Exhibit 99.2

WOORI BANK

SEPARATE FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED

DECEMBER 31, 2019 AND 2018

ATTACHMENT: INDEPENDENT AUDITORS’ REPORT

WOORI BANK

INDEPENDENT AUDITORS’ REPORT

English Translation of a Report Originally Issued in Korean on March 16, 2020

To the Shareholder and the Board of Directors of Woori Bank

Report on the Audited Separate Financial Statements

Audit Opinion

We have audited the accompanying separate financial statements of Woori Bank (the “Bank”), which comprise the separate statement of financial position as of December 31, 2019 and December 31, 2018, respectively, and the separate statement of comprehensive income, separate statement of changes in shareholder’s equity and separate statement of cash flows, for the years then ended, and a summary of significant accounting policies and other explanatory information.

In our opinion, the separate financial statements present fairly, in all material respects, the financial position of the Bank as of December 31, 2019 and December 31, 2018, respectively, and its financial performance and its cash flows for the years then ended in accordance with Korean International Financial Reporting Standards (“K-IFRS”).

Basis for Audit Opinion

We conducted our audits in accordance with the Korean Standards on Auditing (“KSAs”). Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Bank in accordance with the ethical requirements, including those related to independence, that are relevant to our audit of the separate financial statements in the Republic of Korea as required by prevailing audit regulations. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and the Audit Committee for the Financial Statements

Management is responsible for the preparation of the accompanying separate financial statements in accordance with K-IFRS, and for such internal control as they determine is necessary to enable the preparation of separate financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the separate financial statements, management of the Bank is responsible for assessing and presenting the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.

The audit committee is responsible for overseeing the Bank’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with KSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these separate financial statements.

As part of an audit in accordance with KSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our audit opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of the management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Bank to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the separate financial statements, including the disclosures, and whether the separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the audit committee of the Bank regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

March 16, 2020

Notice to Readers

This report is effective as of March 16, 2020 the auditors’ report date. Certain subsequent events or circumstances may have occurred between the auditors’ report date and the time the auditors’ report is read. Such events or circumstances could significantly affect the separate financial statements and may result in modifications to the auditors’ report.

WOORI BANK

SEPARATE FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS

ENDED DECEMBER 31, 2019 AND 2018

The accompanying separate financial statements, including all footnote disclosures, were

prepared by, and are the responsibility of, the management of Woori Bank.

Tae Seung Sohn

President and Chief Executive Officer

Headquarters: (Address) 51, Sogong-ro, Jung-gu, Seoul

                     (Phone Number)                02-2002-3000

WOORI BANK

SEPARATE STATEMENT OF FINANCIAL POSITION

AS OF DECEMBER 31, 2019 AND 2018

	December 31, 2019		December 31, 2018
	(Korean Won in millions)
ASSETS
Cash and cash equivalents (Notes 6 and 45)		5,398,102		5,723,801
Financial assets at fair value through profit or loss (“FVTPL”) (Notes 4, 7, 11, 12, 26 and 45)		5,429,401		3,877,858
Financial assets at fair value through other comprehensive income (“FVTOCI”) (Notes 4, 8, 11, 12, and 18)		26,548,853		17,040,674
Securities at amortized cost (Notes 4, 9, 11, 12 and 18)		20,147,137		22,802,050
Loans and other financial assets at amortized cost (Notes 4, 10, 11, 12, 18 and 45)		267,911,339		260,350,949
Investments in subsidiaries and associates (Note 13)		3,161,729		4,193,775
Investment properties (Note 14)		550,685		367,117
Premises and equipment (Note 15)		2,742,944		2,350,342
Intangible assets (Note 16)		349,273		353,167
Assets held for sale (Note 17)		95		143,288
Current tax assets (Note 42)		27,558		—
Deferred tax assets (Note 42)		—		7,360
Derivative assets (Designated for hedging) (Notes 4, 11, 12 and 26)		111,764		35,503
Other assets (Notes 19 and 45)		113,750		146,995
Total assets		332,492,630		317,392,879
LIABILITIES
Financial liabilities at FVTPL (Notes 4, 11 12, 20, 26 and 45)		2,956,332		2,279,373
Deposits due to customers (Notes 4, 11, 21 and 45)		252,625,294		237,426,765
Borrowings (Notes 4, 11, 12 and 22)		15,325,821		14,081,092
Debentures (Notes 4, 11 and 22)		22,830,252		21,666,331
Provisions (Notes 23, 44 and 45)		380,113		283,501
Net defined benefit liability (Note 24)		46,826		136,163
Liabilities related to assets held for sale (Note 17)		—		72,361
Current tax liabilities (Note 42)		115,513		110,127
Deferred tax liabilities (Note 42)		109,998		—
Derivative liabilities (Designated for hedging) (Notes 4, 11, 12 and 26)		—		17,654
Other financial liabilities (Notes 4, 11, 12, 25 and 45)		15,889,160		20,097,011
Other liabilities (Notes 25 and 45)		151,581		173,501
Total liabilities		310,430,890		296,343,879

(Continued)

WOORI BANK

SEPARATE STATEMENT OF FINANCIAL POSITION (CONTINUED)

AS OF DECEMBER 31, 2019 AND 2018

	December 31, 2019			December 31, 2018
	(Korean Won in millions)
EQUITY
Capital stock (Note 28)		3,381,392			3,381,392
Hybrid securities (Note 29)		3,660,814			3,161,963
Capital surplus (Note 28)		269,533			269,533
Other equity (Note 30)		(369,855	)		(386,840	))
Retained earnings (Notes 31 and 32)
(Regulatory reserve for credit loss as of December 31, 2019 and 2018 is 1,888,816 million Won and 2,091,721 million Won, respectively
Regulatory reserve for credit loss to be reserved (reversed) as of December 31, 2019 and 2018 is (162,779) million Won and 202,905 million Won, respectively
Planned provision of regulatory reserve(reversal) for credit loss as of December 31, 2019 and 2018 is (162,779) million Won and 202,905 million Won, respectively)		15,119,856			14,622,952
Total equity		22,061,740			21,049,000
Total liabilities and equity		332,492,630			317,392,879

See accompanying notes

WOORI BANK

SEPARATE STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

	2019			2018
	(Korean won in millions, except for per share data)
Interest income		9,015,701			8,331,967
Financial assets at fair value through profit or loss (FVTPL)		359			6,047
Financial assets at fair value through other comprehensive income (FVTOCI)		437,104			256,995
Financial assets at amortized cost		8,578,238			8,068,925
Interest expense		(4,155,365	)		(3,604,249	)
Net interest income (Notes 11, 34 and 45)		4,860,336			4,727,718
Fees and commissions income		1,167,983			1,151,201
Fees and commissions expense		(153,490	)		(148,554	)
Net fees and commissions income (Notes 11, 35 and 45)		1,014,493			1,002,647
Dividend income (Notes 36 and 45)		100,708			75,986
Net gain on financial instruments at FVTPL (Notes 11, 37 and 45)		26,733			204,649
Net gain on financial assets at FVTOCI (Notes 11 and 38)		8,245			1,333
Net gain on disposals of amortized cost		84,240			44,166
Net gain on disposals of securities at amortized cost		—			431
Net gain on disposals of loans and other financial assets at amortized cost		84,240			43,735
Impairment losses due to credit loss (Notes 11, 39 and 45)		(91,455	)		(58,823	)
General and administrative expenses (Notes 40 and 45)		(3,210,287	)		(3,189,336	)
Other net operating expenses (Notes 40 and 45)		(321,460	)		(392,649	)
Operating income		2,471,553			2,415,691
Share of impairment losses of subsidiaries and associates (Note 13)		(43,102	)		(241	)
Net other non-operating income(expense)		(63,323	)		70,181
Non-operating income(expense) (Note 41)		(106,425	)		69,940
Net income before income tax expense		2,365,128			2,485,631
Income tax expense (Note 42)		574,297			674,727

(Continued)

WOORI BANK

SEPARATE STATEMENT OF COMPREHENSIVE INCOME (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

	2019			2018
	(Korean won in millions, except for per share data)
Net income
(Net income after the provision for regulatory reserve for credit loss for the years ended December 31, 2019 and 2018, is 1,628,052 million won and 1,819,532 million won, respectively) (Note 32)		1,790,831			1,810,904
Net loss on valuation of equity securities at FVTOCI		(72,141	)		(29,290	)
Net gain on valuation of financial liabilities designated as at FVTPL due to own credit risk		—			100
Remeasurement of the net defined benefit liability		(30,984	)		(79,639	)
Items that will not be reclassified to profit or loss		(103,125	)		(108,829	)
Net gain on valuation of debt securities at FVTOCI		38,019			36,085
Gain on foreign currency translation of foreign operations		8,446			7,882
Items that may be reclassified to profit or loss		46,465			43,967
Other comprehensive loss, net of tax		(56,660	)		(64,862	)
Total comprehensive income		1,734,171			1,746,042
Earnings per share (Note 43)
Basic and diluted earnings per share (in Korean Won)		2,451			2,466

See accompanying notes

WOORI BANK

SEPARATE STATEMENT OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

	Capital stock		Hybrid securities			Capital surplus		Other equity			Retained Earnings and other reserves			Total
	(Korean Won in millions)
January 1, 2018		3,381,392		3,017,888			269,533		(135,282	)		13,260,559			19,794,090
Cumulative effect of change in accounting policy		—		—			—		(393,473	)		246,464			(147,009	)
Adjusted balance, beginning of the year		3,381,392		3,017,888			269,533		(528,755	)		13,507,023			19,647,081
Net income		—		—			—		—			1,810,904			1,810,904
Dividends on common stocks		—		—			—		—			(336,636	)		(336,636	)
Net gain on valuation of financial liabilities designated as at FVTPL due to own credit risk		—		—			—		100			—			100
Changes in other comprehensive income due to redemption of financial liabilities designated as at FVTPL		—		—			—		(4	)		4			—
Net gain on valuation of financial assets at FVTOCI		—		—			—		6,795			—			6,795
Changes in other comprehensive income due to disposal of equity securities at FVTOCI		—		—			—		(1,009	)		1,009			—
Gain on foreign currency translation of foreign operations		—		—			—		7,882			—			7,882
Remeasurement loss related to defined benefit plan		—		—			—		(79,639	)		—			(79,639	)
Appropriation of retained earnings		—		—			—		208,158			(208,158	)		—
Dividends to hybrid securities		—		—			—		—			(151,194	)		(151,194	)
Issuance of hybrid securities		—		398,707			—		—			—			398,707
Redemption of hybrid securities		—		(254,632	)		—		(368	)		—			(255,000	)
December 31, 2018		3,381,392		3,161,963			269,533		(386,840	)		14,622,952			21,049,000
January 1, 2019		3,381,392		3,161,963			269,533		(386,840	)		14,622,952			21,049,000
Net income		—		—			—		—			1,790,831			1,790,831
Dividends on common stocks		—		—			—		—			(437,625	)		(437,625	)
Interim dividend		—		—			—		—			(676,000	)		(676,000	)
Net changes in treasury stock		—		—			—		28,040			—			28,040
Changes in other comprehensive income due to valuation of financial assets at FVTOCI		—		—			—		(34,122	)		—			(34,122	)
Changes in other comprehensive income due to disposal of equity securities at FVTOCI		—		—			—		45,513			(45,513	)		—
Gain on foreign currency translation of foreign operations		—		—			—		8,446			—			8,446
Remeasurement loss related to defined benefit plan		—		—			—		(30,984	)		—			(30,984	)
Appropriation of retained earnings		—		—			—		368			(368	)
Dividends to hybrid securities		—		—			—		—			(134,421	)		(134,421	)
Issuance of hybrid securities		—		658,470			—		—			—			658,470
Redemption of hybrid securities		—		(159,619	)		—		(276	)		—			(159,895	)
December 31, 2019		3,381,392		3,660,814			269,533		(369,855	)		15,119,856			22,061,740

See accompanying notes

WOORI BANK

SEPARATE STATEMENT OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

	2019			2018
	(Korean Won in millions)
Cash flows from operating activities:
Net income		1,790,831			1,810,904
Adjustments:
Income tax expense		574,297			674,727
Interest income		(9,015,700	)		(8,331,967	)
Interest expense		4,155,365			3,604,249
Dividend income		(152,982	)		(113,467	)
		(4,439,020	)		(4,166,458	)
Additions of expenses not involving cash outflows:
Loss on financial assets at FVTOCI		895			—
Impairment losses due to credit loss		91,455			58,823
Impairment loss on investments in subsidiaries and associates		43,102			241
Loss on transaction and valuation of derivatives (designated for hedging)		—			36,488
Loss on hedged items (fair value hedge)		86,214			17,299
Provision for other liabilities		108,749			10,823
Retirement benefits		146,022			128,447
Depreciation and amortization		417,168			217,074
Loss on disposal of premises and equipment, intangible assets and other assets		1,534			933
Impairment loss on premises and equipment, intangible assets and other assets		26,037			5,933
Loss on disposal of assets held for sale		205,046			—
		1,126,222			476,061
Deductions of income not involving cash inflows:
Gain on valuation of financial assets at FVTPL		288,073			216,135
Gain on financial assets at FVTOCI		9,140			1,333
Gain on disposal of securities at amortized cost		—			431
Gain on transaction and valuation of derivatives (designated for hedging)		90,244			9,126
Gain on hedged items (fair value hedge)		231			42,797
Reversal of provisions for other liabilities		3,866			1,883
Gain on disposal of investment in subsidiaries and associates		—			35,409
Gain on disposal of premises and equipment, intangible assets and other assets		1,216			25,537
Reversal of impairment loss on premises and equipment and other assets		85			491
Gain on disposal of assets held for sale		256,829			—
		649,684			333,142

(Continued)

WOORI BANK

SEPARATE STATEMENT OF CASH FLOWS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

	2019			2018
	(Korean Won in millions)
Changes in assets and liabilities from operating activities:
Financial assets at FVTPL		(111,787	)		1,232,277
Loans and other financial assets at amortized cost		(7,879,149	)		(11,927,559	)
Other assets		(157,334	)		(23,497	)
Deposits due to customers		15,196,289			13,042,027
Provisions		4,360			7,781
Net defined benefit liability		(280,267	)		(118,735	)
Other financial liabilities		(4,901,977	)		6,919,137
Other liabilities		(10,270	)		45,077
		1,859,865			9,176,508
Cash received from operating activities:
Interest income received		8,971,435			8,305,699
Interest expense paid		(3,898,180	)		(3,416,210	)
Dividend received		152,982			111,426
Income tax paid		(457,514	)		(464,286	)
Net cash provided by(used in) operating activities		4,456,937			11,500,502
Cash flows from investing activities:
Cash in-flows from investing activities:
Disposal of Financial assets at FVTPL		11,355,894			11,918,394
Disposal of financial assets at FVTOCI		14,598,029			8,969,290
Redemption of securities at amortized cost		8,685,723			9,400,596
Disposal of investments in subsidiaries and associates		37,489			51,962
Disposal of premises and equipment		7,196			387
Disposal of intangible assets		80			2,845
Disposal of assets held for sale		996,885			81,650
		35,681,296			30,425,124
Cash out-flows from investing activities:
Acquisition of financial assets at FVTPL		11,823,630			12,322,160
Acquisition of financial instruments at FVTOCI		23,367,718			12,945,225
Acquisition of securities at amortized cost		6,030,871			15,575,213
Acquisition of investments in subsidiaries and associates		433,138			285,140
Acquisition of investment properties		185,173			12,957
Acquisition of premises and equipment		190,677			89,414
Acquisition of intangible assets		95,330			163,877
Decrease of liabilities held for sale		37,708			—
		42,164,245			41,393,986
Net cash used in investing activities		(6,482,949	)		(10,968,862	)

(Continued)

WOORI BANK

SEPARATE STATEMENT OF CASH FLOWS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

	2019			2018
	(Korean Won in millions)
Cash flows from financing activities:
Cash in-flows from financing activities:
Increase in borrowings		12,748,051			8,539,312
Issuance of debentures		7,679,374			5,248,047
Issuance of hybrid securities		658,470			398,707
		21,085,895			14,186,066
Cash out-flows from financing activities:
Repayment of borrowings		11,204,529			8,280,546
Repayment of debentures		6,744,225			5,523,518
Repayment of lease liabilities		177,823			—
Dividends paid on common stocks		1,113,626			336,636
Redemption of hybrid securities		160,000			255,000
Dividends paid on hybrid securities		156,691			147,625
		19,556,894			14,543,325
Net cash provided by(used in) financing activities		1,529,001			(357,259	)
Net increase(decrease) in cash and cash equivalents		(497,011	)		174,381
Cash and cash equivalents, beginning of the year		5,723,801			5,328,960
Effects of exchange rate changes on cash and cash equivalents		171,312			220,460
Cash and cash equivalents, end of the year (Note 6)		5,398,102			5,723,801

See accompanying notes

WOORI BANK

NOTES TO SEPARATE FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

1. GENERAL

Summary of Woori Bank

Woori Bank (the “Bank”) was established in 1899 and is engaged in the commercial banking business under the Banking Act, trust business and foreign exchange business under the Financial Investment Services and Capital Market Act (hereinafter referred to as the “Capital Market Act”).

As of December 31, 2019, the Bank’s shares are wholly owned by Woori Financial Group Inc. (“Woori Financial Group”) which was established in accordance with the Financial Holding Companies Act on January 11, 2019. The Bank has 676 million shares and common stocks amounting to 3,381,392 million Korean won.

The headquarters of the Bank is located at 51, Sogong-ro, Jung-gu, Seoul, Korea. The Bank has 874 branches and offices in Korea, and 23 branches and offices overseas as of December 31, 2019.

2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES

(1) Basis of preparation

The Bank is preparing its financial statements in accordance with the Korean Financial Reporting Standards (“K-IFRS”), and this separate financial statements are prepared in accordance with K-IFRS 1027 “Separate Financial Statements”. Separate financial statements are those presented by an investor who has significant influence over subsidiaries or investees in which the entity could elect to account for its investments in subsidiaries, joint ventures and associates either at cost, in accordance with K-IFRS 1109 “Financial Instruments”, or using the equity method as described in K-IFRS 1028 “Investments in Associates and Joint Ventures”.

The significant accounting policies applied in the preparation of financial statements are stated below, and the accounting policies applied are identical to ones used in the preparation of previous period’s financial statements, except for the effects of adopting new standards or interpretations as explained below.

The financial statements are prepared at the end of each reporting period on the historical cost basis, except for certain non-current assets and financial assets that are either revalued or measured in fair value. Historical cost is generally measured at the fair value of consideration given to acquire assets.

The financial statements of the Bank was approved by the Board of Directors on March 3, 2020, and is planned for an approval in the annual shareholder’s meeting on March 24, 2020.

1) The Bank has newly adopted the following K-IFRS that affected the Bank’s accounting policies:

① K-IFRS 1109 ‘Financial Instruments,’ K-IFRS 1107 ‘Financial Instruments: Disclosure’ amendments

The Bank has adopted the amendments of K-IFRS 1109 and 1107 for the first time in the current year. The amendments mainly deal with the addition of temporary exceptions from applying specific hedge accounting requirements while the uncertainty arises from interest rate benchmark reform. The amendment requires that for the purpose of determining whether a forecast transaction (or a component thereof) is highly probable, an entity shall assume that the interest rate benchmark on which the hedged cash flows (contractually or non-contractually specified) are based is not altered as a result of interest rate benchmark reform. When applying the prospective assessment, the amendment further requires that an entity shall assume that the hedged risk or the interest rate benchmark on which the hedged item or the hedging instrument is based is not altered as a result of the reform. Additionally, for a hedge of a non-contractually specified benchmark component of interest rate risk, an entity shall apply the requirement that the risk component shall be separately identifiable only at the inception of the hedging relationship. Meanwhile, an entity shall prospectively cease applying the temporary exceptions to a hedged item at the earlier of:

(a) when the uncertainty arising from interest rate benchmark reform is no longer present with respect to the timing and the amount of the interest rate benchmark-based cash flows of the hedged item; and (b) when the hedging relationship that the hedged item is part of is discontinued. Note 26 sets out details of the hedge accounting applied by the Bank. These amendments will be effective from January 1, 2020 but the Bank has applied such amendments in current year as the early adoption is permitted.

- 2 -

② Leases

The Bank initially applied K-IFRS 1116 from January 1, 2019. Other accounting standards enacted from January 1, 2019 are not expected to have material impacts on the Bank’s financial statements.

K-IFRS 1116 introduces an accounting model for the single lessee and as a result, the Bank, as a lessee, recognizes right-of-use assets which represent a lessee’s right to use an underlying asset and lease liabilities which represent an obligation to make lease payments. An accounting model for the lessor is similar to the previous accounting policy.

The Bank recognized the cumulative effects due to the initial application of K-IFRS 1116 on January 1, 2019, which is the date of initial application. Therefore, the comparative financial information applies K-IFRS 1017 and the related interpretations as reported previously, and was not restated. The details of the changes to the accounting policy are described below.

i) Definition of a lease

Previously, the Bank determined whether an arrangement is, or contains, a lease on the arrangement date by applying K-IFRS 1017 and K-IFRS 2104 ‘Determining whether an arrangement contains a lease’. The Bank currently determines whether the contract is, or contains, a lease, based on the new definition of lease. According to K-IFRS 1116, a contract is, or contains a lease if the right to control the use of an identified asset is transferred in exchange for the consideration received for a period of time.

On the date of initial application for K-IFRS 1116, the Bank elected to apply a practical expedient which does not require the Bank to reassess whether the contract is a lease. The Bank applied K-IFRS 1116 only to the contracts that were previously identified as a lease and did not reassess the contracts that were not identified as a lease in line with K-IFRS 1017 and K-IFRS 2104. Therefore, the definition of a lease under K-IFRS 1116 is only applicable to contracts that are entered into or modified after January 1, 2019.

The Bank elected not to recognize right-to-use assets and lease liabilities for certain leases of low-value assets (e.g. IT equipment) and short-term leases (less than one year). The Bank will recognize the related lease payments as expenses equally over the lease period.

IFRS Interpretations Committee published its interpretation of ‘Lease Period and Lease Improvement Useful Life’ as of December 16, 2019. The Interpretation Committee discussed the calculation method of renewable lease and cancellable lease and etc., and according to the interpretation, the Bank shall identify factors to consider a wide range of economic disadvantages and calculate the lease period based on them. However, as the Bank is holding a large number of contracts and the conditions of the contract vary, sufficient time is required for analysis of the contract and accounting policy establishment. Therefore, the Bank is planning to reflect the effects in the financial statements after the analysis of the effects changes in accounting policies over the lease term is completed.

ii) Lessee

The Bank leases various assets, including buildings, vehicles and IT equipment.

Previously, the Bank classified its leases either as an operating lease or as a finance lease based on whether the lease substantially transfers the risk and reward of owning the underlying assets. According to K-IFRS 1116, the Bank recognizes right-of-use assets and lease liabilities for most of its leases, which means most of its leases are presented in the statement of financial position.

For the right-of-use assets that do not satisfy the definition of an investment property, the Bank presents those assets as the same item as the item that the corresponding underlying asset would have been presented for. Right-of-use assets that meet the definition of investment would be presented as investment properties.

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For a contract that contains a lease component, the Bank allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease and non-lease components.

Transition requirements

For leases previously classified as operating leases applying K-IFRS 1017, the Bank measures lease liabilities at the present value of the remaining lease payments using the Bank’s incremental borrowing rates as of January 1, 2019. However, the Bank elected not to apply recognition, measurement and presentation requirements for leases of low-value assets. A right-of-use asset is measured using the following method.

• It is the same amount as the lease liability (adjusted for any advanced payments or payables) and the Bank adopts this method for all its leases.

For leases previously classified as operating leases applying K-IFRS 1017, the Bank applies the following practical expedient when applying K-IFRS 1116. The Bank does not apply the practical expedient that does not recognize assets and liabilities from lease contracts whose remaining lease term is less than 12 months from initial application.

• Did not apply single discount rate upon leases whose natures are quite alike.

• Any initial direct cost is excluded from the estimation of right-of-use assets on the date of initial application.

• As an alternative to impairment review, K-IFRS 1037 ‘Provisions, Contingent Liabilities and Contingent Assets’ is applied immediately prior to the date of initial application to determine whether the leases are onerous.

• Hindsight is used when determining a lease term for contracts that contain an extension option or termination option.

iii) Impacts to the financial statements

a) Impacts at the point of transition

As of the date of transition to K-IFRS 1116, the Bank additionally recognized the right-of-use assets and lease liabilities, and the impacts are as follows (Unit: Korean won in millions):

	January 1, 2019
Right-of-use assets presented as premises and equipment		322,986
Lease liability (*)		263,496

(*) The differences have occurred due to prepaid, unpaid lease payments, transfer, etc. There is no effect on retained earnings.

When measuring lease liabilities for the leases that were previously classified as operating leases, the Bank used its incremental borrowing rate as of January 1, 2019 as follows. The applied weighted-average incremental borrowing rate is 2.09%.

	January 1, 2019
Operating leases as of December 31, 2018		274,686
Amount discounted by incremental borrowing rate on January 1, 2019		263,496
Lease liability recognized on January 1, 2019		263,496

b) Impacts during the transition

The Bank recognized depreciation expenses and interest expenses instead of the operating lease expenses for the leases in line with K-IFRS 1116. For the year ended December 31, 2019, the Bank recognized depreciation expenses of 195,986 million won and interest expenses of 6,262 million won.

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③ Share-based payment

For cash-settled share-based payment transactions that provide cash in return for the goods or services received, the Bank measures the goods or services received and the corresponding liability at the fair value, and recognizes as employee benefit, expenses and liabilities during the vesting period. The fair value of the liability is remeasured at the end of each reporting period and the settlement date until the liability is settled, and changes in fair value are recognized as employee benefits.

④ The following enacted/amended standards are not expected to significantly affect the Bank:

• K-IFRS 2123 – Uncertainty over Income Tax Treatments (enacted)

• Amendments to K-IFRS 1109

• Amendments to K-IFRS 1028

• Amendments to K-IFRS 1019

• Amendments to K-IFRS 1115

• Annual Improvements to K-IFRS 2015-2017 Cycle

These annual improvements include partial amendments of K-IFRS 1012 ‘Income Tax,’ K-IFRS 1023 ‘Borrowing Cost,’ K-IFRS 1103 ‘Business Combination’ and K-IFRS 1111 ‘Joint Arrangements’.

2) The details of K-IFRS that have been issued and published as of date of issue approval of financial statements, but have not yet reached the effective date, and which the Bank has not applied earlier, are as follows:

• Amendments to the conceptual framework for financial reporting

• Amendments to K-IFRS 1103 ‘Business combinations’

• Amendments to K-IFRS 1001 ‘Presentation of Financial Statements,’ and K-IFRS 1008 ‘Changes in Accounting Estimates and Errors’

The above amendments are not considered to have any significant impact on the Bank.

(2) Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured as the sum of the acquisition-date fair values of the assets transferred by the Bank in exchange for control of the acquiree, liabilities assumed by the Bank and the equity interests issued by the Bank. Acquisition-related costs are generally recognized in profit or loss as incurred.

At the acquisition date, the acquiree’s identifiable assets, liabilities and contingent liabilities that meet the condition for recognition under K-IFRS 1103 are recognized at their fair value, except that:

• deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are recognized and measured in accordance with K-IFRS 1012 Income Taxes and K-IFRS 1019 Employee Benefits, respectively;

• liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Bank entered into to replace share-based payment arrangements of the acquiree are measured in accordance with K-IFRS 1102 Share-based Payment at the acquisition date; and

• non-current assets (or disposal groups) that are classified as held for sale in accordance with K-IFRS 1105 Non-current Assets Held for Sale and Discontinued Operations are measured at the lower of their previous carrying amounts and fair value less costs to sell.

Any excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the Bank’s previously held equity interest (if any) in the acquiree over the net of identifiable assets and liabilities assumed of the acquiree at the acquisition date is recognized as goodwill which is included in intangible assets.

If, after reassessment, the Bank’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any), the excess is recognized immediately in net income (or other comprehensive income, if applicable) identical to the treatment assuming interests are sold directly.

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Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognized amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable.

When the consideration transferred by the Bank in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration other than the above is remeasured at subsequent reporting dates as appropriate, with the corresponding gain or loss being recognized in profit or loss.

When a business combination is achieved in stages, the Bank’s previously held equity interest in the acquiree is remeasured at fair value at the acquisition date (i.e., the date when the Bank obtains control) and the resulting gain or loss, if any, is recognized in net income (or other comprehensive income, if applicable). Amounts arising from changes in value of interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are recognized, identical to the treatment assuming interests are sold directly.

In cases where i) a common entity ultimately controls over all participating entities, or businesses, in a business combination transaction, prior to and after the transaction continuously, and ii) the control is not temporary, the transaction meets the definition of “business combination under common control” and it is deemed that the transaction only results in the changes in legal substance, and not economic substance, from the perspective of the ultimate controlling party. Thus, in such transactions, the acquirer recognizes the assets and liabilities of the acquiree in its financial statements at the book values as recognized in the ultimate controlling party’s consolidated financial statements, and the difference between the book value of consideration transferred to and the book value of net assets transferred in is recognized as equity.

(3) Investment in Joint operation

A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

When the Bank operates as a joint operator, it recognizes in relation to its interest in a joint operation:

• its assets, including its share of any assets held jointly;

• its liabilities, including its share of any liabilities incurred jointly;

• its revenue from the sale of its share of the output arising from the joint operation;

• its share of the revenue from the sale of the output by the joint operation; and

• its expenses, including its share of any expenses incurred jointly.

The Bank accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the K-IFRSs applicable to the particular assets, liabilities, revenues and expenses.

When the Bank enters into a transaction with a joint operation in which it is a joint operator, such as a purchase of assets, it does not recognize proportional share of profit or loss until the asset is sold to a third party.

(4) Revenue recognition

K-IFRS 1115 requires the recognition of revenues based on transaction price allocated to the performance obligation when or as the Bank performs that obligation to the customer. Revenues other than those from contracts with customers, such as interest revenue and loan origination fee (cost), are measured through effective interest rate method.

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1) Revenue from contracts with customers

The Bank recognizes revenue when the Bank satisfies a performance obligation by transferring a promised good or service to a customer. When a performance obligation is satisfied, the Bank recognizes as a revenue the amount of the transaction price that is allocated to that performance obligation. The transaction price is the amount of consideration to which the Bank expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.

The Bank recognizes revenue by major sources as shown below:

① Fees and commission received for brokerage

The fees and commission received for agency are the amount of consideration or fee expected to be entitled to receive in return for providing goods or services to the other parties with the Bank acting as an agency, such as in the case of sales of bancassurance and beneficiary certificates. The majority of these fees and commission received for brokerage are from the business activities relevant to Consumer banking segment.

② Fees and commission received related to credit

The fees and commission received related to credit mainly include the lending fees received from the loan activity and the fees received in the L/C transactions. Except for the fees and commission accounted for in calculating the effective interest rate, it is generally recognized when the performance obligation has been performed. The majority of these fees and commission received related to credit are from the business activities relevant to Consumer banking and Corporate banking segment.

③ Fees and commission received for electronic finance

The fees and commission received for electronic finance include fees received in return for providing various kinds of electronic financial services through firm-banking and CMS. These fees are recognized as revenue immediately upon the completion of services. The majority of these fees and commission received for electronic finance are from the business activities relevant to Consumer banking and Corporate banking segment.

④ Fees and commission received on foreign exchange handling

The fees and commission received on foreign exchange handling consist of various fees incurred when transferring foreign currency. The point of processing the customer’s request is the time when performance obligation is satisfied, and revenue is immediately recognized when fees and commission are received after requests are processed. The business activities relevant to these fees and commission received on foreign exchange handling are substantially attributable to Corporate banking segment.

⑤ Fees and commission received on foreign exchange

The fees and commission received on foreign exchange consist of fees related to the issuance of various certificates, such as exchange, import and export performance certificates, purchase certificates, etc. The point of processing the customer’s request is the time when performance obligation is satisfied, and revenue is immediately recognized when fees and commission are received after requests are processed. The business activities relevant to these fees and commission received on foreign exchange are substantially attributable to Corporate banking segment.

⑥ Fees and commission received for guarantee

The fees and commission received for guarantee include the fees received for the various warranties. The activities related to the warranty consist mainly of performance obligations satisfied over time and fees and commission are recognized over the guarantee period. The business activities relevant to these fees and commission received for guarantee are substantially attributable to Corporate banking segment.

⑦ Fees and commission received on securities business

The fees and commission received on securities business consist mainly of fees and commission for the sale of beneficiary certificates, and these fees are recognized when the beneficiary certificates are sold to customers. The business activities relevant to these fees and commission received on credit card are substantially attributable to Consumer banking segment.

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⑧ Fees and commission from trust management

The fees and commission from trust management consist of fees and commission received in return for the operation and management services for entrusted assets. These operation and management services are performance obligations satisfied over time, and revenue is recognized over the service period. Among the fees and commission from trust management, variable considerations such as profit commission that are affected by the value of entrusted assets and base return of the future periods are recognized as revenue when limitations to the estimates are lifted. The majority of these fees and commission received for brokerage are from the business activities relevant to Consumer banking segment.

⑨ Other fees

Other fees are usually fees related to remittances, but include fees related to various other services provided to customers by the Bank. These fees are recognized when transactions occur at the customers’ request and services are provided, at the same time when commissions are received. These other fees occur across all operating segments and no single operating segment represents majority of other fees.

2) Other revenue from contracts with customers

① Interest income

Interest income on financial assets measured at FVTOCI and financial assets at amortized costs is measured using the effective interest method.

The effective interest method is a method of calculating the amortized cost of debt securities (or group of financial assets) and of allocating the interest income over the expected life of the asset. The effective interest rate is the rate that exactly discounts estimated future cash flows to the instrument’s initial total carrying amount over the expected period, or shorter if appropriate. Future cash flows include commissions and cost of reward points (limited to the primary component of effective interest rate) and other premiums or discounts that are paid or received between the contractual parties, and future cash flows exclude expected credit loss when calculating the effective interest rate. All contractual terms of a financial instrument are considered when estimating future cash flows.

For purchased or originated credit-impaired financial assets, interest revenue is recognized by applying the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition. Even if the financial asset is no longer impaired in the subsequent periods due to credit improvement, the basis of interest revenue calculation is not changed from amortized cost to unamortized cost of the financial assets.

② Loan origination fees and costs

The commission fees earned on loans, which is part of the effective interest of loans, is accounted for as deferred origination fees. Incremental costs related to the origination of loans are accounted for as deferred origination fees and is being added or deducted to/from interest income on loans using effective interest rate method.

(5) Accounting for foreign currencies

The Bank’s separate financial statements are presented in Korean Won, which is the functional currency of the Bank. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at its prevailing exchange rates at the date. The effective portion of the changes in fair value of a derivative that qualifies as a cash flow hedge and the foreign exchange differences on monetary items that form part of net investment in foreign operations are recognized in equity.

Assets and liabilities of the foreign operations subject to consolidation are translated into Korean Won at foreign exchange rates at the end of the reporting period. Except for situations in which it is required to use exchange rates at the date of transaction due to significant changes in exchange rates during the period, items that belong to profit or loss are measured by average exchange rate, with foreign exchange differences recognized as other comprehensive income and added to equity (allocated to non-controlling interests, if appropriate). When foreign operations are disposed, the controlling interest’s share of accumulated foreign exchange differences related to such foreign operations will be reclassified to profit or loss, while non-controlling interest’s corresponding share will not be reclassified.

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Adjustments to fair value of identifiable assets and liabilities, and goodwill arising from the acquisition of foreign operations will be treated as assets and liabilities of the corresponding foreign operation, and is translated using foreign exchange rates at the end of the period. The foreign exchange differences are recognized in equity.

(6) Cash and cash equivalents

The Bank is classifying cash on hand, demand deposits, interest-earning deposits with original maturities of up to three months on acquisition date, and highly liquid investments that are readily convertible to known amounts of cash and subject to an insignificant risk of changes in value as cash and cash equivalents.

(7) Financial assets and financial liabilities

1) Financial assets

A regular way purchase or sale of financial assets is recognized or derecognized on the trade date. A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose term requires delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned.

