I. Measures to the six banks which submitted the management improvement plans
□ Based on the MEC's review results of the plans, proper measures will be taken in accordance with the relevant regulations.
□ Self-rescue plans of Chohung Bank and the Korean Exchange Bank were approved with a condition to make some required revisions in accordance with the relevant financial sector restructuring laws and bank supervisory regulations.
o While allowing independent management, the MEC required Chohung Bank and the KEB to submit their revised plans which include the committee's recommendations by the 22nd of November, 2000.
o If they fail to either submit or implement the revised plans, or if the plans are disapproved by the Governor of the FSS, certain corrective actions will be enforced in accordance with the relevant laws and regulations.
< MEC's recommendations for Chohung Bank >
(1) To lower the ratio of loans which are substandard and below down to lower than 6% by the end of June, 2001, and further down to 4% by the end of 2001 through vigorous and prompt settlement of NPLs.
(2) To achieve the per capita operational profit before loan loss provisioning of more than 220million won by 2001, through numerous efforts such as expanding profitability and down sizing.
* per capita operational profit before loan loss provisioning : (operational profit + loan loss provisioning expenses) / total number of employees
< MEC's recommendations for Korea Exchange Bank >
(1) To take complementary measures such as additional sell-off of the shares of KEB Card Co. and issuance of subordinate bonds will be sought in case the capital increase through public subscription (completion of the paying up shares) can't be done by the first half of 2001.
(2) To reduce the ratio of loans which are substandard and below down to lower than 6% by the end of June, 2001, and further down to 4% by the end of 2001 through vigorous and prompt settlement of NPLs.
(3) To meet the target profitability by 2001, through more active self-rescue efforts such as operational profit increase and cost reduction; the targets include the revised ROA of more than 2%, the cost ratio of lower than 38%, the per capita operational profit before loan loss provisioning of more than 220million won.
* revised ROA : (net profit + loan loss provisioning expenses ± special profit/loss) / average balance of total assets
** cost ratio : sales and administration expenses / (operational profit + sales and administration expenses + loan loss provisioning expenses)
□ Hanvit, Peace, Kwangju, Cheju Bank whose plans were disapproved
o The committee required those banks to submit revised plans including the following points of recommendation by the 22nd of November, not acknowledging their ability to stand alone.
(1) Drastic restructuring plans such as adopting Financial Holding Company system.
- The banks which decide to be affiliates of FHC are required to clarify on all the relevant information such as names of other affiliated banks, the consolidation method, detailed procedures and timetable.
(2) Self-rescue efforts to improve their management through, among others, NPLs resolutions, cost reduction, and profit increase.
II. Follow-up measures and time table
□ Submission of the revised management improvement plans by those four banks by November 22, 2000.
□ Completion of investigation on assets and liabilities of those four banks by November 9 for additional injection of public funds.
□ Feasibility review of four banks' revised plans for approval by the end of November.
□ Request the KDIC for the injection of public funds during the month of November.
⇒ Public fund injections by the mid-December
□ Establishment of Financial Holding Company
o By the end of November, the scope of FHC-affiliated institutions will be finalized and the relevant plans will be made.
o Special task force for the FHC establishment will be formed by the end of November, and further proceedings will be decided by the mid-December, 2000.
* Please refer to the attached file for details.