UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of March 2020

Commission File Number: 000-53445

KB Financial Group Inc.

(Translation of registrant’s name into English)

26, Gukjegeumyung-ro 8-gil, Yeongdeungpo-gu, Seoul 07331, Korea

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☒             Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

Audit Report of Kookmin Bank for Fiscal Year 2019

On March 5, 2020, KB Financial Group Inc. disclosed audit reports of Kookmin Bank, its wholly-owned subsidiary, for fiscal year 2019 based on the International Financial Reporting Standards as adopted by the Republic of Korea (including the consolidated and separate financial statements of Kookmin Bank as of and for the years ended December 31, 2019 and 2018 and related notes) received from Samil PricewaterhouseCoopers, its independent auditor. The financial statements in such reports have not been approved by the shareholders of Kookmin Bank and remain subject to change.

KB Financial Group Inc. is furnishing the following documents as exhibits to this Form 6-K filing:

Exhibit 99.1: An English-language translation of the Consolidated Audit Report of Kookmin Bank for FY 2019.

Exhibit 99.2: An English-language translation of the Separate Audit Report of Kookmin Bank for FY 2019.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	KB Financial Group Inc.
	(Registrant)
Date: March 6, 2020	By:	/s/ Ki-Hwan Kim
		(Signature)
	Name: Ki-Hwan Kim
	Title:   Deputy President and Chief Finance Officer

Exhibit 99.1

Kookmin Bank and Subsidiaries

Consolidated Financial Statements

December 31, 2019 and 2018

Kookmin Bank and Subsidiaries

Index

December 31, 2019 and 2018

	Page(s)
Independent Auditor’s Report		1~3
Consolidated Financial Statements
Consolidated Statements of Financial Position		4
Consolidated Statements of Comprehensive Income		5
Consolidated Statements of Changes in Equity		6
Consolidated Statements of Cash Flows		7
Notes to the Consolidated Financial Statements		8~198

Independent Auditor’s Report

(English Translation of a Report Originally Issued in Korean)

To the Board of Directors and Shareholder of Kookmin Bank

Opinion

We have audited the accompanying consolidated financial statements of Kookmin Bank and its subsidiaries (collectively referred to as the “Group”), which comprise the consolidated statements of financial position as at December 31, 2019 and 2018 and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies and other explanatory information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2019 and 2018, and its consolidated financial performance and cash flows for the years then ended in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS)

Basis for Opinion

We conducted our audits in accordance with Korean Standards on Auditing. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements of the Republic of Korea that are relevant to our audit of the consolidated financial statements and we have fulfilled our other ethical responsibilities in accordance with the ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Other Matter

Auditing standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to audit such consolidated financial statements may differ from those generally accepted and applied in other countries.

1

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with Korean IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’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 Group or to cease operations.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated 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 Korean Standards on Auditing 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 consolidated financial statements.

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

• Identify and assess the risks of material misstatement of the consolidated 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 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 entity’s internal control.

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

2

• Conclude on the appropriateness of 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 Group’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 consolidated 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 Group to cease to continue as a going concern.

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

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance 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.

/s/ Samil PricewaterhouseCoopers

Seoul, Korea

March 5, 2020

This report is effective as of March 5, 2020, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

3

Kookmin Bank and Subsidiaries

Consolidated Statements of Financial Position

Years Ended December 31, 2019 and 2018

(In millions of Korean won)	Notes		2019		2018
Assets
Cash and due from financial institutions		4,6,7,36		14,481,309		14,889,010
Financial assets at fair value through profit or loss		4,6,8,12		13,866,303		12,257,005
Derivative financial assets		4,6,9		2,317,425		1,613,970
Loans at amortized cost		4,6,8,10,11		293,531,433		276,944,202
Financial investments		4,6,8,12		52,419,293		42,723,480
Investments in associates		13		564,711		506,664
Property and equipment		14		3,784,374		3,127,666
Investment property		14		475,968		257,924
Intangible assets		15		268,731		224,208
Current income tax assets		32		13,904		4,638
Deferred income tax assets		16,32		2,263		3,131
Assets held for sale		18		6,941		16,952
Other assets		4,6,17		5,692,383		4,390,408
Total assets				387,425,038		356,959,258
Liabilities
Financial liabilities at fair value through profit or loss		4,6		80,235		87,168
Derivative financial liabilities		4,6,9		2,168,982		1,642,409
Deposits		4,6,19		300,917,482		272,484,528
Debts		4,6,20		19,141,262		17,496,055
Debentures		4,6,21		18,739,992		23,163,585
Provisions		22		311,140		308,374
Net defined benefit liabilities		23		179,110		166,605
Current income tax liabilities		32		8,338		5,737
Deferred income tax liabilities		16,32		248,652		120,867
Other liabilities		4,6,24,30		16,625,612		14,816,064
			358,420,805		330,291,392
Total liabilities
Equity
Capital stock		25		2,021,896		2,021,896
Hybrid securities		25		574,523		—
Capital surplus		25		5,219,704		5,218,788
Accumulated other comprehensive income		25, 34		123,334		115,784
Retained earnings		25, 33		21,064,776		19,311,398
(Provision of regulatory reserve for credit losses
December 31, 2019 : W 2,291,019 million
December 31, 2018 : W 2,150,772 million)
(Amounts estimated to be appropriated
December 31, 2019 : W 150,856 million
December 31, 2018 : W 140,247 million)
Equity attributable to the shareholder of the Parent Company				29,004,233		26,667,866
Non-controlling interest equity				—		—
Total equity				29,004,233		26,667,866
Total liabilities and equity				387,425,038		356,959,258

(*) The consolidated statement of financial position as at December 31, 2019 is prepared applying Korean IFRS 1116, and the comparative consolidated statement of financial position as at December 31, 2018 has not been restated retrospectively as permitted by the transitional provisions of Korean IFRS 1116.

4

Kookmin Bank and Subsidiaries

Consolidated Statements of Comprehensive Income

Years Ended December 31, 2019 and 2018

(In millions of Korean won)	Notes		2019			2018
Interest income				10,779,948			10,019,888
Interest income from financial instruments at fair value through other comprehensive income and amortized cost				10,568,018			9,797,583
Interest income from financial instruments at fair value through profit or loss				211,930			222,305
Interest expense				(4,416,161	)		(3,919,166	)
Net interest income		26		6,363,787			6,100,722
Fee and commission income				1,483,362			1,422,791
Fee and commission expense				(350,066)			(300,043)
Net fee and commission income		27		1,133,296			1,122,748
Net gains on financial instruments at fair value through profit or loss		28		422,624			326,395
Net other operating expenses		29		(600,639	)		(696,486	)
General and administrative expenses		14,15,23,30,40		(3,887,419	)		(3,766,995	)
Operating profit before provision for credit losses				3,431,649			3,086,384
Provision for credit losses		7,11,12,17,22		(103,530	)		(93,916	)
Operating profit				3,328,119			2,992,468
Share of profit of associates		13		29,240			49,698
Net other non-operating income		31		(38,887	)		44,172
Net non-operating profit				(9,647	)		93,870
Profit before income tax expense				3,318,472			3,086,338
Income tax expense		32		(879,393	)		(827,140	)
Profit for the year				2,439,079			2,259,198
(Adjusted profit after provision of regulatory reserve for credit losses		25
2019 : W2,288,223 million
2018 : W2,011,991 million
Items that will not be reclassified to profit or loss:
Remeasurements of net defined benefit liabilities		23		(40,369	)		(95,796	)
Losses on equity instruments at fair value through other comprehensive income				(17,151	)		(36,013	)
Items that may be subsequently reclassified to profit or loss:
Currency translation adjustments				26,271			27,383
Gains(losses) on debt instruments at fair value through other comprehensive income				34,275			57,188
Share of other comprehensive gains(losses) of associates				7,546			(3,383	)
Losses on hedging instruments of net investments in foreign operations				(6,267	)		(25,386	)
Gains(losses) on cash flow hedging instruments				(15,230	)		3,788
Other comprehensive income for the year, net of tax		34		(10,925	)		(72,219	)
Total comprehensive income for the year				2,428,154			2,186,979
Profit attributable to:
Shareholder of the Parent Company				2,439,079			2,259,198
Non-controlling interests				—			—
				2,439,079			2,259,198
Total comprehensive income for the year attributable to:
Shareholder of the Parent Company				2,428,154			2,186,979
Non-controlling interests				—			—
				2,428,154			2,186,979

(*) The consolidated statements of comprehensive income for the year ended December 31, 2019 are prepared applying Korean IFRS 1116, and the comparative consolidated statements of comprehensive income for the year ended December 31, 2018 have not been restated retrospectively as permitted by transitional provisions of Korean IFRS 1116.

5

Kookmin Bank and Subsidiaries

Consolidated Statements of Changes in Equity

Years Ended December 31, 2019 and 2018

	Attributable to the shareholder of the Parent Company
(In millions of Korean won)	Capital Stock		Hybrid securites		Capital Surplus			Accumulated Other Comprehensive Income			Retained Earnings			Non-controlling interests		Total Equity
Balance at January 1, 2018		2,021,896		—		5,219,693			678,094			17,403,751			—		25,323,434
The effect of changes in accounting policies		—		—		—			(490,091	)		274,943			—		(215,148	)
Balance after reflecting the change of accounting policies		2,021,896		—		5,219,693			188,003			17,678,694			—		25,108,286
Comprehensive income for the year
Profit for the year		—		—		—			—			2,259,198			—		2,259,198
Remeasurements of net defined benefit liabilities		—		—		—			(95,796	)		—			—		(95,796	)
Net gains on equity instruments at fair value through other comprehensive income		—		—		—			(36,013	)		13,638			—		(22,375	)
Currency translation adjustments		—		—		—			27,383			—			—		27,383
Net gains on debt instruments at fair value through other comprehensive income		—		—		—			57,188			—			—		57,188
Share of other comprehensive loss of associates		—		—		—			(3,383	)		—			—		(3,383	)
Losses on hedging instruments of net investments in foreign operations		—		—		—			(25,386	)		—			—		(25,386	)
Gains on cash flow hedging instruments		—		—		—			3,788			—			—		3,788
Total comprehensive income for the year		—		—		—			(72,219	)		2,272,836			—		2,200,617
Transactions with the shareholder
Dividends		—		—		—			—			(640,132	)		—		(640,132	)
Changes in ownership of subsidiaries		—		—		(905	)		—			—			—		(905	)
Total transactions with the shareholder		—		—		(905	)		—			(640,132	)		—		(641,037	)
Balance at December 31, 2018		2,021,896		—		5,218,788			115,784			19,311,398			—		26,667,866
Balance at January 1, 2019		2,021,896		—		5,218,788			115,784			19,311,398			—		26,667,866
The effect of changes in accounting policies
Comprehensive income for the year
Profit for the year		—		—		—			—			2,439,079			—		2,439,079
Remeasurements of net defined benefit liabilities		—		—		—			(40,369	)		—			—		(40,369	)
Net gains on equity instruments at fair value through other comprehensive income		—		—		—			1,324			(18,475	)		—		(17,151	)
Currency translation adjustments		—		—		—			26,271			—			—		26,271
Net gains on debt instruments at fair value through other comprehensive income		—		—		—			34,275			—			—		34,275
Share of other comprehensive loss of associates		—		—		—			7,546			—			—		7,546
Losses on hedging instruments of net investments in foreign operations		—		—		—			(6,267	)		—			—		(6,267	)
Gains on cash flow hedging instruments		—		—		—			(15,230	)		—			—		(15,230	)
Total comprehensive income for the year		—		—		—			7,550			2,420,604			—		2,428,154
Transactions with the shareholder
Dividends		—		—		—			—			(667,226	)		—		(667,226	)
Issuance of hybrid securities		—		574,523		—			—			—			—		574,523
Changes in ownership of subsidiaries		—		—		916			—			—			—		916
Total transactions with the shareholder		—		574,523		916			—			(667,226	)		—		(91,787	)
Balance at December 31, 2019		2,021,896		574,523		5,219,704			123,334			21,064,776			—		29,004,233

(*) The consolidated statements of comprehensive income for the year ended December 31, 2019 are prepared applying Korean IFRS 1116, and the comparative consolidated statements of comprehensive income for the year ended December 31, 2018 have not been restated retrospectively as permitted by transitional provisions of Korean IFRS 1116.

6

Kookmin Bank and Subsidiaries

Consolidated Statements of Cash Flows

Years Ended December 31, 2019 and 2018

(In millions of Korean won)	Notes	2019			2018
Cash flows from operating activities
Profit for the year			2,439,079			2,259,198
Adjustment for non-cash items
Net losses(gains) on financial assets/liabilities at fair value through profit or loss			(201,982	)		(56,385	)
Net losses(gains) on derivative financial instrument for hedging purposes			(110,405	)		41,522
Adjustment of fair value of derivative financial instruments			282			410
Provision for credit losses			103,170			93,916
Net gains on financial investments			(95,524	)		(88,079	)
Share of profit of associates and subsidiaries			(29,240	)		(49,698	)
Depreciation and amortization expense			509,346			246,488
Other net losses(gains) on property and equipment/intangible assets			1,518			(139,092	)
Share-based payment			15,173			4,051
Post-employment benefits			157,946			140,877
Net interest expense			236,930			250,854
Gains on foreign currency translation			(100,131	)		(9,004	)
Other expense			60,496			16,356
			547,579			452,216
Changes in operating assets and liabilities
Financial assets at fair value through profit or loss			(1,497,738	)		(2,983,784	)
Derivative financial instrument			(7,944	)		(9,867	)
Loans at amortized cost			(16,595,592	)		(25,553,376	)
Current income tax assets			(9,265	)		(1,416	)
Deferred income tax assets			1,110			(649	)
Other assets			(905,137	)		1,622,046
Financial liabilities at fair value through profit or loss			(23,165	)		10,419
Deposits			28,107,474			19,633,557
Deferred income tax liabilities			137,700			56,200
Other liabilities			1,176,035			975,835
			10,383,478			(6,251,035	)
Net cash inflow(outflow) from operating activities			13,370,136			(3,539,621	)
Cash flows from investing activities
Net cash flows from derivative financial instrument for hedging purposes			7,120			(14,918	)
Disposal of financial assets at fair value through profit or loss			7,807,186			8,303,648
Acquisition of financial assets at fair value through profit or loss			(7,817,304	)		(6,220,238	)
Disposal of financial investments			59,540,128			53,180,839
Acquisition of financial investments			(68,825,567	)		(57,553,020	)
Disposal of investments in associates			30,354			44,865
Acquisition of investments in associates			(69,005	)		(159,320	)
Disposal of property and equipment			60			1,724
Acquisition of property and equipment			(525,605	)		(333,949	)
Acquisition of investment property			(230,584	)		(179	)
Disposal of investment property			—			139,639
Disposal of intangible assets			7,126			1,425
Acquisition of intangible assets			(73,726	)		(53,057	)
Net cash flows from changes in ownership of subsidiaries			212,279			14,280
Others			(59,809	)		301,012
Net cash outflow from investing activities			(9,997,347	)		(2,347,249	)
Cash flows from financing activities
Net cash flows from derivative financial instrument for hedging purposes			(28,631	)		(17,698	)
Net increase in debts			1,290,505			1,517,015
Increase in debentures			9,543,968			14,209,940
Decrease in debentures			(14,105,629	)		(10,414,512	)
Payment of dividends			(667,226	)		(640,132	)
Net increase(decrease) in other payables from trust accounts			(68,647	)		267,076
Issuance of hybrid securities			574,523			—
Others			(66,498	)		(220,618	)
Net cash inflow(outflow) from financing activities			(3,527,635	)		4,701,071
Exchange gains (losses) on cash and cash equivalents			177,664			(35,660	)
Net increase(decrease) in cash and cash equivalents			22,818			(1,221,459	)
Cash and cash equivalents at the beginning of the year	36		4,856,495			6,077,954
Cash and cash equivalents at the end of the year	36		4,879,313			4,856,495

(*) The consolidated statements of comprehensive income for the year ended December 31, 2019 are prepared applying Korean IFRS 1116, and the comparative consolidated statements of comprehensive income for the year ended December 31, 2018 have not been restated retrospectively as permitted by transitional provisions of Korean IFRS 1116.

7

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

1. The Bank

Kookmin Bank (the “Bank” or the “Parent Company”) was incorporated in 1963 under the Citizens National Bank Act to provide banking services to the general public and to small and medium-sized enterprises. Pursuant to the Repeal Act of the Citizens National Bank Act, effective January 5, 1995, the Bank’s status changed to a financial institution which operates under the Banking Act and Commercial Act.

The Bank merged with Korea Long Term Credit Bank on December 31, 1998, and with its subsidiaries, Daegu, Busan, Jeonnam Kookmin Mutual Savings & Finance Co., Ltd., on August 22, 1999. Pursuant to the directive from the Financial Services Commission related to the Structural Improvement of the Financial Industry Act, the Bank acquired certain assets, including performing loans, and assumed most of the liabilities of Daedong Bank on June 29, 1998. Also, the Bank completed the merger with Housing and Commercial Bank (“H&CB”) on October 31, 2001, and merged with Kookmin Credit Card Co., Ltd., a majority-owned subsidiary, on September 30, 2003. Meanwhile, the Bank spun off its credit card business segment on February 28, 2011, and KB Kookmin Card Co., Ltd. became a subsidiary of KB Financial Group Inc.

The Bank listed its shares on the Stock Market Division of the Korea Exchange (“KRX,” formerly Korea Stock Exchange) in September 1994. As a result of the merger with H&CB, the shareholder of the former Kookmin Bank and H&CB received new common shares of the Bank which were relisted on the KRX on November 9, 2001. In addition, H&CB listed its American Depositary Shares (“ADS”) on the New York Stock Exchange (“NYSE”) on October 3, 2000, prior to the merger. Following the merger with H&CB, the Bank listed its ADS on the NYSE on November 1, 2001. The Bank became a wholly owned subsidiary of KB Financial Group Inc. through a comprehensive stock transfer on September 29, 2008. Subsequently, the Bank’s shares and its ADS, each listed on the KRX and the NYSE, were delisted on October 10, 2008 and September 26, 2008, respectively. As at December 31, 2019, the Bank’s paid-in capital is \2,021,896 million.

The Bank engages in the banking business in accordance with the Banking Act, trust business and other relevant businesses in accordance with the Financial Investment Services and Capital Markets Act, and telecommunication Services in accordance with the Special Act on Financial Innovation Support. As at December 31, 2019, the Bank operates 1,051 domestic branches and offices, and eight overseas branches (excluding four subsidiaries and two offices).

2. Basis of Preparation

2.1 Application of Korean IFRS

The Bank and its subsidiaries (collectively the “Group”) maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangul) in accordance with Korean IFRS. The accompanying consolidated financial statements have been condensed, restructured and translated into English from the Korean language financial statements.

The preparation of the consolidated financial statements requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 2.4.

8

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

The Group newly applied the following amended and enacted standards and interpretations from January 1, 2019, and these applications did not have a material impact on the consolidated financial statements, except for the adoption of Korean IFRS 1116 Leases.

• Amendments to Korean IFRS 1116 Leases

Korean IFRS 1116 adopts a single lease model and requires lesses to recognize assets and liabilities for all leases of which lease term is over 12 months and underlying assets are not low value assets. A lessee is required to recognize a right-of-use asset and a lease liability representing its obligation to make lease payments.

The Group changed its accounting policies as a result of adopting Korean IFRS 1116 Leases. The Group applied the new accounting policies retrospectively, as permitted under the specific transitional provisions in the standard. The cumulative effect of initial application of Korean IFRS 1116 was recognized on the date of initial application (January 1, 2019). The Group did not elect to restate its comparative prior financial statements. See Note 42 for the effect of adoption of Korean IFRS 1116 Leases.

• Amendments of Korean IFRS 1109 Financial Instruments

The narrow-scope amendments made to Korean IFRS 1109 Financial Instruments enable entities to measure certain pre-payable financial assets with negative compensation at amortized cost. When a modification of a financial liability measured at amortized cost that does not result in the derecognition, a modification gain or loss shall be recognized in profit or loss. The amendments had no material impact on the Group’s financial statements.

• Amendments of Korean IFRS 1019 Employee Benefits

The amendments require that an entity shall calculate current service cost and net interest for the remainder of the reporting period after a plan amendment, curtailment or settlement based on updated actuarial assumptions from the date of the change. The amendments also require that a reduction in a surplus must be recognized in profit or loss even if that surplus was not previously recognized because of the impact of the asset ceiling. The amendments had no material impact on the Group’s financial statements.

• Amendments of Korean IFRS 1028 Investments in Associates and Joint Ventures

The amendments clarify that an entity shall apply Korean IFRS 1109 to financial instruments in an associate or joint venture to which the equity method is not applied. These include long-term interests that, in substance, form part of the entity’s net investment in an associate or joint venture. The amendments had no material impact on the Group’s financial statements.

9

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

• Enactment to Interpretation of Korean IFRS 2123 Uncertainty over Income Tax Treatments

The interpretation explains how to recognize and measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment, and includes guidance on how to determine whether each uncertain tax treatment is considered separately or together. It also presents examples of circumstances where a judgment or estimate is required to be reassessed. The enactment did not have a significant impact on the financial statements.

• Amendments to K-IFRS No. 1109, Financial Instruments, and No. 1107, Financial Instruments: Disclosure

Due to benchmark interest rate reform, exceptions have been added that allow hedge accounting to be applied while uncertainty exists. With regards to the hedging relationship, we assume that the benchmark interest rate, which is the underlying variable of cash flows, is not changed by the benchmark interest rate reform when examining the likelihood of anticipated transactions and the subsequent evaluation of the hedging effect. For hedges of interest rate risk factors not specified in the contract, the requirement that the hedged risk must be separately identified applies only at the inception of the hedge relationship. The application of this exception is terminated when uncertainty regarding the timing and amount of cash flows based on the benchmark interest rates resulting from the benchmark interest rate reform ceases or the hedging relationship ceases. The amendments were implemented from January 1, 2020, but the Group adopted those amendments early as early adoption was allowed. The significant benchmark interest rate indicator for the hedge relationship is LIBOR and CD Rates, and the hedge accounted for in this amendment is hedge accounting in Note 9.

• Annual Improvements 2015-2017 Cycle

Korean IFRS 1103 Business Combination

The amendments clarify that when a party to a joint arrangement obtains control of a business that is a joint operation, and had rights to the assets and obligations for the liabilities relating to that joint operation immediately before the acquisition date, the transaction is a business combination achieved in stages. In such cases, the acquirer shall remeasure its entire previously held interest in the joint operation. The amendments had no material impact on the Group’s financial statements..

Korean IFRS 1111 Joint Agreements

The amendments clarify that when a party that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business. In such cases, previously held interests in the joint operation are not remeasured. The amendments had no material impact on the Group’s financial statements.

Paragraph 57A of Korean IFRS 1012 Income Tax

The amendment is applied to all the income tax consequences of dividends and requires an entity to recognize the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events. The amendment had no material impact on the Group’s financial statements.

10

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Korean IFRS 1023 Borrowing Cost

The amendments clarify that if a specific borrowing remains outstanding after the related qualifying asset is ready for its intended use (or sale), it becomes part of general borrowings. The amendments had no material impact on the Group’s financial statements.

Certain new accounting standards and interpretations that have been published but are not mandatory for the reporting period commencing January 1, 2019 and have not been early adopted by the Group are set out below.

• Amendments to Korean IFRS 1001 Presentation of Financial Statements and Korean IFRS 1008 Accounting policies, changes in accounting estimates and errors – Definition of Material

The amendments clarify the explanation of the definition of material and amended Korean IFRS 1001 and Korean IFRS 1008 in accordance with the clarified definitions. Materiality is assessed by reference to omission or misstatement of material information as well as effects of immaterial information, and to the nature of the users when determining the information to be disclosed by the Group. These amendments should be applied for annual periods beginning on or after January 1, 2020, and earlier application of permitted. The Group does not expect that these amendments had a significant impact on the financial statements.

• Amendments to Korean IFRS 1103 Business Combination – Definition of a Business

To consider the integration of the required activities and assets as a business, the amended definition of a business requires an acquisition to include an input and a substantive process that together significantly contribute to the ability to create outputs and excludes economic benefits from the lower costs. An entity can apply a concentration test, an optional test, where substantially all of the fair value of gross assets acquired is concentrated in a single asset or a group of similar assets, the assets acquired would not represent a business. These amendments should be applied for annual periods beginning on or after January 1, 2020, and earlier application of permitted. The Group does not expect that these amendments had a material impact on the financial statements.

• New interpretations not yet adopted by the Group

On December 16, 2019, the IFRS Interpretation Committee announced that all economic penalties for the termination of the lease are taken into account when determining the enforceable period for lease term and useful life of leasehold improvements. The Group is analyzing the impact of changes in accounting policy for the enforceable period on consolidated financial statements.

Due to the large number of lease contracts held by the Group and varying terms of the contract, the Group expects that sufficient time would be required to assess items to be included in the review of extensive economic penalty and to establish procedures for collecting and analyzing necessary information. Therefore, the effect of the changes in accounting policy for the lease term has not been reflected in the consolidated financial statements for the current reporting period.

If the accounting policy for the lease term is changed in the annual periods beginning on or after January 1, 2020, the amount of the related right-of-use assets and lease liabilities may increase, and the consolidated financial statements may need to be retroactively restated to reflect this effect.

11

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

2.2 Measurement Basis

The consolidated financial statements have been prepared under the historical cost convention unless otherwise specified.

2.3 Functional and Presentation Currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in Korean won, which is the Parent Company’s functional and presentation currency. Refer to Notes 3.2.

2.4 Critical Accounting Estimates

The preparation of consolidated financial statements requires the application of accounting policies, certain critical accounting estimates and assumptions that may have a significant impact on the assets (liabilities) and incomes (expenses). Management’s estimates of outcomes may differ from actual outcomes if management’s estimates and assumptions based on management’s best judgment at the reporting date are different from the actual environment.

Estimates and assumptions are continually evaluated and any change in an accounting estimate is recognized prospectively by including it in profit or loss in the period of the change, if the change affects that period only. Alternatively if the change in accounting estimate affects both the period of change and future periods, that change is recognized in the profit or loss of all those periods.

Uncertainty in estimates and assumptions with significant risk that may result in material adjustment to the consolidated financial statements are as follows:

2.4.1 Income Taxes

The Group is operating in numerous countries and the income generated from these operations is subject to income taxes based on tax laws and interpretations of tax authorities in numerous jurisdictions. There are many transactions and calculations for which the ultimate tax determination is uncertain.

If certain portion of the taxable income is not used for investments, increase in wages, and others in accordance with the Tax Law for Promotion of investment and Collaborative Cooperation (Recirculation of Corporate Income), the Group is liable to pay additional income tax calculated based on the tax laws. The new tax law is effective for three years from 2018 and measurement of current and deferred income tax is affected. As the Group’s income tax is dependent on the investments, increase in wages, and others, there exists uncertainty with regard to measuring the final tax effects.

2.4.2 Fair Value of Financial Instruments

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group uses its judgment to select a variety of methods and make assumptions that are mainly based on material market conditions existing at the end of each reporting period. Refer to Note 6 for details on valuation techniques and inputs used to determine the fair value of financial instruments.

12

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

2.4.3 Provisions for Credit Losses (allowances for loan losses, provisions for acceptances and guarantees, and unused loan commitments)

The Group determines and recognizes allowances for losses on financial assets at amortized cost and fair value through other comprehensive income through impairment test and recognizes provisions for acceptances and guarantees, and unused loan commitments. The accuracy of provisions for credit losses is determined by the methodology and assumptions used for the estimation of expected cash flows of the borrower for individually assessed allowances of loans, collectively assessed allowances for groups of loans, acceptances and guarantees, and unused loan commitments.

2.4.4 Net Defined Benefit Liability

The present value of net defined benefit liability depends on a number of factors that are determined on an actuarial basis using a number of assumptions

2.4.5 Estimated Impairment of Goodwill

The Group tests annually whether goodwill has suffered any impairment. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations.

3. Significant Accounting Policies

The significant accounting policies and calculation methods applied in the preparation of these consolidated financial statements have been consistently applied to all periods presented, except for the impact of changes due to enactment of new standards, amendments and interpretations disclosed in Note 2.1 and the following paragraph.

3.1 Consolidation

3.1.1 Subsidiaries

Subsidiaries are companies that are controlled by the Group. The Group controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The existence and effects of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date when control is transferred to the Group and de-consolidated from the date when control is lost.

If a subsidiary uses accounting policies other than those adopted in the consolidated financial statements for like transactions and events in similar circumstances, appropriate adjustments are made to make the subsidiary’s accounting policies conform to those of the Group when the subsidiary’s financial statements are used by the Group in preparing the consolidated financial statements.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Parent Company and to the non-controlling interests, if any. Total comprehensive income is attributed to the owners of the Parent Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

13

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions; that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss.

3.1.2 Associates

Associates are entities over which the Group has significant influence in the financial and operating policy decisions. If the Group holds 20% or more of the voting power of the investee, it is presumed that the Group has significant influence.

If the Group’s share of losses of an associate equals or exceeds its interest in the associate (including long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognizing its share of further losses. After the Group’s interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

The Group determines at each reporting period whether there is any objective evidence that the investments in the associates are impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associates and its carrying value and recognizes the amount as ‘non-operating income (expense)’ in the statement of comprehensive income.

Under the equity method, investments in associates are initially recognized at cost and the carrying amount is increased or decreased to recognize the Group’s share of the profit or loss of the investee and changes in the investee’s equity after the date of acquisition. The Group’s share of the profit or loss of the investee is recognized in the Group’s profit or loss. Distributions received from an investee reduce the carrying amount of the investment. Profit and loss resulting from ‘upstream’ and ‘downstream’ transactions between the Group and associates are eliminated to the extent at the Group’s interest in associates. Unrealized losses are eliminated in the same way as unrealized gains except that they are only eliminated to the extent that there is no evidence of impairment.

If an associate uses accounting policies other than those of the Group for like transactions and events in similar circumstances, if necessary, adjustments shall be made to make the associate’s accounting policies conform to those of the Group when the associate’s financial statements are used by the entity in applying the equity method.

3.1.3 Structured Entity

A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity. When the Group decides whether it has power to the structured entities in which the Group has interests, it considers factors such as the purpose, the form, the practical ability to direct the relevant activities of a structured entity, the nature of its relationship with a structured entity and the amount of exposure to variable returns.

14

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

3.1.4 Trusts and Funds

The Group provides management services for trust assets, collective investment and other funds. These trusts and funds are not consolidated in the Group’s consolidated financial statements, except for trusts and funds over which the Group has control.

3.1.5 Intra-group Transactions

All intra-group balances and transactions, and any unrealized gains arising on intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealized losses are eliminated in the same way as unrealized gains except that they are only eliminated to the extent that there is no evidence of impairment.

3.2 Foreign Currency

3.2.1 Foreign Currency Transactions and Balances

A foreign currency transaction is recorded, on initial recognition in the functional currency, by applying the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. At the end of each reporting period, foreign currency monetary items are translated using the closing rate which is the spot exchange rate at the end of the reporting period. Non-monetary items that are measured at fair value in a foreign currency are translated using the spot exchange rates at the date when the fair value was determined and non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the spot exchange rate at the date of the transaction.

Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognized in profit or loss in the period in which they arise, except for exchange differences arising on net investments in a foreign operation and financial liability designated as a hedge of the net investment. When gains or losses on a non-monetary item are recognized in other comprehensive income, any exchange component of those gains or losses are also recognized in other comprehensive income. Conversely, when gains or losses on a non-monetary item are recognized in profit or loss, any exchange component of those gains or losses are also recognized in profit or loss.

3.2.2 Foreign Operations

The financial performance and financial position of all foreign operations, whose functional currencies differ from the Group’s presentation currency, are translated into the Group’s presentation currency using the following procedures.

Assets and liabilities for each statement of financial position presented are translated at the closing rate at the end of the reporting period. Income and expenses in the statement of comprehensive income presented are translated at average exchange rates for the period. All resulting exchange differences are recognized in other comprehensive income.

15

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Any goodwill arising from the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising from the acquisition of that foreign operation are treated as assets and liabilities of the foreign operation. Thus, they are expressed in the functional currency of the foreign operation and are translated into the presentation currency at the closing rate.

On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognized in the other comprehensive income and the separate component of equity, is reclassified from other comprehensive income to profit or loss (as a reclassification adjustment) when the gains or losses on disposal are recognized. On the partial disposal of a subsidiary that includes a foreign operation, the Group re-attributes the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income to the non-controlling interests in that foreign operation. In any other partial disposal of a foreign operation, the Group reclassifies to profit or loss only the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income.

3.2.3 Translation of the net investment in a foreign operation

If the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, then foreign currency difference arising on the item which in substance is considered to form part of the net investment in the foreign operation, are recognized in the other comprehensive income and shall be reclassified to profit or loss on disposal of the investment.

3.3 Recognition and Measurement of Financial Instruments

3.3.1 Initial Recognition

The Group recognizes a financial asset or a financial liability in its consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument. A regular way purchase or sale of financial assets (a purchase or sale of a financial asset under a contract whose terms require delivery of the financial instruments within the time frame established generally by market regulation or practice) is recognized and derecognized using trade date accounting.

The Group classifies financial assets as financial assets at fair value through profit or loss, financial assets at fair value through other comprehensive income or financial assets at amortized cost. The Group classifies financial liabilities as financial liabilities at fair value through profit or loss, or other financial liabilities. The classification depends on the Group’s business model for managing financial instruments and the contractual cash flow characteristics of the financial instruments at initial recognition.

At initial recognition, a financial asset or financial liability is measured at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. The fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The fair value of a financial instrument on initial recognition is normally the transaction price (that is, the fair value of the consideration given or received) in an arm’s length transaction.

3.3.2 Subsequent Measurement

After initial recognition, financial instruments are measured at amortized cost or fair value based on classification at initial recognition.

16

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Amortized cost

The amortized cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition and adjusted to reflect principal repayments, cumulative amortization using the effective interest method and any reduction (directly or through the use of an allowance account) for impairment or uncollectibility.

Fair value

Fair values, which the Group primarily uses for the measurement of financial instruments, are the published price quotations based on market prices or dealer price quotations of financial instruments traded in an active market where available. These are the best evidence of fair value. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, an entity in the same industry, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis.

If the market for a financial instrument is not active, fair value is determined either by using a valuation technique or independent third-party valuation service. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties, if available, referencing to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models.

The Group uses valuation models that are commonly used by market participants and customized for the Group to determine fair values of common over-the-counter (OTC) derivatives such as options, interest rate swaps and currency swaps which are based on the inputs observable in markets. For more complex instruments, the Group uses internally developed models, which are usually based on valuation methods and techniques generally used within the industry, or a value measured by an independent external valuation institution as the fair values if all or some of the inputs to the valuation models are not market observable and therefore it is necessary to estimate fair value based on certain assumptions.

The Group’s Fair Value Evaluation Committee, which consists of the risk management department, trading department and accounting department, reviews the appropriateness of internally developed valuation models, and approves the selection and changing of the external valuation institution and other considerations related to fair value measurement. The review results on the fair valuation models are reported to the Market Risk Management subcommittee by the Fair Value Evaluation Committee on a regular basis.

If the valuation technique does not reflect all factors which market participants would consider in setting a price, the fair value is adjusted to reflect those factors. Those factors include counterparty credit risk, bid-ask spread, liquidity risk and others.

The chosen valuation technique makes maximum use of market inputs and relies as little as possible on entity-specific inputs. It incorporates all factors that market participants would consider in setting a price and is consistent with economic methodologies applied for pricing financial instruments. Periodically, the Group calibrates the valuation technique and tests its validity using prices of observable current market transactions of the same instrument or based on other relevant observable market data.

17

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

3.3.3 Derecognition

Derecognition is the removal of a previously recognized financial asset or financial liability from the statement of financial position. The Group derecognizes a financial asset or a financial liability when, and only when:

Derecognition of financial assets

Financial assets are derecognized when the contractual rights to the cash flows from the financial assets expire or the financial assets have been transferred and substantially all the risks and rewards of ownership of the financial assets are also transferred, or all the risks and rewards of ownership of the financial assets are neither substantially transferred nor retained and the Group has not retained control. If the Group neither transfers nor disposes of substantially all the risks and rewards of ownership of the financial assets, the Group continues to recognize the financial asset to the extent of its continuing involvement in the financial asset.

If the Group transfers the contractual rights to receive the cash flows of the financial asset, but retains substantially all the risks and rewards of ownership of the financial asset, the Group continues to recognize the transferred asset in its entirely and recognize a financial liability for the consideration received.

The Group writes off the carrying amount and allowance of financial assets in its entirety or to a portion thereof when the principal and interest are determined to be no longer recoverable. In general, the Group considers write-off when it is determined that the debtor does not have sufficient resources or income to cover the principal and interest, and this write-off decision is made in accordance with internal regulations. After the write-off, the Group can collect the written-off loans continuously according to the internal policy. Recovered amounts from written-off financial assets are recognized in profit or loss.

Derecognition of financial liabilities

Financial liabilities are derecognized from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired.

3.3.4 Offsetting

Financial assets and financial liabilities are offset and the net amount are presented in the statement of financial position when, and only when, the Group currently has a legally enforceable right to offset the recognized amounts and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

3.4 Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, foreign currency, and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

18

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

3.5 Non-derivative Financial Assets

3.5.1 Financial Assets at Fair Value through Profit or Loss

Financial assets classified as held for trading, financial assets designated by the Group as at fair value through profit or loss upon initial recognition, and financial assets that are required to be mandatorily measured at fair value through profit or loss are classified as financial assets at fair value through profit or loss.

The Group may designate certain financial assets upon initial recognition as at fair value through profit or loss when the designation eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as ‘an accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases.

After initial recognition, a financial asset at fair value through profit or loss is measured at fair value and gains or losses arising from a change in the fair value are recognized in profit or loss. Interest income using the effective interest method and dividend income from financial assets at fair value through profit or loss are also recognized in profit or loss.

3.5.2 Financial Assets at Fair Value through Other Comprehensive Income

The Group classifies below financial assets as financial assets at fair value through other comprehensive income;

• Debt instruments that are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and where the assets’ cash flows represent solely payments of principal and interest on the principal amount outstanding or;

• Equity instruments that are not held for trading with the objective of generating a profit from short-term fluctuations in price or dealer’s margin, designated as financial assets at fair value through other comprehensive income.

After initial recognition, a financial asset at fair value through other comprehensive income is measured at fair value. Gains or losses arising from a change in fair value, other than dividend income, interest income using effective interest method and exchange differences arising on monetary items which are recognized directly in profit or loss, are recognized as other comprehensive income in equity.

Upon disposal of financial assets at fair value through other comprehensive income, the cumulative gain or loss previously recognized in other comprehensive income is reclassified to profit or loss. However, cumulative gain or loss of equity instrument designated as fair value through other comprehensive income are reclassified to retained earnings not to profit or loss at disposal.

Financial assets at fair value through other comprehensive income denominated in foreign currencies are translated at the closing rate. Exchange differences on the amortized cost of changes in fair value are recognized in profit or loss, and other changes are recognized as equity.

19

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

3.5.3 Financial Assets at Amortized Cost

A financial asset, which are held within the business model whose objective is to hold assets in order to collect contractual cash flows and consistent with representing solely payments of principal and interest on the principal amount outstanding, are classified as a financial asset at amortized cost.

These financial assets are subsequently carried at amortized cost using the effective interest method after initial recognition and interest income is recognized using the effective interest method.

The carrying amount of financial assets at amortized cost is presented by deducting allowance for doubtful accounts, and the measurement method is described in Note 3.6.

3.6 Expected Credit Loss of Financial Assets (Debt Instruments)

The Group measures expected credit loss and recognizes loss allowance at the end of the reporting period for financial assets at amortized cost and fair value through other comprehensive income with the exception of financial asset at fair value through profit or loss.

Expected credit losses are estimated at present value of probability-weighted amount that is determined by evaluating a range of possible outcomes. The Group measures expected credit losses by reflecting reasonable and supportable information that is reasonably available at the reporting date without undue cost or effort, including information about past events, current conditions and forecasts of future economic conditions.

The approaches of measuring expected credit losses in accordance with Korean IFRS are as follows:

• General approach: for financial assets not subject to the below approach and unused loan commitments on off-balance sheet

• Credit-impaired approach: for financial assets that are credit-impaired at the time of acquisition

Application of general approach is differentiated depending on whether credit risk has increased significantly after initial recognition. After initial recognition, loss allowances for the assets without significant increase in credit risk are measured at the amount of 12 month expected credit losses, whereas the loss allowances for the assets with significant increase in credit risk are measured at the amount of lifetime expected credit losses. Lifetime is presumed to be a period to the contractual maturity date of financial assets (the expected life of financial assets).

The Group determines whether the credit risk has increased significantly using the following information, and if one or more of the following items are met, it is deemed as significant increase in credit risk. Information of more than 30 days overdue is applied to all subsidiaries, and other information is applied selectively considering specific indicators of each subsidiary or additionally considering specific indicators of each subsidiary. When the contractual cash flows of a financial asset are renegotiated or otherwise modified, the Group determines whether the credit risk has increased significantly using the same following information.

• Exceeds 30 days past due

• Decline in credit rating at period end by more than certain notches as compared to that at initial recognition

• Subsequent managing ratings below certain level in the early warning system

• Debt restructuring (except for impaired financial assets) and

• Credit delinquency information on the Korea Federation of Banks, and etc.

20

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

If one or more of the following items are met, it is generally deemed as credit-impaired:

• 90 days or more past due

• Legal proceedings related to collection

• A borrower registered on the credit management list of the Korea Federation of Banks

• A corporate borrower with the credit rating C or D

• Refinancing or

• Debt restructuring, and etc.

3.6.1 Forward-looking Information

The Group uses forward-looking information, when it determines whether the credit risk has increased significantly and measures the expected credit losses.

The Group assumes the risk components have a certain correlation with the economic cycle, and uses statistical methodologies to estimate the relation between key macroeconomic variables and risk components for the expected credit losses. The Group has derived a correlation between the time series data of more than 11 years and the key macroeconomic variables, and calculates the expected credit losses by reflecting the results of the correlation on the risk component. The correlation between the major macroeconomic variables and the credit risk is as follows:

Key macroeconomic variables	Correlation between the major macroeconomic variables and the credit risk
Domestic GDP growth rate		(-	)
Composite stock index		(-	)
Construction investment change rate		(-	)
Rate of change in housing transaction price index		(-	)
Interest rate spread		(+	)
Private consumption growth rate		(-	)

Forward-looking information used in calculation of expected credit losses is based on the macroeconomic forecasts utilized by the management of the Bank for its business plan taking into account reliable external agency’s forecasts and others. The forward-looking information is generated by KB Research under KB Financial Group with comprehensive approach to capture the possibility of various economic forecast scenarios that are derived from the internal and external viewpoints of the macroeconomic situation. The Group determines the macroeconomic variables to use in forecasting future condition of the economy, taking into account the direction of the forecast scenario and the significant relationship between macroeconomic variables and time series data. And there are some changes compared to the macroeconomic variables used in the previous year.

3.6.2 Measuring Expected Credit Losses on Financial Assets at Amortized Cost

The expected credit losses on financial assets at amortized cost are measured as the difference between the asset’s contractual terms of cash flow and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The Group estimates expected future cash flows for financial assets that are individually significant (individual assessment of impairment).

For financial assets that are not individually significant, the Group collectively estimates expected credit loss by grouping loans with homogeneous credit risk profile (collective assessment of impairment).

21

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Individual assessment of impairment

Individual assessment of impairment losses are calculated by discounting the expected future cash flows of a loan at its original effective interest rate and comparing the resultant present value with the loan’s current carrying amount. This process normally encompasses management’s best estimate, such as operating cash flow of the borrower and net realizable value of any collateral held.

Collective assessment of impairment

Collective assessment of impairment is performed by using a methodology based on historical loss experience and reflecting forward-looking information. Such methodology applies factors such as type of collateral, product and borrowers, credit rating, portfolio size, recovery period, probability of default estimated for each group of assets and loss given default by type of recovery method. Also, consistent assumptions are applied to form a formula-based model in estimating expected credit loss and to determine factors on the basis of historical loss experience and forward-looking information. The methodology and assumptions used for collective assessment of impairment are reviewed regularly to reduce any differences between estimated and actual losses.

Lifetime expected credit loss is measured by applying Probability of Default (“PD”) and adjusted Loss Given Default (“LGD “) reflecting the changes in carrying amount to the carrying amount as at the end of the reporting period deducted by expected repayment of principals.

3.6.3 Measuring Expected Credit Losses on Financial Assets at Fair Value through Other Comprehensive Income

Measuring method of expected credit losses on financial assets at fair value through other comprehensive income is equal to that of financial assets at amortized cost. However, the changes in loss allowances are recognized as other comprehensive income. Upon disposal or repayment of financial assets at fair value through other comprehensive income, the amount of loss allowances is reclassified from other comprehensive income to profit or loss.

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Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

3.7 Derivative Financial Instruments

The Group enters into numerous derivative financial instrument contracts such as currency forwards, interest rate swaps, currency swaps and others for trading purposes or to manage its exposures to fluctuations in interest rates and currency exchange, amongst others. The Group’s derivative operations focus on addressing the needs of the Group’s corporate clients to hedge their risk exposure and to hedge the Group’s risk exposure that results from such client contracts. These derivative financial instruments are presented as derivative financial instruments within the consolidated financial statements irrespective of transaction purpose and subsequent measurement requirement.

The Group designates certain derivatives and non-derivatives as hedging instruments to hedge the risk of changes in fair value and cash flow of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge and cash flow hedge). The Group designates part of derivatives and non-derivatives as hedging instruments to hedge the risk of foreign exchange of a net investment in a foreign operation (hedge of net investment).

At the inception of the hedge, there is formal designation and documentation of the hedging relationship and the Group’s risk management objective and strategy for undertaking the hedge. That documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value attributable to the hedged risk.

See Note 9 for changes in fair value of the hedging instruments and changes in other comprehensive income related to derivatives held for cash flow hedging.

The Group applies hedge accounting for risk management activities aligned with the requirements and qualifying criteria for hedge accounting of Korean IFRS 1109.

3.7.1 Derivative Financial Instruments Held for Trading

All derivative financial instruments, except for derivatives that are designated and qualify for hedge accounting, are measured at fair value. Gains or losses arising from changes in fair value are recognized in profit or loss as part of net gains or losses on financial instruments at fair value through profit or loss.

3.7.2 Fair Value Hedges

If derivatives and non-derivatives qualify for a fair value hedge, the change in fair value of the hedging instrument and the change in fair value of the hedged item attributable to the hedged risk are recognized in profit or loss as part of other operating income and expenses. If the hedged items are equity instruments for which the Group has elected to present changes in fair value in other comprehensive income, the change in fair value of the hedging instrument and the change in fair value of the hedged item attributable to the hedged risk are recognized in other comprehensive income. Fair value hedge accounting is discontinued prospectively if the hedging instrument expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for hedge accounting or the Group revokes the designation. Once fair value hedge accounting is discontinued, the adjustment to the carrying amount of a hedged item is amortized to profit or loss by the maturity of the financial instrument using the effective interest method.

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Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

3.7.3 Cash Flow Hedges

The effective portion of changes in fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income, limited to the cumulative change in fair value (present value) of the hedged item (the present value of the cumulative change in the future expected cash flows of the hedged item) from the inception of the hedge. The ineffective portion is recognized in gain or loss (other operating income or expense). The associated gains or losses that were previously recognized in other comprehensive income are reclassified from equity to profit or loss (other operating income and expenses) as a reclassification adjustment in the same period or periods during which the hedged forecast cash flows affects profit or loss. Cash flow hedge accounting is discontinued prospectively if the hedging instrument expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for hedge accounting or the Group revokes the designation. When the cash flow hedge accounting is discontinued, the cumulative gains or losses on the hedging instrument that have been recognized in other comprehensive income are reclassified to profit or loss over the period in which the forecast transaction occurs. If the forecast transaction is no longer expected to occur, the cumulative gains or losses that had been recognized in other comprehensive income are immediately reclassified to profit or loss.

3.7.4 Hedge of Net Investment

If derivatives and non-derivatives qualify for a net investment hedge, the effective portion of changes in fair value of hedging instrument is recognized in other comprehensive income or loss and the ineffective portion is recognized in net other operating income (expense). The gain or loss on the hedging instrument relating to the effective portion of the hedge that has been recognized in other comprehensive income will be reclassified from other comprehensive income or loss to profit or loss as a reclassification adjustment on the disposal or partial disposal of the foreign operation.

3.7.5 Risk Management Strategy

Interest rate risk arises from changes in fair value resulting from changes in the discount rate of fixed rate financial instruments, and changes in cash flows resulting from changes in the nominal interest rate of floating rate financial instruments. Foreign currencies risk arises from net investment in a foreign operation, whose functional currencies differ from the Group’s functional currency.

While the Group entirely hedges the interest rate risk, the Group hedges the foreign currencies risk only the proportional part of the notional amount.

At inception of the hedge relationship, the Group reviews the hedge effectiveness; and periodically reviews the effectiveness in order to confirm that economic relationship between the hedged item and the hedging instrument exists. The requirement that an economic relationship exists means that the hedging instrument and the hedged item have values that generally move in the opposite direction because of the same risk, which is the hedged risk. The Group designates the exposure of hedged item opposite to the exposure of hedging instruments in order to meet economic relationship requirement.

The Group designates hedge relationship at one-on-one ratio between the nominal amount of hedging instrument and to the nominal amount of hedged item.

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Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Ineffectiveness could arise because of differences in the underlying parameters (acquisition date, credit risk or liquidity and others) or other differences between the hedging instrument and the hedged item that the Group accepts in order to achieve a cost-effective hedging relationship.

The Group avoids the cash flow variability of its floating rate debt securities by using interest rate swaps. Both are linked to the same interest rate; however, the paid amount of the floating rate may be set on different dates. Even if the variability of interest rate related cash flows (as a risk factor) are designated as a hedged item, the difference in set-up dates creates an hedge ineffectiveness.

The Group avoids the variability of fair values of its fixed rate debt securities by using interest rate swaps. The calculating method of the number of the dates for paying fixed-rate interest amount can be different between both. Even if the variability of the fair value due to the benchmark interest rate (as a risk factor) are designated as a hedged item, the difference calculating in set-up dates creates an hedge ineffectiveness.

3.7.6 Embedded Derivatives

An embedded derivative is separated from the host contract and accounted for as a derivative if, and only if, 1) the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract, 2) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative and, 3) the hybrid contract contains a host that is not a financial asset and is not designated as at fair value through profit or loss. Gains or losses arising from a change in the fair value of an embedded derivative separated from the host contract are recognized in net profit or loss as part of net gains or losses on financial instruments at fair value through profit or loss.

3.7.7 Day One Gain and Loss

If the Group uses a valuation technique that incorporates data not obtained from observable markets for the fair value at initial recognition of the financial instrument, there may be a difference between the transaction price and the amount determined using that valuation technique. In these circumstances, the difference is deferred and not recognized in profit or loss, and is amortized by using the straight-line method over the life of the financial instrument. If the fair value of the financial instrument is subsequently determined using observable market inputs, the remaining deferred amount is recognized in profit or loss as part of net gains or losses on financial instruments at fair value through profit or loss or other operating income and expenses.

3.8 Property and Equipment

3.8.1 Recognition and Measurement

All property and equipment that qualify for recognition as an asset are measured at cost and subsequently carried at cost less any accumulated depreciation and any accumulated impairment losses.

The cost of property and equipment includes any costs 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 and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

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Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Subsequent expenditures are capitalized only when they prolong the useful life or enhance values of the assets but the costs of the day-to-day servicing of the assets such as repair and maintenance costs are recognized in profit or loss as incurred.

3.8.2 Depreciation

Land is not depreciated whereas other property and equipment are depreciated using the method that reflects the pattern in which the asset’s future economic benefits are expected to be consumed by the Group. The depreciable amount of an asset is determined after deducting its residual value.

The depreciation methods and estimated useful lives of the assets are as follows:

Property and equipment	Depreciation method	Estimated useful lives
Buildings and structures	Straight-line	40 years
Leasehold improvements	Declining-balance	4 years
Equipment and vehicles	Declining-balance	4 years

The residual value, the useful life and the depreciation method applied to an asset are reviewed at least at each financial year end and, if expectations differ from previous estimates or if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset, the changes are accounted for as a change in an accounting estimate.

3.9 Investment Properties

3.9.1 Recognition and Measurement

Properties held to earn rentals or for capital appreciation or both are classified as investment properties. Investment properties are measured initially at their cost and subsequently the cost model is used.    

3.9.2 Depreciation

Land is not depreciated, whereas other investment properties are depreciated using the method that reflects the pattern in which the asset’s future economic benefits are expected to be consumed by the Group. The depreciable amount of an asset is determined after deducting its residual value.

The depreciation method and estimated useful lives of the assets are as follows:

Investment properties	Depreciation method	Estimated useful lives
Buildings	Straight-line	40 years

The residual value, the useful life and the depreciation method applied to an asset are reviewed at least at each financial year end and, if expectations differ from previous estimates or if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset, the changes are accounted for as a change in an accounting estimate.

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Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

3.10 Intangible Assets

Intangible assets are measured initially at cost and subsequently carried at their cost less any accumulated amortization and any accumulated impairment losses.

Intangible assets, except for goodwill and membership rights, are amortized using the straight-line method with no residual value over their estimated useful economic life since the asset is available for use.

Intangible assets	Amortization method	Estimated useful lives
Industrial property rights	Straight-line	5 years
Software	Straight-line	4 ~ 5 years
Others	Straight-line	1 ~ 13 years

The amortization period and the amortization method for intangible assets with a finite useful life are reviewed at least at each financial year end. Where an intangible asset is not being amortized, because its useful life is considered to be indefinite, the Group carries out a review in each accounting period to confirm whether or not events and circumstances still support the assumption of an indefinite useful life. If they do not, the change from the indefinite to finite useful life is accounted for as a change in an accounting estimate.

3.10.1 Goodwill

Recognition and measurement

Goodwill acquired from business combinations before January 1, 2010, is stated at its carrying amount which was recognized under the Group’s previous accounting policy, prior to the transition to Korean IFRS.

Goodwill acquired from business combinations after January 1, 2010, is initially measured as the excess of the aggregate of the consideration transferred, fair value of non-controlling interest and the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the business acquired, the difference is recognized in profit or loss.

For each business combination, the Group decides whether the non-controlling interest in the acquiree is initially measured at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets at the acquisition date.

Acquisition-related costs incurred to effect a business combination are charged to expenses in the periods in which the costs are incurred and the services are received, except for the costs to issue debt or equity securities.

Additional acquisitions of non-controlling interest

Additional acquisitions of non-controlling interests are accounted for as equity transactions. Therefore, no additional goodwill is recognized.

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Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Subsequent measurement

Goodwill is not amortized and is stated at cost less accumulated impairment losses. However, goodwill that forms part of the carrying amount of an investment in associates is not separately recognized and an impairment loss recognized is not allocated to any asset, including goodwill, which forms part of the carrying amount of the investment in the associates.

3.10.2 Subsequent Expenditure

Subsequent expenditure is capitalized only when it enhances values of the assets. Internally generated intangible assets, such as goodwill and trade name, are not recognized as assets but expensed as incurred.

3.11 Impairment of Non-financial Assets

The Group assesses at the end of each reporting period whether there is any indication that a non-financial asset, except for (i) deferred income tax assets, (ii) assets arising from employee benefits and (iii) non-current assets (or group of assets to be sold) classified as held for sale, may be impaired. If any such indication exists, the Group estimates the recoverable amount of the asset. However, irrespective of whether there is any indication of impairment, the Group tests (i) goodwill acquired in a business combination, (ii) intangible assets with an indefinite useful life and (iii) intangible assets not yet available for use for impairment annually by comparing their carrying amount with their recoverable amount.

The recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Group determines the recoverable amount of the cash-generating unit to which the asset belongs (the asset’s cash-generating unit). A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit that are discounted by a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted.

If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss and recognized immediately in profit or loss. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units that are expected to benefit from the synergies of the combination. The impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit.

An impairment loss recognized for goodwill is not reversed in a subsequent period. The Group assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset, other than goodwill, may no longer exist or may have decreased, and an impairment loss recognized in prior periods for an asset other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss cannot exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior years.

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Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

3.12 Non-current Assets Held for Sale

A non-current asset or disposal group is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For being qualified as held for sale, the asset (or disposal group) must be available for immediate sale in its present condition and its sale must be highly probable. A non-current asset (or disposal group) classified as held for sale is measured at the lower of its carrying amount and fair value less costs to sell which is measured in accordance with the applicable Korean IFRS, immediately before the initial classification of the asset (or disposal group) as held for sale.

A non-current asset while it is classified as held for sale or while it is part of a disposal group classified as held for sale is not depreciated (or amortized).

Impairment loss is recognized for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. Gains are recognized for any subsequent increase in fair value less costs to sell of an asset, but not in excess of the cumulative impairment loss that has been recognized.

3.13 Financial Liabilities

The Group classifies non-derivative financial liabilities into financial liabilities at fair value through profit or loss or other financial liabilities in accordance with the substance of the contractual arrangement and the definitions of financial liabilities. The Group recognizes financial liabilities in the statement of financial position when the Group becomes a party to the contractual provisions of the financial liability.

3.13.1 Financial Liabilities at Fair Value through Profit or Loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading or designated as such upon initial recognition. Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the acquisition are recognized in profit or loss as incurred.

In relation to securities lending or borrowing transactions, the Group records transaction using memorandum value when it borrows securities from Korea Securities Depository and others. The borrowed securities are treated as financial liabilities at fair value through profit or loss when they are sold. Changes in fair value at the end of the reporting period and difference between carrying amount at redemption and purchased amount is recognized as profit or loss.

3.13.2 Other Financial Liabilities

Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities. Other financial liabilities include deposits, debts, debentures and others. Upon of initial recognition, other financial liabilities are measured at fair value minus transaction costs that are directly attributable to the acquisition. Subsequent to initial recognition, other financial liabilities are measured at amortized cost using the effective interest method.

In case an asset is sold under repurchase agreement, the Group does not derecognize the asset while the amount sold is accounted for as financial liabilities. The Group derecognizes a financial liability from the consolidated statement of financial position only when the obligation specified in the contract is discharged, cancelled or expired.

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Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

3.14 Provisions

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of provisions, and where the effect of the time value of money is material, the amount of provisions are the present value of the expenditures expected to be required to settle the obligation.

Provisions on confirmed and unconfirmed acceptances and guarantees, unfunded commitments of credit cards and unused credit lines of consumer and corporate loans are recognized using a valuation model that applies the credit conversion factor, probability of default, and loss given default.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provisions are reversed.

If the Group has a contract that is onerous, the present obligation under the contract is recognized and measured as provisions. An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the minimum net cost to exit from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfill it. When an onerous contract is occurred, the present obligation under the contract is recognized and measured as provisions.

3.15 Financial Guarantee Contracts

A financial guarantee contract is a contract that requires the Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due according to the original or modified terms of a debt instrument.

Financial guarantee contracts are initially recognized at fair value and classified as other liabilities, and are amortized over the contractual term. After initial recognition, financial guarantee contracts are measured at the higher of:

• Provisions measured in accordance with Korean IFRS 1109 Financial Instruments and

• The initial amount recognized, less, when appropriate, cumulative amortization recognized in accordance with Korean IFRS 1115 Revenue from Contracts with Customers.

3.16 Equity Instrument Issued by the Group

An equity instrument is any contract or agreement that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

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Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

3.16.1 Ordinary share

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares and exercising stock options are deducted, net of tax, from the equity.

3.16.2 Hybrid Capital Securities

The financial instruments can be classified as either financial liabilities or equity in accordance with the terms of the contract. The Group classifies hybrid securities as an equity if the Group has the unconditional right to avoid any contractual obligation to deliver financial assets such as cash in relation to the financial instruments. As a result, Hybrid Capital Securities issued by subsidiaries are classified as non-controlling interests, dividends are recognized in the consolidated statement of comprehensive income as profit attributable to non-controlling interests.

3.17 Revenue Recognition

The Group recognizes revenues in accordance with the following steps determined in accordance with Korean IFRS 1115 Revenue from Contracts with Customers.

• Step 1: Identify the contract with a customer.

• Step 2: Identify the performance obligations in the contract.

• Step 3: Determine the transaction price.

• Step 4: Allocate the transaction price to the performance obligations in the contract.

• Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

3.17.1 Interest Income and Expense

Interest income and expense from debt instruments at fair value through profit or loss (excluding beneficiary certificates, equity investments and other debt instruments), loans, financial instruments at amortized cost and debt instruments at fair value through other comprehensive income, are recognized in statement of comprehensive income using the effective interest method in accordance with IFRS1109 Financial Instruments. The effective interest method is a method of calculating the amortized cost of a financial asset or a financial liability (or groups of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period.

The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument or, where appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and points paid(main components of effective interest rates only) or received between parties to the contract that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts. In those rare cases when it is not possible to estimate reliably the cash flows or the expected life of a financial instrument (or group of financial instruments), the Group uses the contractual cash flows over the full contractual term of the financial instrument (or group of financial instruments).

Interest on impaired financial assets is recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Interest income earned from debt instruments at fair value through profit or loss is also classified as interest income in the statement of comprehensive income.

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Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

3.17.2 Fee and Commission Income

The Group recognizes financial service fees in accordance with the purpose of charging the fees and the accounting standard of the financial instrument related to the fees earned.

Fees that are an integral part of the effective interest of a financial instrument

Such fees are generally treated as adjustments of effective interest. Such fees may include compensation for activities such as evaluating the borrower’s financial condition, evaluating and recording guarantees, collateral and other security arrangements, negotiating the terms of the instrument, preparing and processing documents and closing the transaction and origination fees received on issuing financial liabilities at amortized cost. However, fees relating to the creation or acquisition of a financial instrument at fair value through profit or loss are recognized as revenue immediately.

Fees related to performance obligations in the contract satisfied over time

As control over related goods and services of fees and commission income of performance obligation contracts transfer over time, commission income is recognized over the period of performance obligations. Fees and commission income, including asset management fees and commission fees are recognized as the related services are rendered.

Fees earned at a point in time

Fees earned at a point in time are recognized when a customer obtains controls of a promised asset and the Group satisfies a performance obligation.

Commission on negotiation or participation in negotiation for the third party such as trading stocks or other securities, arranging transfer and acquisition of business is recognized as revenue when the transaction has been completed.

A syndication fee that arranges a loan and retains no part of the loan package for itself (or retains a part at the same effective interest rate for comparable risk as other participants) is compensation for the service of syndication. Such a fee is recognized as revenue when the syndication has been completed.

3.17.3 Net Gains/Losses on Financial Instruments at Fair Value through Profit or Loss

Net gains/losses on financial instruments at fair value through profit or loss include profit or loss (including changes in fair value, dividends, and gain/loss from foreign currency translation) from following financial instruments:

• Gain or loss from financial instruments at fair value through profit or loss, excluding interest income calculated by the effective interest rate

• Gain or loss from derivatives for trading, including derivatives for hedging that does not meet the criteria for hedge accounting

3.17.4 Dividend Income

Dividend income is recognized as profit or loss when the right to receive payment is established. Dividend income is recognized as net gain or loss on financial assets/liabilities at fair value through profit or loss or other operating income in depending of the classification of equity securities.

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Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

3.18 Employee Compensation and Benefits

3.18.1 Post-employment Benefits:

Defined benefit plans

All post-employment benefits, other than defined contribution plans, are classified as defined benefit plans. The amount recognized as a net defined benefit liability is the present value of the defined benefit obligation less the fair value of plan assets at the end of the reporting period.

The present value of the defined benefit obligation is calculated annually by independent actuaries using the Projected Unit Credit method. The rate used to discount post-employment benefit obligations is determined by reference to market yields at the end of the reporting period on high quality corporate bonds. The currency and term of the corporate bonds are consistent with the currency and estimated term of the post-employment benefit obligations. Actuarial gains and losses including experience adjustments and the effects of changes in actuarial assumptions are recognized in other comprehensive income (loss).

When the total of the present value of the defined benefit obligation minus the fair value of plan assets results in an asset, it is recognized to the extent of the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.

Past service cost is the change in the present value of the defined benefit obligation, which arises when the Group introduces a defined benefit plan or changes the benefits of an existing defined benefit plan. Such past service cost is immediately recognized as an expense for the period.

Defined contribution plans

The contributions are recognized as employee benefit expense when they are due.

3.18.2 Short-term Employee Benefits

Short-term employee benefits are employee benefits (other than termination benefits) that are due to be settled within 12 months after the end of the period in which the employees render the related service. The undiscounted amount of short-term employee benefits expected to be paid in exchange for that service is recognized as a liability (accrued expense), after deducting any amount already paid.

The expected cost of profit-sharing and bonus payments are recognized as liabilities when the Group has a present legal or constructive obligation to make such payments as a result of past events rendered by employees and a reliable estimate of the obligation can be made.

3.18.3 Share-based Payment

The Group has share grant and mileage stock programs to directors and employee. When the stock grant is exercised the Group either distributes issued stock of KB Financial Group Inc., the Parent Company, or makes payment in cash based on the stock price. The mileage stock is exercised, the Group makes payment in cash based on the stock price of KB Financial Group Inc.

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Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

For a share-based payment transaction in which the terms of the arrangement provide the Group with the choice of whether to settle in cash or by issuing equity instruments, the Group determines that it has a present obligation to settle in cash because the Group has a past practice and a stated policy of settling in cash. Therefore, the fair value of the employee service is recognized as expense and accrued expenses over the vesting period. Also, the Group accounts for the mileage stock in accordance with the requirements of cash-settled share-based payment transactions, and recognizes the corresponding liability and expenses at the vesting period.

Until the liability is settled, the Group remeasures the fair value of the liability at the end of each reporting period and at the date of settlement, with any changes in fair value recognized in profit or loss for the period.

3.18.4 Termination Benefits

Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group shall recognize a liability and expense for termination benefits at the earlier of the following dates: when the Group can no longer withdraw the offer of those benefits and when the Group recognizes costs for a restructuring that is within the scope of Korean IFRS 1037 and involves the payment of termination benefits. Termination benefits are measured by considering the number of employees expected to accept the offer in the case of a voluntary early retirement. Termination benefits over 12 months after the reporting period are discounted to present value.

3.19 Income Tax Expenses

Income tax expense comprises current tax expense and deferred income tax expense. Current and deferred income tax are recognized as income or expense for the period, except to the extent that the tax arises from a transaction or an event which is recognized, in the same or a different period outside profit or loss, either in other comprehensive income or directly in equity and a business combination.

Income tax expense for the period is recognized based on management’s best estimate of the weighted average annual income tax rate expected for the full financial year.

3.19.1 Current income tax

Current income tax is the amount of income tax payable in respect of the taxable profit (loss) for a period. A difference between the taxable profit and accounting profit may arise when income or expense is included in accounting profit in one period, but is included in taxable profit in a different period. Differences may also arise if there is revenue that is exempt from taxation, or expense that is not deductible in determining taxable profit (loss). Current income tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period

3.19.2 Deferred Income Tax

Deferred income tax is recognized, using the asset-liability method, on temporary differences arising between the taxes based amount of assets and liabilities and their carrying amount in the consolidated financial statements. Deferred income tax liabilities are recognized for all taxable temporary differences and deferred income tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilized. However, deferred income tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.

34

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, and associates, except for deferred income tax liabilities for which the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of a deferred income tax asset is reviewed at the end of each reporting period. The Group reduces the carrying amount of a deferred income tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred income tax asset to be utilized.

Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets shall reflect the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

The Group offsets deferred income tax assets and deferred income tax liabilities when the Group has a legally enforceable right to offset current income tax assets against current income tax liabilities; and the deferred income tax assets and the deferred income tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity; or different taxable entities which intend either to settle current income tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred income tax liabilities or assets are expected to be settled or recovered.