On initial recognition, financial assets are classified into financial assets at FVTPL, financial assets at FVTOCI, and financial assets at amortized cost.

a) Business model

The Bank evaluates the way business is being managed, and the purpose of the business model for managing a financial asset best reflects the way information is provided to the management at its portfolio level. Such information considers the following:

• The accounting policies and purpose specified for the portfolio, and the actual operation of such policies. This includes strategy of the management focusing on the receipt of contractual interest revenue, maintaining a certain level of interest income, matching the duration of financial assets and the duration of corresponding liabilities to obtain the asset, and outflow or realization of expected cash flows from disposal of assets

• The way the performance of a financial asset held under the business model is evaluated, and the way such evaluation is being reported to the management

• The risk affecting the performance of the business model (and financial assets held under the business model), and the way such risk is being managed

• The compensation plan for the management (e.g. whether the management is being compensated based on the fair value of assets or based on contractual cash flows received)

• Frequency, amount, timing and reason for sale of financial assets in the past, and forecast of future sale activities.

b) Contractual cash flows

The principal is defined to be the fair value of a financial assets at initial recognition. Interest is not only composed of consideration for the time value of money, consideration for the credit risk related to remaining principal at a certain period of time, and consideration for other cost (e.g. liquidity risk and cost of operation) and fundamental risk associated with lending, but also profit.

When evaluating whether contractual cash flows are solely payments of principal and interests, the Bank considers the contractual terms of the financial instrument. When a financial asset contains contractual conditions that modify the timing and amount of contractual cash flows, it is required to determine whether contractual cash flows that arise during the remaining life of the financial instrument due to such contractual condition are solely payments of principal and interest. The Bank considers the following elements when evaluating the following:

• Conditions that lead to modification of timing or amount of cash flows

• Contractual terms that adjust contractual nominal interest, including floating rate features

• Early payment features and maturity extension features

• Contractual terms that limit the Bank’s claim on cash flows arising from certain assets (e.g. non-recourse feature)

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① Financial assets at FVTPL

The Bank is classifying those financial assets that are not classified as either financial assets at amortized cost or financial assets at FVTOCI, and those designated to be measured at FVTPL, as financial assets at FVTPL. Financial assets at FVTPL are measured at fair value, and related profit or loss is recognized in net income. Transaction costs related to acquisition at initial recognition is recognized in net income immediately upon its occurrence.

It is possible to designate a financial asset as financial asset at FVTPL if at initial recognition: (a) it is possible to remove or significantly reduce recognition or measurement mismatch that may otherwise have occurred if not for its designation as financial asset at FVTPL; (b) the financial asset forms part of the Bank’s financial instrument group (a group composed of a combination of financial asset or liability), is measured at fair value and is being evaluated for its performance, and such information is provided internally; and (c) the financial asset is part of a contract that contains one or more of embedded derivatives, and is a hybrid contract in which designation as financial asset at FVTPL is allowed under K-IFRS 1109 ‘Financial Instruments’. However, the designation is irrevocable.

② Financial assets at FVTOCI

When financial assets are held under a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and when contractual cash flows from such financial assets are solely payments of principal and interest, the financial assets are classified as financial assets at FVTOCI. Also, for investments in equity instruments that are not held for short-term trade, an irrevocable election is available at initial recognition to present subsequent changes in fair value as other comprehensive income.

At initial recognition, financial assets at FVTOCI is measured at its fair value plus any direct transaction cost, and is subsequently measured in fair value. However, for equity instruments that do not have a quotation in an active market and in which fair value cannot be measured reliably, they are measured at cost. The changes in fair value except for profit or loss items such as impairment losses (reversals), interest revenue calculated by using effective interest method, and foreign exchange gain or loss, and related income tax effects are recognized as other comprehensive income until the asset’s disposal. Upon derecognition, the accumulated other comprehensive income is reclassified from equity to net income for FVTOCI (debt instruments), and reclassified within the equity for FVTOCI (equity instruments)

③ Financial assets at amortized cost

When financial assets are held under a business model whose objective is to hold financial assets in order to collect contractual cash flows, and when contractual cash flows from such financial assets are solely payments of principal and interest, the financial assets are classified as financial assets at amortized cost. At initial recognition, financial assets at amortized cost are recognized at fair value plus any direct transaction cost. Financial assets at amortized cost is presented at amortized cost using effective interest method, less any loss allowance.

2) Financial liabilities

At initial recognition, financial liabilities are classified into either financial liabilities at FVTPL or financial liabilities at amortized cost.

Financial liabilities are usually classified as financial liabilities at FVTPL when they are acquired with a purpose to repurchase them within a short period of time, when they are part of a certain financial instrument portfolio that is actually and recently being managed with a purpose of short-term profit and joint management by the Bank at initial recognition, and when they are derivatives that do not qualify as hedging instruments. Financial liabilities at FVTPL are measured at fair value with any direct transaction cost recognized in profit or loss, and are subsequently measured at fair value. Profit or loss arising from financial liabilities at FVTPL is recognized in net income when occurred.

It is possible to designate a financial liability as financial liability at FVTPL if at initial recognition: (a) it is possible to remove or significantly reduce recognition or measurement mismatch that may otherwise have occurred if not for its designation as financial liability at FVTPL; (b) the financial asset forms part of the Bank’s financial instrument group (a group composed of a combination of financial asset or liability) according to the Bank’s documented risk management or investment strategy, is measured at fair value and is being evaluated for its performance, and such information is provided internally; and (c) the financial liability is part of a contract that contains one or more of embedded derivatives, and is a hybrid contract in which designation as financial liability at FVTPL is allowed under K-IFRS 1109 ‘Financial Instruments’.

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Financial liabilities designated as at FVTPL are initially recognized at fair value, with any direct transaction cost recognized in profit or loss, and are subsequently measured at fair value. Any profit or loss from financial liabilities at FVTPL are recognized in profit or loss.

Financial liabilities not classified as financial liabilities at FVTPL are measured at amortized cost. The Bank is classifying liabilities such as deposits due to customers, borrowings and debentures as financial liabilities at amortized cost.

3) Reclassification

Financial assets are not reclassified after initial recognition unless the Bank modifies the business model used to manage financial assets. When the Bank modifies the business model used to manage financial assets, all affected financial assets are reclassified on the first day of the first reporting period after the modification.

4) Derecognition

Financial assets are derecognized when contractual rights to cash flows from the financial assets are expired, or when substantially all of risk and reward for holding financial assets is transferred to another entity as a result of a sale of financial assets. If the Bank does not have and does not transfer substantially all of the risk and reward of holding financial assets with control of the transferred financial assets retained, the Bank recognizes financial assets to the extent of its continuing involvement. If the Bank holds substantially all the risk and reward of holding a financial asset, it continues to recognize that asset and proceeds are accounted for as collateralized borrowings.

When a financial asset is fully derecognized, the difference between the book value and the sum of proceeds and accumulated other comprehensive income is recognized as profit or loss in case of FVTOCI (debt instruments), and as retained earnings for FVTOCI (equity instruments).

In case when a financial asset is not fully derecognized, the Bank allocates the book value into amounts retained in the books and removed from the books, based on the relative fair value of each portion at the date of sale, and based on the degree of continuing involvement. For the derecognized portion of the financial assets, the difference between its book value and the sum of proceeds and the portion of accumulated other comprehensive income attributable to that portion will be recognized in profit or loss in case of debt instruments and recognized in retained earnings in case of equity instruments. The accumulated other comprehensive income is distributed to the portion of book value retained in the books, and to the portion of book value removed from the books.

The Bank derecognizes financial liabilities when, and only when, the Bank’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

When the Bank exchanges with the existing lender one debt instrument into another one with substantially different terms, such exchange is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, the Bank accounts for substantial modification of terms of an existing liability or part of it as an extinguishment of the original financial liability and the recognition of a new liability. It is assumed that the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective rate is at least 10 percent different from the discounted present value of the remaining cash flows of the original financial liability.

5) Fair value of financial instruments

Financial assets at FVTPL and financial assets at FVTOCI are measured and presented in financial statements at their fair values, and all derivatives are also subject to fair value measurement.

Fair value is defined as the price that would be received to exchange an asset or paid to transfer a liability in a recent transaction between independent parties that are reasonable and willing. Fair value is the transaction price of identical financial assets or financial liabilities generated in an active market. An active market is a market where trade volume is sufficient and objective price information is available due to the fact that bid and ask price differences are small.

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When trade volume of a financial instrument is low, when transaction prices within the market show large differences among them, or when it cannot be concluded that a financial instrument is being traded within an active market due to disclosures being extremely shallow, fair value is measured using valuation techniques based on alternative market information or using internal valuation techniques based on general and observable information obtained from objective sources. Market information includes maturity and characteristics, duration, similar yield curve, and variability measurement of financial instruments of similar nature. Fair value amount contains unique assumptions on each entity (the Bank concluded that it is using assumptions applied in valuing financial instruments in the market, or risk-adjusted assumptions in case marketability does not exist).

The market approach and income approach, which are valuation techniques used to estimate the fair value of financial instruments, both require significant judgment. Market approach measures fair value using either a recent transaction price that includes the financial instrument, or observable information on comparable firm or assets. Income approach measures fair value through discounting future cash flows with a discount rate reflecting market expectations, and revenue, operating income, depreciation, capital expenditures, income tax, working capital and estimated residual value of financial investments are being considered when deriving future cash flows. Valuation techniques such as the above include estimates based on the financial instruments’ complexity and usefulness of observable information in the market.

The valuation techniques used in the evaluation of financial instruments are explained below.

a) Financial assets at FVTPL and Financial assets at FVTOCI

The fair value of equity securities included in financial assets at FVTPL and financial assets at FVTOCI category is recognized in the statement of financial position at its available market price. Debt securities traded in the over-the-counter market are generally recognized at an amount computed by an independent appraiser. When the Bank uses the fair value determined by independent appraisers, the Bank usually obtains three values from three different appraisers for each financial instrument, and selects the minimum amount without making additional adjustments. For equity securities without marketability, the Bank uses the amount determined by the independent appraiser. The Bank verifies the prices obtained from appraisers in various ways, including the evaluation of independent appraisers’ competency, indirect verification through comparison between appraisers’ price and other available market information, and reappraisal done by employees who have knowledge of valuation models and assumptions that appraisers used.

b) Derivatives

The Bank’s transactions involving derivatives such as futures and exchange traded options are measured at market value. A portion of exchange traded derivatives classified as level 2 in the fair value hierarchy, the fair value is estimated using internal valuation techniques. If there are no publicly available market prices because they are traded over-the-counter, fair value is measured through internal valuation techniques. When using internal valuation techniques to derive fair value, the types of derivatives, base interest rate or characteristics of prices, or stock market indices are considered. When variables used in the internal valuation techniques are not observable information in the market, such variables may contain significant estimates.

c) Adjustment of valuation amount

The Bank is exposed to credit risk when a counterparty to a derivative contract does not perform its contractual obligation, and the exposure amount is equal to the amount of derivative asset recognized in the statement of financial position. When the Bank earns income through derivatives, such income is recognized as derivative asset in the statement of financial position. Some of the derivatives are traded in the market, but most of the derivatives are measured at estimated fair value derived from internal valuation models that use observable information in the market. As such, in order to estimate the fair value there should be an adjustment made to incorporate counterparty’s credit risk, and credit risk adjustment is being considered when valuing derivative assets such as over-the counter derivatives. The amount of financial liabilities is also adjusted by the Bank’s own credit risk when valuing them.

The amount of adjustment is derived from counterparty’s probability of default and loss given default. This adjustment considers contractual matters that are designed to reduce the Bank’s exposure to each counterparty’s credit risk. When derivatives are under master netting arrangement, the exposure used in the computation of credit risk adjustment is a net amount after adding/deducting cash collateral received (or paid) from loss(or gain) position derivatives with the same counterparty.

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6) Expected credit losses on financial assets

The Bank recognizes loss allowance on expected credit losses for the following assets:

• Financial assets at amortized cost

• Debt instruments measured at FVTOCI

• Contract assets as defined by K-IFRS 1115

Expected credit losses are weighted-average value of a range of possible results, considering the time value of money, and are measured by incorporating information on current conditions and forecasts of future economic conditions that are available without undue cost or effort.

The methods to measure expected credit losses are classified into following three categories in accordance with K-IFRS:

• General approach: Financial assets that do not belong to below two models and unused loan commitments

• Simplified approach: When financial assets are either trade receivables, contract assets or lease receivables

• Credit impairment model: Purchased or originated credit-impaired financial assets

The measurement of loss allowance under general approach is differentiated depending on whether the credit risk has increased significantly after initial recognition. That is, loss allowance is measured based on 12-month expected credit loss when the credit risk has not increased significantly after initial recognition, while loss allowance is measured at lifetime expected credit loss when credit risk has increased significantly. Lifetime is the expected remaining life of the financial instrument up to the maturity date of the contract.

The measurement of loss allowance under simplified approach is always based on lifetime expected credit loss, and loss allowance under credit impairment model is measured as the cumulative change in lifetime expected credit loss since initial recognition.

a) Measurement of expected credit losses on financial asset at amortized cost

The expected credit losses on financial assets at amortized cost is measured by the difference between the contractual cash flows during the period and the present value of expected cash flows. Expected cash inflows are computed for individually significant financial assets in order to calculate expected credit losses.

When financial assets are not individually significant, they are included in a group of financial assets with similar credit risk characteristics and expected credit losses of the group are calculated collectively.

Expected credit losses are deducted through loss allowance account, and when the financial asset is determined to be uncollectible, the loss allowance is written off from the books along with the related financial asset. When loan receivable previously written off is subsequently collected, the related loss allowance is increased and changes in loss allowance are recognized in profit or loss.

b) Measurement of expected credit losses on financial asset at FVTOCI

The measurement method of expected credit loss is identical to financial asset at amortized cost, but changes in the allowance is recognized in other comprehensive income. When financial assets at FVTOCI is disposed or repaid, the related allowance is reclassified from other comprehensive income to net income.

(8) Offsetting financial instruments

Financial assets and liabilities are presented as a net amount in the statements of financial position when the Bank has an enforceable legal right and an intention to settle on a net basis or to realize an asset and settle the liability simultaneously.

(9) Investment properties

The Bank classifies a property held to earn rentals and/or for capital appreciation as an investment property. Investment properties are measured initially at cost, including transaction costs, less subsequent depreciation and impairment.

Subsequent costs are included in the carrying amount of the asset or recognized as a separate asset if it is probable that future economic benefits associated with the assets will flow into the Bank and the cost of an asset can be measured reliably, and the book value of a portion of an asset that are replaced by a subsequent expenditure is removed from the books. Routine maintenance and repairs are expensed as incurred.

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While land is not depreciated, all other investment properties are depreciated based on the depreciation method and useful lives of premises and equipment. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, and when it is deemed appropriate to change them, the effect of any change is accounted for as a change in accounting estimates.

An investment property is derecognized from the separate financial statements on disposal or when it is permanently withdrawn from use and no future economic benefits are expected even from its disposal. The gain or loss from derecognition of an investment property is calculated as the difference between the net disposal proceeds and the carrying amount of the property, and is recognized in profit or loss of the period.

(10) Premises and equipment

Premises and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of premises and equipment is expenditure directly attributable to their purchase or construction, which includes any cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. It also includes the initial estimate of costs of dismantling and removing the item and restoring the site on which it is located.

Subsequent costs are recognized in the carrying amount of an asset or as a separate asset (if appropriate) if it is probable that future economic benefit associated with the assets will flow into the Bank and the cost of an asset can be measured reliably. Routine maintenance and repairs are expensed as incurred.

While land is not depreciated, for all other premises and equipment, depreciation is charged to net income on a straight-line basis by applying the following estimated economic useful lives on the amount of cost or revalued amount less residual value.

	Useful life
Buildings used for business purpose	40 years
Structures in leased office	5 years
Properties for business purpose	5 years

The Bank reassesses the depreciation method, the estimated useful lives and residual values of premises and equipment at the end of each reporting period. If changes in the estimates are deemed appropriate, the changes are accounted for as a change in an accounting estimate. When there is an indicator of impairment and the carrying amount of a premises and equipment item exceeds the estimated recoverable amount, the carrying amount of such asset is reduced to the recoverable amount.

(11) Intangible assets and goodwill

The Bank is recognizing intangible assets measured at the manufacturing cost or acquisition cost plus additional incidental expenses less accumulated amortization and accumulated impairment losses. The Bank’s intangible asset are amortized over the following economic lives using the straight-line method. The estimated useful life and amortization method are reviewed at the end of each reporting period. If changes in the estimates are deemed appropriate, the changes are accounted for as a change in an accounting estimate.

	Useful life
Industrial property rights	10 years
Development costs	5 years
Other intangible assets	5 years

In addition, when an indicator that intangible assets are impaired is noted, and the carrying amount of the asset exceeds the estimated recoverable amount of the asset, the carrying amount of the asset is reduced to its recoverable amount.

Goodwill is not amortized, but is subject to an impairment test every year, and whenever there is an indicator that goodwill is impaired.

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Goodwill is allocated to each of the Bank’s cash-generating unit (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit on a pro rata basis based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or loss. An impairment loss recognized for goodwill cannot be reversed in subsequent periods.

(12) Impairment of non-monetary assets

Intangible assets with indefinite useful lives or intangible assets that are not yet available for use are tested for impairment annually, regardless of whether or not there is any indication of impairment. All other assets are tested for impairment by estimating the recoverable amount when there is an objective indication that the carrying amount may not be recoverable. Recoverable amount is the higher of value in use or net fair value, less costs to sell. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and such impairment loss is recognized immediately in net income.

(13) Leases

As the Bank applied K-IFRS 1116 using the revised retrospective method, the comparative financial information has not been prepared. The Bank also applied K-IFRS 1017 and 2104. The accounting policies in accordance with K-IFRS 1017 and 2104 are separately disclosed.

Accounting policy applied since January 1, 2019

The Bank determines whether the agreement is a lease or includes a lease at the time of the agreement. In exchange for consideration in the contract, if the control over the use of the identified asset is transferred for a period of time, the contract is a lease or includes a lease. In determining whether a contract transfers control of the use of the identified asset, the Bank uses the definition of a lease in K-IFRS 1116.

This accounting policy applies to contracts entered into since January 1, 2019.

1) The Bank as a lessee

The Bank recognizes the right-of-use asset and the lease liability at the commencement date of the lease. The right-of-use asset is measured at cost, which comprises the amount of the initial measurement of the lease liability, lease payments made at or before the commencement date (less any lease incentives received), initial direct costs, and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located.

The right-of-use asset is subsequently depreciated on a straight-line basis from the commencement of the lease to the end of the lease term. However, if the lease transfers ownership of the underlying asset to the lessee by the end of the lease term or if the cost of the right-of-use asset reflects that the lessee will exercise a purchase option, the lessee depreciates the right-of-use asset same as a fixed asset from the commencement date to the end of the useful life of the underlying asset. The right-of-use asset may be reduced by an impairment of the underlying asset or adjusted by remeasurement of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease, but if that cannot be readily determined, the Bank uses its incremental borrowing rate. The Bank generally uses the incremental borrowing rate.

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The lease payments included in the measurement of the lease liability comprise the following:

• Fixed payments (including in-substance fixed payments)

• Variable lease payments that depend on an index (or a rate), initially measured using the index or rate as at the commencement date

• Amounts expected to be payable by the lessee under residual value guarantees

• The exercise price of a purchase option if the lessee is reasonably certain to exercise that option, lease payments of the extended period if the lessee is reasonably certain to exercise extension option, and payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease

The lease liability is subsequently increased by the interest expense recognized for the lease liability and decreased by reflecting the payment of the lease payments. The lease liability is remeasured if the future lease payments change depending on changes in the index(or a rate), changes in the expected amount to be paid under the residual value guarantee, and changes in the assessment of whether the purchase or extension option is reasonably certain to be exercised or not to exercise the terminate option.

When remeasureing a lease liability, the related right-of-use asset is adjusted and if the carrying amount of the right-of-use asset decreases to zero, the remeasurement amount is recognized in profit or loss.

The Bank applies its judgment when determining the lease term for some lease contracts that include the extension option. The assessment of whether the bank is reasonably certain to exercise the option significantly affects the lease term and therefore has a significant impact on the amount of lease liabilities and the right-of-use asset.

In the statement of financial position, the Bank classified the right-of-use assets that do not meet the definition of investment property as ‘fixed assets’ and the lease liabilities as ‘other financial liabilities.’

Short-term lease and leases for which the underlying asset is of low value

The Bank has chosen a practical expedient that does not recognize the right-of-use asset and lease liabilities for short-term leases with a lease term less than 12 months and leases for which the underlying asset is of low value. The Bank recognizes the lease payments associated with those leases as an expense on a straight-line basis over the lease term.

2) The Bank as a lessor

At the date of the agreement or the effective date of the modification containing the lease element, the Bank allocates the consideration of the contract to each lease element on the basis of its relative stand-alone price.

As a lessor, the Bank classifies its leases as either an operating lease or a finance lease at the commencement date.

The Bank subsequently judges whether the lease transfers substantially all the risks and rewards incidental to ownership of an underlying asset. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset, otherwise a lease is classified as an operating lease.

If the agreement contains both lease and non-lease elements, the Bank applies K-IFRS 1115 to allocate the consideration of the contract.

The Bank applies derecognition and impairment provisions of K-IFRS 1109 to its net investment in the lease. The Bank also carries out regular review of the unguaranteed residual value used to calculate total lease investment.

The Bank recognizes lease payments from operating lease as income on a straight-line basis.

The accounting policy that the Bank has applied as a lessor is not different from K-IFRS 1116.

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3) Accounting policy applied before January 1, 2019

The Bank classifies a lease as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset to the lessee, and all lease contracts other than finance leases are classified as operating leases.

① The Bank as a lessee

In case of finance leases, the lesser amount of the present value of the minimum lease payments at the commencement date of the lease term or the fair value of the leased asset are recognized as financial lease assets and liabilities in the statement of financial position. Lease payments are allocated as interest expense and repayment of the lease liability so that the same period interest rate is calculated for the balance of the liability. Adjustment to the lease payments are accounted for as expenses during the period.

The operating lease payments are recognized as an expense on a straight-line basis if there is no other systematic basis that is more representative of the pattern in which benefit from the use of underlying asset. Adjustment lease payments from the operating leases are accounted for as expenses during the period in which they are incurred.

② The Bank as a lessor

The Bank recognizes a finance lease receivable equal to the present value of the minimum lease and the non-guaranteed residual value, which is the net investment of the finance lease. The accounting for recognizing interest income by reporting period is carried out on a financial lease receivable after the commencement date of the lease term by applying a method in which a certain interest rate of the Bank’s net investment in the lease is calculated.

The Bank recognizes income from lease payments of operating lease on a straight line basis over the lease term, and the direct costs of the lease incurred during the negotiation and contract phase of the operating lease is added to the carrying value of the lease asset and recognized as an expense over the lease term on a straight-line basis. Operating lease assets are included in other assets and are depreciated over their economic useful life.

(14) Derivative instruments

Derivative instruments are classified as forwards, futures, options and swaps, depending on the types of transactions and are classified at the point of transaction as either trading or hedging based on its purpose.

Derivatives are initially recognized at fair value at the date of contract and are subsequently measured at fair value at the end of each reporting period. The resulting gain or loss is recognized in net income immediately unless the derivative is designated and effective as a hedging instrument. If derivatives have been designated as hedging instruments and if it is effective, the point of recognition of gain or loss depends on the characteristics of hedging relationship.

1) Embedded derivatives

Embedded derivatives are components of a hybrid financial instrument that includes a non-derivative host contract. It has an effect of modifying part of cash flows of the hybrid financial instrument similar to an independent derivative.

Embedded derivatives that are part of a hybrid contract of which the host contract is a financial asset within the scope of K-IFRS 1109 is not separated. The classification is done by considering the hybrid contract as a whole, and subsequent measurement is either at amortized cost or fair value.

If embedded derivatives are part of a hybrid contract of which the host contract is not a financial asset within the scope of K-IFRS 1109 (e.g. financial liability), then these are treated as separate derivatives if embedded derivatives meet the definition of a derivative, characteristics and risk of the embedded derivatives are not closely related to that of host contract, and if the host contract is not measured at FVTPL.

In the previous year, all embedded derivatives which were part of a hybrid contract were treated as separate derivatives if embedded derivatives meet the definition of a derivative, characteristics and risk of the embedded derivatives are not closely related to that of host contract, and if the host contract is not measured at FVTPL

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2) Hedge accounting

The Bank is applying K-IFRS 1109 in regards to hedge accounting. The Bank designates certain derivatives as hedging instrument against fair value changes in relation to the interest rate risk, foreign currency translation and interest rate risk, and foreign currency translation risk.

The Bank documents the relationship between hedging instruments and hedged items at the commencement of hedging in accordance with their purpose and strategy. Also, the Bank documents at the commencement and subsequent dates whether the hedging instrument effectively counters the changes in fair value of hedged items. A hedging instrument is effective only when it meets all the following criteria:

• When there is an economic relationship between the hedged items and hedging instruments.

• When the effect of credit risk is not stronger than the change in value due to the economic relationship between the hedged items and hedging instruments.

• When the hedge ratio is equal to the proportion and the number of hedged items to those of the hedging instruments.

When a hedging relationship no longer meets the hedging effectiveness requirements related to hedge ratio, but when the purpose of risk management on designated hedging relationship is still maintained, the hedge ratio of the hedging relationship is adjusted so that hedging relationship may meet the requirements again (Hedge ratio readjustment).

3) Fair value hedge

Gain or loss arising from valid hedging instrument is recognized in profit or loss. However, when the hedging instrument mitigates risks on equity instruments designated as financial assets at FVTOCI, related gain or loss is recognized in other comprehensive income.

The book value of hedged items that are not measured in fair value is adjusted by the changes in fair value arising from the hedged risk, with resulting gain or loss reflected in net income. In case of debt instruments measured at FVTOCI, book value is an amount that is already adjusted to fair value and thus gain or loss arising from the hedged risk is recognized in profit or loss instead of other comprehensive income without adjustments in book value. When the hedged item is equity instruments measured at FVTOCI, the gain or loss arising from hedged risk is retained at other comprehensive income in order to match the gain or loss with hedging instruments.

Hedge accounting ceases to apply only when hedging relationship (or part of it) does not meet the requirements of hedge accounting (even after hedging relationship readjustment, if applicable). This treatment holds in case of lapse, disposal, expiry and exercise of hedging instruments, and this cease of treatment applies prospectively. The fair value adjustments made to book value of hedged item due to hedged risk is amortized from the date of discontinuance of hedge accounting and is recognized in profit or loss.

(15) Assets (or disposal group) held for sale

The Bank classifies a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.

(16) Provisions

The Bank recognizes provision if (a) it has present or contractual obligations as a result of the past event, (b) it is probable that an outflow of resources will be required to settle the obligation and (c) the amount of the obligation is reliably estimated. Provision is not recognized for the future operating losses.

The Bank recognizes provision related to the unused membership points, payment guarantees, loan commitment and litigations. Where the Bank is required to restore a leased property that is used as a branch to an agreed condition after the contractual term expires, the present value of expected amounts to be used to dispose, decommission or repair the facilities is recognized as an asset retirement obligation.

Where there are a number of similar obligations, the probability that an outflow will be required in settlement is determined by considering the obligations as a whole. Although the likelihood of outflow for any one item may be small, if it is probable that some outflow of resources will be needed to settle the obligations as a whole, a provision is recognized.

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(17) Capital and compound financial instruments

The Bank classifies a financial instrument that it issues as a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. A financial liability is a contractual obligation to deliver cash or another financial asset to another entity. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. The compound financial instruments issued by the Bank are financial instruments where it is neither a financial liability nor an equity instrument because it was designed to contain both equity and debt elements.

If the Bank reacquires its own equity instruments, the consideration paid including the direct transaction costs (net of tax expense) are presented as a deduction from total equity until such instruments are retired or reissued. When these instruments are reissued, the consideration received (net of direct transaction costs) is included in the shareholder’s equity.

(18) Financial guarantee liabilities

A financial guarantee contract is a contract where the issuer must pay a certain amount of money in order to compensate losses suffered by the creditor when debtor defaults on a debt instrument in accordance with original or modified contractual terms.

A financial guarantee is initially measured at fair value and is subsequently measured at the higher of the amounts below unless it is designated to be measured at FVTPL or when it arises from disposal of an asset.

• Loss allowance in accordance with K-IFRS 1109

• Initial book value less accumulated profit measured in accordance with K-IFRS 1115

(19) Employee benefits and pensions

The Bank recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by the employees. Also, the Bank recognizes expenses and liabilities in the case of accumulating compensated absences when the employees render services that entitle their right to future compensated absences. Similarly, the Bank recognizes expenses and liabilities for customary profit distribution or bonuses when the employees render services, even though the Bank does not have legal obligation to do so because it can be construed as constructive obligation.

The Bank is operating defined contribution plans and defined benefit plans. Contributions to defined contribution plans are recognized as an expense when employees have rendered services entitling them to receive the benefits. For defined benefit plans, the defined benefit liability is calculated through an actuarial assessment using the projected unit credit method every end of the reporting period, conducted by professional actuaries. Remeasurement, comprising actuarial gains and losses, the return on plan assets (excluding interest), and the effect of the changes to the asset ceiling (if applicable) is reflected immediately in the separate statement of financial position with a charge or credit recognized as other comprehensive income in the period in which they occur.

Remeasurement recognized in the statement of comprehensive income is not reclassified to profit or loss in the subsequent periods. Past service cost is recognized in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are composed of service cost (including current service cost and past service cost, as well as gains and losses on curtailments and settlements), net interest expense (income) and remeasurement.

The Bank presents the service cost and net interest expense (income) components in profit or loss, and the remeasurement component in other comprehensive income. Curtailment gains and losses are accounted for as past service costs.

The retirement benefit obligation recognized in the separate statement of financial position represents the actual deficit or surplus in the Bank’s defined benefit plans. Any surplus resulting from this calculation is recognized as an asset limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.

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Liabilities for termination benefits are recognized at the earlier of either 1) the date when the Bank is no longer able to cancel its proposal for termination benefits or 2) the date when the Bank has recognized the cost of restructuring that accompanies the payment of termination benefits.

(20) Income taxes

Income tax expense is composed of current tax and deferred tax. That is, income tax expense is composed of taxes payable or refundable during the period and deferred taxes calculated by applying asset-liability method to taxable and deductible temporary differences arising from operating loss and tax credit carryforwards. Temporary differences are the differences between the carrying values of assets and liabilities for financial reporting purposes and their tax bases. Deferred income tax benefit or expense is recognized for the change in deferred tax assets or liabilities. Deferred tax assets and liabilities are measured as of the reporting date using the enacted or substantively enacted tax rates expected to apply in the period in which the liability is settled or asset realized. Deferred tax assets, including the carryforwards of unused tax losses, are recognized to the extent it is probable that the deferred tax assets will be realized.

Deferred income tax assets and liabilities are offset if, and only if, the Bank has a legally enforceable right to offset current tax assets against current tax liabilities, and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority or when the entity intends to settle current tax liabilities and assets on a net basis with different taxable entities.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill. Deferred tax assets or liabilities are not recognized if they arise from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity or when it arises from business combination.

The tax uncertainty arises from the compensation claim filed by the company, and the refund litigation for the amount of tax levied by the tax authority due to differences in tax law analysis

In response, the Bank paid taxes in accordance with K-IFRS 2123 due to the tax authority’s claim, but recognized as a corporate tax asset if it is highly probable of a refund in the future.

(21) Earnings per share (“EPS”)

Basic EPS is a calculation of net income per each common stock. It is calculated by dividing net income attributable to ordinary shareholders by the weighted-average number of common shares outstanding. Diluted EPS is calculated by adjusting the earnings and number of shares for the effects of all dilutive potential common shares.

3. SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS

The significant accounting estimates and assumptions are continuously being evaluated based on numerous factors including historical experiences and expectations of future events considered to be reasonably possible. Actual results can differ from those estimates based on such definitions. The accounting estimates and assumptions that contain significant risk of materially changing current book values of assets and liabilities in the next accounting periods are as follows:

(1) Income taxes

The Bank has recognized current and deferred taxes based on best estimates of expected future income tax effect arising from the Bank’s operations until the end of the current reporting period. However, actual tax payment may not be identical to the related assets and/or liabilities already recognized, and these differences may affect current taxes and deferred tax assets/liabilities at the time when income tax effects are finalized. Deferred tax assets relating to tax losses carried forward and deductible temporary differences are recognized only to the extent that it is probable that future taxable profit will be available against which the tax losses carried forward and the deductible temporary differences can be utilized. In this case the Bank’s evaluation considers various factors such as estimated future taxable profit based on forecasted operating results, which are based on historical financial performance. The Bank is reviewing the book value of deferred tax assets every end of the reporting period and in the event that the possibility of earning future taxable income changes, the deferred tax assets are adjusted up to taxable income sufficient to use deductible temporary differences.

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(2) Valuation of financial instruments

Financial assets at FVTPL and FVTOCI are recognized in the separate financial statements at fair value. All derivatives are measured at fair value. Valuation techniques are required in order to determine fair values of financial instruments where observable market prices do not exist. Financial instruments that are not actively traded and have low price transparency will have less objective fair value and require broad judgment in liquidity, concentration, uncertainty in market factors and assumption in price determination and other risks.

As described in Note 2-(7)-5), ‘Fair value of financial assets and liabilities’, when valuation techniques are used to determine the fair value of a financial instrument, various general and internally developed techniques are used, and various types of assumptions and variables are incorporated during the process.

(3) Impairment of financial instruments

K-IFRS 1109 requires entities to measure loss allowance equal to 12-month expected credit losses or lifetime expected credit losses after classifying financial assets into one of the three stages, which depends on the degree of increase in credit risk after their initial recognition.

Stage number	Stage 1	Stage 2	Stage 3
	Credit risk has not significantly increased since initial recognition(*)	Credit risk has significantly increased since initial recognition	Credit has been impaired
Allowance for expected credit losses	Expected 12-month credit losses: Expected credit losses due to possible defaults on financial instruments within a 12-month period from the year-end.	Expected lifetime credit losses: Expected credit losses from all possible defaults during the expected lifetime of the financial instruments.

(*) Credit risk may be considered to not have been significantly increased when credit risk is low at year-end.

The Bank has estimated the allowance for credit losses based on reasonable and supportable information that was available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.

Probability of default (PD) and Loss given default (LGD) for each category of financial asset is being calculated by considering factors such as debtor type, credit rating and portfolio. The estimates are regularly reviewed in order to reduce discrepancies with actual losses.

In measuring the expected credit losses, the Bank is also using reasonable and supportable macroeconomic indicators such as economic growth rate, interest rates, market index rates, etc., in order to forecast future economic conditions.

The Bank is conducting the following procedures to estimate and apply future economic forecast information.

• Development of estimation models by analyzing the correlation between default rates of corporate and retail exposures per year and macroeconomic indicators

• Calculation of estimated default rate incorporating future economic forecasts by applying estimated macroeconomic indicators provided by verified institutions such as Bank of Korea and National Assembly Budget Office to the estimation model developed.

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At the end of every reporting period, the Bank evaluates whether credit risk reflected forward-looking information has significantly increased since the date of initial recognition. When evaluating whether credit risk has significantly been increased, the changes in the probability of default over the financial instrument’s remaining life is used instead of changes in the amount of expected credit losses. The Bank performs the above evaluation with distinctions made to corporate and retail exposures, and indicators of significant increase in credit risk are as follows:

Corporate Exposures	Retail Exposures
Asset quality level ‘Precautionary’ or lower	Asset quality level ‘Precautionary’ or lower
Overdue of 30 days or longer	Overdue of 30 days or longer
‘Warning’ level in early warning system	Significant decrease in credit rating(*)
Debtor experiencing financial difficulties (Capital impairment, Adverse opinion or Disclaimer of audit opinion)
Significant decrease in credit rating(*)

(*) Determining whether there has been a significant decrease in the credit rating of corporate and retail exposures applies only to credit ratings that are measured through 12-month expected credit loss. The Bank has applied the above indicators of significant decrease in credit rating since initial recognition as follows, and the estimation method is regularly being monitored.

