New Deposit Insurance Fund with the aim of ensuring its future prudence and independence. By faithfully implementing management control strategies and through the resolution of the many insolvent credit unions whose operations were terminated in 2002, the KDIC sought to speed up the pace of structural reform and prevent future cases of failure. In addition, Chohung Bank as well Hyundai Investment Trust & Securities, two financial institutions in which the KDIC was a majority stockholder, were successfully sold, thereby contributing to the recovery of public funds. The KDIC hosted the second Annual General Meeting of the International Association of Deposit Insurers (IADI) in Seoul, Korea, that contributed to the strengthening of ties with fellow deposit insurers from around the world. 02 In addition, Chohung Bank as well Hyundai Investment Trust & Securities, two financial institutions in which the KDIC was a majority stockholder, were successfully sold, thereby contributing to the recovery of public funds. The KDIC hosted the second Annual General Meeting of the International Association of Deposit Insurers (IADI) in Seoul, Korea, that contributed to the strengthening of ties with fellow deposit insurers from around the world. Furthermore, steady progress was made in the areas of receivership and collection as well as investigations of default debtors. The KDIC has also sought to establish a risk management system that will contribute to maintaining the stability of the financial market. The Corporation’s 2003 Annual Report includes an outline of the events briefly discussed above, and takes a look at the laws and regulations governing deposit insurance in Korea as well as the deposit insurance system itself. The KDIC will strive to achieve prudence in the Deposit Insurance Fund, and introduce an efficient risk management system while upholding the stability of the financial environment. It is our sincere hope that this Annual Report will serve to strengthen the public’s trust in the KDIC and in our endeavors. I look forward to your continued support and encouragement, as we carry out our responsibilities in an efficient and market-friendly manner. In-Won Lee Chairman and President 03 Table of Contents Chairman’s Statement 2 OPERATIONS 9 I. Overview 10 Chapter 1. The Financial Markets 10 Chapter 2. Deposit Insurance 13 Chapter 3. Financial Restructuring 15 II. Procurement and Management of the Deposit Insurance Fund 17 Chapter 1. Separation of the Deposit Insurance Fund 17 Chapter 2. Procurement of the Deposit Insurance Fund 17 Chapter 3. Resolution of Insolvent Financial Institutions 21 Chapter 4. Public Fund Recovery 31 III. Risk Management of Insured Financial Institutions 36 Chapter 1. Establishment of Effective Risk Management System 36 Chapter 2. Post Public Fund Injection Management 38 IV. Management Control of Insolvent Financial Institutions and Management of Bankruptcy Estates and Assets 40 Chapter 1. Management Control of Insolvent Financial Institutions 40 Chapter 2. Management of Bankruptcy Estates 40 Chapter 3. Management of Asset Holdings 43 04 V. Insolvency Investigations 45 Chapter 1. Investigations into Insolvent Financial Institutions 45 Chapter 2. Investigations into Default Debtors of Insolvent Financial Institutions 46 Chapter 3. Investigations into Default Debtor Corporations 47 VI. Improvements in the Deposit Insurance System and the Strengthening of KDIC’s Competence 48 Chapter 1. Overhaul of Laws and Regulations Related to Deposit Insurance 48 Chapter 2. Research for a Sounder Deposit Insurance System 49 Chapter 3. KDIC’s Long-term Development Plan and Development of Information Infrastructure 50 Chapter 4. Cooperation with International Organizations 51 VII. Organization and Financial Status 52 Chapter 1. Organization 52 Chapter 2. Fiscal Year 2003 Accounting Settlement Results 55 APPENDIX 65 A-I. Members of the Deposit Insurance Committee and the Executive Board 67 A-II. Items Deliberated by the Deposit Insurance Committee in 2003 68 A-III. Year 2003 Balance Sheets and Profit & Loss Statements 70 A-IV. 2003 Summary of Events 97 A-V. Introduction to the Korean Deposit Insurance System 100 A-VI. Acts Related to the Korea Deposit Insurance System 110 A. Depositor Protection Act B. Enforcement Decree of the Deposit or Protection Act C. Public Fund Oversight Special Act D. Enforcement Decree of the Public Fund Oversight Special Act E. Public Fund Redemption Fund Act F. Enforcement Decree of the Public Fund Redemption Fund Act A-VII. Statistics 160 05 Table of Contents List of Tables Table I - 1. Insured Deposit Movements by Financial Sector 13 Table I - 2. Number of Financial Institutions Insured 14 Table I - 3. Financial Restructuring Progress 16 Table I - 4. Public Fund Support Provision Status 16 Table II - 1. Special Assessment Revenue Status 17 Table II - 2. Special Assessment by Financial Sector 17 Table II - 3. Issuance of Deposit Insurance Fund Bonds by Financial Sector 18 Table II - 4. Balance of Deposit Insurance Fund Bonds 19 Table II - 5. Issuance of Deposit Insurance Fund Bonds by Maturity 19 Table II - 6. Issuance of Deposit Insurance Fund Bonds by Interest Rate 19 Table II - 7. Borrowings Status of Repayment Fund 19 Table II - 8. Premium Revenue Status 20 Table II - 9. Deposit Insurance Premiums by Financial Sector 20 Table II - 10. Contribution Remittances by Financial Sector 21 Table II - 11. Contribution Remittance Methods and Ratios 21 Table II - 12. Cumulative Financial Assistance Status by the Repayment Fund 22 Table II - 13. Financial Assistance by the Repayment Fund During 2003 22 Table II - 14. Financial Assistance by the (New) Deposit Insurance Fund During 2003 22 Table II - 15. Financial Assistance Provided to Banks 23 Table II - 16. Financial Assistance Provided to Securities Companies 24 Table II - 17. Financial Assistance Provided to Insurance Companies 25 Table II - 18. Status of Dividends