3.19.3 Uncertain Tax Positions

Uncertain tax positions arise from tax treatments applied by the Group which may be challenged by the tax authorities due to the complexity of the transaction or different interpretation of the tax laws, a claim for rectification brought by the Group, an appeal for a refund claimed from the tax authorities related to additional assessments or a tax investigation processed by the tax authorities. The Group recognizes its uncertain tax positions in the consolidated financial statements based on the guidance in Korean IFRS 1012. The income tax asset is recognized if a tax refund is probable for taxes paid and levied by the tax authority, and the amount to be paid as a result of the tax investigation and others is recognized as the current tax payable. However, interest and penalties related to income taxes are recognized in accordance with Korean IFRS 1037 as its economic substances.

3.20 Transactions with the Trust Accounts

Under the Financial Investment Services and Capital Markets Act, the Group recognizes trust accounts (“the trust accounts”) as separate. The borrowings from trust accounts represent transfer of funds in trust accounts into banking accounts. Such borrowings from trust accounts are recorded as receivables from the banking accounts in the trust accounts and as borrowings from trust accounts in the banking accounts. The Group earns trust fees from the trust accounts for its management of trust assets and operations. The reserves for future profits and losses are set up in the trust accounts for profits and losses related to those trust funds with a guarantee of the principal or of the principal and a certain minimum rate of return in accordance with the relevant laws and regulations applicable to trust operations. The reserves are used to provide for the losses on such trust funds and, if the losses incurred are in excess of the reserves, the excess losses are compensation paid as a loss on trust management in other operating expenses and the trust accounts recognize the corresponding compensation as compensation from banking accounts.

35

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

3.21 Leases

As explained in Note 2 above, the Group has changed its accounting policy for leases. The impact of the new accounting policies is disclosed in Note 42.

Lease income from operating leases where the Group is a lessor is recognized in income on a straight-line basis over the lease term. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognized as expense over the lease term on the same basis as lease income. The respective leased assets are included in the statement of financial position based on their nature. The Group did not need to make any adjustments to the accounting for assets held as lessor as a result of adopting the new leasing standard.

At inception of a contract, the Group is required to assess whether the contract is, or contains, a lease. Also, at the date of initial application, the Group has assessed whether the contract is, or contains, a lease in accordance with the standard. However, the Group did not reassess all contracts as the Group elected to apply the practical expedient not to apply the standard to contracts that were not previously identified as containing a lease. On the basis of the date of initial application, the Group assesses whether the contract is, or contains, a lease.

A lessee is required to recognize a right-of-use asset (lease assets) representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. Assets and liabilities arising from a lease are initially measured on a present value basis.

Lease liabilities include the net present value of the following lease payments:

• Fixed payments (including in-substance fixed payments), less any lease incentives receivable

• Variable lease payment that are based on an index or a rate

• 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, and

• Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.

Right-of-use assets are measured at cost comprising the following:

• the amount of the initial measurement of lease liability

• any lease payments made at or before the commencement date less any lease incentives received

• any initial direct costs, and

• restoration costs

36

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

However, short-term lease (lease that, at the commencement date, has a lease term of 12 months or less) and lease of low-value assets (For example, underlying leased asset under $ 5,000) are permitted to elect exceptional conditions. The Group applies the exemption of the standard for one time lease of real estate (for training purpose) and leases of low-value assets (underlying assets less than W5 million and $5,000).

The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term.

3.22 Operating Segments

Operating segments are components of the Group where separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

Segment information includes items which are directly attributable and reasonably allocated to the segment.

4. Financial Risk Management

4.1 Summary

4.1.1 Overview of Financial Risk Management Policy

The financial risks that the Group is exposed to are credit risk, market risk, liquidity risk, operational risk and others.

The note regarding financial risk management provides information about the risks that the Group is exposed to, including the objectives, policies and processes for managing the risks, the methods used to measure the risks, and capital management. Additional quantitative information is disclosed throughout the consolidated financial statements.

The Group’s risk management system focuses on increasing transparency, developing the risk management environment, preventing transmission of risk to other risk types, and the preemptive response to risk due to rapid changes in the financial environment to support the Group’s long-term strategy and business decisions efficiently. Credit risk, market risk, liquidity risk, and operational risk have been recognized as the Group’s key risks. These risks are measured and managed in Internal Capital or VaR (Value at Risk) using a statistical method.

4.1.2 Risk Management Organization

Risk Management Committee

The Risk Management Committee establishes risk management strategies in accordance with the directives of the Board of Directors and determines the Group’s target risk appetite, approves significant risk matters and reviews the level of risks that the Group is exposed to and the appropriateness of the Group’s risk management operations as an ultimate decision-making authority.

37

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Risk Management Council

The Risk Management Council is a consultative group which reviews and makes decisions on matters delegated by the Risk Management Committee and discusses the detailed issues relating to the Group’s risk management.

Risk Management Subcommittee

The Risk Management Subcommittee enforces decisions made by Risk Management Council, and makes practical decisions to implement risk management policies and procedures.

• Credit Risk Management Subcommittee

The Credit Risk Management Subcommittee approves exotic and hybrid products accompanying credit risk and reviews newly developed products accompanying credit risk. Also, it reviews and approves the exposure limits by industry.

• Market Risk Management Subcommittee

The Market Risk Management Subcommittee reviews and makes decisions on setting risk limits and approving the standard for investments in newly developed standard, exotic and hybrid products.

• Operational Risk Management Subcommittee

The Operational Risk Management Subcommittee reviews the issues that have a significant effect on the Group’s operational risk relating to establishment, amendment and abolition of major system, process and others.

Risk Strategy Group

The Risk Strategy Group is responsible for managing specific policies, procedures and work processes relating to the Group’s risk management.

4.2 Credit Risk

4.2.1 Overview of Credit Risk

Credit risk is the risk of possible losses in an asset portfolio in the event of a counterparty’s default, breach of contract and deterioration in the credit quality of the counterparty. For risk management reporting purposes, the individual borrower’s default risk, country risk, specific risks and other credit risk exposure components are considered as a whole. The Group uses definition of default as defined and applied in the calculation of Capital Adequacy Ratio (Basel III) in accordance with the new Basel Accord.

4.2.2 Credit Risk Management

The Group measures expected losses and internal capital on assets that are subject to credit risk management whether on- or off-balance sheet items and uses expected losses and internal capital as a management indicator. The Group manages credit risk by allocating credit risk internal capital limits.

In addition, the Group controls the credit concentration risk exposure by applying and managing total exposure limits to prevent an excessive risk concentration to each industry and borrower.

38

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

The Group has organized a credit risk management group that focuses on credit risk management in accordance with the Group’s credit risk management policy. The Group’s credit group, customer service group and SME/SOHO group, which are independent from the sales department, are responsible for loan policy, loan limit, loan review, credit evaluation, restructuring and subsequent events. The credit risk strategy group is also responsible for planning risk management policy, applying limits of credit lines, measuring the credit risk internal capital, adjusting credit limits, reviewing credit and verifying credit evaluation models.

4.2.3 Maximum Exposure to Credit Risk

The Group’s maximum exposures of financial instruments excluding equity securities to credit risk without consideration of collateral values as at December 31, 2019 and 2018 are as follows:

(In millions of Korean won)	2019		2018
Financial assets
Due from financial institutions 1		11,786,957		11,831,688
Financial assets at fair value through profit or loss
Securities		13,446,838		11,883,025
Loans		188,133		212,596
Financial instruments indexed to gold		79,805		78,808
Derivatives		2,317,425		1,613,970
Loans at amortized cost 1		293,531,433		276,944,202
Financial investments
Securities at fair value through other comprehensive income		36,116,988		27,682,463
Securities at amortized cost 1		13,964,339		12,792,526
Loans at fair value through other comprehensive income		344,292		349,547
Other financial assets 1		5,464,704		4,199,197
		377,240,914		347,588,022
Off-balance sheet items 2
Acceptances and guarantees contracts		8,327,494		7,277,136
Financial guarantee contracts		3,305,051		3,135,589
Commitments		87,866,225		81,278,583
		99,498,770		91,691,308
		476,739,684		439,279,330

¹ Due from financial institutions, loans at amortized cost, securities at amortized cost and other financial assets are presented net of allowance.

² For details of relevant provisions, see Note 22.

4.2.4 Credit Risk of Loans

The Group maintains an allowance for loan losses associated with credit risk on loans to manage its credit risk.

The Group assesses expected credit loss on financial asset at amortized cost and financial asset at fair value through other comprehensive income (debt instruments) other than financial asset at fair value through profit or loss and recognizes loss allowance. Expected credit losses are a probability-weighted estimate of possible credit losses occurred in a certain range by reflecting reasonable and supportable information that which is reasonably available at the reporting date without undue cost or effort, including information about past events, current conditions and forecasts of future economic conditions. The Group measures the expected credit losses on loans classified as financial assets measured at amortized cost, and by deducting allowances for credit losses. The expected credit losses of loans classified as financial assets at fair value through other comprehensive income are presented in other comprehensive income on the financial statements.

39

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Credit risk exposure

Loans as at December 31, 2019 and 2018, are classified as follows:

(In millions of Korean won)	2019
	Financial instruments applying 12-month expected credit losses		Financial instruments applying lifetime expected credit losses				Financial instruments applying credit impaired approach		Financial instruments not applying expected credit losses		Total
			Non-impaired		Impaired
Financial assets at amortized cost
Corporate
Grade 1		77,685,587		1,722,935		837		—		—		79,409,359
Grade 2		55,097,112		4,512,631		6,397		—		—		59,616,140
Grade 3		2,486,531		2,135,130		4,188		—		—		4,625,849
Grade 4		423,926		796,468		4,185		—		—		1,224,579
Grade 5		16,648		344,920		744,335		—		—		1,105,903
		135,709,804		9,512,084		759,942		—		—		145,981,830
Retail
Grade 1		135,445,215		3,556,937		7,560		—		—		139,009,712
Grade 2		3,125,163		4,249,881		8,278		—		—		7,383,322
Grade 3		158,769		1,305,097		8,312		—		—		1,472,178
Grade 4		9,468		151,552		2,575		—		—		163,595
Grade 5		8,666		423,127		424,964		—		—		856,757
		138,747,281		9,686,594		451,689		—		—		148,885,564
		274,457,085		19,198,678		1,211,631		—		—		294,867,394
Financial assets at fair value through other comprehensive income
Corporate
Grade 1		210,718		—		—		—		—		210,718
Grade 2		133,574		—		—		—		—		133,574
Grade 3		—		—		—		—		—		—
Grade 4		—		—		—		—		—		—
Grade 5		—		—		—		—		—		—
		344,292		—		—		—		—		344,292
Retail
Grade 1		—		—		—		—		—		—
Grade 2		—		—		—		—		—		—
Grade 3		—		—		—		—		—		—
Grade 4		—		—		—		—		—		—
Grade 5		—		—		—		—		—		—
		—		—		—		—		—		—
		344,292		—		—		—		—		344,292
		274,801,377		19,198,678		1,211,631		—		—		295,211,686

40

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

(In millions of Korean won)	2018
	Financial instruments applying 12- month expected credit losses		Financial instruments applying lifetime expected credit losses				Financial instruments applying credit impaired approach		Financial instruments not applying expected credit losses		Total
			Non-impaired		Impaired
Financial assets at amortized cost
Corporate
Grade 1		69,619,761		1,451,514		1,573		—		—		71,072,848
Grade 2		54,119,274		4,073,167		1,610		—		—		58,194,051
Grade 3		2,698,199		1,691,008		6,566		—		—		4,395,773
Grade 4		395,707		903,215		40,043		—		—		1,338,965
Grade 5		26,019		342,477		935,447		—		—		1,303,943
		126,858,960		8,461,381		985,239		—		—		136,305,580
Retail
Grade 1		124,212,610		4,387,477		8,836		—		—		128,608,923
Grade 2		4,171,518		7,058,259		6,218		—		—		11,235,995
Grade 3		140,074		881,415		4,158		—		—		1,025,647
Grade 4		478,701		154,535		5,103		—		—		638,339
Grade 5		8,478		296,087		379,555		—		—		684,120
		129,011,381		12,777,773		403,870		—		—		142,193,024
		255,870,341		21,239,154		1,389,109		—		—		278,498,604
Financial assets at fair value through other comprehensive income
Corporate
Grade 1		149,226		25,731		—		—		—		174,957
Grade 2		128,712		45,878		—		—		—		174,590
Grade 3		—		—		—		—		—		—
Grade 4		—		—		—		—		—		—
Grade 5		—		—		—		—		—		—
		277,938		71,609		—		—		—		349,547
		256,148,279		21,310,763		1,389,109		—		—		278,848,151

(^*) Before netting of allowance.

41

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	Corporate	Retail
Grade 1	AAA ~ BBB+	1 ~ 5 grade
Grade 2	BBB ~ BB	6 ~ 8 grade
Grade 3	BB- ~ B	9 ~ 10 grade
Grade 4	B- ~ CCC	11 grade
Grade 5	CC or under	12 grade or under

Credit risk mitigation by collateral

The quantification of the extent to which collateral and other credit enhancements mitigate credit risk as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019
	Financial instruments applying 12-month expected credit losses		Financial instruments applying lifetime expected credit loss				Financial instruments applying credit impaired approach		Financial instruments not applying expected credit losses		Total
			Non-impaired		Impaired
Guarantees		69,711,057		3,834,566		177,047		—		—		73,722,670
Deposits and savings		1,376,045		118,204		6,156		—		—		1,500,405
Property and equipment		3,169,212		314,236		1,123		—		—		3,484,571
Real estate		152,887,321		10,508,403		382,471		—		—		163,778,195
		227,143,635		14,775,409		566,797		—		—		242,485,841

42

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

(In millions of Korean won)	2018
	Financial instruments applying 12-month expected credit losses		Financial instruments applying lifetime expected credit loss				Financial instruments applying credit impaired approach		Financial instruments not applying expected credit losses		Total
			Non-impaired		Impaired
Guarantees		60,020,814		5,864,526		146,818		—		—		66,032,158
Deposits and savings		1,372,286		76,960		5,265		—		—		1,454,511
Property and equipment		2,540,384		97,807		2,461		—		—		2,640,652
Real estate		145,155,068		12,512,423		388,109		—		—		158,055,600
		209,088,552		18,551,716		542,653		—		—		228,182,921

4.2.5 Credit Quality of Securities

The credit quality of financial investments excluding equity securities that are exposed to credit risk as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019
	Financial instruments applying 12-month expected credit losses		Financial instruments applying lifetime expected credit losses				Financial instruments applying credit impaired approach		Financial instruments not applying expected credit losses		Total
			Non-impaired		Impaired
Securities at amortized cost
Grade 1		13,894,203		—		—		—		—		13,894,203
Grade 2		33,148		—		—		—		—		33,148
Grade 3		38,230		—		—		—		—		38,230
Grade 4		—		—		—		—		—		—
Grade 5		—		—		—		—		—		—
		13,965,581		—		—		—		—		13,965,581
Securities at fair value through other comprehensive income
Grade 1		34,841,376		—		—		—		—		34,841,376
Grade 2		1,273,007		—		—		—		—		1,273,007
Grade 3		2,606		—		—		—		—		2,606
Grade 4		—		—		—		—		—		—
Grade 5		—		—		—		—		—		—
		36,116,989		—		—		—		—		36,116,989
		50,082,570		—		—		—		—		50,082,570

43

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
	Financial instruments applying 12-month expected credit losses		Financial instruments applying lifetime expected credit losses				Financial instruments applying credit impaired approach		Financial instruments not applying expected credit losses		Total
(In millions of Korean won)			Non-impaired		Impaired
Securities at amortized cost
Grade 1		12,769,605		—		—		—		—		12,769,605
Grade 2		9,569		—		—		—		—		9,569
Grade 3		14,649		—		—		—		—		14,649
Grade 4		—		—		—		—		—		—
Grade 5		—		—		—		—		—		—
		12,793,823		—		—		—		—		12,793,823
Securities at fair value through other comprehensive income
Grade 1		27,120,098		—		—		—		—		27,120,098
Grade 2		559,855		—		—		—		—		559,855
Grade 3		—		—		—		—		—		—
Grade 4		2,510		—		—		—		—		2,510
Grade 5		—		—		—		—		—		—
		27,682,463		—		—		—		—		27,682,463
		40,476,286		—		—		—		—		40,476,286

¹ Before netting of allowance.

The credit qualities of securities, excluding equity securities according to the credit ratings by external rating agencies as at December 31, 2019 are as follows:

	Domestic			Foreign
Credit quality	KIS	NICE P&I	FnPricing Inc.	S&P	Fitch-IBCA	Moody’s
Grade 1	AA0 to AAA	AA0 to AAA	AA0 to AAA	A- to AAA	A- to AAA	A3 to Aaa
Grade 2	A- to AA-	A- to AA-	A- to AA-	BBB- to BBB+	BBB- to BBB+	Baa3 to Baa1
Grade 3	BBB0 to BBB+	BBB0 to BBB+	BBB0 to BBB+	BB to BB+	BB to BB+	Ba2 to Ba1
Grade 4	BB0 to BBB-	BB0 to BBB-	BB0 to BBB-	B+ to BB-	B+ to BB-	B1 to Ba3
Grade 5	Under BB-	Under BB-	Under BB-	Under B	Under B	Under B2

Credit qualities of debt securities denominated in Korean won are based on the lowest credit rating by the three domestic credit rating agencies above, and those denominated in foreign currencies are based on the lowest credit rating by the three foreign credit rating agencies above.

4.2.6 Credit Risk of Due from Financial Institutions

The credit quality of due from financial institutions as at December 31, 2019 and 2018 are classified as follows:

	2019
(In millions of Korean won)	Financial instruments applying 12-month expected credit losses		Financial instruments applying lifetime expected credit losses				Financial instruments applying credit impaired approach		Total
			Non-impaired		Impaired
Due from financial institutions at amortized cost
Grade 1		10,936,300		—		—		—		10,936,300
Grade 2		149,927		—		—		—		149,927
Grade 3		677,249		—		—		—		677,249
Grade 4		—		—		—		—		—
Grade 5		13,990		13,179		360		—		27,529
		11,777,466		13,179		360		—		11,791,005

44

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Financial instruments applying 12-month expected credit losses		Financial instruments applying lifetime expected credit losses				Financial instruments applying credit impaired approach		Total
			Non-impaired		Impaired
Due from financial institutions at amortized cost
Grade 1		11,035,800		—		—		—		11,035,800
Grade 2		167,900		—		—		—		167,900
Grade 3		608,314		—		—		—		608,314
Grade 4		19,531		—		—		—		19,531
Grade 5		1,691		—		—		—		1,691
		11,833,236		—		—		—		11,833,236

¹ Before netting of allowance.

The classification criteria of the credit quality for due from financial institutions are the same as the criteria for securities (excluding equity securities).

4.2.7 Credit Risk Mitigation of Derivative Financial Instruments

The quantification of the extent to which collateral mitigates credit risk of derivative financial instruments as at December 31, 2019 and 2018, is as follows:

(In millions of Korean won)	2019		2018
Deposits and savings, securities and others		496,294		381,959

4.2.8 Credit Risk Concentration Analysis

Details of the Group’s loans by country as at December 31, 2019 and 2018, are as follows:

	2019
((In millions of Korean won)	Retail		Corporate1		Total		%		Allowances			Carrying amount
Korea		148,609,480		139,599,908		288,209,388		97.58		(1,303,099	)		286,906,289
China		—		3,135,501		3,135,501		1.06		(20,652	)		3,114,849
Japan		101		629,717		629,818		0.21		(547	)		629,271
United States		—		1,838,883		1,838,883		0.62		(5,421	)		1,833,462
Europe		—		752,590		752,590		0.25		(3,680	)		748,910
Others		275,983		557,656		833,639		0.28		(2,562	)		831,077
		148,885,564		146,514,255		295,399,819		100.00		(1,335,961	)		294,063,858

45

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Retail		Corporate1		Total		%		Allowances			Carrying amount
Korea		142,003,442		132,576,712		274,580,154		98.40		(1,524,099	)		273,056,055
China		—		2,278,545		2,278,545		0.82		(20,586	)		2,257,959
Japan		106		333,918		334,024		0.12		(1,865	)		332,159
United States		—		892,958		892,958		0.32		(5,165	)		887,793
Europe		—		348,336		348,336		0.12		(498	)		347,838
Others		189,476		437,254		626,730		0.22		(2,189	)		624,541
		142,193,024		136,867,723		279,060,747		100.00		(1,554,402	)		277,506,345

¹ Expected credit loss of loans at fair value through other comprehensive income as at December 31, 2019 and December 31, 2018, are W 582 million and W 1,307 million, respectively.

Details of the Group’s corporate loans by industry as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Loans1		%		Allowances			Carrying amount
Financial institutions		13,564,347		9.26		(5,091	)		13,559,256
Manufacturing		42,707,287		29.15		(389,602	)		42,317,685
Service		62,713,574		42.80		(178,869	)		62,534,705
Wholesale and retail		17,900,225		12.22		(97,238	)		17,802,987
Construction		2,833,544		1.93		(163,791	)		2,669,753
Public		1,170,823		0.80		(2,005	)		1,168,818
Others		5,624,455		3.84		(24,794	)		5,599,661
		146,514,255		100.00		(861,390	)		145,652,865

	2018
(In millions of Korean won)	Loans1		%		Allowances			Carrying amount
Financial institutions		11,118,159		8.12		(5,798	)		11,112,361
Manufacturing		42,063,832		30.73		(448,644	)		41,615,188
Service		59,278,536		43.31		(249,776	)		59,028,760
Wholesale and retail		16,284,464		11.90		(93,091	)		16,191,373
Construction		2,640,614		1.93		(283,768	)		2,356,846
Public		821,317		0.60		(3,286	)		818,031
Others		4,660,801		3.41		(24,512	)		4,636,289
		136,867,723		100.00		(1,108,875	)		135,758,848

¹ Expected credit loss of loans at fair value through other comprehensive income as at December 31, 2019 and December 31, 2018, are W 582 million and W 1,307 million, respectively.

46

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Details of the Group’s retail loans by type as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Loans		%		Allowances			Carrying amount
Housing purpose		77,523,389		52.07		(33,536	)		77,489,853
General purpose		71,362,175		47.93		(441,035	)		70,921,140
		148,885,564		100.00		(474,571	)		148,410,993

	2018
(In millions of Korean won)	Loans		%		Allowances			Carrying amount
Housing purpose		70,178,328		49.35		(28,940	)		70,149,388
General purpose		72,014,696		50.65		(416,587	)		71,598,109
		142,193,024		100.00		(445,527	)		141,747,497

Details of the Group’s mortgage loans¹ as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019
	Loans		%		Allowances			Carrying amount
Group1		9,410,202		9.99		(4,634	)		9,405,568
Group2		19,269,533		20.48		(6,270	)		19,263,263
Group3		33,500,810		35.61		(7,304	)		33,493,506
Group4		30,517,828		32.44		(13,244	)		30,504,584
Group5		1,364,155		1.45		(2,389	)		1,361,766
Group6		25,763		0.03		(128	)		25,635
		94,088,291		100.00		(33,969	)		94,054,322

(In millions of Korean won)	2018
	Loans		%		Allowances			Carrying amount
Group1		6,671,012		7.11		(3,296	)		6,667,716
Group2		18,911,235		20.16		(8,322	)		18,902,913
Group3		35,580,948		37.94		(8,753	)		35,572,195
Group4		32,256,160		34.39		(12,338	)		32,243,822
Group5		356,892		0.38		(737	)		356,155
Group6		16,776		0.02		(35	)		16,741
		93,793,023		100.00		(33,481	)		93,759,542

¹  Retail loans for general purpose with the real estate as collateral are included.

	Ranges
Group1	LTV 0% to less than 20%
Group2	LTV 20% to less than 40%
Group3	LTV 40% to less than 60%
Group4	LTV 60% to less than 80%
Group5	LTV 80% to less than 100%
Group6	LTV over 100%

¹  LTV: Loan to Value ratio

47

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Details of the Group’s credit risk concentration of due from financial institutions, securities excluding equity securities and derivative financial instruments as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Amount		%		Allowances			Carrying amount
Due from financial institutions at amortized cost
Finance and insurance		11,791,005		100.00		(4,048	)		11,786,957
		11,791,005		100.00		(4,048	)		11,786,957
Securities at fair value through profit or loss
Government and government funded institutions		2,810,692		20.90		—			2,810,692
Finance and insurance1		9,033,080		67.18		—			9,033,080
Others		1,603,067		11.92		—			1,603,067
		13,446,839		100.00		—			13,446,839
Derivatives
Government and government funded institutions		7,330		0.32		—			7,330
Finance and insurance		2,146,545		92.62		—			2,146,545
Others		163,551		7.06		—			163,551
		2,317,426		100.00		—			2,317,426
Securities at fair value through other comprehensive income2
Government and government funded institutions		13,852,627		38.35		—			13,852,627
Finance and insurance		18,726,118		51.85		—			18,726,118
Others		3,538,244		9.80		—			3,538,244
		36,116,989		100.00		—			36,116,989
Securities at amortized cost
Government and government funded institutions		2,317,794		16.60		(15	)		2,317,779
Finance and insurance		11,637,772		83.33		(1,225	)		11,636,547
Others		10,015		0.07		(2	)		10,013
		13,965,581		100.00		(1,242	)		13,964,339
		77,637,840				(5,290	)		77,632,550

48

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

(In millions of Korean won)	2018
	Amount		%		Allowances			Carrying amount
Due from financial institutions at amortized cost
Finance and insurance		11,833,236		100.00		(1,548	)		11,831,688
		11,833,236		100.00		(1,548	)		11,831,688
Securities at fair value through profit or loss
Government and government funded institutions		2,755,250		23.19		—			2,755,250
Finance and insurance1		7,523,708		63.31		—			7,523,708
Others		1,604,067		13.50		—			1,604,067
		11,883,025		100.00		—			11,883,025
Derivatives
Government and government funded institutions		39,290		2.43		—			39,290
Finance and insurance		1,485,912		92.07		—			1,485,912
Others		88,768		5.50		—			88,768
		1,613,970		100.00		—			1,613,970
Securities at fair value through other comprehensive income2
Government and government funded institutions		7,844,258		28.34		—			7,844,258
Finance and insurance		17,770,112		64.19		—			17,770,112
Others		2,068,093		7.47		—			2,068,093
		27,682,463		100.00		—			27,682,463
Securities at amortized cost
Government and government funded institutions		1,937,657		15.15		(4	)		1,937,653
Finance and insurance		10,826,102		84.62		(1,287	)		10,824,815
Others		30,064		0.23		(6	)		30,058
		12,793,823		100.00		(1,297	)		12,792,526
		65,806,517				(2,845	)		65,803,672

¹  Collective investment securities included in securities at fair value through profit or loss are classified as finance and insurance.

²  Expected credit loss of securities at fair value through other comprehensive income as at December 31, 2019 and December 31, 2018, are W 2,028 million and W 1,348 million, respectively.

49

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Details of the Group’s credit risk of due from financial institutions, securities, excluding equity securities, and derivative financial instruments by country as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019
	Amount		%		Allowances			Carrying amount
Due from financial institutions at amortized cost
Korea		8,765,109		74.34		—			8,765,109
United States		1,244,220		10.55		—			1,244,220
Others		1,781,676		15.11		(4,048	)		1,777,628
		11,791,005		100.00		(4,048	)		11,786,957
Securities at fair value through profit or loss
Korea		12,460,493		92.66		—			12,460,493
United States		626,596		4.66		—			626,596
Others		359,750		2.68		—			359,750
		13,446,839		100.00		—			13,446,839
Derivatives
Korea		938,971		40.52		—			938,971
United States		461,145		19.90		—			461,145
France		299,491		12.92		—			299,491
Others		617,819		26.66		—			617,819
		2,317,426		100.00		—			2,317,426
Securities at fair value through other comprehensive income 1
Korea		33,895,666		93.85		—			33,895,666
United States		423,145		1.17		—			423,145
Others		1,798,178		4.98		—			1,798,178
		36,116,989		100.00		—			36,116,989
Securities at amortized cost
Korea		12,841,002		91.95		(833	)		12,840,169
United States		165,745		1.19		(34	)		165,711
United Kingdom		765,438		5.48		(237	)		765,201
Others		193,396		1.38		(138	)		193,258
		13,965,581		100.00		(1,242	)		13,964,339
		77,637,840				(5,290	)		77,632,550

50

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

(In millions of Korean won)	December 31, 2018
	Amount		%		Allowances			Carrying amount
Due from financial institutions at amortized cost
Korea		9,478,190		80.10		—			9,478,190
United States		667,139		5.64		(6	)		667,133
Others		1,687,907		14.26		(1,542	)		1,686,365
		11,833,236		100.00		(1,548	)		11,831,688
Securities at fair value through profit or loss
Korea		10,524,924		88.57		—			10,524,924
United States		726,271		6.11		—			726,271
Others		631,830		5.32		—			631,830
		11,883,025		100.00		—			11,883,025
Derivatives
Korea		752,028		46.59		—			752,028
United States		285,460		17.69		—			285,460
France		222,905		13.81		—			222,905
Others		353,577		21.91		—			353,577
		1,613,970		100.00		—			1,613,970
Securities at fair value through other comprehensive income 1
Korea		26,139,297		94.43		—			26,139,297
United States		711,946		2.57		—			711,946
Others		831,220		3.00		—			831,220
		27,682,463		100.00		—			27,682,463
Securities at amortized cost
Korea		11,805,442		92.26		(945	)		11,804,497
United States		155,417		1.22		(32	)		155,385
United Kingdom		705,790		5.52		(247	)		705,543
Others		127,174		1.00		(73	)		127,101
		12,793,823		100.00		(1,297	)		12,792,526
		65,806,517				(2,845	)		65,803,672

¹  Expected credit loss of securities at fair value through other comprehensive income as at December 31, 2019 and December 31, 2018, are W 2,028 million and W 1,348 million, respectively.

Due from financial institutions, financial assets at fair value through profit or loss that linked to gold price and derivatives are mostly relevant to finance and insurance industry with high credit ratings.

51

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

4.3 Liquidity risk

4.3.1 Overview of Liquidity Risk

Liquidity risk is the risk of insolvency or loss due to a disparity between the inflow and outflow of funds, unexpected outflow of funds, and obtaining funds at a high price or disposing of securities at an unfavorable price due to lack of available funds. The Group manages its liquidity risk through analysis of the contractual maturity of interest-bearing assets and liabilities, assets and liabilities related to the other in and outflows, and off-balance sheet items related to the inflows and outflows of currency derivative instruments and others.

4.3.2 Liquidity Risk Management and Indicator

The liquidity risk is managed by ALM (‘Asset Liability Management’) and related guidelines which are applied to the risk management policies and procedures that addresses all the possible risks that arise from the overall business of the Group.

The Group has to establish the liquidity risk management strategy including the objectives of liquidity risk management, management policies and internal control system, and obtain approval from Risk Management Committee. Risk Management Committee operates the Risk Management Council for the purpose of efficient risk management, monitors establishment and enforcement of policies based on risk management strategy.

For the purpose of liquidity management, LCR, NSFR, the liquidity gap ratio, liquidity ratio, maturity gap ratio and the results of the stress testing related to liquidity risk on transactions affecting the inflows and outflows of funds and transactions of off-balance sheet items are measured, managed and reported to the Risk Management Committee and Risk Management Council on a regular basis.

4.3.3 Analysis of Remaining Contractual Maturity of Financial Assets and Liabilities

Cash flows disclosed below are undiscounted contractual principal and interest to be received (paid) and, thus, differ from the amounts in financial statements which are based on the present value of expected cash flows. The amount of interest to be received or paid on floating rate assets and liabilities is measured on the assumption that the current interest rate would be the same through maturity.

52

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

The remaining contractual maturity of financial assets and liabilities, excluding derivatives held for cash flow hedging, as at December 31, 2019 and 2018, is as follows:    

(In millions of Korean won)	2019
	On demand		Up to 1 month		1-3 months		3-12 months			1-5 years		Over 5 years		Total
Financial assets
Cash and due from financial institutions 1		4,738,842		283,601		233,046		487,877			—		—		5,743,366
Financial assets at fair value through profit or loss 2		13,677,669		251		17,846		134,012			—		87,445		13,917,223
Derivatives held for trading 2		2,184,099		—		—		—			—		—		2,184,099
Derivatives held for hedging 3		—		4,306		17,145		24,016			39,693		66,176		151,336
Loans at amortized cost		—		22,455,411		28,091,644		115,979,519			78,654,724		89,601,437		334,782,735
Financial investments		1,893,179		1,253,141		3,045,348		10,727,300			35,015,283		2,859,162		54,793,413
Financial assets at fair value through other comprehensive income 4		1,893,179		310,261		1,122,554		5,499,868			30,502,706		456,250		39,784,818
Securities at amortized cost		—		942,880		1,922,794		5,227,432			4,512,577		2,402,912		15,008,595
Other financial assets		—		3,672,079		—		996,994			—		—		4,669,073
		22,493,789		27,668,789		31,405,029		128,349,718			113,709,700		92,614,220		416,241,245
Financial liabilities
Financial liabilities at fair value through profit or loss 2		80,235		—		—		—			—		—		80,235
Derivatives held for trading 2		2,132,771		—		—		—			—		—		2,132,771
Derivatives held for hedging 3		—		5,973		696		(4,529	)		11,575		129		13,844
Deposits 5		137,848,626		17,156,280		27,200,257		109,833,508			10,608,833		2,538,473		305,185,977
Debts		1,407		5,218,386		2,484,905		6,541,727			4,473,295		753,997		19,473,717
Debentures		22,285		1,014,596		1,870,767		5,668,559			9,593,393		1,633,467		19,803,067
Lease liabilities		520		14,196		27,962		101,976			198,415		13,885		356,954
Other financial liabilities		—		12,130,281		773		77,688			88,594		—		12,297,336
		140,085,844		35,539,712		31,585,360		122,218,929			24,974,105		4,939,951		359,343,901
Off-balance sheet items
Commitments 6		87,866,225		—		—		—			—		—		87,866,225
Acceptances and guarantees contracts		8,327,494		—		—		—			—		—		8,327,494
Financial guarantee contracts 7		3,305,051		—		—		—			—		—		3,305,051
		99,498,770		—		—		—			—		—		99,498,770

¹ The amounts of W 8,759,558 million which are restricted amount due from the financial institutions as at December 31, 2019 are excluded.

² Financial liabilities at fair value through profit or loss derivatives held for trading and financial assets at fair value through profit or loss (excluding loans) are not managed by contractual maturity because they are held for trading or redemption before maturity. Therefore, the carrying amounts are included in the ‘On demand’ category.

³ Cash flows of derivative instruments held for hedging are shown at net amounts of cash inflows and outflows by remaining contractual maturity.

53

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

⁴ Equity securities designated as financial assets at fair value through other comprehensive income included in the ‘On demand’ category as most are available for sale at any time. However, in the case of equity securities which are restricted for sale, these will be classified to its respective maturity when the restriction on disposal is released.

⁵ Deposits that are contractually repayable on demand or on short notice are included under the ‘On demand’ category.

⁶ Unused lines of credit within commitments are included under the ‘On demand’ category as payments can be required upon request.

⁷ Financial guarantee contracts are included under the ‘On demand’ category as payments can be required upon request.

(In millions of Korean won)	2018
	On demand		Up to 1 month		1-3 months			3-12 months			1-5 years		Over 5 years		Total
Financial assets
Cash and due from financial institutions 1		4,727,159		339,350		178,406			458,164			—		—		5,703,079
Financial assets at fair value through profit or loss 2		12,043,909		230		7,182			184,881			5,542		90,736		12,332,480
Derivatives held for trading 2		1,533,650		—		—			—			—		—		1,533,650
Derivatives held for hedging 3		—		2,289		1,364			16,251			20,025		40,830		80,759
Loans at amortized cost		—		18,705,807		27,929,002			107,831,857			71,668,732		95,363,933		321,499,331
Financial investments		1,898,944		2,176,313		3,646,572			13,634,982			20,703,303		2,454,592		44,514,706
Financial assets at fair value through other comprehensive income 4		1,898,944		1,418,537		2,278,547			9,765,281			14,987,787		191,966		30,541,062
Securities at amortized cost		—		757,776		1,368,025			3,869,701			5,715,516		2,262,626		13,973,644
Other financial assets		285		2,449,979		520			1,020,442			—		—		3,471,226
		20,203,947		23,673,968		31,763,046			123,146,577			92,397,602		97,950,091		389,135,231
Financial liabilities
Financial liabilities at fair value through profit or loss 2		87,168		—		—			—			—		—		87,168
Derivatives held for trading 2		1,553,858		—		—			—			—		—		1,553,858
Derivatives held for hedging 3		—		4,091		(4,249	)		(14,415	)		15,660		31		1,118
Deposits 5		123,264,494		16,840,316		27,895,787			94,902,004			11,164,154		2,780,594		276,847,349
Debts		872		2,683,213		3,317,577			6,830,511			4,348,308		669,151		17,849,632
Debentures		30,160		702,704		2,368,679			8,329,923			12,113,285		673,863		24,218,614
Other financial liabilities		—		10,451,177		2,206			76,647			60,145		—		10,590,175
		124,936,552		30,681,501		33,580,000			110,124,670			27,701,552		4,123,639		331,147,914
Off-balance sheet items
Commitments 6		81,278,583		—		—			—			—		—		81,278,583
Acceptances and guarantees contracts		7,277,136		—		—			—			—		—		7,277,136
Financial guarantee contracts 7		3,135,590		—		—			—			—		—		3,135,590
		91,691,309		—		—			—			—		—		91,691,309

54

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

¹ The amounts of W 9,203,969 million which are restricted amount due from the financial institutions as at December 31, 2018, are excluded.

² Financial liabilities at fair value through profit or loss derivatives held for trading and financial assets at fair value through profit or loss (excluding loans) are not managed by contractual maturity because they are held for trading or redemption before maturity. Therefore, the carrying amounts are included in the ‘On demand’ category.

³ Cash flows of derivative instruments held for hedging are shown at net amounts of cash inflows and outflows by remaining contractual maturity.

⁴ Equity securities designated as financial assets at fair value through other comprehensive income included in the ‘On demand’ category as most are available for sale at any time. However, in the case of equity securities which are restricted for sale, these will be classified to its respective maturity when the restriction on disposal is released.

⁵ Deposits that are contractually repayable on demand or on short notice are included under the ‘On demand’ category.

⁶ Unused lines of credit within commitments are included under the ‘On demand’ category as payments can be required upon request.

⁷ Financial guarantee contracts are included under the ‘On demand’ category as payments can be required upon request.

The remaining contractual cash flows of derivatives held for cash flow hedging as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Up to 1 month		1-3 months		3-12 months		1-5 years		Over 5 years		Total
Cash flow to be received of net settlement derivatives		38		357		1,015		564		—		1,974
Cash flow to be paid of net settlement derivatives		191		1,340		2,001		342		—		3,874
	2018
(In millions of Korean won)	Up to 1 month		1-3 months		3-12 months		1-5 years		Over 5 years		Total
Cash flow to be received of net settlement derivatives		251		2,548		4,871		11,642		—		19,312
Cash flow to be paid of net settlement derivatives		197		129		493		79		—		898

4.4 Market Risk

4.4.1 Concept

Market risk is the risk of possible losses which arise from changes in market factors, such as interest rate, stock price, foreign exchange rate and other market factors, and incurred in securities, derivatives and others. The most significant risks associated with trading positions are interest rate risks and currency risks, and other risks include stock price risks. In addition, the Group is exposed to interest rate risks associated with non-trading positions. The Group classifies exposures to market risk into either trading or non-trading positions for managerial purpose.

4.4.2 Risk Management

The Group sets internal capital limits for market risk and interest rate risk and monitors the risks to manage the risk of trading and non-trading positions. The Group maintains risk management systems and procedures, such as trading policies and procedures, market risk management guidelines for trading positions and ALM risk management guidelines for non-trading positions in order to manage market risk efficiently. The procedures mentioned are implemented with approval from the Risk Management Committee and Risk Management Council.

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Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

The Group establishes market risk management policy, sets position limits, loss limits and VaR limits of each business group and approves newly developed products through its Risk Management Council. The Market Risk Management Subcommittee, which is chaired by the Chief Risk Officer (CRO), is the decision maker and sets position limits, loss limits, VaR limits, sensitivity limits and scenario loss limits for each division, at the level of each individual business department.

The Asset-Liability Management Committee (ALCO) determines the operational standards of interest and commission, the details of establishment and prosecution of the Asset Liability Management (ALM) policies, and enacts and amends relevant guidelines. The Risk Management Council monitors the establishment and enforcement of ALM risk management policies and enact and amend ALM risk management guidelines. The interest rate risk limit is set based on the future assets/liabilities position and interest rate volatility estimation reflects the annual work plan. The ALM Department and Risk Management Department measures and monitors the interest risk status and limits on a regular basis. The status and limits of interest rate risks, such as interest rate EaR, duration gap and interest rate VaR, are reported to the ALCO and Risk Management Council on a monthly basis and to the Risk Management Committee on a quarterly basis. To ensure adequacy of interest rate and liquidity risk management, the Risk Management Department assigns the limits, monitors and reviews the risk management procedures and tasks conducted by the ALM Department. Also, the Risk Management Department independently reports related information to management.

4.4.3 Trading Position

Definition of a trading position

Trading positions subject to market risk management are interest rate, stock price positions for short-term profit-taking and others. Also, they include all foreign exchange rate positions. The basic requirements of trading positions are defined under the Trading Policy and Guideline, are as follows:

• The trading position is not restricted for purchase and sale, is measured daily at fair value, and its significant inherent risks are able to be hedged in the market.

• The criteria for classification as a trading position are clearly defined in the Trading Policy and guideline, and separately managed by the trading department.

• The trading position is operated in accordance with the documented trading strategy and managed through position limits.

• The operating department or professional dealers have an authority to enforce a deal on the trading position within predetermined limits without pre-approval.

• The trading position is reported periodically to management for the purpose of the Group’s risk management.

Observation method on market risk arising from trading positions

The Group calculates VaR to measure the market risk by using market risk management systems on the entire trading portfolio. Generally, the Group manages market risk on the trading portfolio. In addition, the Group controls and manages the risk of derivative trading based on the regulations and guidelines formulated by the Financial Supervisory Service.

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Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Value at Risk (VaR)

i. Value at Risk (VaR)

The Group uses the Value-at-Risk methodology to measure the market risk of trading positions.

The Group now uses the ten-day VaR, which estimates the maximum amount of loss that could occur in ten days under an historical simulation model which is considered to be a full valuation method. The distributions of portfolio’s value changes are estimated based on the data over the previous 250 business days, and ten-day VaR is calculated by subtracting net present market value from the value measured at a 99% confident level of portfolio’s value distribution results.

VaR is a commonly used market risk measurement technique. However, the method has some shortcomings. VaR estimates possible losses over a certain period at a particular confidence level using past market movement data. Past market movements are, however, not necessarily a good indicator of future events, as there may be conditions and circumstances in the future that the model does not anticipate. As a result, the timing and magnitude of the actual losses may vary depending on the assumptions made at the time of the calculation. In addition, the time periods used for the model, generally one or ten days, are assumed to be a sufficient holding period before liquidating the relevant underlying positions. If these holding periods are not sufficient, or too long, the VaR results may understate or overstate the potential loss.

The Group uses an internal model (VaR) to measure general risk, and a standard method to measure each individual risk. When the internal model is not permitted for certain market risk, the Group uses the standard method. Therefore, the market risk VaR may not reflect the market risk of each individual risk and some specific positions.

ii. Back-Testing

Back-testing is conducted on a daily basis to validate the adequacy of the VaR model. In back- testing, the Group compares both the actual and hypothetical profit or loss with the VaR calculations.

iii. Stress Testing

Stress testing is carried out to analyze the impact of abnormal market situations on the trading and available-for-sale portfolio. It reflects changes in interest rates, stock prices, foreign exchange rates, implied volatilities of options and other risk factors that have significant influence on the value of the portfolio. The Group uses historical scenarios and hypothetical scenarios for the analysis of abnormal market situations. Stress testing is performed at least once every quarter.

The units that analyze total VaR can be categorized as follows: ① by product: interest rate products (debt securities in Korean won and foreign currencies, etc.), foreign currency products (spots, futures, and CRS, etc.), equity securities (equities, ELS, etc.), ② by risk factors: interest rates (government bond interest rate in Korean won and foreign currencies, corporate bond interest rate, etc.), exchange rates (USD/KRW, USD/JPY, etc.), and stock market indexes (KOSPI, S&P 500, etc.); the Group previously assesses VaR by product considering timeliness and efficiency.

However, as the amount of investment property in foreign currencies increases, products evaluated as multiple risk factors (i.e. for foreign currency bonds, ① by product: interest rate product ② by risk factor: interest rate and foreign exchange rate) had a tendency that dispersion effect is excessive due to not reflecting the actual hedge position by products in detail; to prevent which, the Group has decided to use VaR by risk factor from 2018.

57

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

VaR at a 99%, excluding Stressed Value at Risks, confidence level of interest rate, stock price and foreign exchange rate risk for trading positions with a ten-day holding period as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Average		Minimum		Maximum		Ending
Interest rate risk		11,190		1,725		20,467		16,628
Stock price risk		3,434		2,402		4,310		3,914
Foreign exchange rate risk		15,760		11,416		20,704		13,081
Deduction of diversification effect								(13,246	)
Total VaR		17,545		13,641		24,849		20,377

	2018
(In millions of Korean won)	Average		Minimum		Maximum		Ending
Interest rate risk		12,513		6,044		18,684		7,074
Stock price risk		2,995		1,253		4,831		3,348
Foreign exchange rate risk		9,443		5,033		16,453		16,453
Deduction of diversification effect								(11,939	)
Total VaR		16,221		11,653		23,078		14,936

The required equity capital using the standard method related to the positions which are not measured by VaR as at December 31, 2019 and 2018, is as follows:

(In millions of Korean won)	2019		2018
Interest rate risk		83,731		112,153
Stock price risk		1,954		19,756
Foreign exchange rate risk		1,850		1,339
		87,535		133,248

Details of risk factors

i. Interest rate risk

Trading position interest rate risk usually arises from debt securities denominated in Korean won. The Group’s trading strategy is to benefit from short-term movements in the prices of debt securities arising from changes in interest rates. The Group manages interest rate risk on major trading portfolios using market value-based tools such as VaR and sensitivity analysis (Price Value of a Basis Point: PVBP).

ii. Stock price risk

Stock price risk arises primarily from stock spot positions held by payment guarantee trust and stock-related derivatives of the Capital Markets Department. These stock price risks are managed through VaR, sensitivity limits and others.

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Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

iii. Foreign exchange rate risk

Foreign exchange rate risk arises from holding assets and liabilities denominated in foreign currency and foreign currency derivatives. Net foreign currency exposure mostly occurs from the foreign assets and liabilities which are denominated in US Dollars and Chinese Yuan. The Group sets both loss limits and net foreign currency exposure limits and manages comprehensive net foreign exchange exposures which consider both trading and non-trading portfolios.

4.4.4 Non-trading Position (Interest Rate Risk of Banking Book)

i. Definition of interest rate risk of banking book

Interest rate risk of banking book(IRRBB) is interest rate risk arises from a change in equity and earnings caused by fluctuation in value of interest rate sensitive assets and liabilities, and these risks are measured with change in Economic Value of Equity (DEVE) or interest rate VaR and change in Net Interest Income (DNII).

ii. Bank’s overall interest rate risk management and mitigation strategy

The Risk Management Committee approves policies, procedures and limits for interest rate risk management, and the management department regularly reports on interest rate risk levels of DEVE, DNII and changes of market conditions etc., as compared to the set limit and changes of market conditions etc. To measure the sensitivity of banks’ Economic Value of Measures and Earnings-Based Measures affected by interest rate changes, the interest rate and duration gaps of assets and liabilities are calculated every month. In addition, the management department conducts interest rate risk crisis analysis at least once a quarter, assuming abnormal interest rate fluctuations, and reports the results to the Risk Management Council. Independent internal and external audit departments regularly check the process of identifying, measuring and monitoring interest rate risk. The evaluation of adequacy of interest rate risk model is regularly conducted at least once a year by a department that is independent of the function they are assigned to review.

iii. Main modeling assumption used for the Bank’s interest rate risk measurement system for internal management

The Bank separately calculates DEVE for the internal management purpose using Historical-simulation based on the volatility of interest rates in the past finance crisis(FY08-FY09), the portfolio of assets/liabilities and 27 interest rate gaps, considering the management strategy.

iv. The Bank’s interest rate risk hedging methodology and related accounting

The Bank hedges the interest rate risk through the same back-to-back interest rate swap transaction. The Bank officially documents and manages the risk management strategy for hedge accounting application, risk management purpose, hedging relationship, and methods for assessing compliance with hedge effectiveness.

v. Main assumptions used for calculating DEVE, DNII

Interest rate risk is measured by considering the cash flows of all interest-sensitive assets, liabilities and off-balance sheet items in the Banking Book. DEVE assumes a run-off balance sheet with an outflow view in which existing bank account positions are derecognized and are not replaced by new business.

In addition, DEVE is calculated by the cash flows generated by applying contracted interest rates which include commercial margins and other interest rate components are used for DEVE. Risk-free interest rate that does not include commercial margins and other interest rate components is applied when discounting the estimated cash flows to present value.

59

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

DNII is computed assuming a constant balance sheet, where maturing or repricing cash flows are replaced by new cash flows with identical features with regard to the amount, replaced period and spread components. Interest rate risk for interest rate shock scenarios is calculated considering only loss in each currency. Non-maturity deposits are categorized as retail_transactional, retail_non- transactional and wholesale according to depositor characteristics and account characteristics. The core deposit rate and upper average maturity cap of each aforementioned category are considered to determine average interest rate repricing maturity of non-maturity deposits. The average interest rate repricing maturity for non-maturity deposits is 2.5 years for core deposits and 1 day for non-core deposits, with the longest interest rate repricing maturity of 5 years. The prepayment rate of fixed-rate loan and early redemption rate of term deposit are estimated based on prepayment amount of fixed-rate loan and early redemption amount of term deposits during a month, respectively.

vi. DEVE, DNII

The Group calculates DEVE by applying six rate shock and stress scenarios, and DNII by applying parallel shock up and down scenarios. The results as at December 31, 2019 are as follows:

(	2019
In millions of Korean won)	Changes in the Economic Value of Equity Capital		Changes in net interest income
Scenario 1 (Parallel up)		483,207		152,013
Scenario 2 (Parallel down)		31,718		9,717
Scenario 3(Steepener)		257,756		—
Scenario 4 (Flattener)		411,237		—
Scenario 5 (Short rate up)		378,380		—
Scenario 6 (Short rate down)		492,047		—
Maximum of Scenarios 1-6		492,047		152,013
Basic capital		27,609,684		—

(*) As of the end of December 2019, interest rate risk was calculated by different method from the previous disclosure due to the revision of the Detailed Supervisory Regulations on Banking Business.

The risk is measured using interest rate VaR, which is the maximum possible amount of loss that can occur at 99.90% confidence on interest rate risk and the results as at December 31, 2018 are as follows:

(In millions of Korean won)	2018
Interest Rate VaR		168,282

60

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

4.4.5 Financial Assets and Liabilities in Foreign Currencies

Financial assets and liabilities in foreign currencies as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	USD		JPY		EUR		GBP		CNY		Others		Total
Financial assets
Cash and due from financial institutions		1,914,554		254,502		145,066		33,239		1,148,375		490,021		3,985,757
Financial assets at fair value through profit or loss		1,700,956		3,387		165,330		3,373		—		23,355		1,896,401
Derivatives held for trading		98,786		—		—		—		6,786		—		105,572
Derivatives held for hedging		83,610		—		—		—		—		—		83,610
Loans at amortized cost		14,070,820		465,849		593,530		137,585		1,205,297		613,780		17,086,861
Financial assets at fair value through other comprehensive income		3,953,899		21,267		5,192		—		282,390		37,977		4,300,725
Financial assets at amortized cost		1,026,325		—		—		—		97,844		—		1,124,169
Other financial assets		1,193,680		230,223		289,187		5,178		167,525		87,967		1,973,760
		24,042,630		975,228		1,198,305		179,375		2,908,217		1,253,100		30,556,855
Financial liabilities
Derivatives held for trading		212,569		6		53		—		7,806		—		220,434
Derivatives held for hedging		35,538		—		—		—		—		—		35,538
Deposits		11,939,600		731,178		761,897		45,340		1,471,566		530,990		15,480,571
Debts		8,576,321		125,096		340,530		118,848		15,092		73,640		9,249,527
Debentures		4,083,040		—		—		—		—		101,967		4,185,007
Other financial liabilities		2,111,089		59,761		97,325		21,583		173,480		163,990		2,627,228
		26,958,157		916,041		1,199,805		185,771		1,667,944		870,587		31,798,305
Off-balance sheet items		16,745,727		32,694		191,210		—		252,369		37,195		17,259,195

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Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	USD		JPY		EUR		GBP		CNY		Others		Total
Financial assets
Cash and due from financial institutions		1,374,423		307,580		188,508		24,536		1,088,299		362,727		3,346,073
Financial assets at fair value through profit or loss		1,756,048		44,175		69,728		—		—		17,773		1,887,724
Derivatives held for trading		98,101		—		—		—		4,643		—		102,744
Derivatives held for hedging		32,996		—		—		—		—		—		32,996
Loans at amortized cost		12,155,429		333,848		571,077		5,993		990,705		396,228		14,453,280
Financial assets at fair value through other comprehensive income		2,999,581		36,538		5,134		—		125,571		3,699		3,170,523
Financial assets at amortized cost		949,227		—		—		—		38,802		—		988,029
Other financial assets		942,708		297,430		17,184		21,447		251,725		24,149		1,554,643
		20,308,513		1,019,571		851,631		51,976		2,499,745		804,576		25,536,012
Financial liabilities
Derivatives held for trading		103,451		14		42		—		4,062		—		107,569
Derivatives held for hedging		88,367		—		—		—		—		—		88,367
Deposits		8,948,057		616,551		491,628		48,264		1,263,562		450,340		11,818,402
Debts		8,984,548		90,778		184,173		—		11,393		24,057		9,294,949
Debentures		3,960,312		—		31,979		—		—		42,240		4,034,531
Other financial liabilities		898,222		103,395		130,282		3,566		265,080		41,853		1,442,398
		22,982,957		810,738		838,104		51,830		1,544,097		558,490		26,786,216
Off-balance sheet items		13,573,398		32,619		1,262		—		270,018		7,552		13,884,849

4.5 Operational Risk

4.5.1 Concept

The Group defines operational risk as risk of loss resulting from inadequate or failed internal processes, people, systems and external events. The operational risk includes financial and non-financial risks.

4.5.2 Risk Management

The purpose of operational risk management is not only to comply with requirements of regulatory authorities but is also to establish an integrated system to cultivate enterprise culture that values importance of risk management, strengthen internal controls, improve processes and provide with timely feedback to management so that eventually mitigate operational risk of the Group. In addition, the Group established Business Continuity Planning (BCP) to ensure critical business functions can be maintained, or restored, in the event of material disruptions arising from internal or external events. It has constructed replacement facilities as well as has carried out full scale test for head office and IT departments to test its BCPs.

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Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

4.6 Capital Management

The Group complies with the capital adequacy standard established by the Financial Services Commission. The capital adequacy standard is based on Basel III revised by Basel Committee on Banking Supervision in Bank for International Settlements in June 2011, and was implemented in Korea in December 2013.

The Group is required to maintain a minimum Common Equity Tier 1 ratio of at least 4.5%, a minimum Tier 1 ratio of 6.0% and a minimum Total Regulatory Capital of 8.0% as at December 31, 2019. Capital Conservation Buffer of 2.5% and Capital Requirement of Domestic Systemically Important Bank (D-SIB) of 1.0% are additionally applied. Therefore, the Group is required to maintain a capital ratio including a minimum capital ratio and additional capital requirements (a Common Equity Tier 1 Ratio of 8.0% (December 31, 2018: 7.125%), a Tier 1 Ratio of 9.5% (December 31, 2018: 8.625%), and a Total Regulatory Capital Ratio of 11.5% (December 31, 2018: 10.625%)).

The Group’s equity capital is classified into three categories in accordance with Detailed Supervisory Regulations on Banking Business:

• Common Equity Tier 1 Capital: Common Equity Tier 1 Capital represents the issued capital that takes the first and proportionately greatest share of any losses and represents the most subordinated claim in liquidation of the Group, and not repaid outside of liquidation. It includes common shares issued, capital surplus, retained earnings, non-controlling interests of consolidated subsidiaries, accumulated other comprehensive income, other capital surplus and others.

• Additional Tier 1 Capital: Additional Tier 1 Capital includes perpetual instruments issued by the Group that meet the criteria for inclusion in Additional Tier 1 capital, and stock surplus resulting from the issue of instruments included in Additional Tier 1 capital and others.

• Tier 2 Capital: Tier 2 Capital represents the capital that takes the proportionate share of losses in the liquidation of the Group. Tier 2 Capital includes a fund raised by issuing subordinated debentures maturing in not less than 5 years that meet the criteria for inclusion in Tier 2 capital, and the allowance for loan losses which are accumulated for assets classified as normal or precautionary in accordance with Regulations on Supervision of Banking Business and others.

Risk weighted asset means the assets weighted according to the inherent risks in the total assets and the possible losses resulting from the errors of internal process and external events which the Group should cover. The Group calculates risk weighted asset by each risk (credit risk, market risk and operational risk) based on Detailed Regulations on Supervision of Banking Business and uses it for its capital ratio calculation. The Group complied with external capital adequacy requirements as at December 31, 2019 and December 31, 2018.

In addition to the capital ratio, the Group assesses its adequacy of capital by using the internal assessment and management policy of the capital adequacy. The assessment of the capital adequacy is conducted by comparing available capital (actual amount of available capital) and internal capital (amount of capital enough to cover all significant risks under target credit rate set by the Group). The Group monitors the soundness of finance and provides risk adjusted basis for performance review using the assessment of the capital adequacy. The internal capital is calculated by adding the stress testing results and other required items to the total internal capitals which are calculated for each risk.

63

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

The Risk Management Council of the Group determines the Group’s risk appetite and allocates internal capital by risk type and business group. Each business group efficiently operates its capital within range of granted internal capital. The Risk Management Department of the Group monitors a management of the limit on internal capital and reports the results to management and the Risk Management Council. The Group maintains the adequacy of capital through proactive review and approval of the Risk Management Committee when the internal capital is expected to exceed the limits.

Details of the Group’s capital adequacy calculation in line with Basel III requirements as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Equity Capital:		29,809,730		27,694,178
Tier I Capital		27,609,684		25,567,995
Common Equity Tier 1 Capital		27,035,161		25,567,995
Additional Tier 1 Capital		574,523		—
Tier II Capital		2,200,046		2,126,183
Risk-weighted assets:		188,075,177		178,433,263
Credit risk1		172,985,173		163,693,288
Market risk2		5,150,641		4,747,989
Operational risk3		9,939,363		9,991,986
Equity Capital (%):		15.85		15.52
Tier I Capital (%)		14.68		14.33
Common Equity Tier 1 Capital (%)		14.37		14.33

¹ Credit risk weighted assets are measured using the Internal Rating-Based Approach an Standardized Approach.

² Market risk weighted assets are measured using the Internal Model-Based Approach and Standardized Approach.

³ Operational risk weighted assets are measured using the Advanced Measurement Approach.

5. Segment Information

5.1 Overall Segment Information and Business Segments

The Group is organized into Banking, Retail Banking and Other Activities. These business divisions are based on the nature of the products and services provided, the type or class of customer, and the Group’s management organization.

• Corporate banking: The activities within this segment include providing credit, deposit products and other related financial services to large, small and medium-sized enterprises and SOHOs, and their local subsidiaries-related works

• Retail banking: The activities within this segment include providing credit, deposit products and other related financial services to individuals and households.

• Other activities: The activities within this segment include trading activities in securities and derivatives, funding, trust and other activities.

64

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Financial information by business segment for the years ended December 31, 2019 and 2018 are as follows:

	2019
(In millions of Korean won)	Corporate Banking			Retail Banking			Others			Intra-group Adjustment			Total
Operating revenues from external customers		2,557,438			2,979,503			1,782,127			—			7,319,068
Segment operating revenues (expenses)		22,838			—			24,382			(47,220	)		—
		2,580,276			2,979,503			1,806,509			(47,220	)		7,319,068
Net interest income		2,844,881			3,148,061			370,603			242			6,363,787
Interest income		4,642,555			4,872,937			1,302,085			(37,629	)		10,779,948
Interest expense		(1,797,674	)		(1,724,876	)		(931,482	)		37,871			(4,416,161	)
Net fee and commission income		349,393			471,869			329,432			(17,398	)		1,133,296
Fee and commission income		459,879			577,845			473,637			(27,999	)		1,483,362
Fee and commission expense		(110,486	)		(105,976	)		(144,205	)		10,601			(350,066	)
Net gains (losses) on financial assets/ liabilities at fair value through profit or loss		(2,527	)		—			474,420			(49,269	)		422,624
Net other operating income (expense)		(611,471	)		(640,427	)		632,054			19,205			(600,639	)
General and administrative expenses		(1,241,721	)		(1,982,375	)		(663,618	)		295			(3,887,419	)
Operating profit before provision for credit losses		1,338,555			997,128			1,142,891			(46,925	)		3,431,649
Reversal (provision) for credit losses		125,919			(235,995	)		7,582			(1,036	)		(103,530	)
Operating profit		1,464,474			761,133			1,150,473			(47,961	)		3,328,119
Share of profit of associates		—			—			29,240			—			29,240
Net other non-operating income (expense)		(263	)		—			(19,741	)		(18,883	)		(38,887	)
Segment profit before income tax expense		1,464,211			761,133			1,159,972			(66,844	)		3,318,472
Income tax income (expense)		(404,425	)		(209,311	)		(265,190	)		(467	)		(879,393	)
Profit for the year		1,059,786			551,822			894,782			(67,311	)		2,439,079
Profit attributable to the shareholder of the Parent Company		1,059,786			551,822			894,782			(67,311	)		2,439,079
Profit attributable to non-controlling interests		—			—			—			—			—
Total assets 1		139,496,394			147,468,173			104,297,056			(3,836,585	)		387,425,038
Total liabilities 1		142,063,121			161,834,984			56,127,857			(1,605,157	)		358,420,805

¹ Amounts before intra-segment transaction adjustment.

65

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Corporate Banking			Retail Banking			Others			Intra-group Adjustment			Total
Operating revenues from external customers		2,386,035			2,989,240			1,478,104			—			6,853,379
Segment operating revenues (expenses)		27,687			—			(39,343	)		11,656			—
		2,413,722			2,989,240			1,438,761			11,656			6,853,379
Net interest income		2,753,928			2,960,598			386,407			(211	)		6,100,722
Interest income		4,267,675			4,547,615			1,227,614			(23,016	)		10,019,888
Interest expense		(1,513,747	)		(1,587,017	)		(841,207	)		22,805			(3,919,166	)
Net fee and commission income		287,978			490,447			362,846			(18,523	)		1,122,748
Fee and commission income		381,481			583,213			486,034			(27,937	)		1,422,791
Fee and commission expense		(93,503	)		(92,766	)		(123,188	)		9,414			(300,043	)
Net gains (losses) on financial assets/ liabilities at fair value through profit or loss		13,933			—			297,938			14,524			326,395
Net other operating income (expense)		(642,117	)		(461,805	)		391,570			15,866			(696,486	)
General and administrative expenses		(1,091,556	)		(1,970,409	)		(706,164	)		1,134			(3,766,995	)
Operating profit before provision for credit losses		1,322,166			1,018,831			732,597			12,790			3,086,384
Reversal (provision) for credit losses		77,224			(179,229	)		(273	)		8,362			(93,916	)
Operating profit		1,399,390			839,602			732,324			21,152			2,992,468
Share of profit of associates		—			—			49,698			—			49,698
Net other non-operating income (expense)		(65	)		—			123,936			(79,699	)		44,172
Segment profit before income tax expense		1,399,325			839,602			905,958			(58,547	)		3,086,338
Income tax income (expense)		(386,764	)		(230,891	)		(208,403	)		(1,082	)		(827,140	)
Profit for the year		1,012,561			608,711			697,555			(59,629	)		2,259,198
Profit attributable to the shareholder of the Parent Company		1,012,561			608,711			697,555			(59,629	)		2,259,198
Profit attributable to non-controlling interests		—			—			—			—			—
Total assets 1		131,303,734			140,814,393			88,399,951			(3,558,820	)		356,959,258
Total liabilities 1		123,880,329			152,173,062			55,478,601			(1,240,600	)		330,291,392

¹ Amounts before intra-segment transaction adjustment.

66

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2018 and 2017

5.2 Services and Geographical Segments

5.2.1 Services Information

Operating revenues from external customers by services for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Corporate banking service		2,557,438		2,386,035
Retail banking service		2,979,503		2,989,240
Other service		1,782,127		1,478,104
		7,319,068		6,853,379

5.2.2 Geographical Information

Geographical operating revenues from external customers for the years ended December 31, 2019 and 2018, and major non-current assets as at December 31, 2019 and 2018, are as follows:

	2019				2018
(In millions of Korean won)	Revenues from external customers		Major non-current assets		Revenues from external customers		Major non-current assets
Domestic		7,156,642		4,488,801		6,721,355		3,600,570
United States		13,971		9,452		11,727		144
New Zealand		6,946		3,516		6,213		72
China		92,475		12,946		81,620		3,623
Japan		6,692		3,480		4,166		1,210
Myanmar		4,002		1,570		2,675		707
Vietnam		10,449		1,938		7,655		239
Cambodia		14,764		3,944		9,849		2,696
United Kingdom		9,958		1,893		8,119		537
India		3,169		1,533		—		—
Intra-group Adjustment		—		—		—		—
		7,319,068		4,529,073		6,853,379		3,609,798

67

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

6. Financial Assets and Financial Liabilities

6.1 Classification and Fair Value

Carrying amount and fair values of financial assets and liabilities as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Carrying amount		Fair value
Financial assets
Cash and due from financial institutions		14,481,309		14,478,216
Financial assets at fair value through profit or loss		13,866,303		13,866,303
Debt securities		13,446,838		13,446,838
Equity securities		151,527		151,527
Loans		188,133		188,133
Others		79,805		79,805
Derivatives held for trading		2,184,099		2,184,099
Derivatives held for hedging		133,326		133,326
Loans at amortized cost		293,531,433		293,767,751
Financial assets at fair value through other comprehensive income		38,454,954		38,454,954
Debt securities		36,116,988		36,116,988
Equity securities		1,993,674		1,993,674
Loans		344,292		344,292
Securities at amortized cost		13,964,339		14,056,395
Others		5,464,704		5,464,704
		382,080,467		382,405,748
Financial liabilities
Financial liabilities at fair value through profit or loss		80,235		80,235
Derivatives held for trading		2,132,770		2,132,770
Derivatives held for hedging		36,212		36,212
Deposits		300,917,482		301,409,018
Debts		19,141,262		19,141,682
Debentures		18,739,992		18,959,416
Other financial liabilities		15,446,504		15,446,504
		356,494,457		357,205,837

68

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Carrying amount		Fair value
Financial assets
Cash and due from financial institutions		14,889,010		14,885,511
Financial assets at fair value through profit or loss		12,257,005		12,257,005
Debt securities		11,883,025		11,883,025
Equity securities		82,576		82,576
Loans		212,596		212,596
Others		78,808		78,808
Derivatives held for trading		1,533,650		1,533,650
Derivatives held for hedging		80,321		80,321
Loans at amortized cost		276,944,202		276,957,040
Financial assets at fair value through other comprehensive income		29,930,955		29,930,955
Debt securities		27,682,464		27,682,464
Equity securities		1,898,944		1,898,944
Loans		349,547		349,547
Securities at amortized cost		12,792,526		12,823,961
Others		4,199,197		4,199,197
	352,626,866		352,667,640
Financial liabilities
Financial liabilities at fair value through profit or loss		87,168		87,168
Derivatives held for trading		1,553,858		1,553,858
Derivatives held for hedging		88,551		88,551
Deposits		272,484,528		273,131,227
Debts		17,496,056		17,523,408
Debentures		23,163,585		23,445,303
Other financial liabilities		13,297,404		13,297,394
	328,171,150		329,126,909

The fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The Group discloses the fair value of each class of assets and liabilities in a way that permits it to be compared with its carrying amount at the end of each reporting period. The best evidence of fair value of financial instruments is a quoted price in an active market.