	Credit rating	Indicators of significant decrease in credit rating
Corporate	AAA ~ A+	More than 4 steps
	A- ~ BBB	More than 3 steps
	BBB- ~ BB+	More than 2 steps
	BB ~ BB-	More than 1 step
Retail	1 ~ 3	More than 3 steps
	4 ~ 5	More than 2 steps
	6 ~ 10	More than 1 step

The Bank sees no significant increase in credit risk after initial recognition for debt securities, etc. with a credit rating of A + or higher, which are deemed to have low credit risk at the end of the reporting period.

The Bank concludes that credit is impaired when financial assets are under conditions stated below:

• When principal of loan is overdue for 90 days or longer due to significant deterioration in credit

• For loans overdue for less than 90 days, when it is determined that not even a portion of the loan will be recovered unless claim actions such as disposal of collaterals are taken

• When other objective indicators of impairment have been noted for the financial asset.

The Bank determines which loan is subject to write-off in accordance with internal guidelines, and writes off loan receivables when it is determined that the loans are practically irrecoverable. For example, loans are practically irrecoverable when application is made for rehabilitation under the Debtor Rehabilitation and Bankruptcy Act and loans are confirmed as irrecoverable by the court’s decision to waive debtor’s obligation, or when it is impossible to recover the loan amount through legal means such as auctioning of debtor’s assets or through any other means of recovery available. Notwithstanding the write-off, the Bank may still exercise its right of collection after the asset has been written off in accordance with its collection policies.

(4) Defined benefit plan

The Bank operates a defined benefit pension plan. Defined benefit obligation is calculated at every end of the reporting period by performing actuarial valuation, and estimation of assumptions such as discount rate, expected wage growth rate and mortality rate is required to perform such actuarial valuation. The defined benefit plan, due to its long-term nature, contains significant uncertainties in its estimates.

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4. RISK MANAGEMENT

The Bank’s operating activity is exposed to various financial risks. The Bank is required to analyze and assess the level of complex risks, and determine the permissible level of risks and manage such risks. The Bank’s risk management procedures have been established to improve the quality of assets for holding or investment purposes by making decisions as how to avoid or mitigate risks through the identification of the source of the potential risks and their impact.

The Bank has established an approach to manage the acceptable level of risks and reduce the excessive risks in financial instruments in order to maximize the profit given risks present, for which the Bank has implemented processes for risk identification, assessment, control, and monitoring and reporting.

The risk is managed by the risk management department in accordance with the Bank’s risk management policy. The Risk Management Committee makes decisions on the risk strategies such as the allocation of risk capital and the establishment of acceptable level of risk.

(1) Credit risk

Credit risk represents the possibility of financial losses incurred when the counterparty fails to fulfill its contractual obligations. The goal of credit risk management is to maintain the Bank’s credit risk exposure to a permissible degree and to optimize the rate of return considering such credit risk.

1) Credit risk management

The Bank considers the probability of failure in performing the obligation of its counterparties, credit exposure to the counterparty, the related default risk and the rate of default loss. The Bank uses the credit rating model to assess the possibility of counterparty’s default risk; and when assessing the obligor’s credit grade, the Bank utilizes credit grades derived using statistical methods.

In order to manage credit risk limit, the Bank establishes the appropriate credit line per obligor, company or industry. It monitors obligor’s credit line, total exposures and loan portfolios when approving the loan.

The Bank mitigates credit risk resulting from the obligor’s credit condition by using financial and physical collateral, guarantees, netting agreements and credit derivatives. The Bank has adopted the entrapment method to mitigate its credit risk. Credit risk mitigation is reflected in qualifying financial collateral, trade receivables, guarantees, residential and commercial real estate and other collaterals. The Bank regularly performs a revaluation of collateral reflecting such credit risk mitigation.

2) Maximum exposure to credit risk

The Bank’s maximum exposure to credit risk refers to net book value of financial assets net of allowances, which shows the uncertainties of maximum changes of net value of financial assets attributable to a particular risk without considering collateral and other credit enhancements obtained. However, the maximum exposure is the fair value amount (recorded on the books) for derivatives, maximum contractual obligation for payment guarantees and unused loan commitment.

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The maximum exposure to credit risk is as follows (Unit: Korean Won in millions):

		December 31, 2019		December 31, 2018
Loans and other financial assets at amortized cost	Korean treasury and government agencies		14,747,037		13,513,927
	Banks		14,582,652		19,965,172
	Corporates		91,102,467		87,357,986
	Consumers		147,479,183		139,513,864
	Sub-total		267,911,339		260,350,949
Financial assets at FVTPL(*)	Deposit		27,901		26,935
	Loans		9,037		21,492
	Derivative assets		2,945,273		2,034,988
	Sub-total		2,982,211		2,083,415
Financial assets at FVTOCI	Debt securities		25,776,164		16,254,592
Securities at amortized cost	Debt securities		20,147,137		22,802,050
Derivative assets	Derivative assets (Held for hedging)		111,764		35,503
Off-balance accounts	Guarantees		14,523,768		13,990,450
	Loan commitments		69,035,560		65,012,748
	Sub-total		83,559,328		79,003,198
	Total		400,487,943		380,529,707

(*) Puttable Financial instruments are not included.

a) Credit risk exposure by geographical areas

The following tables analyze credit risk exposure by geographical areas (Unit: Korean Won in millions):

	December 31, 2019
	Korea		U.S.A		U.K		Japan		Others (*)		Total
Loans and other financial assets at amortized cost		254,467,439		3,030,372		1,844,374		1,172,209		7,396,945		267,911,339
Securities at amortized cost		20,104,604		—		—		—		42,533		20,147,137
Financial assets at FVTPL		2,981,487		—		—		724		—		2,982,211
Financial assets at FVTOCI		24,543,575		—		102,311		—		1,130,278		25,776,164
Derivative assets (designated for hedging)		111,764		—		—		—		—		111,764
Off-balance accounts		82,020,882		262,018		78,850		46,662		1,150,916		83,559,328
Total		384,229,751		3,292,390		2,025,535		1,219,595		9,720,672		400,487,943

	December 31, 2018
	Korea		U.S.A		U.K		Japan		Others (*)		Total
Loans and other financial assets at amortized cost		249,216,942		2,754,044		1,526,532		893,354		5,960,077		260,350,949
Securities at amortized cost		22,757,047		—		—		—		45,003		22,802,050
Financial assets at FVTPL		2,083,148		—		—		267		—		2,083,415
Financial assets at FVTOCI		15,642,031		—		16,718		—		595,843		16,254,592
Derivative assets (designated for hedging)		35,503		—		—		—		—		35,503
Off-balance accounts		77,614,417		257,816		136,727		34,999		959,239		79,003,198
Total		367,349,088		3,011,860		1,679,977		928,620		7,560,162		380,529,707

(*) Others consist of financial assets in Hong Kong, Singapore and Australia and others.

b) Credit risk exposure by industries

The following tables analyze credit risk exposure by industries, which are service, manufacturing, finance and insurance, construction, individuals and others in accordance with the Korea Standard Industrial Classification Code (Unit: Korean Won in millions):

	December 31, 2019
	Service		Manufacturing		Finance and insurance		Construction		Individuals		Others		Total
Loans and other financial assets at amortized cost		49,207,201		30,848,489		32,356,929		2,445,858		143,965,810		9,087,052		267,911,339
Securities at amortized cost		8,545,838		—		10,892,540		364,591		—		344,168		20,147,137
Financial assets at FVTPL		122,809		144,614		2,674,784		9,057		15,430		15,517		2,982,211
Financial assets at FVTOCI		15,051		65,042		18,746,268		—		9,241		6,940,562		25,776,164
Derivative assets (designated for hedging)		—		—		111,764		—		—		—		111,764
Off-balance accounts		15,449,472		25,313,872		9,600,883		3,498,976		23,771,740		5,924,385		83,559,328
Total		73,340,371		56,372,017		74,383,168		6,318,482		167,762,221		22,311,684		400,487,943

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	December 31, 2018
	Service		Manufacturing		Finance and insurance		Construction		Individuals		Others		Total
Loans and other financial assets at amortized cost		46,177,373		32,891,096		37,453,611		2,557,684		135,827,962		5,443,223		260,350,949
Securities at amortized cost		1,157,512		—		13,376,324		527,847		—		7,740,367		22,802,050
Financial assets at FVTPL		82,351		81,451		1,872,922		9,173		7,614		29,904		2,083,415
Financial assets at FVTOCI		326,333		41,673		12,830,631		194,562		5,535		2,855,858		16,254,592
Derivative assets (designated for hedging)		—		—		35,503		—		—		—		35,503
Off-balance accounts		15,205,797		23,696,274		8,784,514		3,706,275		21,663,309		5,947,029		79,003,198
Total		62,949,366		56,710,494		74,353,505		6,995,541		157,504,420		22,016,381		380,529,707

3) Credit risk exposure

a) Financial assets

The maximum exposure to credit risk by asset quality, except for financial assets at FVTPL and derivative assets (Held for hedging) is as follows (Unit: Korean Won in millions):

	December 31, 2019
	Stage 1				Stage 2				Stage 3		Total		Loss allowance			Total, net
	Above appropriate credit rating (*1)		Less than a limited credit rating (*3)		Above appropriate credit rating (*2)		Less than a limited credit rating (*3)
Loans and other financial assets at amortized cost		233,368,538		17,470,260		8,099,456		9,054,064		1,155,612		, 269,147,930		(1,236,591	)		267,911,339
Korean treasury and government agencies		14,750,308		—		—		—		—		14,750,308		(3,271	)		14,747,037
Banks		14,452,687		2,316		146,664		—		—		14,601,667		(19,015	)		14,582,652
Corporates		74,515,326		13,313,552		433,256		2,987,899		727,743		91,977,776		(875,309	)		91,102,467
General business		41,610,937		4,537,441		390,456		1,343,639		494,382		48,376,855		(586,386	)		47,790,469
Small- and medium-sized enterprise		29,679,249		8,275,146		42,800		1,584,575		220,028		39,801,798		(266,116	)		39,535,682
Project financing and others		3,225,140		500,965		—		59,685		13,333		3,799,123		(22,807	)		3,776,316
Consumers		129,650,217		4,154,392		7,519,536		6,066,165		427,869		147,818,179		(338,996	)		147,479,183
Securities at amortized cost		20,152,619		—		—		—		—		20,152,619		(5,482	)		20,147,137
Financial assets at FVTOCI (*4)		25,710,935		65,229		—		—		—		25,776,164		(8,051	)		25,776,164
Total		279,232,092		17,535,489		8,099,456		9,054,064		1,155,612		315,076,713		(1,250,124	)		313,834,640

(*1) Credit grade of corporates are AAA ~ BBB, and consumers are grades 1 ~ 6.

(*2) Credit grade of corporates are A- ~ BBB, and consumers are grades 1 ~ 6.

(*3) Credit grade of corporate are BBB- ~ C, and consumers are grades 7 ~ 10.

(*4) Financial assets at FVTOCI have been disclosed as the amount before deducting loss allowance because loss allowance does not reduce the carrying amount.

	December 31, 2018
	Stage 1				Stage 2				Stage 3		Total		Loss allowance			Total, net
	Above appropriate credit rating (*1)		Less than a limited credit rating (*3)		Above appropriate credit rating (*2)		Less than a limited credit rating (*3)
Loans and other financial assets at amortized cost		234,604,099		15,064,338		5,597,603		5,209,197		1,340,212		261,815,449		(1,464,500	)		260,350,949
Korean treasury and government agencies		13,517,080		—		—		—		—		13,517,080		(3,153	)		13,513,927
Banks		19,956,800		10,314		23,935		—		—		19,991,049		(25,877	)		19,965,172
Corporates		70,302,975		13,451,275		532,000		3,236,305		931,193		88,453,748		(1,095,762	)		87,357,986
General business		39,440,686		4,565,102		469,573		1,537,953		648,087		46,661,401		(736,204	)		45,925,197
Small- and medium-sized enterprise		27,303,978		8,337,471		62,427		1,545,602		269,059		37,518,537		(318,312	)		37,200,225
Project financing and others		3,558,311		548,702		—		152,750		14,047		4,273,810		(41,246	)		4,232,564
Consumers		130,827,244		1,602,749		5,041,668		1,972,892		409,019		139,853,572		(339,708	)		139,513,864
Securities at amortized cost		22,808,945		—		—		—		—		22,808,945		(6,895	)		22,802,050
Financial assets at FVTOCI (*4)		16,167,536		87,056		—		—		—		16,254,592		(5,413	)		16,254,592
Total		273,580,580		15,151,394		5,597,603		5,209,197		1,340,212		300,878,986		(1,476,808	)		299,407,591

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	December 31, 2019		For the year ended December 31, 2019						December 31, 2018		For the year ended December 31, 2018
			Collateral value								Collateral value
Risk factor			Stage 1		Stage 2		Stage 3				Stage 1		Stage 2		Stage 3
Loans and other financial assets at amortized cost		182,360,472		167,284,524		14,420,473		655,475		170,983,239		161,494,496		8,815,347		673,396
Korean treasury and government agencies		—		—		—		—		11,600		11,600		—		—
Banks		613,357		611,329		2,028		—		363,436		360,102		3,334		—
Corporates		57,265,633		54,588,838		2,310,316		366,479		53,362,185		50,464,533		2,492,375		405,277
General business		22,685,764		21,464,348		998,586		222,830		20,175,240		18,803,891		1,150,747		220,602
Small- and medium-sized enterprise		32,972,767		31,517,388		1,311,730		143,649		31,255,455		29,779,557		1,291,223		184,675
Project financing and others		1,607,102		1,607,102		—		—		1,931,490		1,881,085		50,405		—
Consumers		124,481,482		112,084,357		12,108,129		288,996		117,246,018		110,658,261		6,319,638		268,119
Securities at amortized cost		—		—		—		—		—		—		—		—
Financial assets at FVTOCI (*4)		—		—		—		—		—		—		—		—
Total		182,360,472		167,284,524		14,420,473		655,475		170,983,239		161,494,496		8,815,347		673,396

(*1) Credit grade of corporates are AAA ~ BBB, and consumers are grades 1 ~ 6.

(*2) Credit grade of corporates are A- ~ BBB, and consumers are grades 1 ~ 6.

(*3) Credit grade of corporate are BBB- ~ C, and consumers are grades 7 ~ 10.

(*4) Financial assets at FVTOCI have been disclosed as the amount before deducting loss allowance because loss allowance does not reduce the carrying amount.

b) Guarantees and loan commitments

The credit quality of the guarantees and loan commitments on December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

	December 31, 2019
Financial assets	Stage 1				Stage 2				Stage3		Total
	Above appropriate credit rating (*1)		Less than a limited credit rating (*3)		Above appropriate credit rating (*2)		Less than a limited credit rating (*3)
Off-balance accounts Guarantees		13,370,253		829,650		355		215,084		108,426		14,523,768
Loan commitments		64,611,094		2,605,074		1,270,196		549,196		—		69,035,560
Total		77,981,347		3,434,724		1,270,551		764,280		108,426		83,559,328

(*1) Credit grade of corporates are AAA ~ BBB, and consumers are grades 1 ~ 6.

(*2) Credit grade of corporates are A- ~ BBB, and consumers are grades 1 ~ 6.

(*3) Credit grade of corporates are BBB- ~ C, and consumers are grades 7 ~ 10.

	December 31, 2018
Financial assets	Stage 1				Stage 2				Stage3		Total
	Above appropriate credit rating (*1)		Less than a limited credit rating (*3)		Above appropriate credit rating (*2)		Less than a limited credit rating (*3)
Off-balance accounts Guarantees		12,800,981		806,487		7,147		254,487		121,348		13,990,450
Loan commitments		60,405,878		2,663,904		1,404,007		538,959		—		65,012,748
Total		73,206,859		3,470,391		1,411,154		793,446		121,348		79,003,198

(*1) Credit grade of corporates are AAA ~ BBB, and consumers are grades 1 ~ 6.

(*2) Credit grade of corporates are A- ~ BBB, and consumers are grades 1 ~ 6.

(*3) Credit grade of corporates are BBB- ~ C, and consumers are grades 7 ~ 10.

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4) Collateral and other credit enhancements

There have been no significant decreases in the value of collateral or other credit enhancements held by the Bank during the current year or significant changes in collateral or other credit enhancements due to changes in the collateral policy of the Bank. As of December 31, 2019, there are no financial assets that do not recognize the allowance for losses due to collateral.

5) For the financial assets that record loss allowance as total expected credit loss, the amortized cost before the change in contractual cash flows is 18,735 million won, and the net loss due to the change is 82 million won.

6) As the Bank manages receivables that have not lost the right of claim to the debtor for the grounds of incomplete statute limitation and uncollected receivables under the related laws as receivable charge-offs, the balance as of December 31, 2019 and December 31, 2018 is 8,024,466 million won and 8,099,143 million Won respectively.

(2) Market risk

Market risk is the possible risk of loss arising from trading and non-trading activities in the volatility of market factors such as interest rates, stock prices, and foreign exchange rates. Market risk occurs as a result of changes in the interest rates and foreign exchange rates for financial instruments that are not yet settled, and all contracts are exposed to a certain level of volatility according to the interest rates, credit spreads, foreign exchange rates and the price of equity securities.

For trading activities and non-trading activities, the Bank avoids, bears or mitigates risks by identifying the underlying source of risks, measuring parameters and evaluating their appropriateness. The process is called market risk management.

1) Market risk management for trading activities

The Bank uses both a standard-based and an internal model-based approach to measure market risk. The standard-based approach is used to calculate individual market risk of owned capital while the internal model-based approach is used to calculate general capital market risk and it is used to measure internal risk management measure.

The Bank measures Value at Risk (“VaR,” maximum losses) with Historical Simulation Method based on 99% confidence level and 10-day holding period of positions, and calculates the required market risk capital using the internal model, which has been approved by Financial Supervisory Service in Korea. For the internal management purpose, VaR is measured based on 99% confidence level and one-day holding period of positions and the limit management is performed on a daily basis. The validation of the model is assessed through the performance of back testing, which is to compare the actual gain or loss to the VaR measurements on a daily basis.

In addition, for crisis management, the Bank performs stress testing on a monthly basis, which is to measure the expected loss amount in case of extreme situation, such as IMF bailout in 1997 or global financial crisis in 2008.

Each year, the Risk Management Committee establishes the VaR limit, loss limit and risk capital limit discriminated by managerial unit(group, department, team, risk element, etc.), and as for minor operating units, the limits are decided by position operating department up to given limit. Limit compliance is independently monitored by risk general department and periodically reported to risk management committee and risk management council.

2) Market risk management for non-trading activities

For non-trading sectors of the Bank, the risk is managed and measured by DNII(change in Net Interest Income) and DEVE(change in Economic Value of Equity) through NII(Net Interest Income) and NPV(Net Present Value) simulation, and for the remaining subsidiaries, the risk is managed and measured with interest rate EaR(Earning at Risk, maximum of the expected change for profit or loss) and interest rate VaR that are in accordance with BIS Framework.

- 27 -

NII is a profit-based indicator for displaying the profit changes in the short term due to the short-term interest changes. It will be estimated as subtracting interest expenses of liabilities from the interest income of assets. NPV is an indicator for displaying risks in an economic view according to unfavorable changes related to interest rate. It will be estimated as subtracting the present value of liabilities from the present value of assets. Meanwhile, DNII means possible variation of net interest income induced by changes of interest rate during the certain future period of time(e.g. 1year), and DEVE is possible variation of present value of assets, liabilities, off-balance accounts and ultimately, economic value of shareholder’s equity which is incurred by the same reason as DNII.

a) Trading activities

The minimum, maximum and average VaR for the year ended December 31, 2019 and 2018, respectively, and the VaR as of December 31, 2019 and 2018, respectively, are as follows (Unit: Korean Won in millions):

	December 31, 2019			For the year ended December 31, 2019									December 31, 2018			For the year ended December 31, 2018
Risk factor				Average			Maximum			Minimum						Average			Maximum			Minimum
Interest rate		5,052			3,406			5,725			1,176			3,107			3,702			5,528			1,730
Stock price		3,730			3,203			5,935			1,146			2,353			2,669			5,081			1,138
Foreign currencies		5,028			5,033			6,469			4,395			4,972			4,678			6,136			3,439
Commodity					1			32			—			—			3			24			—
Diversification		(6,233	)		(5,127	)		(9,229	)		(2,339	)		(4,445	)		(4,869	)		(8,155	)		(1,815	)
Total VaR(*)		7,577			6,516			8,932			4,378			5,987			6,183			8,614			4,492

(*) VaR (Value at Risk): Maximum expected daily losses at 99% confidence level

b) Non-trading activities

For assets and liabilities as of December 31, 2019, DEVE and the DNII calculated based on interest rate risk in the banking book (IRRBB) are as follows (Unit: Korean Won in millions):

December 31, 2019
DEVE(*1)		DNII(*2)
	485,693		146,025

(*1) DEVE: change in Economic Value of Equity

(*2) DNII: change in Net Interest Income

For assets and liabilities as of December 31, 2018, NII and NPV calculated for the assets and liabilities owned by the Bank, respectively, by using the simulation method are as follows (Unit: Korean Won in millions):

Name of scenario	December 31, 2018
	NII(*1)		NPV(*2)
Base case		4,886,919		24,635,872
Base case (Prepay)		4,881,567		24,225,127
IR 100bp up		5,580,848		24,414,552
IR 100bp down		4,321,315		24,906,922
IR 200bp up		6,622,298		24,231,110
IR 200bp down		3,500,800		25,245,603
IR 300bp up		7,593,109		24,077,356
IR 300bp down		3,344,206		25,680,348

(*1) NII: Net Interest Income

(*2) NPV: Net Portfolio Value

- 28 -

The Bank estimates and manages risks related to changes in interest rate due to the difference in the maturities of interest-bearing assets and liabilities and discrepancies in the terms of interest rates. Cash flows (both principal and interest), interest-bearing assets and liabilities, presented by each repricing date, are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Within 3 months		4 to 6 months		7 to 9 months		10 to 12 months		1 to 5 years		Over 5 years		Total
Asset:
Loans and other financial assets at amortized cost		136,468,173		46,964,614		11,045,037		9,406,431		51,908,166		4,286,512		260,078,933
Financial assets at FVTPL		23,808		1,352		37		36		1,161		13,347		39,741
Financial assets at FVTOCI		5,005,157		5,350,722		3,407,372		3,129,659		9,098,128		275,018		26,266,056
Securities at amortized cost		1,700,810		1,654,622		735,105		1,406,665		14,806,513		807,538		21,111,253
Total		143,197,948		53,971,310		15,187,551		13,942,791		75,813,968		5,382,415		307,495,983
Liability:
Deposits due to customers		111,584,479		44,934,733		31,569,737		24,123,007		41,724,832		59,140		253,995,928
Borrowings		8,893,123		1,422,464		1,027,528		682,473		2,992,835		500,685		15,519,108
Debentures		1,775,711		2,326,926		2,770,855		1,998,438		13,872,930		1,487,529		24,232,389
Total		122,253,313		48,684,123		35,368,120		26,803,918		58,590,597		2,047,354		293,747,425

	December 31, 2018
	Within 3 months		4 to 6 months		7 to 9 months		10 to 12 months		1 to 5 years		Over 5 years		Total
Asset:
Loans and other financial assets at amortized cost		145,015,086		43,247,365		7,827,430		9,077,245		41,492,032		3,419,576		250,078,734
Financial assets at FVTPL		117,324		50		160		49		2,281		27,536		147,400
Financial assets at FVTOCI		2,137,253		1,667,291		1,404,980		2,170,105		9,146,385		153,545		16,679,559
Securities at amortized cost		2,410,986		2,249,552		1,735,698		1,944,756		15,140,236		373,268		23,854,496
Total		149,680,649		47,164,258		10,968,268		13,192,155		65,780,934		3,973,925		290,760,189
Liability:
Deposits due to customers		96,816,710		41,903,982		28,169,284		33,573,893		38,622,661		64,425		239,150,955
Borrowings		8,806,595		1,290,054		580,935		460,078		2,664,135		495,516		14,297,313
Debentures		1,723,882		1,972,348		1,693,796		1,839,700		13,675,096		2,387,717		23,292,539
Total		107,347,187		45,166,384		30,444,015		35,873,671		54,961,892		2,947,658		276,740,807

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3) Currency risk

Currency risk arises from the financial instrument denominated in foreign currencies other than the functional currency. Therefore, no currency risk arises from non-monetary items or financial instruments denominated in the functional currency.

Financial instruments in foreign currencies exposed to currency risk are as follows (Unit: USD in millions, JPY in millions, CNY in millions, and EUR in millions and Korean Won in millions):

		December 31, 2019
		USD				JPY				CNY				EUR				Others		Total
		Foreign currency		Korean Won equivalent		Foreign currency		Korean Won equivalent		Foreign currency		Korean Won equivalent		Foreign currency		Korean Won equivalent		Korean won equivalent		Korean Won equivalent
Asset	Loans and other financial assets at amortized cost		18,232		21,109,458		150,146		1,596,760		2,546		421,901		2,170		2,814,799		2,249,997		28,192,915
	Financial assets at FVTPL		154		178,149		5,322		56,602		—		—		105		135,827		100,965		471,543
	Financial assets at FVTOCI		2,282		2,642,470		—		—		—		—		—		—		223,365		2,865,835
	Securities at amortized cost		262		302,930		—		—		—		—		—		—		42,546		345,476
	Total		20,930		24,233,007		155,468		1,653,362		2,546		421,901		2,275		2,950,626		2,616,873		31,875,769
Liability	Financial liabilities at FVTPL		251		291,102		4,415		46,957		—		—		68		87,776		83,790		509,625
	Deposits due to customers		10,477		12,129,878		165,958		1,764,918		1,419		235,241		1,715		2,224,506		1,156,049		17,510,592
	Borrowings		6,084		7,043,586		10,931		116,252		75		12,382		421		546,752		177,807		7,896,779
	Debentures		3,519		4,074,200		—		—		—		—		105		136,230		96,646		4,307,076
	Other financial liabilities		2,731		3,162,520		11,237		119,503		2,105		348,841		357		463,411		148,930		4,243,205
	Total		23,062		26,701,286		192,541		2,047,630		3,599		596,464		2,666		3,458,675		1,663,222		34,467,277
Off-balance accounts			6,810		7,884,777		34,314		364,917		1,340		222,074		547		709,388		430,725		9,611,881

		December 31, 2018
		USD				JPY				CNY				EUR				Others		Total
		Foreign currency		Korean Won equivalent		Foreign currency		Korean Won equivalent		Foreign currency		Korean Won equivalent		Foreign currency		Korean Won equivalent		Korean won equivalent		Korean Won equivalent
Asset	Loans and other financial assets at amortized cost		18,333		20,497,663		167,282		1,694,870		2,761		449,355		1,977		2,528,998		2,569,555		27,740,441
	Financial assets at FVTPL		72		80,953		1,425		14,434		—		—		59		75,169		90,925		261,481
	Financial assets at FVTOCI		1,472		1,646,081		—		—		—		—		—		—		187,959		1,834,040
	Securities at amortized cost		52		58,489		—		—		—		—		—		—		45,013		103,502
	Total		19,929		22,283,186		168,707		1,709,304		2,761		449,355		2,036		2,604,167		2,893,452		29,939,464
Liability	Financial liabilities at FVTPL		118		131,927		1,956		19,815		—		—		55		70,250		121,658		343,650
	Deposits due to customers		10,114		11,307,931		169,742		1,719,796		1,660		270,215		886		1,132,860		1,226,881		15,657,683
	Borrowings		6,372		7,123,977		3,749		37,985		26		4,169		270		344,905		81,868		7,592,904
	Debentures		3,145		3,516,034		—		—		—		—		—		—		103,050		3,619,084
	Other financial liabilities		2,387		2,669,323		28,955		293,362		1,282		208,665		188		240,478		94,540		3,506,368
	Total		22,136		24,749,192		204,402		2,070,958		2,968		483,049		1,399		1,788,493		1,627,997		30,719,689
Off-balance accounts			7,047		7,892,048		33,346		337,852		992		161,534		465		594,603		496,243		9,482,280

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(3) Liquidity risk

Liquidity risk refers to the risk that the Bank may encounter difficulties in meeting obligations from its financial liabilities.

1) Liquidity risk management

Liquidity risk management is to prevent potential cash shortage as a result of mismatching the use of funds (assets) and sources of funds (liabilities) or unexpected cash outflows. The financial liabilities that are relevant to liquidity risk are incorporated within the scope of risk management. Derivative instruments are excluded from those financial liabilities as they reflect expected cash flows for a predetermined period.

Assets and liabilities are grouped by account under Asset Liability Management (“ALM”) in accordance with the characteristics of the account. The Bank manages liquidity risk by identifying maturity gap, and then gap ratio through performing various cash flows analysis (i.e., based on remaining maturity and contract period, etc.), while maintaining the gap ratio at or below the target limit.

2) Maturity analysis of non-derivative financial liabilities

a) Cash flows of principals and interests by remaining contractual maturities of non-derivative financial liabilities are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Within 3 months		4 to 6 months		7 to 9 months		10 to 12 months		1 to 5 years		Over 5 years		Total
Financial liabilities at FVTPL		115,156		—		—		—		—		—		115,156
Deposits due to customers		160,955,482		35,917,880		23,560,412		28,653,283		5,305,862		543,242		254,936,161
Borrowings		5,516,024		2,522,971		2,068,362		1,742,550		3,213,689		500,685		15,564,281
Debentures		1,775,711		2,326,926		2,770,855		1,998,438		13,872,930		1,487,529		24,232,389
Lease liabilities		36,291		32,753		28,959		25,170		147,182		13,170		283,525
Other financial liabilities		9,637,118		—		—		—		—		2,533,989		12,171,107
Total		178,035,782		40,800,530		28,428,588		32,419,441		22,539,663		5,078,615		307,302,619

	December 31, 2018
	Within 3 months		4 to 6 months		7 to 9 months		10 to 12 months		1 to 5 years		Over 5 years		Total
Financial liabilities at FVTPL		191,825		—		—		—		—		—		191,825
Deposits due to customers		139,983,251		32,838,781		20,969,174		40,220,788		5,701,940		509,189		240,223,123
Borrowings		4,979,142		2,682,745		1,775,656		1,512,857		2,917,566		495,516		14,363,482
Debentures		1,723,882		1,972,348		1,693,796		1,839,700		13,675,096		2,387,717		23,292,539
Other financial liabilities		14,057,046		—		—		—		—		2,182,602		16,239,648
Total		160,935,146		37,493,874		24,438,626		43,573,345		22,294,602		5,575,024		294,310,617

b) Cash flows of principals and interests by expected maturities of non-derivative financial liabilities are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Within 3 months		4 to 6 months		7 to 9 months		10 to 12 months		1 to 5 years		Over 5 years		Total
Financial liabilities at FVTPL		115,156		—		—		—		—		—		115,156
Deposits due to customers		169,606,757		37,282,908		22,440,335		21,408,158		3,766,940		78,231		254,583,329
Borrowings		5,516,024		2,522,971		2,068,362		1,742,550		3,213,689		500,685		15,564,281
Debentures		1,775,711		2,326,926		2,770,855		1,998,438		13,872,930		1,487,529		24,232,389
Lease liabilities		36,291		32,753		28,959		25,170		147,182		13,170		283,525
Other financial liabilities		9,637,118		—		—		—		—		2,533,989		12,171,107
Total		186,687,057		42,165,558		27,308,511		25,174,316		21,000,741		4,613,604		306,949,787

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	December 31, 2018
	Within 3 months		4 to 6 months		7 to 9 months		10 to 12 months		1 to 5 years		Over 5 years		Total
Financial liabilities at FVTPL		191,825		—		—		—		—		—		191,825
Deposits due to customers		158,276,249		36,903,728		19,594,060		21,300,055		3,549,305		965		239,624,362
Borrowings		4,979,142		2,682,745		1,775,656		1,512,857		2,917,566		495,516		14,363,482
Debentures		1,723,882		1,972,348		1,693,796		1,839,700		13,675,096		2,387,717		23,292,539
Other financial liabilities		14,057,046		—		—		—		—		2,182,602		16,239,648
Total		179,228,144		41,558,821		23,063,512		24,652,612		20,141,967		5,066,800		293,711,856

3) Maturity analysis of derivative financial liabilities

Derivatives held for trading purposes are not managed in accordance with their contractual maturity since the Bank holds such financial instruments with the purpose of disposing or redemption before their maturity. As such, those derivatives are incorporated as “Within 3 months” in the table below.

Derivatives held for hedging purposes are estimated by offsetting cash inflows and cash outflows.

The cash flow by the maturity of derivative financial liabilities as of December 31, 2019 and 2018, is as follows (Unit: Korean Won in millions):

		Remaining maturity
		Within 3 months			4 to 6 months		7 to 9 months			10 to 12 months		1 to 5 years		Over 5 years		Total
December 31, 2019	Trading		2,841,176			—		—			—		—		—		2,841,176
December 31, 2018	Fair value hedge		(3,835	)		9,448		(3,541	)		9,133		6,991		—		18,196
	Trading		2,087,548			—		—			—		—		—		2,087,548

4) Maturity analysis of off-balance accounts (guarantees and loan commitments)

The Bank provides guarantees on behalf of customers. A financial guarantee represents an irrevocable undertaking that the Bank should meet customer’s obligations to third parties if the customer fails to do so. Under a loan commitment, the Bank agrees to make funds available to a customer in the future. Commitments to lend include commercial standby facilities and credit lines, liquidity facilities to commercial paper conduits and utilized overdraft facilities. The maximum limit to be paid by the Bank in accordance with guarantees and loan commitment only applies to principal amounts. There are contractual maturities for financial guarantees, such as guarantees for debentures issued or loans, loan commitments, and other guarantees, however, under the terms of the guarantees and loan commitments, funds should be paid upon demand from the counterparty. Details of off-balance accounts are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Guarantees		14,523,768		13,990,450
Loan commitments		69,035,560		65,012,748

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(4) Operational risk

The Bank defines the operational risk as the risk of potential losses arising from inadequate or incorrect internal procedures, human resource and system, and external factors.

1) Operational risk management

The Bank has been running the operational risk management system under Basel II. The Bank developed operational risk management system for the purpose of reducing the amount of risk capitals, managing the risk, and precaution for any unexpected occasions, etc. This system has been tested by an independent third party, and is approved by the Financial Supervisory Service.

2) Operational risk measurement

To quantify the required capital for operational risk, the Bank applies Advanced Measurement Approaches (AMA) using of internal and external loss data, business environment and internal control factors (BEICFs), and scenario analysis (SBA).

(5) Capital management

The Bank complies with the standard of capital adequacy provided by financial regulatory authorities. The capital adequacy standard is based on Basel published by Basel III Committee on Banking Supervision in Bank for International Settlement in 2010 and was implemented in Korea as of December 2013. The capital adequacy ratio is calculated by dividing own capital by asset (weighted with a risk premium – risk weighted assets) based on the consolidated financial statements of the Bank.

According to the above regulations, the Bank is required to meet the following new minimum requirements: Common Equity Tier 1 capital ratio of 8.00% and 7.13%, a Tier 1 capital ratio of 9.50% and 8.63% and a minimum total capital ratio of 11.50% and 10.63% as of December 31, 2019 and December 31, 2018, respectively.

Details of the Group’s capital adequacy ratio as of December 31, 2019 and 2018, and are as follows (Unit: Korean Won in millions):

	December 31, 2019			December 31, 2018
Tier 1 capital		17,321,301			17,275,539
Other Tier 1 capital		3,466,009			3,147,680
Tier 2 capital		3,526,902			3,827,573
Total risk-adjusted capital		24,314,212			24,250,792
Risk-weighted assets for credit risk		139,043,544			142,626,069
Risk-weighted assets for market risk		2,706,955			2,372,451
Risk-weighted assets for operational risk		9,197,928			9,972,430
Additional amount due to lower capital limit		6,941,108			—
Total risk-weighted assets		157,889,535			154,970,950
Common Equity Tier 1 ratio		10.97	%		11.15	%
Tier 1 capital ratio		13.17	%		13.18	%
Total capital ratio		15.40	%		15.65	%

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5. OPERATING SEGMENTS

In evaluating the results of the Bank and allocating resources, the Bank’s Chief Operation Decision Maker (“CODM”) utilizes the information per type of customer. This financial information of the segments is regularly reviewed by the CODM to make decisions about resources to be allocated to each segment and evaluate its performance.