69

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Methods of determining fair value for financial instruments are as follows:

Cash and due from financial institutions	The carrying amounts of cash and demand due from financial institutions and payment due from financial institutions are reasonable approximation of fair values. These financial instruments do not have a fixed maturity and are receivable on demand. Fair value of ordinary due from financial institutions is measured using DCF model (Discounted Cash Flow Model).
Investment securities/ Gold deposits and deposits due to customers	The fair value of financial instruments, gold deposits and deposits due to customers that are quoted in active markets is determined using the quoted prices. Fair value is determined through the use of independent third-party pricing services where quoted prices are not available. Pricing services use one or more of the following valuation techniques including DCF Model, Monte Carlo Simulation, FCFE (Free Cash Flow to Equity Model), Comparable Company Analysis, Dividend Discount Model and Net Asset Value Method.
Loans	The fair value of loans is determined through DCF Model and the use of independent third-party pricing services. Fair value measured by DCF Model is determined by discounting the expected cash flows, which are contractual cash flows adjusted by the expected prepayment rate, at appropriate discount rate. Fair value of the other loans that is not determined through DCF model is determined by independent third-party pricing services using Tree Model.
Derivatives	For exchange traded derivatives, quoted price in an active market is used to determine fair value and for OTC derivatives, fair value is determined using valuation techniques. The Group uses internally developed valuation models that are widely used by market participants to determine fair values of plain OTC derivatives including options, interest rate swaps, and currency swaps, based on observable market parameters. However, some complex financial instruments are valued using appropriate models developed from generally accepted market valuation models including the Finite Difference Method, the Monte Carlo Simulation and the Tree model or independent third-party valuation service. For OTC derivatives, the credit risk of counterparty and the Group’s own credit risk are applied through CVA(Credit Valuation Adjustment).
Deposits	The carrying amount of demand deposits is regarded as representative of fair value because they do not have a fixed maturity and are payable on demand. Fair value of time deposits is determined using a DCF model. Fair value is determined by discounting the expected cash flows, which are contractual cash flows adjusted by the expected prepayment rate, at an appropriate discount rate.
Debts	Carrying amount of overdraft in foreign currency is regarded as representative of fair value because they do not have a fixed maturity and are payable on demand. Fair value of other debts is determined using a DCF model discounting contractual future cash flows at an appropriate discount rate.

70

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Debentures	Fair value is determined by using the valuations of external professional valuation institution, which are calculated using market inputs and use of DCF Model to calculate fair value.
Other Financial assets and liabilities	The carrying amounts are reasonable approximation of fair values, without applying DCF Model. These financial instruments are temporary accounts used for other various transactions and their maturities are relatively short or not defined.

Fair value hierarchy

The Group believes that valuation methods used for measuring the fair values of financial instruments are reasonable and that the fair values recognized in the statements of financial position are appropriate. However, the fair values of the financial instruments recognized in the statements of financial position may be different if other valuation methods or assumptions are used. Additionally, as there is a variety of valuation techniques and assumptions used in measuring fair value, it may be difficult to reasonably compare the fair value with that of other financial institutions.

The Group classifies and discloses the fair value of the financial instruments into the following three-level hierarchy:

Level 1: The fair values are based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.

Level 2: The fair values except for quoted prices included within Level 1 are based on inputs that are observable for the asset or liability, either directly or indirectly.

Level 3: The fair values are based on unobservable inputs for the asset or liability.

The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety shall be determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement.

71

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Fair value hierarchy of financial assets and liabilities at fair value in the statements of financial position

The fair value hierarchy of financial assets and liabilities at fair value in the statements of financial position as at December 31, 2019 and 2018, are as follows:

	2019
	Fair value hierarchy
(In millions of Korean won)	Level 1		Level 2		Level 3		Total
Financial assets
Financial assets at fair value through profit or loss
Debt securities		2,960,226		8,633,172		1,853,440		13,446,838
Equity securities		107,480		—		44,047		151,527
Loans		—		—		188,133		188,133
Others		79,805		—		—		79,805
		3,147,511		8,633,172		2,085,620		13,866,303
Derivatives held for trading		—		2,184,029		70		2,184,099
Derivatives held for hedging		—		133,326		—		133,326
Financial assets at fair value through other comprehensive income
Debt securities		12,896,896		23,220,092		—		36,116,988
Equity securities		952,427		—		1,041,247		1,993,674
Loans		—		344,292		—		344,292
		13,849,323		23,564,384		1,041,247		38,454,954
		16,996,834		34,514,911		3,126,937		54,638,682
Financial liabilities
Financial liabilities at fair value through profit or loss		80,235		—		—		80,235
Derivatives held for trading		—		2,132,286		484		2,132,770
Derivatives held for hedging		—		36,212		—		36,212
		80,235		2,168,498		484		2,249,217

	2018
	Fair value hierarchy
(In millions of Korean won)	Level 1		Level 2		Level 3		Total
Financial assets
Financial assets at fair value through profit or loss
Debt securities		2,298,811		8,103,073		1,481,141		11,883,025
Equity securities		43,088		—		39,488		82,576
Loans		—		—		212,596		212,596
Others		78,808		—		—		78,808
		2,420,707		8,103,073		1,733,225		12,257,005
Derivatives held for trading		—		1,533,572		78		1,533,650
Derivatives held for hedging		—		80,321		—		80,321
Financial assets at fair value through other comprehensive income
Debt securities		8,998,246		18,684,218		—		27,682,464
Equity securities		971,367		—		927,577		1,898,944
Loans		—		349,547		—		349,547
		9,969,613		19,033,765		927,577		29,930,955
		12,390,320		28,750,731		2,660,880		43,801,931
Financial liabilities
Financial liabilities at fair value through profit or loss		87,168		—		—		87,168
Derivatives held for trading		—		1,553,072		786		1,553,858
Derivatives held for hedging		—		88,551		—		88,551
		87,168		1,641,623		786		1,729,577

72

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Valuation techniques and the inputs used in the fair value measurement of financial assets and liabilities classified as Level 2

Valuation techniques and inputs of financial assets and liabilities at fair value in the statements of financial position and classified as Level 2 as at December 31, 2019 and 2018, are as follows:

	Fair value		Valuation techniques	Inputs
(In millions of Korean won)	2019
Financial assets
Financial assets at fair value through profit or loss
Debt securities		8,633,172	DCF Model, Net Asset Value, Monte Carlo Simulation	Discount rate, Interest rate, prices of underlying assets(debt securities, stocks, etc.)
		8,633,172
Derivatives held for trading		2,184,029	DCF Model, Closed Form, FDM	Discount rate, volatility, foreign exchange rate and stock price and others
Derivatives held for hedging		133,326	DCF Model, Closed Form, FDM	Discount rate, volatility, foreign exchange rate and others
Financial assets at fair value through other comprehensive income
Debt securities		23,220,092	DCF Model	Discount rate
Loans		344,292	DCF Model	Discount rate
		23,564,384
		34,514,911
Financial liabilities
Derivatives held for trading		2,132,286	DCF Model, Closed Form, FDM	Discount rate, volatility, foreign exchange rate, stock price and others
Derivatives held for hedging		36,212	DCF Model, Closed Form, FDM	Discount rate, volatility, foreign exchange rate and others
		2,168,498

73

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	Fair value		Valuation techniques	Inputs
(In millions of Korean won)	2018
Financial assets
Financial assets at fair value through profit or loss
Debt securities		8,103,073	DCF Model, Net Asset Value	Discount rate, prices of underlying assets(debt securities, stocks, etc.)
		8,103,073
Derivatives held for trading		1,533,572	DCF Model, Closed Form, FDM	Discount rate, volatility, foreign exchange rate, stock price and others
Derivatives held for hedging		80,321	DCF Model, Closed Form, FDM	Discount rate, volatility, foreign exchange rate and others
Financial assets at fair value through other comprehensive income
Debt securities		18,684,218	DCF Model	Discount rate
Loans		349,547	DCF Model	Discount rate
		19,033,765
		28,750,731
Financial liabilities
Derivatives held for trading		1,553,072	DCF Model, Closed Form, FDM	Discount rate, volatility, foreign exchange rate, stock price and others
Derivatives held for hedging		88,551	DCF Model, Closed Form, FDM	Discount rate, volatility, foreign exchange rate and others
		1,641,623

Fair value hierarchy of financial assets and liabilities whose fair value is disclosed

The fair value hierarchy of financial assets and liabilities whose fair value is disclosed as at December 31, 2019 and 2018, is as follows:

	2019
	Fair value hierarchy
(In millions of Korean won)	Level 1		Level 2		Level 3		Total
Financial assets
Cash and due from financial institutions1		2,694,352		10,695,432		1,088,432		14,478,216
Loans at amortized cost		—		—		293,767,751		293,767,751
Securities at amortized cost		4,372,712		9,683,683		—		14,056,395
Other financial assets2		—		—		5,464,704		5,464,704
		7,067,064		20,379,115		300,320,887		327,767,066
Financial liabilities
Deposits1		—		138,097,349		163,311,669		301,409,018
Debts1		—		4,685		19,136,997		19,141,682
Debentures		—		18,959,416		—		18,959,416
Other financial liabilities2		—		—		15,446,504		15,446,504
		—		157,061,450		197,895,170		354,956,620

74

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

¹ The amounts included in Level 2 are the carrying amounts which are reasonable approximation of the fair values.

² The carrying amounts of other financial assets and other financial liabilities that are classified as Level 3 are reasonable approximation of the fair values and presented in the financial statements as at December 31, 2019.

	2018
	Fair value hierarchy
(In millions of Korean won)	Level 1		Level 2		Level 3		Total
Financial assets
Cash and due from financial institutions1		3,057,323		10,827,281		1,000,908		14,885,512
Loans at amortized cost		—		—		276,957,040		276,957,040
Securities at amortized cost		4,126,591		8,697,370		—		12,823,961
Other financial assets2		—		—		4,199,197		4,199,197
		7,183,914		19,524,651		282,157,145		308,865,710
Financial liabilities
Deposits1		—		123,778,718		149,352,509		273,131,227
Debts1		—		38,403		17,485,005		17,523,408
Debentures		—		23,445,303		—		23,445,303
Other financial liabilities3		—		—		13,297,394		13,297,394
		—		147,262,424		180,134,908		327,397,332

¹ The amounts included in Level 2 are the carrying amounts which are reasonable approximation of the fair values.

² The amounts of other financial assets included in Level 3 are the carrying amounts which are reasonable approximation of the fair values as at December 31, 2018.

³ The W13,289,339 million of other financial liabilities included in Level 3 are the carrying amounts which are reasonable approximation of fair values as at December 31, 2018.

Valuation techniques and inputs used in the fair value measurement

Valuation techniques and inputs of financial assets and liabilities which are disclosed by the carrying amounts because it is a reasonable approximation of fair value are not subject to be disclosed.

Valuation techniques and inputs of financial assets and liabilities whose fair values are disclosed and classified as Level 2 as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Fair value		Valuation technique		Inputs
Financial assets
Securities at amortized cost		9,683,683		DCF Model, Monte Carlo Simulation		Discount rate, Interest rate
Financial liabilities
Debentures		18,959,416		DCF Model		Discount rate

75

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Fair value		Valuation technique		Inputs
Financial assets
Securities at amortized cost		8,697,370		DCF Model		Discount rate
Financial liabilities
Debentures		23,445,303		DCF Model		Discount rate

Valuation techniques and inputs of financial assets and liabilities whose fair values are disclosed and classified as Level 3 as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Fair value		Valuation techniques	Inputs	Unobservable inputs
Financial assets
Cash and due from financial institutions		1,088,432	DCF Model	Credit spread, other spread, interest rate	Credit spread, other spread
Loans at amortized cost		293,767,751	DCF Model	Credit spread, other spread, prepayment rate, interest rate	Credit spread, other spread, prepayment rate
		294,856,183
Financial liabilities
Deposits		163,311,669	DCF Model	Other spread, prepayment rate, Interest rate	Other spread, prepayment rate
Debts		19,136,997	DCF Model	Other spread, interest rate	Other spread
		182,448,666

	2018
(In millions of Korean won)	Fair value		Valuation techniques	Inputs	Unobservable inputs
Financial assets
Cash and due from financial institutions		1,000,908	DCF Model	Credit spread, other spread, interest rates	Credit spread, other spread
Loans at amortized cost		276,957,040	DCF Model	Credit spread, other spread, prepayment rate, interest rate	Credit spread, other spread, prepayment rate
		277,957,948
Financial liabilities
Deposits		149,352,509	DCF Model	Other spread, prepayment rate, interest rates	Other spread, prepayment rate
Debts		17,485,005	DCF Model	Other spread, interest rates	Other spread
Other financial liabilities		8,055	DCF Model	Other spread, interest rates	Other spread
		166,845,569

76

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

6.2 Level 3 of the Fair Value Hierarchy Disclosure

6.2.1 Valuation Policy and Process of Level 3 Fair Value

The Group uses external, independent and qualified third-party valuation service in addition to internal valuation models to determine the fair value of the Group’s assets at the end of every reporting period.

Where a reclassification between the levels of the fair value hierarchy occurs for a financial asset or liability, the Group’s policy is to recognize such transfers as having occurred at the beginning of the reporting period.

6.2.2 Changes in Fair Value (Level 3) Measured using Valuation Technique based on Unobservable Inputs in Market

Changes in Level 3 of the fair value hierarchy for the years ended December 31 2019 and 2018, are as follows:

	2019
	Financial assets at fair value through profit or loss						Financial investments			Net derivatives financial instruments
(In millions of Korean won)	Securities at fair value through profit or loss			Loans at fair value through profit or loss			Equity securities at fair value through other comprehensive income			Derivatives held for trading			Derivatives held for hedging
Beginning balance		1,520,631			212,596			927,577			(708	)		—
Total gains or losses
- Profit or loss		35,553			10,412			—			3,233			—
- Other comprehensive income		—			—			36,714			—			—
Purchases		617,814			154,005			78,626			—			—
Sales		(276,511	)		(188,880	)		(1,671	)		—			—
Settlements		—			—			—			(2,941	)		—
Ending balance		1,897,487			188,133			1,041,246			(416	)		—

77

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
	Financial assets at fair value through profit or loss						Financial investments			Net derivatives financial instruments
(In millions of Korean won)	Securities at fair value through profit or loss			Loans at fair value through profit or loss			Equity securities at fair value through other comprehensive income			Derivatives held for trading			Derivatives held for hedging
Beginning balance1		1,277,304			132,722			750,036			(771	)		704
Total gains or losses
- Profit or loss		19,789			4,347			—			4,295			(116	)
- Other comprehensive income		—			—			124,633			—			—
Purchases		460,309			184,655			53,388			—			—
Sales		(236,705	)		(109,128	)		(480	)		—			—
Settlements		—			—			—			(1,220	)		(588	)
Transfers into Level 32		—			—			—			(3,012	)		—
Transferred from Level 32		(66	)		—			—			—			—
Ending balance		1,520,631			212,596			927,577			(708	)		—

¹ Restated based on Korean IFRS 1109.

² Changes in levels for the financial instruments occurred due to the change in the availability of observable market data.

78

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

In relation to changes in Level 3 of the fair value hierarchy, total gains or losses recognized in profit or loss for the period, and total gains or losses for the period included in profit or loss for financial instruments held at the end of the reporting period in the statements of comprehensive income for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Net losses from financial instruments at fair value through profit or loss		Other operating income		Net interest income
Total gains or losses included in profit or loss for the period		47,801		1,375		22
Total gains or losses for the period included in profit or loss for financial instruments held at the end of the reporting period		39,472		1,319		—

	2018
(In millions of Korean won)	Net losses from financial instruments at fair value through profit or loss		Other operating income			Net interest income
Total gains or losses included in profit or loss for the period		28,103		(405	)		617
Total gains or losses for the period included in profit or loss for financial instruments held at the end of the reporting period		22,187		(289	)		43

79

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

6.2.3 Sensitivity Analysis of Changes in Unobservable Inputs

Information about fair value measurements using unobservable inputs as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019
	Fair value		Valuation techniques	Inputs	Unobservable inputs	Range of unobservable inputs (%)		Relationship of unobservable inputs to fair value
Financial assets
Financial assets at fair value through profit or loss
Debt securities		1,853,440	Monte Carlo Simulation, Net Asset Value, DCF Model	Price of underlying asset, interest rate, dividend yield, volatilities and correlation of underlying asset, discount rate, liquidation value, volatility of the real estate price	Volatilities of the underlying asset		16.80~30.55	Higher the volatility, higher the fair value fluctuation
					Correlation of underlying asset		3.11~95.67	Higher the correlation, higher the fair value fluctuation
					Discount rate		7.47	Lower the discount rate, higher the fair value
					Liquidation value		0.00	Higher the liquidation value, higher the fair value
					Volatility of the real estate disposal price		0.00	Higher the sale price, higher the fair value
Equity securities		44,047	DCF Model, Comparable Company Analysis,	Growth rate, discount rate	Growth rate		0.00	Higher the growth rate, higher the fair value
					Discount rate		5.89~16.15	Lower the discount rate, higher the fair value
Loans		188,133	Tree Model, DCF Model	Stock price, volatility of the stock price	Volatility of the stock price		12.91~48.28	Higher the volatility, higher the fair value fluctuation
					Discount rate		10.81	Lower the discount rate, higher the fair value
Derivatives held for trading
Stock and index		70	Tree Model	Stock price, Interest rate, volatility of the stock price, dividend rate	Volatility of the stock price		21.85	Higher the volatility, higher the fair value fluctuation
Financial assets at fair value through other comprehensive income
Equity securities		1,041,247	DCF Model, Comparable Company Analysis, Tree Model	Growth rate, discount rate, volatility of the stock price, stock price	Growth rate		0.00	Higher the growth rate, higher the fair value
					Discount rate		3.04 ~ 16.37	Lower the discount rate, higher the fair value
					Volatility of the stock price		20.97~22.19	Higher the volatility, higher the fair value
		3,126,937
Financial liabilities
Derivatives held for trading
Others		484	MonteCarlo Simulation, DCF Model	Stock price, interest rate, volatility of the stock price, volatility of the interest rate, discount rate	Volatility of the stock price		16.28	Higher the volatility, higher the fair value fluctuation
					Volatility of the interest rate		0.52	Higher the volatility, higher the fair value fluctuation
					Discount rate		1.94 ~ 2.00	Higher the discount rate, lower the fair value
		484

80

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

(In millions of Korean won)	2018
	Fair value		Valuation techniques	Inputs	Unobservable inputs	Range of unobservable inputs (%)		Relationship of unobservable inputs to fair value
Financial assets
Financial assets at fair value through profit or loss
Debt securities		1,481,141	Monte Carlo Simulation, Net Asset Value, DCF Model	Price of underlying asset, interest rate, dividend yield, volatilities and correlation of underlying asset, discount rate, liquidation value, volatility of the real estate price	Volatilities of the underlying asset		19.61 ~ 27.62	Higher the volatility, higher the fair value fluctuation
					Correlation of underlying asset		24.57 ~ 69.18	Higher the correlation, higher the fair value fluctuation
					Discount rate		1.95 ~ 4.82	Lower the discount rate, higher the fair value
					Liquidation value		0.00	Higher the liquidation value, higher the fair value
					Volatility of the real estate disposal price		0.00	Higher the sale price, higher the fair value
Equity securities		39,488	DCF Model, Comparable Company Analysis,	Growth rate, discount rate	Growth rate		0.00	Higher the growth rate, higher the fair value
					Discount rate		7.58~14.14	Lower the discount rate, higher the fair value
Loans		212,596	Tree Model	Stock price, volatility of the stock price	Volatility of the stock price		17.66~49.28	Higher the volatility, higher the fair value fluctuation
Derivatives held for trading
Stock and index		78	Tree Model	Stock price, volatility of the stock price, dividend rate	Volatility of the stock price		25.29	Higher the volatility, higher the fair value fluctuation
Currency		—	DCF Model	Interest rate, foreign exchange rate, loss given default	Loss given default		100.00	Higher the loss given default, lower the fair value
Financial assets at fair value through other comprehensive income
Equity securities		927,577	DCF Model, Comparable Company Analysis	Growth rate, discount rate	Growth rate		0.00	Higher the growth rate, higher the fair value
					Discount rate		3.87~17.40	Lower the discount rate, higher the fair value
		2,660,880
Financial liabilities
Derivatives held for trading
Others		786	MonteCarlo Simulation, DCF Model	Stock price, interest rate, volatility of the stock price, volatility of the interest rate, discount rate	Volatility of the stock price		20.85	Higher the volatility, higher the fair value fluctuation
					Volatility of the interest rate		0.69	Higher the volatility, higher the fair value fluctuation
					Discount rate		2.19~2.26	Higher the discount rate, lower the fair value
		786

81

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Sensitivity analysis of changes in unobservable inputs

Sensitivity analysis of financial instruments is performed to measure favorable and unfavorable changes in the fair value of financial instruments which are affected by unobservable parameters, using a statistical technique. When the fair value is affected by more than two input parameters, the amounts represent the most favorable or unfavorable. Amongst Level 3 financial instruments subject to sensitivity analysis, the changes in fair values of debt securities, loans, equity-related derivatives, currency-related derivatives, interest rate-related derivatives and other derivatives are recognized in profit or loss, and the changes in fair value of equity securities are recognized in profit or loss or other comprehensive income or loss.

Sensitivity analysis by type of instrument as a result of varying input parameters are as follows:

	2019
	Recognition in profit or loss					Other comprehensive income
(In millions of Korean won)	Favorable changes		Unfavorable changes			Favorable changes		Unfavorable changes
Financial assets
Financial assets at fair value through profit or loss
Debt securities3, 5		3,374		(3,429	)		—		—
Equity securities2, 5		10,906		(3,858	)		—		—
Loans4		6,362		(4,344	)		—		—
Derivatives held for trading1		1		(1	)		—		—
Financial assets at fair value through other comprehensive income
Equity securities2, 5, 6		—		—			188,090		(94,201	)
		20,643		(11,632	)		188,090		(94,201	)
Financial liabilities
Derivatives held for trading1		17		(17	)		—		—
		17		(17	)		—		—

82

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
	Recognition in profit or loss					Other comprehensive income
(In millions of Korean won)	Favorable changes		Unfavorable changes			Favorable changes		Unfavorable changes
Financial assets
Financial assets at fair value through profit or loss
Debt securities3, 5		4,231		(4,311	)		—		—
Equity securities2, 5		5,299		(2,794	)		—		—
Loans4		129		(46	)		—		—
Derivatives held for trading1		20		(1	)		—		—
Financial assets at fair value through other comprehensive income Equity securities2, 5, 6		—		—			140,516		(70,691	)
		9,679		(7,152	)		140,516		(70,691	)
Financial liabilities
Derivatives held for trading1		88		(124	)		—		—
		88		(124	)		—		—

¹ For Derivatives financial instruments, the changes in fair value are calculated by shifting principal unobservable input parameters; such as, price and volatility of underlying asset by ± 10%. For certain derivatives in previous year, the changes in fair value were calculated by shifting the loss given default ratio by ± 1%.

² For equity securities, the changes in fair value are calculated by shifting principal unobservable input parameters such as discount rate (-1~1%) and growth rate (0~0.5%).

³ For beneficiary certificates, it is difficult to measure the sensitivity amounts per changes in input factor for practical reasons; only for those consisted with real estate, the sensitivity amounts are calculated by increasing and decreasing volatilities of real estate disposal price (-1~1%). For equity investments, the sensitivity amounts are calculated by increasing and decreasing the correlations between the liquidation value (-1~1%) and the discount rates (-1~1%). There were no significant correlation among major unobservable inputs.

⁴  For loans, the changes in fair value are calculated by shifting principal unobservable input parameters such as stock prices, volatilities of stock prices (± 10%) and discount rate (± 1%).

⁵  The amounts of \ 1,634,743 million and \ 1,437,513 million of financial assets classified as level 3 as at December 31, 2019 and December 31, 2018, respectively, are excluded because it is impracticable to calculate the sensitivity amounts.

⁶  For some equity securities, the changes in fair value are calculated by shifting principal unobservable input parameters such as stock prices and volatilities of stock prices by ± 10%.

6.2.4 Day One Gain or Loss

If the Group uses a valuation technique that incorporates data not obtained from observable markets for the fair value at initial recognition of financial instruments, there could be a difference between the transaction price and the amount determined using that valuation technique. In these circumstances, the fair value of financial instruments is recognized as the transaction price and the difference is deferred and not recognized in profit or loss, and is amortized by using the straight-line method over the life of the financial instrument. If the fair value of the financial instruments is subsequently determined using observable market inputs, the remaining deferred amount is recognized in profit or loss.

83

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

The aggregate deferred differences yet to be recognized in profit or loss at the beginning and end of the periods and changes in the balances of these differences are as follows:

(In millions of Korean won)	2019			2018
Balance at the beginning of the period (A)		(2,916	)		(4,054	)
New transactions (B)		—			—
Amounts recognized in profit or loss during the period (C= a+b)		1,138			1,138
a. Amortization		1,138			1,138
b. Settlement		—			—
Balance at the end of the period (A+B+C)		(1,778	)		(2,916	)

6.3 Carrying Amounts of Financial Instruments by Category

Financial assets and liabilities are measured at fair value or amortized cost. The carrying amounts of financial assets and liabilities by category as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Financial instruments at fair value through profit or loss		Financial instruments mandatorily measured at fair value through other comprehensive income		Financial instruments designated at fair value through other comprehensive income		Financial instruments at amortized cost		Derivatives held for hedging		Total
Financial assets
Cash and due from financial institutions		—		—		—		14,481,309		—		14,481,309
Financial assets at fair value through profit or loss		13,866,303		—		—		—		—		13,866,303
Derivatives		2,184,099		—		—		—		133,326		2,317,425
Loans at amortized cost		—		—		—		293,531,433		—		293,531,433
Financial investments		—		36,461,280		1,993,674		13,964,339		—		52,419,293
Other financial assets		—		—		—		5,464,704		—		5,464,704
		16,050,402		36,461,280		1,993,674		327,441,785		133,326		382,080,467

	2019
(In millions of Korean won)	Financial instruments at fair value through profit or loss		Financial instruments at amortized cost		Derivatives held for hedging		Total
Financial liabilities
Financial liabilities at fair value through profit or loss		80,235		—		—		80,235
Derivatives		2,132,771		—		36,211		2,168,982
Deposits		—		300,917,482		—		300,917,482
Debts		—		19,141,262		—		19,141,262
Debentures		—		18,739,992		—		18,739,992
Other financial liabilities		—		15,446,504		—		15,446,504
		2,213,006		354,245,240		36,211		356,494,457

84

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Financial instruments at fair value through profit or loss		Financial instruments mandatorily measured at fair value through other comprehensive income		Financial instruments designated at fair value through other comprehensive income		Financial instruments at amortized cost		Derivatives held for hedging		Total
Financial assets
Cash and due from financial institutions		—		—		—		14,889,010		—		14,889,010
Financial assets at fair value through profit or loss		12,257,005		—		—		—		—		12,257,005
Derivatives		1,533,650		—		—		—		80,320		1,613,970
Loans at amortized cost		—		—		—		276,944,202		—		276,944,202
Financial investments		—		28,032,010		1,898,944		12,792,526		—		42,723,480
Other financial assets		—		—		—		4,199,197		—		4,199,197
		13,790,655		28,032,010		1,898,944		308,824,935		80,320		352,626,864

	2018
(In millions of Korean won)	Financial instruments at fair value through profit or loss		Financial instruments at amortized cost		Derivatives held for hedging		Total
Financial liabilities
Financial liabilities at fair value through profit or loss		87,168		—		—		87,168
Derivatives		1,553,858		—		88,551		1,642,409
Deposits		—		272,484,528		—		272,484,528
Debts		—		17,496,055		—		17,496,055
Debentures		—		23,163,585		—		23,163,585
Other financial liabilities		—		13,297,404		—		13,297,404
		1,641,026		326,441,572		88,551		328,171,149

85

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

6.4 Transfer of Financial Assets

6.4.1 Transferred Financial Assets that are Derecognized in Their Entirety

The Group transferred loans and other financial assets that are derecognized in their entirety to SPEs, while the maximum exposure to loss (carrying amount) from its continuing involvement in the derecognized financial assets as at December 31, 2019 and 2018, are as follows :

	2019
(In millions of Korean won)	Type of continuing involvement		Classification of financial instruments	Carrying amount of continuing involvement in statement of financial position		Fair value of continuing involvement in statement of financial position
Discovery 2nd Securitization Specialty Co., Ltd.		Subordinated debt	Financial assets at fair value through profit or loss		5,596		5,596
FK 1411 ABS Ltd.		Subordinated debt	Financial assets at fair value through profit or loss		5,428		5,428
AP 3B ABS Ltd.		Subordinated debt	Financial assets at fair value through profit or loss		3,205		3,205
AP 4D ABS Ltd.		Subordinated debt	Financial assets at fair value through profit or loss		6,175		6,175
					20,404		20,404

86

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Type of continuing involvement		Classification of financial instruments	Carrying amount of continuing involvement in statement of financial position		Fair value of continuing involvement in statement of financial position
Discovery 2nd Securitization Specialty Co., Ltd.		Subordinated debt	Financial assets at fair value through profit or loss		6,205		6,205
FK 1411 ABS Ltd.		Subordinated debt	Financial assets at fair value through profit or loss		8,883		8,883
AP 3B ABS Ltd.		Subordinated debt	Financial assets at fair value through profit or loss		5,512		5,512
AP 4D ABS Ltd.		Subordinated debt	Financial assets at fair value through profit or loss		13,494		13,494
					34,094		34,094

¹ The recovered portion in excess of the consideration paid attributable to adjustments based on the agreement with the National Happiness Fund for non-performing loans amounts to W 13,731 million as at December 31, 2018.

6.4.2 Securities under Repurchase Agreements and Loaned Securities

The Group continues to recognize the financial assets related to repurchase agreements and securities lending transactions on the statements of financial position since those transactions are not qualified for derecognition even though the Group transfers the financial assets. A financial asset is sold under a reverse repurchase agreement to repurchase the same asset at a fixed price, or loaned under a securities lending agreement to be returned as the same asset. Thus, the Group substantially retains all the risks and rewards of ownership of the financial asset. The amounts of transferred assets and related liabilities as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Carrying amount of transferred assets1		Carrying amount of related liabilities
Securities under repurchase agreements		871,929		825,710
Loaned securities		788,790		—
Government and public bonds		788,790		—
		1,660,719		825,710

¹ Securities borrowing included 44,988 million.

87

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Carrying amount of transferred assets		Carrying amount of related liabilities
Securities under repurchase agreements		452,487		436,471
Loaned securities		674,431		—
Government and public bonds		674,431		—
		1,126,918		436,471

6.5 Offsetting Financial Assets and Financial Liabilities

The Group enters into International Swaps and Derivatives Association (“ISDA”) master netting agreements and other similar netting arrangements with the Group’s derivative and spot exchange counterparties. Similar netting agreements are also entered into with the Group’s reverse repurchase, securities and others. Pursuant to these agreements, in the event of default by one party, contracts are to be terminated and receivables and payables are to be offset. Further, as the law allows for the right to offset, domestic uncollected receivables balances and domestic accrued liabilities balances are shown in its net settlement balance in the statement of financial position. Account receivables and account payables related to listed securities and derivatives or OTC derivatives settled by the central counterparty are included in the other financial instruments. As the Group has a legally enforceable right to set off the recognized amounts and intends to settle on a net basis, the net amounts of the other financial instruments balances are presented in the statement of financial position.

Details of financial assets subject to offsetting, enforceable master netting arrangements or similar agreements as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Gross amounts of recognized financial assets		Gross amounts of recognized financial liabilities offset in the statement of financial position			Net amounts of financial assets presented in the statement of financial position		Related amounts not offset in the statement of financial position						Net amount
								Financial instruments			Cash collateral
Derivatives held for trading		2,184,029		—			2,184,029		(1,734,044	)		(1,210	)		582,102
Derivatives held for hedging		133,327		—			133,327
Receivable spot exchange		3,003,910		—			3,003,910		(3,002,566	)		—			1,344
Reverse repurchase		6,173,038		—			6,173,038		(6,173,038	)		—			—
Domestic exchange settlement debits		31,256,658		(30,733,476	)		523,182		—			—			523,182
Other financial instruments		14,827		(6,347	)		8,480		—			—			8,480
		42,765,789		(30,739,823	)		12,025,966		(10,909,648	)		(1,210	)		1,115,108

88

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Gross amounts of recognized financial assets		Gross amounts of recognized financial liabilities offset in the statement of financial position			Net amounts of financial assets presented in the statement of financial position		Related amounts not offset in the statement of financial position						Net amount
								Financial instruments			Cash collateral
Derivatives held for trading		1,533,572		—			1,533,572		(1,182,820	)		(5,101	)		425,972
Derivatives held for hedging		80,321		—			80,321
Receivable spot exchange		1,879,572		—			1,879,572		(1,876,844	)		—			2,728
Reverse repurchase		3,021,400		—			3,021,400		(3,021,400	)		—			—
Domestic exchange settlement debits		27,413,384		(26,937,034	)		476,350		—			—			476,350
Other financial instruments		3,261		(2,098	)		1,163		—			—			1,163
		33,931,510		(26,939,132	)		6,992,378		(6,081,064	)		(5,101	)		906,213

Details of financial liabilities subject to offsetting, enforceable master netting arrangements or similar agreements as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Gross amounts of recognized financial liabilities		Gross amounts of recognized financial assets offset in the statement of financial position			Net amounts of financial liabilities presented in the statement of financial position		Related amounts not offset in the statement of financial position					Net amount
								Financial instruments			Cash collateral
Derivatives held for trading		2,132,286		—			2,132,286		(1,566,026	)		—		602,472
Derivatives held for hedging		36,212		—			36,212
Payable spot exchange		3,003,464		—			3,003,464		(3,002,566	)		—		898
Repurchase1		825,710		—			825,710		(825,710	)		—		—
Domestic exchange settlement credits		32,806,739		(30,733,476	)		2,073,263		(2,073,263	)		—		—
Other financial instruments		6,535		(6,347	)		188		—			—		188
		38,810,946		(30,739,823	)		8,071,123		(7,467,565	)		—		603,558

89

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Gross amounts of recognized financial liabilities		Gross amounts of recognized financial assets offset in the statement of financial position			Net amounts of financial liabilities presented in the statement of financial position		Related amounts not offset in the statement of financial position						Net amount
								Financial instruments			Cash collateral
Derivatives held for trading		1,553,072		—			1,553,072		(1,139,240	)		(47,745	)		454,638
Derivatives held for hedging		88,551		—			88,551
Payable spot exchange		1,877,400		—			1,877,400		(1,876,844	)		—			556
Repurchase1		445,724		—			445,724		(445,724	)		—			—
Domestic exchange settlement credits		28,616,949		(26,937,034	)		1,679,915		(1,679,915	)		—			—
Other financial instruments		5,154		(2,098	)		3,056		—			—			3,056
		32,586,850		(26,939,132	)		5,647,718		(5,141,723	)		(47,745	)		458,250

7. Due from Financial Institutions

Details of due from financial institutions as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)		Financial Institution	Interest rate (%)	2019		2018
Due from financial institutions in Korean won	Due from Bank of Korea	Bank of Korea	—		8,117,840		8,723,761
	Due from banking institutions	KEB Hana Bank and others	0.00 ~ 2.75		187,638		268,222
	Due from others	NH Securities Co., Ltd. and others	—		9,608		5,618
					8,315,086		8,997,601
Due from financial institutions in foreign currencies	Due from banks in foreign currencies	Wells Fargo Bank, N.A. and others	—		2,346,580		1,733,095
	Time deposits in foreign currencies	Industrial Bank Changsha Branch and others	0.69 ~ 7.80		920,240		876,596
	Due from others	Morganstanley Bank International and others	—		209,099		225,944
					3,475,919		2,835,635
					11,791,005		11,833,236

¹  Before netting of allowance

90

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Restricted due from financial institutions as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)		Financial Institution	2019		2018		Reason for restriction
Due from financial institutions in Korean won	Due from Bank of Korea	Bank of Korea		8,117,840		8,723,761	Bank of Korea Act
	Due from others	NH Securities Co., Ltd. and others		9,609		5,618	Derivatives margin account
				8,127,449		8,729,379
Due from financial institutions in foreign currencies	Due from banks in foreign currencies	Bank of Korea and others		490,013		375,130	Bank of Korea Act and others
	Time deposits in foreign currencies	ICBC NEW YORK		23,156		22,362	New York State Banking Law
	Due from others	Morganstanley Bank International and others		118,814		76,930	Derivative transaction margin
				631,983		474,422
				8,759,432		9,203,801

Changes in the allowances for due from financial institutions losses

Changes in the allowances for due from financial institutions losses for the years ended December 31, 2019 and 2018 are as follows:

	2019
	Financial instruments applying 12-month expected credit losses		Financial instruments applying lifetime expected credit losses
(In millions of Korean won)			Non-impaired			Impaired
Beginning1		1,548		—			—
Transfer between stages		—		—			—
Reversal of credit losses		924		1,210			360
Others(change of currency ratio, etc.)		30		(24	)		—
Ending		2,502		1,186			360
	2018
	Financial instruments applying 12-month expected credit losses		Financial instruments applying lifetime expected credit losses
(In millions of Korean won)			Non-impaired			Impaired
Beginning1		1,530		—			—
Transfer between stages		—		—			—
Reversal of credit losses		10		—			—
Others(change of currency ratio, etc.)		8		—			—
Ending		1,548		—			—

¹  Restated based on Korean IFRS 1109.

91

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

8. Assets Pledged as Collaterals

Details of assets pledged as collaterals as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)		2019
Assets pledged	Pledgee	Carrying amount		Reason for the pledge
Securities at fair value through profit or loss	Korea Exchange and others		280,210	Repurchase agreements
	Kyobo Securities and others		11,145	Derivatives transactions
			291,355
Securities at fair value through other comprehensive income	Bank of Korea		1,212,021	Borrowings from Bank of Korea
			653,825	Settlement risk of Bank of Korea
	DEUTSCHE BANK AG and others		95,640	Derivatives transactions
			1,961,486
Securities at amortized cost	Meritz Securities and others		581,268	Repurchase agreements
	Bank of Korea		1,767,559	Borrowings from Bank of Korea
			3,077,151	Settlement risk of Bank of Korea
	KB Securities Co., Ltd.		267,793	Derivatives transactions
	Korea Exchange and others		155,595	Others
			5,849,366
Mortgage loans	Others		6,487,022	Covered Bond
Building / Land	Samsung Life Insurance Co., Ltd. and others		207,333	Others
			14,796,562

(*) In addition to the foregoing, the Group provided W 44,988 million of securities borrowing as collateral for the securities under repurchase agreements.

92

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

(In millions of Korean won)		2018
Assets pledged	Pledgee	Carrying amount		Reason for the pledge
Securities at fair value through profit or loss	Korea Exchange and others		210,345	Repurchase agreements
	Korea Securities Finance Corp and others		50,806	Securities lending transactions
	Samsung Futures Inc. and others		20,535	Derivatives transactions
			281,686
Securities at fair value through other comprehensive income	Bank of Korea		49,948	Borrowings from Bank of Korea
	Bank of Korea		479,784	Settlement risk of Bank of Korea
	Korea Development Bank and others		337,315	Derivatives transactions
			867,047
Securities at amortized cost	Meritz Securities and others		276,688	Repurchase agreements
	Bank of Korea		1,911,160	Borrowings from Bank of Korea
	Bank of Korea		1,474,529	Settlement risk of Bank of Korea
	Samsung Futures Inc. and others		194,258	Derivatives transactions
	Others		156,150	Others
			4,012,785
Mortgage loans	Others		4,060,863	Covered Bond
Building / Land	Samsung Life Insurance Co., Ltd. and others		209,459	Others
			9,431,840

The fair value of collateral available to sell or repledge regardless of debtor’s default as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Fair value of collateral		Fair value of collateral sold or repledged
Securities		6,503,655		—

	2018
(In millions of Korean won)	Fair value of collateral		Fair value of collateral sold or repledged
Securities		3,131,496		—

93

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

9. Derivative Financial Instruments and Hedge Accounting

The Group engages in derivative trading activities to hedge the interest rate and foreign currency risk exposures arising from the Group’s own assets and liabilities. In particular, the Group applies fair value hedge accounting to interest rate swaps that hedge the risk of changes in fair values due to the changes in interest rates of structured debentures denominated in Korean won, issued financial debentures, structured deposits denominated in foreign currencies and debt securities at fair value through other comprehensive income. Also, the Group applies cash flow hedge accounting to interest rate swaps that hedge cash flow risk of debentures denominated in foreign currencies and borrowings denominated in foreign currencies. In addition, the Group applies net investment hedge accounting by designating debentures denominated in foreign currencies and spot components of the currency forward as hedging instruments that hedge foreign exchange risks on net investments in foreign operations.

Details of derivative financial instruments for trading as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Notional amount		Assets		Liabilities
Interest rate
Futures1		837,568		—		—
Swaps2		148,405,496		416,866		485,464
Options		15,502,000		266,863		363,369
		164,745,064		683,729		848,833
Currency
Forwards		79,191,968		885,424		670,066
Futures1		—		—		—
Swaps		46,175,092		609,438		598,670
Options		2,789,562		5,438		14,346
		128,156,622		1,500,300		1,283,082
Stock and index
Futures1		2,185		—		—
Options		22,014		70		371
		24,199		70		371
Others		768,980		—		484
		293,694,865		2,184,099		2,132,770

94

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

(In millions of Korean won)	2018
	Notional amount		Assets		Liabilities
Interest rate
Futures1		857,748		—		—
Swaps2		126,608,935		370,004		351,607
Options		13,259,000		158,295		252,243
	140,725,683		528,299		603,850
Currency
Forwards		65,534,154		533,435		481,187
Futures1		419,802		—		—
Swaps		35,977,216		465,774		454,216
Options		2,450,186		6,064		13,608
	104,381,358		1,005,273		949,011
Stock and index
Futures1		2,006		—		—
Options		51,282		78		211
	53,288		78		211
Others		745,160		—		786
	245,905,489		1,533,650		1,553,858

¹  Gains or losses arising from daily mark-to-market futures are reflected in the margin accounts.

² Notional amounts of \ 116,555,938 million and \93,837,816 million as at December 31, 2019 and December 31, 2018, respectively, were traded through the central counterparty clearing house.

The average price condition for future nominal cash flows of hedging instrument by type of hedge accounting as at December 31, 2019 and December 31, 2018, are as follows:

	2019
(In millions of Korean won)	1 year		2 years		3 years		4 years		5 years		Over 5 years		Total
Fair value hedge
The nominal amount of the hedging instrument		757,201		1,548,353		830,440		309,882		466,053		1,414,570		5,326,499
Average price condition(%), (CD and Libor)		2.29		2.70		2.29		3.16		2.50		3.92		2.91
Cash flow hedge
The nominal amount of the hedging instrument		1,539,874		289,450		521,010		—		—		—		2,350,334
Average price condition(%), (Libor)		2.68		2.65		2.83		—		—		—		2.71
Net investment in a foreign operation hedges
The nominal amount of the hedging instrument		190,342		—		—		—		—		—		190,342
Average price condition (KRW/USD)		1,175.97		—		—		—		—		—		1,175.97

95

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	1 year		2 years		3 years		4 years		5 years		Over 5 years		Total
Fair value hedge
The nominal amount of the hedging instrument		69,134		686,513		1,347,597		567,030		195,392		979,889		3,845,555
Average price condition(%), (CD and Libor)		2.21		2.26		2.65		2.23		3.25		3.66		2.80
Cash flow hedge
The nominal amount of the hedging instrument		2,167,227		491,964		—		503,145		—		—		3,162,336
Average price condition(%), (Libor)		2.70		3.11		—		2.83		—		—		2.78
Net investment in a foreign operation hedges
The nominal amount of the hedging instrument		461,104		—		—		—		—		—		461,104
Average price condition (KRW/USD)		1,126.45		—		—		—		—		—		1,126.45

Fair value hedge

Details of fair value hedged items as at December 31, 2019 and 2018, are as follows:

		2019
		Carrying amount				Accumulated adjusted amount				Changes in the fair value
(In millions of Korean won)		Assets		Liabilities		Assets		Liabilities
Interest rate	Debt securities in Korean won		549,526		—		5,485		—		5,502
	Debt securities in foreign currencies	1,670,838		—		19,243		—		25,540
	Deposits in foreign currencies	—		780,491		—		(18,391)		(62,439)
	Debentures in Korean won		—		351,070		—		21,070		(1,818	)
	Debentures in foreign currencies		—		2,067,556		—		41,406		(65,480	)
		2,220,364		3,199,117		24,728		44,085		(98,695)

96

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

(In millions of Korean won)		2018
		Carrying amount				Accumulated adjusted amount				Changes in the fair value
		Assets		Liabilities		Assets		Liabilities
Interest rate	Debt securities in Korean won		465,213		—		1,214		—		6,001
	Debt securities in foreign currencies	702,727		—		(9,790)		—		(1,233)
	Deposits in foreign currencies	—		805,215		—		(89,265)		38,232
	Debentures in Korean won	—		349,252		—		19,252		(2,308)
	Debentures in foreign currencies	—		1,429,457		—		(24,073)		(1,868)
		1,167,940		2,583,924		(8,576)		(94,086)		38,824

Details of derivative instruments designated as fair value hedge as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019
	Notional amount		Carrying amount				Changes in the fair value
			Assets		Liabilities
Swaps		5,326,500		129,084		29,675		101,448

(In millions of Korean won)	2018
	Notional amount		Carrying amount				Changes in the fair value
			Assets		Liabilities
Swaps		3,845,555		58,934		88,017		(37,637	)

Details of the ineffective portion of changes in fair value of derivatives recognized in profit or loss for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
	Hedge ineffectiveness recognized in profit or loss		Hedge ineffectiveness recognized in profit or loss
Interest rate		2,754		1,186

Gains and losses from fair value hedging instruments and hedged items attributable to the hedged risk for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Gains and losses on hedging instruments		108,442			(41,472	)
Gains and losses on the hedged item attributable to the hedged risk		(105,788	)		37,305
	2,654			(4,167)

97

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Cash flow hedge

Details of cash flow hedged items as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019
	Changes in fair value		Other comprehensive income for cash flow hedge
Interest rate risk		18,365		(3,691	)

(In millions of Korean won)	2018
	Changes in fair value			Other comprehensive income for cash flow hedge
Interest rate risk		(7,031	)		11,539

Details of derivative financial instruments designated as cash flow hedging instruments as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019
	Notional amount		Assets		Liabilities		Changes in fair value
Swaps		2,350,334		835		6,537		(18,276	)

(In millions of Korean won)	2018
	Notional amount		Assets		Liabilities		Changes in fair value
Swaps		3,162,336		17,022		534		6,961

Gains and losses from cash flow hedging instruments and hedged items attributable to the hedged risk for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Gains and losses on hedging instruments		(18,276	)		6,961
Effective gains and losses from cash flow hedging instruments (recognized in other comprehensive income or loss)		(18,108	)		6,980
Ineffective gains and losses from cash flow hedging instruments (recognized in profit or loss)		(168	)		(19	)

Amounts recognized in other comprehensive income and reclassified from equity to profit or loss for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Other comprehensive income or loss		(18,108	)		6,980
Reclassification to profit or loss		(2,899	)		(1,755	)
Income tax effect		5,777			(1,437	)
		(15,230	)		3,788

98

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

As at December 31, 2019, the hedged items subject to cash flow hedge are exposed to the risk of changes in cash flows until June 9, 2022.

Hedges of a net investment in a foreign operation

Details of net investment in a foreign operation as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019
	Changes in fair value		Other comprehensive income (loss) for hedges of a net investment in a foreign operation
Currency (foreign currency risk)		9,967		(37,226	)

(In millions of Korean won)	2018
	Changes in fair value		Other comprehensive income (loss) for hedges of a net investment in a foreign operation
Currency (foreign currency risk)		22,787		(30,960	)

Details of derivative financial instruments designated as hedging instruments in hedge of net investment in a foreign operation as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019
	Notional amount		Carrying amount				Changes in the fair value
			Assets		Liabilities
Forward exchange contract		190,342		3,407		—		(6,887	)
Debentures in foreign currencies		97,255		—		97,255		(3,080	)
		287,597		3,407		97,255		(9,967	)

(In millions of Korean won)	2018
	Notional amount		Carrying amount				Changes in the fair value
			Assets		Liabilities
Forward exchange contract		461,104		4,365		—		(19,466	)
Debentures in foreign currencies		89,448		—		89,109		(3,321	)
		550,552		4,365		89,109		(22,787	)

99

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

The fair value of non-derivative financial instruments designated as hedging instruments in hedge of net investment in a foreign operation as at December 31, 2019 and 2018, is as follows:

(In millions of Korean won)	2019		2018
Debentures in foreign currencies		97,737		88,785

Gains or losses from hedging instruments in hedge of net investment in a foreign operation and hedged items attributable to the hedged risk for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Gains and losses on hedging instruments		(9,967	)		(35,015	)
Effective gains and losses from cash flow hedging instruments (recognized in other comprehensive income or loss)		(9,967	)		(35,015	)
Ineffective gains and losses from cash flow hedging instruments (recognized in profit or loss)		—			—

Gains or losses on the hedging instruments in hedge of net investment in a foreign operation relating to the effective portion of the hedge recognized in other comprehensive income or loss for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Other comprehensive income or loss		(9,962	)		(35,015	)
Reclassification to profit or loss		1,317			—
Income tax effect		2,377			9,629
Other comprehensive income or loss after tax		(6,268	)		(25,386	)

10. Loans at Amortized Cost

Loans as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Loans		294,303,453			277,916,607
Deferred loan origination fees and costs		563,941			581,997
Allowances		(1,335,961	)		(1,554,402	)
Carrying amount		293,531,433			276,944,202

Loans to banks as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Loans		4,041,247			3,484,211
Allowances		(434	)		(620	)
Carrying amount		4,040,813			3,483,591

¹  Deferred loan origination fees and costs are included.

100

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Loans to customers other than banks as at December 31, 2019 and 2018 are as follows:

(In millions of Korean won)	2019
	Retail			Corporate			Total
Loans in Korean won		148,609,480			121,449,552			270,059,032
Loans in foreign currencies		276,084			7,154,477			7,430,561
Domestic import usance bills		—			2,617,862			2,617,862
Off-shore funding loans		—			1,452,288			1,452,288
Call loans		—			610,000			610,000
Bills bought in Korean won		—			2,843			2,843
Bills bought in foreign currencies		—			2,158,877			2,158,877
Guarantee payments under payment guarantee		—			3,312			3,312
Reverse repurchase agreements		—			5,937,258			5,937,258
Privately placed bonds		—			554,114			554,114
	148,885,564			141,940,583			290,826,147
Proportion (%)		51.19			48.81			100.00
Allowances		(474,571	)		(860,956	)		(1,335,527	)
	148,410,993			141,079,627			289,490,620

(In millions of Korean won)	2018
	Retail			Corporate			Total
Loans in Korean won		142,003,442			116,673,099			258,676,541
Loans in foreign currencies		189,582			4,238,278			4,427,860
Domestic import usance bills		—			2,817,174			2,817,174
Off-shore funding loans		—			899,741			899,741
Call loans		—			1,473,397			1,473,397
Bills bought in Korean won		—			3,057			3,057
Bills bought in foreign currencies		—			3,427,368			3,427,368
Guarantee payments under payment guarantee		—			4,104			4,104
Reverse repurchase agreements		—			2,951,400			2,951,400
Privately placed bonds		—			333,751			333,751
	142,193,024			132,821,369			275,014,393
Proportion (%)		51.70			48.30			100.00
Allowances		(445,527	)		(1,108,255	)		(1,553,782	)
	141,747,497			131,713,114			273,460,611

101

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Changes in deferred loan origination fees and costs for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019
	Beginning		Increase		Decrease			Other		Ending
Deferred loan origination costs
Loans in Korean won		592,175		313,847		(332,725	)		—		573,297
Other origination costs		486		826		(398	)		—		914
	592,661		314,673		(333,123)			—		574,211
Deferred loan origination fees
Loans in Korean won		6,322		2,316		(2,503	)		—		6,135
Other origination fees		4,342		2,499		(2,707	)		1		4,135
	10,664		4,815		(5,210)			1		10,270
	581,997		309,858		(327,913)			(1)		563,941

(In millions of Korean won)	2018
	Beginning1		Increase		Decrease			Other		Ending
Deferred loan origination costs
Loans in Korean won		562,425		333,833		(304,083	)		—		592,175
Other origination costs		456		528		(499	)		1		486
	562,881		334,361		(304,582)			1		592,661
Deferred loan origination fees
Loans in Korean won		6,793		2,271		(2,742	)		—		6,322
Other origination fees		4,749		832		(1,240	)		1		4,342
	11,542		3,103		(3,982)			1		10,664
	551,339		331,258		(300,600)			—		581,997

¹  Restated based on Korean IFRS 1109.

102

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

11. Allowances for Loan Losses

Changes in the allowances for loan losses for the years ended December 31, 2019 and 2018, are as follows:

	2019
	Retails											Corporates
	Financial instruments applying 12- month expected credit losses			Financial instruments applying lifetime expected credit losses						Financial instruments applying credit impaired approach		Financial instruments applying 12- month expected credit losses			Financial instruments applying lifetime expected credit losses						Financial instruments applying credit impaired approach
(In millions of Korean won)				Non-impaired			Impaired								Non-impaired			Impaired
Beginning		170,571			157,214			117,742			—		197,866			295,928			615,081			—
Transfer Between stages
Transfer to 12-month expected credit losses		157,691			(157,670	)		(21	)		—		60,005			(46,508	)		(13,497	)		—
Transfer to lifetime expected credit losses (Non-impaired)		(140,407	)		149,809			(9,402	)		—		(53,662	)		136,473			(82,811	)		—
Transfer to lifetime expected credit losses (Impaired)		(280	)		(45,410	)		45,690			—		(2,097	)		(36,462	)		38,559			—
Write-offs		(2	)		24			(322,075	)		—		—			2			(217,532	)		—
Disposal		(467	)		(4	)		(766	)		—		—			—			(8,909	)		—
Provision (reversal) for loan losses1,2		(7,875	)		72,715			288,956			—		(9,172	)		(91,087	)		100,381			—
Others (change of currency ratio, etc.)		55			179			(1,696	)		—		1,580			2,438			(25,186	)		—
Ending		179,286			176,857			118,428			—		194,520			260,784			406,086			—

¹  Provision (reversal) for credit losses in statement of comprehensive income also includes provision (reversal) for unused commitments and guarantees (Note 22.(2)), provision (reversal) for financial guarantee contracts (Note 22.(4)), provision (reversal) of allowance for other financial assets (Note 17.(2)), provision (reversal) of allowance for due from financial institutions (Note 7.(3)) and provision (reversal) of allowance for debt securities (Note 12.(5)).

² Recovery of written-off loans amounting to \ 241,372 million is included.

103

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
	Retails											Corporates
	Financial instruments applying 12- month expected credit losses			Financial instruments applying lifetime expected credit losses						Financial instruments applying credit impaired approach		Financial instruments applying 12 -month expected credit losses			Financial instruments applying lifetime expected credit losses						Financial instruments applying credit impaired approach
(In millions of Korean won)				Non-impaired			Impaired								Non-impaired			Impaired
Beginning1		162,111			155,623			133,002			—		193,359			263,721			759,367			—
Transfer between stages
Transfer to 12-month expected credit losses		101,441			(101,375	)		(66	)		—		37,149			(36,251	)		(897	)		—
Transfer to lifetime expected credit losses (Non-impaired)		(90,045	)		102,159			(12,114	)		—		(34,450	)		44,741			(10,291	)		—
Transfer to lifetime expected credit losses (Impaired)		(753	)		(43,126	)		43,880			—		(2,289	)		(30,694	)		32,982			—
Write-offs		—			(2	)		(297,228	)		—		—			(5	)		(228,900	)		—
Disposal		(248	)		(5	)		(1,003	)		—		(73	)		—			(14,172	)		—
Provision (reversal) for loan losses2,3		(2,075	)		43,621			250,848			—		3,438			53,762			51,051			—
Others (change of currency ratio, etc.)		140			319			423			—		732			654			25,941			—
Ending		170,571			157,214			117,742			—		197,866			295,928			615,081			—

¹ Restated based on Korean IFRS 1109.

² Provision (reversal) for credit losses in statement of comprehensive income also includes provision (reversal) for unused commitments and guarantees (Note 22.(2)), provision(reversal) for financial guarantee contracts (Note 22.(4)), provision(reversal) of allowance for other financial assets (Note 17.(2)), provision (reversal) of allowance for due from financial institutions (Note 7.(3)) and provision(reversal) of allowance for debt securities (Note 12.(5)).

³ Recovery of written-off loans amounting to W 284,493 million is included.

The loan which were written-off but the claims has not been forfeited (i.e. its extinctive prescription did not occur, and that are not collected) amounts to W 9,149,486 million and W 9,712,704 million as at December 31, 2019 and December 31, 2018.

104

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Changes in the gross carrying amounts of loans

Changes in the gross carrying amounts of loans that significantly affect allowances for loan losses for the years ended December 31, 2019 and 2018, are as follows:

	2019
	Financial instruments applying 12- month expected credit losses			Financial instruments applying lifetime expected credit losses						Financial instruments applying credit impaired approach
(In millions of Korean won)				Non-impaired			Impaired
Beginning		255,870,341			21,239,153			1,389,110			—
Transfer between stages
Transfer to 12-month expected credit losses		53,328,737			(53,214,637	)		(114,100	)		—
Transfer to lifetime expected credit losses (Non-impaired)		(56,105,075	)		56,629,820			(524,745	)		—
Transfer to lifetime expected credit losses (Impaired)		(405,440	)		(1,632,279	)		2,037,719			—
Write-offs		(2	)		26			(539,607	)		—
Disposal		(888,511	)		(12,223	)		(186,250	)		—
Net increase(decrease) (Execution, repayment and others)		22,657,035			(3,811,182	)		(850,496	)		—
Ending		274,457,085			19,198,678			1,211,631			—

	2018
	Financial instruments applying 12- month expected credit losses			Financial instruments applying lifetime expected credit losses						Financial instruments applying credit impaired approach
(In millions of Korean won)				Non-impaired			Impaired
Beginning1		229,155,046			22,264,683			1,536,734			—
Transfer between stages
Transfer to 12-month expected credit losses		7,505,305			(7,465,523	)		(39,782	)		—
Transfer to lifetime expected credit losses (Non-impaired)		(10,092,301	)		10,144,226			(51,926	)		—
Transfer to lifetime expected credit losses (Impaired)		(638,686	)		(761,893	)		1,400,579			—
Write-offs		—			(7	)		(526,127	)		—
Disposal		(484,646	)		(3,817	)		(190,401	)		—
Net increase(decrease) (Execution, repayment and others)		30,425,623			(2,938,516	)		(739,967	)		—
Ending		255,870,341			21,239,153			1,389,110			—

¹  Restated based on Korean IFRS 1109.

105

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

12. Financial Assets at Fair Value through Profit or Loss and Financial Investments

Details of financial assets at fair value through profit or loss and financial investments as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Financial assets at fair value through profit or loss
Debt securities
Government and public bonds		1,974,113			1,948,984
Financial bonds		6,368,442			4,933,859
Corporate bonds		1,772,550			1,897,070
Asset-backed securities		100,101			59,807
Beneficiary certificates		2,283,046			2,341,301
Equity investments		209,260			164,777
Derivative-linked securities		160,576			126,417
Other debt securities		578,751			410,810
Equity securities
Stocks		151,526			82,576
Loans
Private placed corporate bonds		150,276			179,714
Other loans		37,857			32,882
Others
Financial instruments indexed to the price of gold		79,805			78,808
	13,866,303			12,257,005
Financial Investments
Financial assets at fair value through other comprehensive income
Debt securities
Government and public bonds		8,172,111			2,941,069
Financial bonds		18,110,228			16,902,114
Corporate bonds		9,218,759			6,971,282
Asset-backed securities		615,890			867,998
Equity securities
Stocks		1,954,173			1,861,901
Equity investments		39,501			37,043
Loans
Private placed corporate bonds		344,292			349,547
	38,454,954			29,930,954
Financial assets at amortized cost
Debt securities
Government and public bonds		538,968			544,926
Financial bonds		7,607,567			6,245,768
Corporate bonds		1,753,941			1,413,022
Asset-backed securities		4,065,105			4,590,107
Allowance		(1,242	)		(1,297	)
	13,964,339			12,792,526
	52,419,293			42,723,480

106

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Dividend incomes from the equity securities designated at fair value through other comprehensive income for the years ended December 31, 2019 and 2018, are as follows:

		2019
(In millions of Korean won)		From the financial asset derecognized		From the remaining financial asset
Stocks	Listed		—		26,121
	Unlisted		—		17,025
Equity investments			—		—
			—		43,146

		2018
(In millions of Korean won)		From the financial asset derecognized		From the remaining financial asset
Stocks	Listed		—		22,173
	Unlisted		—		14,508
Equity investments			—		2,256
			—		38,937

The derecognized equity securities at fair value through other comprehensive income for the years ended December 31, 2019 and 2018, are as follows:

		2019
(In millions of Korean won)		Disposal price1		Accumulated OCI as at disposal date
Stocks	Listed		18,342		(25,652	)
	Unlisted		1,671		169
			20,013		(25,483	)

		2018
(In millions of Korean won)		Disposal price1		Accumulated OCI as at disposal date
Stocks	Listed		26,877		18,330
	Unlisted		480		480
			27,357		18,810

¹ In accordance with the resolution of the creditor groups and the joint sales agreement, the Group disposed of stocks acquired by a debt to equity swap.

107

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Provision, and reversal for the allowance of financial investments for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won) Debt instruments at fair value through other comprehensive income	2019
	Impairment losses			Reversal of impairment		Total
		(1,330	)		365		(965	)
Loans at fair value through other comprehensive income		(170	)		947		777
Securities at amortized cost		(216	)		271		55
		(1,716	)		1,583		(133	)

(In millions of Korean won)	2018
	Impairment losses			Reversal of impairment		Total
Debt instruments at fair value through other comprehensive income		(877	)		342		(535	)
Loans at fair value through other comprehensive income		(905	)		825		(80	)
Securities at amortized cost		(202	)		282		80
		(1,984	)		1,449		(535	)

Changes in the allowances for financial investments for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019
	Financial instruments applying 12- month expected credit losses			Financial instruments applying lifetime expected credit losses
				Non-impaired			Impaired
Beginning		3,758			193			—
Transfer between stages		—			—			—
Transfer to 12-month expected credit losses		189			(189	)		—
Transfer to lifetime expected credit losses		(669	)		669			—
Disposal		(329	)		—			—
Provision (reversal) for loan losses		834			(701	)		—
Others (change of currency ratio, etc.)		38			28			—
Ending		3,821			—			—

108

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

(In millions of Korean won)	2018
	Financial instruments applying 12- month expected credit losses			Financial instruments applying lifetime expected credit losses
				Non-impaired			Impaired
Beginning1		3,042			482			—
Transfer between stages
Transfer to 12-month expected credit losses		125			(125	)		—
Transfer to lifetime expected credit losses		—			—			—
Disposal		(171	)		—			—
Provision (reversal) for loan losses		715			(180	)		—
Others (change of currency ratio, etc.)		48			16			—
Ending		3,759			193			—

¹  Prepared in accordance with Korean IFRS 1109.

13. Investments in Associates

Investments in associates as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019
	Ownership (%)		Acquisition cost		Share of net asset amount			Carrying amount		Industry	Location
Korea Credit Bureau Co., Ltd.1		9.00		4,500		5,991			5,991	Credit information		Korea
Balhae Infrastructure Fund1		12.61		105,213		101,390			101,390	Investment finance		Korea
KB GwS Private Securities Investment Trust		20.93		89,124		108,026			108,026	Investment finance		Korea
Incheon Bridge Co., Ltd. 1		14.99		9,159		(14,746	)		—	Operation of highways and related facilities		Korea
KB Sprott Renewables No.1. Private Equity Fund1		30.00		1,327		1,031			1,031	Investment finance		Korea
KB Digital innovation & Growth New Technology Business Investment Fund1		45.00		2,250		2,030			2,030	Discovery of and investment in promising FinTech-business venture		Korea
KB12-1 Venture Investment Partnership2		80.00		14,000		53,535			53,535	Investment finance		Korea
Future Planning KB Start-up Creation Fund2		50.00		9,900		15,021			15,021	Investment finance		Korea
KoFC POSCO HANWHA KB Shared Growth No.2.		20.00		10,376		10,892			10,892	Investment finance		Korea
KB High-tech Company Investment Fund2		50.00		13,350		31,904			31,904	Investment finance		Korea
Aju Good Technology Venture Fund		38.46		19,998		23,016			23,016	Investment finance		Korea
KB-KDBC New Technology Business Investment Fund2		33.33		10,000		9,494			9,494	Investment finance		Korea
KB-TS Technology Venture Private Equity Fund2		30.00		10,620		10,570			10,570	Investment finance		Korea

109

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

KB Intellectual Property Fund 22	37.50		9,000		8,514			8,514	Investment finance	Korea
KB Digital Innovation Investment Fund Limited partnership2	25.74		32,200		31,371			31,371	Investment finance	Korea
KB-Brain KOSDAQ Scale-up Fund2	21.28		11,000		10,252			10,252	Investment finance	Korea
KB Global Platform Fund2	22.73		19,500		18,779			18,779	Investment finance	Korea
KB-UTC Inno-Tech Venture Fund2	29.53		300		278			278	Investment finance	Korea
Shinla Construction Co., Ltd. 3	20.17		—		(551	)		—	Specialty construction	Korea
Terra Corporation3	24.06		—		2			—	Manufacture of fabricated and processed metal products	Korea
MJT&I Corp. 3	22.89		—		(613	)		116	Wholesale of other merchandise	Korea
Jungdong Steel Co., Ltd. 3	42.65		—		(433	)		—	Wholesale of primary metal	Korea
Doosung Metal Co., Ltd3	26.49		—		(62	)		—	Manufacture of metal door, windows, shutter and relevant products	Korea
Shinhwa Underwear Co., Ltd. 3	26.05		—		16			256	Manufacture of underwear and sleepwear	Korea
DPAPS Co., Ltd. 3	38.62		—		—			—	Wholesale of paper	Korea
Jaeyang Industry Co., Ltd. 3	20.86		—		(552	)		—	Manufacture of pouches, cases, and bags	Korea
Kendae Co., Ltd. 3	41.01		—		(252	)		98	Screen Printing	Korea
Jinseung Tech Co., Ltd. 3	30.04		—		(194	)		—	Manufacture of other general-purpose machinery n.e.c.	Korea
Dongjo Co., Ltd. 3	29.29		—		806			115	Wholesale of agricultural and forestry machinery and equipment	Korea
Korea NM Tech Co., Ltd. 3	22.41		—		552			—	Manufacture of motor vehicles, trailers and semitrailers	Korea
Jungdo Co., Ltd. 3	25.34		—		1,492			—	Office, commercial and institutional building construction	Korea
Dae-A Leisure Co., Ltd. 3	49.36		—		1,613			578	Earth works	Korea
Chong Il Machine & Tools Co., Ltd. 3	20.40		—		(126	)		—	Wholesale machinery and equipment	Korea
Imt Technology Co., Ltd. 3	25.29		—		22			3	Computer Peripherals distribution	Korea
Iwon Alloy Co., Ltd. 3	23.20		—		394			—	Manufacture of smelting, refining and alloys	Korea
Carlife Co., Ltd. 3	24.39		—		(75	)		—	Publishing of magazines and periodicals (publishing industry)	Korea
Computerlife Co., Ltd. 3	45.71		—		(260	)		69	Publishing of magazines and periodicals (publishing industry)	Korea
SKYDIGITAL INC.3	20.40		—		(248	)		—	Manufacture of Multimedia machine	Korea
Jo Yang Industrial Co., Ltd.3	22.77		—		75			—	Manufacture of Special Glasses	Korea
IL-KWANG ELECTRONIC MATERIALS CO., LTD3	29.06		—		(398	)		—	Manufacture of electronic parts	Korea
SO-MYUNG RECYCLING CO., LTD.3	20.23		—		184			—	Manufacture of nonferrous metal	Korea
IDTECK CO., LTD3	32.80		—		(103	)		—	Other manufacturing of wireless	Korea
Seyoon Development Company3	26.95		—		2			—	Civil engineering facility construction industry	Korea
PIP System CO., LTD3	20.72		—		27			—	Print equipment	Korea
PT Bank Bukopin TBK4,5	22.00		116,422		115,321			121,382	Bank, foreign currency work	Indonesia
		488,239		543,987			564,711

110

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

(In millions of Korean won)	2018
	Ownership (%)		Acquisition cost		Share of net asset amount			Carrying amount		Industry	Location
Korea Credit Bureau Co., Ltd.1		9.00		4,500		5,941			5,941	Credit information		Korea
Balhae Infrastructure Fund1		12.61		104,621		108,050			108,050	Investment finance		Korea
KB GwS Private Securities Investment Trust		20.93		89,124		106,613			106,613	Investment finance		Korea
Incheon Bridge Co., Ltd. 1		14.99		9,159		(16,689	)		—	Operation of highways and related facilities		Korea
KB Digital innovation & Growth New Technology Business Investment Fund1		45.00		1,125		1,079			1,079	Discovery of and investment in promising FinTech-business venture		Korea
KB12-1 Venture Investment Partnership2		80.00		17,400		49,912			49,912	Investment finance		Korea
Future Planning KB Start-up Creation Fund2		50.00		14,300		18,069			18,069	Investment finance		Korea
KoFC KBIC Frontier Champ 2010-5(PEF)		30.00		90		140			140	Investment finance		Korea
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund		20.00		10,376		11,681			11,681	Investment finance		Korea
KB High-tech Company Investment Fund2		50.00		20,300		22,563			22,563	Investment finance		Korea
Aju Good Technology Venture Fund		38.46		18,038		18,134			18,134	Investment finance		Korea
KB-KDBC New Technology Business Investment Fund2		33.33		7,500		7,297			7,297	Investment finance		Korea
KBTS Technology Venture Private Equity Fund2		30.00		7,620		7,381			7,381	Investment finance		Korea
KB IP Investment Fund II2		37.50		3,000		2,942			2,942	Investment finance		Korea
KB Digital Innovation Investment Fund Limited partnership2		25.74		7,700		7,617			7,617	Investment finance		Korea
KB-Brain KOSDAQ Scale-up Fund2		21.28		4,000		3,966			3,966	Investment finance		Korea
KB Star office private real estate Investment Trust No.1		21.05		20,000		20,252			20,252	Investment finance		Korea
Shinla Construction Co., Ltd. 3		20.17		—		(551	)		—	Specialty construction		Korea
Terra Corporation3		24.06		—		2			—	Manufacture of fabricated and processed metal products		Korea
MJT&I Corp. 3		22.89		—		(606	)		122	Wholesale of other merchandise		Korea
Jungdong Steel Co., Ltd. 3		42.65		—		(433	)		—	Wholesale of primary metal		Korea
Doosung Metal Co., Ltd3		26.49		—		(16	)		—	Manufacture of metal door, windows, shutter and relevant products		Korea

111

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Shinhwa Underwear Co., Ltd. 3	26.05		—		(57	)		182	Manufacture of underwear and sleepwear	Korea
DPAPS Co., Ltd. 3	38.62		—		14			—	Wholesale of paper	Korea
Jaeyang Industry Co., Ltd. 3	20.86		—		(552	)		—	Manufacture of pouches, cases, and bags	Korea
Kendae Co., Ltd. 3	41.01		—		(252	)		98	Screen Printing	Korea
Jinseung Tech Co., Ltd. 3	30.04		—		(176	)		—	Manufacture of other general-purpose machinery n.e.c.	Korea
Dongjo Co., Ltd. 3	29.29		—		806			115	Wholesale of agricultural and forestry machinery and equipment	Korea
Korea NM Tech Co., Ltd. 3	22.41		—		552			—	Manufacture of motor vehicles, trailers and semitrailers	Korea
Jungdo Co., Ltd. 3	25.34		—		1,492			—	Office, commercial and institutional building construction	Korea
Dae-A Leisure Co., Ltd. 3	49.36		—		1,613			578	Earth works	Korea
Chong Il Machine & Tools Co., Ltd. 3	20.40		—		(107	)		—	Wholesale machinery and equipment	Korea
Imt Technology Co., Ltd. 3	25.29		—		18			—	Computer Peripherals distribution	Korea
Iwon Alloy Co., Ltd. 3	23.20		—		394			—	Manufacture of smelting, refining and alloys	Korea
Carlife Co., Ltd. 3	24.39		—		(75	)		—	Publishing of magazines and periodicals (publishing industry)	Korea
Computerlife Co., Ltd. 3	45.71		—		(329	)		—	Publishing of magazines and periodicals (publishing industry)	Korea
SKYDIGITAL INC.3	20.40		—		(142	)		—	Manufacture of Multimedia machine	Korea
Jo Yang Industrial Co., Ltd.3	22.77		—		75			—	Manufacture of Special Glasses	Korea
PT Bank Bukopin TBK4,5	22.00		116,422		106,484			113,932	Bank, foreign currency work	Indonesia
		455,275		483,102			506,664

¹ As at December 31, 2019 and December 31, 2018, the Group is represented in the governing bodies of its associates. Therefore, the Group has significant influence over the decision-making process relating to their financial and business policies.

² As at December 31, 2019 and December 31 2018, the Group is a partner in a limited partnership and does not have the right to control over these entities.

³ The investment in associates was reclassified from financial assets at fair value through other comprehensive income due to termination of rehabilitation procedures.

⁴ The Group has entered into an agreement with PT Bosowa Corporindo, the major shareholder of PT Bank Bukopin TBK. Under this agreement, both parties have a right of first refusal, a tag-along right and a drag-along right. The Group additionally has the drag-along right that can be exercised for the duration of two years after three-years from acquisition date (July 27, 2018), subject to the occurrence of certain situations as defined in the agreement.

⁵ The fair value of PT Bank Bukopin TBK’s common stock based on its quoted market price is \47,709 million and \53,540 million as at December 31, 2019 and December 31, 2018.

Although the Group holds more than 20% of ownership in many investment trusts including Hanbando BTL Private Special Asset Fund, those investment trusts are not recognized as associates of the Group because the Bank’s influence to those trust is limited according to the trust agreement. In addition, the Group holds more than 20% of its ownership in nine companies including Orient shipyard Co., Ltd., but those companies are not recogniazed as associates of the Bank bacause the Group’s influence to those companies is limited due to the status of those companies such as bankruptcy and rehabilitation.

112

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Summarized financial information on the main associates, the carrying amount of the Group’s interest in the main associates and dividends received from the main associates is as follows:

	20191
(In millions of Korean won)	Total assets		Total liabilities		Paid-in capital		Equity			Share of net asset amount			Unrealized gains and losses and others		Carrying amount
Korea Credit Bureau Co., Ltd.		96,855		30,289		10,000		66,566			5,991			—		5,991
Balhae Infrastructure Fund		806,218		1,854		834,695		804,364			101,390			—		101,390
KB GwS Private Securities Investment Trust		522,865		741		425,814		522,124			108,026			—		108,026
Incheon Bridge Co., Ltd.		609,194		707,563		61,096		(98,369	)		(14,746	)		14,746		—
KB Sprott Renewables No.1. Private Equity Fund		3,686		249		9,640		3,437			1,031			—		1,031
KB Digital Innovation & Growth New Technology Business Investment Fund		4,510		—		5,000		4,510			2,030			—		2,030
KB12-1 Venture Investment Partnership		67,896		977		17,500		66,919			53,535			—		53,535
Future Planning KB Start-up Creation Fund		32,704		2,662		19,800		30,042			15,021			—		15,021
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund		55,524		1,063		51,880		54,461			10,892			—		10,892
KB High-tech Company Investment Fund		64,125		317		26,700		63,808			31,904			—		31,904
Aju Good Technology Venture Fund		60,675		828		52,000		59,847			23,016			—		23,016
KB-KDBC New Technology Business Investment Fund		29,086		603		30,000		28,483			9,494			—		9,494
KBTS Technology Venture Private Equity Fund		36,445		1,212		35,400		35,233			10,570			—		10,570
KB IP Investment FundII		22,708		4		24,000		22,704			8,514			—		8,514
KB Digital Innovation Investment Fund Limited partnership		122,153		255		125,120		121,898			31,371			—		31,371
KB-Brain KOSDAQ Scale-up Fund		48,369		185		51,700		48,184			10,252			—		10,252
KB Global Platform Fund		85,314		2,686		85,800		82,628			18,779			—		18,779
KB-UTC Inno-Tech Venture Fund		1,016		75		1,016		941			278			—		278
PT Bank Bukopin TBK2		8,148,013		7,623,829		106,536		524,184			115,321			6,061		121,382

113

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	20191
(In millions of Korean won)	Operating revenues		Profit (Loss)			Other comprehen- sive income		Comprehen- sive income (loss)			Dividends
Korea Credit Bureau Co., Ltd.		91,200		1,480			—		1,480			135
Balhae Infrastructure Fund		62,113		(3,153	)		—		(3,153	)		6,855
KB GwS Private Securities Investment Trust		42,503		41,524			—		41,524			7,276
Incheon Bridge Co., Ltd.		107,178		9,127			—		9,127			—
KB Sprott Renewables No.1. Private Equity Fund		1		(986	)		—		(986	)		—
KB Digital Innovation & Growth New Technology Business Investment Fund		8		(388	)		—		(388	)		—
KB12-1 Venture Investment Partnership		15,082		8,778			—		8,778			—
Future Planning KB Start-up Creation Fund		5,831		2,704			—		2,704			—
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund		4,077		(3,911	)		—		(3,911	)		—
KB High-tech Company Investment Fund		35,565		32,581			—		32,581			—
Aju Good Technology Venture Fund		9,288		7,734			—		7,734			—
KB-KDBC New Technology Business Investment Fund		371		(638	)		—		(638	)		—
KBTS Technology Venture Private Equity Fund		1,643		632			—		632			—
KB IP Investment FundII		70		(1,141	)		—		(1,141	)		—
KB Digital Innovation Investment Fund Limited partnership		2,564		(2,900	)		—		(2,900	)		—
KB-Brain KOSDAQ Scale-up Fund		138		(3,355	)		—		(3,355	)		—
KB Global Platform Fund		250		(3,172	)		—		(3,172	)		—
KB-UTC Inno-Tech Venture Fund		—		(75	)		—		(75	)		—
PT Bank Bukopin TBK		721,169		(5,612	)		45,780		40,168			—

114

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	20181
(In millions of Korean won)	Total assets		Total liabilities		Paid-in capital		Equity			Share of net asset amount			Unrealized gains and losses and others		Carrying amount
Korea Credit Bureau Co., Ltd.		88,797		22,788		10,000		66,009			5,941			—		5,941
Balhae Infrastructure Fund		859,040		1,843		829,995		857,197			108,050			—		108,050
KB GwS Private Securities Investment Trust		516,115		741		425,814		515,374			106,613			—		106,613
Incheon Bridge Co., Ltd.		617,560		728,896		61,096		(111,336	)		(16,689	)		16,689		—
KB Digital Innovation & Growth New Technology Business Investment Fund		2,398		—		2,500		2,398			1,079			—		1,079
KB12-1 Venture Investment Partnership		63,628		1,238		21,750		62,390			49,912			—		49,912
Future Planning KB Start-up Creation Fund		38,889		2,751		28,600		36,138			18,069			—		18,069
KoFC KBIC Frontier Champ 2010-5(PEF)		469		3		300		466			140			—		140
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund		59,464		1,061		51,880		58,403			11,681			—		11,681
KB High-tech Company Investment Fund		45,402		276		40,600		45,126			22,563			—		22,563
Aju Good Technology Venture Fund		47,216		66		46,900		47,150			18,134			—		18,134
KB-KDBC New Technology Business Investment Fund		22,492		602		22,500		21,890			7,297			—		7,297
KBTS Technology Venture Private Equity Fund		24,810		208		25,400		24,602			7,381			—		7,381
KB IP Investment FundII		7,848		3		8,000		7,845			2,942			—		2,942
KB Digital Innovation Investment Fund Limited partnership		29,601		3		29,920		29,598			7,617			—		7,617
KB-Brain KOSDAQ Scale-up Fund		18,820		181		18,800		18,639			3,966			—		3,966
KB Star office private real estate Investment Trust No.1		218,025		121,828		95,000		96,197			20,252			—		20,252
PT Bank Bukopin TBK2		7,195,249		6,711,233		106,536		484,016			106,484			7,448		113,932

115

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	20181
(In millions of Korean won)	Operating revenues		Profit (Loss)			Other comprehen- sive income			Comprehen- sive income (loss)			Dividends
Korea Credit Bureau Co., Ltd.		78,018		9,901			—			9,901			113
Balhae Infrastructure Fund		61,525		54,241			—			54,241			6,804
KB GwS Private Securities Investment Trust		42,502		41,524			—			41,524			6,385
Incheon Bridge Co., Ltd.		94,373		(2,757	)		—			(2,757	)		—
KB Digital Innovation & Growth New Technology Business Investment Fund		7		(82	)		(21	)		(103	)		—
KB12-1 Venture Investment Partnership		38,942		35,556			—			35,556			10,640
Future Planning KB Start-up Creation Fund		6,826		5,467			—			5,467			2,600
KoFC KBIC Frontier Champ 2010-5(PEF)		1,460		1,453			—			1,453			999
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund		2,401		(12,313	)		—			(12,313	)		—
KB High-tech Company Investment Fund		5,025		86			—			86			—
Aju Good Technology Venture Fund		2,491		1,356			—			1,356			—
KB-KDBC New Technology Business Investment Fund		39		(568	)		—			(568	)		—
KBTS Technology Venture Private Equity Fund		—		(798	)		—			(798	)		—
KB IP Investment FundII		9		(155	)		—			(155	)		—
KB Digital Innovation Investment Fund Limited partnership		24		(322	)		—			(322	)		—
KB-Brain KOSDAQ Scale-up Fund		20		(161	)		—			(161	)		—
KB Star office private real estate Investment Trust No.1		14,092		6,135			—			6,135			1,162
PT Bank Bukopin TBK		148,793		(8,843	)		(2,325	)		(11,168	)		—

¹ The amounts included in the financial information of the associates are adjusted to reflect adjustments made by the Group, such as fair value adjustments made at the time of acquisition and adjustments for differences in accounting policies.

²  The goodwill of PT Bank Bukopin TBK as at December 31, 2019 and 2018, are W 4,437 million and W 4,101 million, respectively.

116

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Changes in investments in associates for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Beginning		Acquisition and others		Disposal and others			Dividends			Gains (losses) from using equity method			Other comprehensive income		Impairment loss			Ending
Korea Credit Bureau Co., Ltd.		5,941		—		—			(135	)		185			—		—			5,991
Balhae Infrastructure Fund		108,050		593		—			(6,855	)		(398	)		—		—			101,390
KB GwS Private Securities Investment Trust		106,613		—		—			(7,276	)		8,689			—		—			108,026
KB Sprott Renewables No.1. Private Equity Fund		—		1,327		—			—			(296	)		—		—			1,031
KB Digital Innovation & Growth New Technology Business Investment Fund		1,079		1,125		—			—			(174	)		—		—			2,030
KB12-1 Venture Investment Partnership		49,912		—		(3,400	)		—			7,023			—		—			53,535
Future Planning KB Start-up Creation Fund		18,069		—		(4,400	)		—			1,352			—		—			15,021
KoFC KBIC Frontier Champ 2010-5(PEF)		140		—		(140	)		—			—			—		—			—
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund		11,681		—		—			—			(789	)		—		—			10,892
KB High-tech Company Investment Fund		22,563		—		(6,950	)		—			16,291			—		—			31,904
Aju Good Technology Venture Fund		18,134		1,960		—			—			2,922			—		—			23,016
KB-KDBC New Technology Business Investment Fund		7,297		2,500		—			—			(303	)		—		—			9,494
KBTS Technology Venture Private Equity Fund		7,381		4,200		(1,200	)		—			189			—		—			10,570
KB Intellectual Property Fund 2		2,942		6,000		—			—			(428	)		—		—			8,514
KB Digital Innovation Investment Fund Limited Partnership		7,617		24,500		—			—			(746	)		—		—			31,371
KB-Brain KOSDAQ Scale-up Fund		3,966		7,000		—			—			(714	)		—		—			10,252
KB Global Platform Fund		—		19,500		—			—			(721	)		—		—			18,779
KB-UTC Inno-Tech Venture Fund		—		300		—			—			(22	)		—		—			278
KB Star office private real estate Investment Trust No.1		20,252		—		(20,252	)		—			—			—		—			—
MJT&I Corp.		122		—		—			—			(6	)		—		—			116
Shinhwa Underwear Co., Ltd.		182		—		—			—			74			—		—			256
Kendae Co.,Ltd.		98		—		—			—			—			—		—			98
Dongjo Co., Ltd.		115		—		—			—			—			—		—			115
Dae-A Leisure Co., Ltd.		578		—		—			—			—			—		—			578
Imt Technology Co., Ltd.		—		—		—			—			3			—		—			3
Computerlife Co., Ltd		—		—		—			—			69			—		—			69
IL-KWANG ELECTRONIC MATERIALS CO., LTD.		—		—		—			—			—			—		—			—
SO-MYUNG RECYCLING CO., LTD.		—		—		—			—			—			—		—			—
IDTECK CO., LTD		—		—		—			—			—			—		—			—
Seyoon Development Company		—		—		—			—			—			—		—			—
PIP System CO., LTD		—		—		—			—			—			—		—			—
PT Bank Bukopin TBK		113,932		—		—			—			(1,235	)		10,408		(1,723	)		121,382
		506,664		69,005		(36,342	)		(14,266	)		30,965			10,408		(1,723	)		564,711

117

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Beginning1		Acquisition and others		Disposal and others			Dividends			Gains (losses) from using equity method			Other comprehensive income			Ending
Korea Credit Bureau Co., Ltd.		5,056		—		—			(113	)		998			—			5,941
Balhae Infrastructure Fund		105,190		4,645		(1,818	)		(6,804	)		6,837			—			108,050
KB GwS Private Securities Investment Trust		104,310		—		—			(6,386	)		8,689			—			106,613
KB Digital Innovation & Growth New Technology Business Investment Fund		—		1,125		—			—			(37	)		(9	)		1,079
KB12-1 Venture Investment Partnership		37,507		—		(5,400	)		(10,640	)		28,445			—			49,912
Future Planning KB Start-up Creation Fund		18,336		—		(400	)		(2,600	)		2,733			—			18,069
KoFC KBIC Frontier Champ 2010-5(PEF)		4,137		—		(3,138	)		(999	)		140			—			140
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund		14,171		—		—			—			(1,498	)		(992	)		11,681
KB High-tech Company Investment Fund		27,220		—		(4,700	)		—			43			—			22,563
Aju Good Technology Venture Fund		8,230		9,808		—			—			96			—			18,134
KB-KDBC New Technology Business Investment Fund		2,486		5,000		—			—			(189	)		—			7,297
KBTS Technology Venture Private Equity Fund		—		7,620		—			—			(239	)		—			7,381
KB IP Investment FundII		—		3,000		—			—			(58	)		—			2,942
KB Digital Innovation Investment Fund Limited Partnership		—		7,700		—			—			(83	)		—			7,617
KB-Brain KOSDAQ Scale-up Fund		—		4,000		—			—			(34	)		—			3,966
KB Star office private real estate Investment Trust No.1		20,122		—		—			(1,162	)		1,292			—			20,252
Terra Corporation		20		—		—			—			(20	)		—			—
MJT&I Corp.		127		—		—			—			(5	)		—			122
Shinhwa Underwear Co., Ltd.		138		—		—			—			44			—			182
Kendae Co.,Ltd.		127		—		—			—			(29	)		—			98
Dongjo Co., Ltd.		—		—		—			—			115			—			115
Dae-A Leisure Co., Ltd.		—		—		—			—			3,698			(3,120	)		578
PT Bank Bukopin TBK		—		116,422		—			—			(1,946	)		(544	)		113,932
		347,177		159,320		(15,456	)		(28,704	)		48,992			(4,665	)		506,664

¹ Restated based on Korean IFRS 1109.

118

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

The tables below provide unrecognized share of losses of associates, both for the reporting period and cumulatively, because the Group has stopped recognizing its share of losses of associates when applying the equity method.

	2019					2018
(In millions of Korean won)	Unrecognized loss (gain)			Accumulated unrecognized loss		Unrecognized loss (gain)			Accumulated unrecognized loss
Incheon Bridge Co., Ltd.		(1,944	)		14,746		487			16,689
Shinla Construction Co., Ltd.		—			183		—			183
Doosung Metal Co., Ltd		46			65		(4	)		19
Jungdong Steel Co., Ltd		—			487		—			487
DPAPS Co., Ltd.		14			339		141			325
Jinseung Tech Co., Ltd.		18			21		3			3
Korea NM Tech Co., Ltd.		—			28		28			28
Jungdo Co., Ltd.		—			160		160			160
Jaeyang Industry Co., Ltd.		—			30		30			30
Terra Corporation		—			14		14			14
Chong Il Machine & Tools Co., Ltd.		19			19		—			—
SKYDIGITAL INC		106			106		—			—

119

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

14. Property and Equipment, and Investment Properties

Details of property and equipment as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Acquisition cost		Accumulated depreciation			Accumulated impairment losses			Carrying amount
Land		1,985,370		—			(1,018	)		1,984,352
Buildings		1,478,343		(476,154	)		(5,859	)		996,330
Leasehold improvements		788,586		(697,387	)		—			91,199
Equipment and vehicles		1,262,759		(1,001,033	)		—			261,726
Construction in-progress		85,953		—			—			85,953
Right-of-use assets		597,267		(232,453	)		—			364,814
		6,198,278		(2,407,027	)		(6,877	)		3,784,374

	2018
(In millions of Korean won)	Acquisition cost		Accumulated depreciation			Accumulated impairment losses			Carrying amount
Land		1,979,811		—			(1,018	)		1,978,793
Buildings		1,256,234		(442,318	)		(5,859	)		808,057
Leasehold improvements		794,814		(700,046	)		—			94,768
Equipment and vehicles		1,147,644		(993,785	)		—			153,859
Construction in-progress		81,268		—			—			81,268
Finance lease assets		32,709		(21,788	)		—			10,921
		5,292,480		(2,157,937	)		(6,877	)		3,127,666

Changes in property and equipment for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Beginning1		Acquisition		Transfers2			Disposal			Depreciation			Others			Ending
Land		1,978,793		185		5,483			(124	)		—			15			1,984,352
Buildings		808,057		67		224,748			(3,095	)		(33,481	)		34			996,330
Leasehold improvements		89,709		2,707		62,263			—			(63,576	)		96			91,199
Equipment and vehicles		153,859		229,793		—			(234	)		(121,820	)		128			261,726
Construction in-progress		81,268		292,852		(288,119	)		—			—			(48	)		85,953
Right-of-use assets		376,606		328,623		—			(138,642	)		(218,565	)		16,792			364,814
		3,488,292		854,227		4,375			(142,095	)		(437,442	)		17,017			3,784,374

120

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Beginning		Acquisition		Transfers2			Disposal			Depreciation			Others		Ending
Land		1,972,212		124		7,129			(691	)		—			19		1,978,793
Buildings		801,064		—		40,956			(4,079	)		(29,928	)		44		808,057
Leasehold improvements		76,076		1,086		69,646			(242	)		(62,035	)		10,237		94,768
Equipment and vehicles		148,826		102,974		246			(795	)		(97,423	)		31		153,859
Construction in-progress		12,187		229,765		(160,684	)		—			—			—		81,268
Finance lease assets		5,229		9,640		—			—			(3,948	)		—		10,921
		3,015,594		343,589		(42,707	)		(5,807	)		(193,334	)		10,331		3,127,666

¹  Restated based on Korean IFRS 1116.

² Including transfers from investment properties and assets held for sale.

Changes in accumulated impairment losses of property and equipment for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)

2019
Beginning	Impairment		Reversal		Others		Ending
(6,877)		—		—		—		(6,877	)

(In millions of Korean won)

2018
Beginning	Impairment		Reversal		Others		Ending
(6,877)		—		—		—		(6,877	)

Details of investment properties as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Acquisition cost		Accumulated depreciation			Carrying amount
Land		328,587		—			328,587
Buildings		164,774		(17,393	)		147,381
		493,361		(17,393	)		475,968

	2018
(In millions of Korean won)	Acquisition cost		Accumulated depreciation			Carrying amount
Land		166,737		—			166,737
Buildings		107,554		(16,367	)		91,187
		274,291		(16,367	)		257,924

121

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

The valuation technique and input variables that are used to measure the fair value of investment property as at December 31, 2019, are as follows:

(In millions of Korean won)	2019
	Fair Value		Valuation technique	Inputs
Land and Buildings		47,623	Cost approach value	- Price per square meter - Replacement cost
		465,684	Income approach	- Discount rate - Capitalization rate - Vacancy rate

As at December 31, 2019 and 2018, fair values of the investment properties amount to W 513,307 million and W 286,475 million, respectively. The investment properties were measured by qualified independent appraisers with experience in valuing similar properties in the same area. In addition, per the fair value hierarchy on Note 6.1, the fair value hierarchy of all investment properties has been categorized and classified as Level 3.

Rental income from the above investment properties for the years ended December 31, 2019 and 2018, amounts to W 15,663 million and W 18,162 million, respectively.

Changes in investment properties for the years ended December 31, 2019 and 2018, are as follows:

			2019
(In millions of Korean won)	Beginning		Acquisitions		Transfers			Disposal		Depreciation			Ending
Land		166,737		167,333		(5,483	)		—		—			328,587
Buildings		91,187		63,251		(4,195	)		—		(2,862	)		147,381
		257,924		230,584		(9,678	)		—		(2,862	)		475,968

			2018
(In millions of Korean won)	Beginning		Acquisitions		Transfers		Disposal			Depreciation			Ending
Land		205,723		—		17,069		(56,055	)		—			166,737
Buildings		131,777		179		13,349		(50,872	)		(3,246	)		91,187
		337,500		179		30,418		(106,927	)		(3,246	)		257,924

122

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

15. Intangible Assets

Details of intangible assets as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Acquisition cost		Accumulated amortization			Accumulated impairment losses			Carrying amount
Goodwill		66,490		—			(1,202	)		65,288
Other intangible assets		1,040,642		(835,033	)		(2,166	)		203,443
		1,107,132		(835,033	)		(3,368	)		268,731

	2018
(In millions of Korean won)	Acquisition cost		Accumulated amortization			Accumulated impairment losses			Carrying amount
Goodwill		66,490		—			(1,202	)		65,288
Other intangible assets		935,208		(771,182	)		(5,106	)		158,920
		1,001,698		(771,182	)		(6,308	)		224,208

Details of goodwill as at December 31, 2019 and 2018, are as follows:

	2019				2018
(In millions of Korean won)	Acquisition cost		Carrying amount		Acquisition cost		Carrying amount
Housing & Commercial Bank		65,288		65,288		65,288		65,288
KB Cambodia Bank		1,202		—		1,202		—
		66,490		65,288		66,490		65,288

The goodwill arose from the merger of Housing & Commercial Bank (“H&CB”), and there is no change in goodwill for the years ended December 31, 2019 and 2018.

Changes in accumulated impairment losses for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Beginning			Impairment		Reversal		Others		Ending
Accumulated impairment losses on other intangible assets		(1,202	)		—		—		—		(1,202	)

	2018
(In millions of Korean won)	Beginning			Impairment		Reversal		Others		Ending
Accumulated impairment losses on other intangible assets		(1,202	)		—		—		—		(1,202	)

123

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Details of allocation of goodwill to cash-generating units and related information for impairment testing as at December 31, 2019 is as follows:

	2019
(In millions of Korean won)	Retail Banking		Corporate Banking		Total
Carrying amounts		49,315		15,973		65,288
Recoverable amount exceeded carrying amount		3,424,398		3,142,439		6,566,837
Discount rate (%)		13.02		13.09
Permanent growth rate (%)		1.00		1.00

Goodwill is allocated to cash-generating units that are expected to benefit from the synergies of the combination for impairment testing, and cash-generating units consist of an operating segment or units which are not larger than an operating segment. The Group recognized the amount of W 65,288 million related to goodwill acquired in the merger of Housing & Commercial Bank. Of this amount, the amounts of W 49,315 million and W 15,973 million were allocated to the Retail Banking and Corporate Banking, respectively. Cash-generating units, to which goodwill has been allocated, is tested for impairment annually and whenever there is an indication that the unit may be impaired, by comparing the carrying amount of the unit, including the goodwill, with the recoverable amount of the unit.

The recoverable amount of a cash-generating unit is measured at the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell is the amount obtainable from the sale in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal. If it is difficult to measure the amount obtainable from the sale of the cash-generating unit, the Group measures the fair value less costs to sell by reflecting the characteristics of the measured cash-generating unit. If it is not possible to obtain the reliable information to measure the fair value less costs to sell, the Group uses the asset’s value in use as its recoverable amount. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit. The projections of the future cash flows are based on the most recent financial budget approved by management and generally cover a period of five years. The future cash flows after projection period are estimated on the assumption that the future cash flows will increase by 1.0% annually for Retail Banking, Corporate Banking. The key assumptions used for the estimation of the future cash flows are the market size and the Group’s market share. The discount rate is a pre-tax rate that reflects assumptions regarding risk-free interest rate, market risk premium and the risks specific to the asset for which the future cash flow estimates have not been adjusted.

124

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Details of intangible assets, excluding goodwill, as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Acquisition cost		Accumulated amortization			Accumulated impairment losses			Carrying amount
Industrial property rights		2,020		(1,727	)		—			293
Software		853,867		(719,890	)		—			133,977
Other intangible assets		149,628		(87,928	)		(2,166	)		59,534
Right-of-use assets		35,127		(25,488	)		—			9,639
		1,040,642		(835,033	)		(2,166	)		203,443

	2018
(In millions of Korean won)	Acquisition cost		Accumulated amortization			Accumulated impairment losses			Carrying amount
Industrial property rights		1,858		(1,608	)		—			250
Software		769,244		(673,475	)		—			95,769
Other intangible assets		129,975		(77,129	)		(5,106	)		47,740
Finance leases assets		34,131		(18,970	)		—			15,161
		935,208		(771,182	)		(5,106	)		158,920

Changes in intangible assets, excluding goodwill, for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Beginning		Acquisition		Disposal			Amortization			Others		Ending
Industrial property rights		250		149		—			(106	)		—		293
Software		95,769		88,896		—			(50,949	)		261		133,977
Other intangible assets		47,740		30,283		(7,126	)		(11,469	)		106		59,534
Right-of-use assets		15,161		996		—			(6,518	)		—		9,639
		158,920		120,324		(7,126	)		(69,042	)		367		203,443

125

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Beginning		Acquisition		Disposal			Amortization			Others			Ending
Industrial property rights		281		58		—			(89	)		—			250
Software		88,635		45,839		—			(38,707	)		2			95,769
Other intangible assets		50,865		7,160		(2,825	)		(5,710	)		(1,750	)		47,740
Finance leases assets		12,539		8,024		—			(5,402	)		—			15,161
		152,320		61,081		(2,825	)		(49,908	)		(1,748	)		158,920

Changes in accumulated impairment losses on other intangible assets for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Beginning			Impairment			Reversal		Others		Ending
Accumulated impairment losses on other intangible assets		(5,106	)		(50	)		112		2,878		(2,166	)

	2018
(In millions of Korean won)	Beginning			Impairment			Reversal		Others		Ending
Accumulated impairment losses on other intangible assets		(3,597	)		(1,806	)		31		266		(5,106	)

16. Deferred Income Tax Assets and Liabilities

Details of deferred income tax assets and liabilities as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Assets			Liabilities			Net amount
Other provisions		60,244			—			60,244
Impairment losses on property and equipment		2,656			—			2,656
Share-based payments		12,114			—			12,114
Provisions for guarantees		20,959			—			20,959
Gains on valuation of derivatives		—			(59,827	)		(59,827	)
Present value discount		—			(118	)		(118	)
Losses on fair value hedged item		12,123			—			12,123
Accrued interest		—			(48,979	)		(48,979	)
Deferred loan origination fees and costs		—			(136,178	)		(136,178	)
Gains on revaluation		—			(286,269	)		(286,269	)
Investments in subsidiaries and associates		31,509			(88,492	)		(56,983	)
Gains on valuation of security investment		—			(100,400	)		(100,400	)
Defined benefit liabilities		422,800			—			422,800
Accrued expenses		173,023			—			173,023
Retirement insurance expense		—			(375,300	)		(375,300	)
Adjustments to the prepaid contributions		—			(22,897	)		(22,897	)
Others		250,358			(113,715	)		136,643
		985,786			(1,232,175	)		(246,389	)
Offsetting of deferred income tax assets and liabilities		(983,523	)		983,523			—
		2,263			(248,652	)		(246,389	)

126

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Assets			Liabilities			Net amount
Other provisions		62,179			—			62,179
Impairment losses on property and equipment		4,132			—			4,132
Share-based payments		11,868			—			11,868
Provisions for guarantees		20,298			—			20,298
Gains on valuation of derivatives		—			(13,188	)		(13,188	)
Present value discount		—			(34	)		(34	)
Gains on fair value hedged item		—			(25,873	)		(25,873	)
Accrued interest		—			(41,687	)		(41,687	)
Deferred loan origination fees and costs		—			(139,697	)		(139,697	)
Gains on revaluation		—			(286,739	)		(286,739	)
Investments in subsidiaries and associates		29,410			(67,358	)		(37,948	)
Gains on valuation of security investment		—			(53,384	)		(53,384	)
Defined benefit liabilities		387,667			—			387,667
Accrued expenses		202,220			—			202,220
Retirement insurance expense		—			(343,176	)		(343,176	)
Adjustments to the prepaid contributions		—			(19,033	)		(19,033	)
Others		183,561			(28,902	)		154,659
		901,335			(1,019,071	)		(117,736	)
Offsetting of deferred income tax assets and liabilities		(898,204	)		898,204			—
		3,131			(120,867	)		(117,736	)

Unrecognized deferred income tax liabilities

No deferred income tax liabilities have been recognized for the taxable temporary difference of W 33,487 million and 42,404 million associated with investments in subsidiaries and associates as at December 31, 2019, due to the following reasons:

• The Group is able to control the timing of the reversal of the temporary difference.

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

As at December 31, 2019 and 2018, no deferred income tax liabilities have been recognized for the taxable temporary difference of W 65,288 million arising from the initial recognition of goodwill from the merger of Housing and Commercial Bank in 2001.

Unrecognized deferred income tax assets

No deferred income tax assets have been recognized for the deductible temporary difference of W 7,716 million and W 8,938 million associated with investments in subsidiaries and associates as at December 31, 2019 and 2018, because it is not probable that the temporary differences will be reversed in the foreseeable future.

127

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

No deferred income tax assets have been recognized for deductible temporary differences of W19,388 million associated with others as at December 31, 2019 (W 363 million and W15,030 million associated with accrued expenses and others respectively as at December 31, 2018), due to the uncertainty that these will be realized in the future.

Changes in cumulative temporary differences for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Beginning		Decrease		Increase		Ending
Deductible temporary differences
Gains and Losses on fair value hedged item		—		—		44,085		44,085
Other provisions		226,103		226,103		219,069		219,069
Impairment losses on property and equipment		15,027		15,027		9,659		9,659
Share-based payments		43,156		43,156		44,049		44,049
Provisions for guarantees		73,809		73,809		76,214		76,214
Investment in subsidiaries and associates		115,883		21,567		27,976		122,292
Retirement insurance expense		1,409,700		112,517		240,272		1,537,455
Accrued expenses		735,712		735,712		629,175		629,175
Others		682,521		133,335		380,595		929,781
		3,301,911		1,361,226		1,671,094		3,611,779
Unrecognized deferred income tax assets
Accrued expenses		363						—
Investment in subsidiaries and associates		8,938						7,716
Others		15,030						19,388
		3,277,580						3,584,675
Tax rate (%)		27.50						27.50
Total deferred income tax assets from deductible temporary differences		901,335						985,786

128

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

(In millions of Korean won)	2019
	Beginning			Decrease			Increase			Ending
Taxable temporary differences
Gain and Losses from fair value hedge		(94,085	)		(94,085	)		—			—
Accrued interest		(151,588	)		(102,728	)		(129,247	)		(178,107	)
Deferred loan origination fees and costs		(507,988	)		(507,988	)		(495,193	)		(495,193	)
Gains on valuation of derivatives		(47,956	)		(47,956	)		(217,552	)		(217,552	)
Present value discount		(124	)		(124	)		(429	)		(429	)
Goodwill from merger		(65,288	)		—			—			(65,288	)
Gains on revaluation		(1,042,687	)		(1,711	)		—			(1,040,976	)
Investment in subsidiaries and associates		(287,344	)		(1,572	)		(69,503	)		(355,275	)
Gains on valuation of security investment		(194,124	)		(194,124	)		(365,092	)		(365,092	)
Retirement insurance expense		(1,247,911	)		(112,517	)		(229,333	)		(1,364,727	)
Adjustments to the prepaid contributions		(69,212	)		(69,212	)		(83,262	)		(83,262	)
Others		(105,098	)		(38,594	)		(347,006	)		(413,510	)
		(3,813,405	)		(1,170,611	)		(1,936,617	)		(4,579,411	)
Unrecognized deferred income tax liabilities
Goodwill from merger		(65,288	)								(65,288	)
Investments in subsidiaries and associates		(42,404	)								(33,487	)
		(3,705,713	)								(4,480,636	)
Tax rate (%)		27.50									27.50
Total deferred income tax liabilities from taxable temporary differences		(1,019,071	)								(1,232,175	)

129

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

(In millions of Korean won)	2018
	Beginning1		Decrease		Increase		Ending
Deductible temporary differences
Other provisions		256,282		256,282		226,103		226,103
Impairment losses on property and equipment		19,678		19,678		15,027		15,027
Interest on equity index-linked deposits		155		155		—		—
Share-based payments		61,870		61,870		43,156		43,156
Provisions for guarantees		98,294		98,294		73,809		73,809
Loss on SPE repurchase		80,204		80,204		—		—
Investment in subsidiaries and associates		81,336		13,835		48,382		115,883
Gains on valuation of security investment		75,642		75,642		—		—
Defined benefit liabilities		1,210,654		114,562		313,608		1,409,700
Accrued expenses		467,999		467,999		735,712		735,712
Others		881,600		353,386		154,307		682,521
		3,233,714		1,541,907		1,610,104		3,301,911
Unrecognized deferred income tax assets
Accrued expenses		—						363
Loss on SPE repurchase		80,204						—
Investment in subsidiaries and associates		18,084						8,938
Others		12,500						15,030
		3,122,926						3,277,580
Tax rate (%)2		27.50						27.50
Total deferred income tax assets from deductible temporary differences		858,805						901,335

130

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

(In millions of Korean won)	2018
	Beginning1			Decrease			Increase			Ending
Taxable temporary differences
Losses from fair value hedge		(57,083	)		(57,083	)		(94,085	)		(94,085	)
Accrued interest		(157,556	)		(116,532	)		(110,564	)		(151,588	)
Deferred loan origination fees and costs		(479,671	)		(479,671	)		(507,988	)		(507,988	)
Gains on valuation of derivatives		(52,764	)		(52,764	)		(47,956	)		(47,956	)
Present value discount		(209	)		(209	)		(124	)		(124	)
Goodwill from merger		(65,288	)		—			—			(65,288	)
Gains on revaluation		(1,113,979	)		(71,292	)		—			(1,042,687	)
Investment in subsidiaries and associates		(370,348	)		(130,476	)		(47,472	)		(287,344	)
Gains on valuation of security investment		—			—			(194,124	)		(194,124	)
Retirement insurance expense		(1,095,495	)		(82,468	)		(234,884	)		(1,247,911	)
Adjustments to the prepaid contributions		(59,040	)		(59,040	)		(69,212	)		(69,212	)
Others		(72,737	)		(12,708	)		(45,069	)		(105,098	)
		(3,524,170	)		(1,062,243	)		(1,351,478	)		(3,813,405	)
Unrecognized deferred income tax liabilities
Goodwill from merger		(65,288	)								(65,288	)
Investments in subsidiaries and associates		(4,901	)								(42,404	)
		(3,453,981	)								(3,705,713	)
Tax rate (%) 2		27.50									27.50
Total deferred income tax liabilities from taxable temporary differences		(949,845	)								(1,019,071	)

¹ Restated based on Korean IFRS 1109.

² As the corporate tax rate was changed due to the revision of the tax law at the end of 2017, deferred tax assets (liabilities) expected to be realized after 2018 are calculated using 27.5%.

17. Other Assets

Details of other assets as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Other financial assets
Other receivables		3,059,196			1,921,593
Accrued income		867,534			793,340
Guarantee deposits		995,678			1,019,169
Domestic exchange settlement debits		523,182			476,349
Others		32,329			11,843
Allowances for loan losses		(11,461	)		(21,775	)
Present value discount		(1,754	)		(1,322	)
		5,464,704			4,199,197

131

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

(In millions of Korean won)	2019			2018
Other non-financial assets
Other receivables		86			61
Prepaid expenses		120,873			130,432
Guarantee deposits		3,047			3,061
Others		120,201			74,649
Allowances on other assets		(16,528	)		(16,992	)
		227,679			191,211
		5,692,383			4,390,408

Changes in allowances for loan losses on other assets for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019
	Other financial assets			Other non-financial assets			Total
Beginning		21,775			16,992			38,767
Provision		(7,758	)		(312	)		(8,070	)
Written-off		(3,367	)		(152	)		(3,519	)
Others		811			—			811
Ending		11,461			16,528			27,989

(In millions of Korean won)	2018
	Other financial assets			Other non- financial assets			Total
Beginning1		54,190			22,575			76,765
Provision		1,179			(3,720	)		(2,541	)
Written-off		(34,773	)		(1,863	)		(36,636	)
Others		1,179			—			1,179
Ending		21,775			16,992			38,767

¹ Restated based on Korean IFRS 1109.

18. Assets Held for Sale

Details of assets held for sale as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019
	Acquisition cost1		Accumulated impairment losses			Carrying amount		Fair value less costs to sell
Land		7,210		(1,530	)		5,680		6,467
Buildings		2,513		(1,252	)		1,261		1,261
		9,723		(2,782	)		6,941		7,728

132

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

(In millions of Korean won)	2018
	Acquisition cost1		Accumulated impairment losses			Carrying amount		Fair value less costs to sell
Land		16,048		(3,442	)		12,606		16,552
Buildings		9,054		(4,708	)		4,346		4,403
		25,102		(8,150	)		16,952		20,955

¹ Acquisition cost of buildings held for sale is net of accumulated depreciation before classified as assets held for sale.

The valuation technique and input variables that are used to measure the fair value of assets held for sale as at December 31, 2019, are as follows:

	2019
(In millions of Korean won)	Fair value		Valuation technique1		Unobservable inputs2		Estimated range of unobservable inputs(%)		Effect of unobservable inputs on fair value
Land and buildings		7,728		Market comparison approach model and others		Adjustment index		0.44 ~ 1.36		Fair value increases as the adjustment index rises

¹ The appraisal value is adjusted by the adjustment ratio in the event the public sale is unsuccessful.

² Adjustment index is calculated by using the time factor correction, regional factors or individual factors.

Among assets held for sale, real estates were measured by an independent evaluator who has recently assessed similar properties in the area of the qualifying real estates. All of assets held for sale are included in level 3 in accordance with Note 6-1. (2).

Changes in accumulated impairment losses of assets held for sale for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)
2019
Beginning	Provision	Reversal	Others	Ending
(8,150)	(333)	—	5,701	(2,782)

(In millions of Korean won)
2018
Beginning	Provision	Reversal	Others	Ending
(12,801)	(5,281)	286	9,646	(8,150)

As at December 31, 2019, assets held for sale consist of three real estates of closed offices, which were committed to sell by the management, but not yet sold as at December 31, 2019. Negotiation with buyers is in process for the one asset and the remaining two assets are also being actively marketed.

133

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

19. Deposits

Details of deposits as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Demand deposits
Demand deposits in Korean won		124,457,990			112,746,957
Demand deposits in foreign currencies		7,937,663			6,242,996
		132,395,653			118,989,953
Time deposits
Time deposits in Korean won		156,738,952			144,387,450
Time deposits in foreign currencies		7,561,299			5,664,671
Fair value adjustments on fair value hedged time deposits in foreign currencies		(18,391	)		(89,265	)
		164,281,860			149,962,856
Certificates of deposits		4,239,969			3,531,719
		300,917,482			272,484,528

20. Debts

Details of debts as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Borrowings		18,043,380		16,689,574
Bonds sold under repurchase agreements and others		830,095		444,066
Call money		267,787		362,415
Total		19,141,262		17,496,055

134

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Details of borrowings as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)		Lenders	Annual interest rate (%)		2019		2018
Borrowings in Korean won	Borrowings from the Bank of Korea	Bank of Korea		0.50 ~ 0.75		2,649,851		1,672,714
	Borrowings from the government	SEMAS and others		0.00 ~ 3.00		1,658,810		1,745,939
	Borrowings from non-banking financial institutions	Korea Development Bank		0.20 ~ 2.20		408,042		372,853
	Other borrowings	Korea Development Bank and others		0.00 ~ 4.90		4,344,937		3,965,534
						9,061,640		7,757,040
Borrowings in foreign currencies	Due to banks	KEB Hana Bank and others		—		4,682		13,353
	Borrowings from banking institutions	Central Bank of Uzbekistan and others		0.00 ~ 3.53		7,450,947		7,110,028
	Borrowings from other financial institutions	Export Import Bank of Korea and others		2.28 ~ 3.08		7,081		18,725
	Other borrowings in foreign currencies	Standard Chartered Bank and others		0.00 ~ 2.63		1,519,030		1,790,428
						8,981,740		8,932,534
						18,043,380		16,689,574

Details of bonds sold under repurchase agreements and others as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	Lenders	Annual interest rate (%)		2019		2018
Bonds sold under Repurchase agreements	Individuals, groups, corporations		0.91 ~ 1.18		825,710		436,471
Bills sold	Counter sale		0.70 ~ 1.05		4,385		7,595
					830,095		444,066

Details of call money as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	Lenders	Annual interest rate (%)	2019		2018
Call money in foreign currencies	Central Bank of Uzbekistan and others	2.91 ~ 4.30		267,787		362,415

135

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

21. Debentures

Details of debentures as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	Annual interest rate (%)		2019			2018
Debentures in Korean won
Structured debentures		5.65 ~ 5.86		33,310			34,320
Subordinated fixed rate debentures		2.96 ~ 4.35		3,416,590			3,422,729
Fixed rate debentures		1.47 ~ 2.44		10,787,614			15,024,545
Floating rate debentures		1.54		300,000			640,000
			14,537,514			19,121,594
Fair value adjustments on fair value hedged debentures in Korean won				21,070			19,252
Discount on debentures in Korean won				(3,588	)		(11,792	)
			14,554,996			19,129,054
Debentures in foreign currencies
Floating rate debentures		2.31 ~ 2.84		1,301,367			1,344,628
Fixed rate debentures		2.13 ~ 4.50		2,857,545			2,725,700
			4,158,912			4,070,328
Fair value adjustments on fair value hedged debentures in foreign currencies				41,406			(24,073	)
Discount on debentures in foreign currencies				(15,322	)		(11,724	)
				4,184,996			4,034,531
				18,739,992			23,163,585

Changes in debentures based on face value for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Beginning		Issues		Repayments			Others			Ending
Debentures in Korean won
Structured debentures		34,320		—		(1,010	)		—			33,310
Subordinated fixed rate debentures		3,422,729		—		(6,139	)		—			3,416,590
Fixed rate debentures		15,024,545		8,597,400		(12,834,331	)		—			10,787,614
Floating rate debentures		640,000		300,000		(640,000	)		—			300,000
		19,121,594		8,897,400		(13,481,480	)		—			14,537,514
Debentures in foreign currencies
Floating rate debentures		1,344,628		60,780		(33,199	)		(70,842	)		1,301,367
Fixed rate debentures		2,725,699		595,490		(590,950	)		127,306			2,857,545
		4,070,327		656,270		(624,149	)		56,464			4,158,912
		23,191,921		9,553,670		(14,105,629	)		56,464			18,696,426

136

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Beginning		Issues		Repayments			Others		Ending
Debentures in Korean won
Structured debentures		135,800		—		(101,480	)		—		34,320
Subordinated fixed rate debentures		2,888,411		600,000		(65,682	)		—		3,422,729
Fixed rate debentures		13,236,365		11,761,400		(9,973,220	)		—		15,024,545
Floating rate debentures		—		640,000		—			—		640,000
		16,260,576		13,001,400		(10,140,382	)		—		19,121,594
Debentures in foreign currencies
Floating rate debentures		835,692		725,638		(274,130	)		57,428		1,344,628
Fixed rate debentures		2,142,800		493,022		—			89,877		2,725,699
		2,978,492		1,218,660		(274,130	)		147,305		4,070,327
		19,239,068		14,220,060		(10,414,512	)		147,305		23,191,921

22. Provisions

Details of provisions as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Provisions for unused loan commitments		95,755		103,882
Provisions for acceptances and guarantees		76,256		73,897
Provisions for asset retirement obligation		106,269		95,396
Others		32,860		35,199
		311,140		308,374

137

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Changes in provisions for unused loan commitments, acceptances and guarantees for the years ended December 31, 2019 and 2018, are as follows:

	2019
	Provisions for unused loan commitments									Provisions for acceptances and guarantees
	12-month expected credit losses			Lifetime expected credit losses						12-month expected credit losses			Lifetime expected credit losses
(In millions of Korean won)				Non- impaired			Impaired						Non- impaired			Impaired
Beginning		74,987			28,895			—			26,291			29,625			17,981
Transfer between stages
Transfer to 12-month expected credit losses		15,262			(15,235	)		(27	)		365			(365	)		—
Transfer to lifetime expected credit losses		(13,691	)		13,749			(58	)		(976	)		1,705			(729	)
Impairment		(118	)		(800	)		918			(24	)		(280	)		304
Provision (reversal) for loan losses		(15,676	)		7,824			(833	)		(1,971	)		4,643			(892	)
Others (effects of changes in foreign exchange rate, etc.)		321			237			—			196			260			123
Ending		61,085			34,670			—			23,881			35,588			16,787

	2018
	Provisions for unused loan commitments									Provisions for acceptances and guarantees
	12-month expected credit losses			Lifetime expected credit losses						12-month expected credit losses			Lifetime expected credit losses
(In millions of Korean won)				Non- impaired			Impaired						Non- impaired			Impaired
Beginning1		74,885			27,178			—			40,277			39,628			18,744
Transfer between stages
Transfer to 12-month expected credit losses		10,001			(9,935	)		(66	)		661			(661	)		—
Transfer to lifetime expected credit losses		(7,701	)		7,784			(83	)		(534	)		676			(142	)
Impairment		(201	)		(667	)		867			(6	)		(87	)		93
Provision (reversal) for loan losses		(2,204	)		4,377			(718	)		(14,515	)		(10,174	)		(898	)
Others (effects of changes in foreign exchange rate, etc.)		207			158			—			408			243			184
Ending		74,987			28,895			—			26,291			29,625			17,981

¹  Restated based on Korean IFRS 1109.

138

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Changes in provisions for asset retirement obligation for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Beginning		95,396			85,575
Increase		3,584			1,780
Reversal		(6,054	)		(154	)
Used		(3,658	)		(2,534	)
Unwinding of discount		1,981			2,305
Effects of changes in foreign exchange rate		15,020			8,424
Ending		106,269			95,396

Provisions for asset retirement obligation are present value of estimated costs to be incurred for restoration of the leased properties. Actual expenses are expected to be incurred at the end of each lease contract. Three-year historical data of expired leases were used to estimate the average lease year. Also, the average restoration expense based on actual three-year historical data and the three-year historical average inflation rate were used to estimate the present value of estimated costs.

Changes in other provisions for the years ended December 31, 2019 and 2018, are as follows:

				2019
(In millions of Korean won)				Membership rewards program			Dormant accounts			Litigations			Financial guarantee liabilities			Others			Total
Beginning					61			4,375			6,478			2,391			21,894			35,199
Provision					61			2,296			8,160			3,020			710			14,247
Used and Others					(69	)		(3,093	)		(3,976	)		—			(9,448	)		(16,586	)
Ending					53			3,578			10,662			5,411			13,156			32,860
	2018
(In millions of Korean won)	Membership rewards program			Dormant accounts			Litigations			Financial guarantee liabilities1			Greenhouse Gas Emission liabilities			Others			Total
Beginning		138			5,050			7,482			2,218			177			62,137			77,202
Provision (Reversal)		111			2,657			184			173			(177	)		(10,620	)		(7,672	)
Used and Others		(188	)		(3,332	)		(1,188	)		—			—			(29,623	)		(34,331	)
Ending		61			4,375			6,478			2,391			—			21,894			35,199

¹  Restated based on Korean IFRS 1109.

139

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

23. Net Defined Benefit Liabilities

Defined benefit plan

The Group operates defined benefit plans which have the following characteristics:

• The Group has the obligation to pay the agreed benefits to all its current and former employees.

• Actuarial risk (that benefits will cost more than expected) and investment risk fall, in substance, on the Group.

The net defined benefit liability recognized in the statements of financial position is calculated in accordance with actuarial valuation methods. Data such as discount rates, future salary growth rates, and mortality rates based on market data and historical data are used. Actuarial assumptions may differ from actual results, due to changes in the market, economic trends and mortality trends.

Changes in the net defined benefit liabilities (assets) for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Present value of defined benefit obligation			Fair value of plan assets			Net defined benefit liabilities (assets)
Beginning		1,549,092			(1,382,487	)		166,605
Current service cost		151,846			—			151,846
Past service cost1		2,276			—			2,276
Interest expense (income)		35,227			(31,403	)		3,824
Remeasurements :
-Actuarial loss arising from experience adjustment		10,219			—			10,219
-Actuarial loss arising from changes in demographic assumptions		(5,128	)		—			(5,128	)
-Actuarial loss arising from changes in financial assumptions		42,426			—			42,426
-Return on plan assets (excluding amounts included in interest income)		—			8,165			8,165
Contributions		—			(196,100	)		(196,100	)
Payments from plans (benefit payments)		(112,516	)		(112,516	)		—
Payments from the Group		(5,323	)		—			(5,323	)
Transfer in		4,406			(4,102	)		304
Transfer out		(2,558	)		2,558			—
Effects of changes in foreign exchange rate		(4	)		—			(4	)
Ending		1,669,963			(1,490,853	)		179,110

140

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Present value of defined benefit obligation			Fair value of plan assets			Net defined benefit liabilities
Beginning		1,318,665			(1,310,097	)		8,568
Current service cost		136,279			—			136,279
Past service cost1		26,663			—			26,663
Interest expense (income)		37,568			(37,327	)		241
Remeasurements :
-Actuarial loss arising from experience adjustment		26,780			—			26,780
-Actuarial loss arising from changes in demographic assumptions		9,775			—			9,775
-Actuarial loss arising from changes in financial assumptions		77,611			—			77,611
-Return on plan assets (excluding amounts included in interest income)		—			17,967			17,967
Contributions		—			(133,000	)		(133,000	)
Payments from plans (benefit payments)		(77,785	)		77,785			—
Payments from the Group		(4,476	)		—			(4,476	)
Transfer in		2,677			(2,497	)		180
Transfer out		(4,682	)		4,682			—
Effects of changes in foreign exchange rate		17			—			17
Ending		1,549,092			(1,382,487	)		166,605

¹ Other provisions of ￦22,306 million were transferred to the account as at December 31, 2017.

Details of the net defined benefit liabilities as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Present value of defined benefit obligation		1,669,963			1,549,092
Fair value of plan assets		(1,490,853	)		(1,382,487	)
Net defined benefit liabilities		179,110			166,605

Details of post-employment benefits recognized in profit or loss as employee compensation and benefits for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Current service cost		151,846		136,279
Past service cost		2,276		4,357
Interest expenses of net defined benefit liabilities		3,824		241
Total		157,946		140,877

141

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Remeasurements of net defined benefit liabilities recognized as other comprehensive income for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Remeasurements:
-Actuarial gain arising from changes in demographic assumptions		5,128			(9,775	)
-Actuarial loss arising from experience adjustment		(10,219	)		(26,780	)
-Actuarial gain arising from changes in financial assumptions		(42,426	)		(77,611	)
- Return on plan assets (excluding amounts included in interest income)		(8,165	)		(17,967	)
Income tax effects		15,313			36,336
Remeasurements after income tax		(40,369	)		(95,797	)

Details of fair value of plan assets as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Assets quoted in an active market		Assets not quoted in an active market		Total
Time deposits		—		1,490,590		1,490,590
Others		—		263		263
		—		1,490,853		1,490,853

	2018
(In millions of Korean won)	Assets quoted in an active market		Assets not quoted in an active market		Total
Time deposits		—		1,382,487		1,382,487

Key actuarial assumptions used as at December 31, 2019 and 2018, are as follows:

	Ratio (%)
	2019		2018
Discount rate		2.00		2.30
Salary growth rate		3.75		3.75
Turnover		1.00		1.00

Expected mortality assumptions are based on the experience-based mortality table of Korea Insurance Development Institute of 2019.

The sensitivity of the defined benefit obligation to changes in the principal assumptions as at December 31, 2019, is as follows:

	Effect on defined benefit obligation
	Changes in principal assumption		Increase in principal assumption		Decrease in principal assumption
Discount rate		0.5%p		4.20% decrease		4.51% increase
Salary growth rate		0.5%p		4.12% increase		3.88% decrease
Turnover		0.5%p		0.49% decrease		0.52% increase

142

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

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 significant actuarial assumptions is calculated using the projected unit credit method which is used to calculate the defined benefit obligation.

Expected maturity analysis of undiscounted pension benefits as at December 31, 2019, is as follows:

(In millions of Korean won)	Less than 1 year		Between 1 and 2 years		Between 2 and 5 years		Between 5 and 10 years		Over 10 years		Total
Pension benefits		43,470		112,459		484,102		992,573		2,672,924		4,305,528

The weighted average duration of the defined benefit obligations is 8.88 and 8.86 years as at December 31, 2019 and December 31, 2018, respectively.

Expected contributions to plan assets for the period after December 31, 2019, are estimated to be approximately W 156,000 million.

24. Other Liabilities

Details of other liabilities as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Other financial liabilities
Other payables		3,422,209		2,253,535
Prepaid card and debit cards		2,038		2,351
Accrued expenses		2,748,242		2,679,685
Financial guarantee liabilities		41,008		29,867
Deposits for letter of guarantees and others		286,946		156,364
Domestic exchange settlement credits		2,073,263		1,679,914
Foreign exchanges settlement credits		114,316		102,187
Borrowings from other business accounts		256		13,166
Payables to trust accounts		5,216,460		5,285,108
Liabilities incurred from agency relationship		771,609		605,076
Account for agency businesses		407,475		460,949
Lease liabilities		344,417		—
Others		18,265		29,202
		15,446,504		13,297,404
Other non-financial liabilities
Other payables		557,775		847,347
Unearned revenue		47,932		48,188
Accrued expenses		389,976		450,493
Withholding taxes		118,057		93,856
Others		65,368		78,776
		1,179,108		1,518,660
		16,625,612		14,816,064

143

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

25. Equity

25.1 Capital Stock

Details of outstanding shares as at December 31, 2019 and 2018, are as follows:

	Ordinary shares
	2019		2018
Number of shares authorized		1,000,000,000		1,000,000,000
Face value per share1		5,000		5,000
Number of shares		404,379,116		404,379,116
Capital stock2		2,021,896		2,021,896

¹  In Korean won.

² In millions of Korean won.

24.2 Hybrid Security

Details of hybrid security classified as equity as at December 31, 2019 and December 31, 2018, are as follows:

(In millions of Korean won)	Issuance date		Maturity		Interest rate (%)		2019		2018
Amortized Conditional Capital Securities		July 2, 2019		Permanent		4.35		574,523		—

Above securities are redeemable at the option of the Group on July 2, 2024 and each interest payment date thereafter.

25.3 Capital Surplus

Details of capital surplus as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Paid-in capital in excess of face value		4,604,417		4,604,417
Gain on business combination		397,669		397,669
Revaluation increment		177,229		177,229
Other capital surplus		40,389		39,473
		5,219,704		5,218,788

The gain on business combination is a gain from a bargain purchase related to the merger with Korea Long Term Credit Bank on December 31, 1998, in accordance with previous Korean GAAP.

144

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

25.4 Accumulated Other Comprehensive Income

Details of accumulated other comprehensive income as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Remeasurements of net defined benefit liabilities		(216,067	)		(175,698	)
Currency translation differences		15,943			(10,328	)
Net gains on debt instruments at fair value through other comprehensive income		56,750			22,475
Net gains on equity instruments at fair value through other comprehensive income		303,338			302,014
Share of other comprehensive income of associates		4,287			(3,259	)
Gains and losses on cash flow hedging instruments		(3,691	)		11,539
Losses on hedges of a net investment in a foreign operations		(37,226	)		(30,959	)
		123,334			115,784

25.5 Retained Earnings

Retained earnings as at December 31, 2019 and 2018, consist of:

(In millions of Korean won)	2019		2018
Legal reserves		2,041,898		2,034,015
Regulatory reserve for credit losses		2,291,019		2,150,772
Voluntary reserves		14,257,527		12,522,628
Retained earnings before appropriation		2,474,332		2,603,983
		21,064,776		19,311,398

With respect to the allocation of net profit earned in a fiscal term, the Bank must set aside in its legal reserve an amount equal to at least 10% of its net income after tax as reported in the statement of comprehensive income each time it pays dividends on its net profits earned until its legal reserve reaches at least the aggregate amount of its paid-in capital in accordance with Article 40 of the Banking Act. This reserve is not available for the payment of cash dividends, but may be transferred to share capital, or used to reduce accumulated deficit. The Group is reserving other reserves (legal reserves) in accordance with local regulation in oversea.

Regulatory Reserve for Credit Losses

Measurement and Disclosure of Regulatory Reserve for Credit Losses are required in accordance with Articles 29.1 through 29.2 of Regulation on Supervision of Banking Business.

Details of the regulatory reserve for credit losses as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Beginning		2,291,019		2,150,772
Amounts estimated to be appropriated		150,856		140,247
Ending		2,441,875		2,291,019

145

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Adjustments to the regulatory reserve for credit losses for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Provision of regulatory reserve for credit losses1		150,856		247,207
Adjusted profit after provision of regulatory reserve for credit losses2		2,288,223		2,011,991

¹  The previous amount expected to be appropriated is the amount required to reserve for credit losses, calculated based on the beginning balance of regulatory reserve for credit losses (including unearned reserves) that reflects the effect of adoption of Korean IFRS 1109 retrospectively.

² Adjusted profit after provision of regulatory reserve for credit losses is calculated on the assumption that expected provision of regulatory reserve for credit losses which is measured in accordance with Banking Supervision Regulations would be reflected in net profit for the periods without consideration of income tax effect.

26. Interest Income and Expense

Details of interest income, expense, and net interest income for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Interest income
Securities at fair value through profit or loss		202,244		214,455
Loans at fair value through profit or loss		9,686		7,850
Securities at fair value through other comprehensive income		602,042		502,093
Loans at fair value through other comprehensive income		13,670		2,138
Due from financial institutions at amortized cost		64,653		68,029
Securities at amortized cost		302,329		320,361
Loans at amortized cost		9,451,056		8,798,656
Others		134,268		106,306
		10,779,948		10,019,888
Interest expense
Deposits		3,452,860		3,019,866
Debts		344,285		319,017
Debentures		517,311		501,892
Others		101,705		78,391
		4,416,161		3,919,166
Net interest income		6,363,787		6,100,722

Interest income recognized on impaired loans is ￦ 23,672 million (December 31, 2018: ￦23,355 million) for the year ended December 31, 2019.

146

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

27. Net Fee and Commission Income

Details of fee and commission income, and fee and commission expense for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Fee and commission income
Banking activity fees		221,600		209,499
Lending activity fees		76,481		73,005
Credit card related fees		920		1,030
Debit card related fees and commissions		594		554
Agent activity fees		321,452		312,497
Trust and other fiduciary fees		308,084		287,385
Guarantee fees		39,170		32,423
Foreign currency related fees		100,499		92,140
Security activity commissions		128,891		146,883
Other business account commission on consignment		36,813		36,947
Others		248,858		230,428
		1,483,362		1,422,791
Fee and commission expense
Trading activity related fees1		12,898		12,427
Lending activity fees		31,613		30,661
Credit card related fees		29,303		18,478
Outsourcing related fees		95,988		78,986
Foreign currency related fees		24,140		21,402
Management fees of written-off loans		15,181		12,680
Contributions to external institutions		24,558		23,949
Others		116,385		101,460
		350,066		300,043
Net fee and commission income		1,133,296		1,122,748

¹ Fees from financial assets/liabilities at fair value through profit or loss.

147

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

28. Net Gains or Losses from Financial Assets/Liabilities at Fair Value through Profit or Loss

Net gains or losses from financial assets/liabilities at fair value through profit or loss are composed of dividend income and gains or losses arising from changes in the fair values, sales and redemptions.

Details for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Revenue from financial instruments at fair value through profit or loss
Financial assets at fair value through profit or loss
Debt instruments		265,422		249,860
Equity instruments		27,946		31,327
		293,368		281,187
Derivatives held for trading
Interest rate		1,692,513		1,509,811
Currency		4,995,524		3,463,934
Stock or stock index		254		7,048
Others		1,224		987
		6,689,515		4,981,780
Financial liabilities at fair value through profit or loss		394		377
Other financial instruments		5,810		22
		6,989,087		5,263,366
Expense from financial instruments at fair value through profit or loss
Financial assets at fair value through profit or loss
Debt instruments		47,850		169,248
Equity instruments		3,637		37,844
		51,487		207,092
Derivatives held for trading
Interest rate		1,774,890		1,554,325
Currency		4,732,495		3,169,608
Stock or stock index		937		4,473
Others		484		1,210
		6,508,806		4,729,616
Financial liabilities at fair value through profit or loss		466		203
Other financial instruments		5,704		60
		6,566,463		4,936,971
Net gains or losses from financial assets/liabilities at fair value through profit or loss		422,624		326,395

148

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

29. Other Operating Income and Expenses

Details of other operating income and expenses for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Other operating income
Revenue related to financial assets at fair value through other comprehensive income
Gains on redemption of the securities at fair value through other comprehensive income		524			230
Gains on sale of the securities at fair value through other comprehensive income		99,195			94,984
Revenue related to financial assets at amortized cost
Gains on sale of loans at amortized cost		19,346			15,691
Gains on foreign exchange transactions		1,554,311			1,147,691
Dividend income		43,146			38,937
Others		198,049			86,307
		1,914,571			1,383,840
Other operating expense
Expenses related to financial assets at fair value through other comprehensive income
Losses on sale of the securities at fair value through other comprehensive income		4,195			7,135
Expenses related to financial assets at amortized cost
Losses on sale of loans at amortized cost		15,015			6,674
Losses on foreign exchanges transactions		1,515,382			1,211,920
Others		980,618			854,597
		2,515,210			2,080,326
Net other operating expense		(600,639	)		(696,486	)

149

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

30. General and Administrative Expenses

30.1 General and Administrative Expenses

Details of general and administrative expenses for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Employee Benefits
Salaries and short-term employee benefits - salaries		1,489,102		1,522,003
Salaries and short-term employee benefits - welfare expense		638,184		652,781
Post-employment benefits - defined benefit plans		157,946		140,877
Post-employment benefits - defined contribution plans		7,220		6,719
Termination benefits		213,749		209,737
Share-based payments		15,173		4,051
		2,521,374		2,536,168
Depreciation and amortization		509,346		246,488
Other general and administrative expenses
Rental expense		62,277		259,194
Tax and dues		126,975		108,389
Communication		26,035		23,163
Electricity and utilities		22,435		21,641
Publication		8,977		9,771
Repairs and maintenance		12,037		11,263
Vehicle		6,878		7,367
Travel		5,163		4,096
Training		19,078		17,521
Service fees		123,425		107,678
Others		443,419		414,256
		856,699		984,339
		3,887,419		3,766,995

150

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

30.2 Share-based Payments

30.2.1 Share Grants

The Group changed the scheme of share-based payment from share option to share grants in November 2007. The share grant award program is an incentive plan that sets, on grant date, the maximum number of shares that can be awarded. Actual shares to be granted is determined in accordance with achievement of performance targets over the vesting period.