(1) Segment by type of customers

The Bank’s reporting segments comprise the following customers: consumer banking, corporate banking, investment banking, capital market and headquarters and others. The reportable segments are classified based on the target customers for whom the service is being provided:

• Consumer banking: Loans/deposits and financial services for retail and individual consumers, etc.

• Corporate banking: Loans/deposits and export/import, financial services for corporations, etc.

• Investment banking: Domestic/foreign investment, structured finance, M&A, equity & fund investment-related business, venture advisory related tasks, real estate SOC development practices, etc.

• Capital market: Fund management, investment securities and derivatives business, etc.

• Headquarters and others: Segments that do not belong to above operating segments

The details of operating income by each segment are as follows (Unit: Korean Won in millions):

	For the year ended December 31, 2019
	Consumer banking			Corporate banking			Investment banking			Capital market			Headquarters and others			Sub-total			Adjustments (*)			Total
Net interest income(expense)
Interest income		3,782,031			3,648,980			152,368			6,635			1,065,068			8,655,082			360,619			9,015,701
Interest expense		(1,158,128	)		(2,549,507	)		—			—			(731,455	)		(4,439,090	)		283,725			(4,155,365	)
Intersegment		(868,580	)		885,816			(174,188	)		63,738			93,214			—			—			—
		1,755,323			1,985,289			(21,820	)		70,373			426,827			4,215,992			644,344			4,860,336
Net non-interest income(expense)
Non-interest income		541,013			662,186			283,304			9,963,528			(165,774	)		11,284,257			(9,896,348	)		1,387,909
Non-interest expense		(34,268	)		(119,374	)		(80,681	)		(9,877,111	)		297,795			(9,813,639	)		9,338,689			(474,950	)
Intersegment		126,756			72,052			—			—			(198,808	)		—			—			—
		633,501			614,864			202,623			86,417			(66,787	)		1,470,618			(557,659	)		912,959
Other income(expense)
General and administrative expense		(1,872,196	)		(913,239	)		(20,586	)		(22,902	)		(381,364	)		(3,210,287	)		—			(3,210,287	)
Reversal of allowance for credit loss and impairment losses due to credit loss		(80,181	)		(12,617	)		9,343			(178	)		78,863			(4,770	)		(86,685	)		(91,455	)
		(1,952,377	)		(925,856	)		(11,243	)		(23,080	)		(302,501	)		(3,215,057	)		(86,685	)		(3,301,742	)
Operating income		436,447			1,674,297			169,560			133,710			57,539			2,471,553			—			2,471,553
Non-operating income(expense)		(99,015	)		(23,843	)		41,754			(9,453	)		(15,868	)		(106,425	)		—			(106,425	)
Net income before income tax expense		337,432			1,650,454			211,314			124,257			41,671			2,365,128			—			2,365,128
Income tax expense		(92,794	)		(447,731	)		(58,111	)		(34,171	)		58,510			(574,297	)		—			(574,297	)
Net income		244,638			1,202,723			153,203			90,086			100,181			1,790,831			—			1,790,831

(*) These adjustments are performed in order to present intersegment profit or loss adjustments based on managerial accounting as profit or loss in accordance with K-IFRS.

- 34 -

	For the year ended December 31, 2018
	Consumer banking			Corporate banking			Investment banking			Capital market			Headquarters and others			Sub-total			Adjustments (*)			Total
Net interest income(expense)
Interest income		3,529,645			3,409,835			152,273			8,945			896,479			7,997,177			334,790			8,331,967
Interest expense		(1,021,639	)		(2,168,000	)		(150	)		—			(685,647	)		(3,875,436	)		271,187			(3,604,249	)
Intersegment		(634,110	)		833,224			(163,962	)		25,963			(61,115	)		—			—			—
		1,873,896			2,075,059			(11,839	)		34,908			149,717			4,121,741			605,977			4,727,718
Non-interest income(expense)
Non-interest income		678,360			721,096			230,357			7,020,740			475,258			9,125,811			(7,648,476	)		1,477,335
Non-interest expense		(143,704	)		(290,347	)		(53,671	)		(6,964,671	)		(165,937	)		(7,618,330	)		7,077,127			(541,203	)
Intersegment		132,690			70,016			—			—			(202,706	)		—			—			—
		667,346			500,765			176,686			56,069			106,615			1,507,481			(571,349	)		936,132
Other income(expense)
General and administrative expense		(1,865,933	)		(868,608	)		(14,318	)		(18,452	)		(422,025	)		(3,189,336	)		—			(3,189,336	)
Reversal of allowance for credit loss and impairment losses due to credit loss		(127,220	)		(61,064	)		62,454			(16,861	)		118,496			(24,195	)		(34,628	)		(58,823	)
		(1,993,153	)		(929,672	)		48,136			(35,313	)		(303,529	)		(3,213,531	)		(34,628	)		(3,248,159	)
Operating income		548,089			1,646,152			212,983			55,664			(47,197	)		2,415,691			—			2,415,691
Non-operating income(expense)		(20,208	)		900			32,738			—			56,510			69,940			—			69,940
Net income before income tax expense		527,881			1,647,052			245,721			55,664			9,313			2,485,631			—			2,485,631
Income tax expense		(145,167	)		(445,619	)		(67,573	)		(15,308	)		(1,060	)		(674,727	)		—			(674,727	)
Net income		382,714			1,201,433			178,148			40,356			8,253			1,810,904			—			1,810,904

(*) These adjustments are performed in order to present intersegment profit or loss adjustments based on managerial accounting as profit or loss in accordance with K-IFRS.IFRS.

(2) Information on financial products and services

The products of the Bank are classified as interest-bearing products such as loans, deposits and debt securities and non-interest-bearing products such as loan commitment, credit commitment, equity securities and credit card service. This classification of products has been reflected in the segment information presenting interest income and non-interest income.

(3) Information on geographical areas

Among the Bank’s revenue (interest income and non-interest income) from services, revenue from domestic operations for the nine months ended December 31, 2019 and 2018, amounted to 9,812,045 million Won and 9,288,996 million Won, respectively, and revenue from foreign operations amounted to 591,565 million Won and 520,306 million Won, respectively. Among the Bank’s non-current assets (investments in joint ventures and associates, investment properties, premises and equipment and intangible assets), non-current assets attributed to domestic subsidiaries as of December 31, 2019 and December 31, 2018, are 6,767,214 million Won and 7,256,271 million Won, respectively, and foreign subsidiaries are 37,417 million Won and 8,130 million Won, respectively.

(4) Information about major customers

The Bank does not have any single customer that generates 10% or more of the Bank’s total revenue.

6. CASH AND CASH EQUIVALENTS

(1) Details of cash and cash equivalents are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Cash		1,957,984		2,207,844
Foreign currencies		568,110		670,829
Demand deposits		2,872,008		2,618,265
Fixed deposits		—		226,863
Total		5,398,102		5,723,801

- 35 -

(2) Among the investing and financing activities, significant transactions not involving cash inflows and outflows are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Changes in other comprehensive income related to valuation of financial assets at FVTOCI		(34,122	)		6,795
Changes in financial assets at FVTOCI as a result of debt-equity swap		96,527			14,378
Changes in investments in associates due to accounts transfer		—			(223,366	)
Changes in unpaid dividends on hybrid equity securities		(22,269	)		3,569
Changes in intangible assets related to account payables		29,705			35,585
Changes in other comprehensive gain(loss) of foreign currency translation of foreign operations		8,446			7,882
Changes in other comprehensive loss due to remeasurement of defined benefit liabilities		(30,984	)		(79,639	)
Classified to assets held for distribution (sale) from premises and equipment		95			7,163
Classified to assets held for distribution (sale) from other assets		—			26,997
Increase in right-of-use assets and lease liabilities		449,872			—
Changes in investments in subsidiaries and associates due to the Changes in consolidated scope		1,418,074			116,620

(3) Adjustments of liabilities from financing activities in current year are as follows (Unit: Korean Won in millions):

	For the year ended December 31, 2019
	January 1, 2019		Cash flow			Not involving cash inflows and outflows								December 31, 2019
						Foreign exchange			Variation of gains on valuation of hedged items		Others
Borrowings		14,081,092		1,543,522			(298,577	)		—		(216	)		15,325,821
Debentures		21,666,331		935,149			124,471			85,983		18,318			22,830,252
Lease liabilities (*)		263,496		(177,823	)		934			—		191,048			277,655
Total		36,010,919		2,300,848			(173,172	)		85,983		209,150			38,433,728

(*) The amount of lease liability at the beginning of the current in applying K-IFRS 1116 is reflected.

	For the year ended December 31, 2018
	January 1, 2018		Cash flow			Not involving cash inflows and outflows							December 31, 2018
						Foreign exchange		Variation of gains on valuation of hedged items			Others
Borrowings		13,662,984		258,766			159,261		—			81		14,081,092
Debentures		21,707,466		(275,471	)		240,828		(25,498	)		19,006		21,666,331
Total		35,370,450		(16,705	)		400,089		(25,498	)		19,087		35,747,423

- 36 -

7. FINANCIAL ASSETS AT FVTPL

Details of financial assets at fair value through profit or loss mandatorily measured at fair value and financial assets held for trading are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Deposits:
Gold banking assets		27,901		26,935
Securities:
Equity securities		600,622		410,604
Capital contributions		470,579		386,096
Beneficiary certificates		1,375,989		997,743
Sub-total		2,447,190		1,794,443
Loans		9,037		21,492
Derivative assets		2,945,273		2,034,988
Total		5,429,401		3,877,858

As of December 31, 2019, and December 31, 2018, the Bank does not hold financial assets designated at FVTPL.

8. FINANCIAL ASSETS AT FVTOCI

(1) Details of financial assets at FVTOCI as of December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Debt securities:
Korean treasury and government agencies		1,152,711		1,353,401
Financial institutions		17,769,924		11,252,790
Corporates		3,906,957		1,774,332
Bond denominated in foreign currencies		2,865,835		1,834,040
Sub-total		25,695,427		16,214,563
Equity securities		772,689		786,082
Securities loaned		80,737		40,029
Total		26,548,853		17,040,674

(2) Details of equity securities designated as financial assets at FVTOCI are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Purpose of acquisition	Fair value		Fair value
Investment for strategic business partnership purpose		517,244		498,092
Debt-equity swap		255,445		287,990
Total		772,689		786,082

- 37 -

(3) Changes in the loss allowance and gross carrying amount of financial assets at FVTOCI are as follows (Unit: Korean Won in millions):

1) Allowance for credit losses

	For the year ended December 31, 2019
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		(5,413	)		—		—		(5,413	)
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Net allowance for credit losses		(3,111	)		—		—		(3,111	)
Disposal		476			—		—		476
Others (*)		(3	)		—		—		(3	)
Ending balance		(8,051	)		—		—		(8,051	)

	For the year ended December 31, 2018
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		(3,778	)		—		—		(3,778	)
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Net allowance for credit losses		(1,704	)		—		—		(1,704	)
Others (*)		69			—		—		69
Ending balance		(5,413	)		—		—		(5,413	)

(*) Others consist of foreign currencies translation, etc.

2) Gross carrying amount

	For the year ended December 31, 2019
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		16,254,592			—		—		16,254,592
Transfer to 12-month expected credit losses		—			—		—
Transfer to lifetime expected credit losses		—			—		—
Transfer to credit-impaired financial assets		—			—		—
Acquisition		23,182,940			—		—		23,182,940
Disposal		(13,760,417	)		—		—		(13,760,417	)
Gain on valuation		47,827			—		—		47,827
Amortization on the effective interest method		11,522			—		—		11,522
Others (*)		39,700			—		—		39,700
Ending balance		25,776,164			—		—		25,776,164

	For the year ended December 31, 2018
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		12,247,623			—		—		12,247,623
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Acquisition		12,718,786			—		—		12,718,786
Disposal		(8,851,549	)		—		—		(8,851,549	)
Gain on valuation		69,825			—		—		69,825
Amortization on the effective interest method		6,894			—		—		6,894
Others (*)		63,013			—		—		63,013
Ending balance		16,254,592			—		—		16,254,592

(*) Others consist of foreign currencies translation, etc.

(4) The Bank disposed equity securities designated as financial assets at FVTOCI in accordance with the limitation from commercial law of acquiring holding company (Woori Financial Group Inc.) equity as a subsidiary. The fair value and accumulated loss on valuation of the equity securities at disposal date are 767,727 million Won and 23,782 million Won, respectively. The Bank disposed equity securities designated as financial assets at FVTOCI in accordance with the resolution of disposal from the creditors’ council during the current year. The fair value and accumulated loss on valuation of the equity securities at the disposal date are 34,640 million Won and 38,995 million Won, respectively.

- 38 -

9. SECURITIES AT AMORTIZED COST

(1) Details of securities at amortized cost as of December 31, 2018 and 2019 are as follows (Unit: Korean Won in millions):

	December 31, 2019			December 31, 2018
Korean treasury and government agencies		8,044,040			7,523,458
Financial institutions		6,694,614			9,474,922
Corporates		5,068,489			5,707,063
Bond denominated in foreign currencies		345,476			103,502
Allowance for credit losses		(5,482	)		(6,895	)
Total		20,147,137			22,802,050

(2) Changes in the loss allowance and gross carrying amount of securities at amortized cost are as follows (Unit: Korean Won in millions):

1) Allowance for credit losses

	For the year ended December 31, 2019
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		(6,895	)		—		—		(6,895	)
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Net reversal of credit losses		1,413			—		—		1,413
Ending balance		(5,482	)		—		—		(5,482	)

	For the year ended December 31, 2018
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		(4,996	)		—		—		(4,996	)
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Net allowance for credit losses		(1,921	)		—		—		(1,921	)
Disposal		22			—		—		22
Ending balance		(6,895	)		—		—		(6,895	)

2) Gross carrying amount

	For the year ended December 31, 2019
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		22,808,945			—		—		22,808,945
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Acquisition		6,030,871			—		—		6,030,871
Disposal / Redemption		(8,685,723	)		—		—		(8,685,723	)
Amortization on the effective interest method		(3,286	)		—		—		(3,286	)
Others (*)		1,812			—		—		1,812
Ending balance		20,152,619			—		—		20,152,619

	For the year ended December 31, 2018
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		16,638,727			—		—		16,638,727
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Acquisition		15,575,213			—		—		15,575,213
Disposal / Redemption		(9,400,576	)		—		—		(9,400,576	)
Amortization on the effective interest method		(8,349	)		—		—		(8,349	)
Others (*)		3,930			—		—		3,930
Ending balance		22,808,945			—		—		22,808,945

(*) Others consist of foreign currencies translation, etc.

- 39 -

10. LOAN AND OTHER FINANCIAL ASSETS AT AMORTIZED COST

(1) Details of loans and other financial assets at amortized cost as of December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Due from banks		12,554,759		12,268,372
Loans		247,799,726		241,285,766
Other financial assets		7,556,854		6,796,811
Total		267,911,339		260,350,949

(2) Details of due from banks are as follows (Unit: Korean Won in millions):

	December 31, 2019			December 31, 2018
Due from banks in local currency:
Due from The Bank of Korea (“BOK”)		11,028,850			11,034,602
Others		39,136			81,889
Allowance for credit losses		(2,591	)		(2,660	)
Sub-total		11,065,395			11,113,831
Due from banks in foreign currencies:
Due from banks on demand		862,747			622,354
Due from banks on time		42,539			40,527
Others		585,301			493,204
Allowance for credit losses		(1,223	)		(1,544	)
Sub-total		1,489,364			1,154,541
Total		12,554,759			12,268,372

(3) Details of restricted due from banks are as follows (Unit: Korean Won in millions):

	Counterparty	December 31, 2019		Reason of restriction
Due from banks in local currency:
Due from BOK	The BOK		11,028,850	Reserve deposits under the BOK Act
Others	The Korea Exchange and others		39,136	Central counterparty KRW margin and others
	Sub-total		11,067,986
Due from banks in foreign currencies:
Due from banks on demand	The BOK and others		861,027	Reserve deposits under the BOK Act and others
Others	Korea Investment & Securities Co., Ltd. and others		585,301	Deposits for foreign futures and options trading and others
	Sub-total		1,446,328
	Total		12,514,314

	Counterparty	December 31, 2018		Reason of restriction
Due from banks in local currency:
Due from BOK	The BOK		11,034,602	Reserve deposits under the BOK Act
Others	The Korea Exchange and others		81,889	Central counterparty KRW margin and others
	Sub-total		11,116,491
Due from banks in foreign currencies:
Due from banks on demand	The BOK and others		620,452	Reserve deposits under the BOK Act and others
Others	Korea Investment & Securities Co., Ltd. and others		493,204	Deposits for foreign futures and options trading and others
	Sub-total		1,113,656
	Total		12,230,147

- 40 -

(4) Changes in the loss allowance and gross carrying amount of due from banks are as follows (Unit: Korean Won in millions):

1) Allowance for credit losses

	For the year ended December 31, 2019
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		(4,204	)		—		—		(4,204	)
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Net reversal of credit losses		390			—		—		390
Ending balance		(3,814	)		—		—		(3,814	)

	For the year ended December 31, 2018
	Stage 1			Stage 2		Stage 3		Total
Beginning balance		(2,464	)		—		—		(2,464	)
Transfer to 12-month expected credit losses		—			—		—		—
Transfer to lifetime expected credit losses		—			—		—		—
Transfer to credit-impaired financial assets		—			—		—		—
Net allowance for credit losses		(1,740	)		—		—		(1,740	)
Ending balance		(4,204	)		—		—		(4,204	)

2) Gross carrying amount

	For the year ended December 31, 2019
	Stage 1		Stage 2		Stage 3		Total
Beginning balance		12,272,576		—		—		12,272,576
Transfer to 12-month expected credit losses		—		—		—		—
Transfer to lifetime expected credit losses		—		—		—		—
Transfer to credit-impaired financial assets		—		—		—		—
Net increase		285,997		—		—		285,997
Ending balance		12,558,573		—		—		12,558,573

	For the year ended December 31, 2018
	Stage 1		Stage 2		Stage 3		Total
Beginning balance		7,394,885		—		—		7,394,885
Transfer to 12-month expected credit losses		—		—		—		—
Transfer to lifetime expected credit losses		—		—		—		—
Transfer to credit-impaired financial assets		—		—		—		—
Net increase		4,877,691		—		—		4,877,691
Ending balance		12,272,576		—		—		12,272,576

(5) Details of loans are as follows (Unit: Korean Won in millions):

	December 31, 2019			December 31, 2018
Loans in local currency		219,156,962			208,837,131
Loans in foreign currencies		11,089,570			8,958,771
Domestic banker’s letter of credit		2,846,259			2,910,115
Bills bought in foreign currencies		4,633,210			7,727,904
Bills bought in local currency		16,012			19,385
Factoring receivables		20,737			45,661
Advances for customers on guarantees		11,425			12,364
Private placement bonds		62,468			81,368
Call loans		1,889,927			1,944,678
Bonds purchased under resale agreements		8,670,352			11,605,383
Others		470			590
Loan origination costs and fees		569,512			539,470
Discounted present value		(69	)		—
Loss allowance		(1,167,109	)		(1,397,054	)
Total		247,799,726			241,285,766

- 41 -

(6) Changes in the loss allowance on loans for the years ended December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

	For the year ended December 31, 2019
	Consumers									Corporates
	Stage 1			Stage 2			Stage 3			Stage 1			Stage 2			Stage 3
Beginning balance		(98,645	)		(41,383	)		(113,886	)		(317,581	)		(336,546	)		(489,013	)
Transfer to 12-month expected credit losses		(13,493	)		12,751			742			(57,996	)		49,345			8,651
Transfer to lifetime expected credit losses		13,381			(14,596	)		1,215			11,672			(28,524	)		16,852
Transfer to credit-impaired financial assets		1,216			4,136			(5,352	)		3,120			17,751			(20,871	)
Net reversal of (allowance for) credit losses		29,265			(32,564	)		(143,545	)		89,888			12,005			(54,851	)
Recovery from write-off receivables		—			—			(58,512	)		—			—			(60,484	)
Charge-off		—			—			197,072			—			—			198,394
Disposal		—			—			2,763			—			1			42,095
Unwinding effect		—			—			9,647			—			—			17,887
Others (*)		—			—			—			(19,108	)		—			(8	)
Ending balance		(68,276	)		(71,656	)		(109,856	)		(290,005	)		(285,968	)		(341,348	)

	For the year ended December 31, 2019
	Total
	Stage 1			Stage 2			Stage 3
Beginning balance		(416,226	)		(377,929	)		(602,899	)
Transfer to 12-month expected credit losses		(71,489	)		62,096			9,393
Transfer to lifetime expected credit losses		25,053			(43,120	)		18,067
Transfer to credit-impaired financial assets		4,336			21,887			(26,223	)
Net reversal of (allowance for) credit losses		119,153			(20,559	)		(198,396	)
Recovery from write-off receivables		—			—			(118,996	)
Charge-off		—			—			395,466
Disposal		—			1			44,858
Unwinding effect		—			—			27,534
Others (*)		(19,108	)		—			(8	)
Ending balance		(358,281	)		(357,624	)		(451,204	)

(*) Others consist of debt-equity swap, foreign currencies translation, etc.

	For the year ended December 31, 2018
	Consumers									Corporates
	Stage 1			Stage 2			Stage 3			Stage 1			Stage 2			Stage 3
Beginning balance		(89,404	)		(32,352	)		(108,689	)		(342,921	)		(251,368	)		(849,467	)
Transfer to 12-month expected credit losses		(8,720	)		7,900			820			(24,116	)		22,451			1,665
Transfer to lifetime expected credit losses		5,058			(6,222	)		1,164			14,736			(407,442	)		392,706
Transfer to credit-impaired financial assets		66,967			36,871			(103,838	)		62,709			97,697			(160,406	)
Net reversal of (allowance for) credit losses		(72,546	)		(47,613	)		(39,332	)		(61,605	)		201,879			(85,654	)
Recovery		—			—			(50,381	)		—			—			(137,334	)
Charge-off		—			—			176,792			—			—			276,489
Disposal		—			33			1,633			—			237			49,902
Unwinding effect		—			—			7,945			—			—			23,274
Others (*)		—			—			—			33,616			—			(188	)
Ending balance		(98,645	)		(41,383	)		(113,886	)		(317,581	)		(336,546	)		(489,013	)

	For the year ended December 31, 2018
	Total
	Stage 1			Stage 2			Stage 3
Beginning balance		(432,325	)		(283,720	)		(958,156	)
Transfer to 12-month expected credit losses		(32,836	)		30,351			2,485
Transfer to lifetime expected credit losses		19,794			(413,664	)		393,870
Transfer to credit-impaired financial assets		129,676			134,568			(264,244	)
Net reversal of (allowance for) credit losses		(134,151	)		154,266			(124,986	)
Recovery		—			—			(187,715	)
Charge-off		—			—			453,281
Disposal		—			270			51,535
Unwinding effect		—			—			31,219
Others (*)		33,616			—			(188	)
Ending balance		(416,226	)		(377,929	)		(602,899	)

(*) Others consist of debt-equity swap, foreign currencies translation, etc

- 42 -

(7) Changes in the gross carrying amount of loans are as follows (Unit: Korean Won in millions):

	For the year ended December 31, 2019
	Consumers									Corporates
	Stage 1			Stage 2			Stage 3			Stage 1			Stage 2			Stage 3
Beginning balance		107,107,365			5,976,763			359,331			123,518,883			4,810,308			910,170
Transfer to 12-month expected credit losses		2,620,006			(2,607,808	)		(12,198	)		1,554,441			(1,543,871	)		(10,570	)
Transfer to lifetime expected credit losses		(8,215,779	)		8,233,760			(17,981	)		(2,268,548	)		2,304,243			(35,695	)
Transfer to credit-impaired financial assets		(140,980	)		(97,205	)		238,185			(251,440	)		(142,645	)		394,085
Charge-off		—			—			(197,072	)		—			—			(198,394	)
Disposal		—			(55	)		(67,924	)		—			(70	)		(161,318	)
Net increase (decrease)		5,584,609			897,046			77,256			1,248,174			(704,027	)		(194,210	)
Ending balance		106,955,221			12,402,501			379,597			123,801,510			4,723,938			704,068

	For the year ended December 31, 2019
	Total
	Stage 1			Stage 2			Stage 3
Beginning balance		230,626,248			10,787,071			1,269,501
Transfer to 12-month expected credit losses		4,174,447			(4,151,679	)		(22,768	)
Transfer to lifetime expected credit losses		(10,484,327	)		10,538,003			(53,676	)
Transfer to credit-impaired financial assets		(392,420	)		(239,850	)		632,270
Charge-off		—			—			(395,466	)
Disposal		—			(125	)		(229,242	)
Net increase (decrease)		6,832,783			193,019			(116,954	)
Ending balance		230,756,731			17,126,439			1,083,665

	For the year ended December 31, 2018
	Consumers									Corporates
	Stage 1			Stage 2			Stage 3			Stage 1			Stage 2			Stage 3
Beginning balance		100,815,109			5,432,359			309,302			124,381,464			4,246,421			1,506,875
Transfer to 12-month expected credit losses		1,912,698			(1,903,350	)		(9,348	)		1,078,166			(1,074,810	)		(3,356	)
Transfer to lifetime expected credit losses		(3,163,028	)		3,176,368			(13,340	)		(2,250,991	)		2,708,867			(457,876	)
Transfer to credit-impaired financial assets		(197,915	)		(115,696	)		313,611			(348,147	)		(274,987	)		623,134
Charge-off		—			—			(176,792	)		—			—			(276,489	)
Disposal		—			(478	)		(31,910	)		—			(2,782	)		(166,346	)
Net increase (decrease)		7,740,501			(612,440	)		(32,192	)		658,391			(792,401	)		(315,772	)
Ending balance		107,107,365			5,976,763			359,331			123,518,883			4,810,308			910,170

	For the year ended December 31, 2018
	Total
	Stage 1			Stage 2			Stage 3
Beginning balance		225,196,573			9,678,780			1,816,177
Transfer to 12-month expected credit losses		2,990,864			(2,978,160	)		(12,704	)
Transfer to lifetime expected credit losses		(5,414,019	)		5,885,235			(471,216	)
Transfer to credit-impaired financial assets		(546,062	)		(390,683	)		936,745
Charge-off		—			—			(453,281	)
Disposal		—			(3,260	)		(198,256	)
Net increase (decrease)		8,398,892			(1,404,841	)		(347,964	)
Ending balance		230,626,248			10,787,071			1,269,501

(8) Details of other financial assets are as follows (Unit: Korean Won in millions):

	December 31, 2019			December 31, 2018
Receivables		5,411,855			4,528,060
Accrued income		855,296			879,274
Telex and telephone subscription rights and refundable deposits		961,058			951,761
Other receivables		394,313			500,958
Allowance for credit losses		(65,668	)		(63,242	)
Total		7,556,854			6,796,811

- 43 -

(9) Changes in the allowances for credit losses on other financial assets are as follows (Unit: Korean Won in millions):

	For the year ended December 31, 2019
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		(1,120	)		(836	)		(61,286	)		(63,242	)
Transfer to 12-month expected credit losses		(145	)		136			9			—
Transfer to lifetime expected credit losses		68			(101	)		33			—
Transfer to credit-impaired financial assets		15			153			(168	)		—
Net reversal of (allowance for) credit losses		358			(75	)		(6,791	)		(6,508	)
Charge-off		—			—			2,397			2,397
Disposal		—			—			1,685			1,685
Ending balance		(824	)		(723	)		(64,121	)		(65,668	)

	For the year ended December 31, 2018
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		(1,302	)		(960	)		(52,496	)		(54,758	)
Transfer to 12-month expected credit losses		(93	)		83			10			—
Transfer to lifetime expected credit losses		62			(373	)		311			—
Transfer to credit-impaired financial assets		6,444			207			(6,651	)		—
Net reversal of (allowance for) credit losses		(6,231	)		205			(31,735	)		(37,761	)
Charge-off		—			—			28,012			28,012
Disposal		—			2			1,263			1,265
Ending balance		(1,120	)		(836	)		(61,286	)		(63,242	)

(10) Changes in the gross carrying amount of other financial assets are as follows (Unit: Korean Won in millions):

	For the year ended December 31, 2019
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		6,769,613			19,729			70,711			6,860,053
Transfer to 12-month expected credit losses		6,533			(6,517	)		(16	)		—
Transfer to lifetime expected credit losses		(15,999	)		16,060			(61	)		—
Transfer to credit-impaired financial assets		(803	)		(845	)		1,648			—
Charge-off		—			—			(2,397	)		(2,397	)
Disposal		—			—			(2,212	)		(2,212	)
Net increase (decrease)		764,150			(1,346	)		4,274			767,078
Ending balance		7,523,494			27,081			71,947			7,622,522

	For the year ended December 31, 2018
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		6,134,524			21,013			78,140			6,233,677
Transfer to 12-month expected credit losses		6,227			(6,210	)		(17	)		—
Transfer to lifetime expected credit losses		(9,744	)		10,059			(315	)		—
Transfer to credit-impaired financial assets		(7,375	)		(925	)		8,300			—
Charge-off		—			—			(28,012	)		(28,012	)
Disposal		—			(6	)		(1,639	)		(1,645	)
Net increase (decrease)		645,981			(4,202	)		14,254			656,033
Ending balance		6,769,613			19,729			70,711			6,860,053

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11. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

(1) The fair value hierarchy

The fair value hierarchy is determined by the level of market observable inputs. The market observable inputs reflect unique characteristics of a financial instrument or market condition (including transparency and whether there are transactions among market participants), and when a financial instrument is traded in an active market, the best estimate of its fair value is the quoted price in the active market. The Bank maximizes the use of market observable inputs and minimizes the use of unobserved firm-specific inputs to selected valuation technique. Fair value of the Bank is measured based on the perspective of a market participant. As such, even when market observable inputs are not readily available, firm-specific inputs reflect factors that market participants would use for measuring the fair value of assets or liabilities.

The fair value measurement is described in one of the following three levels used to classify fair value measurements:

• Level 1: When a financial instrument measures its fair value at the quoted price in the active market, the fair value of such financial instruments are classified as Level 1. The types of financial assets or liabilities generally included in Level 1 are publicly traded equity securities, derivatives and debt securities issued by governmental bodies.

• Level 2: When fair value of a financial instrument is measured using valuation techniques, the fair value is classified as Level 2 when all major elements are market observable inputs. The types of financial instruments generally included in Level 2 are most debt securities both in local and foreign currencies and regular OTC derivatives such as swaps, forwards, options, etc.

• Level 3: When fair value of a financial instrument is measured using valuation techniques, the fair value is classified as Level 3 when one or more major elements are inputs that are not observable in the market. The types of financial assets or liabilities generally included in Level 3 are non-public securities and derivatives and debt securities whose valuation techniques require significant judgments and subjectivity.

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Bank’s assessment of the significance of a particular input to a fair value measurement in its entirety requires judgment and consideration of inherent factors of the asset or liability.

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(2) Fair value hierarchy of financial assets and liabilities measured at fair value are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Level 1 (*)		Level 2 (*)		Level 3		Total
Financial assets:
Financial assets at FVTPL
Due from banks		27,901		—		—		27,901
Equity securities		136,723		—		463,899		600,622
Capital contributions		—		—		470,579		470,579
Beneficiary certificates		—		27,476		1,348,513		1,375,989
Loans		—		—		9,037		9,037
Derivative assets		3,057		2,917,168		25,048		2,945,273
Sub-total		167,681		2,944,644		2,317,076		5,429,401
Financial assets at FVTOCI
Debt securities		2,014,978		23,680,449		—		25,695,427
Equity securities		441,655		—		331,034		772,689
Securities loaned		—		80,737		—		80,737
Sub-total		2,456,633		23,761,186		331,034		26,548,853
Derivative assets (designated for hedging)		—		111,764		—		111,764
Total		2,624,314		26,817,594		2,648,110		32,090,018
Financial liabilities:
Financial liabilities at FVTPL
Deposit due to customers		27,530		—		—		27,530
Derivative liabilities		4,336		2,764,801		72,039		2,841,176
Sub-total		31,866		2,764,801		72,039		2,868,706
Financial liabilities designated as at FVTPL Equity-linked securities		—		—		87,626		87,626
Total		31,866		2,764,801		159,665		2,956,332

	December 31, 2018
	Level 1 (*)		Level 2 (*)		Level 3		Total
Financial assets:
Financial assets at FVTPL
Due from banks		26,935		—		—		26,935
Equity securities		37,420		—		373,184		410,604
Capital contributions		—		—		386,096		386,096
Beneficiary certificates		—		125,720		872,023		997,743
Loans		—		—		21,492		21,492
Derivative assets		13,216		1,972,831		48,941		2,034,988
Sub-total		77,571		2,098,551		1,701,736		3,877,858
Financial assets at FVTOCI
Debt securities		1,757,107		14,457,456		—		16,214,563
Equity securities		482,310		—		303,772		786,082
Securities loaned		—		40,029		—		40,029
Sub-total		2,239,417		14,497,485		303,772		17,040,674
Derivative assets (designated for hedging)		—		35,503		—		35,503
Total		2,316,988		16,631,539		2,005,508		20,954,035
Financial liabilities:
Financial liabilities at FVTPL
Deposit due to customers		27,058		—		—		27,058
Derivative liabilities		2,245		2,068,612		16,691		2,087,548
Sub-total		29,303		2,068,612		16,691		2,114,606
Financial liabilities designated as at FVTPL
Equity-linked securities		—		—		164,767		164,767
Derivative liabilities (designated for hedging)		—		17,654		—		17,654
Total		29,303		2,086,266		181,458		2,297,027

(*) There were no transfers between Level 1 and Level 2 of financial assets and liabilities measured at fair value. The Bank recognizes transfers among levels at the end of reporting period in which events have occurred or conditions have changed.

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Financial assets and liabilities at FVTPL, financial assets and liabilities designated as at FVTPL, financial assets at FVTOCI, and derivative assets and liabilities are recognized at fair value. Fair value is the amount that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.

Financial instruments are measured at fair value using a quoted market price in active markets. If there is no active market for a financial instrument, the Bank determines the fair value using valuation methods.

① Valuation methods and input variables used for the fair value measurement of level 2 financial assets and liabilities are as follows:

	Valuation methods	Input variables
Debt securities	The fair value is measured by discounting the projected cash flows of debt securities by applying the risk-free market rate.	Risk-free market rate
Beneficiary certificates	Beneficiary certificates classified as Level 2 are Money Market Fund(MMF), and are measured with base price.	Base price
Derivatives	The fair value is measure by using Option model(Closed Form), Finite Difference Method(FDM), Monte Carlo Simulation.	Discount rate, foreign exchange rate, stock prices, price and volatility of underlying asset and etc.

② Valuation methods and input variables used for the fair value measurement of level 3 financial assets and liabilities are as follows:

	Valuation methods	Input variables
Loans	The fair value of loans is measured by the Binomial Tree given the values of underlying assets and volatility.	Values of underlying assets, Volatility
Debt securities	The fair value is measured by discounting the projected cash flows of debt securities by applying the market discount rate that has been applied to a proxy company that has similar credit rating to the issuers of the securities.	Risk-free market rate, credit spread
Equity securities, capital contributions and beneficiary certificates	Among DCF (Discounted Cash Flow) Model, FCFE (Free Cash Flow to Equity) Model, Comparable Company Analysis, Dividend Discount Model, Risk-adjusted Rate of Return Method, and Net Asset Value Method, more than one method is used given the characteristic of the subject of fair value measurement.	Risk-free market rate, market risk premium, Beta, etc.
Derivatives	The fair value is measure by using Option model(Closed Form), DCF model, Finite Difference Method(FDM), Monte Carlo Simulation.	Discount rate, foreign exchange rate, stock prices, price and volatility of underlying asset and etc.
Equity-linked securities	The fair value is measure by using Option model(Closed Form), DCF model, Finite Difference Method(FDM), Monte Carlo Simulation.	Values of underlying assets, discount rate, dividend, volatility, correlation coefficient and foreign exchange rate

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The valuation technique for level 3 financial assets and financial liabilities measured at fair value and the details of significant but unobservable inputs are as follows:

	Valuation techniques	Type	Input variable	Range	Impact of changes in significant unobservable inputs on fair value measurement
Loans	Binomial Tree		Stock price and volatility of underlying asset	14.51% ~ 46.06%	Fair value increases as volatility of underlying asset increases.
Derivative assets	Option valuation model and others	Interest rate	Correlation coefficient	0.9 ~ 0.98	Variation of fair value increases as correlation coefficient increases.
			Volatility of underlying asset	16.3% ~ 41.2%	Variation of fair value increases as volatility increases.
		Securities	Correlation coefficient	0.237 ~ 0.675	Variation of fair value increases as correlation coefficient increases.
	DCF model	Currency	Credit risk adjustment ratio	7.7% ~ 100.0%	Variation of fair value increases as the ratio increases
Derivative liabilities	Option valuation model and others	Interest rate	Correlation coefficient	0.9 ~ 0.98	Variation of fair value increases as correlation coefficient increases.
			Volatility of underlying asset	16.3% ~ 41.2%	Variation of fair value increases as volatility increases.
		Securities	Correlation coefficient	0.237 ~ 0.675	Variation of fair value increases as correlation coefficient increases.
			Volatility of underlying asset	21.4% ~ 22.4%	Variation of fair value increases as volatility increases.
Equity linked securities	Monte Carlo Simulation and others	Securities	Correlation coefficient	0.294 ~0.675	Equity linked securities’ variation of fair value increases if both volatility and correlation coefficient increase. However when correlation coefficient decreases, despite the increase in volatility, the variation of fair value of equity linked securities may decrease.
			Volatility of underlying asset	19.1% ~ 25.3%
Equity securities, capital contributions and beneficiary certificates	External appraisal value and others		Terminal growth rate	0	Fair value increases as terminal growth rate increases .
			Discount rate	0.35% ~ 19.21%	Fair value increases as discount rate decreases.
			Volatility of real estate sale price	0	Fair value increases as volatility of real estate sale price increases.
			Volatility of underlying assets	13.21% ~ 34.72%	Fair value increases as volatility of underlying assets increases.