Details of the share grants as at December 31, 2019, are as follows:

(In number of shares)
Share grants	Grant date		Number of granted shares1, 2		Vesting conditions
Series 72		2017.08.28		6,742	Services fulfillment, TSR 30~50%, Company and work performance 50~70%
Series 73		2017.11.21		27,786	Services fulfillment, TSR 30%, EPS and Asset Quality 70%
Series 74		2018.01.01		134,465	Services fulfillment, TSR 30~50%, Company and work performance 50~70%
Series 75		2019.01.01		192,170	Services fulfillment, TSR 30~50%, Company and work performance 50~70%
Series 76		2019.04.01		5,380	Services fulfillment, TSR 30~50%, Company and work performance 50~70%
Series 77		2019.05.27		5,569	Services fulfillment, TSR 30~50%, Company and work performance 50~70%
Series 78		2019.11.21		36,443	Services fulfillment, TSR 30%, EPS and Asset Quality 70%
Deferred grant in 2015		—		4,756
Deferred grant in 2016		—		65,419
Deferred grant in 2017		—		95,697
Deferred grant in 2018		—		97,244
				671,671

¹ Granted shares in relation to Series 72 ~ 78 represent the total number of shares granted to directors and employees but not vested at the end of reporting period. The number of deferred grants represents residual shares that have been vested at the end of reporting period.

² Certain percentages among the granted shares are deferred for over five years from the time of initial exercising. Accordingly, a certain percentage of the granted amount is deferred for up to five years after the date of retirement after the deferred grant has been confirmed.

151

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Details of share grants linked to short-term performance as at December 31, 2019, are as follows:

Share grants1	Number of vested shares		Vesting conditions
Granted shares for 2015		15,831	Vested
Granted shares for 2016		52,855	Vested
Granted shares for 2017		55,490	Vested
Granted shares for 2018		109,296	Vested
Granted shares for 2019		112,445	Proportion to service period

¹ Executives and employees were given the option of deferred payment of the granted shares (after the date of retirement), payment ratio, and payment period. Accordingly, a certain percentage of the granted amount is deferred for up to five years after the date of retirement after the deferred grant has been confirmed.

Share grants are measured at fair value using the Monte Carlo Simulation Model and assumptions used in determining the fair value as at December 31, 2019, are as follows:

(In Korean won)	Expected exercise period (Years)		Risk free rate (%)			Fair value (Market performance condition)		Fair value (Non-market performance condition)
Linked to long-term performance
Series 72		0.00~3.00		1.34	%		43,659~47,631		43,659~47,631
Series 73		0.00~2.89		1.34	%		41,253~43,741		43,803~46,445
Series 74		0.00~3.00		1.34	%		41,279~45,035		43,659~47,631
Series 75		0.00~4.00		1.34	%		41,506~46,021		42,336~47,631
Series 76		1.25~5.01		1.34	%		41,070~44,926		41,070~44,926
Series 77		1.40~5.01		1.34	%		41,070~44,926		41,070~44,926
Series 78		1.89~5.01		1.34	%		38,303~41,900		41,070~44,926
Grant deferred in 2015		0.00~2.00		1.34	%		—		44,926~47,631
Grant deferred in 2016		0.00~4.00		1.34	%		—		42,336~47,631
Grant deferred in 2017		0.00~4.00		1.34	%		—		42,336~47,631
Grant deferred in 2018		0.00~4.00		1.34	%		—		42,336~47,631
Share granted in 2015		0.00~4.00		1.34	%		—		42,336~47,631
Share granted in 2016		0.00~5.01		1.34	%		—		41,070~47,631
Share granted in 2017		0.00~4.00		1.34	%		—		42,336~47,631
Share granted in 2018		0.00~4.00		1.34	%		—		42,336~47,631
Share granted in 2019		1.00~3.00		1.34	%		—		43,659~46,281

The Group used the volatility of the stock price over the previous year as the expected volatility and used the dividend yield as the arithmetic mean of the dividend rate of one year before, two years before, and three years before the base year, in order to calculate fair value. Fair value is calculated based on 1 year-KTB rate.

As at December 31, 2019 and 2018, the accrued expenses related to share-based payments, including share grants, amounted to W41,344 million and W40,873 million, respectively, and the compensation costs from share grants amounting to W15,173 million and W4,051 million were incurred during the years ended December 31, 2019 and 2018, respectively.

152

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

30.2.2 Mileage Stock

Details of Mileage Stock as at December 31, 2019, are as follows:

(In number of shares)	Grant date		Number of granted shares1		Expected exercise period (Years)2		Number of exercisable shares
Share granted in 2017		2017-01-09		28,925		0.00~0.02		11,365
		2017-02-03		43		0.00~0.09		28
		2017-04-03		82		0.00~0.25		61
		2017-05-22		20		0.00~0.39		20
		2017-07-03		52		0.00~0.50		52
		2017-08-07		29		0.00~0.60		19
		2017-08-08		5		0.00~0.60		2
		2017-08-16		204		0.00~0.62		151
		2017-08-17		40		0.00~0.63		24
		2017-08-24		387		0.00~0.65		288
		2017-09-08		83		0.00~0.69		73
		2017-11-01		120		0.00~0.84		103
		2017-11-06		106		0.00~0.85		101
		2017-12-06		105		0.00~0.93		83
		2017-12-26		255		0.00~0.99		175
		2017-12-29		114		0.00~0.99		58
Share granted in 2018		2018-01-10		19,197		0.00~1.03		15,430
		2018-02-12		9		0.00~1.12		7
		2018-04-02		115		0.00~1.25		99
		2018-04-30		86		0.00~1.33		62
		2018-05-08		170		0.00~1.35		150
		2018-06-01		140		0.00~1.42		121
		2018-07-02		180		0.00~1.50		123
		2018-08-07		194		0.00~1.60		175
		2018-08-09		47		0.00~1.61		38
		2018-08-14		30		0.00~1.62		30
		2018-08-16		130		0.00~1.62		112
		2018-09-07		106		0.00~1.68		82
		2018-10-04		129		0.00~1.76		106
		2018-11-01		258		0.00~1.84		248
		2018-11-06		236		0.00~1.85		206
		2018-12-03		132		0.00~1.92		132
		2018-12-04		21		0.00~1.93		21
		2018-12-07		91		0.00~1.93		91
		2018-12-12		64		0.00~1.95		57
		2018-12-18		271		0.00~1.96		271
		2018-12-19		42		0.00~1.97		42
		2018-12-31		127		0.00~2.00		127
		2019-01-11		26,580		0.00~2.03		25,563
		2019-02-01		12		0.00~2.09		12
		2019-04-01		167		0.00~2.25		167
		2019-04-18		105		0.00~2.30		105

153

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Share granted in 2019	2019-04-22	33	0.00~2.31	33
	2019-07-01	109	0.00~2.50	109
	2019-08-29	39	0.00~2.66	39
	2019-09-02	50	0.00~2.67	50
	2019-11-01	119	0.00~2.84	119
	2019-11-08	14	0.00~2.85	14
	2019-12-05	56	0.00~2.93	56
	2019-12-06	84	0.00~2.93	84
	2019-12-31	87	0.00~3.00	87
		79,800		56,771

¹ Mileage stock is exercisable for two years after one year from the grant date. When the mileage stock is exercised, the closing price of prior month is applied. However, in case of transfer or retirement during the vesting period, mileage stock is exercisable at the closing price of the last month prior to transfer or retirement.

² The exercisable shares are assessed based on the stock price as at December 31, 2019. These shares are vested immediately at grant date.

The accrued expenses for share-based payments in regard to mileage stock as at December 31, 2019 and 2018, are W2,705 million and W2,283 million, respectively. The compensation costs amounting to W1,334 million and W1,350 million were recognized as an expense for the years ended December 31, 2019 and 2018, respectively.

31. Non-operating Income and Expenses

Details of non-operating income and expenses for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Non-operating income
Gains on disposal in property and equipment and assets held for sale		3,343			152,852
Rental income		24,640			26,429
Others		57,634			17,515
		85,617			196,796
Non-operating expenses
Losses on disposal in property and equipment and assets held for sale		4,591			5,590
Donation		84,211			91,943
Restoration cost		3,017			1,854
Others		32,685			53,237
		124,504			152,624
Net non-operating income (expenses)		(38,887	)		44,172

154

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

32. Income Tax Expense

Income tax expense for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Tax payable
Current tax expense		793,937			806,618
Adjustments recognized in the period for current tax of prior years		(24,034	)		(4,856	)
		769,903			801,762
Changes in deferred income tax assets (liabilities)		128,653			26,696
Income tax expense of overseas branches		8,615			6,863
Income tax recognized directly in equity
Net losses on equity instruments at fair value through other comprehensive income		(502	)		13,660
Net losses on debt instruments at fair value through other comprehensive income		(12,709	)		(21,703	)
Exchange difference in foreign operation		(4,488	)		(9,346	)
Remeasurements of net defined benefit liabilities		15,313			36,336
Gains on hedges of a net investment in a foreign operations		2,378			9,629
Gains on cash flow hedging instruments		5,777			(1,437	)
Share of other comprehensive income of associates		(2,862	)		1,283
		2,907			28,422
Reclassification of sale of securities at fair value through other comprehensive income		7,007			(5,172	)
Consolidated tax effect		(37,692	)		(31,431	)
Tax expense		879,393			827,140

An analysis of the net profit before income tax and income tax expense for the years ended December 31, 2019 and 2018, follows:

(In millions of Korean won)	2019			2018
Profit before income tax		3,318,472			3,086,338
Tax at the applicable tax rate1		902,218			838,381
Non-taxable income		(4,035	)		(2,967	)
Non-deductible expense		12,174			12,964
Tax credit and tax exemption		(381	)		(275	)
Temporary difference for which no deferred tax is recognized		1,253			1,112
Tax supplementary pay (rebate) for tax of prior years		(9,938	)		(2,771	)
Income tax expense of overseas branch		8,615			6,863
Tax effect of investments in subsidiaries		81			1,878
Foreign subsidiary tax rate difference effect		(774	)		(1,470	)
Consolidated tax effect		(37,692	)		(31,431	)
Others		7,872			4,856
Tax expense		879,393			827,140
Tax expense / Profit before income tax (%)		26.50			26.80

¹ Applicable income tax rate for W200 million and below is 11%, for over W200 million to W20 billion is 22%, and for over W20 billion to W300 billion is 24.2%, for over W300 billion is 27.5% as at December 31, 2019 and 2018.

155

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Details of current tax liabilities (income tax payables) and current tax assets (income tax refund receivables) before offsetting, as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Tax payables after offsetting1, 2		405,894			623,867
Adjustment on consolidated tax payable and others3		(37,692	)		(31,431	)
Accounts payables4		(359,864	)		(586,699	)
Current tax payable		8,338			5,737

¹ Current tax assets of W 9,692 million (December 31, 2018: W 486 million) and current tax assets of W 4,212 million (December 31, 2018: W 4,152 million) for overseas branches were excluded due to an uncertain tax position which does not qualify for offsetting.

² Includes income tax payable of W 8,338 million (December 31, 2018: W 5,737 million) under current tax liabilities as at December 31, 2019, which are not to be offset against any income tax refund receivables, such as those of overseas branches.

³ Tax expense reduced due to the adoption of consolidated tax return was recognized as tax benefit.

⁴ The amount of income tax payable by the Bank is reclassified as accounts payable, not to the tax authority, but to KB Financial Group Inc. due to the adoption of consolidated tax return.

33. Dividends

The dividend to the shareholder of the Bank in respect of the year ended December 31, 2019, of W1,810 per share, amounting to total dividends of W 731,926 million, is to be proposed at the annual general shareholder’s meeting on March 19, 2020. The Bank’s financial statements as at December 31, 2019, do not reflect this dividend payable.

156

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

34. Accumulated Other Comprehensive Income

Details of accumulated other comprehensive income for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Beginning			Changes (excluding reclassifica- tion)			Reclassificati- on to profit or loss			Tax effect			Transfer to retained earnings		Ending
Remeasurements of net defined benefit liabilities		(175,698	)		(55,682	)		—			15,313			—		(216,067	)
Currency translation differences		(10,328	)		25,406			5,353			(4,488	)		—		15,943
Net gains (losses) on debt instruments at fair value through other comprehensive income		22,475			98,224			(51,240	)		(12,709	)		—		56,750
Net gains (losses) on equity instruments at fair value through other comprehensive income		302,014			(23,657	)		—			(502	)		25,483		303,338
Share of other comprehensive income of associates		(3,259	)		10,408			—			(2,862	)		—		4,287
Gains(losses) on cash flow hedging instruments		11,539			(18,108	)		(2,899	)		5,777			—		(3,691	)
Gains (losses) on hedges of a net investment in a foreign operations		(30,959	)		(9,962	)		1,317			2,378			—		(37,226	)
		115,784			26,629			(47,469	)		2,907			25,483		123,334

	2018
(In millions of Korean won)	Beginning1			Changes (excluding reclassifica- tion)			Reclassificati- on to profit or loss			Tax effect			Transfer to retained earnings			Ending
Remeasurements of net defined benefit liabilities		(79,902	)		(132,132	)		—			36,336			—			(175,698	)
Currency translation differences		(37,711	)		21,672			15,057			(9,346	)		—			(10,328	)
Net gains (losses) on debt instruments at fair value through other comprehensive income		(34,713	)		72,415			6,476			(21,703	)		—			22,475
Net gains (losses) on equity instruments at fair value through other comprehensive income		338,027			(30,863	)		—			13,660			(18,810	)		302,014
Share of other comprehensive income of associates		124			(4,666	)		—			1,283			—			(3,259	)
Gains(losses) on cash flow hedging instruments		7,751			6,980			(1,755	)		(1,437	)		—			11,539
Gains (losses) on hedges of a net investment in a foreign operations		(5,573	)		(22,685	)		(12,330	)		9,629			—			(30,959	)
		188,003			(89,279	)		7,448			28,422			(18,810	)		115,784

¹  Restated based on Korean IFRS 1109.

157

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

35. Trust Accounts

Financial information of the trust segments the Group manages as at December 31, 2019 and 2018, and for the years ended December 31, 2019 and 2018, is as follows:

(In millions of Korean won)	Total assets				Operating revenues
	2019		2018		2019		2018
Consolidated		4,384,959		4,259,441		137,017		127,994
Unconsolidated		51,685,885		47,644,193		2,206,184		1,609,587
		56,070,844		51,903,634		2,343,201		1,737,581

¹ Financial information of the trust accounts has been prepared in accordance with the Statement of Korea Accounting Standard 5004, Trust Accounts, and enforcement regulations of Financial Investment Services under the Financial Investment Services and Capital Markets Act.

Significant receivables and payables related to the Group’s trust accounts as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)		2019		2018
Trust Segment	Assets
	Accrued trust fees		37,340		36,172
	Other accrued income		23,976		23,658
			61,316		59,830
	Liabilities
	Due to trust accounts		1,268,401		1,160,152
	Accrued interest on due to trust accounts		7,081		6,267
	Deposits		278,975		345,873
	Accrued interest on deposits		2,481		24,867
			1,556,938		1,537,159
Custody Segment	Assets
	Accrued trust fees		6,387		5,549
	Liabilities
	Due to trust accounts		3,948,059		4,124,955
	Accrued interest on due to trust accounts		3,055		4,280
			3,951,114		4,129,235

158

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Significant revenue and expenses related to the Group’s trust accounts for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)		2019		2018
Trust Segment	Revenues
	Fees and commissions from trust accounts		276,985		259,170
	Management fees and commissions from retirement pension		25,741		25,321
	Commissions from early termination in trust accounts		119		88
			302,845		284,579
	Expenses
	Interest expenses on due to trust accounts		20,515		17,842
	Interest expenses on deposits		12,926		21,389
			33,441		39,231
Custody Segment	Revenues
	Fees and commissions from trust accounts		31,099		28,215
	Expenses
	Interest expenses on due to trust accounts		45,191		43,612

36. Supplemental Cash Flow Information

Cash and cash equivalents as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Cash		2,310,852			2,185,156
Checks with other banks		383,501			872,166
Due from Bank of Korea		8,336,097			8,911,607
Due from other financial institutions		3,450,859			2,920,081
		14,481,309			14,889,010
Restricted due from financial institutions		(8,759,432	)		(9,203,801	)
Due from financial institutions with original maturities over three months		(842,565	)		(828,714	)
		(9,601,997	)		(10,032,515	)
		4,879,312			4,856,495

159

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Significant non-cash transactions for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Decrease in loans due to the write-offs		539,584		526,134
Changes in accumulated other comprehensive income due to gains and losses on debt instruments at fair value through other comprehensive income		34,275		57,188
Changes in accumulated other comprehensive income due to investment in associates		7,546		(4,665	)
Changes in financial investments due to debt-for-equity swap		88,958		22,286

Cash inflows and outflows from income tax, interest and dividends for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	Activities	2019		2018
Income tax paid	Operating		961,615		396,072
Interest received	Operating		10,968,984		10,162,987
Interest paid	Operating		4,325,880		3,483,064
Dividends received	Operating		101,657		97,440
Dividends paid	Financing		667,226		640,132

Changes in liabilities arising from financial activities for the years ended December 31, 2019 and 2018 are as follows:

	2019
(In millions of Korean won)	Derivative financial instrument for hedging purposes1			Debts			Debentures			Payables to trust accounts			Lease liabilities			Deposits for letter of guarantees and others		Other payable			Total
Beginning		14,643			17,496,056			23,163,585			5,285,107			340,522			156,364		104,184			46,560,461
Cash flow		(28,631	)		1,290,505			(4,561,661	)		(68,647	)		(164,201	)		130,566		(32,864	)		(3,434,933	)
Lease newly acquired and disposal		—			—			—			—			160,451			—		—			160,451
Exchange differences		—			355,151			56,463			—			—			—		—			411,614
Changes in fair values		(108,220	)		—			67,297			—			—			—		—			(40,923	)
Changes from business combination		—			—			—			—			—			—		93,277			93,277
Other changes from non-cash transactions		7,618			(450	)		14,308			—			7,645			16		(103,313	)		(74,176	)
Ending		(114,590	)		19,141,262			18,739,992			5,216,460			344,417			286,946		61,284			43,675,771

160

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Derivative financial instrument for hedging purposes1			Debts			Debentures		Payables to trust accounts		Finance lease liabilities			Deposits for letter of guarantees and others			Other payable			Total
Beginning		(3,659	)		15,810,753			19,183,798		5,018,031		1,642			351,455			144,636			40,506,656
Cash flow		(17,698	)		1,517,014			3,795,428		267,076		(11,242	)		(205,302	)		(3,170	)		5,342,106
Lease newly acquired		—			—			—		—		17,555			—			—			17,555
Exchange differences		—			169,122			147,306		—		—			—			—			316,428
Changes in fair values		30,679			—			4,019		—		—			—			—			34,698
Changes from business combination		—			—			—		—		—			—			(48,711	)		(48,711	)
Other changes from non-cash transactions		5,321			(833	)		33,034		—		110			10,211			11,429			59,272
Ending		14,643			17,496,056			23,163,585		5,285,107		8,065			156,364			104,184			46,228,004

¹  Derivative financial instruments held for hedging are shown at net amounts of liabilities and assets.

161

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

37. Contingent Liabilities and Commitments

Acceptances and guarantees as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Confirmed acceptances and guarantees
Confirmed acceptances and guarantees in Korean won
Acceptances and guarantees for KB purchasing loan		161,314		196,517
Performance bond		3,686		—
Refund guarantees		28,021		—
Others		715,116		597,636
		908,137		794,153
Confirmed acceptances and guarantees in foreign currencies
Acceptances of letter of credit		155,151		208,926
Letter of guarantees		49,754		53,210
Bid bond		37,765		51,528
Performance bond		718,097		604,311
Refund guarantees		1,022,646		592,925
Others		2,935,939		2,539,900
		4,919,352		4,050,800
Financial guarantees
Acceptances and guarantees for mortgage		47,384		50,497
Overseas debt guarantees		406,680		311,796
International financing guarantees in foreign currencies		231,685		110,070
Others		230,000		270,000
		915,749		742,363
		6,743,238		5,587,316
Unconfirmed acceptances and guarantees
Guarantees of letter of credit		1,845,509		1,745,340
Refund guarantees		654,496		686,843
		2,500,005		2,432,183
		9,243,243		8,019,499

162

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Guarantee exposure by credit ratings

The credit quality of the guarantees exposure as at December 31, 2019 and 2018 can be categorized as follows:

(In millions of Korean won)	2019
	Financial instruments applying 12-month expected credit losses		Financial instruments applying lifetime expected credit losses				Total
			Non-impaired		Impaired
Confirmed acceptances and guarantees
Grade 1		4,220,046		696		—		4,220,742
Grade 2		2,105,637		38,271		—		2,143,908
Grade 3		93,074		81,317		—		174,391
Grade 4		18,773		172,440		—		191,213
Grade 5		—		2,873		10,111		12,984
		6,437,530		295,597		10,111		6,743,238
Unconfirmed acceptances and guarantees
Grade 1		1,228,258		1,289		—		1,229,547
Grade 2		1,121,159		32,413		—		1,153,572
Grade 3		17,091		20,957		—		38,048
Grade 4		4,236		62,964		—		67,200
Grade 5		—		170		11,468		11,638
		2,370,744		117,793		11,468		2,500,005
		8,808,274		413,390		21,579		9,243,243

(In millions of Korean won)	2018
	Financial instruments applying 12-month expected credit losses		Financial instruments applying lifetime expected credit losses				Total
			Non-impaired		Impaired
Confirmed acceptances and guarantees
Grade 1		3,726,259		179		—		3,726,438
Grade 2		1,571,258		29,034		—		1,600,292
Grade 3		84,251		13,585		—		97,836
Grade 4		30,443		117,166		420		148,029
Grade 5		—		171		14,550		14,721
		5,412,211		160,135		14,970		5,587,316
Unconfirmed acceptances and guarantees
Grade 1		1,102,478		1,747		—		1,104,225
Grade 2		1,180,137		17,795		—		1,197,932
Grade 3		25,749		16,225		—		41,974
Grade 4		9,627		66,186		—		75,813
Grade 5		—		219		12,020		12,239
		2,317,991		102,172		12,020		2,432,183
		7,730,202		262,307		26,990		8,019,499

¹  Applied same criteria as the credit quality classification of loans.

163

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Acceptances and guarantees by counterparty as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019
	Confirmed guarantees		Unconfirmed guarantees		Total		Proportion (%)
Large companies		5,962,004		1,904,346		7,866,350		85.10
Small and medium sized companies		650,612		397,539		1,048,151		11.34
Public and others		130,622		198,120		328,742		3.56
		6,743,238		2,500,005		9,243,243		100.00
(In millions of Korean won)	2018
	Confirmed guarantees		Unconfirmed guarantees		Total		Proportion (%)
Large companies		4,775,838		1,901,951		6,677,789		83.27
Small and medium sized companies		617,458		423,947		1,041,405		12.99
Public and others		194,020		106,285		300,305		3.74
		5,587,316		2,432,183		8,019,499		100.00

Acceptances and guarantees by industry as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019
	Confirmed guarantees		Unconfirmed guarantees		Total		Proportion (%)
Financial institutions		260,974		23,999		284,973		3.08
Manufacturing		3,373,220		1,627,840		5,001,060		54.11
Service		1,187,516		88,158		1,275,674		13.80
Wholesale and retail		1,126,976		597,998		1,724,974		18.66
Construction		467,114		20,590		487,704		5.28
Public		107,481		81,895		189,376		2.05
Others		219,957		59,525		279,482		3.02
		6,743,238		2,500,005		9,243,243		100.00

(In millions of Korean won)	2018
	Confirmed guarantees		Unconfirmed guarantees		Total		Proportion (%)
Financial institutions		72,071		3,736		75,807		0.95
Manufacturing		2,981,245		1,451,657		4,432,902		55.27
Service		931,680		84,586		1,016,266		12.67
Wholesale and retail		998,333		723,367		1,721,700		21.47
Construction		280,146		40,988		321,134		4.00
Public		165,571		36,256		201,827		2.52
Others		158,270		91,593		249,863		3.12
		5,587,316		2,432,183		8,019,499		100.00

164

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Commitments as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Commitments
Corporate loan commitments		41,340,286		36,929,404
Retail loan commitments		42,492,182		41,283,734
Other acceptance and guarantees in Korean won		1,300,000		1,300,000
Purchase of securities		2,733,757		1,765,445
		87,866,225		81,278,583
Financial Guarantees
Credit line		1,797,802		1,956,426
Purchase of securities		591,500		436,800
		2,389,302		2,393,226
		90,255,527		83,671,809

Other Matters (including litigation)

a) The Group has filed 58 lawsuits (excluding minor lawsuits in relation to the collection or management of loans), as the plaintiff, involving aggregate claims of W 293,254 million, and faces 97 lawsuits as the defendant (excluding minor lawsuits in relation to the collection or management of loans) involving aggregate damages of W 156,914 million, which arose in the normal course of the business and are still pending as at December 31, 2019.

b) As at December 31, 2019, the Group has entered into construction contracts amounting to W 155,546 million related to the construction of integrated headquarters building and payments made up to December 31, 2019 amount to W 41,598 million.

c) As at December 31, 2019, the Group has entered into construction contracts amounting to W 250,458 million related to the construction of The K Project(IT infrastructure construction business needed KB’s Digital Transformation to cope with change of IT technology and finance environment), and payments made until December 31, 2019 amount to W 60,462 million.

d) The Group has entered into a share purchase agreement to acquire a 70% shares in PRASAC(PRASAC Microfinance Institution Limited), a microfinance deposit taking institution in Cambodia, for US$ 603 million from the existing shareholders on January 6, 2020. The consummation of the acquisition is subject to approvals by the domestic and foreign financial authorities.

The Group has signed a shareholders’ agreement with the existing shareholders of PRASAC. Each of the existing shareholders has a put option to sell the remaining 30% shares to the Group at the exercise price calculated on the basis of the adjusted book value as of December 31, 2021. The put option will expire within six months following the finalization of the audited financial statements for the period ending December 31, 2021 and the confirmation of the adjusted book value. If the put option is not exercised until its expiry, the Group may exercise a call option during the six months following the expiry of such put option. All shareholders are restricted from selling shares or additional pledge before exercising the put option and call option.

d) The face values of the securities sold to general customers through tellers’ sale amount to W 372 million and W 372 million as at December 31, 2019 and 2018, respectively.

165

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

38. Subsidiaries

Details of subsidiaries as at December 31, 2019, are as follows:

Investor	Investee	Ownership (%)	Location	Industry
Kookmin Bank	Kookmin Bank Int’l Ltd.(London)1	100.00	United Kingdom	Banking and foreign exchange transaction
Kookmin Bank	Kookmin Bank Cambodia PLC.	100.00	Cambodia	Banking and foreign exchange transaction
Kookmin Bank	Kookmin Bank (China) Ltd.	100.00	China	Banking and foreign exchange transaction
Kookmin Bank	KB Microfinance Myanmar Co., Ltd	100.00	Myanmar	Micro finance services
Kookmin Bank	Personal pension trust and 10 others2	0.00	Korea	Trust
Kookmin Bank	KH the 2nd L.L.C. and 39 others3	0.00	Korea	Asset-backed securitization and others
Kookmin Bank	KB Wise Star Private Real Estate Feeder Fund 13	86.00	Korea	Investment Trust
KB Wise Star Private Real Estate Feeder Fund 1	KB Star Office Private Real Estate Master Fund 23	44.44	Korea	Investment Trust
Kookmin Bank	KB Haeorum Private Securities 833	99.94	Korea	Investment Trust
Kookmin Bank	Kiwoom Frontier Private placement fund 10[Bond]3	99.90	Korea	Investment Trust
Kookmin Bank	Woori Safe Plus Qualified Private Trust S-8(Bond)3	99.96	Korea	Investment Trust
Kookmin Bank	Mirae Asset Triumph Global Privately placed Feeder Investment Trust 13	99.92	Korea	Investment Trust
Mirae Asset Triumph Global Privately placed Feeder Investment Trust 1	Mirae Asset Triumph Global Privately placed Master Investment Trust 1	100.00	Korea	Investment Trust
Mirae Asset Triumph Global Privately placed Feeder Investment Trust 1	Mirae Asset Triumph Global Privately placed Master Investment Trust 2	100.00	Korea	Investment Trust
Kookmin Bank	NH-Amundi Global Private Securities Investment Trust 1(BOND)3	77.78	Korea	Investment Trust
Kookmin Bank	Meritz Private Real Estate fund No.9-23	99.98	Korea	Investment Trust
Kookmin Bank	AIP US Red Private Real Estate Trust NO.103	99.97	Korea	Investment Trust
Kookmin Bank	KB Leaders Private placement fund 10[Bond]3	87.53	Korea	Investment Trust
Kookmin Bank	Samsung KODEX 10Y F-SKTB Inverse ETF(Bond-Derivatives)3	98.56	Korea	Investment Trust
Kookmin Bank	KB Core Blind Private Estate Fund 1st3	90.09	Korea	Investment Trust
KB Core Blind Private Estate Fund 1st	Wise Star Private Real Estate Feeder Fund 3rd3	46.65	Korea	Investment Trust
Kookmin Bank	KB Global Private Real Estate Debt Fund 3rd(USD)3	99.50	Korea	Investment Trust

¹ The Bank converted Kookmin Bank Int’l Ltd.(London) into a London branch as at May 16, 2018, which is considered to be a merger transaction between subsidiaries under common control. The Bank accounted for the transaction by applying carrying amount method and measured the transferred assets and liabilities at carrying amounts included in the consolidated financial statements. The amounts of the transferred assets and liabilities resulting from the business combination were W 480,161 million and W 480,023 million, respectively as at the acquisition date.

166

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

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 or payment of principal and fixed rate of return.

³ The Bank controls these investees because it is exposed to variable returns from its involvement with the investees and has ability to affect those returns through its power.

KB Western Inland highway Private Special Asset Fund(SOC) and Koratevien Specialist Private Equity Fund 1 as structured companies that hold more than half of their ownership percentage but do not have the strength to related activities in accordance with agreements with trust and other sharerholders are excluded from the consolidation.

The condensed financial information of major subsidiaries as at December 31, 2019 and 2018, and for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019
	Assets		Liabilities		Equity		Operating revenue		Profit (loss) for the period
Kookmin Bank Int’l Ltd.(London)		37,404		887		36,517		558		293
Kookmin Bank Cambodia PLC.		307,604		208,670		98,934		15,815		2,851
Kookmin Bank (China) Ltd.		3,032,642		2,599,516		433,126		135,117		12,462
KB Microfinance Myanmar Co., Ltd		24,188		2,559		21,629		4,349		(149	)
Personal pension trust and 10 others		4,413,755		4,299,288		114,467		141,162		3,515
(In millions of Korean won)	2018
	Assets		Liabilities		Equity		Operating revenue		Profit (loss) for the period
Kookmin Bank Int’l Ltd.(London)		35,923		940		34,983		7,330		1,331
Kookmin Bank Hongkong Ltd.1		—		—		—		5,716		5,434
Kookmin Bank Cambodia PLC.		197,135		104,328		92,807		10,307		1,621
Kookmin Bank (China) Ltd.		2,605,033		2,192,469		412,564		138,453		14,819
KB Microfinance Myanmar Co., Ltd		20,941		879		20,062		2,783		538
Personal pension trust and 10 others		4,284,440		4,173,488		110,952		144,767		3,966

¹  Liquidation was completed during the year ended December 31, 2018.

Nature of the risks associated with interests in consolidated structured entities

Terms of contractual arrangements that provide financial support to a consolidated structured entity are as follows:

• The Bank provides the capital commitments of W 172,000 million to KB Wise Star Private Real Estate Feeder Fund 1st, of which W 817 million has not been utilized, of W 57,878 million to Meritz Private Real Estate fund No.9-2, of which W 24,258 million has not been utilized, and of W 100,000 million to KB Core Blind Private Estate Fund 1st, of which W 66,842 million has not been utilized. Based on the investment agreement, the Bnak is subject to increase its investment upon the request of the asset management company or agreement among existing investors.

167

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

• The Bank has provided purchase commitment and grant of credit to the structured entities that are considered as subsidiaries. The Bank should purchase unsold commercial paper securities if there is a shortage of the investors for the commercial paper securities issued by the structured entity. If events causing the cessation of the issuance of commercial paper securities occur or if the structured entities become insolvent, the Bank should provide loans to the structured entities under certain conditions.

(In millions of Korean won)	2019
KH the 2nd L.L.C.		41,309
Silver Investment 2nd Inc.		50,000
KH the 3rd L.L.C.		30,100
KBH the 1st L.L.C.		8,070
HLD the 3rd L.L.C.		111,600
KBH the 3rd L.L.C.		30,217
KBC the 2nd L.L.C.		30,186
KLD the 1st L.L.C.		13,100
LOG the 3rd L.L.C.		24,300
KBL Incheon 1st L.L.C.		101,000
KB DTower 1st L.L.C.		50,151
KB Display 1st L.L.C.		100,303
KB Firstpark L.L.C		48,450
KB Alminium 1st L.L.C		50,236
KB INO 2nd L.L.C.		30,131
KBH the 5th L.L.C		25,072
KB Happy 1st L.L.C		50,138
KL Industrial 2nd L.L.C		30,164
KB Socio the 1st L.L.C.		30,187
KB Industry the 1st L.L.C.		30,158
KBST the 1st L.L.C		30,078
KBH the 4th L.L.C		30,168
KB Geumjeong Hill L.L.C		65,130
KBM the 1st L.L.C		45,220
KB Future the 1st L.L.C		30,127
Great Forest the 1st L.L.C		25,149
KBC the 3rd L.L.C.		35,074
KBH the 6th L.L.C		50,064
KB industry 2nd L.L.C		30,151
Beomuh Landmark the 2nd L.L.C		60,216
KB Firstville the 1st L.L.C		19,081
KB Handok the 1st L.L.C.		30,029
KB Heracles the 1st L.L.C.		25,131
KB World Vista the 1st L.L.C.		19,790
SLT Gamsam Co., Ltd.		24,300
K plus the 1st L.L.C.		200,369

168

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

• The Bank provides the guarantees of payment of principal or principal and fixed rate of return, in case the operating results of the trusts are less than the guaranteed principal or principal and a fixed rate of return.

Changes in subsidiaries

KBH the 5th L.L.C and 26 other subsidiaries were newly included in the consolidation scope, and KL the 1st L.L.C. and 19 other subsidiaries were excluded from the scope of consolidation due to redemption and others during the nine-month periods ended December 31, 2019.

Net cash flow from change in subsidiaries

The net cash inflow from subsidiaries newly consolidated and de-consolidated is amounting to W174,559 million and W37,720 million, respectively for the year ended December 31, 2019.

39. Unconsolidated Structured Entity

The nature, purpose and activities of the unconsolidated structured entities and how the structured entities are financed, are as follows:

Nature	Purpose	Activities	Methods of Financing
Asset - backed securitization	Early cash generation through transfer of securitization assets Fees earned as services to SPC, such as providing lines of credit and ABCP purchase commitments	Fulfillment of Asset-backed securitization plan Purchase and collection securitization assets Issuance and repayment of ABS and ABCP	Issuance of ABS and ABCP based on securitization assets
Structured finance	Granting PF loans related to SOC and real property Granting loans to ships/aircrafts SPC Project finance to M&A and others	Construction of SOC and real property Building ships/ Construction and purchase of aircrafts M&A	Loan commitments through Credit Line, providing lines of credit and investment agreements
Investment funds	Investment in beneficiary certificates Investment in PEF and partnerships	Management of fund assets Payment of fund fees and allocation of fund profits	Sales of beneficiary certificate instruments Investment of general partners and limited partners

169

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

As at December 31, 2019 and 2018, the size of the unconsolidated structured entities and the risks associated with its interests in unconsolidated structured entities are as follows:

(In millions of Korean won)	2019
	Asset-backed securitization		Structured finance		Investment funds		Total
Total assets of the unconsolidated structured entities		69,638,263		39,608,941		44,867,926		154,115,130
Carrying amount on financial statements
Assets
Financial assets at fair value through profit or loss		228,848		21,778		2,153,921		2,404,547
Derivative financial assets		1,367		—		—		1,367
Loans at amortized cost		124,054		2,686,643		—		2,810,697
Financial investments		4,680,995		—		—		4,680,995
Investments in associates		—		—		334,713		334,713
Other assets		—		—		—		—
		5,035,264		2,708,421		2,488,634		10,232,319
Liabilities
Deposits		409,246		523,705		111,908		1,044,859
Other liabilities		1,072		654		—		1,726
		410,318		524,359		111,908		1,046,585
Maximum exposure to loss
Asset1		5,035,264		2,708,421		2,488,634		10,232,319
Purchase and capital commitments		—		—		2,142,836		2,142,836
Acceptances and guarantees and Loan commitments		2,398,467		1,798,208		—		4,196,675
		7,433,731		4,506,629		4,631,470		16,571,830
Methods of determining the maximum exposure to loss		Providing lines of credit / Purchase commitments/ Acceptances and guarantees and Loan commitments		Loan commitments / Capital commitments / Purchase commitments and Acceptances and guarantees		Capital commitments

170

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

(In millions of Korean won)	2018
	Asset-backed securitization		Structured finance		Investment funds		Total
Total assets of the unconsolidated structured entities		81,464,276		29,714,246		28,470,016		139,648,538
Carrying amount on financial statements
Assets
Financial assets at fair value through profit or loss		213,279		19,985		2,241,304		2,474,568
Derivative financial assets		4,034		—		22,250		26,284
Loans at amortized cost		60,404		2,456,843		—		2,517,247
Financial investments		5,458,105		—		—		5,458,105
Investments in associates		—		—		277,645		277,645
Other assets		—		—		—		—
		5,735,822		2,476,828		2,541,199		10,753,849
Liabilities
Deposits		291,465		970,890		62,319		1,324,674
Derivative financial liabilities		331		—		—		331
Other liabilities		893		1,200		58		2,151
		292,689		972,090		62,377		1,327,156
Maximum exposure to loss
Asset1		5,735,822		2,476,828		2,541,199		10,753,849
Purchase and capital commitments		—		20,000		1,664,461		1,684,461
Acceptances and guarantees and Loan commitments		2,476,060		1,562,943		—		4,093,003
		8,211,882		4,059,771		4,205,660		16,477,313
Methods of determining the maximum exposure to loss		Providing lines of credit / Purchase commitments/ Acceptances and guarantees and Loan commitments		Loan commitments / Capital commitments / Purchase commitments and Acceptances and guarantees		Capital commitments

¹ Maximum exposure to loss includes the asset amounts, after deducting loss (provision for assets, impairment losses and others), recognized in the consolidated financial statements of the Group.

171

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

40. Leases

The amounts recognized in the consolidated statements of financial position

The consolidated statement of financial position shows the following amounts relating to leases:

(In millions of Korean won)	December 31, 2019		January 1, 2019
Right-of-use property and equipment1
Real estate		341,288		354,473
Vehicles		8,207		11,181
Others		15,319		10,952
		364,814		376,606
Right-of-use intangible assets1		9,639		15,162
		9,639		15,162
		374,453		391,768
Lease liabilities1		344,417		340,522

¹  It is included in property and equipment, intangible assets and other liabilities.

The amounts recognized in the consolidated statements of comprehensive income

The amounts related to lease recognized in the consolidated statements of comprehensive income for the years ended Decemmber 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Depreciation and amortization of right-of-use assets
Real estate		197,909		—
Vehicles		13,684		—
Others		6,972		—
Intangible asset		6,519		—
		225,084		—
Interest expenses on the lease liabilities (Included in finance charges)		7,645		—
Expense relating to short-term leases (Included in administrative expenses)		1,996		—
Expense relating to leases of low-value assets that are not short-term leases (Included in administrative expenses)		1,034		—

The total cash outflow for leases in 2019 was W 167,442 million.

172

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Finance lease - 2018

The future minimum lease payments classified as a finance lease as at December 31, 2018 is as follows:

(In millions of Korean won)	2018
Net carrying amount of finance lease assets		26,083
Minimum lease payments
Within 1 year		5,824
1-5 years		2,406
		8,230
Present value of minimum lease payments
Within 1 year		5,716
1-5 years		2,349
		8,065

Operating Lease - 2018

The Group as an Operating Lessee

The future minimum lease payments arising from the non-cancellable lease contracts as at December 31, 2018 is as follows:

(In millions of Korean won)	2018
Minimum lease payments
Within 1 year		135,474
1-5 years		192,148
Over 5 years		16,675
		344,297
Minimum sublease payments		(2,323	)

The lease payments reflected in profit or loss for the year ended December 31, 2018 is as follows:

(In millions of Korean won)	2018
Lease payments reflected in profit or loss
Minimum lease payments		161,936
Sublease payments		(1,769	)
		160,167

The Group as an Operating Lessor

The future minimum lease receipts arising from the non-cancellable lease contracts as at December 31, 2018 is as follows:

(In millions of Korean won)	2019		2018
Minimum lease receipts
Within 1 year		23,796		17,376
1-5 years		41,193		23,984
Over 5 years		4,366		—
		69,355		41,360

173

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

41. Related Party Transactions

Profit or loss arising from transactions with related parties for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)		2019		2018
Parent
KB Financial Group Inc.	Fee and commission income		5,355		4,644
	Other non-operating income		932		808
	Interest expense		1,574		5,178
	Fee and commission expense		1		—
	Other operating expense		69		—
	General and administrative expenses		841		778
Parent’s subsidiaries
KB Securities Co., Ltd.	Interest expense		1,325		459
	Fee and commission income		14,298		15,770
	Gains on financial instruments at fair value through profit or loss		39,373		8,583
	Reversal of credit losses		6		—
	Other non-operating income		8,849		10,371
	Interest expense		6,307		3,771
	Fee and commission expense		726		1,079
	Losses on financial instruments at fair value through profit or loss		13,616		8,448
	Other operating expense		134		—
	Provision for credit losses		—		21
	General and administrative expenses		—		8,361
KB Asset Management Co., Ltd.	Fee and commission income		1,201		1,085
	Other non-operating income		4		4
	Interest expense		90		95
	Fee and commission expense		986		3,157
	Other operating expense		15		—
	General and administrative expenses		500		458

174

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

KB Real Estate Trust Co., Ltd.	Fee and commission income	211	134
	Other non-operating income	45	42
	Interest expense	328	197
	Fee and commission expense	1,899	2,282
KB Investment Co., Ltd.	Fee and commission income	42	23
	Interest expense	1,019	376
KB Credit Information Co., Ltd.	Fee and commission income	64	58
	Other non-operating income	232	205
	Interest expense	134	85
	Fee and commission expense	20,508	16,780
KB Data System Co., Ltd.	Fee and commission income	225	202
	Other non-operating income	92	98
	Interest expense	309	250
	General and administrative expenses	50,074	50,803
KB Life Insurance Co., Ltd.	Fee and commission income	14,075	12,471
	Gains on financial instruments at fair value through profit or loss	14,612	14,064
	Other non-operating income	2,898	4,284
	Interest expense	1,062	983
	Fee and commission expense	8	12
	Losses on financial instruments at fair value through profit or loss	2,853	3,421
	Other operating expense	11	—
	General and administrative expenses	1,286	1,582

175

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

KB Kookmin Card Co., Ltd.	Interest income	4,054	3,855
	Fee and commission income	211,806	211,328
	Gains on financial instruments at fair value through profit or loss	2,348	2,730
	Reversal of credit losses	54	7
	Other non-operating income	1,314	983
	Interest expense	1,073	870
	Fee and commission expense	1,732	1,587
	Losses on financial instruments at fair value through profit or loss	38	400
	Provision for credit losses	—	4
	General and administrative expenses	153	216
KB Savings Bank Co., Ltd.	Fee and commission income	736	379
	Other non-operating income	50	44
	Interest expense	6	2
	Fee and commission expense	17	24
KB Capital Co., Ltd.	Interest income	2,907	1,989
	Fee and commission income	2,968	2,311
	Other non-operating income	167	208
	Interest expense	670	1,138
	Fee and commission expense	44	61
	Other operating expense	—	5
	Provision for credit losses	46	163
	General and administrative expenses	—	16

176

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

KB Insurance Co., Ltd.	Interest income	79	45
	Fee and commission income	23,458	22,948
	Gains on financial instruments at fair value through profit or loss	74,576	24,999
	Other non-operating income	361	363
	Interest expense	1,806	2,112
	Fee and commission expense	1	967
	Losses on financial instruments at fair value through profit or loss	7,468	4,328
	Other operating expense	—	16
	Provision for credit losses	6	—
	General and administrative expenses	15,576	15,667
Hanbando BTL Private Special Asset Fund	Fee and commission income	149	160
KB Senior Loan Private Fund No.1	Fee and commission income	8	20
KB Evergreen Private Securities Fund 98(Bond)1	Fee and commission income	—	5
KB AMP Infra Private Special Asset Fund 1 (FoFs)	Fee and commission income	11	5
KB Onkookmin 2020 TDF Fund (FoFs) 1	Fee and commission income	—	1
KB Onkookmin 2025 TDF Fund (FoFs) 1	Fee and commission income	2	1
KB Onkookmin 2030 TDF Fund (FoFs)	Fee and commission income	2	1
KB Onkookmin 2035 TDF Fund (FoFs)1	Fee and commission income	—	2
KB Onkookmin 2040 TDF Fund (FoFs) 1	Fee and commission income	—	1
KB Onkookmin 2045 TDF Fund (FoFs)	Fee and commission income	1	1
KB Onkookmin 2050 TDF Fund (FoFs) 1	Fee and commission income	—	1
KB Muni bond Private Securities Fund 1 (USD)(bond)	Fee and commission income	11	10
KB Global Private Real Estate Debt Fund 1	Fee and commission income	10	5
KB Na Compass Energy Private Special Asset Fund	Fee and commission income	8	5
KB Star Office Private Real Estate Investment Trust No.3	Interest income	619	433
	Interest expense	110	48
KB Star Office Private Real Estate Investment Trust No.4	Interest income	760	396
	Fee and commission income	19	10
	Interest expense	33	13
KB Korea Short Term Premium Private Securities 4(USD)(Bond)1	Fee and commission income	2	—
	Losses on financial instruments at fair value through profit or loss	2,931	—
KB Korea Short Term Premium Private Securities 5(USD)(Bond)1	Fee and commission income	9	2
	Gains on financial instruments at fair value through profit or loss	1,347	—
	Losses on financial instruments at fair value through profit or loss	12,104	—

177

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

KB Korea Short Term Premium Private Securities 10(USD)(Bond)1	Fee and commission income	1	—
KB Global Core Bond Securities Master Fund(Bond)	Fee and commission income	23	2
	Gains on financial instruments at fair value through profit or loss	1,276	—
	Losses on financial instruments at fair value through profit or loss	28	—
KB AU Infigen Energy Private Special Asset Fund	Fee and commission income	4	—
KB AU Infigen Energy Private Special Asset Fund 2rd	Fee and commission income	6	—
KB NA Loan Specialty Private Real Estate Investment Trust 1	Fee and commission income	1	—
	Gains on financial instruments at fair value through profit or loss	4	—
	Losses on financial instruments at fair value through profit or loss	335	—
KB NA Loan Specialty Private Real Estate Investment Trust 3	Fee and commission income	1	—
	Gains on financial instruments at fair value through profit or loss	209	—
	Losses on financial instruments at fair value through profit or loss	14	—
Associates
Korea Credit Bureau Co., Ltd.	Fee and commission income	—	4
	Interest expense	21	127
	Fee and commission expense	1,601	1,486
Incheon Bridge Co., Ltd.	Interest income	8,612	9,426
	Fee and commission income	—	9
	Gains on financial instruments at fair value through profit or loss	4,975	2,655
	Reversal of credit losses	5	—
	Interest expense	483	296
	Fee and commission expense	7	2
	Provision for credit losses	—	1

178

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Dongjo Co., Ltd.	Reversal of credit losses	—		31
Dae-A Leisure Co., Ltd.	Interest expense	8		9
KB12-1 Venture Investment Partnership	Interest expense	3		24
Future Planning KB Start-up Creation Fund	Interest expense	—		18
KB High-tech Company Investment Fund	Interest expense	26		27
Aju Good Technology Venture Fund	Interest expense	22		30
KB-KDBC New Technology Business Investment Fund	Interest expense	58		39
KB Digital Innovation & Growth New Technology Business Investment Fund	Interest expense	8		7
KB-Brain KOSDAQ Scale-up Fund	Interest expense	89		21
KB Global Platform Fund	Interest expense	193		—
Associate of parent
KB Star office private real estate Investment Trust No.1	Interest expense	208		93
Associates of parent’s subsidiaries
SY Auto Capital Co., Ltd.	Interest income	191		189
	Fee and commission income	—		1
	Reversal of credit losses	13		—
	Interest expense	1		—
	Provision for credit losses	—		14
KB No.8 Special Purpose Acquisition Company 1	Interest expense	—		17
KB No.9 Special Purpose Acquisition Company 1	Interest expense	(23	)	43
KB No.10 Special Purpose Acquisition Company 1	Interest expense	18		30
KB No.11 Special Purpose Acquisition Company1	Interest expense	9		12
KB No.17 Special Purpose Acquisition Company	Interest expense	28		—
KB No.18 Special Purpose Acquisition Company	Interest expense	28		—
KB No.19 Special Purpose Acquisition Company	Interest expense	8		—
KB No.20 Special Purpose Acquisition Company	Interest expense	3		—
RAND Bio Science Co., Ltd.	Interest expense	5		3
Wise Asset Management Co., Ltd.	Interest expense	2		9
Food Factory Co., Ltd.	Interest income	41		9
	Fee and commission expense	12		1
	Provision for credit losses	1		1
Acts Co., Ltd.	Interest income	1		—
APRO CO.,LTD.	Interest income	19		—
	Interest expense	4		1
	Fee and commission expense	17		—
JLK Inspection Inc.1	Interest expense	1		—

179

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Rainist Co., Ltd.	Fee and commission income	39	—
	Interest expense	—	2
Spark Biopharma Inc. 1	Interest expense	59	25
Stratio, Inc.	Interest expense	1	—
Nexelon Co.,Ltd 1	Interest expense	2	—
CellinCells Co., Ltd	Interest expense	19	—
Bomap Inc	Interest expense	1	—
BNF Corporation Ltd.	Provision for credit losses	1	—
KB Pre IPO Secondary Venture Fund 1st	Interest expense	7	27
POSCO-KB Shipbuilding Fund	Interest expense	—	81
Inolanding Lab Inc. 1	Fee and commission income	—	1
Other
Retirement pension	Fee and commission income	939	876
	Interest expense	4	3

¹  Excluded from the Group’s related party as of December 31, 2019.

180

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Details of receivables and payables, and related allowances for loan losses arising from the related party transactions as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)		2019		2018
Parent
KB Financial Group Inc.	Other assets		35		4,545
	Deposits		18,537		69,621
	Other liabilities		418,286		643,010
Parent’s subsidiaries
KB Securities Co., Ltd.	Cash and cash equivalents		1,387		5,286
	Derivative assets		9,424		3,935
	Loans at amortized cost (Gross amount)		65,289		25,617
	Allowances		23		21
	Other assets		18,320		8,644
	Derivative liabilities		3,979		1,412
	Deposits		423,053		334,470
	Provisions		30		37
	Other liabilities2		23,330		23,076
KB Asset Management Co., Ltd.	Other assets		260		209
	Deposits		6,929		3,284
	Other liabilities3		607		316
KB Real Estate Trust Co., Ltd.	Other assets		2		—
	Deposits		49,708		27,321
	Other liabilities4		3,964		3,050
KB Investment Co., Ltd.	Other assets		41		—
	Deposits		62,686		20,784
	Other liabilities		53		17
KB Credit Information Co., Ltd.	Deposits		4,047		4,240
	Other liabilities		6,022		5,659
KB Data System Co., Ltd.	Other assets		886		322
	Deposits		21,642		18,059
	Other liabilities		5,372		4,397
KB Life Insurance Co., Ltd.	Derivative assets		—		270
	Other assets		3,804		1,827
	Derivative liabilities		1,532		1,197
	Deposits		571		1,576
	Debts		25,000		25,000
	Other liabilities5		22,771		16,671
KB Kookmin Card Co., Ltd.	Derivative assets		676		—
	Loans at amortized cost (Gross amount)		19,683		3,354
	Allowances		8		2
	Other assets		30,938		24,582
	Derivative liabilities		—		612
	Deposits		74,800		84,089
	Provisions		238		298
	Other liabilities		59,277		59,748

181

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

KB Savings Bank Co., Ltd.	Other assets	144	2
	Other liabilities	389	391
KB Capital Co., Ltd.	Loans at amortized cost (Gross amount)	64,489	54,787
	Allowances	269	227
	Other assets	1,804	574
	Deposits	126,878	64,283
	Provisions	12	—
	Other liabilities	1,337	57
KB Insurance Co., Ltd.	Derivative assets	15,612	7,034
	Other assets	8,549	12,143
	Derivative liabilities	6,453	5,265
	Deposits	5,485	5,188
	Debts	20,000	20,000
	Debentures	29,991	30,002
	Provisions	6	—
	Other liabilities6	4,794	31,863
Hanbando BTL Private Special Asset Fund	Other assets	36	39
KB Senior Loan Private Fund No.1	Other assets	1	3
KB AMP Infra Private Special Asset Fund 1	Other assets	1	1
KB KBSTAR Mid-Long Term KTB Active ETF(Bond)	Other assets	500	—
KB Onkookmin 2030 TDF Fund(FoFs)	Other assets	1	—
KB Muni bond Private Securities Fund 1 (USD)	Other assets	2	2
KB Global Private Real Estate Debt Fund 1	Other assets	2	2
KB Na Compass Energy Private Special Asset Fund	Other assets	1	1
KB Star Office Private Real Estate Master Fund 3	Loans at amortized cost (Gross amount)	—	24,000
	Other assets	—	12
	Deposits	7,364	5,361
	Other liabilities	58	48
KB Star Office Private Real Estate Master Fund 4	Loans at amortized cost (Gross amount)	20,000	20,000
	Other assets	13	13
	Deposits	1,983	1,629
	Other liabilities	16	13
KB Korea Short Term Premium Private Securities 51	Other assets	—	2
KB Korea Short Term Premium Private Securities 10	Other assets	1	—

182

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

KB Global Core Bond Securities Master Fund(Bond)	Other assets	2	2
KB AU Infigen Energy Private Special Asset Fund	Other assets	1	—
KB AU Infigen Energy Private Special Asset Fund 2	Other assets	1	—
KB NA Loan Specialty Private Real Estate Investment Trust 1	Other assets	1	—
	Derivative liabilities	335	—
KB NA Loan Specialty Private Real Estate Investment Trust 3	Other assets	1	—
	Derivative liabilities	6	—
Associates
Korea Credit Bureau Co., Ltd.	Deposits	17,966	15,674
	Other liabilities	—	33
Incheon Bridge Co., Ltd.	Financial assets at fair value through profit or loss	37,857	32,882
	Loans at amortized cost (Gross amount)	147,700	158,200
	Allowances	11	14
	Other assets	520	736
	Deposits	45,447	43,666
	Provisions	6	7
	Other liabilities	346	24
Doosung Metal Co., Ltd.	Deposits	—	3
Jungdo Steel Co., Ltd.	Deposits	4	4
Dae-A Leisure Co., Ltd.	Deposits	753	1,229
	Other liabilities	14	7
Carlife Co., Ltd.	Deposits	—	2
Computerlife Co., Ltd.	Deposits	1	1
Skydigital INC.	Deposits	25	16
Jo Yang Industrial Co., Ltd.	Deposits	2	—
KB12-1 Venture Investment Partnership	Deposits	440	245
	Other liabilities	—	1
KB High-tech Company Investment Fund	Deposits	11,755	275
	Other liabilities	2	—
Aju Good Technology Venture Fund	Deposits	5,456	6,439
	Other liabilities	2	2
KB-KDBC Pre-IPO New Technology Business Investment Fund	Deposits	7,054	7,088
	Other liabilities	4	3
KB Digital Innovation & Growth New Technology Business Investment Fund	Deposits	12	618
KB-Brain KOSDAQ Scale-up Fund	Deposits	13,118	18,813
	Other liabilities	4	7
KB Global Platform Fund	Deposits	17,928	—
	Other liabilities	9	—
Associate of Parent
KB Star Office Private Real Estate Investment Trust No.1	Deposits	8,293	7,946
	Other liabilities	66	58

183

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Associates of Parent’s subsidiaries
SY Auto Capital Co., Ltd.	Loans at amortized cost (Gross amount)	1,900	8,300
	Allowances	4	18
	Other assets	—	9
	Deposits	8	5
	Provisions	13	11
	Other liabilities	2	2
KB No.9 Special Purpose Acquisition Company1	Deposits	—	2,275
	Other liabilities	—	42
KB No.10 Special Purpose Acquisition Company1	Deposits	—	1,666
	Other liabilities	—	11
KB No.11 Special Purpose Acquisition Company1	Deposits	—	658
	Other liabilities	—	2
KB No.17 Special Purpose Acquisition Company	Deposits	1,742	—
	Other liabilities	27	—
KB No.18 Special Purpose Acquisition Company	Deposits	2,140	—
	Other liabilities	28	—
KB No.19 Special Purpose Acquisition Company	Deposits	1,093	—
	Other liabilities	7	—
KB No.20 Special Purpose Acquisition Company	Deposits	1,984	—
	Other liabilities	3	—
RAND Bio Science Co., Ltd.	Deposits	4,452	232
Wise Asset Management Co., Ltd.	Deposits	21	696
	Other liabilities	—	2
Built On Co., Ltd. 1	Deposits	—	7
Food Factory Co., Ltd.	Loans at amortized cost (Gross amount)	1,987	200
	Allowances	2	1
	Other assets	1	1
	Deposits	1,073	68
	Other liabilities	1	—
Acts Co., Ltd.	Deposits	1	29
Paycoms Co., Ltd.	Deposits	1	1
Big Dipper Co., Ltd.	Deposits	6	182
APRO Co.,Ltd.	Loans at amortized cost (Gross amount)	2,016	—
	Deposits	3,201	2,201
	Other liabilities	1	—
Rainist Co., Ltd.1	Deposits	—	1
Spark Biopharma Inc.1	Deposits	—	2,630
	Other liabilities	—	19
Stratio, Inc.	Deposits	726	516
CellinCells Co., Ltd	Deposits	1,545	—
	Other liabilities	1	—
Fabric Types CO.,LTD.	Deposits	395	—
	Other liabilities	2	—

184

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

BNF Corporation Ltd.	Loans at amortized cost (Gross amount)	1,400	—
	Other assets	2	—
	Deposits	947	—
	Other liabilities	6	—
KB IGen Private Equity Fund No.1	Deposits	147	148
KB Pre IPO Secondary Venture Fund 1	Deposits	2,955	1,115
	Other liabilities	1	1
Key management	Loans at amortized cost (Gross amount)	3,423	2,218
	Allowances	1	—
	Other assets	3	2
	Deposits	10,104	9,771
	Other liabilities	226	165
Other
Retirement pension	Other assets	366	331
	Other liabilities	17,620	16,388

¹  Excluded from the Group’s related party as of December 31, 2019.

²  Non-controlling interest equity classified as liabilities include \ 3,602 million and \ 2,704 million as at December 31, 2019 and 2018, respectively.

³  Non-controlling interest equity classified as liabilities include \ 325 million as at December 31, 2019.

⁴ Non-controlling interest equity classified as liabilities include \ 3,596 million and \ 2,700 million as at December 31, 2019 and 2018, respectively.

⁵ Non-controlling interest equity classified as liabilities include \ 19,604 million and \ 13,502 million as at December 31, 2019 and 2018, respectively.

⁶ Non-controlling interest equity classified as liabilities include \ 1,624 million and \ 29,846 million as at December 31, 2019 and 2018, respectively.

Right-of-use assets and lease liability with related parties as at December 31, 2019, are as follows:

(In millions of Korean won)		2019
Parent’s Subsidiaries
KB Securities Co., Ltd.	Right-of-use assets		13,863
	Lease liabilities		16,658
KB Kookmin Card Co., Ltd.	Right-of-use assets		168
	Lease liabilities		28
KB Capital Co., Ltd.	Right-of-use assets		9
	Lease liabilities		23
KB Insurance Co., Ltd.	Right-of-use assets		5,693
	Lease liabilities		5,751

185

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Notional amount of derivative assets and liabilities arising from the related party transactions as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)		2019		2018
Parent’s subsidiaries
KB Securities Co., Ltd.	Notional amount of Derivative financial instruments		651,372		393,515
KB Life Insurance Co., Ltd..	Notional amount of Derivative financial instruments		104,058		252,213
KB Kookmin Card Co., Ltd.	Notional amount of Derivative financial instruments		44,472		62,611
KB Insurance Co., Ltd.	Notional amount of Derivative financial instruments		799,567		1,127,722
KB NA Loan Specialty Private Real Estate Investment Trust 1	Notional amount of Derivative financial instruments		29,153		—
KB NA Loan Specialty Private Real Estate Investment Trust 3	Notional amount of Derivative financial instruments		95,519		—

In accordance with Korean IFRS 1024, the Group includes the Parent, the Parent’s subsidiaries, associates, associates of the Parent’s subsidiaries, key management (including family members), and post-employment benefit plans of the Group and entities regarded as its related parties in the scope of its related parties. Additionally, the Group discloses balances (receivables and payables) and other amounts arising from the related party transactions in the notes to the consolidated financial statements. Refer to Note 13 for details on investments in associates.

Key management includes the directors of the Bank and the executive directors (vice presidents and above) of the Bank and companies where the directors and/or their close family members have control or joint control.

186

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Significant loan transactions with related parties for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	20191
	Beginning		Loans		Repayments		Others		Ending
Parent’s subsidiaries
KB Securities Co., Ltd.		25,617		892,470		853,096		298		65,289
KB Kookmin Card Co., Ltd.		3,354		268,897		252,639		71		19,683
KB Capital Co., Ltd.		54,787		7,624		—		2,078		64,489
KB Star Office Private Real Estate Master Fund 3		24,000		—		24,000		—		—
KB Star Office Private Real Estate Master Fund 4		20,000		—		—		—		20,000
Associate
Incheon Bridge Co., Ltd.		191,082		—		10,500		4,975		185,557
Associate of parent’s subsidiaries
SY Auto Capital Co., Ltd.		8,300		27,998		34,398		—		1,900
Food Factory Co., Ltd.		200		1,800		20		7		1,987
APRO CO.,LTD.		—		2,000		—		16		2,016
BNF Corporation Ltd.		—		—		—		1,400		1,400
Acts CO.,LTD		—		68		68		—		—
Key management2		2,218		638		555		1,122		3,423

	2018 1
(In millions of Korean won)	Beginning		Loans		Repayments		Others		Ending
Parent’s subsidiaries
KB Securities Co., Ltd.		4,346		1,369,958		1,348,687		—		25,617
KB Kookmin Card Co., Ltd.		6,806		164,635		168,087		—		3,354
KB Capital Co., Ltd.		19,285		33,711		—		1,791		54,787
KB Star Office Private Real Estate Master Fund 3		—		24,000		—		—		24,000
KB Star Office Private Real Estate Master Fund 4		—		20,000		—		—		20,000
Associate
Incheon Bridge Co., Ltd.		203,126		—		14,700		2,656		191,082
Dongjo Co., Ltd		116		—		116		—		—
Associate of parent’s subsidiaries
SY Auto Capital Co., Ltd.		—		50,053		41,753		—		8,300
Food Factory Co., Ltd.		200		—		—		—		200
Key management2		1,619		108		836		1,327		2,218

¹ Transactions between related parties, such as settlements arising from operating activities and daylight overdraft to be repaid on the day of handling, are excluded.

² Includes details of loan transactions that occurred before they became related parties.