Fair value of financial assets and liabilities classified into Level 3 is measured by the Bank using its own valuation methods or using external specialists. Unobservable inputs used in the fair value measurements are produced by the internal system of the Bank and the appropriateness of inputs is reviewed regularly.

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(3) Changes in financial assets and liabilities measured at fair value classified into Level 3 are as follows (Unit: Korean Won in millions):

	For the year ended December 31, 2019
	January 1, 2019		Net Income (loss) (*1)			Other comprehensive income		Purchases/ issuances			Disposals/ settlements			Transfer to or out of Level 3 (*2)			December 31, 2019
Financial assets:
Financial assets at FVTPL
Equity securities		373,184		57,675			—		60,942			(27,902	)		—			463,899
Capital contributions		386,096		(13,244	)		—		148,960			(51,233	)		—			470,579
Beneficiary certificates		872,023		22,177			—		600,524			(154,652	)		8,441			1,348,513
Loans		21,492		1,536			—		500			(14,491	)		—			9,037
Derivative assets		48,941		16,935			—		1,115			(40,344	)		(1,599	)		25,048
Subtotal		1,701,736		85,079			—		812,041			(288,622	)		6,842			2,317,076
Financial assets at FVTOCI
Equity securities		303,772		—			26,936		431			(105	)		—			331,034
Total		2,005,508		85,079			26,936		812,472			(288,727	)		6,842			2,648,110
Financial liabilities:
Financial liabilities at FVTPL
Derivative liabilities		16,691		84,034			—		(11,140	)		(14,817	)		(2,729	)		72,039
Financial liabilities designated at FVTPL
Equity-linked securities		164,767		33,237			—		1,810			(112,188	)		—			87,626
Total		181,458		117,271			—		(9,330	)		(127,005	)		(2,729	)		159,665

(*1) The losses that increase financial liabilities are presented as positive amounts, and the gains that decrease financial liabilities are presented as negative amounts. The loss amounting to 25,834 million Won for the years ended December 31, 2019, which is from financial assets and liabilities that the Bank holds as at the end of the periods, has been recognized in net gain (loss) on financial instruments at FVTPL and net gain (loss) on financial assets at FVTOCI in the separate statement of comprehensive income.

(*2) The Bank recognizes transfers between levels at the end of reporting period within which events have occurred or conditions have changed.

	For the year ended December 31, 2018
	January 1, 2018		Net Income (loss) (*1)			Other comprehensive income		Purchases/ issuances		Disposals/ settlements			Transfer to or out of Level 3 (*2)			December 31, 2018
Financial assets:
Financial assets at FVTPL
Equity securities		260,085		55,759			—		57,953		(613	)		—			373,184
Capital contributions		273,789		15,888			—		121,577		(25,158	)		—			386,096
Beneficiary certificates		655,507		17,006			—		311,672		(115,472	)		3,310			872,023
Loans		52,854		(1,118	)		—		24,830		(55,074	)		—			21,492
Derivative assets		19,243		75,839			—		4,722		(50,863	)		—			48,941
Subtotal		1,261,478		163,374			—		520,754		(247,180	)		3,310			1,701,736
Financial assets at FVTOCI
Equity securities		285,397		—			20,714		220		(2,559	)		—			303,772
Total		1,546,875		163,374			20,714		520,974		(249,739	)		3,310			2,005,508
Financial liabilities:
Financial liabilities at FVTPL
Derivative liabilities		20,941		46,409			—		255		(50,911	)		(3	)		16,691
Financial liabilities designated at FVTPL
Equity-linked securities		160,057		(16,243	)		—		183,039		(162,086	)		—			164,767
Total		180,998		30,166			—		183,294		(212,997	)		(3	)		181,458

(*1) The losses that increase financial liabilities are presented as positive amounts, and the gains that decrease financial liabilities are presented as negative amounts. The gain amounting to 138,718 million Won for the years ended December 31, 2018, which is from financial assets and liabilities that the Bank holds as at the end of the periods, has been recognized in net gain (loss) on financial instruments at FVTPL and net gain (loss) on financial assets at FVTOCI in the separate statement of comprehensive income.

(*2) The Bank recognizes transfers between levels at the end of reporting period within which events have occurred or conditions have changed.

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(4) The results of a sensitivity analysis on the rational fluctuation in the unobservable inputs used for measuring Level 3 financial instruments are as follows.

The sensitivity analysis of the financial instruments has been performed by classifying favorable and unfavorable changes based on how changes in unobservable inputs would lead to the fluctuations of financial instruments’ value. When the fair value of a financial instrument is affected by more than one unobservable input, the below table reflects the most favorable or the most unfavorable circumstances. The sensitivity analysis was performed for two types of level 3 financial instruments: (1) debt securities, equity securities, interest rate related derivatives, currency related derivatives, equity related derivatives, equity-linked securities, beneficiary certificates and loans of which fair value changes are recognized as net income; (2) equity securities of which fair value changes are recognized as other comprehensive income.

Meanwhile, among the financial instruments that are classified as Level 3 amounting to 2,807,775 million Won and 2,186,966 million Won as of December 31, 2019 and December 31, 2018 respectively, equity investments of 2,021,513 million Won and 1,392,874 million Won that are considered to provide the best estimate of fair value are excluded from the sensitivity analysis respectively.

The following table shows the sensitivity analysis to disclose the effect of reasonably possible volatility on the fair value of Level 3 financial instruments (Unit: Korean Won in millions):

	As of December 31, 2019
	Net income (loss)					Other comprehensive income (loss)
	Favorable		Unfavorable			Favorable		Unfavorable
Financial assets:
Financial assets at FVTPL
Derivative assets (*1)		640		(935	)		—		—
Loans (*2)		152		(128	)		—		—
Equity securities (*3)		15,317		(10,361	)		—		—
Beneficiary certificates (*4)		1,125		(1,125	)		—		—
Financial assets at FVTOCI
Equity securities (*3)		—		—			19,547		(9,399	)
Total		17,234		(12,549	)		19,547		(9,399	)
Financial liabilities:
Financial liabilities at FVTPL
Derivative liabilities (*1)		1,054		(816	)		—		—
Financial liabilities designated as at FVTPL
Equity-linked securities (*1)		136		(142	)		—		—
Total		1,190		(958	)		—		—

	As of December 31, 2018
	Net income (loss)					Other comprehensive income (loss)
	Favorable		Unfavorable			Favorable		Unfavorable
Financial assets:
Financial assets at FVTPL
Derivative assets (*1)		4,579		(4,352	)		—		—
Loans (*2)		146		(127	)		—		—
Equity securities (*3)		11,854		(8,420	)		—		—
Beneficiary certificates (*4)		1,441		(1,440	)		—		—
Financial assets at FVTOCI
Equity securities (*3)		—		—			14,517		(7,128	)
Total		18,020		(14,339	)		14,517		(7,128	)
Financial liabilities:
Financial liabilities at FVTPL
Derivative liabilities (*1)		2,433		(2,751	)		—		—
Financial liabilities designated as at FVTPL
Equity-linked securities (*1)		1,561		(1,669	)		—		—
Total		3,994		(4,420	)		—		—

(*1) Fair value changes of equity related derivatives assets and liabilities and equity-linked securities are calculated by increasing or decreasing historical volatility of the stock price and correlation, which are major unobservable variables, by 10%, respectively. In the case of interest rate related derivative assets and liabilities, fair value changes are calculated by increasing or decreasing the volatility of interest rate, which are major unobservable variables, by 10%.

(*2) Fair value changes of equity securities are calculated by increasing or decreasing stock price (-10~10%) and fluctuation rate (-10~10%) and discount rate. The growth rate, discount rate, and liquidation value are major unobservable variables.

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(*3) Fair value changes of equity securities are calculated by increasing or decreasing growth rate (0~1%) and discount rate or liquidation value (-1~1%). The growth rate, discount rate, and liquidation value are major unobservable variables.

(*4) Even if the sensitivity analysis of the capital contributions and beneficiary certificates is not possible in practice, fair value changes of beneficiary certificates and other securities whose major unobservable variables are composed of the real estate are calculated by increasing or decreasing price fluctuation of real estate which is underlying assets and discount rate by 1%.

(5) Fair value and carrying amount of financial assets and liabilities that are recorded at amortized cost are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Fair value								Book value
	Level 1		Level 2		Level 3		Total
Financial assets:
Securities at amortized cost		3,123,898		17,205,518		—		20,329,416		20,147,137
Loans and other financial assets at amortized cost		—		—		257,019,589		257,019,589		267,911,339
Financial liabilities:
Deposits due to customers		—		252,857,819		—		252,857,819		252,625,294
Borrowings		—		15,245,919		—		15,245,919		15,325,821
Debentures		—		23,058,735		—		23,058,735		22,830,252
Other financial liabilities		—		15,888,244		—		15,888,244		15,889,160

	December 31, 2018
	Fair value								Book value
	Level 1		Level 2		Level 3		Total
Financial assets:
Securities at amortized cost		3,604,176		19,300,641		—		22,904,817		22,802,050
Loans and other financial assets at amortized cost		—		—		263,712,018		263,712,018		260,350,949
Financial liabilities:
Deposits due to customers		—		237,496,448		—		237,496,448		237,426,765
Borrowings		—		14,081,175		—		14,081,175		14,081,092
Debentures		—		21,689,756		—		21,689,756		21,666,331
Other financial liabilities		—		20,097,664		—		20,097,664		20,097,011

The fair values of financial instruments are measured using quoted market price in active markets. In case there is no active market for financial instruments, the Bank determines the fair value using valuation methods. Valuation techniques and input variables for financial assets and liabilities that are measured at amortized costs are given as follows:

	Valuation methods	Input variables
Securities at amortized cost	The fair value is measured by discounting the projected cash flows of debt securities by applying the market discount rate that has been applied to a proxy company that has similar credit rating to the issuers of the securities.	Risk-free market rate and credit spread
Loans and other financial assets at amortized cost	The fair value is measured by discounting the projected cash flows of loan products by applying the market discount rate that has been applied to a proxy company that has similar credit rating to the debtor.	Risk-free market rate, credit spread and prepayment rate
Deposits due to customers, borrowings, debentures and other financial liabilities	The fair value is measured by discounting the projected cash flows of debt products by applying the market discount rate that is reflecting credit rating of the Bank.	Risk-free market rate and forward rate

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(6) Financial instruments by category

Carrying amounts of financial assets and liabilities are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Financial assets at FVTPL		Financial assets at FVTOCI		Financial assets at amortized cost		Derivative assets (designated for hedging)		Total
Financial assets:
Due from banks		27,901		—		12,554,759		—		12,582,660
Securities		2,447,190		26,548,853		20,147,137		—		49,143,180
Loans		9,037		—		247,799,726		—		247,808,763
Derivative assets		2,945,273		—		—		111,764		3,057,037
Other financial assets at amortized cost		—		—		7,556,854		—		7,556,854
Total		5,429,401		26,548,853		288,058,476		111,764		320,148,494

	December 31, 2019
	Financial liabilities at FVTPL		Financial liabilities at amortized cost		Derivative assets (designated for hedging)		Total
Financial liabilities:
Deposits due to customers		27,530		252,625,294		—		252,652,824
Borrowings		87,626		15,325,821		—		15,413,447
Debentures		—		22,830,252		—		22,830,252
Derivative liabilities		2,841,176		—		—		2,841,176
Other financial liabilities (*)		—		15,955,782		—		15,955,782
Total		2,956,332		306,737,149		—		309,693,481

(*) Other financial liabilities include 66,622 million Won of financial guarantee liabilities measured at amortized cost included in provisions.

	December 31, 2018
	Financial assets at FVTPL		Financial assets at FVTOCI		Financial assets at amortized cost		Derivative assets (designated for hedging)		Total
Financial assets:
Due from banks		26,935		—		12,268,372		—		12,295,307
Securities		1,794,443		17,040,674		22,802,050		—		41,637,167
Loans		21,492		—		241,285,766		—		241,307,258
Derivative assets		2,034,988		—		—		35,503		2,070,491
Other financial assets at amortized cost		—		—		6,796,811		—		6,796,811
Total		3,877,858		17,040,674		283,152,999		35,503		304,107,034

	December 31, 2018
	Financial liabilities at FVTPL		Financial liabilities at amortized cost		Derivative assets (designated for hedging)		Total
Financial liabilities:
Deposits due to customers		27,058		237,426,765		—		237,453,823
Borrowings		164,767		14,081,092		—		14,245,859
Debentures		—		21,666,331		—		21,666,331
Derivative liabilities		2,087,548		—		17,654		2,105,202
Other financial liabilities (*)		—		20,148,283		—		20,148,283
Total		2,279,373		293,322,471		17,654		295,619,498

(*) Other financial liabilities include 51,272 million Won of financial guarantee liabilities measured at amortized cost included in provisions.

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(7) Income or expense from financial assets and liabilities by each category are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Interest income(expense)			Fees and commissions income(expense)		Reversal of (provision for) credit losses			Others		Total
Financial assets at FVTPL		359			90,188		—			112,322		202,869
Financial assets at FVTOCI		437,104			—		(3,111	)		23,229		457,222
Securities at amortized cost		430,440			—		1,413			—		431,853
Loans and other financial assets at amortized cost		8,147,798			150,754		(105,919	)		84,240		8,276,873
Financial liabilities at FVTPL		—			—		—			135		135
Financial liabilities at amortized cost		(4,155,366	)		—		—			—		(4,155,366	)
Derivative assets (designated for hedging)		—			—		—			4,261		4,261
Off-balance provisions		—			56,635		16,162			—		72,797
Total		4,860,335			297,577		(91,455	)		224,187		5,290,644

	December 31, 2018
	Interest income(expense)			Fees and commissions income(expense)		Reversal of (provision for) credit losses			Others			Total
Financial assets at FVTPL		6,047			88,149		—			250,854			345,050
Financial assets at FVTOCI		256,995			66		(1,704	)		13,630			268,987
Securities at amortized cost		372,006			—		(1,921	)		431			370,516
Loans and other financial assets at amortized cost		7,696,919			144,479		(144,372	)		43,735			7,740,761
Financial liabilities at FVTPL		(3,164	)		—		—			17,484			14,320
Financial liabilities at amortized cost		(3,601,085	)		27,138		—			25,498			(3,548,449	)
Derivative assets (designated for hedging)		—			—		—			(27,362	)		(27,362	)
Off-balance provisions		—			—		89,174			—			89,174
Total		4,727,718			259,832		(58,823	)		324,270			5,252,997

12. DERECOGNITION AND OFFSET OF FINANCIAL INSTRUMENTS

(1) Derecognition of financial instruments

Transferred financial assets that do not meet the condition of derecognition in their entirety.

a) Bonds sold under repurchase agreements

The financial instruments that were disposed but the Bank agreed to repurchase at the fixed amounts at the same time, so that they did not meet the conditions of derecognition, are as follows (Unit: Korean Won in millions):

		December 31, 2019		December 31, 2018
Asset transferred	Securities at amortized cost		5,570		5,552
Related liabilities	Bonds sold under repurchase agreements		6,008		2,129

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b) Securities loaned

When the Bank loans its securities to outside parties, the legal ownerships of the securities are transferred; however, they should be returned at the end of lending period. Therefore, the Bank does not derecognize them from the financial statements as it owns the majority of risks and benefits from the securities continuously, regardless of the transfer of legal ownership. The carrying amounts of the securities loaned are as follows (Unit: Korean won in millions):

		December 31, 2019		December 31, 2018		Loaned to
Financial assets at FVTOCI	Korean corporate bonds and others		80,737		40,029	Korea Securities Finance Corporation

The details of the transferred financial assets that do not meet the condition of derecognition in their entirety, such as disposal of securities under repurchase agreement or securities loaned, are also explained in Note 18.

(2) The offset of financial assets and liabilities

The Bank possesses both the uncollected domestic exchange receivables and the unpaid domestic exchange payable, which satisfy offsetting criteria of K-IFRS 1032. Therefore, the total number of uncollected domestic exchange receivables or unpaid domestic exchange payable has been countervailed with part of unpaid domestic exchange payable or uncollected domestic exchange receivables and has been disclosed in loans and other financial assets at amortized cost or other financial liabilities of the Bank’s statements of financial position.

The Bank possesses the derivative assets, derivative liabilities, receivable spot exchange and payable spot exchange that do not satisfy the offsetting criteria of K-IFRS 1032, but provide the Bank under the circumstances of the trading party’s defaults, insolvency or bankruptcy, the right of offsetting. Items such as cash collateral cannot satisfy the offsetting criteria of K-IFRS 1032, but in accordance with the collateral arrangements and under the circumstances of the trading party’s default, insolvency or bankruptcy, the derivative assets, derivative liabilities, receivable spot exchange and net amount of payable spot exchange can be offset.

The Bank has entered into a sale and repurchase agreement and accounted it as a collateralized borrowing. The Bank has also entered into a purchase and resale agreement and accounted it as a secured loan. The Bank under the repurchase agreements has offsetting right only upon the counterparty’s default, insolvency or bankruptcy; thus, the repurchase agreements are applied by the TBMA/ISMA Global Master Repurchase Agreement, which does not satisfy the offsetting criteria of K-IFRS 1032. The Bank disclosed bonds sold (purchased) under repurchase agreements as borrowings, loans and other financial assets at amortized cost.

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As of December 31, 2019, and 2018, the financial instruments to be offset and covered by master netting agreements and similar agreements are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Gross amounts of recognized financial assets		Gross amounts of recognized financial assets setoff		Net amounts of financial assets presented		Related amounts not setoff in the statement of financial position				Net amounts
							Netting agreements and others		Cash collateral received
Financial assets:
Derivative assets (*1)		3,056,782		—		3,056,782		6,954,531		111,122		970,177
Receivable spot exchange (*2)		4,979,048		—		4,979,048
Bonds purchased under repurchase agreements (*2)		8,670,352		—		8,670,352		8,670,352		—		—
Domestic exchanges receivable (*2) (*6)		31,639,302		31,269,258		370,044		—		—		370,044
Total		48,345,484		31,269,258		17,076,226		15,624,883		111,122		1,340,221

	December 31, 2019
	Gross amounts of recognized financial liabilities		Gross amounts of recognized financial liabilities setoff		Net amounts of financial liabilities presented		Related amounts not setoff in the statement of financial position				Net amounts
							Netting agreements and others		Cash collateral pledged
Financial liabilities:
Derivative liabilities (*1)		2,822,441		—		2,822,441		6,967,194		172,488		748,596
Equity-linked securities index in short position (*3)		87,626		—		87,626
Payable spot exchange (*4)		4,978,211		—		4,978,211
Bonds sold under repurchase agreements (*5)		6,008		—		6,008		6,008		—		—
Domestic exchanges payable (*4) (*6)		32,526,538		31,269,258		1,257,280		1,257,280		—		—
Total		40,420,824		31,269,258		9,151,566		8,230,482		172,488		748,596

	December 31, 2018
	Gross amounts of recognized financial assets		Gross amounts of recognized financial assets setoff		Net amounts of financial assets presented		Related amounts not setoff in the statement of financial position				Net amounts
							Netting agreements and others		Cash collateral received
Financial assets:
Derivative assets (*1)		1,905,771		—		1,905,771		5,439,720		66,857		485,781
Receivable spot exchange (*2)		4,086,587		—		4,086,587
Bonds purchased under repurchase agreements (*2)		11,605,383		—		11,605,383		11,605,383		—		—
Domestic exchanges receivable (*2) (*6)		30,084,899		29,699,412		385,487		—		—		385,487
Total		47,682,640		29,699,412		17,983,228		17,045,103		66,857		871,268

	December 31, 2018
	Gross amounts of recognized financial liabilities		Gross amounts of recognized financial liabilities setoff		Net amounts of financial liabilities presented		Related amounts not setoff in the statement of financial position				Net amounts
							Netting agreements and others		Cash collateral pledged
Financial liabilities:
Derivative liabilities (*1)		1,859,865		—		1,859,865		5,452,751		115,615		548,321
Equity-linked securities index in short position (*3)		164,767		—		164,767
Payable spot exchange (*4)		4,092,055		—		4,092,055
Bonds sold under repurchase agreements (*5)		2,129		—		2,129		2,129		—		—
Domestic exchanges payable (*4) (*6)		36,825,514		29,699,412		7,126,102		6,231,538		—		894,564
Total		42,944,330		29,699,412		13,244,918		11,686,418		115,615		1,442,885

(*1) The items include derivatives held for trading and derivatives designated for hedging.

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(*2) The items are included in loans and other financial assets at amortized cost.

(*3) The items are equity linked securities related to derivatives and are included in financial liabilities at FVTPL.

(*4) The items are included in other financial liabilities.

(*5) The items are included in borrowings.

(*6) Certain financial assets and liabilities are presented as net amounts.

13. INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES

(1) The Bank has the following subsidiaries (Unit: Korean Won in 100 million, USD in 10 thousand, CNY in 100 million, RUB in 100 million, IDR in 100 million, BRL in 10 thousand, MMK in 100 million, PHP in 100 million, VND in trillion):

Subsidiaries	Location	Capital stock		Main business
Woori FIS Co., Ltd. (*1)	Korea		—	System software development and maintenance
Woori Private Equity Asset Management Co., Ltd.(*1)	Korea		—	Finance
Woori Finance Research Institute Co., Ltd. (*1)	Korea		—	Other service business
Woori Card Co., Ltd. (*1)	Korea		—	Finance
Woori Investment Bank Co., Ltd.(*1)	Korea		—	Other credit finance business
Woori Credit Information Co., Ltd. (*1)	Korea		—	Credit information
Woori America Bank	America	USD	19,250	Finance
PT Bank Woori Saudara Indonesia 1906 Tbk	Indonesia	IDR	6,581	Finance
Woori Global Markets Asia Limited	Hong Kong	USD	10,000	Finance
Woori Bank China Limited	China	CNY	21.6	Finance
AO Woori Bank	Russia	RUB	14.5	Finance
Banco Woori Bank do Brasil S.A.	Brazil	BRL	7,709	Finance
Korea BTL Infrastructure Fund(*2)	Korea	KRW	8,118	Finance
Woori Fund Service Co., Ltd.(*1)	Korea		—	Finance
Woori Finance Cambodia PLC.	Cambodia	USD	1,300	Finance
Woori Finance Myanmar Co., Ltd.	Myanmar	MMK	162	Finance
Wealth Development Bank	Philippine	PHP	7.7	Finance
Woori Bank Vietnam Limited	Vietnam	VND	4.6	Finance
WB Finance Co., Ltd.(*2)	Cambodia	USD	5,939	Finance
Woori Bank Europe	Germany	EUR	5,000	Finance

(*1) These related parties were transferred as a wholly-owned subsidiary of Woori Financial Group Inc. during the current period.

(*2) The number of capital and investment shares increased during the current term due to paid-in capital increase by subsidiary.

	December 31, 2019					December 31, 2018
Subsidiaries	Number of shares owned		Percentage of ownership (%)		Financial statements as of	Number of shares owned		Percentage of ownership (%)		Financial statements as of
Woori FIS Co., Ltd. (*1)		—		—	—		4,900,000		100.0	Dec. 31, 2018
Woori Private Equity Asset Management Co., Ltd.(*1)		—		—	—		6,000,000		100.0	Dec. 31, 2018
Woori Finance Research Institute Co., Ltd. (*1)		—		—	—		600,000		100.0	Dec. 31, 2018
Woori Card Co., Ltd. (*1)		—		—	—		179,266,200		100.0	Dec. 31, 2018
Woori Investment Bank Co., Ltd.(*1)		—		—	—		403,404,538		59.8	Dec. 31, 2018
Woori Credit Information Co., Ltd. (*1)		—		—	—		1,008,000		100.0	Dec. 31, 2018
Woori America Bank		38,500,000		100.0	Dec. 31, 2019		38,500,000		100.0	Dec. 31, 2018
PT Bank Woori Saudara Indonesia 1906 Tbk		5,256,690,211		79.9	Dec. 31, 2019		5,256,690,211		79.9	Dec. 31, 2018
Woori Global Markets Asia Limited		78,000,000		100.0	Dec. 31, 2019		78,000,000		100.0	Dec. 31, 2018
Woori Bank China Limited		—		100.0	Dec. 31, 2019		—		100.0	Dec. 31, 2018
AO Woori Bank		57,999,999		100.0	Dec. 31, 2019		57,999,999		100.0	Dec. 31,2018
Banco Woori Bank do Brasil S.A.		77,093,999		100.0	Dec. 31, 2019		77,093,999		100.0	Dec. 31, 2018
Korea BTL Infrastructure Fund(*2)		162,167,420		99.9	Dec. 31, 2019		154,910,839		99.9	Dec. 31, 2018

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	December 31, 2019					December 31, 2018
Subsidiaries	Number of shares owned		Percentage of ownership (%)		Financial statements as of	Number of shares owned		Percentage of ownership (%)		Financial statements as of
Woori Fund Service Co., Ltd.(*1)		—		—	—		2,000,000		100.0	Dec. 31, 2018
Woori Finance Cambodia PLC.		13,000,000		100.0	Dec. 31, 2019		13,000,000		100.0	Dec. 31, 2018
Woori Finance Myanmar Co., Ltd.		1,200,000		100.0	Dec. 31, 2019		1,200,000		100.0	Dec. 31, 2018
Wealth Development Bank		3,931,365		51.0	Dec. 31, 2019		3,931,365		51.0	Dec. 31, 2018
Woori Bank Vietnam Limited		—		100.0	Dec. 31, 2019		—		100.0	Dec. 31, 2018
WB Finance Co., Ltd.(*2)		2,400,000		100.0	Dec. 31, 2019		1,200,000		100.0	Dec. 31, 2018
Woori Bank Europe		50,000,000		100.0	Dec. 31, 2019		50,000,000		100.0	Dec. 31, 2018

(*1) These related parties were transferred as a wholly-owned subsidiary of Woori Financial Group Inc. during the current period.

(*2) Capital stock and the number of investment shares increased due to the capital increase of subsidiaries.

(2) As for the structured entities in accordance with K-IFRS 1110 and K-IFRS 1112, it is determined that the Bank controls the entity after considering facts and circumstances, such as the Bank’s power over the entity’s related business activities, the Bank’s exposure to variable returns from the its involvement with the entity and the Bank’s ability to affect the returns through its power over the entity.

1) Details of structured entities that the Bank controls are as follows:

	As of December 31, 2019
Structured entities	Location	Main business	Percentage of ownership (%)		Financial statements as of
Structured entities established for securitization of financial assets (*1)
Kumho Trust First Co., Ltd. and 46 structured entities	Korea	Asset securitization		—		Dec. 31, 2019
KAMCO Value Recreation First Securitization Specialty Co., Ltd.	Korea	Asset securitization		15.0		Dec. 31, 2019
Money trust under the FISCM Act (*2)
Principal Guaranteed Trust and Principal and Interest Guaranteed Trust	Korea	Trust		—		Dec. 31, 2019
Structured entity for the investments in securities
G5 Pro Short-term Bond Investment Fund 13	Korea	Securities investment and others		100.0		Dec. 31, 2019
Igis Australia Investment Trust No. 209-1	Korea	Securities investment and others		99.4		Dec. 31, 2019
Multi Asset Global Real Estate Investment Trust No. 5-2	Korea	Securities investment and others		99.0		Dec. 31, 2019
HeungkukWoori Tech Company Private Placement Investment Trust No. 1	Korea	Securities investment and others		98.0		Dec. 31, 2019
AI Partners Water Supply Private Placement Investment Trust No. 2	U.K	Securities investment and others		97.3		Dec. 31, 2019
Heungkuk Global Private Placement Investment Trust No. 1	Korea	Securities investment and others		98.5		Dec. 31, 2019
Consus Sakhalin Real Estate Investment Trust 1st	Korea	Securities investment and others		75.0		Dec. 31, 2019
Woori Global Development Infrastructure Synergy Company Private Placement Investment Trust No. 1	Korea	Securities investment and others		99.9		Dec. 31, 2019
IGIS Global Private Placement Real Estate Fund No. 316-1	Korea	Securities investment and others		99.3		Dec. 31, 2019

(*1) It is determined that the Bank controls the entity after considering all the facts and circumstances, such as the Bank’s power over the entity’s related business activities, the Bank’s exposure to variable returns from its involvement with the entity and the Bank’s ability to affect the returns through its power over the entity, even though the Bank holds less than 50% ownership interest of the entity.

(*2) The Bank controls the trust because it has power that determines the management performance over the trust and is exposed to variable returns to absorb losses through the guarantees of payment of principal and fixed rate of return.

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	As of December 31, 2018
Structured entities	Location	Main business	Percentage of ownership (%)		Financial statements as of
Structured entities established for securitization of financial assets (*1)
Kumho Trust First Co., Ltd. and 27 structured entities	Korea	Asset securitization		—	Dec. 31, 2018
KAMCO Value Recreation First Securitization Specialty Co., Ltd.	Korea	Asset securitization		15.0	Dec. 31, 2018
Money trust under the FISCM Act (*2)
Principal Guaranteed Trust and Principal and Interest Guaranteed Trust	Korea	Trust		—	Dec. 31, 2018
Structured entity for the investments in securities G5 Pro Short-term Bond Investment Fund 13	Korea	Securities investment		100.0	Dec. 31, 2018
Heungkuk Global Private Placement Investment Trust No. 1	Korea	Securities investment		98.5	Dec. 31, 2018
HeungkukWoori Tech Company Private Placement Investment Trust No. 1	Korea	Securities investment		98.0	Dec. 31, 2018
AI Partners Water Supply Private Placement Investment Trust No. 2	U.K	Securities investment		97.3	Dec. 31, 2018
Consus Sakhalin Real Estate Investment Trust 1st	Korea	Securities investment		75.0	Dec. 31, 2018

(*1) It is determined that the Bank controls the entity after considering all the facts and circumstances, such as the Bank’s power over the entity’s related business activities, the Bank’s exposure to variable returns from its involvement with the entity and the Bank’s ability to affect the returns through its power over the entity, even though the Bank holds less than 50% ownership interest of the entity.

(*2) The Bank controls the trust because it has power that determines the management performance over the trust and is exposed to variable returns to absorb losses through the guarantees of payment of principal and fixed rate of return.

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2) The following companies have been excluded from the consolidation scope despite the Bank’s majority ownership interest:

	December 31, 2019
Subsidiaries	Location	Main business	Percentage of ownership (%)
Golden Bridge NHN Online Private Equity Investment (*)	Korea	Securities investment		60.0
Mirae Asset Maps Clean Water Private Equity Investment Trust 7th (*)	Korea	Securities investment		59.7
Kiwoom Yonsei Private Equity Investment Trust (*)	Korea	Securities investment		88.9
IGIS Europe Private Placement Real Estate Fund No. 163-2(*)	Korea	Securities investment		97.9
IGIS Global Private Placement Real Estate Fund No. 148-1(*)	Korea	Securities investment		69.0
IGIS Global Private Placement Real Estate Fund No. 148-2(*)	Korea	Securities investment		69.0
Mirae Asset Seoul Ring Expressway Private Special Asset Fund No. 1 (*)	Korea	Securities investment		66.7
Hangkang Sewage Treatment Plant Fund (*)	Korea	Securities investment		55.6
KIM Pocheon-Hwado Highway Infra Private Placement Special Asset Fund(*)	Korea	Securities investment		55.2
Woori Innovative Growth Professional Investment Trust(*)	Korea	Securities investment		55.0

(*) The Bank owns the majority ownership interest in these structured entities but has no power over the investees’ relevant activities as they are private investment trusts. As a result, it is deemed that the Bank has no power or control over the structured entities.

	December 31, 2018
Subsidiaries	Location	Main business	Percentage of ownership (%)
Golden Bridge NHN Online Private Equity Investment (*)	Korea	Securities investment		60.0
Mirae Asset Seobu Underground Expressway Professional Investment (*)	Korea	Securities investment		65.8
Mirae Asset Maps Clean Water Private Equity Investment Trust 7th(*)	Korea	Securities investment		59.7
Kiwoom Yonsei Private Equity Investment Trust (*)	Korea	Securities investment		88.9
Hana Walmart Real Estate Investment Trust 41-1 (*)	Korea	Securities investment		77.0
IGIS Europe Private Placement Real Estate Fund No. 163-2 (*)	Korea	Securities investment		97.9
IGIS Global Private Placement Real Estate Fund No. 148-1 (*)	Korea	Securities investment		69.0
IGIS Global Private Placement Real Estate Fund No. 148-2 (*)	Korea	Securities investment		69.0
KB Nongso Sewage Treatment Equipment Private Special Asset (*)	Korea	Securities investment		50.0
Mirae Asset Seoul Ring Expressway Private Special Asset Fund(*)	Korea	Securities investment		66.2
Hangang Sewage Treatment Plant Fund (*)	Korea	Securities investment		55.6
Consus KyungJu Green Private Placement Real Estate Fund 1(*)	Korea	Securities investment		52.4

(*) The Bank owns the majority ownership interest in these structured entities but has no power over the investees’ relevant activities as they are private investment trusts. As a result, it is deemed that the Bank has no power or control over the structured entities.

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(3) Investments in associates are as follows (Unit: Korean Won in 100 million):

							December 31, 2019
Investees	Location	Capital		Main Business	Number of shares owned		Percentage of ownership (%)		Financial statements as of
Woori Service Networks Co., Ltd. (*2)	Korea		5	Freight & staffing services		4,704		4.9	2019.11.30.(*5)
Korea Credit Bureau Co., Ltd. (*1)	Korea		100	Credit information		180,000		9.9	2019.12.31.
Korea Finance Security Co., Ltd. (*2)	Korea		60	Security service		180,000		15.0	2019.11.30.(*5)
Chin Hung International Inc. (*4)	Korea		733	Construction		37,059,405		25.3	2019.11.30.(*5)
Saman Corporation (*1)	Korea		7	General construction Technology service		12,542		9.2	2019.9.30.(*5)
Dongwoo C & C Co., Ltd. (*3)	Korea		7	Construction		13,317		23.2	—
SJCO Co., Ltd. (*3)	Korea		26	Aggregate transportation and wholesale		70,529		26.5	—
G2 collection Co., Ltd. (*3)	Korea		2	Wholesale and retail sales		12,574		28.9	—
The Base Enterprise Co., Ltd. (*3)	Korea		7	Manufacturing		68,470		48.4	—
Kyesan Engineering Co., Ltd. (*3)	Korea		13	Construction		60,581		23.2	—
Good Software Lab Co., Ltd. (*3)	Korea		3	Service		17,121		28.9	—
Wongwang Co., Ltd. (*3)	Korea		1	Wholesale and real estate		2,590		29.0	—
Sejin Construction Co., Ltd. (*3)	Korea		4	Construction		12,123		29.6	—
QTS Shipping Co., Ltd. (*3)	Korea		4	Complex transportation brokerage		17,460		49.4	—
Reading Doctors Co., Ltd. (*3)	Korea		1	Other services		7,398		35.4	—
PREXCO Co., Ltd. (*3)	Korea		16	Manufacturing		919,972		28.1	—
Jiwon Plating Co., Ltd. (*3)	Korea		7	Plating		28,705		20.5	—
Cultizm Korea LTD Co., Ltd. (*3)	Korea		0.14	Wholesale and retail sales		858		31.3	—
Gil Co., Ltd. (*9)	Korea		—	Manufacturing		—		—	—
NK Eng Co., Ltd. (*3)	Korea		15	Manufacturing		697,033		23.1	—
Woori Growth Partnerships New Technology (*6)	Korea		968	Other financial services		21,609		23.1	2019.12.31.
DAEA SNC Co., Ltd. (*3)	Korea		1	Wholesale and retail sales		1,253		24.0	—
ARES-TECH Co., Ltd. (*3)	Korea		2	Electronic component manufacturing		7,187		23.4	—
Force TEC Co., Ltd.	Korea		93	Manufacturing		4,780,907		25.8	—
Sinseong Trading Co., Ltd. (*3)	Korea		1	Manufacturing		2,584		27.2	—
2016KIF-IMM Woori Bank Technology (*6)	Korea		650	Other financial services		12,993		20.0	2019.12.31.
K BANK Co., Ltd. (*1)(*7)	Korea		5,051	Finance		14,630,057		14.5	2019.11.30.(*5)
Smart Private Equity Fund No. 2 (*6)	Korea		146	Other financial services		2,915		20.0	2019.12.31.
Woori Bank-Company K Korea Movie Asset	Korea		120	Other financial services		3,000		25.0	2019.12.31.
Well to Sea No. 3 Private Equity Fund (*8)	Korea		2,051	Finance		102,500,000,000		50.0	2019.9.30.(*5)
Youngdong Sea Food Co., Ltd. (*3)	Korea		3	Processed sea food manufacturing		12,106		24.0	—
Partner One Value Up I Private Equity Fund	Korea		430	Other financial services		10,000,000,000		23.3	2019.12.31.
IBK KIP Seongjang Dideemdol 1st Private (*7)	Korea		229	Other financial services		4,576,000,000		20.0	2019.12.31.
Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund (*7)	Korea		175	Other financial services		4,375,000,000		25.0	2019.12.31.
Woori-Shinyoung Growth-Cap Private Equity Fund I (*10)	Korea		397	Other financial services		9,742,331,288		24.5	2019.12.31.
Lotte Card Co., Ltd. (*10)	Korea		3,737	Credit card and installment financial business		14,948,013		20.0	2019.9.30.(*5)
Woori-Q Corporate Restructuring Private Equity Fund (*10)	Korea		160	Trust and collective investment		4,532,000,000		28.4	2019.12.31.
PCC-Woori LP Secondary Fund (*10)	Korea		65	Other financial investment businesses		1,750		26.9	2019.12.31.

- 60 -

					December 31, 2018
Investees	Location	Capital		Main business	Number of shares owned		Percentage of ownership (%)		Financial statements as of
Woori Service Networks Co., Ltd. (*2)	Korea		5	Freight & staffing services		4,704		4.9	2018.11.30.(*5)
Korea Credit Bureau Co., Ltd. (*1)	Korea		100	Credit information		180,000		9.9	2018.12.31.
Korea Finance Security Co., Ltd. (*2)	Korea		60	Security service		180,000		15.0	2018.11.30.(*5)
Chin Hung International Inc. (*4)	Korea		733	Construction		37,059,405		25.3	2018.11.30.(*5)
Saman Corporation (*1)	Korea		7	General construction Technology service		12,542		9.2	2018.09.30.(*5)
Dongwoo C & C Co., Ltd. (*3)	Korea		7	Construction		13,317		23.2	—
SJCO Co., Ltd. (*3)	Korea		26	Aggregate transportation and wholesale		70,529		26.5	—
G2 collection Co., Ltd. (*3)	Korea		2	Wholesale and retail sales		12,574		28.9	—
The Base Enterprise Co., Ltd. (*3)	Korea		7	Manufacturing		68,470		48.4	—
Kyesan Engineering Co., Ltd. (*3)	Korea		13	Construction		60,581		23.2	—
Good Software Lab Co., Ltd. (*3)	Korea		3	Service		17,121		28.9	—
Wongwang Co., Ltd. (*3)	Korea		1	Wholesale and real estate		2,590		29.0	—
Sejin Construction Co., Ltd. (*3)	Korea		4	Construction		12,123		29.6	—
QTS Shipping Co., Ltd. (*3)	Korea		4	Complex transportation brokerage		17,460		49.4	—
Reading Doctors Co., Ltd. (*3)	Korea		1	Other services		7,398		35.4	—
PREXCO Co., Ltd. (*3)	Korea		16	Manufacturing		919,972		28.1	—
Jiwon Plating Co., Ltd. (*3)	Korea		7	Plating		28,705		20.5	—
Cultizm Korea LTD Co., Ltd. (*3)	Korea		0.14	Wholesale and retail sales		858		31.3	—
Gil Co., Ltd. (*9)	Korea		—	Manufacturing		44,662		26.1	—
NK Eng Co., Ltd. (*3)	Korea		15	Manufacturing		697,033		23.1	—
Woori Growth Partnerships New Technology (*6)	Korea		968	Other financial services		27,282		23.1	2018.12.31.
DAEA SNC Co., Ltd. (*3)	Korea		1	Wholesale and retail sales		1,253		24.0	—
ARES-TECH Co., Ltd. (*3)	Korea		2	Electronic component manufacturing		7,187		23.4	—
Force TEC Co., Ltd.	Korea		93	Manufacturing		4,780,907		25.8	—
Sinseong Trading Co., Ltd. (*3)	Korea		1	Manufacturing		2,584		27.2	—
2016KIF-IMM Woori Bank Technology (*6)	Korea		663	Other financial services		15,000		20.0	2018.12.31.
K BANK Co., Ltd. (*1)(*7)	Korea		5,051	Finance		13,468,600		14.1	2018.11.30.(*5)
Smart Private Equity Fund No. 2	Korea		146	Other financial services		3,000		20.0	2018.12.31.
Woori Bank-Company K Korea Movie Asset	Korea		120	Other financial services		3,000		25.0	2018.12.31.
Well to Sea No. 3 Private Equity Fund (*8)	Korea		2,051	Finance		102,500,000,000		50.0	2018.09.30.(*5)
Youngdong Sea Food Co., Ltd. (*3)	Korea		3	Processed sea food manufacturing		12,106		24.0	—
Partner One Value Up I Private Equity Fund	Korea		430	Other financial services		10,000,000,000		23.3	2018.12.31.
IBK KIP Seongjang Dideemdol 1st Private (*7)	Korea		229	Other financial services		4,426,000,000		20.0	2018.12.31.
Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund (*7)	Korea		166	Other financial services		3,025,000,000		25.0	2018.12.31.
Woori-Shinyoung Growth-Cap Private Equity Fund I (*10)	Korea		—	Other financial services		—		—	—
Lotte Card Co., Ltd. (*10)	Korea		—	Credit card and installment financial business		—		—	—
Woori-Q Corporate Restructuring Private Equity Fund (*10)	Korea		—	Trust and collective investment		—		—	—
PCC-Woori LP Secondary Fund (*10)	Korea		—	Other financial investment businesses		—		—	—

(*1) The Bank has significant influence over the creditors’ council, which makes the financial and operating policy decisions.

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(*2) Most of the significant business transactions are with the associates as of December 31, 2019 and December 31, 2018.

(*3) There is no investment amount as of December 31, 2019 and December 31, 2018.

(*4) Equity securities with quoted market prices in the investment assets of the associates are the common stock of the Chin Hung International Inc. The share price of Chin Hung International Inc. as quoted in the market as of December 31, 2019 and December 31, 2018 are 2,310 Won and 2,065 Won, respectively.

(*5) Significant transactions or events that occurred between the end of the reporting period of the associates and the end of the reporting period of the Bank were properly reflected.

(*6) Due to the consolidation of stocks and debt-equity swap of the associates, the Bank’s number of holding shares and ownership ratio decreased during the year ended December 31, 2019.

(*7) Due to paid capital increase of associates, the Bank’s capital stock and number of holding shares increased during the nine months ended December 31, 2019.

(*8) The Bank has entered into an agreement as the Bank (or a third party designated by the Bank) may exercise the right of purchase upon the disposal of the underlying asset (Aju Capital Co., Ltd.).

(*9) Due to the sale of the entire shares, it was excluded from the associates as of December 31, 2019.

(*10) Included in associates due to the Bank’s investment during the reporting period.

(4) The entities excluded from associates, although the Bank’s ownership interest in them is higher than 20% as of December 31, 2019 and 2018, are as follows:

	As of December 31, 2019
Associate (*)	Number of shares owned		Ownership (%)
Orient Shipyard Co., Ltd.		464,812		21.4
Saenuel Co., Ltd.		3,531		37.4
E Mirae Tech Co., Ltd.		7,696		41.0
Jehin Trading Co., Ltd.		81,610		27.3
The Season Company Co., Ltd.		18,187		30.1
Yuil PESC Co., Ltd.		8,642		24.0
CL Tech Co., Ltd.		13,759		38.6

	As of December 31, 2018
Associate (*)	Number of shares owned		Ownership (%)
Orient Shipyard Co., Ltd.		464,812		21.4
Saenuel Co., Ltd.		3,531		37.4
E Mirae Tech Co., Ltd.		7,696		41.0
Jehin Trading Co., Ltd.		81,610		27.3
The Season Company Co., Ltd.		18,187		30.1
Yuil PESC Co., Ltd.		8,642		24.0
CL Tech Co., Ltd.		13,759		38.6

(*) Even though the Bank’s ownership interest in the entity is more than 20%, it is determined that the Bank does not have significant influence over the entity since it is going through workout process under receivership; thus, it is excluded from the investment in associates.

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(5) Changes in carrying value of investments in subsidiaries and associates are as follows (Korean won in millions). As the investments associated with structured entities were classified as financial assets at FVTPL for the current and previous quarter, they were excluded from the carrying value of investments in subsidiaries and associates.

	For the year ended December 31, 2019
Investees	January 1, 2019		Acquisitions		Disposals and others (*1)			Impairment (*2)			December 31, 2019
Woori Card Co., Ltd.		1,274,260		—		(1,274,260	)		—			—
Woori Investment Bank		143,814		—		(143,814	)		—			—
Woori America Bank		281,471		—		—			—			281,471
PT Bank Woori Saudara Indonesia 1906 Tbk		328,012		—		—			—			328,012
Woori Global Markets Asia Limited		113,858		—		—			—			113,858
Woori Bank China Limited		427,802		—		—			—			427,802
AO Woori Bank		51,780		—		—			—			51,780
Banco Woori Bank do Brasil S.A		44,045		—		—			—			44,045
Korea BTL Infrastructure Fund		778,620		63,500		(27,299	)		—			814,821
Woori Finance Cambodia PLC.		15,850		—		—			—			15,850
Woori Finance Myanmar Co., Ltd.		13,649		—		—			—			13,649
Wealth Development Bank		24,355		—		—			—			24,355
Woori Bank Vietnam Limited		232,840		—		—			—			232,840
WB Finance Co., Ltd.		87,562		33,480		—			—			121,042
Woori Bank Europe		64,062		—		—			—			64,062
Woori Service Networks Co., Ltd.		108		—		—			—			108
Korea Credit Bureau Co., Ltd.		3,313		—		—			—			3,313
Korea Finance Security Co., Ltd.		3,267		—		—			—			3,267
Chin Hung International Inc.		70,969		—		—			(1,112	)		69,857
Saman Corporation		1,014		—		—			(95	)		919
Woori Growth Partnerships New Technology Private Equity Fund		25,847		309		(7,490	)		—			18,666
2016KIF-IMM Woori Bank Technology Venture Fund		15,000		—		(2,615	)		—			12,385
K BANK Co., Ltd.		67,343		5,807		—			(41,896	)		31,254
Smart Private Equity Fund No. 2		3,000		—		(85	)		—			2,915
Woori Bank-Company K Korea Movie Asset Fund		3,000		—		—			—			3,000
Well to Sea No. 3 Private Equity Fund		101,483		—		—			—			101,483
Partner One Value Up 1 Private Equity Fund		10,000		—		—			—			10,000
IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership		4,426		150		—			—			4,576
Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund		3,025		1,350		—			—			4,375
Woori-Shinyoung Growth-Cap Private Equity Fund I		—		9,742		—			—			9,742
Lotte Card Co., Ltd.		—		346,000		—			—			346,000
Woori-Q Corporate Restructuring Private Equity Fund		—		4,532		—			—			4,532
PCC-Woori LP Secondary Fund		—		1,750		—			—			1,750
Total		4,193,775		466,620		(1,455,563	)		(43,103	)		3,161,729

(*1) The amount of 1,418,074 million Won among the investments in subsidiaries and associates, was sold to Woori Financial Group Inc., the holding company.

(*2) The Bank recognized the impairment because carrying amount of the investments in subsidiaries and associates exceeds the estimated recoverable amount.

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	For the year ended December 31, 2018
Investees	January 1, 2018		Acquisitions		Disposals and others(*)			Impairment			December 31, 2018
Woori FIS Co., Ltd.		35,362		—		(35,362	)		—			—
Woori Private Equity Asset Management Co., Ltd.		43,227		—		(43,227	)		—			—
Woori Finance Research Institute Co., Ltd.		3,364		—		(3,364	)		—			—
Woori Card Co., Ltd.		1,274,260		—		—			—			1,274,260
Woori Investment Bank		143,814		—		—			—			143,814
Woori Credit Information Co., Ltd.		24,666		—		(24,666	)		—			—
Woori America Bank		281,471		—		—			—			281,471
PT Bank Woori Saudara Indonesia 1906 Tbk		328,012		—		—			—			328,012
Woori Global Markets Asia Limited		113,858		—		—			—			113,858
Woori Bank China Limited		427,802		—		—			—			427,802
AO Woori Bank		51,780		—		—			—			51,780
Banco Woori Bank do Brasil S.A.		44,045		—		—			—			44,045
Korea BTL Infrastructure Fund		783,164		7,500		(12,044	)		—			778,620
Woori Fund Service Co., Ltd.		10,000		—		(10,000	)		—			—
Woori Finance Cambodia PLC.		15,850		—		—			—			15,850
Woori Finance Myanmar Co., Ltd.		13,649		—		—			—			13,649
Wealth Development Bank		24,355		—		—			—			24,355
Woori Bank Vietnam Limited		155,400		77,440		—			—			232,840
WB Finance Co., Ltd.		—		88,216		(654	)		—			87,562
Woori Bank Europe		—		64,062		—			—			64,062
Kumho Tire Co., Inc.		98,932		—		(98,932	)		—			—
Woori Service Networks Co., Ltd.		108		—		—			—			108
Korea Credit Bureau Co., Ltd.		3,313		—		—			—			3,313
Korea Finance Security Co., Ltd.		3,267		—		—			—			3,267
Chin Hung International Inc.		70,969		—		—			—			70,969
Poonglim Industrial Co., Ltd.		6		—		(6	)		—			—
STX Corporation		7,809		—		(7,809	)		—			—
Saman Corporation		1,255		—		—			(241	)		1,014
Woori Growth Partnerships New Technology Private Equity Fund		28,833		360		(3,346	)		—			25,847
2016KIF-IMM Woori Bank Technology Venture Fund		6,840		8,160		—			—			15,000
K BANK Co., Ltd.		45,392		21,951		—			—			67,343
Smart Private Equity Fund No. 2		3,000		—		—			—			3,000
Woori Bank-Company K Korea Movie Asset Fund		3,000		—		—			—			3,000
Well to Sea No. 3 Private Equity Fund		101,992		—		(509	)		—			101,483
Partner One Value Up 1st Private Equity Fund		—		10,000		—			—			10,000
IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership		—		4,426		—			—			4,426
Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund		—		3,025		—			—			3,025
Total		4,148,795		285,140		(239,919	)		(241	)		4,193,775

(*) The amounts replaced in subsidiaries to assets held for sales is 116,619 million Won. Also, the amounts replaced from investments in associates to financial assets at FVTPL is 6 million Won and the amount replaced from investments in associates to financial assets at FVTOCI) is 98,932 million Won.

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14. INVESTMENT PROPERTIES

(1) Details of investment properties are as follows (Unit: Korean Won in millions):

	December 31, 2019			December 31, 2018
Acquisition cost		588,246			399,805
Accumulated depreciation		(37,561	)		(32,688	)
Net carrying value		550,685			367,117

(2) Changes in investment properties are as follows (Unit: Korean Won in millions):

	For the year ended December 31
	2019			2018
Beginning net carrying value		367,117			350,235
Acquisition		185,173			12,957
Depreciation		(4,901	)		(3,723	)
Transfers		3,273			7,623
Foreign currencies translation adjustments		23			25
Ending net carrying value		550,685			367,117

(3) Fair value of investment properties amounted to 647,899 million won and 427,329 million won as of December 31, 2019 and 2018, respectively. The fair value of investment properties has been assessed on the basis of recent similar real estate market price and officially assessed land price in the area of the investment properties, is classified as Level 3 on the fair value hierarchy.

(4) Rental fee earned from investment properties amounted to 20,386 million Won and 14,402 million Won for the years ended December 31, 2019 and 2018, respectively. The operating expenses directly related to the investment property in which the rent income occurred are 5,638 million won and 3,723 million won, respectively.

(5) The minimum lease payments expected to be received in the future under non-refundable lease contracts for the year ended December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

	For the year ended December 31
	2019		2018
Lease payments
Within 1 year		10,641		3,622
After 1 year but within 2 years		4,500		1,485
After 2 years but within 3 years		2,157		787
After 3 years but within 4 years		1,418		397
After 4 years but within 5 years		904		—
After 5 years		241		—
Total		19,861		6,291

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15. PREMISES AND EQUIPMENT

(1) Details of premises and equipment are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Land		Building		Properties for business use		Structures in leased office		Construction in progress		Total
Premises and equipment(owned)		1,516,297		674,522		188,849		35,872		399		2,415,939
Right-of-use asset		—		314,477		12,528		—		—		327,005
Total		1,516,297		988,999		201,377		35,872		399		2,742,944

(2) Details of premises and equipment (ownership) are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Land		Building			Properties for business use			Leasehold improvement			Construction in progress		Total
Acquisition cost		1,516,297		902,392			665,303			406,209			399		3,490,600
Accumulated depreciation		—		(227,870	)		(476,454	)		(370,337	)		—		(1,074,661	)
Net carrying value		1,516,297		674,522			188,849			35,872			399		2,415,939

	December 31, 2018
	Land		Building			Properties for business use			Leasehold improvement			Construction in progress		Total
Acquisition cost		1,466,639		852,662			609,709			396,751			7,720		3,333,481
Accumulated depreciation		—		(202,213	)		(424,871	)		(356,055	)		—		(983,139	)
Net carrying value		1,466,639		650,449			184,838			40,696			7,720		2,350,342

(3) Details of changes in premises and equipment (owned) are as follows (Unit: Korean Won in millions):

	For the year ended December 31, 2019
	Land			Building			Properties for business use			Structures in leased office			Construction in progress			Total
Beginning net carrying value		1,466,639			650,449			184,838			40,696			7,720			2,350,342
Acquisitions		51,684			45,555			67,058			21,309			5,070			190,676
Disposals		(3,284	)		(2,245	)		(22	)		(2,151	)		—			(7,702	)
Depreciation		—			(26,878	)		(64,411	)		(22,035	)		—			(113,324	)
Classified to assets held for sale		(21	)		(74	)		—			—			—			(95	)
Transfer		991			6,040			1,101			987			(12,393	)		(3,274	)
Foreign currencies translation adjustments		19			5			253			86			2			365
Others		269			1,670			32			(3,020	)		—			(1,049	)
Ending net carrying value		1,516,297			674,522			188,849			35,872			399			2,415,939

	For the year ended December 31, 2018
	Land			Building			Properties for business use			Structures in leased office			Construction in progress			Total
Beginning net carring value		1,472,170			669,823			119,066			49,290			64,241			2,374,590
Acquisitions		990			13,088			55,710			12,567			7,059			89,414
Disposals		(29	)		—			(24	)		(731	)		(187	)		(971	)
Depreciation		—			(25,103	)		(52,431	)		(27,852	)		—			(105,386	)
Classification to held for sale		(3,651	)		(2,592	)		(920	)		—			—			(7,163	)
Transfer		(2,863	)		(4,760	)		63,283			—			(63,283	)		(7,623	)
Foreign currencies translation adjustments		22			5			122			82			(110	)		121
Others		—			(12	)		32			7,340			—			7,360
Ending carrying value		1,466,639			650,449			184,838			40,696			7,720			2,350,342

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(4) Details of right-of-use assets are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Building			Properties for business use			Total
Acquisition cost		449,060			19,869			468,929
Accumulated depreciation		(134,583	)		(7,341	)		(141,924	)
Net carrying value		314,477			12,528			327,005

(5) Details of changes in right-of-use assets are as follows (Unit: Korean Won in millions)

	December 31, 2019
	Building			Properties for business use			Total
Beginning net carrying value		304,930			18,056			322,986
New contracts		200,626			3,505			204,131
Change of contracts		(47	)		—			(47	)
Cancelled contracts		(3,740	)		(69	)		(3,809	)
Depreciation		(187,010	)		(8,976	)		(195,986	)
Others		(282	)		12			(270	)
Ending net carrying value		314,477			12,528			327,005

16. INTANGIBLE ASSETS

(1) Details of intangible assets are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Industrial property rights			Development cost			Others			Membership deposit			Construction in progress		Total
Acquisition cost		1,429			321,716			757,835			16,174			4,066		1,101,220
Accumulated amortization		(787	)		(120,182	)		(604,327	)		—			—		(725,296	)
Accumulated impairment losses		—			—			(25,848	)		(803	)		—		(26,651	)
Net carrying value		642			201,534			127,660			15,371			4,066		349,273

	December 31, 2018
	Industrial property rights			Development cost			Others			Membership deposit			Construction in progress		Total
Acquisition cost		1,143			284,898			667,262			12,438			10,415		976,156
Accumulated amortization		(623	)		(64,330	)		(557,329	)		—			—		(622,282	)
Accumulated impairment losses		—			—			—			(707	)		—		(707	)
Net carrying value		520			220,568			109,933			11,731			10,415		353,167

(2) Details of changes in intangible assets are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Industrial property rights			Development cost			Others			Membership deposit			Construction in progress			Total
Beginning balance		520			220,568			109,933			11,731			10,415			353,167
Acquisitions		287			28,878			83,310			3,806			8,754			125,035
Disposal		—			—			—			(75	)		—			(75	)
Amortization (*1)		(165	)		(55,840	)		(46,953	)		—			—			(102,958	)
Impairment loss (*2)		—			—			(25,848	)		(105	)		—			(25,953	)
Transfer		—			7,928			7,175			—			(15,103	)		—
Foreign currencies translation adjustments		—			—			67			14			—			81
Others		—			—			(24	)		—			—			(24	)
Ending balance		642			201,534			127,660			15,371			4,066			349,273

(*1) Amortization of other intangible assets amounting to 22,317 million Won is included in other operating expenses.

(*2) Membership is an intangible asset with an indefinite useful life that recognizes an impairment loss if recoverable value is lower than its carrying amount, while the reversal of an impairment loss should be recognized when the recoverable value is higher than its carrying amount. The bank also recognized impairment loss from other intangible assets as recoverable value of them is lower than its carrying amount.

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	December 31, 2018
	Industrial property rights			Development cost			Others			Membership deposit			Construction in progress			Total
Beginning balance		480			54,397			85,715			9,524			153,209			303,325
Acquisitions		192			18,594			42,382			2,811			97,067			161,046
Disposal		—			—			(196	)		(1,021	)		—			(1,217	)
Amortization (*1)		(152	)		(38,790	)		(69,023	)		—			—			(107,965	)
Reversal of impairment loss(*2)		—			—			—			403			—			403
Transfer		—			188,189			51,672			—			(239,861	)		—
Classified to assets held for distribution (sale)		—			(1,822	)		(630	)		—			—			(2,452	)
Foreign currencies translation adjustments		—			—			32			14			—			46
Others		—			—			(19	)		—			—			(19	)
Ending balance		520			220,568			109,933			11,731			10,415			353,167

(*1) Amortization of other intangible assets amounting to 51,770 million Won is included in other operating expenses.

(*2) Membership is an intangible asset with an indefinite useful life that recognizes an impairment loss if recoverable value is lower than its carrying amount, while the reversal of an impairment loss should be recognized when the recoverable value is higher than its carrying amount.

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17. ASSETS HELD FOR DISTRIBUTION (SALE)

(1) Assets held for distribution (sale) are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Disposal group as held for distribution		—		141,143
Premises and equipment, etc. (*)		95		2,145
Total		95		143,288

(*) The Bank classified premises and equipment and others that are highly likely to be sold within one year as assets held for sale.

(2) Details of disposal group as held for distribution and liabilities related to assets held for sale are as follows (Unit: Korean Won in millions)

In accordance with the establishment of financial holding company and plans on share transfer, the Bank classified assets, liabilities and equity of each subsidiary as of the end of the reporting period. The details of disposal group held for distribution as of December 31, 2018 as follows (Unit: KRW Won in millions)

		December 31, 2018
Disposal group as held for distribution
Investment in subsidiaries	Woori FIS Co., Ltd.		35,362
	Woori Private Equity Asset Management Co., Ltd.		43,227
	Woori Finance Research Institute Co., Ltd.		3,364
	Woori Credit Information Co., Ltd.		24,666
	Woori Fund Service Co., Ltd.		10,000
Other assets	Wibee Members		30,370
impairment losses			(5,846	)
Total			141,143
Liabilities related to assets held for sale
Other liabilities	Wibee Members		72,361

The Bank calculated net fair value of each subsidiary subject to future distribution as of December 31, 2018 based on the value of net asset and net income. The computed value 110,773 million Won is classified as Level 3 in the fair value, hierarchy.

The Bank estimates the assets held for distribution (sale) the lower of net fair value and book value, and thus 5,846 million won is recognized as impairment loss as the end of December 2018.

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18. ASSETS SUBJECT TO LIEN AND ASSETS ACQUIRED THROUGH FORECLOSURES

(1) Assets subjected to lien are as follows (Unit: Korean Won in millions):

		December 31, 2019
		Collateral given to	Amount		Reason for collateral
Loans and other financial assets at amortized cost	Due from banks in local currency	Samsung Securities Co., Ltd. and others		17,345	Margin deposit for futures or option
	Due from banks in foreign currencies	Korea Investment & Securities Co., Ltd. and others		180,919	Foreign margin deposit for future or option and others
Financial assets at FVTOCI	Korean debt securities corporate bonds and others	The BOK and others		5,127,379	Settlement risk and others
Securities at amortized cost	Korean treasury and government agencies bonds	Korea Securities Depository		5,570	Related to bonds sold under repurchase agreements (*)
	Korean treasury and government agencies bonds and others	The BOK and others		6,190,626	Settlement risk and others
		Total		11,521,839

		December 31, 2018
		Collateral given to	Amount		Reason for collateral
Loans and other financial assets at amortized cost	Due from banks in local currency	Samsung Securities Co., Ltd. and others		38,112	Margin deposit for futures or option
	Due from banks in foreign currencies	Korea Investment & Securities Co., Ltd. and others		202,156	Foreign margin deposit for future or option and others
Financial assets at FVTOCI	Korean financial institutions’ debt securities and others	The BOK and others		2,887,218	Settlement risk and others
Securities at amortized cost	Korean treasury and government bonds	Korea Securities Depository		5,552	Related to bonds sold under repurchase agreements (*)
	Korean treasury government bonds and others	The BOK and others		6,378,398	Settlement risk and others
		Total		9,511,436

(*) The Bank entered into the repurchase agreements at predetermined price or original sale price added with certain rate of return after the disposal of securities. In this regard, the securities are provided as collateral, and the purchasers are eligible to dispose or provide them as collateral. The Bank has not derecognized the securities after transferring them, and therefore has recognized the relevant amount as liabilities (bonds sold under repurchase agreements).

(2) As of December 31, 2019 and December 31, 2018 there is no asset acquired through foreclosures.

(3) Securities loaned are as follows (Unit: Korean Won in millions):

		December 31, 2019		December 31, 2018		Loaned to
Financial assets at FVTOCI	Korean financial institutions’ debt securities and others		80,737		40,029	Korea Securities Finance Corporation

Securities loaned are lending of specific securities to borrowers who agree to return the same quantity of the same security at the end of lending period. As the Bank does not derecognize these securities, there are no liabilities recognized through such transactions relates to securities loaned.

(4) Collaterals held that can be disposed and re-subjected to lien regardless of defaults of counterparties

Fair values of collaterals held that can be disposed and re-subjected to lien regardless of defaults of counterparties as of December 31, 2019 and 2018, are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Fair values of collaterals		Fair values of collaterals were disposed or re-subjected to lien
Securities		9,029,117		—

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	December 31, 2018
	Fair values of collaterals		Fair values of collaterals were disposed or re-subjected to lien
Securities		12,165,473		—

19. OTHER ASSETS

Details of other assets are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Prepaid expenses		108,664		140,843
Advance payments		—		3,007
Others		5,086		3,145
Total		113,750		146,995

20. FINANCIAL LIABILITIES AT FVTPL

(1) Financial liabilities at FVTPL are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Financial liabilities at fair value through profit or loss mandatorily measured at fair value		2,868,706		2,114,606
Financial liabilities at fair value through profit or loss designated as upon initial recognition		87,626		164,767
Total		2,956,332		2,279,373

(2) Financial liabilities at fair value through profit or loss mandatorily measured at fair value(Financial liabilities held for trading) are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Deposits
Gold banking liabilities		27,530		27,058
Derivative liabilities		2,841,176		2,087,548
Total		2,868,706		2,114,606

(3) Financial liabilities designated as at FVTPL are as follows (Unit: Korean won in millions):

	December 31, 2019		December 31, 2018
Equity-linked securities index
Equity-linked securities index in short position		87,626		164,767

Financial liabilities at fair value through profit or loss designated as upon initial recognition are designated in order to eliminate or significantly reduce accounting mismatch arising from recognition or measurement.

(4) There are no accumulated changes in credit risk adjustments to financial liabilities at fair value through profit or loss designated as upon initial recognition.

The adjustment to reflect Bank’s credit risk is considered in measuring the fair value of equity-linked securities and debentures. The Bank’s credit risk is determined by adjusting credit spread observed in credit rating of Bank.

(5) The difference between financial liabilities at fair value through profit or loss designated as upon initial recognition carrying amount and nominal amount at maturity is as follows (Unit: Korean won in millions):

	December 31, 2019			December 31,2018
Carrying amount		87,626			164,767
Nominal amount at maturity		97,503			217,280
Difference		(9,877	)		(52,513	)

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21. DEPOSITS DUE TO CUSTOMERS

Details of deposits due to customers by type are as follows (Unit: Korean Won in millions):

	December 31, 2019			December 31, 2018
Deposits in local currency:
Deposits on demand		8,680,363			11,081,708
Deposits at termination		225,438,122			204,215,703
Mutual installment		28,574			30,783
Certificate of deposits		973,625			6,510,571
Sub-total		235,120,684			221,838,765
Deposits in foreign currency:
Deposits in foreign currencies		17,510,592			15,657,683
Present value discount		(5,982	)		(69,683	)
Total		252,625,294			237,426,765

22. BORROWINGS AND DEBENTURES

(1) Details of borrowings are as follows (Unit: Korean Won in millions):

	December 31, 2019
	Lenders	Interest rate (%)		Amount
Borrowings in local currency:
Borrowings from the BOK	The BOK		0.5 ~ 0.8		1,770,726
Borrowings from government funds	Small Enterprise And Market Service and others		0.0 ~ 2.8		1,844,798
Others	The Korea Development Bank and others		0.0 ~ 2.8		3,804,072
Sub-total					7,419,596
Borrowings in foreign currencies:
Borrowings in foreign currencies	The Export-Import BOK and others		(0.3) ~ 3.6		7,716,113
Offshore borrowings in foreign currencies	HSBC, HKG		3.0		34,734
Sub-total					7,750,847
Bills sold	Others		0.0 ~ 1.6		9,367
Call money	Bank and others		0.1 ~ 3.0		140,302
Bonds sold under repurchase agreements	Other financial institutions		4.0 ~ 12.7		6,008
Present value discount					(299	)
Total					15,325,821

	December 31, 2018
	Lender	Interest rate (%)		Amount
Borrowings in local currency:
Borrowings from The BOK	The BOK		0.5 ~ 0.8		1,335,459
Borrowing from government funds	Small Enterprise and Market Service and others		0.0 ~ 3.5		1,771,379
Others	The Korea Development Bank and others		0.0 ~ 3.8		3,359,968
Sub-total					6,466,806
Borrowings in foreign currencies:
Borrowings in foreign currencies	The Export-Import Bank of Korea and others		0.0 ~ 3.7		6,961,717
Offshore borrowings in foreign currencies	JPMORGAN CHASE BANK		2.9		33,543
Sub-total					6,995,260
Bills sold	Others		0.0 ~ 1.8		19,336
Call money	Banks and others		0.0 ~ 7.3		597,645
Bonds sold under repurchase agreements	Other financial institutions		0.8 ~ 12.7		2,129
Present value discount					(84	)
Total					14,081,092

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(2) Details of debentures are as follows (Unit: Korean Won in millions):

	December 31, 2019				December 31, 2018
	Interest rate (%)		Amount		Interest rate (%)			Amount
Face value of bond (*):
Ordinary bonds		0.0 ~ 4.3		17,064,976		1.6 ~ 4.5			16,346,278
Subordinated bonds		2.7 ~ 5.9		5,782,688		3.0 ~ 5.9			5,343,478
Sub-total						22,847,664			21,689,756
Discount on bonds						(17,412	)		(23,425	)
Total						22,830,252			21,666,331

(*) Included debentures under fair value hedge relationships are 3,151,172 million Won and 2,956,565 million Won as of December 31, 2019 and 2018, respectively.

23. PROVISIONS

(1) Details of provisions are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Asset retirement obligation		60,477		61,477
Provisions for guarantees (*1)		95,402		92,636
Provisions for unused loan commitments		59,479		71,368
Other provisions (*2)		164,755		58,020
Total		380,113		283,501

(*1) Provisions for guarantees include provision for financial guarantee of 66,622 million Won and 51,272 million Won as of December 31, 2019 and 2018, respectively.

(*2) Other provisions consist of provision for litigation and others.

(2) Changes in provisions for guarantees and unused loan commitments are as follows (Unit: Korean Won in millions):

1) Provisions for guarantees

	For the year ended December 31, 2019
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		47,860			33,698			11,078			92,636
Replaced with 12-month expected credit loss		13,568			(13,568	)		—			—
Replaced with expected credit loss for the entire period		(317	)		532			(215	)		—
Replaced with credit-impaired financial assets		(30	)		(32	)		62			—
Provisions used		(27,711	)		—			—			(27,711	)
Net reversal of unused amount		(14,278	)		5,603			4,437			(4,238	)
Others (*)		34,717			(2	)		—			34,715
Ending balance		53,809			26,231			15,362			95,402

	For the year ended December 31, 2018
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		49,384			18,102			127,511			194,997
Replaced with 12-month expected credit loss		84			(84	)		—			—
Replaced with expected credit loss for the entire period		(236	)		91,007			(90,771	)		—
Replaced with credit-impaired financial assets		(38	)		(29	)		67			—
Provisions used		(20,429	)		—			—			(20,429	)
Net reversal of unused amount		(4,118	)		(75,298	)		(25,729	)		(105,145	)
Others (*)		23,213			—			—			23,213
Ending balance		47,860			33,698			11,078			92,636

(*) This is the effect of new financial guarantee contracts that are initially measured at fair value.