187

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Significant lending transactions with related parties for the years ended December 31, 2019 and 2018, are as follows:

		2019
(In millions of Korean won)		Beginning		Increase		Decrease		Others1			Ending
Parent
KB Financial Group Inc..	Deposits		69,621		310,000		370,000		8,916			18,537
Parent’s subsidiaries
KB Asset Management Co., Ltd.	Deposits		3,284		—		—		3,645			6,929
KB Real Estate Trust Co., Ltd.	Deposits		27,321		—		—		22,387			49,708
KB Investment Co., Ltd.	Deposits		20,784		410,000		365,000		(3,098	)		62,686
KB Credit Information Co., Ltd.	Deposits		4,240		1,611		1,425		(379	)		4,047
KB Data System Co., Ltd.	Deposits		18,059		18,500		13,500		(1,417	)		21,642
KB Life Insurance Co., Ltd.	Deposits		1,576		—		—		(1,005	)		571
	Debts		25,000		—		—		—			25,000
KB Kookmin Card Co., Ltd.	Deposits		84,089		22,000		22,000		(9,289	)		74,800
KB Capital Co., Ltd.	Deposits		64,283		—		—		62,595			126,878
KB Insurance Co., Ltd.	Deposits		5,188		—		2,441		2,738			5,485
	Debts		20,000		—		—		—			20,000
	Debenture		30,002		—		—		(11	)		29,991
KB Securities Co., Ltd.	Deposits		334,470		96,445		75,000		67,138			423,053
KB Star Office Private Real Estate Investment Trust No.3	Deposits		5,361		2,003		—		—			7,364
KB Star Office Private Real Estate Investment Trust No.4	Deposits		1,629		354		—		—			1,983
Associates
Korea Credit Bureau Co., Ltd.	Deposits		15,674		—		3,000		5,292			17,966
Incheon Bridge Co., Ltd.	Deposits		43,666		25,260		5,260		(18,219	)		45,447
Doosung Metal Co., Ltd.	Deposits		3		—		—		(3	)		—
Jungdo Co., Ltd.	Deposits		4		—		—		—			4
Dae-A Leisure Co., Ltd.	Deposits		1,229		—		—		(476	)		753
Carlife Co., Ltd.	Deposits		2		—		—		(2	)		—
Computerlife Co., Ltd.	Deposits		1		—		—		—			1
SKYDIGITAL INC	Deposits		16		—		—		9			25
Jo Yang Industrial Co., Ltd.	Deposits		—		—		—		2			2

188

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

KB12-1 Venture Investment Partnership	Deposits	245	—	—	195		440
KB High-tech Company Investment Fund	Deposits	275	5,500	5,500	11,480		11,755
Aju Good Technology Venture Fund	Deposits	6,439	—	—	(983	)	5,456
KB-KDBC Pre-IPO New Technology Business Investment Fund	Deposits	7,088	15,000	10,000	(5,034	)	7,054
KB Digital Innovation & Growth New Technology Business Investment Fund	Deposits	618	—	—	(606	)	12
KB-Brain KOSDAQ Scale-up Fund	Deposits	18,813	—	—	(5,695	)	13,118
KB Global Platform Fund	Deposits	—	—	—	17,928		17,928
Associate of parent
KB Star Office Private Real Estate Investment Trust No.1	Deposits	7,946	5,018	5,072	401		8,293
Associates of parent’s subsidiaries
SY Auto Capital Co., Ltd.	Deposits	5	—	—	3		8
KB No.9 Special Purpose Acquisition Company2	Deposits	2,275	—	2,266	(9	)	—
KB No.10 Special Purpose Acquisition Company2	Deposits	1,666	—	1,618	(48	)	—
KB No.11 Special Purpose Acquisition Company2	Deposits	658	—	530	(128	)	—
KB No.17 Special Purpose Acquisition Company	Deposits	—	1,500	—	242		1,742
KB No.18 Special Purpose Acquisition Company	Deposits	—	2,200	100	40		2,140
KB No.19 Special Purpose Acquisition Company	Deposits	—	1,000	—	93		1,093
KB No.20 Special Purpose Acquisition Company	Deposits	—	1,500	—	484		1,984

189

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

RAND Bio Science Co., Ltd.	Deposits	232	1,900	—	2,320		4,452
Wise Asset Management Co., Ltd.	Deposits	696	—	682	7		21
Built On Co., Ltd. 2	Deposits	7	—	—	(7	)	—
Food Factory Co., Ltd.	Deposits	68	—	—	1,005		1,073
Acts Co., Ltd.	Deposits	29	—	—	(28	)	1
Paycoms Co., Ltd.	Deposits	1	—	—	—		1
Big Dipper Co., Ltd.	Deposits	182	—	—	(176	)	6
Apro Co., Ltd.	Deposits	2,201	—	—	1,000		3,201
Rainist Co., Ltd.		1	—	—	(1	)	—
Spark Biopharma Inc.2	Deposits	2,630	17,000	9,000	(10,630	)	—
Stratio, Inc	Deposits	516	—	—	210		726
Nexelon Co.,Ltd.2	Deposits	—	—	200	200		—
CellinCells Co., Ltd	Deposits	—	—	—	1,545		1,545
KB IGen Private Equity Fund No.1	Deposits	148	—	—	(1	)	147
KB Pre IPO Secondary Venture Fund 1st	Deposits	1,115	—	—	1,840		2,955
Fabric Types CO.,LTD.	Deposits	—	—	—	395		395
BNF Corporation Ltd.	Deposits	—	—	—	947		947
Key management3	Deposits	9,771	8,724	8,232	(159	)	10,104

		2018
(In millions of Korean won)		Beginning		Increase		Decrease		Others1			Ending
Parent
KB Financial Group Inc..	Deposits		46,062		1,555,000		1,495,000		(36,441	)		69,621
Parent’s subsidiaries
KB Asset Management Co., Ltd.	Deposits		8,958		—		—		(5,674	)		3,284
KB Real Estate Trust Co., Ltd.	Deposits		16,187		—		—		11,134			27,321
KB Investment Co., Ltd.	Deposits		19,816		56,200		68,200		12,968			20,784
KB Credit Information Co., Ltd.	Deposits		4,444		1,569		1,409		(364	)		4,240
KB Data System Co., Ltd.	Deposits		15,036		11,500		10,700		2,223			18,059
KB Life Insurance Co., Ltd.	Deposits		372		—		—		1,204			1,576
	Debts		25,000		—		—		—			25,000
KB Kookmin Card Co., Ltd.	Deposits		85,091		22,000		22,000		(1,002	)		84,089
KB Capital Co., Ltd.	Deposits		73,906		—		—		(9,623	)		64,283
KB Insurance Co., Ltd.	Deposits		7,034		—		1,650		(196	)		5,188
	Debts		20,000		—		—		—			20,000
	Debenture		49,981		—		—		(19,979	)		30,002
KB Securities Co., Ltd.	Deposits		436,508		111,996		82,512		(131,522	)		334,470

190

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

KB Star Office Private Real Estate Investment Trust No.3	Deposits	—	5,361	—	—		5,361
KB Star Office Private Real Estate Investment Trust No.4	Deposits	—	1,629	—	—		1,629
Associates
Korea Credit Bureau Co., Ltd.	Deposits	25,513	8,000	16,000	(1,839	)	15,674
Incheon Bridge Co., Ltd.	Deposits	48,795	1,260	1,270	(5,119	)	43,666
Terra Co., Ltd.	Deposits	10	—	—	(10	)	—
Jungdong Steel Co., Ltd.	Deposits	3	—	—	(3	)	—
Doosung Metal Co., Ltd.	Deposits	—	—	—	3		3
Jungdo Co., Ltd.	Deposits	4	—	—	—		4
Dae-A Leisure Co., Ltd.	Deposits	466	479	466	750		1,229
Daesang Techlon Co., Ltd.2	Deposits	2	—	—	(2	)	—
Carlife Co., Ltd.	Deposits	—	—	—	2		2
Computerlife Co., Ltd.	Deposits	—	—	—	1		1
SKYDIGITAL INC	Deposits	—	—	—	16		16
KB12-1 Venture Investment Partnership	Deposits	4,963	—	—	(4,718	)	245
Future Planning KB Start-up Creation Fund	Deposits	—	9,000	9,000	—		—
KB High-tech Company Investment Fund	Deposits	7,212	—	—	(6,937	)	275
Aju Good Technology Venture Fund	Deposits	2,771	—	—	3,668		6,439
KB-KDBC Pre-IPO New Technology Business Investment Fund	Deposits	7,500	—	—	(412	)	7,088
KB Digital Innovation & Growth New Technology Business Investment Fund	Deposits	—	—	—	618		618
KB-Brain KOSDAQ Scale-up Fund	Deposits	—	—	—	18,813		18,813

191

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Associate of parent
KB Star Office Private Real Estate Investment Trust No.1	Deposits	6,962	351	—	633		7,946
Associates of parent’s subsidiaries
SY Auto Capital Co., Ltd.	Deposits	6	—	—	(1	)	5
KB No.8 Special Purpose Acquisition Company2	Deposits	2,339	—	2,300	(39	)	—
KB No.9 Special Purpose Acquisition Company2	Deposits	2,309	2,266	2,234	(66	)	2,275
KB No.10 Special Purpose Acquisition Company2	Deposits	1,698	1,618	1,618	(32	)	1,666
KB No.11 Special Purpose Acquisition Company2	Deposits	530	530	530	128		658
RAND Bio Science Co., Ltd.	Deposits	1,032	—	500	(300	)	232
Wise Asset Management Co., Ltd.	Deposits	340	2,366	2,008	(2	)	696
Built On Co., Ltd. 2	Deposits	26	—	—	(19	)	7
Food Factory Co., Ltd.	Deposits	1	—	—	67		68
Acts Co., Ltd.	Deposits	4	—	—	25		29
Paycoms Co., Ltd.	Deposits	—	—	—	1		1
Big Dipper Co., Ltd.	Deposits	473	—	—	(291	)	182
Apro Co., Ltd.	Deposits	—	—	—	2,201		2,201
Rainist Co., Ltd.	Deposits	—	—	—	1		1
Spark Biopharma Inc.2	Deposits	—	4,300	3,300	1,630		2,630
Stratio, Inc	Deposits	—	—	—	516		516
KB IGen Private Equity Fund No.1	Deposits	—	—	—	148		148
KB Pre IPO Secondary Venture Fund 1st	Deposits	2,690	2,000	4,000	425		1,115
POSCO-KB Shipbuilding Fund	Deposits	—	32,800	32,800	—		—
Inno Lending Lab Co., Ltd.2	Deposits	41	—	—	(41	)	—
Key management3	Deposits	8,042	6,605	5,140	264		9,771

¹  Transactions between related parties, such as settlements arising from operating activities and deposits, are excluded.

²  Not considered to be the Bank’s related party as at December 31, 2019.

³ Includes details of lending transactions that occurred before they became related parties.

Significant contribution and collection arising from transactions with related parties for the year ended December 31, 2019, are as follows:

192

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

(In millions of Korean won)	2019
	Contribution		Collection and others
Parent’s subsidiaries
Hanbando BTL Private Special Asset Fund		—		21,563
Hope Sharing BTL Private Special Asset Fund		—		1,653
KB Intellectual Property Investment Association		—		182
KB Senior Loan Private Fund No.1		—		13,458
KB Evergreen Private Securities Fund 98(Bond) 1		—		52,302
KB KBSTAR Mid-Long Term KTB Active ETF(Bond)		—		500
KB Onkookmin 2025 TDF Fund (FoFs) 1		5,500		—
KB Onkookmin 2030 TDF Fund (FoFs)		5,500		—
KB Onkookmin 2035 TDF Fund (FoFs) 1		—		2,289
KB Onkookmin 2045 TDF Fund (FoFs)		—		2,184
KB Star Office Private Real Estate Master Fund 3		—		2,313
KB Star Office Private Real Estate Master Fund 4		—		1,713
KB Korea Short Term Premium Private Securities 4(USD)(Bond) 1		—		48,050
KB Korea Short Term Premium Private Securities 5(USD)(Bond) 1		92,776		211,053
KB Korea Short Term Premium Private Securities 10(USD)(Bond)		70,176		—
KB Global Core Bond Securities Master Fund(Bond)		30,000		22,220
KB Haeoreum private securities investment trust 96(Bond) 1		—		50,656
KB New Renewable Energy Private Special Asset Fund 1		858		4
KB Mezzanine Private Securities Fund 3rd		22,000		—
KB Wise Star Jongno Tower Real Estate Master Fund		65,000		1,836
Koratevien Specialist Private Equity Fund 1		35,000		—
KB Europe Renewable Specialized Private Equity Private Asset Investment Trust No. 2		3,767		—
KB Global Infra Specialized Private Equity Private Asset Investment Trust No. 5		1		—
KB Global Infra Specialized Private Equity Private Asset Investment Trust No. 6		1		—
Associates
Korea Credit Bureau Co., Ltd.		—		135
Balhae Infrastructure Fund		592		6,855
KoFC KBIC Frontier Champ 2010-5 (PEF) 1		—		138
KB GwS Private Securities Investment Trust		—		7,276
KB12-1 Venture Investment Partnership		—		3,400
Future Planning KB Start-up Creation Fund		—		4,400
KB High-tech Company Investment Fund		—		6,950
Aju Good Technology Venture Fund		1,960		—
KB-KDBC New Technology Business Investment Fund		2,500		—
KB-TS Technology Venture Private Equity Fund		4,200		1,200
KB Digital Innovation & Growth New Technology Business Investment Fund		1,125		—
KB Intellectual Property Fund 2		6,000		—
KB Digital Innovation Investment Fund Limited partnership		24,500		—
KB-Brain KOSDAQ Scale-up Fund		7,000		—
KB Sprott Renewables No.1. Private Equity Fund		1,327		—
KB Global Platform Fund		19,500		—
KB-UTC Inno-Tech Venture Fund		300		—
Associate of parent
KB Star Office Private Real Estate Investment Trust No.1		—		1,275
Associates of parent’s subsidiaries
KB Stone Bridge Secondary Private Equity Investment		4,040		1,060

¹  Not considered to be the Group’s related party as at December 31, 2019.

193

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Acceptances and guarantees and unused commitments provided to related parties as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)		2019		2018
Parent’s subsidiaries
KB Securities Co., Ltd	Loan commitment in Korean won		140,000		137,509
KB Investment Co., Ltd.	Loss sharing agreements		1,000		1,000
KB Kookmin Card Co., Ltd.	Loan commitment in Korean won		820,000		820,000
	Loan commitment in foreign currency		3,473		5,591
	Other commitments in Korean won		1,300,000		1,300,000
KB Insurance Co., Ltd.	Loan commitment in Korean won		20,000		—
KB Mezzanine Private Security Investment Trust No.2	Purchase of securities		11,141		11,141
KB Mezzanine Private Securities Fund 3rd	Purchase of securities		48,260		—
KB Senior Loan Private Fund No.1	Purchase of securities		3,770		3,770
KB New Renewable Energy Private Special Asset Fund 1	Purchase of securities		39,142		—
KB Europe Renewable Specialized Private Equity Private Asset Investment Trust No. 2	Purchase of securities		14,454		—
KB Global Infra Specialized Private Equity Private Asset Investment Trust No. 5	Purchase of securities		24,999		—
KB Global Infra Specialized Private Equity Private Asset Investment Trust No. 6	Purchase of securities		24,999		—
Associates
Balhae Infrastructure Fund	Purchase of securities		7,327		10,453
Incheon Bridge Co., Ltd.	Loan commitment in Korean won		20,000		20,000
KoFC KBIC Frontier Champ 2010-5 (PEF) 1	Purchase of securities		—		1,290
KB GwS Private Securities Investment Trust	Purchase of securities		876		876
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund	Purchase of securities		10,040		10,040
Aju Good Technology Venture Fund	Purchase of securities		1,154		1,960

194

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

KB-KDBC New Technology Business Investment Fund	Purchase of securities	—	2,500
KB-TS Technology Venture Private Equity Fund	Purchase of securities	3,180	7,380
KB Digital Innovation & Growth New Technology Business Investment Fund	Purchase of securities	2,250	3,375
KB Intellectual Property Fund 2	Purchase of securities	6,000	12,000
KB Digital Innovation Investment Fund Limited partnership	Purchase of securities	2,800	27,300
KB-Brain KOSDAQ Scale-up Fund	Purchase of securities	9,000	16,000
KB Sprott Renewables No.1. Private Equity Fund	Purchase of securities	18,173	—
KB Global Platform Fund	Purchase of securities	30,500	—
KB-UTC Inno-Tech Venture Fund	Purchase of securities	14,700	—
Associates of parent’s subsidiaries
SY Auto Capital Co., Ltd.	Loan commitment in Korean won	8,100	6,700
BNF Corporation Ltd.	Loan commitment in Korean won	360	—
KB Stone Bridge Secondary Private Equity Investment	Purchase of securities	15,960	—
Key management	Loan commitment in Korean won	564	894

¹  Not considered to be the Group’s related party as at December 31, 2019.

Acceptances and guarantees and unused commitments received from related parties as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)		2019		2018
Parent’s subsidiaries
KB Investment Co., Ltd.	Loss sharing agreements		12,209		14,474
KB Real Estate Trust Co., Ltd.	Purchase of securities		19		1,319
KB Securities Co., Ltd.	Purchase of securities		19		1,319
KB Life Insurance Co., Ltd.	Purchase of securities		3,438		6,595
KB Insurance Co., Ltd.	Purchase of securities		3,343		—
KB Asset Management Co., Ltd.	Purchase of securities		666		—
KB Kookmin Card Co., Ltd.	Loan commitment in Korean won		86,400		87,922

195

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Compensation to key management for the years ended December 31, 2019 and 2018, consists of:

	2019
(In millions of Korean won)	Short-term employee benefits		Post- employment benefits		Share- based payments		Total
Registered directors (executive)		1,833		49		1,594		3,476
Registered directors (non-executive)		402		—		—		402
Non-registered directors		5,767		213		4,235		10,215
		8,002		262		5,829		14,093

	2018
(In millions of Korean won)	Short-term employee benefits		Post- employment benefits		Share-based payments		Total
Registered directors (executive)		1,278		51		1,022		2,351
Registered directors (non-executive)		337		—		—		337
Non-registered directors		4,807		183		3,217		8,207
		6,422		234		4,239		10,895

Significant operating transactions occurring between the Group and related parties include the establishment of deposit accounts, issuance of general purpose loans, loans on business transactions and trade receivables, and providing foreign currency remittances and related services. Other significant transactions include the grant of credit due to acceptance of banker’s usance that the Bank issues and overdraft credit accounts arising from net settlement agreement between the Bank and KB Kookmin Card Co., Ltd.

Collateral offered to related parties as at December 31, 2019 and 2018, are as follows:

		2019				2018
(In millions of Korean won)	Assets pledged as collateral 1	Carrying amount		Collateralized amount		Carrying amount		Collateralized amount
Parent’s subsidiaries
KB Securities Co., Ltd.	Securities		50,471		50,000		62,006		62,000
KB Life Insurance Co., Ltd.	Securities		25,977		25,000		26,055		25,000
	Building/ Land	207,333		32,500		209,459		32,500
KB Insurance Co., Ltd.	Securities		49,990		50,000		50,000		50,000
	Building/ Land	207,333		26,000		209,459		26,000

¹  Collaterals related to lease contracts arising from operating activities between related parties are excluded.

196

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

Collateral received from related parties as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	Assets pledged as collateral 1	2019		2018
Parent’s subsidiaries
KB Securities Co., Ltd.	Time deposits/ Beneficiary right certificate		167,000		178,178
	Securities	27,948		20,000
	Real estate 2	12,000		—
KB Life Insurance Co., Ltd.	Securities		10,000		10,000
KB Kookmin Card Co., Ltd.	Time deposits		22,000		22,000
KB Insurance Co., Ltd.	Securities		135,500		66,500
KB Credit Information Co., Ltd.	Time deposits and others		1,611		1,425
KB Star Office Private Real Estate Master Fund 3	Real estate		—		28,800
KB Star Office Private Real Estate Master Fund 4	Real estate		24,000		24,000
Key management	Time deposits and others		192		401
	Real estate		2,922		3,182

¹  Collaterals related to lease contracts arising from operating activities between related parties are excluded.

²  Related to KB Wise Star Jongno Tower Real Estate Master Fund, a subsidiary of KB Securities Co., Ltd.

As at December 31, 2019, Incheon Bridge Co., Ltd., a related party, provides fund management account, civil engineering completed risk insurance, and management rights as senior collateral amounting to W 611,000 million to a financial syndicate that consists of the Group and five other institutions, and as subordinated collateral amounting to W384,800 million to subordinated debt holders that consist of the Group and two other institutions. Also, it provides certificate of credit guarantee amounting to W400,000 million as collateral to a financial syndicate consisting of the Group and five other institutions.

The amounts of debt securities purchased through KB securities Co., Ltd. are W12,778,602 million and W 7,920,050 million for the years ended December 31, 2019 and 2018, respectively, and the amounts of debts securities sold through KB securities Co., Ltd. are W7,799,397 million and W 3,835,245 million for the years ended December 31, 2019 and 2018, respectively. In addition, KB securities Co., Ltd. acquired W 2,120,000 million and W 160,000 million of bonds issued by the Bank for the years ended December 31, 2019 and 2018, respectively.

The amounts of intangible assets purchased through KB Data System Co., Ltd. are W 37,004 million and W 17,831 million for the years ended December 31, 2019 and 2018, respectively.

The Bank has entered CLS(Continuous Linked Settlement) service agreement with KB Securities Co., Ltd. and accordingly the Bank is able to provide USD 500 million in intraday liquidity under the terms of repayment on the day of payment.

The Bank and KB Kookmin Card Co., Ltd. are jointly and severally liable for the payables of the Bank before the spin-off date.

197

Kookmin Bank and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2019 and 2018

42. Changes in accounting policies-adoption of Korean IFRS 1116 Leases

The Group applied Korean IFRS 1116 retrospectively with recognizing the cumulative effect of initial adoption of the standard as at January 1, 2019. The Group did not restate any comparative prior financial statements under the transitional provisions of Korean IFRS 1116.

Therefore reclassification and adjustments under the new IFRS were recognized in the financial statements beginning on January 1, 2019.

A lessee shall apply this standard to its leases either:

• retrospectively to each prior reporting period presented applying Korean IFRS 1008 Accounting Policies, Changes in Accounting Estimates and Errors (Full retrospective application); or

• retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application.

For leases previously classified as ‘finance leases’, the Group recognized the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right-of-use asset and the lease liability at the date of initial application. The measurement principles of Korean IFRS 1116 are only applied after that date. The remeasurements to the lease liabilities were recognized as adjustments to the related right-of-use assets immediately after the date of initial application.

(In millions of Korean won)	January 1, 2019
Right-of-use asset
Operating lease commitments as at December 31, 20181		365,685
Add : Finance lease asset recognized at December 31, 2018		26,083
Right-of use asset recognized as of the date of initial application		391,768
Lease liability
Operating lease commitments as at December 31, 2018		346,348
Discounted amount using the lessee’s incremental borrowing rate2 at the date of initial application		332,457
Add : Finance lease liability recognized at December 31, 2018		8,065
Lease liabilities recognized as of the date of initial application		340,522

¹  The amount included lease contract related provisions for asset retirement obligation and other assets/liabilities according to the adoption of Korean IFRS.

²  The weighted average incremental borrowing rate of interest is 2.19%.

The difference between the amount of the right-of-use asset and the lease liabilities is adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the consolidated statement of financial position immediately before the date of initial application.

The Group did not need to make any adjustments to the accounting for assets held as lessor as a result of the adoption of Korean IFRS 1116.

43. Approval of Issuance of the Financial Statements

The issuance of the Group’s consolidated financial statements as at and for the year ended December 31, 2019, was approved by the Board of Directors on February 5, 2020.

198

Exhibit 99.2

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Separate Financial Statements

December 31, 2019 and 2018

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Index

December 31, 2019 and 2018

	Page(s)
Independent Auditor’s Report		1~3
Separate Financial Statements
Separate Statements of Financial Position		4
Separate Statements of Comprehensive Income		5
Separate Statements of Changes in Equity		6
Separate Statements of Cash Flows		7
Notes to the Separate Financial Statements		8~183
Report of Independent Auditor’s Review of Internal Control over Financial Reporting		184~185
Report on the Effectiveness of the Internal Control over Financial Reporting		186

Independent Auditor’s Report

(English Translation of a Report Originally Issued in Korean)

To the Board of Directors and Shareholder of Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Opinion

We have audited the accompanying separate financial statements of Kookmin Bank (the Bank), which comprise the separate statements of financial position as at December 31, 2019 and 2018 and the separate statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the separate financial statements, including a summary of significant accounting policies and other explanatory information.

In our opinion, the accompanying separate financial statements present fairly, in all material respects, the separate financial position of Kookmin Bank as at December 31, 2019 and 2018, and its separate financial performance and cash flows for the years then ended in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS).

Basis for Opinion

We conducted our audits in accordance with Korean Standards on Auditing. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Bank in accordance with the ethical requirements of the Republic of Korea that are relevant to our audit of the financial statements and we have fulfilled our other ethical responsibilities in accordance with the ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Other Matter

Auditing standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to audit such financial statements may differ from those generally accepted and applied in other countries.

1

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the separate financial statements in accordance with Korean IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing 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.

Those charged with governance are 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 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 Korean Standards on Auditing 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 financial statements.

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

• Identify and assess the risks of material misstatement of the 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 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 entity’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 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 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

2

• 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 financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance 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.

/s/ Samil PricewaterhouseCoopers

Seoul, Korea

March 5, 2020

This report is effective as of March 5, 2020, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying separate financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

3

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Separate Statements of Financial Position

December 31, 2019 and 2018

(In millions of Korean won)	Notes		2019		2018
Assets
Cash and due from financial institutions		4,6,7,36		13,093,005		13,413,780
Financial assets at fair value through profit or loss		4,6,8,12		9,785,350		8,612,864
Derivative financial assets		4,6,9		2,319,687		1,611,295
Loans at amortized cost		4,6,8,10,11		291,425,606		274,985,803
Financial investments		4,6,8,12		52,039,028		42,559,078
Investments in associates and subsidiaries		13,38		1,050,407		997,389
Property and equipment		14		3,770,027		3,123,612
Investment property		14		38,400		48,466
Intangible assets		15		265,996		221,756
Current income tax assets		32		11,373		2,633
Assets held for sale		18		6,941		16,952
Other assets		4,6,17		5,680,023		4,384,063
Total assets				379,485,843		349,977,691
Liabilities
Financial liabilities at fair value through profit or loss		4,6		80,235		87,168
Derivative financial liabilities		4,6,9		2,156,763		1,638,795
Deposits		4,6,19		295,690,896		267,525,970
Debts		4,6,20		18,706,328		17,411,985
Debentures		4,6,21		17,142,392		21,799,085
Provisions		22		310,666		307,379
Net defined benefit liabilities		23		179,046		166,525
Current income tax liabilities		32		6,814		4,026
Deferred income tax liabilities		16,32		200,412		78,067
Other liabilities		4,6,24,30		16,151,045		14,387,972
Total liabilities				350,624,597		323,406,972
Equity
Capital stock		25		2,021,896		2,021,896
Hybrid securities		25		574,523		—
Capital surplus		25		5,220,031		5,220,031
Accumulated other comprehensive income		25,34		143,388		163,376
Retained earnings		25,33		20,901,408		19,165,416
(Provision of regulatory reserve for credit losses
December 31, 2019 : W2,270,125 million
December 31, 2018 : W2,137,264 million
(Amounts estimated to be appropriated (reveresd)
December 31, 2019 : W 134,199 million
December 31, 2018 : W132,861 million
Total equity				28,861,246		26,570,719
Total liabilities and equity				379,485,843		349,977,691

(*) The separate statement of financial position for year ended December 31, 2019 is prepared applying Korean IFRS 1116, and the comparative separate statement of financial position for the year ended December 31, 2018 has not been restated retrospectively as permitted by transitional provisions of Korean IFRS 1116.

The accompanying notes are an integral part of these separate financial statements.

4

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Separate Statements of Comprehensive Income

December 31, 2019 and 2018

(In millions of Korean won)	Notes		2019			2018
Interest income				10,533,742			9,737,156
Interest income from financial instruments at fair value through other comprehensive income and amortized cost				10,426,144			9,648,150
Interest income from financial instruments at fair value through profit or loss				107,598			89,006
Interest expense				(4,243,698	)		(3,749,069	)
Net interest income		26		6,290,044			5,988,087
Fee and commission income				1,505,343			1,443,839
Fee and commission expense				(337,751	)		(284,139	)
Net fee and commission income		27		1,167,592			1,159,700
Net gains on financial assets/liabilities at fair value through profit or loss		28		421,140			357,580
Net other operating expense		29		(594,574	)		(654,763	)
General and administrative expenses		14,15,23,30,39		(3,851,974	)		(3,733,708	)
Operating profit before provision for credit losses				3,432,228			3,116,896
Provision(Reversal) for credit losses		7,11,12,17,22		(102,970	)		(99,802	)
Operating profit				3,329,258			3,017,094
Net non-operating profit		31		(34,636	)		41,367
Profit before income tax expense				3,294,622			3,058,461
Income tax expense		32		(872,929	)		(819,144	)
Profit for the year				2,421,693			2,239,317
(Adjusted profit after provision of regulatory reserve for credit losses		25
2019 : W2,287,494 million
2018 : W1,999,344 million
Items that will not be reclassified to profit or loss:
Remeasurements of net defined benefit liabilities		23		(40,369	)		(95,796	)
Losses on equity instruments at fair value through other comprehensive income				(17,151	)		(36,013	)
Items that may be subsequently reclassified to profit or loss:
Currency translation differences				781			856
Gains(losses) on debt instruments at fair value through other comprehensive income				33,506			56,992
Gains(losses) on cash flow hedging instruments				(15,230	)		3,788
Other comprehensive income for the year, net of tax		34		(38,463	)		(70,173	)
Total comprehensive income for the year				2,383,230			2,169,144

(*) The separate statement of comprehensive income for year ended December 31, 2019 is prepared applying Korean IFRS 1116, and the comparative separate statement of comprehensive income for the year ended December 31, 2018 has not been restated retrospectively as permitted by transitional provisions of Korean IFRS 1116.

The accompanying notes are an integral part of these separate financial statements.

5

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Separate Statements of Changes in Equity

December 31, 2019 and 2018

(In millions of Korean won)	Capital Stock		Hybrid Securities		Capital Surplus		Accumulated Other Comprehensive Income			Retained Earnings			Total Equity
Balance at January 1, 2018		2,021,896		—		5,220,031		745,856			17,252,939			25,240,722
The effect of changing of accounting policies
The adoption of Korean IFRS 1109 Financial Instruments		—		—		—		(499,269	)		286,616			(212,653	)
Other (Note 2)		—		—		—		(13,038	)		13,038			—
Balance after reflecting the change of accounting policies		2,021,896		—		5,220,031		233,549			17,552,593			25,028,069
Comprehensive income for the year
Profit for the year		—		—		—		—			2,239,317			2,239,317
Remeasurements of net defined benefit liabilities		—		—		—		(95,796	)		—			(95,796	)
Net gains on equity instruments at fair value through other comprehensive income		—		—		—		(36,013	)		13,638			(22,375	)
Currency translation differences		—		—		—		856			—			856
Net gains on debt instruments at fair value through other comprehensive income		—		—		—		56,992			—			56,992
Gains on cash flow hedging instruments		—		—		—		3,788			—			3,788
Total comprehensive income for the year		—		—		—		(70,173	)		2,252,955			2,182,782
Transactions with the shareholder
Dividends		—		—		—		—			(640,132	)		(640,132	)
Total transactions with the shareholder		—		—		—		—			(640,132	)		(640,132	)
Balance at December 31, 2018		2,021,896		—		5,220,031		163,376			19,165,416			26,570,719
Balance at January 1, 2019		2,021,896		—		5,220,031		163,376			19,165,416			26,570,719
Comprehensive income for the year
Profit for the year		—		—		—		—			2,421,693			2,421,693
Remeasurements of net defined benefit liabilities		—		—		—		(40,369	)		—			(40,369	)
Net gains on equity instruments at fair value through other comprehensive income		—		—		—		1,324			(18,475	)		(17,151	)
Currency translation differences		—		—		—		781			—			781
Net gains on debt instruments at fair value through other comprehensive income		—		—		—		33,506			—			33,506
Gains on cash flow hedging instruments		—		—		—		(15,230	)		—			(15,230	)
Total comprehensive income for the year		—		—		—		(19,988	)		2,403,218			2,383,230
Transactions with the shareholder
Dividends		—		—		—		—			(667,226	)		(667,226	)
Issuance of hybrid securities		—		574,523		—		—			—			574,523
Total transactions with the shareholder		—		574,523		—		—			(667,226	)		(92,703	)
Balance at December 31, 2019		2,021,896		574,523		5,220,031		143,388			20,901,408			28,861,246

(*) The separate statement of changes in equity for year ended December 31, 2019 is prepared applying Korean IFRS 1116, and the comparative separate statement of changes in equity for the year ended December 31, 2018 has not been restated retrospectively as permitted by transitional provisions of Korean IFRS 1116.

The accompanying notes are an integral part of these separate financial statements.

6

Kookmin Bank    

(A wholly owned subsidiary of KB Financial Group Inc.)    

Separate Statements of Cash Flows    

December 31, 2019 and 2018         

(in millions of Korean won)	Notes		2019			2018
Cash flows from operating activities
Profit for the year				2,421,693			2,239,317
Adjustment for non-cash items
Net losses(gains) on financial assets/liabilities at fair value through profit or loss				(192,418	)		(40,016	)
Net losses(gains) on derivative financial investments for hedging purposes				(108,267	)		41,491
Adjustment of fair value of derivative financial instruments				282			410
Provision for credit losses				102,609			99,802
Net gains on financial investments				(95,524	)		(86,994	)
Net losses(gains) on associates and subsidiaries				(101	)		31,263
Depreciation and amortization expense				498,480			241,400
Other net losses(gains) on property and equipment/intangible assets				1,503			(106,376	)
Share-based payment				15,173			4,051
Post-employment benefits				157,946			140,790
Net interest expense				237,405			248,356
Losses on foreign currency translation				(93,555	)		(10,120	)
Other expense				62,874			19,117
				586,407			583,174
Changes in operating assets and liabilities
Financial assets at fair value through profit or loss				(1,212,179	)		(3,066,415	)
Derivative financial instrument				(18,856	)		(11,166	)
Loans at amortized cost				(16,499,522	)		(25,022,135	)
Current income tax assets				(8,741	)		(1,245	)
Deffered income tax assets				164			449
Other assets				(873,028	)		2,250,031
Financial liabilities at fair value through profit or loss				(23,164	)		10,419
Deposits				27,859,539			19,411,037
Deferred income tax liabilities				137,231			55,218
Other liabilities				1,231,001			544,622
				10,592,445			(5,829,185	)
Net cash inflow(outflow) from operating activities				13,600,545			(3,006,694	)
Cash flows from investing activities
Net cash flows from derivative financial instrument for hedging purposes				9,589			3,065
Disposal of financial assets at fair value through profit or loss				9,238,975			11,093,020
Acquisition of financial assets at fair value through profit or loss				(9,007,163	)		(8,901,732	)
Disposal of financial investments				59,503,216			53,147,788
Acquisition of financial investments				(68,575,150	)		(57,399,854	)
Disposal of investments in associates and subsidiaries				16,088			39,772
Acquisition of investments in associates and subsidiaries				(69,004	)		(201,348	)
Disposal of property and equipment				57			1,722
Acquisition of property and equipment				(523,504	)		(330,618	)
Disposal of intangible assets				7,126			1,425
Acquisition of intangible assets				(73,202	)		(52,719	)
Net cash flows due to conversion of a subsidiary into a branch				—			32,903
Others				(59,821	)		301,954
Net cash outflow from investing activities				(9,532,793	)		(2,264,622	)
Cash flows from financing activities
Net cash flows from derivative financial instrument for hedging purposes				(28,631	)		(17,698	)
Net increase in debts				955,745			1,346,037
Increase in debentures				4,766,568			9,308,540
Decrease in debentures				(9,561,329	)		(5,861,362	)
Payment of dividends				(667,226	)		(640,132	)
Net increase in other payables from trust accounts				(89,353	)		276,446
Issuance of hybrid securities				574,523			—
Others				(36,849	)		(212,475	)
Net cash inflow(outflow) from financing activities				(4,086,552	)		4,199,356
Exchange losses on cash and cash equivalents				155,856			(29,310	)
Net increase(decrease) in cash and cash equivalents				137,056			(1,101,270	)
Cash and cash equivalents at the beginning of the year		36		4,408,576			5,509,846
Cash and cash equivalents at the end of the year		36		4,545,632			4,408,576

(*) The separate statement of cash flows for the year ended December 31, 2019 is prepared applying Korean IFRS 1116, and the comparative separate statement of cash flows for the year ended December 31, 2018 has not been restated retrospectively as permitted by transitional provisions of Korean IFRS 1116.

The accompanying notes are an integral part of these separate financial statements.

7

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

1. The Bank

Kookmin Bank (the “Bank”) was incorporated in 1963 under the Citizens National Bank Act to provide banking services to the general public and to small and medium-sized enterprises. Pursuant to the Repeal Act of the Citizens National Bank Act, effective January 5, 1995, the Bank’s status changed to a financial institution which operates under the Banking Act and Commercial Act.

The Bank merged with Korea Long Term Credit Bank on December 31, 1998, and with its subsidiaries, Daegu, Busan, Jeonnam Kookmin Mutual Savings & Finance Co., Ltd., on August 22, 1999. Pursuant to the directive from the Financial Services Commission related to the Structural Improvement of the Financial Industry Act, the Bank acquired certain assets, including performing loans, and assumed most of the liabilities of Daedong Bank on June 29, 1998. Also, the Bank completed the merger with Housing and Commercial Bank (“H&CB”) on October 31, 2001, and merged with Kookmin Credit Card Co., Ltd., a majority-owned subsidiary, on September 30, 2003. Meanwhile, the Bank spun off its credit card business segment on February 28, 2011, and KB Kookmin Card Co., Ltd. became a subsidiary of KB Financial Group Inc.

The Bank listed its shares on the Stock Market Division of the Korea Exchange (“KRX,” formerly Korea Stock Exchange) in September 1994. As a result of the merger with H&CB, the shareholder of the former Kookmin Bank and H&CB received new common shares of the Bank which were relisted on the KRX on November 9, 2001. In addition, H&CB listed its American Depositary Shares (“ADS”) on the New York Stock Exchange (“NYSE”) on October 3, 2000, prior to the merger. Following the merger with H&CB, the Bank listed its ADS on the NYSE on November 1, 2001. The Bank became a wholly owned subsidiary of KB Financial Group Inc. through a comprehensive stock transfer on September 29, 2008. Subsequently, the Bank’s shares and its ADS, each listed on the KRX and the NYSE, were delisted on October 10, 2008 and September 26, 2008, respectively. As at December 31, 2019, the Bank’s paid-in capital is W2,021,896 million.

The Bank engages in the banking business in accordance with the Banking Act, trust business and other relevant businesses in accordance with the Financial Investment Services and Capital Markets Act, and telecommunication Services in accordance with the Special Act on Financial Innovation Support. As at December 31, 2019, the Bank operates 1,051 domestic branches and offices, and eight overseas branches (excluding four subsidiaries and two offices).

2. Basis of Preparation

2.1 Application of Korean IFRS

The Bank maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangul) in accordance with Korean IFRS. The accompanying separate financial statements have been condensed, restructured and translated into English from the Korean language financial statements.

The separate financial statements of the Bank have been prepared in accordance with Korean IFRS. These are the standards and related interpretations issued by the International Accounting Standards Board (“IASB”) that have been adopted by the Republic of Korea.

8

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

The preparation of the separate financial statements requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Bank’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the separate financial statements are disclosed in Note 2.(4).

The Bank has prepared the separate financial statements in accordance with Korean IFRS 1027 Separate Financial Statements.

The Bank newly applied the following amended and enacted standards and interpretations from January 1, 2019, and these applications did not have a material impact on the separate financial statements, except for the adoption of Korean IFRS 1116 Lease.

• Amendments to Korean IFRS 1116 Leases

Korean IFRS 1116 adopts a single lease model and requires lessee to recognize assets and liabilities for all leases which lease term is over 12 months and underlying assets are not low value assets. A lessee is required to recognize a right-of-use asset and a lease liability representing its obligation to make lease payments.

The Bank changed its accounting policies as a result of adopting Korean IFRS 1116 Leases. The Bank applied the new accounting policies retrospectively, as permitted under the specific transitional provisions in the standard. The cumulative effect of initial application of Korean IFRS 1116 was recognized on the date of initial application (January 1, 2019). The Bank does not elect to restate its previous financial statements, which is the comparative information. See Note 41 for the effect of adoption of Korean IFRS 1116 Leases.

• Amendments to IFRS 1109 Financial Instruments

The narrow-scope amendments made to Korean IFRS 1109 Financial Instruments enable entities to measure certain pre-payable financial assets with negative compensation at amortized cost. When a modification of a financial liability measured at amortized cost that does not result in the derecognition, a modification gain or loss shall be recognized in profit or loss. The amendments had no material impact on the Bank’s financial statements.

• Amendments of Korean IFRS 1019 Employee Benefits

The amendments require that an entity shall calculate current service cost and net interest for the remainder of the reporting period after a plan amendment, curtailment or settlement based on updated actuarial assumptions from the date of the change. The amendments also require that a reduction in a surplus must be recognized in profit or loss even if that surplus was not previously recognized because of the impact of the asset ceiling. The amendments had no material impact on the Bank’s financial statements.

• Differences between fair value and carrying amount when changes in classification of associates in separate financial statements

Although the Bank previously had accounted for the difference between fair value and book value as other comprehensive income when the classification of associates in separate financial statements changed, the bank recognized those difference as profit or loss in accordance with the IFRS Interpretations Committee’s interpretation in 2019.

The Bank believes the change in accounting policy provides more relevant information. The separate statements of financial position as at December 31, 2018 and separate statements of changes in equity for the years ended December 31, 2018 have been restated by adjusting those changed accounting policy.

9

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

(In millions of Korean won)	2019			2018
Accumulated other comprehensive income		(13,038	)		(13,038	)
Retained earnings		13,038			13,038

• Amendments of Korean IFRS 1028 Investments in Associates and Joint Ventures

The amendments clarify that an entity shall apply Korean IFRS 1109 to financial instruments in an associate or joint venture to which the equity method is not applied. These include long-term interests that, in substance, form part of the entity’s net investment in an associate or joint venture. The amendments had no material impact on the Bank’s financial statements.

• Enactment to Interpretation of Korean IFRS 2123 Uncertainty over Income Tax Treatments

The interpretation explains how to recognize and measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment, and includes guidance on how to determine whether each uncertain tax treatment is considered separately or together. It also presents examples of circumstances where a judgment or estimate is required to be reassessed. The enactment did not have a significant impact on the financial statements.

• Amendments to K-IFRS No. 1109, Financial Instruments, and No. 1107, Financial Instruments: Disclosure

Due to benchmark interest rate reform, exceptions have been added that allow hedge accounting to be applied while uncertainty exists. With regards to the hedging relationship, we assume that the benchmark interest rate, which is the underlying variable of cash flows, is not changed by the benchmark interest rate reform when examining the likelihood of anticipated transactions and the subsequent evaluation of the hedging effect. For hedges of interest rate risk factors not specified in the contract, the requirement that the hedged risk must be separately identified applies only at the inception of the hedge relationship. The application of this exception is terminated when uncertainty regarding the timing and amount of cash flows based on the benchmark interest rates resulting from the benchmark interest rate reform ceases or the hedging relationship ceases. The amendments were implemented from January 1, 2020, but the Bank adopted those amendments early as early adoption was allowed. The significant benchmark interest rate indicator for the hedge relationship is LIBOR and CD Rates, and the hedge accounted for in this amendment is hedge accounting in Note 9.

• Annual Improvements 2015-2017 Cycle

Korean IFRS 1103 Business Combination

The amendments clarify that when a party to a joint arrangement obtains control of a business that is a joint operation and had rights to the assets and obligations for the liabilities relating to that joint operation immediately before the acquisition date, the transaction is a business combination achieved in stages. In such cases, the acquirer shall remeasure its entire previously held interest in the joint operation. The amendments had no material impact on the Bank’s financial statements.

Korean IFRS 1111 Joint Agreements

The amendments clarify that when a party that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business. In such cases, previously held interests in the joint operation are not remeasured. The amendments had no material impact on the Bank’s financial statements.

10

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Paragraph 57A of Korean IFRS 1012 Income Tax

The amendment is applied to all the income tax consequences of dividends and requires an entity to recognize the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events. The amendment had no material impact on the Bank’s financial statements.

Korean IFRS 1023 Borrowing Cost

The amendments clarify that if a specific borrowing remains outstanding after the related qualifying asset is ready for its intended use (or sale), it becomes part of general borrowings. The amendments had no material impact on the Bank’s financial statements.

Certain new accounting standards and interpretations that have been published but are not mandatory for the reporting period commencing January 1, 2019 and have not been early adopted by the Bank are set out below.

• Amendments to Korean IFRS 1001 Presentation of Financial Statements and Korean IFRS 1008 Accounting policies, changes in accounting estimates and errors – Definition of Material

The amendments clarify the explanation of the definition of material and amended Korean IFRS 1001 and Korean IFRS 1008 in accordance with the clarified definitions. Materiality is assessed by reference to omission or misstatement of material information as well as effects of immaterial information, and to the nature of the users when determining the information to be disclosed by the Bank. These amendments should be applied for annual periods beginning on or after January 1, 2020, and earlier application of permitted. The Bank does not expect that these amendments have a significant impact on the financial statements.

• Amendments to Korean IFRS 1103 Business Combination – Definition of a Business

To consider the integration of the required activities and assets as a business, the amended definition of a business requires an acquisition to include an input and a substantive process that together significantly contribute to the ability to create outputs and excludes economic benefits from the lower costs. An entity can apply a concentration test, an optional test, where substantially all of the fair value of gross assets acquired is concentrated in a single asset or a group of similar assets, the assets acquired would not represent a business. These amendments should be applied for annual periods beginning on or after January 1, 2020, and earlier application of permitted. The Bank does not expect that these amendments have a significant impact on the financial statements.

• New interpretations not yet adopted by the Bank

On December 16, 2019, the IFRS Interpretation Committee announced that all economic penalties for the termination of the lease are taken into account when determining the enforceable period for lease term and useful life of leasehold improvements. The Bank is analyzing the impact of changes in accounting policy for the enforceable period on consolidated financial statements.

11

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Due to the large number of lease contracts held by the Bank and varying terms of the contract, the Bank expects that sufficient time would be required to assess items to be included in the review of extensive economic penalty and to establish procedures for collecting and analyzing necessary information. Therefore, the effect of the changes in accounting policy for the lease term has not been reflected in the consolidated financial statements for the current reporting period.

If the accounting policy for the lease term is changed in the annual periods beginning on or after January 1, 2020, the amount of the related right-of-use assets and lease liabilities may increase, and the consolidated financial statements may need to be retroactively restated to reflect this effect.

2.2 Measurement Basis

The separate financial statements have been prepared under the historical cost convention unless otherwise specified.

2.3 Functional and Presentation Currency

Items included in the financial statements of the Bank are measured using the currency of the primary economic environment in which the Bank operates (the “functional currency”). The separate financial statements are presented in Korean won, which is the Bank’s functional and presentation currency. Refer to Notes 3.2.

2.4 Critical Accounting Estimates

The preparation of separate financial statements requires the application of accounting policies, certain critical accounting estimates and assumptions that may have a significant impact on the assets (liabilities) and incomes (expenses). Management’s estimates of outcomes may differ from actual outcomes if management’s estimates and assumptions based on management’s best judgment at the reporting date are different from the actual environment.

Estimates and assumptions are continually evaluated and any change in an accounting estimate is recognized prospectively by including it in profit or loss in the period of the change, if the change affects that period only. Alternatively if the change in accounting estimate affects both the period of change and future periods, that change is recognized in the profit or loss of all those periods.

Uncertainty in estimates and assumptions with significant risk that may result in material adjustment to the separate financial statements are as follows:

2.4.1 Income Taxes

The Bank is operating in numerous countries and the income generated from these operations is subject to income taxes based on tax laws and interpretations of tax authorities in numerous jurisdictions. There are many transactions and calculations for which the ultimate tax determination is uncertain.

If certain portion of the taxable income is not used for investments, increase in wages, and others in accordance with the Tax Law for Promotion of investment and Collaborative Cooperation (Recirculation of Corporate Income), the Bank is liable to pay additional income tax calculated based on the tax laws. The new tax law is effective for three years from 2018 and measurement of current and deferred income tax is affected. As the Bank’s income tax is dependent on the investments, increase in wages, and others, there exists uncertainty with regard to measuring the final tax effects.

12

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

2.4.2 Fair Value of Financial Instruments

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Bank uses its judgment to select a variety of methods and make assumptions that are mainly based on material market conditions existing at the end of each reporting period. Refer to Note 6 for details on valuation techniques and inputs used to determine the fair value of financial instruments.

2.4.3 Provisions for Credit Losses (allowances for loan losses, provisions for acceptances and guarantees, and unused loan commitments)

The Bank determines and recognizes allowances for losses on financial assets at amortized cost and fair value through other comprehensive income through impairment test and recognizes provisions for acceptances and guarantees, and unused loan commitments. The accuracy of provisions for credit losses is determined by the methodology and assumptions used for the estimation of expected cash flows of the borrower for individually assessed allowances of loans, collectively assessed allowances for groups of loans, acceptances and guarantees, and unused loan commitments.

2.4.4 Net Defined Benefit Liability

The present value of net defined benefit liability depends on a number of factors that are determined on an actuarial basis using a number of assumptions

2.4.5 Estimated Impairment of Goodwill

The Bank tests annually whether goodwill has suffered any impairment. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations

3. Significant Accounting Policies

The significant accounting policies and calculation methods applied in the preparation of these separate financial statements have been consistently applied to all periods presented, except for the impact of changes due to enactment of new standards, amendments and interpretations disclosed in Note 2.1 and the following paragraph.

3.1 Investments in Associates and Subsidiaries

Associates are entities over which the Bank has significant influence in the financial and operating policy decisions. If the Bank holds 20% or more of the voting power of the investee, it is presumed that the Bank has significant influence.Subsidiaries are companies that are controlled by the Bank. The Bank controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The existence and effects of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Bank controls another entity. Subsidiaries are fully consolidated from the date when control is transferred to the Bank and de-consolidated from the date when control is lost.

Investments in associates and subsidiaries are accounted for at cost in accordance with Korean IFRS 1027. Beneficiary certificates in private equity fund which is consolidated is classified as financial assets at fair value through profit or loss in accordance with Korean IFRS 1109, and measured at fair value in accordance with Korean IFRS 1113.

The Bank determines at each reporting period whether there is any objective evidence that the investments in the associates and subsidiaries are impaired. If this is the case, the Bank calculates the amount of impairment as the difference between the recoverable amount of the associate or subsidiary and its carrying value and recognizes the amount as ‘non-operating income (expense)’ in the statement of comprehensive income.

13

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

3.2 Foreign Currency

3.2.1 Foreign Currency Transactions and Balances

A foreign currency transaction is recorded, on initial recognition in the functional currency, by applying the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. At the end of each reporting period foreign currency monetary items are translated using the closing rate which is the spot exchange rate at the end of the reporting period. Non-monetary items that are measured at fair value in a foreign currency are translated using the spot exchange rates at the date when the fair value was determined and non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the spot exchange rate at the date of the transaction.

Excludes translation differences of net investments in foreign operations and financial liabilities arising from designated as hedging instruments for net investments, exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognized in profit or loss in the period in which they arise. When gains or losses on a non-monetary item are recognized in other comprehensive income, any exchange component of those gains or losses are also recognized in other comprehensive income. Conversely, when gains or losses on a non-monetary item are recognized in profit or loss, any exchange component of those gains or losses are also recognized in profit or loss.

3.2.2 Foreign Operations

The financial performance and financial position of all foreign operations, whose functional currencies differ from the Bank’s presentation currency, are translated into the Bank’s presentation currency using the following procedures.

Assets and liabilities for each statement of financial position presented are translated at the closing rate at the end of the reporting period. Income and expenses in the statement of comprehensive income presented are translated at average exchange rates for the period. All resulting exchange differences are recognized in other comprehensive income.

Any goodwill arising from the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising from the acquisition of that foreign operation are treated as assets and liabilities of the foreign operation. Thus, they are expressed in the functional currency of the foreign operation and are translated into the presentation currency at the closing rate.

On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognized in the other comprehensive income and the separate component of equity, is reclassified from other comprehensive income to profit or loss (as a reclassification adjustment) when the gains or losses on disposal are recognized.

3.2.3 Translation of the net investment in a foreign operation

If the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, then foreign currency difference arising on the item which in substance is considered to form part of the net investment in the foreign operation, are recognized in the other comprehensive income and shall be reclassified to profit or loss on disposal of the investment.

14

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

3.3 Recognition and Measurement of Financial Instruments

3.3.1 Initial Recognition

The Bank recognizes a financial asset or a financial liability in its statement of financial position when the Bank becomes a party to the contractual provisions of the instrument. A regular way purchase or sale of financial assets (a purchase or sale of a financial asset under a contract whose terms require delivery of the financial instruments within the time frame established generally by market regulation or practice) is recognized and derecognized using trade date accounting.

The Bank classifies financial assets as financial assets at fair value through profit or loss, financial assets at fair value through other comprehensive income or financial assets at amortized cost. The Bank classifies financial liabilities as financial liabilities at fair value through profit or loss, or other financial liabilities. The classification depends on the Bank’s business model for managing financial instruments and the contractual cash flow characteristics of the financial instruments at initial recognition.

At initial recognition, a financial asset or financial liability is measured at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. The fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The fair value of a financial instrument on initial recognition is normally the transaction price (that is, the fair value of the consideration given or received) in an arm’s length transaction.

3.3.2 Subsequent Measurement

After initial recognition, financial instruments are measured at amortized cost or fair value based on classification at initial recognition.

Amortized cost

The amortized cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition and adjusted to reflect principal repayments, cumulative amortization using the effective interest method and any reduction (directly or through the use of an allowance account) for impairment or uncollectibility.

Fair value

Fair values, which the Bank primarily uses for the measurement of financial instruments, are the published price quotations based on market prices or dealer price quotations of financial instruments traded in an active market where available. These are the best evidence of fair value. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, an entity in the same industry, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis.

If the market for a financial instrument is not active, fair value is determined either by using a valuation technique or independent third-party valuation service. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties, if available, referencing to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models.

The Bank uses valuation models that are commonly used by market participants and customized for the Bank to determine fair values of common over-the-counter (OTC) derivatives such as options,

15

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

interest rate swaps and currency swaps which are based on the inputs observable in markets. For more complex instruments, the Bank uses internally developed models, which are usually based on valuation methods and techniques generally used within the industry, or a value measured by an independent external valuation institution as the fair values if all or some of the inputs to the valuation models are not market observable and therefore it is necessary to estimate fair value based on certain assumptions.

The Bank’s Fair Value Evaluation Committee, which consists of the risk management department, trading department and accounting department, reviews the appropriateness of internally developed valuation models, and approves the selection and changing of the external valuation institution and other considerations related to fair value measurement. The review results on the fair valuation models are reported to the Market Risk Management subcommittee by the Fair Value Evaluation Committee on a regular basis.

If the valuation technique does not reflect all factors which market participants would consider in setting a price, the fair value is adjusted to reflect those factors. Those factors include counterparty credit risk, bid-ask spread, liquidity risk and others.

The chosen valuation technique makes maximum use of market inputs and relies as little as possible on entity-specific inputs. It incorporates all factors that market participants would consider in setting a price and is consistent with economic methodologies applied for pricing financial instruments. Periodically, the Bank calibrates the valuation technique and tests its validity using prices of observable current market transactions of the same instrument or based on other relevant observable market data.

3.3.3 Derecognition

Derecognition is the removal of a previously recognized financial asset or financial liability from the statement of financial position. The Bank derecognizes a financial asset or a financial liability when, and only when:

Derecognition of financial assets

Financial assets are derecognized when the contractual rights to the cash flows from the financial assets expire or the financial assets have been transferred and substantially all the risks and rewards of ownership of the financial assets are also transferred, or all the risks and rewards of ownership of the financial assets are neither substantially transferred nor retained and the Bank has not retained control. If the Bank neither transfers nor disposes of substantially all the risks and rewards of ownership of the financial assets, the Bank continues to recognize the financial asset to the extent of its continuing involvement in the financial asset.

If the Bank transfers the contractual rights to receive the cash flows of the financial asset, but retains substantially all the risks and rewards of ownership of the financial asset, the Bank continues to recognize the transferred asset in its entirely and recognize a financial liability for the consideration received.

The Bank writes off the carrying amount and allowance of financial assets in its entirety or to a portion thereof when the principal and interest are determined to be no longer recoverable. In general, the Bank considers write-off when it is determined that the debtor does not have sufficient resources or income to cover the principal and interest, and this write-off decision is made in accordance with internal regulations. After the write-off, the Bank can collect the written-off loans continuously according to the internal policy. Recovered amounts from written-off financial assets are recognized in profit or loss.

16

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Derecognition of financial liabilities

Financial liabilities are derecognized from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired.

3.3.4 Offsetting

Financial assets and financial liabilities are offset and the net amount are presented in the statement of financial position when, and only when, the Bank currently has a legally enforceable right to offset the recognized amounts and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

3.4 Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, foreign currency, and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

3.5 Non-derivative Financial Assets

3.5.1 Financial Assets at Fair Value through Profit or Loss

Financial assets classified as held for trading, financial assets designated by the Bank as at fair value through profit or loss upon initial recognition, and financial assets that are required to be mandatorily measured at fair value through profit or loss are classified as financial assets at fair value through profit or loss.

The Bank may designate certain financial assets upon initial recognition as at fair value through profit or loss when the designation eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as ‘an accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases.

After initial recognition, a financial asset at fair value through profit or loss is measured at fair value and gains or losses arising from a change in the fair value are recognized in profit or loss. Interest income using the effective interest method and dividend income from financial assets at fair value through profit or loss are also recognized in profit or loss.

3.5.2 Financial Assets at Fair Value through Other Comprehensive Income

The Bank classifies below financial assets as financial assets at fair value through other comprehensive income;

• Debt instruments that are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and where the assets’ cash flows represent solely payments of principal and interest on the principal amount outstanding or;

• Equity instruments that are not held for trading with the objective of generating a profit from short-term fluctuations in price or dealer’s margin, designated as financial assets at fair value through other comprehensive income.

After initial recognition, a financial asset at fair value through other comprehensive income is measured at fair value. Gains or losses arising from a change in fair value, other than dividend income, interest income using effective interest method and exchange differences arising on monetary items which are recognized directly in profit or loss, are recognized as other comprehensive income in equity.

Upon disposal of financial assets at fair value through other comprehensive income, the cumulative gain or loss previously recognized in other comprehensive income is reclassified to profit or loss. However, cumulative gain or loss of equity instrument designated as fair value through other comprehensive income are reclassified to retained earnings not to profit or loss at disposal.

17

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Financial assets at fair value through other comprehensive income denominated in foreign currencies are translated at the closing rate. Exchange differences on the amortised cost of changes in fair value are recognized in profit or loss, and other changes are recognized as equity.

3.5.3 Financial Assets at Amortized Cost

A financial asset, which are held within the business model whose objective is to hold assets in order to collect contractual cash flows and consistent with representing solely payments of principal and interest on the principal amount outstanding, are classified as a financial asset at amortized cost.

These financial assets are subsequently carried at amortized cost using the effective interest method after initial recognition and interest income is recognized using the effective interest method.

The carrying amount of financial assets at amortized cost is presented by deducting allowance for doubtful accounts, and the measurement method is described in Note 3.6.

3.6 Expected Credit Loss of Financial Assets (Debt Instruments)

The Bank measures expected credit loss and recognizes loss allowance at the end of the reporting period for financial assets at amortized cost and fair value through other comprehensive income with the exception of financial asset at fair value through profit or loss.

Expected credit losses are estimated at present value of probability-weighted amount that is determined by evaluating a range of possible outcomes. The Bank measures expected credit losses by reflecting reasonable and supportable information that is reasonably available at the reporting date without undue cost or effort, including information about past events, current conditions and forecasts of future economic conditions.

The approaches of measuring expected credit losses in accordance with Korean IFRS are as follows:

• General approach: for financial assets not subject to the below approach and unused loan commitments on off-balance sheet

• Credit-impaired approach: for financial assets that are credit-impaired at the time of acquisition

Application of general approach is differentiated depending on whether credit risk has increased significantly after initial recognition. After initial recognition, loss allowances for the assets without significant increase in credit risk are measured at the amount of 12 month expected credit losses, whereas the loss allowances for the assets with significant increase in credit risk are measured at the amount of lifetime expected credit losses. Lifetime is presumed to be a period to the contractual maturity date of financial assets (the expected life of financial assets).

The Bank determines whether the credit risk has increased significantly using the following information, and if one or more of the following items are met, it is deemed as significant increase in credit risk. When the contractual cash flows of a financial asset are renegotiated or otherwise modified, the Bank determines whether the credit risk has increased significantly using the same following information.

• Exceeds 30 days past due

• Decline in credit rating at period end by more than certain notches as compared to that at initial recognition

• Subsequent managing ratings below certain level in the early warning system

• Debt restructuring (except for impaired financial assets) and

• Credit delinquency information on Korea Federation of Banks, and etc.

18

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

If one or more of the following items are met, it is generally deemed as credit-impaired:

• 90 days or more past due

• Legal proceedings related to collection

• A borrower registered on the credit management list of Korea Federation of banks

• A corporate borrower with the credit rating C or D

• Refinancing or

• Debt restructuring, and etc.

3.6.1 Forward-looking Information

The Bank uses forward-looking information, when it determines whether the credit risk has increased significantly and measures the expected credit losses.

The Bank assumes the risk components have a certain correlation with the economic cycle, and uses statistical methodologies to estimate the relation between key macroeconomic variables and risk components for the expected credit losses. The Bank has derived a correlation between the time series data of more than 11 years and the key macroeconomic variables, and calculates the expected credit losses by reflecting the results of the correlation on the risk component. The correlation between the major macroeconomic variables and the credit risk is as follows;

Key macroeconomic variables	Correlation between the major macroeconomic variables and the credit risk
Domestic GDP growth rate		(-	)
Composite stock index		(-	)
Construction investment change rate		(-	)
Rate of change in housing transaction price index		(-	)
Interest rate spread		(+	)
Private consumption growth rate		(-	)

Forward-looking information used in calculation of expected credit losses is based on the macroeconomic forecasts utilized by the management of the Bank for its business plan taking into account reliable external agency’s forecasts and others. The forward-looking information is generated by KB Research under KB Financial Group with comprehensive approach to capture the possibility of various economic forecast scenarios that are derived from the internal and external viewpoints of the macroeconomic situation. And the Bank determines the macroeconomic variables to use in forecasting future condition of the economy, taking into account the direction of the forecast scenario and the significant relationship between macroeconomic variables and time series data. And there are some changes compared to the macroeconomic variables used in the previous year.

3.6.2 Measuring Expected Credit Losses on Financial at Amortized Cost

The expected credit losses on financial assets at amortized cost are measured as the difference between the asset’s contractual terms of cash flow and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The Bank estimates expected future cash flows for financial assets that are individually significant (individual assessment of impairment).

For financial assets that are not individually significant, the Bank collectively estimates expected credit loss by grouping loans with homogeneous credit risk profile (collective assessment of impairment).

Individual assessment of impairment

Individual assessment of impairment losses are calculated by discounting the expected future cash flows of a loan at its original effective interest rate and comparing the resultant present value with the loan’s current carrying amount. This process normally encompasses management’s best estimate, such as operating cash flow of the borrower and net realizable value of any collateral held.

19

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Collective assessment of impairment

Collective assessment of impairment is performed by using a methodology based on historical loss experience and reflecting forward-looking information. Such methodology applies factors such as type of collateral, product and borrowers, credit rating, portfolio size, recovery period, probability of default estimated for each group of assets and loss given default by type of recovery method. Also, consistent assumptions are applied to form a formula-based model in estimating expected credit loss and to determine factors on the basis of historical loss experience and forward-looking information. The methodology and assumptions used for collective assessment of impairment are reviewed regularly to reduce any differences between estimated and actual losses.

Lifetime expected credit loss is measured by applying Probability of Default (“PD”) and adjusted Loss Given Default (“LGD”) reflecting the changes in carrying amount to the carrying amount as at the end of the reporting period with deducted by expected repayment of principals.

3.6.3 Measuring Expected Credit Losses on Financial Assets at Fair Value through Other Comprehensive Income

Measuring method of expected credit losses on financial assets at fair value through other comprehensive income is equal to that of financial assets at amortized cost. However, the changes in loss allowances are recognized as other comprehensive income. Upon disposal or repayment of financial assets at fair value through other comprehensive income, the amount of loss allowances is reclassified from other comprehensive income to profit or loss.

3.7 Derivative Financial Instruments

The Bank enters into numerous derivative financial instrument contracts such as currency forwards, interest rate swaps, currency swaps and others for trading purposes or to manage its exposures to fluctuations in interest rates and currency exchange, amongst others. The Bank’s derivative operations focus on addressing the needs of the Bank’s corporate clients to hedge their risk exposure and to hedge the Bank’s risk exposure that results from such client contracts. These derivative financial instruments are presented as derivative financial instruments within the separate financial statements irrespective of transaction purpose and subsequent measurement requirement.

The Bank designates certain derivatives and non-derivatives as hedging instruments to hedge the risk of changes in fair value and cash flow of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge and cash flow hedge).

At the inception of the hedge, there is formal designation and documentation of the hedging relationship and the Bank’s risk management objective and strategy for undertaking the hedge. That documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value attributable to the hedged risk.

See Note 9 for changes in fair value of the hedging instruments and changes in other comprehensive income related to derivatives held for cash flow hedging.

The Bank applies hedge accounting for risk management activities aligned with the requirements and qualifying criteria for hedge accounting of Korean IFRS 1109.

20

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

3.7.1 Derivative Financial Instruments Held for Trading

All derivative financial instruments, except for derivatives that are designated and qualify for hedge accounting, are measured at fair value. Gains or losses arising from changes in fair value are recognized in profit or loss as part of net gains or losses on financial instruments at fair value through profit or loss.

3.7.2 Fair Value Hedges

If derivatives and non-derivatives qualify for a fair value hedge, the change in fair value of the hedging instrument and the change in fair value of the hedged item attributable to the hedged risk are recognized in profit or loss as part of other operating income and expenses. If the hedged items are equity instruments for which the Bank has elected to present changes in fair value in other comprehensive income, the change in fair value of the hedging instrument and the change in fair value of the hedged item attributable to the hedged risk are recognized in other comprehensive income. Fair value hedge accounting is discontinued prospectively if the hedging instrument expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for hedge accounting or the Bank revokes the designation. Once fair value hedge accounting is discontinued, the adjustment to the carrying amount of a hedged item is amortized to profit or loss by the maturity of the financial instrument using the effective interest method.

3.7.3 Cash Flow Hedges

The effective portion of changes in fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income, limited to the cumulative change in fair value (present value) of the hedged item (the present value of the cumulative change in the future expected cash flows of the hedged item) from the inception of the hedge. The ineffective portion is recognized in gain or loss (other operating income or expense). The associated gains or losses that were previously recognized in other comprehensive income are reclassified from equity to profit or loss (other operating income and expenses) as a reclassification adjustment in the same period or periods during which the hedged forecast cash flows affects profit or loss. Cash flow hedge accounting is discontinued prospectively if the hedging instrument expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for hedge accounting or the Bank revokes the designation. When the cash flow hedge accounting is discontinued, the cumulative gains or losses on the hedging instrument that have been recognized in other comprehensive income are reclassified to profit or loss over the period in which the forecast transaction occurs. If the forecast transaction is no longer expected to occur, the cumulative gains or losses that had been recognized in other comprehensive income are immediately reclassified to profit or loss.

3.7.4 Risk management strategy

Interest rate risk arises from changes in fair value resulting from changes in the discount rate of fixed rate financial instruments, and changes in cash flows resulting from changes in the nominal interest rate of floating rate financial instruments.

The Bank entirely hedges the interest rate risk.

At inception of the hedge relationship, the Bank reviews the hedge effectiveness; and periodically reviews the effectiveness in order to confirm that economic relationship between the hedged item and the hedging instrument exists. The requirement that an economic relationship exists means that the hedging instrument and the hedged item have values that generally move in the opposite direction because of the same risk, which is the hedged risk. The Bank designates the exposure of hedged item opposite to the exposure of hedging instruments in order to meet economic relationship requirement.

The Bank designates hedge relationship at one-on-one ratio between the nominal amount of hedging instrument and to the nominal amount of hedged item.

21

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Ineffectiveness could arise because of differences in the underlying parameters (acquisition date, credit risk or liquidity and others) or other differences between the hedging instrument and the hedged item that the Bank accepts in order to achieve a cost-effective hedging relationship.

The Bank avoids the cash flow variability of its floating rate debt securities by using interest rate swaps. Both are linked to the same interest rate; however, the paid amount of the floating rate may be set on different dates. Even if the variability of interest rate related cash flows (as a risk factor) are designated as a hedged item, the difference in set-up dates creates a hedge ineffectiveness.

The Bank avoids the variability of fair values of its fixed rate debt securities by using interest rate swaps. The calculating method of the number of the dates for paying fixed-rate interest amount can be different between both. Even if the variability of the fair value due to the benchmark interest rate (as a risk factor) are designated as a hedged item, the difference calculating in set-up dates creates a hedge ineffectiveness.

3.7.5 Embedded Derivatives

An embedded derivative is separated from the host contract and accounted for as a derivative if, and only if, 1) the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract, 2) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative and, 3) the hybrid contract contains a host that is not a financial asset and is not designated as at fair value through profit or loss. Gains or losses arising from a change in the fair value of an embedded derivative separated from the host contract are recognized in net profit or loss as part of net gains or losses on financial instruments at fair value through profit or loss.

3.7.6 Day One Gain and Loss

If the Bank uses a valuation technique that incorporates data not obtained from observable markets for the fair value at initial recognition of the financial instrument, there may be a difference between the transaction price and the amount determined using that valuation technique. In these circumstances, the difference is deferred and not recognized in profit or loss, and is amortized by using the straight-line method over the life of the financial instrument. If the fair value of the financial instrument is subsequently determined using observable market inputs, the remaining deferred amount is recognized in profit or loss as part of net gains or losses on financial instruments at fair value through profit or loss or other operating income and expenses.