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2) Provisions for unused loan commitments

	For the year ended December 31, 2019
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		40,813			30,555			—			71,368
Replaced with 12-month expected credit loss		5,401			(5,401	)		—			—
Replaced with expected credit loss for the entire period		(503	)		503			—			—
Replaced with credit-impaired financial assets		(78	)		(35	)		113			—
Net provision(reversal) of unused amount		(16,050	)		4,239			(113	)		(11,924	)
Others		34			1			—			35
Ending balance		29,617			29,862			—			59,479

	For the year ended December 31, 2018
	Stage 1			Stage 2			Stage 3			Total
Beginning balance		42,106			13,100			167			55,373
Replaced with 12-month expected credit loss		1,708			(1,551	)		(157	)		—
Replaced with expected credit loss for the entire period		(820	)		825			(5	)		—
Replaced with credit-impaired financial assets		(77	)		(1,329	)		1,406			—
Net provision(reversal) of unused amount		(2,128	)		19,510			(1,411	)		15,971
Others		24			—			—			24
Ending balance		40,813			30,555			—			71,368

(3) Changes in asset retirement obligation are as follows (Unit: Korean Won in millions):

	For years ended December 31
	2019			2018
Beginning balance		61,477			56,243
Provisions provided		3,025			1,361
Provisions used		(1,418	)		(822	)
Reversal of provisions unused		(2,635	)		(989	)
Amortization		431			562
Increase in restoration costs and others		(403	)		5,122
Ending balance		60,477			61,477

The amount of the asset retirement obligation is the present value of the best estimate of future expected expenditure to settle the obligation – arising from leased premises as of December 31, 2019, discounted by appropriate discount rate. The restoration cost is expected to occur by the end of each premise’s lease period, and the Bank has used average lease period of each category of leases terminated during the past years in order to rationally estimate the lease period. In addition, the Bank used average amount of actual recovery cost for the past 3 years and the inflation rate for the preceding year in order to estimate future recovery cost.

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(4) Changes in other provisions are as follows (Unit: Korean Won in millions):

	For the nine months ended December 31, 2019
	Other provisions
Beginning balance		58,020
Provisions provided		104,891
Provisions used		(883	)
Transfer		—
Classified as held for sale		—
Others		2,727
Ending balance		164,755

	For year ended December 31, 2018
	Provisions for customer reward credits			Other provisions			Total
Beginning balance		37,256			52,940			90,196
Provisions provided		2,050			7,795			9,845
Provisions used		(80,629	)		(5,015	)		(85,644	)
Transfer (*)		59,924			—			59,924
Classified as held for sale		(46,140	)		(2,055	)		(48,195	)
Others		27,539			4,355			31,894
Ending balance		—			58,020			58,020

(*) Provision for customer reward credits have increased for the Bank due to the point transfer from partners during the year ended in December 31, 2018.

(5) Others

1) As of September 23, 2019, the Bank temporarily suspended the won-payment business due to tightened U.S. sanctions on Iran while it was ongoing to settle trade transactions between Korea and Iran. In connection with these services, the Bank is currently being investigated by US government agencies including US prosecutors (United States Attorney’s Office and New York State Attorney General’s Office) and Office of Foreign Assets Control as to whether the Bank has violated United States laws by participating in prohibited transactions involving the following countries: Iran, Sudan, Syria and Cuba, which have been sanctioned by the US.

2) The Bank recognized the provision of the estimated compensation amount related to the incomplete selling of the Derivative Linked Fund (DLF) incurred during the current term and a fine expected to be imposed by the Financial Supervisory Service as the best estimate for the expenditure required to meet its obligations at the end of the reporting period. On the other hand, the actual amount of compensation of the Bank may change as the global spread of the new coronavirus has caused abnormal interest rate changes since the end of the reporting period

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24. NET DEFINED BENEFIT LIABILITIES

The characteristics of the Bank’s defined benefit retirement pension plans are as follows:

Employees and directors with one or more years of service are entitled to receive a payment upon termination of their employment, based on their length of service and rate of pay at the time of termination. The assets of the plans are measured at their fair value at the end of reporting date. The plan liabilities are measured using actuarial assumption that is considered to be the most reasonable estimate of future cash flows (the projected unit method, which takes account of projected earnings increases).

The Bank is exposed to various risks through defined benefit retirement pension plan, and the most significant risks are as follows:

Volatility of asset	The defined benefit obligation was estimated with an interest rate calculated based on blue chip corporate bonds earnings. A deficit may occur if the rate of return of plan assets falls short of the discount rate.
Decrease in profitability of blue-chip bonds	A decrease in profitability of blue chip bonds will be partially offset by increases in the value of debt securities that the employee benefit plan owns but will bring an increase in the defined benefit obligation.
Risk of inflation	Most defined benefit obligations are related to inflation rate; the higher the inflation rate is, the higher the level of liabilities. Therefore, deficit occurs in the system if an inflation rate increases.

(1) Details of net defined benefit liabilities are as follows (Unit: Korean Won in millions):

	December 31, 2019			December 31, 2018
Present value of defined benefit obligation		1,311,238			1,175,650
Fair value of plan assets		(1,264,412	)		(1,039,487	)
Net defined benefit liabilities		46,826			136,163

(2) Changes in the carrying value of defined benefit obligation are as follows (Unit: Korean Won in millions):

		For the year ended December 31, 2019			For the year ended December 31, 2018
Beginning balance			1,175,650			990,007
Transfer effect			601			—
Current service cost			144,317			130,006
Interest cost			30,751			30,604
Remeasurements	Financial assumptions		49,554			54,423
	Demographic assumptions		32,566			7,728
	Experience adjustments		(47,481	)		33,697
Foreign currencies translation adjustments			12			29
Retirement benefit paid			(74,732	)		(70,844	)
Ending balance			1,311,238			1,175,650

(3) Changes in the plan assets are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Beginning balance		1,039,487			975,723
Interest income		29,046			32,163
Remeasurements		(8,098	)		(13,999	)
Employer’s contributions		279,066			117,000
Retirement benefit paid		(72,930	)		(69,109	)
Others		(2,159	)		(2,291	)
Ending balance		1,264,412			1,039,487

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(4) Plan assets consist of regular deposits as of December 31, 2019 and December 31, 2018, and the actual return on plan assets amount to 20,948 million Won and 18,164 million Won for the year ended December 31, 2019 and 2018, respectively.

Meanwhile, the contribution expected to be paid in the current accounting year amounts to 148,124 million Won.

(5) Current service cost, net interest income, loss(gain) on the curtailment or settlement and re-measurements recognized in the separate statements comprehensive income are as follows (Unit: Korean Won in millions):

	For the year ended December 31
	2019		2018
Current service cost		144,317		130,006
Net interest income		1,705		(1,559	)
Cost recognized in net income		146,022		128,447
Remeasurements		42,737		109,847
Cost recognized in total comprehensive income		188,759		238,294

Retirement benefits related to defined contribution plans recognized as expenses are 2,097 million Won and 1,873 million Won for the year ended December 31, 2019 and 2018, respectively.

(6) Key actuarial assumptions used in net defined benefit liability measurement are as follows:

	December 31, 2019	December 31, 2018
Discount rate	2.42%	2.69%
Future wage growth rate	2.64%	6.18%
Mortality rate	Issued by Korea Insurance Development Institute	Issued by Korea Insurance Development Institute
Retirement rate	Experience rate for each employment classification	Experience rate for each employment classification

The weighted average maturity of defined benefit liability is 11.85 years.

(7) The sensitivity to actuarial assumptions used in the assessment of defined benefit obligation is as follows (Unit: Korean Won in millions):

		December 31, 2019 (*)			December 31, 2018 (*)
Discount rate	Increase by 1% point		(139,312	)		(113,874	)
	Decrease by 1% point		164,744			133,530
Future wage growth rate	Increase by 1% point		162,701			132,324
	Decrease by 1% point		(140,339	)		(115,041	)

(*) The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. The sensitivity of the defined benefit obligation to changes in principal actuarial assumptions is calculated using the projected unit credit method, the same method applied when calculating the defined benefit obligations recognized on the statement of financial position.

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25. OTHER FINANCIAL LIABILITIES AND OTHER LIABILITIES

Other financial liabilities and other liabilities are as follows (Unit: Korean Won in millions):

	December 31, 2019			December 31, 2018
Other financial liabilities:
Accounts payable		5,268,280			4,360,077
Accrued expenses		2,259,532			2,018,814
Borrowing from trust accounts		3,440,874			3,850,860
Agency business revenue		362,820			396,735
Foreign exchanges payable		753,819			520,815
Domestic exchanges payable		1,257,280			7,127,706
Lease liabilities		277,655			—
Other miscellaneous financial liabilities		2,269,901			1,822,657
Present value discount		(1,001	)		(653	)
Sub-total		15,889,160			20,097,011
Other liabilities:
Unearned income		40,100			56,502
Other miscellaneous liabilities		111,481			116,999
Sub-total		151,581			173,501
Total		16,040,741			20,270,512

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26. DERIVATIVES

(1) Derivative assets and derivative liabilities are as follows (Unit: Korean Won in millions):

	December 31, 2019
			Assets				Liabilities
	Notional amount		For fair value hedge		For trading		For fair value hedge		For trading
Interest rate:
Futures		79,021		—		—		—		—
Swaps		152,784,737		111,764		325,542		—		413,568
Purchase options		460,000		—		11,888		—		—
Written options		395,789		—		—		—		9,655
Currency:
Forwards		113,791,702		—		1,447,224		—		1,027,903
Swaps		81,359,428		—		965,346		—		1,106,423
Purchase options		1,588,746		—		18,835		—		—
Written options		2,341,179		—		—		—		9,403
Equity:
Forwards		11		—		—		—		—
Futures		630,562		—		—		—		—
Swaps		1,280,436		—		1,217		—		54,393
Purchase options		8,851,984		—		175,221		—		—
Written options		8,978,953		—		—		—		219,831
Total		372,542,548		111,764		2,945,273		—		2,841,176

	December 31, 2018
			Assets				Liabilities
	Notional amount		For fair value hedge		For trading		For fair value hedge		For trading
Interest rate:
Futures		—		—		—		—		—
Swaps		151,908,990		35,503		229,811		17,654		266,596
Purchase options		530,000		—		10,461		—		—
Written options		525,000		—		—		—		12,438
Currency:
Futures		294,172		—		—		—		—
Forwards		87,625,827		—		840,859		—		774,241
Swaps		66,419,673		—		761,907		—		772,805
Purchase options		1,933,454		—		17,544		—		—
Written options		3,134,774		—		—		—		20,739
Equity:
Futures		186,737		—		—		—		—
Swaps		441,573		—		31,377		—		1,217
Purchase options		4,925,315		—		143,029		—		—
Written options		6,145,935		—		—		—		239,512
Total		324,071,450		35,503		2,034,988		17,654		2,087,548

Derivatives held for trading are classified to financial assets at FVTPL (Note 7) and financial liabilities at FVTPL (Note 20), and derivatives held for hedging are presented as derivative assets and derivative liabilities in the statements of financial position.

- 79 -

(2) Overview of the Bank’s hedge accounting

The hedging relationships the Bank applies fair value hedge accounting and cash flow hedge accounting to are affected by interest rate which is related with Interest Rate Benchmark Reform. The interest rates to which the hedging relationships are exposed are USD 3M LIBOR, USD 6M LIBOR. The nominal amounts of hedging instruments related to 3M LIBOR and 6M LIBOR are USD 2,150,000,000 and USD 500,000,000, respectively. The Bank pays close attention to discussions in the market and industry regarding the applicable alternative benchmark interest rates for the exposed interest rate. The entity judges related uncertainty is expected to be no longer present when the exposed interest rates are replaced by the applicable benchmark interest rates.

As of the year end, the Bank has applied fair value hedge on fixed interest rate foreign currency denominated debentures amounting to 3,151,172 million Won. The purpose of the hedging is to avoid fair value change risk of fixed interest rate foreign currency denominated debentures derived from fluctuations of market interest rate, and as such the Bank entered into interest rate swap agreements designated as hedging instruments.

Pursuant to the interest rate swap agreement, by swapping the calculated difference between the fixed interest rate and floating interest rate applied to the nominal value, the fair value fluctuation risk is hedged as the foreign currency denominated debentures fixed interest rate terms are converted to floating interest rate. Pursuant to the interest rate swap agreement, hedge ratio is determined by matching the nominal value to the face value of the hedging instrument.

In this hedging relationship, only the market interest rate fluctuation, which is the most significant part of the fair value change of the hedged item, is designated as the hedged risk, and other risk factors including credit risk are not included in the hedged risk. Therefore, the ineffective portion of the hedge could arise from difference in the timing of the cash flow of the hedged item, price margin set by the counterparty of hedging instruments, or unilateral credit risk fluctuation of either party of the hedging instrument.

The interest rate swap agreements and the hedged items are subject to fluctuations in the underlying market rate of interest and the Bank expects the fair value of the interest rate swap contract and the value of the hedged item to generally change in the opposite direction.

The fair value of the interest rate swap at the end of the reporting period is determined by discounting future cash flows estimated using the yield curve at the end of the reporting period and the credit risk embedded in the contract and the average interest rate is determined based on the outstanding balance at the end of the reporting period. The variable interest rate applied to the interest rate swap is USD Libor 3M (6M) plus spread. In accordance with the terms of each interest rate swap contract designated as a hedging instrument, the Bank receives interest at a fixed interest rate and pays interest at a variable interest rate.

- 80 -

(3) The nominal amounts of the hedging instrument are as follows (Unit: Korean Won in millions, USD, SGD):

	December 31, 2019
	1 year or less		1 year to 5 years		More than 5 years		Total
Fair value hedge
Interest rate risk
Interest rate swap (USD)		350,000,000		2,000,000,000		300,000,000		2,650,000,000

	December 31, 2018
	1 year or less		1 year to 5 years		More than 5 years		Total
Fair value hedge
Interest rate risk
Interest rate swap (USD)		—		1,350,000,000		1,300,000,000		2,650,000,000

(4) The average interest rate and average currency rate of the hedging instrument as of December 31, 2019 and as of December 31, 2018 are as follows:

	December 31, 2019
	Average interest rate
Fair value hedge
Interest rate risk
Interest rate swaps (USD)	Fixed 3.96% receipt and Libor 3M+1.61% floating paid Fixed 5.88% receipt and Libor 6M+2.15% floating paid

	December 31, 2018
	Average interest rate
Fair value hedge
Interest rate risk
Interest rate swaps (USD)	Fixed 3.96% receipt and Libor 3M+1.61% floating paid Fixed 5.88% receipt and Libor 6M+2.15% floating paid

(5) The amounts related to items designated as hedging instruments are as follows (Unit: Korean Won in millions, USD):

	December 31, 2019
	Nominal amounts of the hedging instrument		Carrying amounts of the hedging instrument				Line item in the statement of financial position where the hedging instrument is located		Changing in fair value used for calculating hedge ineffectiveness
			Assets		Liabilities
Fair value hedge
Interest rate risk
Interest rate swaps (USD)		USD 2,650,000,000		111,764		—		Derivative assets (designated for hedging) Derivative liabilities (designated for hedging		90,244

December 31, 2018

Nominal amounts of the hedging instrument

Carrying amounts of the hedging instrument

Line item in the statement of financial position where the hedging instrument is located

Changing in fair value used for calculating hedge ineffectiveness

Assets

Liabilities

Fair value hedge

Interest rate risk

Interest rate swaps (USD)

USD 2,650,000,000

35,503

17,654

Derivative assets (designated for hedging Derivative liabilities (designated for hedging

)  )

(27,362

)

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(6) Details of carrying amount to hedged and amount adjusted due to hedge accounting as of December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

December 31, 2019

Accumulated amount of fair value hedge

Carrying amounts of the hedging item

adjustments on the hedged item included in the carrying amount of the hedged item

Line item in the statement of financial position in which the hedged item  is included

Changing in fair value used for calculating hedge ineffectiveness

Assets

Liabilities

Assets

Liabilities

Fair value hedge

Interest rate risk

Debenture

—

3,151,172

—

91,368

Debentures

(85,984

)

December 31, 2018

Carrying amounts of the hedging item

Accumulated amount of fair value hedge adjustments on the hedged item included in the carrying amount of the hedged item

Line item in the statement of financial position in which the hedged item is included

Changing in fair value used for calculating hedge ineffectiveness

Assets

Liabilities

Assets

Liabilities

Fair value hedge

Interest rate risk

Debenture

—

2,956,565

—

5,200

Debentures

25,498

(7) Amounts recognized in profit or loss due to the ineffective portion of fair value hedges for the years ended December 31, 2019 and 2018 are as follows (Unit: Korean won in millions):

		December 31, 2019
		Hedge ineffectiveness recognized in profit or loss		Line item in the profit or loss that includes hedge ineffectiveness
Fair value hedge	Interest rate risk		4,260	Other net operating income

		December 31, 2018
		Hedge ineffectiveness recognized in profit or loss			Line item in the profit or loss that includes hedge ineffectiveness
Fair value hedge	Interest rate risk		(1,864	)	Other net operating income

27. DEFERRED DAY 1 PROFITS OR LOSSES

Changes in deferred day 1 profits or losses are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Beginning balance		25,515			7,416
New transactions		53,289			23,744
Amounts recognized in losses		(26,545	)		(5,645	)
Ending balance		52,259			25,515

In case some variables to measure fair values of financial instruments are not observable in the market, valuation techniques are utilized to evaluate such financial instruments. These financial instruments are recorded the transaction price as at the time of acquisition, even though there are differences noted between the transaction price and the fair value. The table above presents the differences yet to be realized as profit or losses.

28. CAPITAL STOCK AND CAPITAL SURPLUS

(1) The number of shares authorized and others are as follows:

	December 31, 2019		December 31, 2018
Shares of common stock authorized		5,000,000,000 shares		5,000,000,000 shares
Par value		5,000 Won		5,000 Won
Shares of common stock issued		676,000,000 shares		676,000,000 shares
Capital		3,381,392 million Won		3,381,392 million Won

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(2) There are no changes in the number of shares issued and outstanding for the years ended December 31, 2019 and 2018.

(3) Details of capital surplus are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Paid in capital in excess of par value		269,533		269,533

29. HYBRID SECURITIES

The bond-type hybrid securities classified as equity are as follows (Unit: Korean Won in millions):

	Issue date		Maturity		Interest rates (%)		December 31, 2019			December 31, 2018
Securities in local currency		April 25, 2013		April 25, 2043		4.4		500,000			500,000
		November 13, 2013		November 13, 2043		5.7		200,000			200,000
		December 12, 2014		December 12, 2044		5.2		—			160,000
		June 3, 2015		June 3, 2045		4.4		240,000			240,000
		July 26, 2018		—		4.4		400,000			400000
Securities in foreign currencies		June 10, 2015		June 10, 2045		5.0		559,650			559,650
		September 27, 2016		—		4.5		553,450			553,450
		May 16, 2017		—		5.3		562,700			562,700
		October 4, 2019		—		4.3		662,035			—
Issuance cost								(17,021	)		(13,837	)
Total								3,660,814			3,161,963

The hybrid securities mentioned above are either without a maturity date or its maturity can be extended indefinitely at the maturity date without change of terms.

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30. OTHER EQUITY

(1) Details of other equity are as follows (Unit: Korean Won in millions):

	December 31, 2019			December 31, 2018
Accumulated other comprehensive loss:
Net loss on valuation of financial assets at FVTOCI		(104,639	)		(116,032	)
Loss on foreign currency translation of foreign operations		(10,366	)		(18,811	)
Remeasurement loss related to defined benefit plan		(248,500	)		(217,516	)
Sub-total		(363,505	)		(352,359	)
Treasury shares		—			(34,113	)
Other capital adjustments		(6,350	)		(368	)
Total		(369,855	)		(386,840	)

(2) Changes in the accumulated other comprehensive income are as follows (Unit: Korean Won in millions):

	For the year ended December 31, 2019
	Beginning balance			Increase (decrease) (*)			Reclassification adjustments			Income tax effect			Ending balance
Net gain (loss) on valuation of financial assets at FVTOCI		(116,032	)		15,767			(53	)		(4,321	)		(104,639	)
Gain (loss) on foreign currency translation of foreign operations		(18,811	)		11,649			—			(3,204	)		(10,366	)
Remeasurement gain (loss) related to defined benefit plan		(217,516	)		(42,737	)		—			11,753			(248,500	)
Total		(352,359	)		(15,321	)		(53	)		4,228			(363,505	)

(*) Net gain (loss) on valuation of financial assets at FVTOCI included the 45,513 million Won transferred to retained earnings due to disposal of equity securities.

	For the year ended December 31, 2018
	Beginning balance			Increase (decrease) (*1)(*2)			Reclassification adjustments		Income tax effect			Ending balance
Net gain (loss) on valuation of financial assets at FVTOCI		(121,818	)		(34	)		8,015		(2,195	)		(116,032	)
Gain (loss) on financial liabilities at FVTPL designated as upon initial recognition due to own credit risk		(96	)		132			—		(36	)		—
Gain (loss) on foreign currency translation of foreign operations		(26,693	)		10,872			—		(2,990	)		(18,811	)
Remeasurement gain (loss) related to defined benefit plan		(137,877	)		(109,847	)		—		30,208			(217,516	)
Total		(286,484	)		(98,877	)		8,015		24,987			(352,359	)

(*1) Net gain (loss) on valuation of financial assets at FVTOCI included the 1,009 million Won transferred to retained earnings due to disposal of equity securities.

(*2) Gain (loss) on financial liabilities at fair value through profit or loss designated as upon initial recognition due to own credit risk included the 4 million Won and is transferred to retained earnings due to redemption.

- 84 -

31. RETAINED EARNINGS AND OTHER RESERVES

(1) Details of retained earnings are as follows (Unit: Korean Won in millions):

		December 31, 2019		December 31, 2018
Legal reserve	Earned surplus reserve		2,039,754		1,857,754
	Other legal reserve		46,635		46,384
	Sub-total		2,086,389		1,904,138
Voluntary reserve	Business rationalization reserve		8,000		8,000
	Reserve for financial structure improvement		235,400		235,400
	Additional reserve		8,576,105		7,759,804
	Regulatory reserve for credit loss		1,888,816		2,091,721
	Revaluation reserve		714,018		715,860
	Sub-total		11,422,339		10,810,785
Retained earnings before appropriation			1,611,128		1,908,029
	Total		15,119,856		14,622,952

i. Earned surplus reserve

In accordance with the Article 40, Banking Act, earned surplus reserve is appropriated at least one tenth of the earnings after tax on every dividend declaration, not exceeding the paid in capital. This reserve may not be used other than for offsetting a deficit or transferring to capital.

ii. Other legal reserve

Other legal reserves were appropriated in the branches located in Japan, Vietnam and Bangladesh according to the banking laws of Japan, Vietnam and Bangladesh respectively, and may be used to offset any deficit incurred in those branches.

iii. Business rationalization reserve

Pursuant to the Restriction of Special Taxation Act, the Bank was previously required to appropriate, as a reserve for business rationalization, amounts equal to tax reductions arising from tax exemptions and tax credits up to December 31, 2001. The requirement was no longer effective from 2002.

iv. Reserve for financial structure improvement

From 2002 to 2014, the Finance Supervisory Services recommended banks in Korea to appropriate at least 10 percent of net income after accumulated deficit for financial structure improvement, until tangible common equity ratio equals 5.5 percent. But this reserve is not available for payment of cash dividends; however, it can be used to reduce a deficit or be transferred to capital. The reserve and appropriation is an autonomous judgment matter of the Bank since 2015.

v. Additional reserve

Additional reserve was appropriated for capital adequacy and other management purpose.

vi. Regulatory reserve for credit loss

In accordance with Article 29 of the Regulation on Supervision of Banking Business (“RSBB”), if provisions for credit loss under K-IFRS for the accounting purpose are lower than provisions under RSBB, the Bank discloses such short fall amount as regulatory reserve for credit loss.

vii. Revaluation reserve

In accordance with appendix 3 of the Regulation on Supervision of Banking Business Enforcement Rules, revaluation reserve is the amount of limited dividends set by the board of directors to be recognized as complementary capital when the gains or losses occurred in the property revaluation by adopting K-IFRS.

- 85 -

(2) Statements of appropriations of retained earnings (plan) are as follows (Unit: Korean won in millions):

	2019(*)			2018
Unappropriated retained earnings:
Unappropriated retained earnings carried over from prior years		676,231			842
Interim dividend		(676,000	)		—
Adjustment of K-IFRS 1109 implementation effect		—			246,464
Disposal gain or loss in FVOCI financial assets		(45,513	)		1,013
Net income		1,790,831			1,810,904
Dividend on/repayment of hybrid equity securities		(134,421	)		(151,194	)
		1,611,128			1,908,029
Transfer from retained earnings:
Provision of revaluation excess		1,069			1,842
Credit loss		—			202,905
		1,069			204,747
Appropriation of retained earnings:
Legal reserve		180,000			182,000
Regulatory reserve for credit loss		162,779			—
Other reserve		498			251
Amortization of loss of repayment of hybrid equity securities		276			368
Losses on disposal of treasury stock		6,073			—
Cash dividend (dividend per share (%)) 2019: 1,000 won (20.0%), 2018: 650 won (13.0%)		676,000			437,626
Additional reserve		—			816,300
		1,025,626			1,436,545
Unappropriated retained earnings to be carried forward to next year		586,571			676,231

(*) Expected appropriation date is on March 24, 2020.

- 86 -

32. REGULATORY RESERVE FOR CREDIT LOSS

In accordance with paragraphs 1 and 2 of Article 29 of the Regulation on the Supervision of Banking Business (“RSBB”), the Bank discloses the difference as the planned regulatory reserve for credit loss.

(1) Balance of the planned regulatory reserve for credit loss is as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Regulatory reserve for credit loss		1,888,816		2,091,721
Planned provision (reversal) of regulatory reserve for credit loss		162,779		(202,905	)
Ending balance of regulatory reserve for credit loss		2,051,595		1,888,816

(2) Planned reserves provided, adjusted net income after the planned reserves provided and adjusted EPS after the planned reserves provided are as follows (Unit: Korean Won in millions, except for EPS amount):

	For the years ended December 31
	2019		2018
Net income		1,790,831		1,810,904
Provision (reversal) of regulatory reserve for credit loss (*)		162,779		(8,628	)
Adjusted net income after the provision (reversal) of regulatory reserve		1,628,052		1,819,532
Adjusted EPS after the provision (reversal) of regulatory reserve (Unit: Korean Won)		2,210		2,479

(*) The amount of reserve for credit loss for the year ended December 31, 2018 is calculated considering only the change in the reserve for credit loss after the accounting policy change due to adoption of K-IFRS 1109. Therefore, the effect of reducing the reserve for credit losses due to changes in accounting policies was excluded.

33. DIVIDENDS

Dividends for the year ended December 31, 2019 and 2018 are 1,000 Won and 650 Won per share, respectively. The total amount of dividends approved are 676,000 million Won and 437,626 million Won, respectively. Also, the Bank paid interim dividend during the year 2019, and the amount is 1,000 Won for share, 676,000 million Won for total. Dividends for the year ended December 31, 2019 will be brought up as an agenda in the annual shareholder’s meeting scheduled for March 24, 2020.

- 87 -

34. NET INTEREST INCOME

(1) Interest income recognized is as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Financial assets at FVTPL		359		6,047
Financial assets at FVTOCI		437,104		256,995
Securities at amortized cost		430,440		372,006
Financial assets at amortized cost:
Interest on due from banks		120,691		96,901
Interest on loans		8,003,563		7,578,302
Interest of other receivables		23,544		21,716
Sub-total		8,147,798		7,696,919
Total		9,015,701		8,331,967

(2) Interest expenses recognized are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Interest on deposits due to customers		3,155,097		2,704,194
Interest on borrowings		305,279		252,140
Interest on debentures		598,295		558,328
Interest on lease liabilities		6,262		—
Other interest expense		90,432		89,587
Total		4,155,365		3,604,249

35. NET FEES AND COMMISSIONS INCOME

(1) Details of fees and commissions income recognized are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Fees and commission received for brokerage		278,847		301,106
Fees and commission received related to credit		175,316		163,489
Fees and commission received for electronic finance		137,892		121,712
Fees and commission received on foreign exchange handling		51,700		51,977
Fees and commission received on foreign exchange		37,815		25,390
Fees and commission received for guarantee		86,801		73,302
Fees and commission received on securities business		90,188		88,149
Fees and commission from trust management		178,752		185,239
Other fees		130,672		140,837
Total		1,167,983		1,151,201

(2) Details of fees and commissions expense incurred are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Fees and commissions paid		153,262		148,296
Others		228		258
Total		153,490		148,554

- 88 -

36. DIVIDEND INCOME

(1) Details of dividend income recognized are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Financial assets at FVTPL		85,724		63,690
Financial assets at FVTOCI		14,984		12,296
Total		100,708		75,986

(2) Details of dividends related to Financial assets at FVTOCI for the year ended December 31, 2019 and 2018 are as follows (Unit: Korean won in millions):

	For the years ended December 31
	2019		2018
Dividend income recognized from assets held
Equity securities		14,984		12,022
Dividend income recognized in assets derecognized		—		274
Total		14,984		12,296

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37. NET GAIN OR LOSS ON FINANCIAL INSTRUMENTS AT FVTPL

(1) Details of gains or losses related to net gain or loss on financial instruments at FVTPL are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Gains on financial instruments at fair value through profit or loss mandatorily measured at fair value		59,970			187,165
Gains(Losses) on financial instruments at fair value through profit or loss designated as upon initial recognition		(33,237	)		17,484
Total		26,733			204,649

(2) Details of net gain or loss on financial instrument at FVTPL are as follows (Unit: Korean Won in millions):

			For the years ended December 31
			2019			2018
Financial assets at FVTPL	Securities	Gain on valuation		106,452			113,618
(financial assets held for		Gain on disposals		45,230			28,136
trading)		Loss on valuation		(50,420	)		(20,479	)
		Loss on disposals		(9,388	)		(11,745	)
		Sub-total		91,874			109,530
	Loans	Gain on valuation		1,037			1,606
		Gain on disposals		519			4,136
		Loss on valuation		(20	)		(4,805	)
		Loss on disposals		—			(117	)
		Sub-total		1,536			820
	Other financial assets	Gain on valuation		2,062			2,050
		Gain on disposals		1,901			530
		Loss on valuation		(1,755	)		(2,280	)
		Loss on disposals		(1,815	)		(86	)
		Sub-total		393			214
	Sub-total			93,803			110,564
Derivatives (for trading)	Interest rate derivatives	Gain on transactions and valuation		1,511,965			1,269,528
		Loss on transactions and valuation		(1,608,840	)		(1,302,937	)
		Sub-total		(96,875	)		(33,409	)
	Currency derivatives	Gain on transactions and valuation		6,855,592			4,888,508
		Loss on transactions and valuation		(6,836,794	)		(4,780,695	)
		Sub-total		18,798			107,813
	Equity derivatives	Gain on transactions and valuation		832,070			481,123
		Loss on transactions and valuation		(787,827	)		(478,946	)
		Sub-total		44,243			2,177
	Other derivatives	Gain on transactions and valuation		39			2,099
		Loss on transactions and valuation		(38	)		(2,079	)
		Sub-total		1			20
	Sub-total			(33,833	)		76,601
	Total			59,970			187,165

- 90 -

(3) Details of net gain or loss on financial instrument designated as at FVTPL are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Gain (loss) on equity-linked securities:
Loss on disposal of equity-linked securities		(16,006	)		(2,058	)
Gain(loss) on valuation of equity-linked securities		(17,231	)		17,945
Sub-total		(33,237	)		15,887
Gain(loss) on other financial instruments:
Gain on valuation of other financial instruments		—			1,597
Total		(33,237	)		17,484

38. NET GAIN OR LOSS ON FINANCIAL ASSETS AT FVTOCI AND AFS FINANCIAL ASSETS

Details of net gain or loss on financial assets at FVTOCI recognized are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Gains on redemption of securities		(5	)		28
Gains on transactions of securities		8,250			1,305
Total		8,245			1,333

39. REVERSAL OF (PROVISION FOR) IMPAIRMENT LOSSES DUE TO CREDIT LOSS

Reversal of (provision for) impairment losses due to credit loss are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Provision of credit loss on financial assets at financial assets at FVTOCI		(3,111	)		(1,704	)
Reversal of credit loss on (provision for) securities at amortized cost losses		1,413			(1,921	)
Reversal of credit loss on (provision for) loans and other financial assets at amortized cost		(105,919	)		(144,372	)
Reversal of provision on (provision for) guarantee		4,238			105,145
Reversal of provision on (provision for) unused loan commitment		11,924			(15,971	)
Total		(91,455	)		(58,823	)

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40. GENERAL AND ADMINISTRATIVE EXPENSES AND OTHER NET OPERATING INCOME (EXPENSES)

(1) Details of general and administrative expenses recognized are as follows (Unit: Korean Won in millions):

			For the years ended December 31
			2019		2018
Salaries	Short-term employee benefits	Salaries		1,271,874		1,229,278
		Employee benefits		404,763		411,175
	Share based payments			5,509		—
	Retirement benefit service costs			148,119		130,320
	Termination			146,620		221,677
	Sub-total			1,976,885		1,992,450
Depreciation and amortization				389,951		161,581
Other general and administrative expenses	Rent			51,380		255,594
	Taxes and public dues			111,542		92,816
	Service charges			208,029		199,221
	Computer and IT related			235,418		262,477
	Telephone and communication			35,357		36,663
	Operating promotion			37,345		36,804
	Advertising			80,151		66,341
	Printing			6,236		7,073
	Traveling			8,435		8,805
	Supplies			5,303		5,154
	Insurance premium			3,158		2,997
	Reimbursement			20,446		21,147
	Maintenance			15,030		14,312
	Water, light and heating			12,497		12,428
	Vehicle maintenance			7,192		7,653
	Others			5,932		5,820
	Sub-total			843,451		1,035,305
	Total			3,210,287		3,189,336

(2) Details of other operating income recognized are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Gains on transactions of foreign exchange		557,082		982,555
Gains related to derivatives (Designated for hedging)		90,244		9,126
Gains on fair value hedged items		231		42,797
Others (*)		7,989		55,016
Total		655,546		1,089,494

(*) For the year ended December 31, 2018, other income includes gains amounting to 29,316 million Won respectively that the Bank recognized in relation to amounts receivable from other creditor financial institutions in accordance with the creditor financial institutions committee agreement.

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(3) Details of other operating expenses recognized are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Losses on transactions of foreign exchange		138,542		724,229
KDIC deposit insurance premium		329,198		311,662
Contribution to miscellaneous funds		315,145		295,909
Losses related to derivatives (Designated for hedging)		—		36,488
Losses on fair value hedged items		86,214		17,299
Others (*)		107,907		96,556
Total		977,006		1,482,143

(*) For the years ended December 31, 2019 and 2018, ‘other expense’ includes 22,317 million Won and 51,770 million Won of intangible asset amortization expense. In addition, as for 2018, it includes losses amounting to 1,594 million Won, which is related to the Bank’s expected payments to other creditor financial institutions in accordance with the creditor financial institutions committee agreement.

(4) Share-based Payment

Details of performance condition share-based payment granted to executives as of December 31, 2019 are as follows:

1) Performance condition Share-based Payment

Subject to	Shares granted for the year 2019
Type of payment	Cash-settled
Vesting period	January 1, 2019 ~ December 31, 2022
Date of payment	January 1, 2023
Number of shares measured as of the closing date (*)	524,746 shares

(*) The number of payable stock is granted at the initial contract date and the payment rate is determined based on the achievement of the pre-determined performance targets. Performance is evaluated as long-term performance indication including relative shareholder return, net income, return on equity (ROE), non-performing loan ratio and job performance.

2) The Bank accounts for performance condition share-based payments according to the cash-settled method and the fair value of the liabilities is reflected in the compensation costs by re-measuring every closing period. As of December 31, 2019, the book value of the liabilities related to the performance condition share-based payments recognized by the Bank is 5,509 million Won.