3.8 Property and Equipment

3.8.1 Recognition and Measurement

All property and equipment that qualify for recognition as an asset are measured at cost and subsequently carried at cost less any accumulated depreciation and any accumulated impairment losses.

The cost of property and equipment includes any costs 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 and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

Subsequent expenditures are capitalized only when they prolong the useful life or enhance values of the assets but the costs of the day-to-day servicing of the assets such as repair and maintenance costs are recognized in profit or loss as incurred.

22

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

3.8.2 Depreciation

Land is not depreciated whereas other property and equipment are depreciated using the method that reflects the pattern in which the asset’s future economic benefits are expected to be consumed by the Bank. The depreciable amount of an asset is determined after deducting its residual value.

The depreciation methods and estimated useful lives of the assets are as follows:

Property and equipment	Depreciation method	Estimated useful lives
Buildings and structures	Straight-line	40 years
Leasehold improvements	Declining-balance	4 years
Equipment and vehicles	Declining-balance	4 years

The residual value, the useful life and the depreciation method applied to an asset are reviewed at least at each financial year end and, if expectations differ from previous estimates or if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset, the changes are accounted for as a change in an accounting estimate.

3.9 Investment Properties

3.9.1 Recognition and Measurement

Properties held to earn rentals or for capital appreciation or both are classified as investment properties. Investment properties are measured initially at their cost and subsequently the cost model is used.

3.9.2 Depreciation

Land is not depreciated, whereas other investment properties are depreciated using the method that reflects the pattern in which the asset’s future economic benefits are expected to be consumed by the Bank. The depreciable amount of an asset is determined after deducting its residual value.

The depreciation method and estimated useful lives of the assets are as follows:

Investment Properties	Depreciation method	Estimated useful lives
Buildings	Straight-line	40 years

The residual value, the useful life and the depreciation method applied to an asset are reviewed at least at each financial year end and, if expectations differ from previous estimates or if there has been a significant change in the expected pattern of consumption of the future economic benefits embodied in the asset, the changes are accounted for as a change in an accounting estimate.

23

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

3.10 Intangible Assets

Intangible assets are measured initially at cost and subsequently carried at their cost less any accumulated amortization and any accumulated impairment losses.

Intangible assets, except for goodwill and membership rights, are amortized using the straight-line method with no residual value over their estimated useful economic life since the asset is available for use.

Intangible assets	Amortization method	Estimated useful lives
Industrial property rights	Straight-line	5 years
Software	Straight-line	4~5 years
Others	Straight-line	1~13 years

The amortization period and the amortization method for intangible assets with a finite useful life are reviewed at least at each financial year end. Where an intangible asset is not being amortized because its useful life is considered to be indefinite, the Bank carries out a review in each accounting period to confirm whether or not events and circumstances still support the assumption of an indefinite useful life. If they do not, the change from the indefinite to finite useful life is accounted for as a change in an accounting estimate.

3.10.1 Goodwill

Recognition and measurement

Goodwill acquired from business combinations before January 1, 2010, is stated at its carrying amount which was recognized under the Bank’s previous accounting policy, prior to the transition to Korean IFRS.

Goodwill acquired from business combinations after January 1, 2010, is initially measured as the excess of the aggregate of the consideration transferred, fair value of non-controlling interest and the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the business acquired, the difference is recognized in profit or loss.

Acquisition-related costs incurred to effect a business combination are charged to expenses in the periods in which the costs are incurred and the services are received, except for the costs to issue debt or equity securities.

Subsequent measurement

Goodwill is not amortized and is stated at cost less accumulated impairment losses. However, goodwill that forms part of the carrying amount of an investment in associates is not separately recognized and an impairment loss recognized is not allocated to any asset, including goodwill, which forms part of the carrying amount of the investment in the associates.

3.10.2 Subsequent Expenditure

Subsequent expenditure is capitalized only when it enhances values of the assets. Internally generated intangible assets, such as goodwill and trade name, are not recognized as assets but expensed as incurred.

3.11 Impairment of Non-financial Assets

The Bank assesses at the end of each reporting period whether there is any indication that a non-financial asset, except for (i) deferred income tax assets, (ii) assets arising from employee benefits

24

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

and (iii) non-current assets (or group of assets to be sold) classified as held for sale, may be impaired. If any such indication exists, the Bank estimates the recoverable amount of the asset. However, irrespective of whether there is any indication of impairment, the Bank tests (i) goodwill acquired in a business combination, (ii) intangible assets with an indefinite useful life and (iii) intangible assets not yet available for use for impairment annually by comparing their carrying amount with their recoverable amount.

The recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Bank determines the recoverable amount of the cash-generating unit to which the asset belongs (the asset’s cash-generating unit). A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit that are discounted by a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted.

If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss and recognized immediately in profit or loss. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units that are expected to benefit from the synergies of the combination. The impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit.

An impairment loss recognized for goodwill is not reversed in a subsequent period. The Bank assesses at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset, other than goodwill, may no longer exist or may have decreased, and an impairment loss recognized in prior periods for an asset other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss cannot exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior years.

3.12 Non-current Assets Held for Sale

A non-current asset or disposal group is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For being qualified as held for sale, the asset (or disposal group) must be available for immediate sale in its present condition and its sale must be highly probable. A non-current asset (or disposal group) classified as held for sale is measured at the lower of its carrying amount and fair value less costs to sell which is measured in accordance with the applicable Korean IFRS, immediately before the initial classification of the asset (or disposal group) as held for sale.

A non-current asset while it is classified as held for sale or while it is part of a disposal group classified as held for sale is not depreciated (or amortized).

Impairment loss is recognized for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. Gains are recognized for any subsequent increase in fair value less costs to sell of an asset, but not in excess of the cumulative impairment loss that has been recognized.

25

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

3.13 Financial Liabilities

The Bank classifies non-derivative financial liabilities into financial liabilities at fair value through profit or loss or other financial liabilities in accordance with the substance of the contractual arrangement and the definitions of financial liabilities. The Bank recognizes financial liabilities in the statement of financial position when the Bank becomes a party to the contractual provisions of the financial liability.

3.13.1 Liabilities at Fair Value through Profit or Loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading or designated as such upon initial recognition. Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the acquisition are recognized in profit or loss as incurred.

In relation to securities lending or borrowing transactions, the Bank records transaction using memorandum value when it borrows securities from Korea Securities Depository and others. The borrowed securities are treated as financial liabilities at fair value through profit or loss when they are sold. Changes in fair value at the end of the reporting period and difference between carrying amount at redemption and purchased amount is recognized as profit or loss.

3.13.2 Other Financial Liabilities

Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities. Other financial liabilities include deposits, debts, debentures and others. Upon of initial recognition, other financial liabilities are measured at fair value minus transaction costs that are directly attributable to the acquisition. Subsequent to initial recognition, other financial liabilities are measured at amortized cost using the effective interest method.

In case an asset is sold under repurchase agreement, the Bank does not derecognize the asset while the amount sold is accounted for as financial liabilities. The Bank derecognizes a financial liability from the separate statement of financial position only when the obligation specified in the contract is discharged, cancelled or expired.

3.14 Provisions

Provisions are recognized when the Bank has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of provisions, and where the effect of the time value of money is material, the amount of provisions are the present value of the expenditures expected to be required to settle the obligation.

Provisions on confirmed and unconfirmed acceptances and guarantees, unfunded commitments of credit cards and unused credit lines of consumer and corporate loans are recognized using a valuation model that applies the credit conversion factor, probability of default, and loss given default.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provisions are reversed.

If the Bank has a contract that is onerous, the present obligation under the contract is recognized and measured as provisions. An onerous contract is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the minimum net cost to exit from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfill it.

26

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

When an onerous contract is occurred, the present obligation under the contract is recognized and measured as provisions.

3.15 Financial Guarantee Contracts

A financial guarantee contract is a contract that requires the Bank to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due according to the original or modified terms of a debt instrument.

Financial guarantee contracts are initially recognized at fair value and classified as other liabilities, and are amortized over the contractual term. After initial recognition, financial guarantee contracts are measured at the higher of:

• Provisions measured in accordance with Korean IFRS 1109 Financial Instruments and

• The initial amount recognized, less, when appropriate, cumulative amortization recognized in accordance with Korean IFRS 1115 Revenue from Contracts with Customers.

3.16 Equity Instrument Issued by the Bank

An equity instrument is any contract or agreement that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

3.16.1 Ordinary share

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares and exercising stock options are deducted, net of tax, from the equity.

3.16.2 Hybrid Capital Securities

The financial instruments can be classified as either financial liabilities or equity in accordance with the terms of the contract. The Bank classifies hybrid securities as an equity if the Bank has the unconditional right to avoid any contractual obligation to deliver financial assets such as cash in relation to the financial instruments. As a result, Hybrid Capital Securities issued by subsidiaries are classified as non-controlling interests, dividends are recognized in the consolidated statement of comprehensive income as profit attributable to non-controlling interests.

3.17 Revenue Recognition

The Bank recognizes revenues in accordance with the following steps determined in accordance with Korean IFRS 1115 Revenue from Contracts with Customers.

• Step 1: Identify the contract with a customer.

• Step 2: Identify the performance obligations in the contract.

• Step 3: Determine the transaction price.

• Step 4: Allocate the transaction price to the performance obligations in the contract.

• Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

3.17.1 Interest Income and Expense

Interest income and expense from debt instruments at fair value through profit or loss (excluding beneficiary certificates, equity investments and other debt instruments), loans, financial instruments at amortized cost and debt instruments at fair value through other comprehensive income, are recognized in statement of comprehensive income using the effective interest method in accordance with IFRS1109 Financial Instruments. The effective interest method is a method of calculating the amortized cost of a financial asset or a financial liability (or groups of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period.

27

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument or, where appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Bank estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and points paid(main components of effective interest rates only) or received between parties to the contract that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts. In those rare cases when it is not possible to estimate reliably the cash flows or the expected life of a financial instrument (or group of financial instruments), the Bank uses the contractual cash flows over the full contractual term of the financial instrument (or group of financial instruments).

Interest on impaired financial assets is recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Interest income earned from debt instruments at fair value through profit or loss is also classified as interest income in the statement of comprehensive income.

3.17.2 Fee and Commission Income

The Bank recognizes financial service fees in accordance with the purpose of charging the fees and the accounting standard of the financial instrument related to the fees earned.

Fees that are an integral part of the effective interest of a financial instrument

Such fees are generally treated as adjustments of effective interest. Such fees may include compensation for activities such as evaluating the borrower’s financial condition, evaluating and recording guarantees, collateral and other security arrangements, negotiating the terms of the instrument, preparing and processing documents and closing the transaction and origination fees received on issuing financial liabilities at amortized cost. However, fees relating to the creation or acquisition of a financial instrument at fair value through profit or loss are recognized as revenue immediately.

Fees related to performance obligations in the contract satisfied over time

As control over related goods and services of fees and commission income of performance obligation contracts transfer over time, commission income is recognized over the period of performance obligations. Fees and commission income, including asset management fees and commission fees are recognized as the related services are rendered.

Fees earned at a point in time

Fees earned at a point in time are recognized when a customer obtains controls of a promised asset and the Bank satisfies a performance obligation.

Commission on negotiation or participation in negotiation for the third party such as trading stocks or other securities, arranging transfer and acquisition of business is recognized as revenue when the transaction has been completed.

A syndication fee that arranges a loan and retains no part of the loan package for itself (or retains a part at the same effective interest rate for comparable risk as other participants) is compensation for the service of syndication. Such a fee is recognized as revenue when the syndication has been completed.

28

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

3.17.3 Net Gains/Losses on Financial Instruments at Fair Value through Profit or Loss

Net gains/losses on financial instruments at fair value through profit or loss include profit or loss (including changes in fair value, dividends, and gain/loss from foreign currency translation) from following financial instruments:

• Gain or loss from financial instruments at fair value through profit or loss, excluding interest income calculated by the effective interest rate

• Gain or loss from derivatives for trading, including derivatives for hedging that does not meet the criteria for hedge accounting

3.17.4 Dividend Income

Dividend income is recognized as profit or loss when the right to receive payment is established. Dividend income is recognized as net gain or loss on financial assets/liabilities at fair value through profit or loss or other operating income in depending of the classification of equity securities.

3.18 Employee Compensation and Benefits

3.18.1 Post-employment Benefits:

Defined benefit plans

All post-employment benefits, other than defined contribution plans, are classified as defined benefit plans. The amount recognized as a net defined benefit liability is the present value of the defined benefit obligation less the fair value of plan assets at the end of the reporting period.

The present value of the defined benefit obligation is calculated annually by independent actuaries using the Projected Unit Credit method. The rate used to discount post-employment benefit obligations is determined by reference to market yields at the end of the reporting period on high quality corporate bonds. The currency and term of the corporate bonds are consistent with the currency and estimated term of the post-employment benefit obligations. Actuarial gains and losses including experience adjustments and the effects of changes in actuarial assumptions are recognized in other comprehensive income (loss).

When the total of the present value of the defined benefit obligation minus the fair value of plan assets results in an asset, it is recognized to the extent of the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.

Past service cost is the change in the present value of the defined benefit obligation, which arises when the Bank introduces a defined benefit plan or changes the benefits of an existing defined benefit plan. Such past service cost is immediately recognized as an expense for the period.

Defined contribution plans

The contributions are recognized as employee benefit expense when they are due.

3.18.2 Short-term Employee Benefits

Short-term employee benefits are employee benefits (other than termination benefits) that are due to be settled within 12 months after the end of the period in which the employees render the related service. The undiscounted amount of short-term employee benefits expected to be paid in exchange for that service is recognized as a liability (accrued expense), after deducting any amount already paid.

The expected cost of profit-sharing and bonus payments are recognized as liabilities when the Bank has a present legal or constructive obligation to make such payments as a result of past events rendered by employees and a reliable estimate of the obligation can be made.

29

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

3.18.3 Share-based Payment

The Bank has share grant and mileage stock programs to directors and employees. When the stock grant is exercised the Group either distributes issued stock of KB Financial Group Inc., the Parent Company, or makes payment in cash based on the stock price. The mileage stock is exercised, the Group makes payment in cash based on the stock price of KB Financial Group Inc.

For a share-based payment transaction in which the terms of the arrangement provide the Bank with the choice of whether to settle in cash or by issuing equity instruments, the Bank determines that it has a present obligation to settle in cash because the Bank has a past practice and a stated policy of settling in cash. Therefore, the fair value of the employee service is recognized as expense and accrued expenses over the vesting period. Also, the Bank accounts for the mileage stock in accordance with the requirements of cash-settled share-based payment transactions, and recognizes the corresponding liability and expenses at the vesting period.

Until the liability is settled, the Bank remeasures the fair value of the liability at the end of each reporting period and at the date of settlement, with any changes in fair value recognized in profit or loss for the period.

3.18.4 Termination Benefits

Termination benefits are payable when employment is terminated by the Bank before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Bank shall recognize a liability and expense for termination benefits at the earlier of the following dates: when the Bank can no longer withdraw the offer of those benefits and when the Bank recognizes costs for a restructuring that is within the scope of Korean IFRS 1037 and involves the payment of termination benefits. Termination benefits are measured by considering the number of employees expected to accept the offer in the case of a voluntary early retirement. Termination benefits over 12 months after the reporting period are discounted to present value.

3.19 Income Tax Expenses

Income tax expense comprises current tax expense and deferred income tax expense. Current and deferred income tax are recognized as income or expense for the period, except to the extent that the tax arises from a transaction or an event which is recognized, in the same or a different period outside profit or loss, either in other comprehensive income or directly in equity and a business combination.

Income tax expense for the period is recognized based on management’s best estimate of the weighted average annual income tax rate expected for the full financial year.

3.19.1 Current income tax

Current income tax is the amount of income tax payable in respect of the taxable profit (loss) for a period. A difference between the taxable profit and accounting profit may arise when income or expense is included in accounting profit in one period, but is included in taxable profit in a different period. Differences may also arise if there is revenue that is exempt from taxation, or expense that is not deductible in determining taxable profit (loss). Current income tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period

30

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

3.19.2 Deferred Income Tax

Deferred income tax is recognized, using the asset-liability method, on temporary differences arising between the taxes based amount of assets and liabilities and their carrying amount in the separate financial statements. Deferred income tax liabilities are recognized for all taxable temporary differences and deferred income tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilized. However, deferred income tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.

The carrying amount of a deferred income tax asset is reviewed at the end of each reporting period. The Bank reduces the carrying amount of a deferred income tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred income tax asset to be utilized.

Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets shall reflect the tax consequences that would follow from the manner in which the Bank expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

The Bank offsets deferred income tax assets and deferred income tax liabilities when the Bank has a legally enforceable right to offset current income tax assets against current income tax liabilities; and the deferred income tax assets and the deferred income tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity; or different taxable entities which intend either to settle current income tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred income tax liabilities or assets are expected to be settled or recovered.

3.19.3 Uncertain Tax Positions

Uncertain tax positions arise from tax treatments applied by the Bank which may be challenged by the tax authorities due to the complexity of the transaction or different interpretation of the tax laws, a claim for rectification brought by the Bank, an appeal for a refund claimed from the tax authorities related to additional assessments or a tax investigation processed by the tax authorities. The Bank recognizes its uncertain tax positions in the separate financial statements based on the guidance in Korean IFRS 1012. The income tax asset is recognized if a tax refund is probable for taxes paid and levied by the tax authority, and the amount to be paid as a result of the tax investigation and others is recognized as the current tax payable. However, interest and penalties related to income taxes are recognized in accordance with Korean IFRS 1037 as its economic substances.

3.20 Transactions with the Trust Accounts

Under the Financial Investment Services and Capital Markets Act, the Bank recognizes trust accounts (“the trust accounts”) as separate. The borrowings from trust accounts represent transfer of funds in trust accounts into banking accounts. Such borrowings from trust accounts are recorded as receivables from the banking accounts in the trust accounts and as borrowings from trust accounts in the banking accounts. The Bank earns trust fees from the trust accounts for its management of trust assets and operations. The reserves for future profits and losses are set up in the trust accounts for profits and losses related to those trust funds with a guarantee of the principal or of the principal and a certain minimum rate of return in accordance with the relevant laws and regulations applicable to trust operations. The reserves are used to provide for the losses on such trust funds and, if the losses incurred are in excess of the reserves, the excess losses are compensation paid as a loss on trust management in other operating expenses and the trust accounts recognize the corresponding compensation as compensation from banking accounts.

31

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

3.21 Leases

As explained in Note 2 above, the Bank has changed its accounting policy for leases. The impact of the new accounting policies is disclosed in Note 41.

At inception of a contract, the Bank is required to assess whether the contract is, or contains, a lease. Also, at the date of initial application, the Bank has assessed whether the contract is, or contains, a lease in accordance with the standard. However, the Bank did not reassess all contracts as the Bank elected to apply the practical expedient not to apply the standard to contracts that were not previously identified as containing a lease. On the basis of the date of initial application, the Bank assesses whether the contract is, or contains, a lease.

A lessee is required to recognize a right-of-use asset (lease assets) representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. Assets and liabilities arising from a lease are initially measured on a present value basis.

Lease liabilities include the net present value of the following lease payments:

• Fixed payments (including in-substance fixed payments), less any lease incentives receivable

• Variable lease payment that are based on an index or a rate

• 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, and

• Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.

Right-of-use assets are measured at cost comprising the following:

• the amount of the initial measurement of lease liability

• any lease payments made at or before the commencement date less any lease incentives received

• any initial direct costs, and

• restoration costs

However, short-term lease (lease that, at the commencement date, has a lease term of 12 months or less) and lease of low-value assets (For example, underlying leased asset under $ 5,000) are permitted to elect exceptional conditions. The Bank applies the exemption of the standard for one time lease of real estate (for training purpose) and leases of low-value assets(underlying assets less than W 5 million and $5,000).

32

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term.

3.22 Operating Segments

Operating segments are components of the Bank where separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Segment information includes items which are directly attributable and reasonably allocated to the segment.

4. Financial Risk Management

4.1 Summary

4.1.1 Overview of Financial Risk Management Policy

The financial risks that the Bank is exposed to are credit risk, market risk, liquidity risk, operational risk and others.

The note regarding financial risk management provides information about the risks that the Bank is exposed to, including the objectives, policies and processes for managing the risks, the methods used to measure the risks, and capital management. Additional quantitative information is disclosed throughout the separate financial statements.

The Bank’s risk management system focuses on increasing transparency, developing the risk management environment, preventing transmission of risk to other risk types, and the preemptive response to risk due to rapid changes in the financial environment to support the Bank’s long-term strategy and business decisions efficiently. Credit risk, market risk, liquidity risk, and operational risk have been recognized as the Bank’s key risks. These risks are measured and managed in Internal Capital or VaR (Value at Risk) using a statistical method.

4.1.2 Risk Management Organization

Risk Management Committee

The Risk Management Committee establishes risk management strategies in accordance with the directives of the Board of Directors and determines the Bank’s target risk appetite, approves significant risk matters and reviews the level of risks that the Bank is exposed to and the appropriateness of the Bank’s risk management operations as an ultimate decision-making authority.

Risk Management Council

The Risk Management Council is a consultative group which reviews and makes decisions on matters delegated by the Risk Management Committee and discusses the detailed issues relating to the Bank’s risk management.

Risk Management Subcommittee

The Risk Management Subcommittee enforces decisions made by Risk Management Council and makes practical decisions to implement risk management policies and procedures.

• Credit Risk Management Subcommittee

The Credit Risk Management Subcommittee approves exotic and hybrid products accompanying credit risk and reviews newly developed products accompanying credit risk. Also, it reviews and approves the exposure limits by industry.

33

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

• Market Risk Management Subcommittee

The Market Risk Management Subcommittee reviews and makes decisions on setting risk limits and approving the standard for investments in newly developed standard, exotic and hybrid products.

• Operational Risk Management Subcommittee

The Operational Risk Management Subcommittee reviews the issues that have a significant effect on the Bank’s operational risk relating to establishment, amendment and abolition of major system, process and others.

Risk Strategy Group

The Risk Management Group is responsible for managing specific policies, procedures and work processes relating to the Bank’s risk management.

4.2 Credit Risk

4.2.1 Overview of Credit Risk

Credit risk is the risk of possible losses in an asset portfolio in the event of a counterparty’s default, breach of contract and deterioration in the credit quality of the counterparty. For risk management reporting purposes, the individual borrower’s default risk, country risk, specific risks and other credit risk exposure components are considered as a whole. The Bank uses definition of default as defined and applied in the calculation of Capital Adequacy Ratio (Basel III) in accordance with the new Basel Accord.

4.2.2 Credit Risk Management

The Bank measures expected losses and internal capital on assets that are subject to credit risk management whether on-or off-balance sheet items and uses expected losses and internal capital as a management indicator. The Bank manages credit risk by allocating credit risk internal capital limits.

In addition, the Bank controls the credit concentration risk exposure by applying and managing total exposure limits to prevent an excessive risk concentration to each industry and borrower.

The Bank has organized a credit risk management group that focuses on credit risk management in accordance with the Bank’s credit risk management policy. The Bank’s credit group, customer service group and SME/SOHO group, which are independent from the sales department, are responsible for loan policy, loan limit, loan review, credit evaluation, restructuring and subsequent events. The credit risk strategy group is also responsible for planning risk management policy, applying limits of credit lines, measuring the credit risk internal capital, adjusting credit limits, reviewing credit and verifying credit evaluation models.

34

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

4.2.3 Maximum Exposure to Credit Risk

The Bank’s maximum exposures of financial instruments, excluding equity securities, to credit risk without consideration of collateral values as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Financial assets
Due from financial institutions1		10,403,284		10,362,359
Financial assets at fair value through profit or loss
Securities		9,490,491		8,299,293
Loans		188,133		212,596
Financial instruments indexed to gold		79,805		78,808
Derivatives		2,319,687		1,611,295
Loans at amortized cost1		291,425,606		274,985,803
Financial investments
Securities at fair value through other comprehensive income		35,834,598		27,556,891
Securities at amortized cost1		13,866,494		12,753,724
Loans at fair value through other comprehensive income		344,292		349,547
Other financial assets1		5,466,052		4,197,708
		369,418,442		340,408,024
Off-balance sheet items2
Acceptances and guarantees contracts		8,250,284		7,250,061
Financial guarantee contracts		5,077,410		4,636,538
Commitments		87,695,459		81,137,779
		101,023,153		93,024,378
		470,441,595		433,432,402

¹ Due from financial institutions, loans at amortized cost, securities at amortized cost and other financial assets are presented net of allowance.

² For details of relevant provisions, see Note 22

4.2.4 Credit Risk of Loans

The Bank maintains an allowance for loan losses associated with credit risk on loans to manage its credit risk.

The Bank assesses expected credit loss on financial asset at amortized cost and financial asset at fair value through other comprehensive income (debt instruments) other than financial asset at fair value through profit or loss and recognizes loss allowance. Expected credit losses are a probability-weighted estimate of possible credit losses occurred in a certain range by reflecting reasonable and supportable information that which is reasonably available at the reporting date without undue cost or effort, including information about past events, current conditions and forecasts of future economic conditions. The Bank measures the expected credit losses on loans classified as financial assets measured at amortized cost, by deducting allowances for credit losses. The expected credit losses of loans classified as financial assets at fair value through other comprehensive income are presented in other comprehensive income on the financial statements.

35

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Credit risk exposure

Loans as at December 31, 2019 and 2018, are classified as follows:

	2019
	Financial instruments applying 12-month expected credit losses		Financial instruments applying lifetime expected credit losses				Financial instruments applying credit impaired approach		Financial instruments not applying expected credit losses		Total
(In millions of Korean won)			Non-impaired		Impaired
Financial assets at amortized cost
Corporate
Grade 1		76,656,822		1,639,311		837		—		—		78,296,970
Grade 2		54,824,807		4,507,043		6,397		—		—		59,338,247
Grade 3		2,150,892		2,127,430		4,188		—		—		4,282,510
Grade 4		419,333		782,452		4,185		—		—		1,205,970
Grade 5		16,648		344,920		695,726		—		—		1,057,294
		134,068,502		9,401,156		711,333		—		—		144,180,991
Retail
Grade 1		135,269,735		3,554,462		7,535		—		—		138,831,732
Grade 2		2,980,061		4,249,015		6,863		—		—		7,235,939
Grade 3		158,514		1,304,904		8,312		—		—		1,471,730
Grade 4		9,466		151,544		2,575		—		—		163,585
Grade 5		8,649		423,037		424,497		—		—		856,183
		138,426,425		9,682,962		449,782		—		—		148,559,169
		272,494,927		19,084,118		1,161,115		—		—		292,740,160
Financial assets at fair value through other comprehensive income
Corporate
Grade 1		210,718		—		—		—		—		210,718
Grade 2		133,574		—		—		—		—		133,574
Grade 3		—		—		—		—		—		—
Grade 4		—		—		—		—		—		—
Grade 5		—		—		—		—		—		—
		344,292		—		—		—		—		344,292
Retail
Grade 1		—		—		—		—		—		—
Grade 2		—		—		—		—		—		—
Grade 3		—		—		—		—		—		—
Grade 4		—		—		—		—		—		—
Grade 5		—		—		—		—		—		—
		—		—		—		—		—		—
		344,292		—		—		—		—		344,292
		272,839,219		19,084,118		1,161,115		—		—		293,084,452

36

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	2018
	Financial instruments applying 12-month expected credit losses		Financial instruments applying lifetime expected credit losses				Financial instruments applying credit impaired approach		Financial instruments not applying expected credit losses		Total
(In millions of Korean won)			Non-impaired		Impaired
Financial assets at amortized cost
Corporate
Grade 1		68,474,730		1,406,552		1,573		—		—		69,882,855
Grade 2		53,896,127		4,065,708		1,610		—		—		57,963,445
Grade 3		2,472,873		1,677,369		6,566		—		—		4,156,808
Grade 4		395,335		902,790		40,043		—		—		1,338,168
Grade 5		20,648		342,216		920,190		—		—		1,283,054
		125,259,713		8,394,635		969,982		—		—		134,624,330
Retail
Grade 1		123,963,709		4,387,477		8,836		—		—		128,360,022
Grade 2		4,171,518		7,058,259		6,218		—		—		11,235,995
Grade 3		140,074		881,415		4,158		—		—		1,025,647
Grade 4		431,480		154,506		2,582		—		—		588,568
Grade 5		8,426		296,087		379,555		—		—		684,068
		128,715,207		12,777,744		401,349		—		—		141,894,300
		253,974,920		21,172,379		1,371,331		—		—		276,518,630
Financial assets at fair value through other comprehensive income
Corporate
Grade 1		149,226		25,731		—		—		—		174,957
Grade 2		128,712		45,878		—		—		—		174,590
Grade 3		—		—		—		—		—		—
Grade 4		—		—		—		—		—		—
Grade 5		—		—		—		—		—		—
		277,938		71,609		—		—		—		349,547
Retail
Grade 1		—		—		—		—		—		—
Grade 2		—		—		—		—		—		—
Grade 3		—		—		—		—		—		—
Grade 4		—		—		—		—		—		—
Grade 5		—		—		—		—		—		—
		—		—		—		—		—		—
		277,938		71,609		—		—		—		349,547
		254,252,858		21,243,988		1,371,331		—		—		276,868,177

¹  Before netting of allowance.

37

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	Corporate	Retail
Grade 1	AAA ~ BBB+	1 ~ 5 grade
Grade 2	BBB ~ BB	6 ~ 8 grade
Grade 3	BB- ~ B	9 ~ 10 grade
Grade 4	B- ~ CCC	11 grade
Grade 5	CC or under	12 grade or under

Credit risk mitigation by collateral

The quantification of the extent to which collateral and other credit enhancements mitigate credit risk as at December 31, 2019, are as follows:

	2019
	Financial instruments applying 12-month expected credit losses		Financial instruments applying lifetime expected credit losses				Financial instruments applying credit impaired approach		Financial instruments not applying expected credit losses		Total
(In millions of Korean won)			Non-impaired		Impaired
Guarantees		69,618,120		3,834,566		177,047		—		—		73,629,733
Deposits and savings		1,351,959		118,204		6,156		—		—		1,476,319
Property and equipment		2,925,884		286,280		1,123		—		—		3,213,287
Real estate		152,660,506		10,478,492		381,208		—		—		163,520,206
		226,556,469		14,717,542		565,534		—		—		241,839,545

The quantification of the extent to which collateral and other credit enhancements mitigate credit risk as at December 31, 2018, are as follows:

	2018
	Financial instruments applying 12-month expected credit losses		Financial instruments applying lifetime expected credit losses				Financial instruments applying credit impaired approach		Financial instruments not applying expected credit losses		Total
(In millions of Korean won)			Non-impaired		Impaired
Guarantees		59,710,931		5,864,526		146,818		—		—		65,722,275
Deposits and savings		1,354,807		76,960		5,265		—		—		1,437,032
Property and equipment		2,411,077		72,326		2,461		—		—		2,485,864
Real estate		145,007,035		12,494,029		385,562		—		—		157,886,626
		208,483,850		18,507,841		540,106		—		—		227,531,797

38

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

4.2.5 Credit Risk of Securities

The credit quality of financial investments excluding equity securities that are exposed to credit risk as at December 31, 2019 and 2018, are as follows:

	2019
	Financial instruments applying 12-month expected credit losses		Financial instruments applying lifetime expected credit losses				Financial instruments applying credit impaired approach		Financial instruments not applying expected credit losses		Total
(In millions of Korean won)			Non-impaired		Impaired
Securities at amortized cost
Grade 1		13,867,628		—		—		—		—		13,867,628
Grade 2		—		—		—		—		—		—
Grade 3		—		—		—		—		—		—
Grade 4		—		—		—		—		—		—
Grade 5		—		—		—		—		—		—
		13,867,628		—		—		—		—		13,867,628
Securities at fair value through other comprehensive income
Grade 1		34,622,682		—		—		—		—		34,622,682
Grade 2		1,209,310		—		—		—		—		1,209,310
Grade 3		2,606		—		—		—		—		2,606
Grade 4		—		—		—		—		—		—
Grade 5		—		—		—		—		—		—
		35,834,598		—		—		—		—		35,834,598
		49,702,226		—		—		—		—		49,702,226

	2018
	Financial instruments applying 12-month expected credit losses		Financial instruments applying lifetime expected credit losses				Financial instruments applying credit impaired approach		Financial instruments not applying expected credit losses		Total
(In millions of Korean won)			Non-impaired		Impaired
Securities at amortized cost
Grade 1		12,754,979		—		—		—		—		12,754,979
Grade 2		—		—		—		—		—		—
Grade 3		—		—		—		—		—		—
Grade 4		—		—		—		—		—		—
Grade 5		—		—		—		—		—		—
		12,754,979		—		—		—		—		12,754,979
Securities at fair value through other comprehensive income
Grade 1		27,028,610		—		—		—		—		27,028,610
Grade 2		525,772		—		—		—		—		525,772
Grade 3		—		—		—		—		—		—
Grade 4		2,509		—		—		—		—		2,509
Grade 5		—		—		—		—		—		—
		27,556,891		—		—		—		—		27,556,891
		40,311,870		—		—		—		—		40,311,870

¹ Before netting of allowance.

39

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

The credit qualities of securities, excluding equity securities according to the credit ratings by external rating agencies as at December 31, 2019, are as follows:

Credit	Domestic			Foreign
quality	KIS	NICE P&I	FnPricing Inc.	S&P	Fitch-IBCA	Moody’s
Grade 1	AA0 to AAA	AA0 to AAA	AA0 to AAA	A- to AAA	A- to AAA	A3 to Aaa
Grade 2	A- to AA-	A- to AA-	A- to AA-	BBB- to BBB+	BBB- to BBB+	Baa3 to Baa1
Grade 3	BBB0 to BBB+	BBB0 to BBB+	BBB0 to BBB+	BB to BB+	BB to BB+	Ba2 to Ba1
Grade 4	BB0 to BBB-	BB0 to BBB-	BB0 to BBB-	B+ to BB-	B+ to BB-	B1 to Ba3
Grade 5	BB- or under	BB- or under	BB- or under	B or under	B or under	B2 or under

Credit qualities of debt securities denominated in Korean won are based on the lowest credit rating by the three domestic credit rating agencies above, and those denominated in foreign currencies are based on the lowest credit rating by the three foreign credit rating agencies above.

4.2.6 Credit Risk of Due from Financial Institutions

The credit quality of due from financial institutions as at December 31, 2019 and 2018, is classified as follows:

	2019
(In millions of Korean won)	Financial instruments applying 12-month expected credit losses		Financial instruments applying lifetime expected credit losses				Financial instruments applying credit impaired approach		Total
			Non-impaired		Impaired
Due from financial institutions at amortized cost
Grade 1		10,390,542		—		—		—		10,390,542
Grade 2		761		—		—		—		761
Grade 3		—		—		—		—		—
Grade 4		—		—		—		—		—
Grade 5		—		13,179		360		—		13,539
		10,391,303		13,179		360		—		10,404,842

	2018
(In millions of Korean won)	Financial instruments applying 12-month expected credit losses		Financial instruments applying lifetime expected credit losses				Financial instruments applying credit impaired approach		Total
			Non-impaired		Impaired
Due from financial institutions at amortized cost
Grade 1		10,362,365		—		—		—		10,362,365
Grade 2		—		—		—		—		—
Grade 3		—		—		—		—		—
Grade 4		—		—		—		—		—
Grade 5		—		—		—		—		—
		10,362,365		—		—		—		10,362,365

¹ Before netting of allowance.

The classification criteria of the credit quality for due from financial institutions are the same as the criteria for securities (excluding equity securities).

40

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

4.2.7 Credit Risk Mitigation of Derivative Financial Instruments

The quantification of the extent to which collateral mitigates credit risk of derivative financial instruments as at December 31, 2019 and 2018, is as follows:

(In millions of Korean won)	2019		2018
Deposits and savings, securities and others		496,294		381,959

4.2.8 Credit Risk Concentration Analysis

Details of the Bank’s loans by jurisdiction as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Retail		Corporate1		Total		%		Allowances			Carrying amount
Korea		148,407,504		139,364,351		287,771,855		98.13		(1,300,478	)		286,471,377
Japan		101		629,716		629,817		0.21		(547	)		629,270
United States		—		1,770,232		1,770,232		0.60		(5,187	)		1,765,045
China		—		1,771,334		1,771,334		0.61		(3,389	)		1,767,945
Others		151,564		1,177,783		1,329,347		0.45		(4,953	)		1,324,394
		148,559,169		144,713,416		293,272,585		100.00		(1,314,554	)		291,958,031

	2018
(In millions of Korean won)	Retail		Corporate1		Total		%		Allowances			Carrying amount
Korea		141,754,541		132,231,620		273,986,161		98.89		(1,521,921	)		272,464,240
Japan		106		333,918		334,024		0.12		(1,865	)		332,159
United States		—		839,620		839,620		0.30		(4,795	)		834,825
China		—		1,111,453		1,111,453		0.40		(2,507	)		1,108,946
Others		139,653		669,862		809,515		0.29		(1,739	)		807,776
		141,894,300		135,186,473		277,080,773		100.00		(1,532,827	)		275,547,946

¹ Expected credit loss of loans at fair value through other comprehensive income as at December 31, 2019 and 2018, are W 582 million and W 1,307 million, respectively.

Details of the Bank’s corporate loans by industry as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Loans1		%		Allowances			Carrying amount
Financial institutions		14,085,470		9.73		(3,931	)		14,081,539
Manufacturing		41,583,867		28.74		(386,676	)		41,197,191
Service		62,473,729		43.17		(164,574	)		62,309,155
Wholesale and retail		17,593,922		12.16		(96,557	)		17,497,365
Construction		2,671,437		1.85		(163,257	)		2,508,180
Public		1,162,185		0.80		(1,994	)		1,160,191
Others		5,142,806		3.55		(23,658	)		5,119,148
		144,713,416		100.00		(840,647	)		143,872,769

41

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Loans1		%		Allowances			Carrying amount
Financial institutions		11,356,143		8.40		(4,667	)		11,351,476
Manufacturing		40,971,041		30.31		(444,637	)		40,526,404
Service		58,908,168		43.58		(235,936	)		58,672,232
Wholesale and retail		16,012,121		11.84		(92,275	)		15,919,846
Construction		2,628,180		1.94		(283,620	)		2,344,560
Public		820,832		0.61		(3,285	)		817,547
Others		4,489,988		3.32		(23,443	)		4,466,545
		135,186,473		100.00		(1,087,863	)		134,098,610

¹ Expected credit loss of loans at fair value through other comprehensive income as at December 31, 2019 and 2018, are W 582 million and W 1,307 million, respectively.

Details of the Bank’s retail as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Loans		%		Allowances			Carrying amount
Housing purpose		77,523,390		52.18		(33,536	)		77,489,854
General purpose		71,035,779		47.82		(440,371	)		70,595,408
		148,559,169		100.00		(473,907	)		148,085,262

	2018
(In millions of Korean won)	Loans		%		Allowances			Carrying amount
Housing purpose		70,178,329		49.46		(28,940	)		70,149,389
General purpose		71,715,971		50.54		(416,024	)		71,299,947
		141,894,300		100.00		(444,964	)		141,449,336

Details of the Bank’s mortgage loans¹ as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Loans		%		Allowances			Carrying amount
Group1		9,410,202		10.00		(4,634	)		9,405,568
Group2		19,269,533		20.48		(6,270	)		19,263,263
Group3		33,500,810		35.60		(7,304	)		33,493,506
Group4		30,517,828		32.44		(13,244	)		30,504,584
Group5		1,364,155		1.45		(2,389	)		1,361,766
Group6		25,763		0.03		(128	)		25,635
		94,088,291		100.00		(33,969	)		94,054,322

42

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Loans		%		Allowances			Carrying amount
Group1		6,671,012		7.11		(3,296	)		6,667,716
Group2		18,911,235		20.16		(8,322	)		18,902,913
Group3		35,580,948		37.94		(8,753	)		35,572,195
Group4		32,256,160		34.39		(12,338	)		32,243,822
Group5		356,892		0.38		(737	)		356,155
Group6		16,776		0.02		(35	)		16,741
		93,793,023		100.00		(33,481	)		93,759,542

¹  Retail loans for general purpose with the real estate as collateral are included.

	Ranges
Group1	LTV 0% to less than 20%
Group2	LTV 20% to less than 40%
Group3	LTV 40% to less than 60%
Group4	LTV 60% to less than 80%
Group5	LTV 80% to less than 100%
Group6	LTV over 100%

¹  LTV: Loan to Value ratio

Details of the Bank’s credit risk of due from financial institutions, securities excluding equity securities and derivative financial instruments by industry as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Amount		%		Allowances			Carrying amount
Due from financial institutions at amortized cost
Finance and Insurance		10,404,842		100.00		(1,558	)		10,403,284
		10,404,842		100.00		(1,558	)		10,403,284
Securities at fair value through profit or loss
Government and government funded institutions		1,622,121		17.10		—			1,622,121
Finance and Insurance1		7,381,118		77.77		—			7,381,118
Others		487,252		5.13		—			487,252
		9,490,491		100.00		—			9,490,491
Derivatives
Government and government funded institutions		7,330		0.32		—			7,330
Finance and Insurance1		2,135,780		92.07		—			2,135,780
Others		176,577		7.61		—			176,577
		2,319,687		100.00		—			2,319,687

43

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Securities at fair value through other comprehensive income2
Government and government funded institutions	13,737,679	38.33	—		13,737,679
Finance and Insurance	18,686,144	52.15	—		18,686,144
Others	3,410,775	9.52	—		3,410,775
	35,834,598	100.00	—		35,834,598
Securities at amortized cost
Government and government funded institutions	2,282,894	16.46	—		2,282,894
Finance and Insurance	11,574,719	83.47	(1,132	)	11,573,587
Others	10,015	0.07	(2	)	10,013
	13,867,628	100.00	(1,134	)	13,866,494
	71,917,246		(2,692	)	71,914,554

	2018
(In millions of Korean won)	Amount		%		Allowances			Carrying amount
Due from financial institutions at amortized cost
Finance and Insurance		10,362,364		100.00		(5	)		10,362,359
		10,362,364		100.00		(5	)		10,362,359
Securities at fair value through profit or loss
Government and government funded institutions		1,175,311		14.16		—			1,175,311
Finance and Insurance1		6,632,430		79.92		—			6,632,430
Others		491,552		5.92		—			491,552
		8,299,293		100.00		—			8,299,293
Derivatives
Government and government funded institutions		39,290		2.44		—			39,290
Finance and Insurance1		1,476,717		91.65		—			1,476,717
Others		95,288		5.91		—			95,288
		1,611,295		100.00		—			1,611,295
Securities at fair value through other comprehensive income2
Government and government funded institutions		7,844,258		28.47		—			7,844,258
Finance and Insurance		17,706,660		64.25		—			17,706,660
Others		2,005,973		7.28		—			2,005,973
		27,556,891		100.00		—			27,556,891
Securities at amortized cost
Government and government funded institutions		1,927,884		15.11		—			1,927,884
Finance and Insurance		10,797,031		84.65		(1,249	)		10,795,782
Others		30,064		0.24		(6	)		30,058
		12,754,979		100.00		(1,255	)		12,753,724
		60,584,822				(1,260	)		60,583,562

¹  Collective investment securities are classified as finance and insurance.

44

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

²  Expected credit loss of securities at fair value through other comprehensive income as at December 31, 2019 and 2018, are W 1,917 million and W 1,299 million, respectively.

Details of the Bank’s credit risk of due from financial institutions, securities, excluding equity securities and derivative financial instruments by country as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Amount		%		Allowances			Carrying amount
Due from financial institutions at amortized cost
Korea		8,627,819		82.92		—			8,627,819
United States		1,212,057		11.65		—			1,212,057
Others		564,966		5.43		(1,558	)		563,408
		10,404,842		100.00		(1,558	)		10,403,284
Securities at fair value through profit or loss
Korea		8,770,046		92.40		—			8,770,046
United States		394,341		4.16		—			394,341
Others		326,104		3.44		—			326,104
		9,490,491		100.00		—			9,490,491
Derivatives
Korea		948,019		40.87		—			948,019
United States		461,145		19.88		—			461,145
France		299,491		12.91		—			299,491
Others		611,032		26.34		—			611,032
		2,319,687		100.00		—			2,319,687
Securities at fair value through other comprehensive income1
Korea		33,895,665		94.59		—			33,895,665
United States		423,145		1.18		—			423,145
Others		1,515,788		4.23		—			1,515,788
		35,834,598		100.00		—			35,834,598
Securities at amortized cost
Korea		12,841,001		92.59		(833	)		12,840,168
United States		165,745		1.20		(34	)		165,711
United Kingdom		765,438		5.52		(237	)		765,201
Others		95,444		0.69		(30	)		95,414
		13,867,628		100.00		(1,134	)		13,866,494
		71,917,246				(2,692	)		71,914,554

45

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

(In millions of Korean won)	2018
	Amount		%		Allowances			Carrying amount
Due from financial institutions at amortized cost
Korea		9,172,142		88.51		—			9,172,142
United States		564,594		5.45		(5	)		564,589
Others		625,628		6.04		—			625,628
		10,362,364		100.00		(5	)		10,362,359
Securities at fair value through profit or loss
Korea		7,648,895		92.16		—			7,648,895
United States		105,541		1.27		—			105,541
Others		544,857		6.57		—			544,857
		8,299,293		100.00		—			8,299,293
Derivatives
Korea		756,248		46.92		—			756,248
United States		285,460		17.72		—			285,460
France		222,905		13.83		—			222,905
Others		346,682		21.53		—			346,682
		1,611,295		100.00		—			1,611,295
Securities at fair value through other comprehensive income1
Korea		26,139,297		94.86		—			26,139,297
United States		711,946		2.58		—			711,946
Others		705,648		2.56		—			705,648
		27,556,891		100.00		—			27,556,891
Securities at amortized cost
Korea		11,805,442		92.56		(945	)		11,804,497
United States		155,417		1.22		(32	)		155,385
United Kingdom		705,790		5.53		(247	)		705,543
Others		88,330		0.69		(31	)		88,299
		12,754,979		100.00		(1,255	)		12,753,724
		60,584,822				(1,260	)		60,583,562

¹  Expected credit loss of securities at fair value through other comprehensive income as at December 31, 2019 and 2018, are W 1,917 million and W 1,299 million, respectively.

Due from financial institutions, financial assets at fair value through profit or loss that linked to gold price and derivatives are mostly relevant to finance and insurance industry with high credit ratings.

46

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

4.3 Liquidity risk

4.3.1 Overview of Liquidity Risk

Liquidity risk is the risk of insolvency or loss due to a disparity between the inflow and outflow of funds, unexpected outflow of funds, and obtaining funds at a high price or disposing of securities at an unfavorable price due to lack of available funds. The Bank manages its liquidity risk through analysis of the contractual maturity of interest-bearing assets and liabilities, assets and liabilities related to the other in and outflows, and off-balance sheet items related to the inflows and outflows of currency derivative instruments and others.

4.3.2 Liquidity Risk Management and Indicator

The liquidity risk is managed by ALM (‘Asset Liability Management’) and related guidelines which are applied to the risk management policies and procedures that addresses all the possible risks that arise from the overall business of the Bank.

The Bank has to establish the liquidity risk management strategy including the objectives of liquidity risk management, management policies and internal control system, and obtain approval from Risk Management Committee. Risk Management Committee operates the Risk Management Council for the purpose of efficient risk management, monitors establishment and enforcement of policies based on risk management strategy.

For the purpose of liquidity management, LCR, NSFR, the liquidity gap ratio, liquidity ratio, maturity gap ratio and the results of the stress testing related to liquidity risk on transactions affecting the inflows and outflows of funds and transactions of off-balance sheet items are measured, managed and reported to the Risk Management Committee and Risk Management Council on a regular basis.

4.3.3 Analysis of Remaining Contractual Maturity of Financial Assets and Liabilities

Cash flows disclosed below are undiscounted contractual principal and interest to be received (paid) and, thus, differ from the amounts in financial statements which are based on the present value of expected cash flows. The amount of interest to be received or paid on floating rate assets and liabilities is measured on the assumption that the current interest rate would be the same through maturity.

47

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

The remaining contractual maturity of financial assets and liabilities, excluding derivatives held for cash flow hedging, as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	On demand		Up to 1 month		1-3 months		3-12 months			1-5 years		Over 5 years		Total
Financial assets
Cash and due from financial institutions 1		4,540,832		10,758		33,939		13,367			—		—		4,598,896
Financial assets at fair value through profit or loss 2		9,596,717		251		17,846		134,012			—		87,445		9,836,271
Derivatives held for trading 2		2,189,768		—		—		—			—		—		2,189,768
Derivatives held for hedging 3		—		3,392		14,651		24,016			39,693		66,176		147,928
Loans at amortized cost		—		22,203,967		27,975,042		115,754,264			77,138,799		89,367,778		332,439,850
Financial investments		1,893,149		1,246,869		3,028,220		10,672,136			34,687,166		2,859,161		54,386,701
Financial assets at fair value through other comprehensive income 4		1,893,149		304,139		1,105,600		5,462,997			30,261,169		456,249		39,483,303
Securities at amortized cost		—		942,730		1,922,620		5,209,139			4,425,997		2,402,912		14,903,398
Other financial assets		—		3,676,268		—		995,736			—		—		4,672,004
		18,220,466		27,141,505		31,069,698		127,593,531			111,865,658		92,380,560		408,271,418
Financial liabilities
Financial liabilities at fair value through profit or loss 2		80,235		—		—		—			—		—		80,235
Derivatives held for trading 2		2,120,551		—		—		—			—		—		2,120,551
Derivatives held for hedging 3		—		5,973		696		(4,529	)		11,575		129		13,844
Deposits 5		137,324,138		16,309,989		26,965,970		108,935,764			9,307,839		1,097,750		299,941,450
Debts		627		4,960,681		2,547,372		6,529,849			4,186,714		753,997		18,979,240
Debentures		22,285		641,896		645,867		5,668,559			9,593,393		1,633,467		18,205,467
Lease liabilities		520		13,773		27,182		99,067			191,406		13,885		345,833
Other financial liabilities		—		12,163,017		473		77,688			—		—		12,241,178
		139,548,356		34,095,329		30,187,560		121,306,398			23,290,927		3,499,228		351,927,798
Off-balance sheet items
Commitments 6		87,695,459		—		—		—			—		—		87,695,459
Acceptances and guarantees contracts		8,250,284		—		—		—			—		—		8,250,284
Financial guarantee contracts 7		5,077,410		—		—		—			—		—		5,077,410
		101,023,153		—		—		—			—		—		101,023,153

¹ The amounts of W 8,497,179 million which are restricted amount due from the financial institutions as at December 31, 2019 are excluded.

² Financial liabilities at fair value through profit or loss and derivatives held for trading and financial assets at fair value through profit or loss (excluding loans) are not managed by contractual maturity because they are held for trading or redemption before maturity. Therefore, the carrying amounts are included in the ‘On demand’ category.

³ Cash flows of derivative instruments held for hedging are shown at net amounts of cash inflows and outflows by remaining contractual maturity.

48

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

⁴ Equity securities designated as financial assets at fair value through other comprehensive income included in the ‘On demand’ category as most are available for sale at any time. However, in the case of equity investments which are restricted for sale, these will be classified to its respective maturity when the restriction on disposal is released.

⁵ Deposits that are contractually repayable on demand or on short notice are included under the ‘On demand’ category.

⁶ Unused lines of credit within commitments are included under the ‘On demand’ category as payments can be required upon request.

⁷ Financial guarantee contracts are included under the ‘On demand’ category as payments can be required upon request.

	2018
(In millions of Korean won)	On demand		Up to 1 month			1-3 months			3-12 months			1-5 years		Over 5 years		Total
Financial assets
Cash and due from financial institutions 1		4,408,582		—			—			—			—		—		4,408,582
Financial assets at fair value through profit or loss 2		8,399,768		230			7,182			184,881			5,542		90,736		8,688,339
Derivatives held for trading 2		1,535,339		—			—			—			—		—		1,535,339
Derivatives held for hedging 3		—		(1,332	)		620			16,251			20,025		40,830		76,394
Loans at amortized cost		—		18,547,767			27,835,144			106,859,411			70,884,404		95,290,607		319,417,333
Financial investments		1,898,915		2,170,613			3,630,644			13,611,640			20,571,067		2,454,592		44,337,471
Financial assets at fair value through other comprehensive income 4		1,898,915		1,412,984			2,262,619			9,748,141			14,891,941		191,966		30,406,566
Securities at amortized cost		—		757,629			1,368,025			3,863,499			5,679,126		2,262,626		13,930,905
Other financial assets		—		2,441,445			—			1,019,223			—		—		3,460,668
		16,242,604		23,158,723			31,473,590			121,691,406			91,481,038		97,876,765		381,924,126
Financial liabilities
Financial liabilities at fair value through profit or loss 2		87,168		—			—			—			—		—		87,168
Derivatives held for trading 2		1,550,244		—			—			—			—		—		1,550,244
Derivatives held for hedging 3		—		4,091			(4,249	)		(14,415	)		15,660		31		1,118
Deposits 5		122,933,103		15,956,422			27,749,492			94,043,792			9,911,549		1,279,935		271,874,293
Debts		602		2,799,623			3,255,685			6,790,902			4,216,642		669,151		17,732,605
Debentures		30,160		331,604			1,385,279			8,319,923			12,113,285		673,863		22,854,114
Other financial liabilities		—		10,456,755			2,203			76,647			2,406		—		10,538,011
		124,601,277		29,548,495			32,388,410			109,216,849			26,259,542		2,622,980		324,637,553
Off-balance sheet items
Commitments 6		81,137,779		—			—			—			—		—		81,137,779
Acceptances and guarantees contracts		7,250,059		—			—			—			—		—		7,250,059
Financial guarantee contracts 7		4,636,540		—			—			—			—		—		4,636,540
		93,024,378		—			—			—			—		—		93,024,378

¹ The amounts of W 9,005,372 million which are restricted amount due from the financial institutions as at December 31, 2018 are excluded.

49

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

² Financial liabilities at fair value through profit or loss and derivatives held for trading and financial assets at fair value through profit or loss (excluding loans) are not managed by contractual maturity because they are held for trading or redemption before maturity. Therefore, the carrying amounts are included in the ‘On demand’ category.

³ Cash flows of derivative instruments held for hedging are shown at net amounts of cash inflows and outflows by remaining contractual maturity.

⁴ Equity securities designated as financial assets at fair value through other comprehensive income included in the ‘On demand’ category as most are available for sale at any time. However, in the case of equity investments which are restricted for sale, these will be classified to its respective maturity when the restriction on disposal is released.

⁵ Deposits that are contractually repayable on demand or on short notice are included under the ‘On demand’ category.

⁶ Unused lines of credit within commitments are included under the ‘On demand’ category as payments can be required upon request.

⁷ Financial guarantee contracts are included under the ‘On demand’ category as payments can be required upon request.

The remaining contractual cash flows of derivatives held for cash flow hedging as at December 31, 2019 and 2018, are as follows:

(In millions of  Korean won)	2019
	Up to 1 month		1-3 months		3-12 months		1-5 years		Over 5 years		Total
Cash flow to be received of net settlement derivatives		38		357		1,015		564		—		1,974
Cash flow to be paid of net settlement derivatives		191		1,340		2,001		342		—		3,874

(In millions of  Korean won)	2018
	Up to 1 month		1-3 months		3-12 months		1-5 years		Over 5 years		Total
Cash flow to be received of net settlement derivatives		251		2,548		4,871		11,642		—		19,312
Cash flow to be paid of net settlement derivatives		197		129		493		79		—		898

4.4 Market Risk

4.4.1 Concept

Market risk is the risk of possible losses which arise from changes in market factors, such as interest rate, stock price, foreign exchange rate and other market factors, and incurred in securities, derivatives and others. The most significant risks associated with trading positions are interest rate risks and currency risks, and other risks include stock price risks. In addition, the Bank is exposed to interest rate risks associated with non-trading positions. The Bank classifies exposures to market risk into either trading or non-trading positions for managerial purpose.

4.4.2 Risk Management

The Bank sets internal capital limits for market risk and interest rate risk and monitors the risks to manage the risk of trading and non-trading positions. The Bank maintains risk management systems and procedures, such as trading policies and procedures, market risk management guidelines for trading positions and ALM risk management guidelines for non-trading positions in order to manage market risk efficiently. The procedures mentioned are implemented with approval from the Risk Management Committee and Risk Management Council.

50

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

The Bank establishes market risk management policy, sets position limits, loss limits and VaR limits of each business group and approves newly developed products through its Risk Management Council. The Market Risk Management Subcommittee, which is chaired by the Chief Risk Officer (CRO), is the decision maker and sets position limits, loss limits, VaR limits, sensitivity limits and scenario loss limits for each division, at the level of each individual business department.

The Asset-Liability Management Committee (ALCO) determines the operational standards of interest and commission, the details of establishment and prosecution of the Asset Liability Management (ALM) policies, and enacts and amends relevant guidelines. The Risk Management Council monitors the establishment and enforcement of ALM risk management policies and enact and amend ALM risk management guidelines. The interest rate risk limit is set based on the future assets/liabilities position and interest rate volatility estimation reflects the annual work plan. The ALM Department and Risk Management Department measures and monitors the interest risk status and limits on a regular basis. The status and limits of interest rate risks, such as interest rate EaR, duration gap and interest rate VaR, are reported to the ALCO and Risk Management Council on a monthly basis and to the Risk Management Committee on a quarterly basis. To ensure adequacy of interest rate and liquidity risk management, the Risk Management Department assigns the limits, monitors and reviews the risk management procedures and tasks conducted by the ALM Department. Also, the Risk Management Department independently reports related information to management.

4.4.3 Trading Position

Definition of a trading position

Trading positions subject to market risk management are interest rate, stock price positions for short-term profit-taking and others. Also, they include all foreign exchange rate positions. The basic requirements of trading positions are defined under the Trading Policy and Guideline, are as follows:

• The trading position is not restricted for purchase and sale, is measured daily at fair value, and its significant inherent risks are able to be hedged in the market.

• The criteria for classification as a trading position are clearly defined in the Trading Policy and guideline, and separately managed by the trading department.

• The trading position is operated in accordance with the documented trading strategy and managed through position limits.

• The operating department or professional dealers have an authority to enforce a deal on the trading position within predetermined limits without pre-approval.

• The trading position is reported periodically to management for the purpose of the Bank’s risk management.

Observation method on market risk arising from trading positions

The Bank calculates VaR to measure the market risk by using market risk management systems on the entire trading portfolio. Generally, the Bank manages market risk on the trading portfolio. In addition, the Bank controls and manages the risk of derivative trading based on the regulations and guidelines formulated by the Financial Supervisory Service.

Value at Risk (VaR)

i. Value at Risk (VaR)

The Bank uses the Value-at-Risk methodology to measure the market risk of trading positions.

The Bank now uses the ten-day VaR, which estimates the maximum amount of loss that could occur in ten days under an historical simulation model which is considered to be a full valuation method. The distributions of portfolio’s value changes are estimated based on the data over the previous 250 business days, and ten-day VaR is calculated by subtracting net present market value from the value measured at a 99% confident level of portfolio’s value distribution results.

51

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

VaR is a commonly used market risk measurement technique. However, the method has some shortcomings. VaR estimates possible losses over a certain period at a particular confidence level using past market movement data. Past market movements are, however, not necessarily a good indicator of future events, as there may be conditions and circumstances in the future that the model does not anticipate. As a result, the timing and magnitude of the actual losses may vary depending on the assumptions made at the time of the calculation. In addition, the time periods used for the model, generally one or ten days, are assumed to be a sufficient holding period before liquidating the relevant underlying positions. If these holding periods are not sufficient, or too long, the VaR results may understate or overstate the potential loss.

The Bank uses an internal model (VaR) to measure general risk, and a standard method to measure each individual risk. When the internal model is not permitted for certain market risk, the Bank uses the standard method. Therefore, the market risk VaR may not reflect the market risk of each individual risk and some specific positions.

ii. Back-Testing

Back-testing is conducted on a daily basis to validate the adequacy of the VaR model. In back- testing, the Bank compares both the actual and hypothetical profit or loss with the VaR calculations.

iii. Stress Testing

Stress testing is carried out to analyze the impact of abnormal market situations on the trading and available-for-sale portfolio. It reflects changes in interest rates, stock prices, foreign exchange rates, implied volatilities of options and other risk factors that have significant influence on the value of the portfolio. The Bank uses historical scenarios and hypothetical scenarios for the analysis of abnormal market situations. Stress testing is performed at least once every quarter.

The units that analyze total VaR can be categorized as follows: ① by product: interest rate products (debt securities in Korean won and foreign currencies, etc.), foreign currency products (spots, futures, and CRS, etc.), equity securities (equities, ELS, etc.), ② by risk factors: interest rates (government bond interest rate in Korean won and foreign currencies, corporate bond interest rate, etc.), exchange rates (USD/KRW, USD/JPY, etc.), and stock market indexes (KOSPI, S&P 500, etc.); the Bank previously assesses VaR by product considering timeliness and efficiency.

However, as the amount of investment property in foreign currencies increases, products evaluated as multiple risk factors (i.e. for foreign currency bonds, ① by product: interest rate product ② by risk factor: interest rate and foreign exchange rate) had a tendency that dispersion effect is excessive due to not reflecting the actual hedge position by products in detail; to prevent which, the Bank has decided to use VaR by risk factor from 2018.

VaR at a 99%, excluding Stressed Value at Risks, confidence level of interest rate, stock price and foreign exchange rate risk for trading positions with a ten-day holding period as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Average		Minimum		Maximum		Ending
Interest rate risk		3,647		1,089		8,227		3,494
Stock price risk		189		48		259		202
Foreign exchange rate risk		21,746		9,634		28,170		20,346
Deduction of diversification effect								(5,769	)
Total VaR		20,747		11,498		26,492		18,273

52

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Average		Minimum		Maximum		Ending
Interest rate risk		6,004		3,189		9,287		5,775
Stock price risk		188		34		484		63
Foreign exchange rate risk		11,558		5,198		23,761		22,392
Deduction of diversification effect								(5,738	)
Total VaR		13,336		3,860		25,013		22,492

The required equity capital using the standard method related to the positions which are not measured by VaR as at December 31, 2019 and 2018, is as follows:

(In millions of Korean won)	2019		2018
Interest rate risk		—		3,032
Stock price risk		2		—
		2		3,032

Details of risk factors

i. Interest rate risk

Trading position interest rate risk usually arises from debt securities denominated in Korean won. The Bank’s trading strategy is to benefit from short-term movements in the prices of debt securities arising from changes in interest rates. The Bank manages interest rate risk on major trading portfolios using market value-based tools such as VaR and sensitivity analysis (Price Value of a Basis Point: PVBP).

ii. Stock price risk

Stock price risk arises primarily from stock spot positions held by payment guarantee trust and stock-related derivatives of the Capital Markets Department. These stock price risks are managed through VaR, sensitivity limits and others.

iii. Foreign exchange rate risk

Foreign exchange rate risk arises from holding assets and liabilities denominated in foreign currency and foreign currency derivatives. Net foreign currency exposure mostly occurs from the foreign assets and liabilities which are denominated in US Dollars and Chinese Yuan. The Bank sets both loss limits and net foreign currency exposure limits and manages comprehensive net foreign exchange exposures which consider both trading and non-trading portfolios.

4.4.4 Non-trading Position (Interest Rate Risk of Banking Book)

i. Definition of interest rate risk of banking book

Interest rate risk of banking book(IRRBB) is interest rate risk arises from a change in equity and earnings caused by fluctuation in value of interest rate sensitive assets and liabilities, and these risks are measured with change in Economic Value of Equity (DEVE) or interest rate VaR and change in Net Interest Income (DNII).

53

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

ii. Bank’s overall interest rate risk management and mitigation strategy

The Risk Management Committee approves policies, procedures and limits for interest rate risk management, and the management department regularly reports on interest rate risk levels of D EVE, D NII and changes of market conditions etc., as compared to the set limit and changes of market conditions etc. To measure the sensitivity of banks’ Economic Value of Measures and Earnings-Based Measures affected by interest rate changes, the interest rate and duration gaps of assets and liabilities are calculated every month. In addition, the management department conducts interest rate risk crisis analysis at least once a quarter, assuming abnormal interest rate fluctuations, and reports the results to the Risk Management Council. Independent internal and external audit departments regularly check the process of identifying, measuring and monitoring interest rate risk. The evaluation of adequacy of interest rate risk model is regularly conducted at least once a year by a department that is independent of the function they are assigned to review.

iii. Main modeling assumption used for the Bank’s interest rate risk measurement system for internal management

The Bank separately calculates DEVE for the internal management purpose using Historical-simulation based on the volatility of interest rates in the past finance crisis(FY08-FY09), the portfolio of assets/liabilities and 27 interest rate gaps, considering the management strategy.

iv. The Bank’s interest rate risk hedging methodology and related accounting

The Bank hedges the interest rate risk through the same back-to-back interest rate swap transaction. The Bank officially documents and manages the risk management strategy for hedge accounting application, risk management purpose, hedging relationship, and methods for assessing compliance with hedge effectiveness.

v. Main assumptions used for calculating DEVE, DNII

Interest rate risk is measured by considering the cash flows of all interest-sensitive assets, liabilities and off-balance sheet items in the Banking Book. DEVE assumes a run-off balance sheet with an outflow view in which existing bank account positions are derecognized and are not replaced by new business.

In addition, DEVE is calculated by the cash flows generated by applying contracted interest rates which include commercial margins and other interest rate components are used for DEVE. Risk-free interest rate that does not include commercial margins and other interest rate components is applied when discounting the estimated cash flows to present value.

DNII is computed assuming a constant balance sheet, where maturing or repricing cash flows are replaced by new cash flows with identical features with regard to the amount, replaced period and spread components. Interest rate risk for interest rate shock scenarios is calculated considering only loss in each currency. Non-maturity deposits are categorized as retail_transactional, retail_non- transactional and wholesale according to depositor characteristics and account characteristics. The core deposit rate and upper average maturity cap of each aforementioned category are considered to determine average interest rate repricing maturity of non-maturity deposits. The average interest rate repricing maturity for non-maturity deposits is 2.5 years for core deposits and 1 day for non-core deposits, with the longest interest rate repricing maturity of 5 years. The prepayment rate of fixed-rate loan and early redemption rate of term deposit are estimated based on prepayment amount of fixed-rate loan and early redemption amount of term deposits during a month, respectively.

54

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

vi. DEVE, DNII

The bank calculates DEVE by applying six rate shock and stress scenarios and DNII by applying parallel shock up and down scenarios. The results as at December 31, 2019 are as follows:

	2019
(In millions of Korean won)	Changes in the Economic Value of Equity Capital		Changes in net interest income
Scenario 1 (Parallel up)		426,667		116,958
Scenario 2 (Parallel down)		33,310		4,222
Scenario 3(Steepener)		222,659		—
Scenario 4 (Flattener)		416,300		—
Scenario 5 (Short rate up)		382,042		—
Scenario 6 (Short rate down)		498,690		—
Maximum of Scenarios 1-6		498,690		116,958
Basic capital		27,860,004		—

(*) As of the end of December 2019, interest rate risk was calculated by different method from the previous disclosure due to the revision of the Detailed Supervisory Regulations on Banking Business.