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41. OTHER NON-OPERATING INCOME (EXPENSES)

(1) Details of losses on valuation of investments in subsidiaries and associates are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Impairment losses of investments in subsidiaries and associates		43,102		241

(2) Details of other non-operating income and expenses recognized are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Other non-operating income		360,787			149,165
Other non-operating expenses		(424,110	)		(78,984	)
Total		(63,323	)		70,181

(3) Other non-operating income recognized are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Rental fee income		20,386		15,022
Dividends from investments in subsidiaries and associates		52,273		37,481
Gains from disposal of investments in subsidiaries and associates		256,829		35,409
Gains on disposal of premises and equipment, intangible assets and other assets		1,033		25,537
Reversal of impairment loss of premises and equipment, intangible assets and other assets		85		491
Others		30,181		35,225
Total		360,787		149,165

(4) Other non-operating expenses recognized are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Depreciation of investment properties		4,901		3,723
Interest expenses of refundable deposits		738		620
Loss on disposal of investments in subsidiaries and associates		205,046		—
Loss on disposal of premises and equipment, intangible assets and other assets		1,534		933
Impairment loss on premises and equipment, intangible assets and other assets		26,037		5,933
Donation		60,328		47,542
Others		125,526		20,233
Total		424,110		78,984

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42. INCOME TAX EXPENSE

(1) Details of income tax expense are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Current tax expense:
Current tax expense with respect to the current period		500,006			355,754
Adjustments recognized in the current period in relation to the tax expense of prior periods		(47,295	)		6,283
Sub-total		452,711			362,037
Deferred tax expense(income):
Changes in deferred tax assets (liabilities) relating to the temporary differences		117,358			312,690
Income tax expense directly reflected in capital, etc.		4,228			—
Sub-total		121,586			312,690
Income tax expense		574,297			674,727

(2) Income tax expense reconciled to net income before income tax expense is as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019			2018
Net income before income tax expense		2,365,128			2,485,631
Tax calculated at statutory tax rate (*)		640,048			683,086
Adjustments:
Effect of income that is exempt from taxation		(56,899	)		(44,151	)
Effect of expenses not deductible in determining taxable profit		22,345			11,339
Adjustments recognized in the current period in relation to the current tax of prior periods		(47,295	)		6,283
Consolidated taxation effect		(14,452	)		—
Others		30,550			18,170
Sub-total		(65,751	)		(8,359	)
Income tax expense		574,297			674,727
Effective tax rate		24.3	%		27.2	%

(*) The applicable income tax rate: 1) 11% for taxable income below 200 million Won, 2) 22% for above 200 million Won and below 20 billion Won, 3) 24.2% for above 20 billion Won and below 300 billion Won, 4) 27.5% for above 300 billion Won.

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(3) Changes in cumulative temporary differences for the years ended December 31, 2019 and 2018, are as follows (Unit: Korean Won in millions):

	For the year ended December 31, 2019
	Beginning balance			Recognized as income (loss)			Recognized as other comprehensive income (loss)			Ending balance
Gain (loss) on financial assets at FVTPL		287,531			(93,857	)		(4,321	)		189,353
Loss on valuation of derivatives		(27,851	)		(45,563	)		—			(73,414	)
Accrued income		(55,471	)		(9,582	)		—			(65,053	)
Provision for loan losses		1,156			(107	)		—			1,049
Loans and receivables written off		4,565			—			—			4,565
Deferred loan origination costs and fees		(148,354	)		(8,261	)		—			(156,615	)
Defined benefit liability		322,168			28,020			11,753			361,941
Deposits with employee retirement insurance trust		(298,515	)		(64,081	)		—			(362,596	)
Provisions for guarantees		11,375			(3,460	)		—			7,915
Other provision		57,843			12,680			—			70,523
Others		(147,087	)		62,625			(3,204	)		(87,666	)
Net deferred tax assets (liabilities)		7,360			(121,586	)		4,228			(109,998	)

	For the year ended December 31, 2018
				K-IFRS 1109 adoption effect
	Beginning balance			Recognized as retained earnings			Recognized as other comprehensive income		Beginning balance after K-IFRS 1109 adoption			Recognized as income (loss)			Recognized as other comprehensive income (loss)			Ending balance
Gain (loss) on financial assets at FVTPL		494,159			(150,140	)		149,247		493,266			(100,500	)		(2,231	)		390,535
Loss on valuation of derivatives		(9,828	)		(3,990	)		—		(13,818	)		(14,033	)		—			(27,851	)
Accrued income		(60,460	)		—			—		(60,460	)		4,989			—			(55,471	)
Provision for loan losses		572			46,870			—		47,442			(46,286	)		—			1,156
Loans and receivables written off		7,776			—			—		7,776			(3,211	)		—			4,565
Deferred loan origination costs and fees		(134,477	)		36			—		(134,441	)		(13,913	)		—			(148,354	)
Defined benefit liability		266,785			—			—		266,785			25,175			30,208			322,168
Deposits with employee retirement insurance trust		(277,130	)		—			—		(277,130	)		(21,385	)		—			(298,515	)
Provisions for guarantees		30,602			1,370			—		31,972			(20,597	)		—			11,375
Other provision		34,712			7,732			—		42,444			15,399			—			57,843
Others		(114,168	)		5,395			—		(108,773	)		(138,328	)		(2,990	)		(250,091	)
Net deferred tax assets (liabilities)		238,543			(92,727	)		149,247		295,063			(312,690	)		24,987			7,360

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(4) Unrealizable temporary differences are as follows (Unit: Korean Won in millions):

	December 31, 2019			December 31, 2018
Deductible temporary differences		162,457			264,972
Tax loss carry forward		—			56,513
Taxable temporary differences		(108,055	)		(866,294	)
Total		54,402			(544,809	)

No deferred income tax asset has been recognized for the deductible temporary difference of 162,457 million Won associated with investments in subsidiaries and associates as of December 31, 2019, because it is not probable that the temporary differences will be reversed in the foreseeable future.

No deferred income tax liability has been recognized for the taxable temporary difference of 108,055 million Won associated with investment in subsidiaries and associates as of December 31, 2019, due to the following reasons:

• The Bank can control the timing of the reversal of the temporary differences.

• It is probable that the temporary differences will not be reversed in the foreseeable future.

(5) Details of accumulated deferred tax charged directly to other equity are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Net gain on valuation of financial assets at FVTOCI		39,691		44,012
Gain on foreign currency translation of foreign operations		3,931		7,135
Remeasurement of the net defined benefit liability		94,259		82,506
Total		137,881		133,653

(6) Current tax assets and liabilities are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Current tax assets		27,558		—
Current tax liabilities		115,513		110,127

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43. EARNINGS PER SHARE(“EPS”)

(1) Basic EPS is calculated by dividing net income by weighted-average number of common shares outstanding (Unit: Korean Won in millions, except for EPS and number of shares):

	For the years ended December 31
	2019			2018
Net income for the period attributable to Common shareholders		1,790,831			1,810,904
Dividends to hybrid securities		(134,421	)		(151,194	)
Net income attributable to common shareholders		1,656,410			1,659,710
Weighted-average number of common shares outstanding		676 million shares			673 million shares
Basic EPS (Unit: Korean Won)		2,451			2,466

(2) The weighted average number of common shares outstanding is as follows:

	For the year ended December 31, 2019
	Period	Number of shares			Dates		Accumulated number of shares outstanding during period
Common shares issued at the beginning of the period	2019-01-01 ~ 2019-12-31		673,271,226			365		245,743,997,490
Purchase of treasury stock	2019-01-09 ~ 2019-01-10		(11,453,702	)		2		(22,907,404	)
Disposal of treasury stock	2019-01-11 ~ 2019-12-31		2,728,774			355		968,714,770
	Sub-total (①)							246,689,804,856
Weighted average number of common shares outstanding (②=(①/365)								675,862,479

	For the year ended December 31, 2018
	Period	Number of shares		Dates		Accumulated number of shares outstanding during period
Common shares issued at the beginning of the period	2018-01-01 ~ 2018-12-31		673,271,226		365		245,743,997,490
	Sub-total (①)						245,743,997,490
Weighted average number of common shares outstanding (②=(①/365)							673,271,226

Diluted EPS is equal to basic EPS because there is no dilution effect for the years ended December 31, 2019 and 2018.

44. CONTINGENT LIABILITIES AND COMMITMENTS

(1) Details of guarantees are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Confirmed guarantees:
Guarantees for loans		89,699		125,870
Acceptances		254,231		257,203
Guarantees in acceptance of imported goods		224,746		158,179
Other confirmed guarantees		6,882,899		6,638,359
Sub-total		7,451,575		7,179,611
Unconfirmed guarantees:
Local letters of credit		193,096		305,057
Letters of credit		3,046,201		3,276,807
Other unconfirmed guarantees		742,125		647,968
Sub-total		3,981,422		4,229,832
Commercial paper purchase commitments and others		3,090,771		2,581,007
Total		14,523,768		13,990,450

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(2) Details of loan commitments and other commitments are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Loan commitments		69,035,560		65,012,748
Other commitments		3,438,625		2,173,333

(3) Litigation case

The Bank had filed lawsuits as follows (Unit: Korean Won in millions except for number of cases):

	December 31, 2019
	As plaintiff		As defendant
Number of cases		31 cases		132 cases
Amount of litigation		227,071		197,216
Provisions for litigations		21,562

	December 31, 2018
	As plaintiff		As defendant
Number of cases		54 cases		132 cases
Amount of litigation		448,357		245,287
Provisions for litigations		16,770

(4) Recently, the FSS announced ‘Results of interim inspection of Lime Asset Management Co., Ltd and future countermeasures’ regarding the deferment of the redemption of Lime Asset Management Co., Ltd. The status of the sale of the Lime Asset Management Co., Ltd. operation deferral fund of the Bank is 357.7 billion won for 1,640 accounts as of the end of December 2019. Currently, a full-time management team is dispatched to monitor the implementation of the normal repurchase and management plan of lime and proper performance of internal control work.

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45. RELATED-PARTY TRANSACTIONS

Related parties of the Bank as of December 31, 2019 and 2018, and assets and liabilities recognized, guarantees and commitments, major transactions with related parties and compensation to key management for the years ended December 31, 2019 and 2018 are as follows:

(1) Related parties

	Related parties
Parent	Woori Financial Group Inc.
Subsidiaries	Woori America Bank, PT Bank Woori Saudara Indonesia 1906 Tbk, Woori Global Markets Asia Limited, Woori Bank China Limited, Banco Woori Bank do Brasil S.A., AO Woori Bank, Korea BTL Infrastructure Fund, Woori Finance Cambodia PLC., Woori Finance Myanmar Co., Ltd., Wealth Development Bank, Woori Bank Vietnam Limited, WB Finance Co., Ltd., Woori Bank Europe, Woori Bank Principal and Interest Guaranteed Trust, Woori Bank Principal Guaranteed Trust, Kumho Trust First Co., Ltd. and 49 SPCs, Heungkuk Woori Tech Company Private Placement Investment Trust No. 1 and 8 beneficiary certificates
Associates	Woori Service Networks Co., Ltd., Korea Credit Bureau Co., Ltd., Korea Finance Security Co., Ltd., Lotte Card Co., Ltd., Chin Hung International Inc, 2016KIF-IMM Woori Bank Technology Venture Fund, K BANK Co., Ltd., Well to Sea No. 3 Private Equity Fund, and others (Dongwoo C & C Co., Ltd. and 28 associates)
Other related parties	Woori Card Co., Ltd. and its subsidiaries, Woori Investment Bank Co., Ltd. and its subsidiaries,, Woori FIS Co., Ltd, Woori Private Equity Asset Management Co., Ltd., Woori Finance Research Institute Co., Ltd., Woori Credit Information Co., Ltd., Woori Fund Service Co., Ltd.,Woori Asset Management Co., Woori global asset management co.,Ltd., Woori asset trust. Ltd., Godo Kaisha Oceanos 1, Uri Hanhwa Eureka Private Equity Fund, Japanese Hotel Real Estate Private Equity Fund 2, Woori Growth Partnerships New Technology Private Equity Fund 1, Tongyang China Convertible Bond Fund, WOORIG China Value Equity (C/C(F))

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(2) Assets and liabilities from transactions with related parties are as follows (Unit: Korean Won in millions):

Related parties		A title of account	December 31, 2019			December 31, 2018
Parent	Woori Financial Group Inc.(*1)	Deposits due to customers		1,173,670			—
		Other liabilities		99,181			—
Subsidiaries	Woori America Bank	Cash and cash equivalents		6,534			12,354
		Loans		15,569			15,350
		Loss allowance		(6	)		(4	)
	PT Bank Woori Saudara Indonesia 1906 Tbk	Cash and cash equivalents		5,969			11,110
		Loans		277,872			368,973
		Loss allowance		(497	)		(791	)
		Other assets		616			1,463
	Woori Global Markets Asia Limited	Loans		452,827			354,364
		Loss allowance		(365	)		(369	)
		Deposits due to customers		6,692			2,613
		Borrowings		3,167			3,041
	Banco Woori Bank do Brasil S.A.	Loans		—			1,006
		Loss allowance		—			(1	)
	Woori Bank China Limited	Cash and cash equivalents		24,006			38,312
		Loans		208,404			325,060
		Loss allowance		(373	)		(697	)
		Other assets		3,379			3,853
		Deposits due to customers		58,403			61,526
		Other liabilities		2,339			2,492
		Derivative liabilities		8			9
	AO Woori Bank	Cash and cash equivalents		7,529			16,699
		Loans		78,521			54,687
		Loss allowance		(140	)		(117	)
		Other assets		327			79
	Korea BTL Infrastructure Fund	Other assets		10			9
	Woori Finance Cambodia PLC.	Loans		99,339			69,099
		Loss allowance		(80	)		(72	)
		Other liabilities		1			6
	Woori Finance Myanmar Co., Ltd.	Loans		6,947			4,472
		Loss allowance		(6	)		(5	)
	Woori Bank Vietnam Limited	Loans		13,508			16,883
		Loss allowance		(51	)		(159	)
		Other assets		180,254			165,560
		Deposits due to customers		4,049			195
		Borrowings		75,338			16,772
	WB Finance Co., Ltd.	Loan		245,454			122,991
		Loss allowance		(198	)		(128	)
		Other liabilities		1			13
	Woori Bank Principal and Interest Guaranteed Trust and Principal Guaranteed Trust	Other assets		479			565
		Other liabilities		163,302			103,367
	Structured entities	Loans		22,509			2,882
		Loss allowance		(175	)		(4	)
		Other assets		146			121
		Derivative assets		24,427			11,671
		Deposits due to customers		11,870			6,485
		Other liabilities		5,215			3,706
		Derivative liabilities		373			126
	Beneficiary certificates	Other assets		20			20

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Related parties		A title of account	December 31, 2019			December 31, 2018
Associates	Woori Service Networks Co., Ltd.	Deposits due to customers		1,881			1,967
		Other liabilities		311			312
	Korea Credit Bureau Co., Ltd.	Deposits due to customers		26			6,494
		Other liabilities		—			19
	Korea Finance Security Co., Ltd.	Loan		1,800			—
		Loss allowance		(3	)		—
		Deposits due to customers		1,371			5,040
		Other liabilities		—			6
	Chin Hung International Inc.	Deposits due to customers		5,381			11,605
		Other liabilities		320			2,960
	Lotte Card Co., Ltd.	Loan		7,500			—
		Loss allowance		(30	)		—
		Deposits due to customers		2,726			—
	Well to Sea No. 3 Private Equity Fund	Loans		4,490			1,857
		Loss allowance		(8	)		(9	)
		Deposits due to customers		714			356
		Other liabilities		47			64
	Others (*2)	Loans		84			260
		Loss allowance		(84	)		(234	)
		Deposits due to customers		5,577			8,049
		Other liabilities		172			165

- 102 -

Related parties		A title of account	December 31, 2019			December 31, 2018
Other Related Parties	Woori Card Co., Ltd. and its subsidiaries(*3)	Loans		4,631			—
		Other assets		13,342			14,820
		Derivative assets		420			—
		Deposits due to customers		52,638			78,490
		Other liabilities		18,641			14,656
		Derivative liabilities		—			271
	Woori Investment Bank Co., Ltd. (*3)	Cash and cash equivalents		—			100,000
		Loans		24,000			37,900
		Loss allowance		(43	)		(81	)
		Other assets		13,879			6,712
		Deposits due to customers		6,303			6,050
		Other liabilities		26,470			9,237
	Woori FIS Co., Ltd. (*3)	Other assets		114			61
		Deposits due to customers		42,693			51,057
		Other liabilities		23,415			16,498
	Woori Private Equity Asset Management Co., Ltd. (*3)	Deposits due to customers		1,370			1,323
	Woori Finance Research Institute Co., Ltd. (*3)	Deposits due to customers		2,132			2,741
		Other liabilities		—			588
	Woori Credit Information Co., Ltd. (*3)	Other assets		6			—
		Deposits due to customers		15,765			14,674
		Other liabilities		10,954			10,945
	Woori Fund Service Co., Ltd.(*3)	Deposits due to customers		11,238			8,605
		Other liabilities		1,157			1,128
	Woori Asset Management Co., Ltd.(*3)	Deposits due to customers		11,665			—
	Woori Global Asset Management Co., Ltd.(*3)	Deposits due to customers		98			—
	Woori Asset Trust Co., Ltd.(*3)	Deposits due to customers		29,546			—

(*1) Woori Financial Group Inc. was established during the current period and the Bank was transferred as a wholly-owned subsidiary.

(*2) Saman Co., Ltd., Kyesan Industry Corporation, Daea S&C Co., Ltd., and etc. are included during the year ended December 31, 2019 and 2018.

(*3) These related parties were transferred as a wholly-owned subsidiary of Woori Financial Group Inc. during the current period.

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(3) Gain or loss from transactions with related parties is as follows (Unit: Korean Won in millions):

			For the years ended December 31
Related party		Title of account	2019			2018
Parent company	Woori Financial Group (*1)	Fees income		264			—
		Other income		1,823			—
		Interest expenses’		7,741			—
Subsidiaries	Woori America Bank	Interest income		21			—
		Fees income		280			343
		Other income		180			13
		Impairment losses due to credit loss		2			—
	PT Bank Woori Saudara Indonesia 1906 Tbk	Interest income		11,650			1,463
		Fees income		121			121
		Dividends income		6,300			6,127
		Impairment losses due to credit loss (reversal of provision for credit loss)		(294	)		625
	Woori Global Markets Asia Limited	Interest income		12,739			7,162
		Fee income		39			19
		Interest expenses		390			3
		Impairment losses due to credit loss (reversal of provision for credit loss)		(3	)		299
	Woori Bank China Limited	Interest income		9,257			7,589
		Fees income		476			438
		Other income		64			—
		Gains related to derivatives		26			7
		Interest expenses		708			612
		Fee expenses		2			1
		Other expenses		55			1
		Impairment losses due to credit loss (reversal of provision for credit loss)		(325	)		467
	AO Woori Bank	Interest income		2,394			965
		Fees income		41			—
		Impairment losses due to credit loss		23			62
	Banco Woori Bank do Brasil S. A	Interest income		27			45
		Reversal of provision for credit loss		(1	)		—
	Korea BTL Infrastructure Fund	Dividends income		26,835			30,185
		Fees income		82			77
	Woori Finance Cambodia PLC.	Interest income		3,514			2,126
		Fees income		23			12
		Impairment losses due to credit loss		8			59
	Woori Finance Myanmar Co., Ltd	Interest income		218			158
		Fees income		9			5
		Impairment losses due to credit loss		1			3
	Woori Bank Vietnam Limited	Interest income		778			618
		Fees income		205			62
		Interest expenses		1,861			2,186
		Impairment losses due to credit loss (reversal of provision for credit loss)		(108	)		16

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			For the years ended December 31
Related party		Title of account	2019		2018
	WB Finance Co., Ltd	Interest income		6,648		1,453
		Impairment losses due to credit loss		70		128
	Consolidated trusts	Other income		7,815		8,282
		Interest expenses		2,030		1,626
		Other expenses		35		33
	Consolidated SPC	Interest income		912		106
		Fees income		19,158		10,150
		Gains related to derivatives		14,134		13,187
		Interest expenses		9		9
		Impairment losses due to credit loss (reversal of provision for credit loss)		171		(298	)
		Losses related to derivatives		401		—
	Consolidated beneficiary certificates	Dividend income		—		852
		Fees income		73		774

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			For the years ended December 31
Related party		Title of account	2019			2018
Associates	Kumho Tire Co., Inc. (*2)	Interest income		—			1,098
		Reversal of provision for credit loss		—			(156,621	)
	Woori Service Networks Co., Ltd.	Dividend income		2			2
		Other income		32			30
		Interest expenses		20			14
	Korea Credit Bureau Co., Ltd.	Dividend income		135			113
		Interest expenses		29			62
	Korea Finance Security Co., Ltd.	Dividends income		—			54
		Interest expenses		9			12
		Impairment losses due to credit loss		3			—
	Chin Hung International Inc.	Interest expenses		35			43
	STX Engine Co., Ltd.(*3)	Interest income		—			333
		Interest expenses		—			86
		Reversal of provision for credit loss		—			(88,603	)
	STX Corporation (*3)	Interest expenses		—			2
		Reversal of provision for credit loss		—			(31,164	)
	Well to Sea No. 3 Private Equity Fund	Interest income		1,774			2,179
		Dividends income		18,836			517
		Interest expenses		11			9
		Reversal of provision for credit loss		(18	)		(30	)
	Lotte Card Co., Ltd.	Interest income		213			—
		Fees income		593			—
		Interest expenses		53			—
		Impairment losses due to credit loss		30			—
	Others (*4)	Other income		17			14
		Dividends income		164			484
		Interest expenses		55			40
		Reversal of provision for credit loss		(5	)		(237	)

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			For the years ended December 31
Related party		Title of account	2019			2018
Other related parties	Woori Card Co., Ltd and its subsidiaries(*5)	Interest income		775			689
		Fees income		125,183			142,552
		Gains related to derivatives		691			961
		Other income		696			798
		Interest expenses		185			39
		Fees expenses		83			76
	Woori Investment Bank Co., Ltd. and its subsidiaries(*5)	Interest income		648			1,853
		Fees income		851			669
		Other income		543			538
		Interest expenses		21			20
		Impairment losses due to credit loss (reversal of provision for credit loss)		(38	)		58
	Woori FIS Co., Ltd.(*5)(*6)	Fees income		578			537
		Other income		7,675			7,507
		Interest expenses		4			16
		Other expenses		208,145			238,312
	Woori Private Equity Asset Management Co., Ltd.(*5)	Fees income		7			20
		Interest expenses		17			8
	Woori Finance Research Institute Co., Ltd.(*5)	Fees income		12			10
		Interest expenses		43			51
		Fees expenses		—			4,650
	Woori Credit Information Co., Ltd.(*5)	Fees income		83			69
		Other income		698			408
		Interest expenses		250			232
		Fees expenses		15,009			12,668
	Woori Fund Service Co., Ltd.(*5)	Fees income		25			21
		Other income		288			192
		Interest expenses		252			140
	Woori Asset Management Co., Ltd.(*5)	Fees income		21			—
		Interest expenses		36			—
	Woori Global Asset Management Co., Ltd.(*5)	Fees income		1			—

(*1) Woori Financial Group Inc. was established during the current period and the Bank was transferred as a wholly-owned subsidiary.

(*2) The Bank lost significant influence over the entity due to the termination of the joint management procedures of the creditors’ financial institution during the prior term, and thus the entity was excluded from the list of associates.

(*3) During the prior term, the account was replaced by assets held for sale and disposed of and excluded from the associate.

(*4) Saman Co., Ltd., Kyesan industry Corporation, Daea S&C Co., Ltd., and etc are included during the term and prior term.

(*5) These related parties were transferred as a wholly-owned subsidiary of Woori Financial Group Inc. during the current year.

(*6) Total amount of 3,445 million Won of lease liability repayment is included in other expenses.

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(4) Major loan transactions with related parties for the years ended December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

		For the year ended December 31, 2019
Related parties		Beginning balance		Loan		Collection		Others			Ending balance(*1)
Subsidiaries	PT Bank Woori Saudara Indonesia 1906 Tbk		368,973		510,407		614,424		12,916			277,872
	Woori Global Markets Asia Limited		354,364		1,032,745		939,915		5,633			452,827
	Woori Bank China Limited		325,060		453,440		580,291		10,195			208,404
	AO Woori Bank		54,687		290,225		266,835		444			78,521
	Banco Woori Bank do Brasil S.A.		1,006		1,907		2,913		—			—
	Woori Finance Cambodia PLC.		69,099		30,624		2,883		2,499			99,339
	Woori Finance Myanmar Co., Ltd.		4,472		2,403		—		72			6,947
	Woori Bank Vietnam Limited		16,883		650		4,805		773			13,501
	WB Finance Co., Ltd.(*2)		122,991		122,328		2,892		3,027			245,454
	Woori America Bank		15,350		15,569		15,350		—			15,569
	Consolidated SPC		2,882		20,790		613		(550	)		22,509
Associates	Well to Sea No.3 Private Equity Fund		1,857		2,633		—		—			4,490
	Lotte Card Co., Ltd.		—		7,500		—		—			7,500
	Korea Finance Security Co., Ltd		—		1,800		—		—			1,800
Other related parties	Woori Investment Bank Co., Ltd. and its subsidiaries		37,900		21,300		35,200		—			24,000
	Woori Card Co., Ltd and its subsidiaries		—		4,551		—		80			4,631
		For the year ended December 31, 2018
Related parties		Beginning balance		Loan		Collection		Others			Ending balance(*1)
Subsidiaries	PT Bank Woori Saudara Indonesia 1906 Tbk		160,710		346,809		142,341		3,795			368,973
	Woori Global Markets Asia Limited		172,184		732,518		553,559		3,221			354,364
	Woori Bank China Limited		246,422		713,980		647,078		11,736			325,060
	AO Woori Bank		53,426		208,783		207,522		—			54,687
	Banco Woori Bank do Brasil S.A.		1,607		2,230		2,682		(149	)		1,006
	Woori Finance Cambodia PLC.		32,142		34,963		—		1,994			69,099
	Woori Finance Myanmar Co., Ltd.		4,286		—		—		186			4,472
	Woori Bank Vietnam Limited		17,410		—		1,283		756			16,883
	WB Finance Co., Ltd. (*2)		—		122,602		—		389			122,991
	Woori America Bank		—		15,350		—		—			15,350
	Woori Investment Bank Co., Ltd.		22,600		44,900		29,600		—			37,900
	Structured entities		2,102		1,026		463		217			2,882
Associates	Kumho Tire Co., Inc.(*3)		57,470		—		7,057		(50,413	)		—
	Well to Sea No. 3 Private Equity Fund		73,810		16,857		88,810		—			1,857
	STX Engine Co., Ltd. (*4)		39,886		—		2,177		(37,709	)		—

(*1) Settlement payment from normal operation among the related parties were excluded, and in the case of a limited loan, it was presented as a net increase or decrease.

(*2) With more than half of capital contribution, companies were included in subsidiaries during the prior term.

(*3) The Bank lost significant influence over the entity due to the termination of the joint management procedures of the creditors’ financial institution during the prior term, and thus the entity was excluded from the list of associates.

(*4) During the prior term, the account was replaced by assets held for sale and disposed of and excluded from the associate.

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(5) Changes in major deposits due to customers with related parties for years ended December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

		For the year ended December 31, 2019
Related parties		Beginning balance		Borrowings		Repayment and others		Ending balance (*)
Parent company	Woori Financial Group		—		2,730,000		1,600,000		1,130,000
Subsidiaries	Woori Global Markets Asia Limited		—		2,316		—		2,316
Associates	Saman Corporation		2,436		86		—		2,522
	Woori Service Networks Co., Ltd		1,180		1,460		1,460		1,180
	Chin Hung International Inc		765		400		765		400
.	Korea Credit Bureau Co., Ltd.		6,000		—		6,000		—
	Partner One Value Up I Private Equity Fund		1,403		1,617		1,870		1,150
	Korea Finance Security Co., Ltd.		535		25		560		—
Other related parties	Woori Investment Bank Co., Ltd. and its subsidiaries		1,000		1,000		—		2,000
	Woori Finance Research Institute Co., Ltd.,		1,800		3,700		5,500		—
	Woori Credit Information Co., Ltd.		13,199		12,000		11,000		14,199
	Woori Fund Service Co., Ltd		7,900		10,000		7,900		10,000
	Woori asset trust. Ltd		—		15,000		—		15,000
		For the year ended December 31, 2018
Related parties		Beginning balance		Borrowings		Repayment and others		Ending balance (*)
Subsidiaries	Woori Global Markets Asia Limited		2,143		—		2,143		—
	Woori Investment Bank Co., Ltd.		1,000		—		—		1,000
	Woori Credit Information Co., Ltd.		12,699		11,500		11,000		13,199
.	Woori Fund Service Co., Ltd		6,100		7,900		6,100		7,900
	Woori asset trust. Ltd		2,100		5,700		6,000		1,800
Associates	Saman Corporation		2,334		102		—		2,436
	Woori Service Networks Co., Ltd		1,135		1,025		980		1,180
	Chin Hung International Inc		765		765		765		765
.	Korea Credit Bureau Co., Ltd.		4,000		12,000		10,000		6,000
	Partner One Value Up I Private Equity Fund		—		1,803		400		1,403
	Korea Finance Security Co., Ltd.		635		560		660		535
	STX Corporation		330		—		330		—
	STX Engine Co., Ltd.		10,256		—		10,256		—
	Kumho Tire Co., Inc.		37		—		37		—
	Hyunwoo International		41		—		41		—

(*) The details of payments made between related parties and the deposits due to customers that can be taken in and out easily are excluded.

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(6) Major borrowing transactions with related parties for years ended December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

		For the year ended December 31, 2019
Related parties		Beginning balance		Borrowings		Repayment		Others			Ending balance (*)
Subsidiaries	Woori Global Markets Asia Limited		3,041		51,011		51,011		126			3,167
	Woori Bank Vietnam Limited		16,772		255,022		195,751		(705	)		75,338
Other related parties	Woori Investment Bank Co., Ltd. and its subsidiaries		11,428		223,893		217,712		—			17,609
		For the year ended December 31, 2018
Related parties		Beginning balance		Borrowings		Repayment		Others			Ending balance (*)
Subsidiaries	Woori Global Markets Asia Limited		—		3,041		—		—			3,041
	Woori Bank Vietnam Limited		—		146,291		129,520		1			16,772
Other related parties	Woori Investment Bank Co., Ltd. and its subsidiaries		11,088		216,989		216,649		—			11,428

(7) Guarantees provided to the related parties are as follows (Unit: Korean Won in millions):

	Warranty	December 31, 2019		December 31, 2018
Woori Card Co., Ltd.	Unused loan commitment		500,000		500,000
Woori Investment Bank Co., Ltd.	Unused loan commitment		50,000		50,000
PT Bank Woori Saudara Indonesia 1906 Tbk	Confirmed guarantees in foreign currencies and others		109,673		161,758
Woori Bank China Limited	Confirmed guarantees in foreign currencies and others		84,801		92,545
AO Woori Bank	Confirmed guarantees in foreign currencies		29,888		27,826
Banco Woori Bank do Brasil S.A.	Confirmed guarantees in foreign currencies and others		25,686		21,017
Woori Global Markets Asia Limited	Confirmed guarantees in foreign currencies		247,327		47,799
Woori Bank Europe	Loan commitment in foreign currency		1,492		—
Korea BTL Infrastructure Fund	Securities purchase contract		240,078		303,578
Woori Finance Cambodia PLC.	Unused loan commitment		5,789		20,349
			22,230		—
Woori Bank Vietnam Limited	Confirmed guarantees in foreign currencies and others		50,276		40,398
WB Finance Co., Ltd. (*1)	Unused loan commitment		5,210		44,724
	Loan commitment in foreign currency		4,052		—
Structured entities	Loan commitment in local currency		2,206,740		1,320,420
	Unused loan commitment		4,756		1,618
	Securities purchase contract		1,274		1,274
Chin Hung International Inc.	Unused loan commitment		31,749		31,749
Well to Sea No. 3 Private Equity Fund	Unused loan commitment		210,510		208,143
Korea Finance Security Co., Ltd	Unused loan commitment		200		—
Lotte Card Co., Ltd.	Unused loan commitment		150,000		—

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For the guarantees provided to the related parties, the Bank recognized provisions for guarantees amounting to 4,034 million Won and 3,510 million Won as of December 31, 2019 and 2018, respectively.

The amount of guarantees and unused loan commitments provided by the related parties to the Bank as of December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions):

	Warranty		December 31, 2019		December 31, 2018
Woori Card Co., Ltd and its subsidiaries		Loan commitment in local currency		167,880		174,287

(8) Commitments of derivatives to the related parties are as follows (Unit: Korean Won in millions):

	Warranty	December 31, 2019		December 31, 2018
Woori Card Co., Ltd and its subsidiaries	Unsettled commitment		100,000		100,000
Woori Bank China Limited	Unsettled commitment		964		203
Structured entities	Unsettled commitment		2,052,750		1,198,500
Well to Sea No. 3 Private Equity Fund	Unsettled commitment		584,377		439,243

(9) Details of compensation to key management are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Short-term employee salaries		9,744		12,326
Retirement benefit service costs		364		489
Share-based payments		1,965		—
Total		12,073		12,815

Key management includes registered executives and non-registered executives. Outstanding assets and from transactions with key management amount to 2,414 million Won and 2,816 million Won, respectively, as of the years ended December 31, 2019 and 2018, and with respect to the assets, the Bank has not recognized any allowance nor related impairment loss due to credit losses. Also, outstanding liabilities from transactions with key management amount to 6,543 million Won and 6,096 million Won, respectively.

(10) The Bank and Woori Card Co., Ltd. have joint obligation on the liability of the Bank that arose prior to the spin-off of Woori Card Co., Ltd.

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46. TRUST ACCOUNTS

(1) Trust accounts of the Bank are as follows (Unit: Korean Won in millions):

	Total assets				Operating income
	December 31, 2019		December 31, 2018		For the years ended December 31
					2019		2018
Trust accounts		60,288,399		53,560,071		1,118,746		1,049,105

(2) Receivables and payables between the Bank and trust accounts are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Receivables:
Trust fees receivable		31,533		28,703
Payables:
Deposits due to customers		392,453		574,330
Borrowings from trust accounts		2,730,806		3,020,371
Total		3,123,259		3,594,701

(3) Significant transactions between the Bank and trust accounts are as follows (Unit: Korean Won in millions):

	For the years ended December 31
	2019		2018
Revenue:
Trust fees		171,072		177,913
Termination fees		488		5,885
Total		171,560		183,798
Expense:
Interest expenses on deposits due to customers		6,684		7,813
Interest expenses on borrowings from trust accounts		40,489		38,873
Total		47,173		46,686

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(4) Principal guaranteed trusts and principal and interest guaranteed trusts

1) The carrying values of principal guaranteed trusts and principal and interest guaranteed trusts are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Partial principal guaranteed trusts:
Household money		9,430		9,989
Corporate money		630		633
Installment plan purpose		1,651		1,737
Sub-total		11,711		12,359
Principal guaranteed trusts:
Old-age pension trusts		3,298		3,564
Personal pension trusts		516,913		521,200
Pension trusts		824,735		819,102
Retirement trusts		34,374		42,187
New personal pension trusts		7,807		8,104
New old-age pension trusts		1,742		2,134
Sub-total		1,388,869		1,396,291
Principal and interest guaranteed trusts:
Development trusts		19		19
Unspecified money trusts		871		835
Sub-total		890		854
Total		1,401,470		1,409,504

2) The amounts that the Bank must pay by the operating results of the principal guaranteed trusts or the principal and interest guaranteed trusts are as follows (Unit: Korean Won in millions):

	December 31, 2019		December 31, 2018
Liabilities for the account (subsidy for trust account adjustment)		35		33

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47. LEASES

(1) The future lease payments under lease contracts are as follows (Unit: Korean won in millions):

	For the year ended December 31
	2019
Lease payments
Within one year		123,173
After one year but within five years		147,182
After five years		13,170
Total		283,525

(2) Total cash outflows from leases are as follows (Unit: Korean won in millions):

	For the year ended December 31
	2019
Cash outflows from leases		177,823

(3) There are no lease payments that are not included in the measurement of lease liabilities due to the fact that they are short-term leases or leases for which the underlying asset is of low value.

48. EVENTS AFTER THE REPORTING PERIOD

The Coronavirus disease (COVID-19) outbreak in January 2020 is having a negative impact on the global economy, including Korea. As a result, the macroeconomic environment is unstable overall. The Bank is keeping a close eye on the situation, and credit portfolio is being reviewed to maintain proper capital ratio. Though the Bank is considering various economic conditions in calculating expected credit losses, the effects of coronavirus were not explicitly considered due to the availability of limited information as of the end of the reporting period.

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