The risk is measured using interest rate VaR, which is the maximum possible amount of loss that can occur at 99.90% confidence on interest rate risk and the results as at December 31, 2018 are as follows:

(In millions of Korean won)	2018
Interest Rate VaR		185,612

55

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

4.4.5 Financial Assets and Liabilities in Foreign Currencies

Financial assets and liabilities in foreign currencies as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	USD		JPY		EUR		GBP		CNY		Others		Total
Financial assets
Cash and due from financial institutions		1,722,576		244,277		144,399		33,228		161,766		487,361		2,793,607
Financial assets at fair value through profit or loss		1,555,545		—		159,888		1,116		—		18,103		1,734,652
Derivatives held for trading		98,077		—		—		—		—		—		98,077
Derivatives held for hedging		80,202		—		—		—		—		—		80,202
Loans at amortized cost		14,896,881		463,897		593,074		137,585		50,989		558,678		16,701,104
Financial assets at fair value through other comprehensive income		3,953,870		21,267		5,192		—		—		37,977		4,018,306
Financial assets at amortized cost		1,026,325		—		—		—		—		—		1,026,325
Other financial assets		1,199,067		230,223		289,134		5,178		146,722		87,105		1,957,429
		24,532,543		959,664		1,191,687		177,107		359,447		1,189,224		28,409,702
Financial liabilities
Derivatives held for trading		209,639		6		53		—		—		—		209,698
Derivatives held for hedging		35,538		—		—		—		—		—		35,538
Deposits		11,851,098		719,081		761,074		45,485		203,219		523,079		14,103,036
Debts		8,707,309		125,096		340,530		118,848		6,586		62,050		9,360,419
Debentures		4,083,040		—		—		—		—		101,967		4,185,007
Other financial liabilities		2,108,945		59,761		97,325		21,475		151,144		163,054		2,601,704
		26,995,569		903,944		1,198,982		185,808		360,949		850,150		30,495,402
Off-balance sheet items		16,773,630		32,694		191,210		—		153,451		37,195		17,188,180

56

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	USD		JPY		EUR		GBP		CNY		Others		Total
Financial assets
Cash and due from financial institutions		1,055,982		305,814		187,715		24,464		212,207		358,040		2,144,222
Financial assets at fair value through profit or loss		1,255,498		—		69,728		—		—		17,773		1,342,999
Derivatives held for trading		91,406		—		—		—		—		—		91,406
Derivatives held for hedging		31,082		—		—		—		—		—		31,082
Loans at amortized cost		12,705,015		333,848		571,077		5,993		8,659		378,946		14,003,538
Financial assets at fair value through other comprehensive income		2,999,553		36,538		5,134		—		—		3,699		3,044,924
Financial assets at amortized cost		949,227		—		—		—		—		—		949,227
Other financial assets		938,944		297,430		17,184		21,447		236,979		21,337		1,533,321
		20,026,707		973,630		850,838		51,904		457,845		779,795		23,140,719
Financial liabilities
Derivatives held for trading		100,635		14		42		—		—		—		100,691
Derivatives held for hedging		88,367		—		—		—		—		—		88,367
Deposits		8,820,671		612,001		491,628		48,264		200,664		449,726		10,622,954
Debts		9,113,898		90,778		184,173		—		5,107		22,901		9,416,857
Debentures		3,960,312		—		31,979		—		—		42,240		4,034,531
Other financial liabilities		897,366		103,395		130,282		3,407		253,069		39,033		1,426,552
		22,981,249		806,188		838,104		51,671		458,840		553,900		25,689,952
Off-balance sheet items		13,608,120		31,148		1,262		—		184,545		7,552		13,832,627

4.5 Operational Risk

4.5.1 Concept

The Bank defines operational risk as risk of loss resulting from inadequate or failed internal processes, people, systems and external events. The operational risk includes financial and non-financial risks.

4.5.2 Risk Management

The purpose of operational risk management is not only to comply with requirements of regulatory authorities but is also to establish an integrated system to cultivate enterprise culture that values importance of risk management, strengthen internal controls, improve processes and provide with timely feedback to management so that eventually mitigate operational risk of the Bank. In addition, the Bank established Business Continuity Planning (BCP) to ensure critical business functions can be

57

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

maintained, or restored, in the event of material disruptions arising from internal or external events. It has constructed replacement facilities as well as has carried out full scale test for head office and IT departments to test its BCPs.

4.6 Capital Management

The Bank complies with the capital adequacy standard established by the Financial Services Commission. The capital adequacy standard is based on Basel III revised by Basel Committee on Banking Supervision in Bank for International Settlements in June 2011, and was implemented in Korea in December 2013.

The Bank is required to maintain a minimum Common Equity Tier 1 ratio of at least 4.5%, a minimum Tier 1 ratio of 6.0% and a minimum Total Regulatory Capital of 8.0% as at December 31, 2019. Capital Conservation Buffer of 2.5% and Capital Requirement of Domestic Systemically Important Bank (D-SIB) of 1.0% are additionally applied. Therefore, the Bank is required to maintain a capital ratio including a minimum capital ratio and additional capital requirements (a Common Equity Tier 1 Ratio of 8.0% (December 31, 2018: 7.125%), a Tier 1 Ratio of 9.5% (December 31, 2018: 8.625%), and a Total Regulatory Capital Ratio of 11.5% (December 31, 2018: 10.625%)).

The Bank’s equity capital is classified into three categories in accordance with Detailed Supervisory Regulations on Banking Business:

• Common Equity Tier 1 Capital: Common Equity Tier 1 Capital represents the issued capital that takes the first and proportionately greatest share of any losses and represents the most subordinated claim in liquidation of the Bank, and not repaid outside of liquidation. It includes common shares issued, capital surplus, retained earnings, non-controlling interests of consolidated subsidiaries, accumulated other comprehensive income, other capital surplus and others.

• Additional Tier 1 Capital: Additional Tier 1 Capital includes perpetual instruments issued by the Bank that meet the criteria for inclusion in Additional Tier 1 capital, and stock surplus resulting from the issue of instruments included in Additional Tier 1 capital and others.

• Tier 2 Capital: Tier 2 Capital represents the capital that takes the proportionate share of losses in the liquidation of the Bank. Tier 2 Capital includes a fund raised by issuing subordinated debentures maturing in not less than 5 years that meet the criteria for inclusion in Tier 2 capital, and the allowance for loan losses which are accumulated for assets classified as normal or precautionary in accordance with Regulations on Supervision of Banking Business and others.

Risk weighted asset means the assets weighted according to the inherent risks in the total assets and the possible losses resulting from the errors of internal process and external events which the Bank should cover. The Bank calculates risk weighted asset by each risk (credit risk, market risk and operational risk) based on Detailed Regulations on Supervision of Banking Business and uses it for its capital ratio calculation. The Bank and its subsidiaries complied with external capital adequacy requirements as at December 31, 2019 and 2018.

In addition to the capital ratio, the Bank assesses its adequacy of capital by using the internal assessment and management policy of the capital adequacy. The assessment of the capital adequacy is conducted by comparing available capital (actual amount of available capital) and internal capital (amount of capital enough to cover all significant risks under target credit rate set by the Bank). The Bank monitors the soundness of finance and provides risk adjusted basis for performance review using the assessment of the capital adequacy. The internal capital is calculated by adding the stress testing results and other required items to the total internal capitals which are calculated for each risk.

The Risk Management Council of the Bank determines the Bank’s risk appetite and allocates internal capital by risk type and business group. Each business group efficiently operates its capital within range of granted internal capital. The Risk Management Department of the Bank monitors a

58

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

management of the limit on internal capital and reports the results to management and the Risk Management Council. The Bank maintains the adequacy of capital through proactive review and approval of the Risk Management Committee when the internal capital is expected to exceed the limits.

Details of the Bank’s capital adequacy calculation in line with Basel III requirements as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Equity Capital		29,809,730		27,694,178
Tier I Capital		27,609,684		25,567,995
Common Equity Tier 1 Capital		27,035,161		25,567,995
Additional Tier 1 Capital		574,523		—
Tier II Capital		2,200,046		2,126,183
Risk-weighted assets:		188,075,177		178,433,263
Credit risk1		172,985,173		163,693,288
Market risk2		5,150,641		4,747,989
Operational risk3		9,939,363		9,991,986
Equity Capital (%):		15.85		15.52
Tier I Capital (%)		14.68		14.33
Common Equity Tier 1 Capital (%)		14.37		14.33

¹ Credit risk weighted assets are measured using the Internal Rating-Based Approach and Standardized Approach.

² Market risk weighted assets are measured using the Internal Model-Based Approach and Standardized Approach.

³ Operational risk weighted assets are measured using the Advanced Measurement Approach.

5. Segment Information

5.1 Overall Segment Information and Business Segments

The Bank is organized into Corporate Banking, Retail Banking and Other. These business divisions are based on the nature of the products and services provided, the type or class of customer, and the Bank’s management organization.

• Corporate banking: The activities within this segment include providing credit, deposit products and other related financial services to large, small and medium-sized enterprises and SOHOs.

• Retail banking: The activities within this segment include providing credit, deposit products and other related financial services to individuals and households.

• Other: The activities within this segment include trading activities in securities and derivatives, funding and other supporting activities.

59

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Financial information by business segment for the years ended December 31, 2019, is as follows:

	2019
(In millions of Korean won)	Corporate Banking			Retail Banking			Others			Total
Operating revenues from external customers		2,531,458			2,979,503			1,773,241			7,284,202
Net interest income		2,783,464			3,148,061			358,519			6,290,044
Interest income		4,484,502			4,872,937			1,176,303			10,533,742
Interest expense		(1,701,038	)		(1,724,876	)		(817,784	)		(4,243,698	)
Net fee and commission income		356,060			471,869			339,663			1,167,592
Fee and commission income		453,863			577,845			473,635			1,505,343
Fee and commission expense		(97,803	)		(105,976	)		(133,972	)		(337,751	)
Net gains on financial assets/ liabilities at fair value through profit or loss		207			—			420,933			421,140
Net other operating income (expense)		(608,273	)		(640,427	)		654,126			(594,574	)
General and administrative expenses		(1,208,541	)		(1,982,375	)		(661,058	)		(3,851,974	)
Operating profit before provision for credit losses		1,322,917			997,128			1,112,183			3,432,228
Reversal (provision) for credit losses		125,785			(235,995	)		7,240			(102,970	)
Operating profit		1,448,702			761,133			1,119,423			3,329,258
Net other non-operating income (expense)		128			—			(34,764	)		(34,636	)
Segment profit before income tax expense		1,448,830			761,133			1,084,659			3,294,622
Income tax profit (expense)		(398,428	)		(209,311	)		(265,190	)		(872,929	)
Profit for the year		1,050,402			551,822			819,469			2,421,693
Total assets1		134,486,979			147,468,173			97,530,691			379,485,843
Total liabilities1		137,626,763			161,834,984			51,162,850			350,624,597

¹ Amounts before intra-group transaction adjustment.

60

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Financial information by business segment for the year ended December 31, 2018, is as follows:

	2018
(In millions of Korean won)	Corporate Banking			Retail Banking			Others			Total
Operating revenues from external customers		2,362,581			2,989,240			1,498,783			6,850,604
Net interest income		2,689,712			2,960,598			337,777			5,988,087
Interest income		4,121,160			4,547,615			1,068,381			9,737,156
Interest expense		(1,431,448	)		(1,587,017	)		(730,604	)		(3,749,069	)
Net fee and commission income		292,799			490,447			376,454			1,159,700
Fee and commission income		374,598			583,213			486,028			1,443,839
Fee and commission expense		(81,799	)		(92,766	)		(109,574	)		(284,139	)
Net gains on financial assets/ liabilities at fair value through profit or loss		—			—			357,580			357,580
Net other operating income(expense)		(619,930	)		(461,805	)		426,972			(654,763	)
General and administrative expenses		(1,060,674	)		(1,970,409	)		(702,625	)		(3,733,708	)
Operating profit before provision for credit losses		1,301,907			1,018,831			796,158			3,116,896
Reversal (provision) for credit losses		79,451			(179,229	)		(24	)		(99,802	)
Operating profit		1,381,358			839,602			796,134			3,017,094
Net other non-operating income (expense)		(78	)		—			41,445			41,367
Segment profit before income tax expense		1,381,280			839,602			837,579			3,058,461
Income tax income (expense)		(379,851	)		(230,891	)		(208,402	)		(819,144	)
Profit for the year		1,001,429			608,711			629,177			2,239,317
Total assets1		127,071,039			140,814,393			82,092,259			349,977,691
Total liabilities1		120,196,957			152,173,062			51,036,953			323,406,972

¹ Amounts before intra-group transaction adjustment.

61

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

5.2 Services and Geographical Segments

5.2.1 Services Information

Operating revenues from external customers by services for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Corporate banking service		2,531,458		2,362,581
Retail banking service		2,979,503		2,989,240
Other service		1,773,241		1,498,783
		7,284,202		6,850,604

5.2.2 Geographical Information

Geographical operating revenues from external customers for the years ended December 31, 2019 and 2018, and major non-current assets as at December 31, 2019 and 2018, are as follows:

	2019				2018
(In millions of Korean won)	Revenues from external customers		Major non-current assets		Revenues from external customers		Major non-current assets
Domestic		7,211,160		4,051,234		6,800,844		3,391,111
China		22,391		1,377		16,544		521
United States		13,971		9,452		11,727		144
New Zealand		6,946		3,516		6,213		72
Japan		6,692		3,480		4,166		1,210
United Kingdom		9,424		1,893		3,455		537
Vietnam		10,449		1,938		7,655		239
India		3,169		1,533		—		—
		7,284,202		4,074,423		6,850,604		3,393,834

62

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

6. Financial Assets and Financial Liabilities

6.1 Classification and Fair Value

Carrying amount and fair values of financial assets and liabilities as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Carrying amount		Fair value
Financial assets
Cash and due from financial institutions		13,093,005		13,092,922
Financial assets at fair value through profit or loss		9,785,350		9,785,350
Debt securities		9,490,491		9,490,491
Equity securities		26,921		26,921
Loans		188,133		188,133
Others		79,805		79,805
Derivatives held for trading		2,189,768		2,189,768
Derivatives held for hedging		129,919		129,919
Loans at amortized cost		291,425,606		291,686,008
Financial assets at fair value through other comprehensive income		38,172,534		38,172,534
Debt securities		35,834,598		35,834,598
Equity securities		1,993,644		1,993,644
Loans		344,292		344,292
Securities at amortized cost		13,866,494		13,958,441
Others		5,466,052		5,466,052
		374,128,728		374,480,994
Financial liabilities
Financial liabilities at fair value through profit or loss		80,235		80,235
Derivatives held for trading		2,120,551		2,120,551
Derivatives held for hedging		36,212		36,212
Deposits		295,690,896		296,187,156
Debts		18,706,328		18,705,850
Debentures		17,142,392		17,361,816
Other financial liabilities		14,990,170		14,990,170
		348,766,784		349,481,990

63

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Carrying amount		Fair value
Financial assets
Cash and due from financial institutions		13,413,780		13,413,780
Financial assets at fair value through profit or loss		8,612,864		8,612,864
Debt securities		8,299,293		8,299,293
Equity securities		22,167		22,167
Loans		212,596		212,596
Others		78,808		78,808
Derivatives held for trading		1,535,339		1,535,339
Derivatives held for hedging		75,956		75,956
Loans at amortized cost		274,985,803		275,009,503
Financial assets at fair value through other comprehensive income		29,805,354		29,805,355
Debt securities		27,556,893		27,556,893
Equity securities		1,898,914		1,898,915
Loans		349,547		349,547
Securities at amortized cost		12,753,724		12,785,117
Others		4,197,709		4,197,709
		345,380,529		345,435,623
Financial liabilities
Financial liabilities at fair value through profit or loss		87,168		87,168
Derivatives held for trading		1,550,244		1,550,244
Derivatives held for hedging		88,551		88,551
Deposits		267,525,970		268,178,880
Debts		17,411,985		17,436,422
Debentures		21,799,085		22,080,803
Other financial liabilities		12,887,455		12,887,445
		321,350,458		322,309,513

The fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The Bank discloses the fair value of each class of assets and liabilities in a way that permits it to be compared with its carrying amount at the end of each reporting period. The best evidence of fair value of financial instruments is a quoted price in an active market.

Methods of determining fair value for financial instruments are as follows:

Cash and due from financial institutions

The carrying amounts of cash and demand due from financial institutions and payment due from financial institutions are reasonable approximation of fair values. These financial instruments do not have a fixed maturity and are receivable on demand. Fair value of ordinary due from financial institutions is measured using DCF model (Discounted Cash Flow Model).

Investment securities/ Gold deposits and deposits due to customers

The fair value of financial instruments, gold deposits and deposits due to customers that are quoted in active markets is determined using the quoted prices. Fair value is determined through the use of independent third-party pricing services where quoted prices are not available. Pricing services use one or more of the following valuation techniques including DCF Model, Monte Carlo Simulation, FCFE (Free Cash Flow to Equity Model), Comparable Company Analysis, Dividend Discount Model, and Net Asset Value Method.

64

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Loans	The fair value of loans is determined through DCF Model and the use of independent third-party pricing services. Fair value measured by DCF Model is determined by discounting the expected cash flows, which are contractual cash flows adjusted by the expected prepayment rate, at appropriate discount rate. Fair value of the other loans that is not determined through DCF model is determined by independent third-party pricing services using Tree Model.
Derivatives	For exchange traded derivatives, quoted price in an active market is used to determine fair value and for OTC derivatives, fair value is determined using valuation techniques. The Bank uses internally developed valuation models that are widely used by market participants to determine fair values of plain OTC derivatives including options, interest rate swaps, and currency swaps, based on observable market parameters. However, some complex financial instruments are valued using appropriate models developed from generally accepted market valuation models including the Finite Difference Method, the Monte Carlo Simulation and the Tree model or independent third-party valuation service. For OTC derivatives, the credit risk of counterparty and the Bank’s own credit risk are applied through CVA(Credit Valuation Adjustment).
Deposits	The carrying amount of demand deposits is regarded as representative of fair value because they do not have a fixed maturity and are payable on demand. Fair value of time deposits is determined using a DCF model. Fair value is determined by discounting the expected cash flows, which are contractual cash flows adjusted by the expected prepayment rate, at an appropriate discount rate.
Debts	The carrying amount of overdraft in foreign currency is regarded as representative of fair value because they do not have a fixed maturity and are payable on demand. Fair value of other debts is determined using a DCF model discounting contractual future cash flows at an appropriate discount rate.
Debentures	Fair value is determined by using the valuations of external professional valuation institution, which are calculated using market inputs and use of DCF Model to calculate fair value.
Other financial assets and other financial liabilities	The carrying amounts are reasonable approximation of fair values. These financial instruments are temporary accounts used for other various transactions, and their maturities are relatively short or not defined.

Fair value hierarchy

The Bank believes that valuation methods used for measuring the fair values of financial instruments are reasonable and that the fair values recognized in the statements of financial position are appropriate. However, the fair values of the financial instruments recognized in the statements of financial position may be different if other valuation methods or assumptions are used. Additionally, as there is a variety of valuation techniques and assumptions used in measuring fair value, it may be difficult to reasonably compare the fair value with that of other financial institutions.

65

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

The Bank classifies and discloses the fair value of the financial instruments into the following three-level hierarchy:

Level 1: The fair values are based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.

Level 2: The fair values except for quoted prices included within Level 1 are based on inputs that are observable for the asset or liability, either directly or indirectly.

Level 3: The fair values are based on unobservable inputs for the asset or liability.

The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety shall be determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement.

Fair value hierarchy of financial assets and liabilities at fair value in the statements of financial position

The fair value hierarchy of financial assets and liabilities at fair value in the statements of financial position as at December 31, 2019 and 2018, are as follows:

	2019
	Fair value hierarchy
((In millions of Korean won)	Level 1		Level 2		Level 3		Total
Financial assets
Financial assets at fair value through profit or loss
Debt securities		2,552,499		5,224,401		1,713,591		9,490,491
Equity securities		1,159		—		25,762		26,921
Loans		—		—		188,133		188,133
Others		79,805		—		—		79,805
		2,633,463		5,224,401		1,927,486		9,785,350
Derivatives held for trading		—		2,189,698		70		2,189,768
Derivatives held for hedging		—		129,919		—		129,919
Financial assets at fair value through other comprehensive income
Debt securities		12,842,006		22,992,592		—		35,834,598
Equity securities		952,427		—		1,041,217		1,993,644
Loans		—		344,292		—		344,292
		13,794,433		23,336,884		1,041,217		38,172,534
		16,427,896		30,880,902		2,968,773		50,277,571
Financial liabilities
Financial liabilities at fair value through profit or loss		80,235		—		—		80,235
Derivatives held for trading		—		2,120,551		—		2,120,551
Derivatives held for hedging		—		36,212		—		36,212
		80,235		2,156,763		—		2,236,998

66

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	2018
	Fair value hierarchy
(In millions of Korean won)	Level 1		Level 2		Level 3		Total
Financial assets
Financial assets at fair value through profit or loss
Debt securities		1,504,344		5,405,005		1,389,944		8,299,293
Equity securities		145		—		22,022		22,167
Loans		—		—		212,596		212,596
Others		78,808		—		—		78,808
		1,583,297		5,405,005		1,624,562		8,612,864
Derivatives held for trading		—		1,535,261		78		1,535,339
Derivatives held for hedging		—		75,956		—		75,956
Financial assets at fair value through other comprehensive income
Debt securities		8,998,246		18,558,647		—		27,556,893
Equity securities		971,367		—		927,548		1,898,915
Loans		—		349,547		—		349,547
		9,969,613		18,908,194		927,548		29,805,355
		11,552,910		25,924,416		2,552,188		40,029,514
Financial liabilities
Financial liabilities at fair value through profit or loss		87,168		—		—		87,168
Derivatives held for trading		—		1,550,178		66		1,550,244
Derivatives held for hedging		—		88,551		—		88,551
		87,168		1,638,729		66		1,725,963

67

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Valuation techniques and the inputs used in the fair value measurement of financial assets and liabilities classified as Level 2

Valuation techniques and inputs of financial assets and liabilities at fair value in the statements of financial position and classified as Level 2 as at December 31, 2019 and 2018, are as follows:

	Fair value		Valuation techniques	Inputs
(In millions of Korean won)	2019
Financial assets
Financial assets at fair value through profit or loss
Debt securities		5,224,401	DCF Model, Net Asset Value, Monte Carlo Simulation	Discount rate, Interest rate, prices of underlying assets(debt securities, stocks, etc.)
		5,224,401
Derivatives held for trading		2,189,698	DCF Model, Closed Form, FDM	Discount rate, volatility, foreign exchange rate and stock price and others
Derivatives held for hedging		129,919	DCF Model, Closed Form, FDM	Discount rate, volatility, foreign exchange rate and others
Financial assets at fair value through other comprehensive income
Debt securities		22,992,592	DCF Model	Discount rate
Loans		344,292	DCF Model	Discount rate
		23,336,884
		30,880,902
Financial liabilities
Derivatives held for trading		2,120,551	DCF Model, Closed Form, FDM	Discount rate, volatility, foreign exchange rate, stock price and others
Derivatives held for hedging		36,212	DCF Model, Closed Form, FDM	Discount rate, volatility, foreign exchange rate and others
		2,156,763

68

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	Fair value		Valuation techniques	Inputs
	2018
Financial assets
Financial assets at fair value through profit or loss
Debt securities		5,405,005	DCF Model, Net Asset Value	Discount rate, prices of underlying assets(debt securities, stocks, etc.)
		5,405,005
Derivatives held for trading		1,535,261	DCF Model, Closed Form, FDM	Discount rate, volatility, foreign exchange rate, stock price and others
Derivatives held for hedging		75,956	DCF Model, Closed Form, FDM	Discount rate, volatility, foreign exchange rate and others
Financial assets at fair value through other comprehensive income
Debt securities		18,558,647	DCF Model	Discount rate
Loans		349,547	DCF Model	Discount rate
		18,908,194
		25,924,416
Financial liabilities
Derivatives held for trading		1,550,178	DCF Model, Closed Form, FDM	Discount rate, volatility, foreign exchange rate, stock price and others
Derivatives held for hedging		88,551	DCF Model, Closed Form, FDM	Discount rate, volatility, foreign exchange rate and others
		1,638,729

Fair value hierarchy of financial assets and liabilities whose fair value is disclosed

The fair value hierarchy of financial assets and liabilities whose fair value is disclosed as at December 31, 2019 and 2018, are as follows:

	2019
	Fair value hierarchy
(In millions of Korean won)	Level 1		Level 2		Level 3		Total
Financial assets
Cash and due from financial institutions 1		2,689,721		10,150,932		252,269		13,092,922
Loans at amortized cost		—		—		291,686,008		291,686,008
Securities at amortized cost		4,372,712		9,585,729		—		13,958,441
Other financial assets 2		—		—		5,466,052		5,466,052
		7,062,433		19,736,661		297,404,329		324,203,423
Financial liabilities
Deposits 1		—		133,685,536		162,501,620		296,187,156
Debts 1		—		4,685		18,701,165		18,705,850
Debentures		—		17,361,816		—		17,361,816
Other financial liabilities 2		—		—		14,990,170		14,990,170
		—		151,052,037		196,192,955		347,244,992

¹ The amounts included in Level 2 are the carrying amounts which are reasonable approximation of the fair values.

69

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

² The carrying amounts of other financial assets and other financial liabilities that are classified as Level 3 are reasonable approximation of the fair values and presented in the financial statements as at December 31, 2019.

	2018
	Fair value hierarchy
(In millions of Korean won)	Level 1		Level 2		Level 3		Total
Financial assets
Cash and due from financial institutions 1		3,051,421		10,210,779		151,581		13,413,781
Loans at amortized cost		—		—		275,009,503		275,009,503
Securities at amortized cost		4,126,591		8,658,526		—		12,785,117
Other financial assets 2		—		—		4,197,709		4,197,709
		7,178,012		18,869,305		279,358,793		305,406,110
Financial liabilities
Deposits 1		—		119,650,955		148,527,925		268,178,880
Debts 1		—		38,403		17,398,019		17,436,422
Debentures		—		22,080,803		—		22,080,803
Other financial liabilities 3		—		—		12,887,445		12,887,445
		—		141,770,161		178,813,389		320,583,550

¹ The amounts included in Level 2 are the carrying amounts which are reasonable approximation of the fair values.

² The amounts of other financial assets included in Level 3 are the carrying amounts which are reasonable approximation of the fair values as at December 31, 2018.

³ W 12,879,390 million of other financial liabilities included in Level 3 are the carrying amounts which are reasonable approximation of fair values as at December 31, 2018.

70

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Valuation techniques and inputs used in the fair value measurement

Valuation techniques and inputs of financial assets and liabilities which are disclosed by the carrying amounts because it is a reasonable approximation of fair value are not subject to be disclosed.

Valuation techniques and inputs of financial assets and liabilities whose fair values are disclosed and classified as Level 2 as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Fair value		Valuation technique	Inputs
Financial assets
Securities at amortized cost		9,585,729	DCF Model, Monte Carlo Simulation	Discount rate, Interest rate
Financial liabilities
Debentures		17,361,816	DCF Model	Discount rate

	2018
(In millions of Korean won)	Fair value		Valuation technique	Inputs
Financial assets
Securities at amortized cost		8,658,526	DCF Model	Discount rate
Financial liabilities
Debentures		22,080,803	DCF Model	Discount rate

Valuation techniques and inputs of financial assets and liabilities whose fair values are disclosed and classified as Level 3 as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Fair value		Valuation techniques		Inputs	Unobservable inputs
Financial assets
Cash and due from financial institutions		252,269		DCF Model	Credit spread, other spread, interest rate	Credit spread, other spread
Loans at amortized cost		291,686,008		DCF Model	Credit spread, other spread, prepayment rate, interest rate	Credit spread, other spread, prepayment rate
		291,938,277
Financial liabilities
Deposits		162,501,620		DCF Model	Other spread, prepayment rate, Interest rate	Other spread, prepayment rate
Debts		18,701,165		DCF Model	Other spread, Interest rate	Other spread
		181,202,785

71

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Fair value		Valuation techniques	Inputs	Unobservable inputs
Financial assets
Cash and due from financial institutions		151,581	DCF Model	Credit spread, other spread, interest rate	Credit spread, other spread
Loans at amortized cost		275,009,503	DCF Model	Credit spread, other spread, prepayment rate, interest rate	Credit spread, other spread, prepayment rate
		275,161,084
Financial liabilities
Deposits		148,527,925	DCF Model	Other spread, prepayment rate, Interest rate	Other spread, prepayment rate
Debts		17,398,019	DCF Model	Other spread, interest rates	Other spread
Other financial liabilities		8,055	DCF Model	Other spread, interest rate	Other spread
		165,933,999

6.2 Level 3 of the Fair Value Hierarchy Disclosure

6.2.1 Valuation Policy and Process of Level 3 Fair Value

The Bank uses external, independent and qualified third-party valuation service in addition to internal valuation models to determine the fair value of the Bank’s assets at the end of every reporting period.

Where a reclassification between the levels of the fair value hierarchy occurs for a financial asset or liability, the Bank’s policy is to recognize such transfers as having occurred at the beginning of the reporting period.

6.2.2 Changes in Fair Value (Level 3) Measured using Valuation Technique based on Unobservable Inputs in Market

Changes in Level 3 of the fair value hierarchy for the years ended December 31, 2019 and 2018, are as follows:

	2019
	Financial assets at fair value through profit or loss						Financial investments			Net derivatives financial instruments
(In millions of Korean won)	Securities at fair value through profit or loss			Loans at fair value through profit or loss			Equity securities at fair value through other comprehensive income			Derivatives held for trading			Derivatives held for hedging
Beginning balance		1,411,966			212,596			927,549			12			—
Total gains or losses
- Profit or loss		30,687			10,412			—			2,998			—
- Other comprehensive income		—			—			36,713			—			—
Purchases		441,413			154,005			78,626			—			—
Sales		(144,713	)		(188,880	)		(1,671	)		—			—
Settlements		—			—			—			(2,940	)		—
Ending balance		1,739,353			188,133			1,041,217			70			—

72

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	2018
	Financial assets at fair value through profit or loss						Financial investments			Net derivatives financial instruments
(In millions of Korean won)	Securities at fair value through profit or loss			Loans at fair value through profit or loss			Equity securities at fair value through other comprehensive income			Derivatives held for trading			Derivatives held for hedging
Beginning balance1		1,170,782			132,722			750,009			121			704
Total gains or losses
- Profit or loss		37,092			4,347			—			4,124			(115	)
- Other comprehensive income		—			—			124,632			—			—
Purchases		376,276			184,656			53,388			—			—
Sales		(172,118	)		(109,129	)		(480	)		—			—
Settlements		—			—			—			(1,221	)		(589	)
Transfers into Level 32		—			—			—			(3,012	)		—
Transferred from Level 32		(66	)		—			—			—			—
Ending balance		1,411,966			212,596			927,549			12			—

¹ Restated based on Korean IFRS 1109.

²  Changes in levels for the financial instruments occurred due to the change in the availability of observable market data.

In relation to changes in Level 3 of the fair value hierarchy, total gains or losses recognized in profit or loss for the period, and total gains or losses for the period included in profit or loss for financial instruments held at the end of the reporting period in the statements of comprehensive income for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Net gains on financial instruments at fair value through profit or loss		Other operating income		Net interest income
Total gains or losses included in profit or loss for the period		40,840		3,235		22
Total gains or losses for the period included in profit or loss for financial instruments held at the end of the reporting period		32,511		3,178		—

	2018
(In millions of Korean won)	Net gains on financial instruments at fair value through profit or loss		Other operating income			Net interest income
Total gains or losses included in profit or loss for the period		45,016		(185	)		617
Total gains or losses for the period included in profit or loss for financial instruments held at the end of the reporting period		39,099		(70	)		43

73

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

6.2.3 Sensitivity Analysis of Changes in Unobservable Inputs

Information about fair value measurements using unobservable inputs as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Fair value		Valuation techniques	Inputs	Unobservable inputs	Range of unobservable inputs (%)		Relationship of unobservable inputs to fair value
Financial assets
Financial assets at fair value through profit or loss
Debt securities		1,713,591	Net Asset Value, DCF Model	Volatilities of real estate disposal price, discount rate, liquidation value	Volatilities of real estate, disposal price		0.00	Higher the sale price, higher the fair value
					Discount rate		7.47	Lower the discount rate, higher the fair value
					Liquidation value		0.00	Higher the liquidation value, higher the fair value
Equity securities		25,762	DCF Model, Comparable Company Analysis	Growth rate, discount rate	Growth rate		0.00	Higher the growth rate, higher the fair value
					Discount rate		5.89 ~ 16.15	Lower the discount rate, higher the fair value
Loans		188,133	Tree Model, DCF Model	Stock price, volatility of the stock price, discount rate	Volatility of the stock price		12.91 ~ 48.28	Higher the volatility, higher the fair value fluctuation
					Discount rate		10.81	Lower the discount rate, higher the fair value
Derivatives held for trading
Stock and index		70	Tree Model	Stock price, interest rate, volatility of the stock price, dividend rate	Volatility of the stock price		21.85	Higher the volatility, higher the fair value fluctuation
Financial assets at fair value through other comprehensive income
Equity securities		1,041,217	DCF Model, Comparable Company Analysis, Tree Model	Growth rate, discount rate, stock price, volatility of stock price	Growth rate		0.00	Higher the growth rate, higher the fair value
					Discount rate		3.04 ~ 16.37	Lower the discount rate, higher the fair value
					Volatility of the stock price		20.97 ~ 22.19	Higher the volatility, higher the fair value fluctuation
		2,968,773
Financial liabilities
Derivatives held for trading
Others		—	Monte Carlo Simulation	Stock price, interest rate, volatility of the stock price, volatility of the interest rate	Volatility of the stock price		16.28	Higher the volatility, higher the fair value fluctuation
					Volatility of the interest rate		0.52	Higher the volatility, higher the fair value fluctuation
		—

74

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Fair value		Valuation techniques	Inputs	Unobservable inputs	Range of unobservable inputs (%)	Relationship of unobservable inputs to fair value
Financial assets
Financial assets at fair value through profit or loss
					Volatilities of real estate disposal price	0.00	Higher the sale price, higher the fair value
					Discount rate	1.95 ~ 4.82	Lower the discount rate, higher the fair value
Debt securities		1,389,944	Net Asset Value, DCF Model	Volatilities of real estate disposal price, discount rate, liquidation value	Liquidation value	0.00	Higher the liquidation value, higher the fair value
			DCF Model, Comparable Company		Growth rate	0.00	Higher the growth rate, higher the fair value
Equity securities		22,022	Analysis	Growth rate, discount rate	Discount rate	7.58 ~ 14.14	Lower the discount rate, higher the fair value
Loans		212,596	Tree Model	Stock price, volatility of the stock price	Volatility of the stock price	17.66 ~ 49.28	Higher the volatility, higher the fair value fluctuation
Derivatives held for trading
Stock and index		78	Tree Model	Stock price and volatility of the stock price, dividend rate	Volatility of the stock price	25.29	Higher the volatility, higher the fair value fluctuation
Currency		—	DCF Model	Interest rate, foreign exchange rate, loss given default	Loss given default	100.00	Higher the loss given default, lower the fair value
Financial assets at fair value through other comprehensive income
Equity securities		927,549	DCF Model, Comparable Company Analysis	Growth rate, discount rate	Growth rate	0.00	Higher the growth rate, higher the fair value
					Discount rate	3.87 ~ 17.40	Lower the discount rate, higher the fair value
		2,552,188
Financial liabilities
Derivatives held for trading
Others		66	Monte Carlo Simulation	Stock price, interest rate, volatility of the stock price, volatility of the interest rate	Volatility of the stock price	20.85	Higher the volatility, higher the fair value fluctuation
					Volatility of the interest rate	0.69	Higher the volatility, higher the fair value fluctuation
		66

75

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Sensitivity analysis of changes in unobservable inputs

Sensitivity analysis of financial instruments is performed to measure favorable and unfavorable changes in the fair value of financial instruments which are affected by unobservable parameters, using a statistical technique. When the fair value is affected by more than two input parameters, the amounts represent the most favorable or unfavorable. Amongst Level 3 financial instruments subject to sensitivity analysis, the changes in fair values of debt securities, loans, equity-related derivatives, currency-related derivatives, interest rate-related derivatives and other derivatives are recognized in profit or loss and the changes in fair value of equity securities are recognized in profit or loss or other comprehensive income or loss.

Sensitivity analysis by type of instrument as a result of varying input parameters are as follows:

	2019
	Recognition in profit or loss					Other comprehensive income
(In millions of Korean won)	Favorable changes		Unfavorable changes			Favorable changes		Unfavorable changes
Financial assets
Financial assets at fair value through profit or loss
Debt securities3, 5		3,204		(3,192	)		—		—
Equity securities2, 5		6,353		(1,611	)		—		—
Loans4		6,362		(4,344	)		—		—
Derivatives held for trading1		1		(1	)		—		—
Financial assets at fair value through other comprehensive income
Equity securities2, 5, 6		—		—			188,090		(94,201	)
		15,920		(9,148	)		188,090		(94,201	)
Financial liabilities
Derivatives held for trading1		—		—			—		—
		—		—			—		—

76

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	2018
	Recognition in profit or loss					Other comprehensive income
(In millions of Korean won)	Favorable changes		Unfavorable changes			Favorable changes		Unfavorable changes
Financial assets
Financial assets at fair value through profit or loss
Debt securities3, 5		2,714		(2,688	)		—		—
Equity securities2, 5		1,225		(742	)		—		—
Loans4		129		(46	)		—		—
Derivatives held for trading1		20		(1	)		—		—
Financial assets at fair value through other comprehensive income
Equity securities2, 5, 6		—		—			140,516		(70,691	)
		4,088		(3,477	)		140,516		(70,691	)
Financial liabilities
Derivatives held for trading1		42		(77	)		—		—
		42		(77	)		—		—

¹ For Derivatives financial instruments, the changes in fair value are calculated by shifting principal unobservable input parameters; such as, price and volatility of underlying asset by ± 10%. For certain derivatives in previous year, the changes in fair value were calculated by shifting the loss given default ratio by ± 1%.

² For equity securities, the changes in fair value are calculated by shifting principal unobservable input parameters such as discount rate (-1~1%) and growth rate (0~0.5%).

³ For beneficiary certificates, it is difficult to measure the sensitivity amounts per changes in input factor for practical reasons; only for those consisted with real estate, the sensitivity amounts are calculated by increasing and decreasing volatilities of real estate disposal price (-1~1%).For equity investments, the sensitivity amounts are calculated by increasing and decreasing the correlations between the liquidation value (-1~1%) and the discount rates (-1~1%). There were no significant correlation among major unobservable inputs.

⁴  For loans, the changes in fair value are calculated by shifting principal unobservable input parameters such as stock prices, volatilities of stock prices (± 10%) and discount rate (± 1%).

⁵  The amounts of W1,563,538 million and W1,417,179 million of financial assets classified as level 3 as at December 31, 2019 and 2018, respectively, are excluded because it is impracticable to calculate the sensitivity amounts.

⁶  For some Equity securities, the changes in fair value are calculated by shifting principal unobservable input parameters such as stock prices and volatilities of stock prices by ± 10%.

6.2.4 Day One Gain or Loss

If the Bank uses a valuation technique that incorporates data not obtained from observable markets for the fair value at initial recognition of financial instruments, there could be a difference between the transaction price and the amount determined using that valuation technique. In these circumstances, the fair value of financial instruments is recognized as the transaction price and the difference is deferred and not recognized in profit or loss, and is amortized by using the straight-line method over the life of the financial instrument. If the fair value of the financial instruments is subsequently determined using observable market inputs, the remaining deferred amount is recognized in profit or loss.

77

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

6.3 Carrying Amounts of Financial Instruments by Category

Financial assets and liabilities are measured at fair value or amortized cost. The carrying amounts of financial assets and liabilities by category as at December 31, 2019, are as follows:

	2019
(In millions of Korean won)	Financial instruments at fair value through profit or loss		Financial instruments mandatorily measured at fair value through other comprehensive income		Financial instruments designated at fair value through other comprehensive income		Financial instruments at amortized cost		Derivatives held for hedging		Total
Financial assets
Cash and due from financial institutions		—		—		—		13,093,005		—		13,093,005
Financial assets at fair value through profit or loss		9,785,350		—		—		—		—		9,785,350
Derivatives		2,189,768		—		—		—		129,919		2,319,687
Loans at amortized cost		—		—		—		291,425,606		—		291,425,606
Financial investments		—		36,178,890		1,993,644		13,866,494		—		52,039,028
Other financial assets		—		—		—		5,466,052		—		5,466,052
		11,975,118		36,178,890		1,993,644		323,851,157		129,919		374,128,728

	2019
(In millions of Korean won)	Financial instruments at fair value through profit or loss		Financial instruments at amortized cost		Derivatives held for hedging		Total
Financial liabilities
Financial liabilities at fair value through profit or loss		80,235		—		—		80,235
Derivatives		2,120,551		—		36,212		2,156,763
Deposits		—		295,690,896		—		295,690,896
Debts		—		18,706,328		—		18,706,328
Debentures		—		17,142,392		—		17,142,392
Other financial liabilities		—		14,990,170		—		14,990,170
		2,200,786		346,529,786		36,212		348,766,784

The carrying amounts of financial assets and liabilities by category as at December 31, 2018, are as follows:

	2018
(In millions of Korean won)	Financial instruments at fair value through profit or loss		Financial instruments mandatorily measured at fair value through other comprehensive income		Financial instruments designated at fair value through other comprehensive income		Financial instruments at amortized cost		Derivatives held for hedging		Total
Financial assets
Cash and due from financial institutions		—		—		—		13,413,780		—		13,413,780
Financial assets at fair value through profit or loss		8,612,864		—		—		—		—		8,612,864
Derivatives		1,535,339		—		—		—		75,956		1,611,295
Loans at amortized cost		—		—		—		274,985,803		—		274,985,803
Financial investments		—		27,906,440		1,898,915		12,753,723		—		42,559,078
Other financial assets		—		—		—		4,197,709		—		4,197,709
		10,148,203		27,906,440		1,898,915		305,351,015		75,956		345,380,529

78

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Financial instruments at fair value through profit or loss		Financial instruments at amortized cost		Derivatives held for hedging		Total
Financial liabilities
Financial liabilities at fair value through profit or loss		87,168		—		—		87,168
Derivatives		1,550,244		—		88,551		1,638,795
Deposits		—		267,525,970		—		267,525,970
Debts		—		17,411,985		—		17,411,985
Debentures		—		21,799,085		—		21,799,085
Other financial liabilities		—		12,887,455		—		12,887,455
		1,637,412		319,624,495		88,551		321,350,458

6.4 Transfer of Financial Assets

6.4.1 Transferred Financial Assets that are derecognized in Their Entirety

The Bank transferred loans and other financial assets that are derecognized in their entirety to SPEs, while the maximum exposure to loss (carrying amount) from its continuing involvement in the derecognized financial assets as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Type of continuing involvement		Classification of financial instruments	Carrying amount of continuing involvement in statement of financial position		Fair value of continuing involvement in statement of financial position
Discovery 2nd Securitization Specialty Co., Ltd.		Subordinated debt	Financial assets at fair value through profit or loss		5,596		5,596
FK 1411 ABS Ltd.		Subordinated debt	Financial assets at fair value through profit or loss		5,428		5,428
AP 3B ABS Ltd.		Subordinated debt	Financial assets at fair value through profit or loss		3,205		3,205
AP 4D ABS Ltd.		Subordinated debt	Financial assets at fair value through profit or loss		6,175		6,175
					20,404		20,404

79

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Type of continuing involvement	Classification of financial instruments	Carrying amount of continuing involvement in statement of financial position	Fair value of continuing involvement in statement of financial position
Discovery 2nd Securitization Specialty Co., Ltd.	Subordinated debt	Financial assets at fair value through profit or loss	6,205		6,205
FK 1411 ABS Ltd.	Subordinated debt	Financial assets at fair value through profit or loss	8,883		8,883
AP 3B ABS Ltd.	Subordinated debt	Financial assets at fair value through profit or loss	5,512		5,512
AP 4D ABS Ltd.	Subordinated debt	Financial assets at fair value through profit or loss	13,494		13,494
			34,094		34,094

¹ The recovered portion in excess of the consideration paid attributable to adjustments based on the agreement with the National Happiness Fund for non-performing loans amounts to W 13,731 million as at December 31, 2018.

6.4.2 Securities under Repurchase Agreements and Loaned Securities

The Bank continues to recognize the financial assets related to repurchase agreements and securities lending transactions on the statements of financial position since those transactions are not qualified for derecognition even though the Bank transfers the financial assets. A financial asset is sold under a reverse repurchase agreement to repurchase the same asset at a fixed price, or loaned under a securities lending agreement to be returned as the same asset. Thus, the Bank substantially retains all the risks and rewards of ownership of the financial asset. The amounts of transferred assets and related liabilities as at December 31, 2019 and 2018, are as follows:

	2019				2018
(In millions of Korean won)	Carrying amount of transferred assets		Carrying amount of related liabilities		Carrying amount of transferred assets		Carrying amount of related liabilities
Securities under repurchase agreements		575,562		548,710		364,886		350,771
Loaned securities		788,790		—		674,431		—
Government and public bonds		788,790		—		674,431		—
		1,364,352		548,710		1,039,317		350,771

6.5 Offsetting Financial Assets and Financial Liabilities

The Bank enters into International Swaps and Derivatives Association (“ISDA”) master netting agreements and other similar netting arrangements with the Bank’s derivative and spot exchange counterparties. Similar netting agreements are also entered into with the Bank’s reverse repurchase, securities and others. Pursuant to these agreements, in the event of default by one party, contracts are to be terminated and receivables and payables are to be offset. Further, as the law allows for the right to offset, domestic uncollected receivables balances and domestic accrued liabilities balances are shown in its net settlement balance in the statement of financial position. Account receivables and account payables related to listed securities and derivatives or OTC derivatives settled by the central counterparty are included in the other financial instruments. As the Bank has a legally enforceable right to set off the recognized amounts and intends to settle on a net basis, the net amounts of the other financial instruments balances are presented in the statement of financial position.

80

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Details of financial assets subject to offsetting, enforceable master netting arrangements or similar agreements as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Gross amounts of recognized financial assets		Gross amounts of recognized financial liabilities offset in the statement of financial position			Net amounts of financial assets presented in the statement of financial position		Related amounts not offset in the statement of financial position
								Financial instruments			Cash collateral			Net amount
Derivatives held for trading		2,189,698		—			2,189,698		(1,731,521	)		(1,211	)		586,885
Derivatives held for hedging		129,919		—			129,919
Receivable spot exchange		3,003,910		—			3,003,910		(3,002,566	)		—			1,344
Reverse repurchase		6,133,038		—			6,133,038		(6,133,038	)		—			—
Domestic exchange settlement debits		31,256,658		(30,733,476	)		523,182		—			—			523,182
Other financial instruments		14,827		(6,347	)		8,480		—			—			8,480
		42,728,050		(30,739,823	)		11,988,227		(10,867,125	)		(1,211	)		1,119,891

	2018
(In millions of Korean won)	Gross amounts of recognized financial assets		Gross amounts of recognized Financial liabilities offset in the statement of financial position			Net amounts of financial assets presented in the statement of financial position		Related amounts not offset in the statement of financial position
								Financial instruments			Cash collateral			Net amount
Derivatives held for trading		1,535,262		—			1,535,262		(1,182,820	)		(5,102	)		423,296
Derivatives held for hedging		75,956		—			75,956
Receivable spot exchange		1,879,572		—			1,879,572		(1,876,844	)		—			2,728
Reverse repurchase		3,021,400		—			3,021,400		(3,021,400	)		—			—
Domestic exchange settlement debits		27,413,384		(26,937,034	)		476,350		—			—			476,350
Other financial instruments		3,261		(2,098	)		1,163		—			—			1,163
		33,928,835		(26,939,132	)		6,989,703		(6,081,064	)		(5,102	)		903,537

81

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Details of financial liabilities subject to offsetting, enforceable master netting arrangements or similar agreements as December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Gross amounts of recognized financial liabilities		Gross amounts of recognized financial assets offset in the statement of financial position			Net amounts of financial liabilities presented in the statement of financial position		Related amounts not offset in the statement of financial position					Net amount
								Financial instruments			Cash collateral
Derivatives held for trading		2,120,551		—			2,120,551		(1,563,503	)		—		593,260
Derivatives held for hedging		36,212		—			36,212
Payable spot exchange		3,003,464		—			3,003,464		(3,002,566	)		—		898
Repurchase1		548,710		—			548,710		(548,710	)		—		—
Domestic exchange settlement credits		32,806,739		(30,733,476	)		2,073,263		(2,073,263	)		—		—
Other financial instruments		6,535		(6,347	)		188		—			—		188
		38,522,211		(30,739,823	)		7,782,388		(7,188,042	)		—		594,346

	2018
	Gross amounts of recognized financial liabilities		Gross amounts of recognized financial assets offset in the statement of financial position			Net amounts of financial liabilities presented in the statement of financial position		Related amounts not offset in the statement of financial position						Net amount
								Financial instruments			Cash collateral
Derivatives held for trading		1,550,178		—			1,550,178		(1,139,240	)		(47,745	)		451,744
Derivatives held for hedging		88,551		—			88,551
Payable spot exchange		1,877,400		—			1,877,400		(1,876,844	)		—			556
Repurchase1		360,024		—			360,024		(360,024	)		—			—
Domestic exchange settlement credits		28,616,949		(26,937,034	)		1,679,915		(1,679,915	)		—			—
Other financial instruments		5,154		(2,098	)		3,056		—			—			3,056
		32,498,256		(26,939,132	)		5,559,124		(5,056,023	)		(47,745	)		455,356

¹  Includes repurchase agreements sold to customers.

82

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

7. Due from Financial Institutions

Details of due from financial institutions as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)		Financial Institution	Interest rate (%)		2019		2018
Due from financial institutions in Korean won	Due from Bank of Korea	Bank of Korea		—		8,117,840		8,723,761
	Due from banking institutions	KEB Hana Bank and others		—		1,092		461
						8,118,932		8,724,222
Due from financial institutions in foreign currencies	Due from banks in foreign currencies	Wells Fargo Bank N.A. and others		—		2,033,092		1,487,017
	Time deposits in foreign currencies	ICBC New York and others		2.20 ~ 7.80		79,836		22,362
	Due from others	Morganstanley Bank International and others		—		172,982		128,763
						2,285,910		1,638,142
						10,404,842		10,362,364

¹  Before netting of allowance

Restricted due from financial institutions as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)		Financial Institution	2019		2018		Reason for restriction
Due from financial institutions in Korean won	Due from Bank of Korea	Bank of Korea		8,117,840		8,723,761	Bank of Korea Act
				8,117,840		8,723,761
Due from financial institutions in foreign currencies	Due from banks in foreign currencies	Bank of Korea and others		243,304		192,503	Bank of Korea Act and others
	Time deposits in foreign currencies	ICBC NEW YORK		23,156		22,362	New York State Banking Law
	Due from others	Morganstanley Bank International and others		112,752		66,578	Derivative transaction margin
				379,212		281,443
				8,497,052		9,005,204

83

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Changes in the allowances for due from financial institutions losses

Changes in the allowances for due from financial institutions losses for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Financial instruments applying 12-month expected credit losses		Financial instruments applying lifetime expected credit losses
			Non-impaired			Impaired
Beginning		5		—			—
Transfer between stages		—		—			—
Provision (reversal) for credit losses		7		1,210			360
Others (change of currency ratio, etc.)		—		(24	)		—
Ending		12		1,186			360

	2018
	Financial instruments applying 12-month expected credit losses			Financial instruments applying lifetime expected credit losses
(In millions of Korean won)				Non-impaired		Impaired
Beginning1		38			—		—
Transfer between stages		—			—		—
Provision (reversal) for credit losses		(34	)		—		—
Others (change of currency ratio, etc.)		1			—		—
Ending		5			—		—

¹  Restated based on Korean IFRS 1109.

84

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

8. Assets Pledged as Collaterals

Details of assets pledged as collaterals as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)		2019
Assets pledged	Pledgee	Carrying amount		Reason for the pledge
Securities at fair value through profit or loss	Korea Exchange		28,831	Repurchase agreements
Securities at fair value through other comprehensive income	Bank of Korea		1,212,021	Borrowings from Bank of Korea
		653,825		Settlement risk of Bank of Korea
	Deutsche Bank AG and others		95,640	Derivatives transactions
			1,961,486
Securities at amortized cost	Meritz Securities and others		581,268	Repurchase agreements
	Bank of Korea		1,767,559	Borrowings from Bank of Korea
			3,077,151	Settlement risk of Bank of Korea
	KB Securities Co., Ltd. and others		267,793	Derivatives transactions
	Korea Exchange and others		155,595	Others
			5,849,366
Mortgage loans	Others		6,487,022	Covered Bond
		14,326,705

(In millions of Korean won)		2018
Assets pledged	Pledgee	Carrying amount		Reason for the pledge
Securities at fair value through profit or loss	Korea Exchange		122,744	Repurchase agreements
	Korea Securities Finance Corp		39,778	Securities lending transactions
			162,522
Securities at fair value through other comprehensive income	Bank of Korea		49,948	Borrowings from Bank of Korea
			479,784	Settlement risk of Bank of Korea
	Korea Development Bank and others		337,315	Derivatives transactions
			867,047
Securities at amortized cost	Meritz Securities and others		276,688	Repurchase agreements
	Bank of Korea		1,911,160	Borrowings from Bank of Korea
			1,474,529	Settlement risk of Bank of Korea
	Samsung Futures Inc. and others		194,258	Derivatives transactions
	Others		156,150	Others
		4,012,785
Mortgage loans	Others		4,060,863	Covered Bond
		9,103,217

85

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

The fair value of collateral available to sell or repledge regardless of debtor’s default as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Fair value of collateral		Fair value of collateral sold or repledged
Securities		6,463,650		—

	2018
(In millions of Korean won)	Fair value of collateral		Fair value of collateral sold or repledged
Securities		3,131,496		—

9. Derivative Financial Instruments and Hedge Accounting

The Bank engages in derivative trading activities to hedge the interest rate and foreign currency risk exposures arising from the Bank’s own assets and liabilities. In particular, the Bank applies fair value hedge accounting to interest rate swaps that hedge the risk of changes in fair values due to the changes in interest rates of structured debentures denominated in Korean won, issued financial debentures, structured deposits denominated in foreign currencies and debt securities at fair value through other comprehensive income. Also, the Bank applies cash flow hedge accounting to interest rate swaps that hedge cash flow risk of debentures denominated in foreign currencies and borrowings denominated in foreign currencies.

Details of derivative financial instruments held for trading as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Notional amount		Assets		Liabilities
Interest rate
Futures1		673,266		—		—
Swaps2		149,543,211		430,029		481,535
Options		15,502,000		266,863		363,369
		165,718,477		696,892		844,904
Currency
Forwards		78,094,165		877,930		662,260
Futures1		—		—		—
Swaps		46,175,092		609,438		598,670
Options		2,789,562		5,438		14,346
		127,058,819		1,492,806		1,275,276
Stock and index
Futures1		2,185		—		—
Options		22,014		70		371
		24,199		70		371
Others		694,680		—		—
		293,496,175		2,189,768		2,120,551

86

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Notional amount		Assets		Liabilities
Interest rate
Futures1		643,952		—		—
Swaps2		127,469,915		376,523		350,083
Options		13,259,000		158,295		252,243
		141,372,867		534,818		602,326
Currency
Forwards		65,084,258		528,606		479,816
Futures1		419,802		—		—
Swaps		35,977,216		465,774		454,217
Options		2,450,186		6,063		13,608
		103,931,462		1,000,443		947,641
Stock and index
Futures1		2,006		—		—
Options		51,282		78		211
		53,288		78		211
Others		670,860		—		66
		246,028,477		1,535,339		1,550,244

¹  Gains or losses arising from daily mark-to-market futures are reflected in the margin accounts.

² Notional amounts of W116,505,938 million and W93,837,816 million as at December 31, 2019 and 2018, respectively, were traded through the central counterparty clearing house.

The average price condition for future nominal cash flows of hedging instrument by type of hedge accounting as at December 31, 2019 and December 31, 2018, are as follows:

(In millions of Korean won)	2019
	1 year		2 years		3 years		4 years		5 years		Over 5 years		Total
Fair value hedge
The nominal amount of the hedging instrument		757,201		1,548,353		830,440		309,882		466,053		1,414,570		5,326,499
Average price condition(%), (CD and Libor)		2.29		2.70		2.29		3.16		2.50		3.92		2.91
Cash flow hedge
The nominal amount of the hedging instrument		1,539,874		289,450		521,010		—		—		—		2,350,334
Average price condition(%), (Libor)		2.68		2.65		2.83		—		—		—		2.71

87

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

(In millions of Korean won)	2018
	1 year		2 years		3 years		4 years		5 years		Over 5 years		Total
Fair value hedge
The nominal amount of the hedging instrument		69,134		686,513		1,347,597		567,030		195,392		979,889		3,845,555
Average price condition(%), (CD and Libor)		2.21		2.26		2.65		2.23		3.25		3.66		2.80
Cash flow hedge
The nominal amount of the hedging instrument		2,167,227		491,964		—		503,145		—		—		3,162,336
Average price condition(%), (Libor)		2.70		3.11		—		2.83		—		—		2.78

Fair value hedge

Details of fair value hedged items as at December 31, 2019 and 2018, are as follows:

	2019
	Carrying amount				Accumulated adjusted amount					Changes in the fair value
(In millions of Korean won)	Assets		Liabilities		Assets		Liabilities
Interest rate
Debt securities in Korean won		549,526		—		5,485		—			5,502
Debt securities in foreign currencies		1,670,838		—		19,243		—			25,540
Deposits in foreign currencies		—		780,491		—		(18,391	)		(62,439	)
Debentures in Korean won		—		351,070		—		21,070			(1,818	)
Debentures in foreign currencies		—		2,067,556		—		41,406			(65,480	)
		2,220,364		3,199,117		24,728		44,085			(98,695	)

	2018
	Carrying amount				Accumulated adjusted amount						Changes in the fair value
(In millions of Korean won)	Assets		Liabilities		Assets			Liabilities
Interest rate
Debt securities in Korean won		465,213		—		1,214			—			6,001
Debt securities in foreign currencies		702,727		—		(9,790	)		—			(1,233	)
Deposits in foreign currencies		—		805,215		—			(89,265	)		38,232
Debentures in Korean won		—		349,252		—			19,252			(2,308	)
Debentures in foreign currencies		—		1,429,457		—			(24,073	)		(1,868	)
		1,167,940		2,583,924		(8,576	)		(94,086	)		38,824

88

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Details of derivative financial instruments designated as fair value hedging instruments as at December 31, 2019 and 2018, are as follows:

	2019
	Notional amount		Carrying amount				Changes in the fair value
(In millions of Korean won)			Assets		Liabilities
Interest rate
Swaps		5,326,500		129,084		29,675		101,448

	2018
	Notional amount		Carrying amount				Changes in the fair value
(In millions of Korean won)			Assets		Liabilities
Interest rate
Swaps		3,845,555		58,934		88,017		(37,637	)

Details of the ineffective portion of changes in fair value of derivatives recognized in profit or loss for the years ended December 31, 2019 and 2018, are as follows:

	2019		2018
(In millions of Korean won)	Hedge ineffectiveness recognized in profit or loss		Hedge ineffectiveness recognized in profit or loss
Interest rate		2,754		1,186

Gains and losses from fair value hedging instruments and hedged items attributable to the hedged risk for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Gains(losses) on hedging instruments		108,442			(41,472	)
Gains(losses) on the hedged item attributable to the hedged risk		(105,788	)		37,305
		2,654			(4,167	)

Cash flow hedge

Details of cash flow hedged items subject to cash flow hedges as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Changes in fair value		Other comprehensive income for cash flow hedge
Interest rate risk		18,365		(3,691	)

	2018
(In millions of Korean won)	Changes in fair value			Other comprehensive income for cash flow hedge
Interest rate risk		(7,031	)		11,539

89

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Details of derivative financial instruments designated as cash flow hedging instruments as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Notional amount		Assets		Liabilities		Changes in fair value
Interest rate
Swaps		2,350,334		835		6,537		(18,276	)

	2018
(In millions of Korean won)	Notional amount		Assets		Liabilities		Changes in fair value
Interest rate
Swaps		3,162,336		17,022		534		6,961

Gains and losses from cash flow hedging instruments and hedged items attributable to the hedged risk for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Gains or losses on hedging instruments		(18,276	)		6,961
Effective gains or losses from cash flow hedging instruments (recognized in other comprehensive income or loss)		(18,108	)		6,980
Ineffective gains or losses from cash flow hedging instruments (recognized in profit or loss)		(168	)		(19	)

Amounts recognized in other comprehensive income and reclassified from equity to profit or loss for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Other comprehensive income or loss		(18,108	)		6,980
Reclassification to profit		(2,899	)		(1,755	)
Income tax effect		5,777			(1,437	)
		(15,230	)		3,788

As at December 31, 2019, the hedged items subject to cash flow hedge are exposed to the risk of changes in cash flows until June 9, 2022.

10. Loans at Amortized Cost

Loans as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Loans		292,176,219			275,936,633
Deferred loan origination fees and costs		563,941			581,997
Allowances		(1,314,554	)		(1,532,827	)
Carrying amount		291,425,606			274,985,803

Loans to banks as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Loans1		5,120,941			4,163,259
Allowances		(387	)		(197	)
Carrying amount		5,120,554			4,163,062

¹  Deferred loan origination fees and costs are included.

90

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Loans to customers other than banks as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Retail			Corporate			Total
Loans in Korean won		148,407,504			120,028,903			268,436,407
Loans in foreign currencies		151,665			5,812,391			5,964,056
Domestic import usance bills		—			2,617,862			2,617,862
Off-shore funding loans		—			1,452,288			1,452,288
Call loans		—			610,000			610,000
Bills bought in Korean won		—			2,843			2,843
Bills bought in foreign currencies		—			2,151,143			2,151,143
Guarantee payments under payment guarantee		—			3,312			3,312
Reverse repurchase agreements		—			5,897,258			5,897,258
Privately placed bonds		—			484,050			484,050
		148,559,169			139,060,050			287,619,219
Proportion (%)		51.65			48.35			100.00
Allowances		(473,907	)		(840,260	)		(1,314,167	)
		148,085,262			138,219,790			286,305,052

	2018
(In millions of Korean won)	Retail			Corporate			Total
Loans in Korean won		141,754,541			115,501,502			257,256,043
Loans in foreign currencies		139,759			3,145,891			3,285,650
Domestic import usance bills		—			2,817,174			2,817,174
Off-shore funding loans		—			899,741			899,741
Call loans		—			1,473,362			1,473,362
Bills bought in Korean won		—			3,057			3,057
Bills bought in foreign currencies		—			3,421,392			3,421,392
Guarantee payments under payment guarantee		—			4,104			4,104
Reverse repurchase agreements		—			2,951,400			2,951,400
Privately placed bonds		—			243,448			243,448
		141,894,300			130,461,071			272,355,371
Proportion (%)		52.10			47.90			100.00
Allowances		(444,964	)		(1,087,666	)		(1,532,630	)
		141,449,336			129,373,405			270,822,741

91

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Changes in deferred loan origination fees and costs for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Beginning		Increase		Decrease			Others			Ending
Deferred loan origination costs
Loans in Korean won		592,175		313,847		(332,725	)		—			573,297
Other origination costs		486		826		(398	)		—			914
		592,661		314,673		(333,123	)		—			574,211
Deferred loan origination fees
Loans in Korean won		6,322		2,316		(2,503	)		—			6,135
Other origination fees		4,342		2,499		(2,707	)		1			4,135
		10,664		4,815		(5,210	)		1			10,270
		581,997		309,858		(327,913	)		(1	)		563,941

	2018
(In millions of Korean won)	Beginning1		Increase		Decrease			Others		Ending
Deferred loan origination costs
Loans in Korean won		562,425		333,833		(304,083	)		—		592,175
Other origination costs		202		527		(244	)		1		486
		562,627		334,360		(304,327	)		1		592,661
Deferred loan origination fees
Loans in Korean won		6,793		2,271		(2,742	)		—		6,322
Other origination fees		4,750		831		(1,240	)		1		4,342
		11,543		3,102		(3,982	)		1		10,664
		551,084		331,258		(300,345	)		—		581,997

¹  Restated based on Korean IFRS 1109.

92

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

11. Allowances for Loan Losses

Changes in the allowances for loan losses for the years ended December 31, 2019 and 2018, are as follows:

	2019
	Retails											Corporates
(In millions of Korean won)	Financial instruments applying 12-month expected credit  losses			Financial instruments applying lifetime expected credit losses						Financial instruments applying credit impaired approach		Financial instruments applying 12-month expected credit losses			Financial instruments applying lifetime expected credit losses						Financial instruments applying credit impaired approach
				Non-impaired			Impaired								Non-impaired			Impaired
Beginning		170,290			157,202			117,472			—		192,451			295,441			599,971			—
Transfer between stages
Transfer to 12-month expected credit losses		157,689			(157,668	)		(21	)		—		59,994			(46,497	)		(13,497	)		—
Transfer to lifetime expected credit losses (Non-impaired)		(140,401	)		149,801			(9,400	)		—		(53,618	)		136,429			(82,811	)		—
Transfer to lifetime expected credit losses (Impaired)		(280	)		(45,396	)		45,676			—		(1,863	)		(36,696	)		38,559			—
Write-offs		(2	)		24			(322,075	)		—		—			2			(217,532	)		—
Disposal		(467	)		(4	)		(766	)		—		—			—			(8,909	)		—
Provision (reversal) for loan losses1, 2		(7,963	)		72,693			288,809			—		(9,440	)		(90,944	)		100,386			—
Others (change of currency ratio, etc.)		54			185			(1,545	)		—		376			2,800			(23,955	)		—
Ending		178,920			176,837			118,150			—		187,900			260,535			392,212			—

¹ Provision (reversal) for credit losses in statement of comprehensive income also includes provision (reversal) for unused commitments and guarantees (Note 22.(2)), provision (reversal) for financial guarantee contracts (Note 22.(4)), provision (reversal) of allowance for other financial assets (Note 17.(2)), provision (reversal) of allowance for due from financial institutions (Note 7.(3)) and provision (reversal) of allowance for debt securities (Note 12.(5)).

² Recovery of written-off loans amounting to W 241,181 million is included.

	2018
	Retails											Corporates
(In millions of Korean won)	Financial instruments applying 12-month expected credit losses			Financial instruments applying lifetime expected credit losses						Financial instruments applying credit impaired approach		Financial instruments applying 12-month expected credit losses			Financial instruments applying lifetime expected credit losses						Financial instruments applying credit impaired approach
				Non-impaired			Impaired								Non-impaired			Impaired
Beginning1		161,886			155,623			132,773			—		180,822			263,536			745,011			—
Transfer between stages
Transfer to 12-month expected credit losses		101,441			(101,375	)		(66	)		—		37,146			(36,248	)		(897	)		—
Transfer to lifetime expected credit losses (Non-impaired)		(90,044	)		102,158			(12,114	)		—		(34,407	)		44,698			(10,291	)		—
Transfer to lifetime expected credit losses (Impaired)		(753	)		(43,126	)		43,879			—		(2,289	)		(30,693	)		32,982			—
Write-offs		—			(2	)		(297,228	)		—		—			(5	)		(228,900	)		—
Disposal		(248	)		(5	)		(1,003	)		—		(73	)		—			(14,172	)		—
Provision (reversal) for loan losses2,3		(2,036	)		43,608			250,560			—		10,041			53,662			50,828			—
Others (change of currency ratio, etc.)		44			321			671			—		1,211			491			25,410			—
Ending		170,290			157,202			117,472			—		192,451			295,441			599,971			—

¹ Restated based on Korean IFRS 1109.

² Provision (reversal) for credit losses in statement of comprehensive income also includes provision (reversal) for unused commitments and guarantees (Note 22.(2)), provision (reversal) for financial guarantee contracts (Note 22.(4)), provision (reversal) of allowance for other financial assets (Note 17.(2)), provision (reversal) of allowance for due from financial institutions (Note 7.(3)) and provision (reversal) of allowance for debt securities (Note 12.(5)).

³ Recovery of written-off loans amounting to W 284,457 million is included

93

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

The loan which were written-off but the claims has not been forfeited (i.e. its extinctive prescription did not occur, and that are not collected) amounts to W 9,013,608 million and W 9,576,055 million as at December 31, 2019 and 2018.

Changes in the gross carrying amounts of loans

Changes in the gross carrying amounts of loans that significantly affect allowances for loan losses for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Financial instruments applying 12-month expected credit losses			Financial instruments applying lifetime expected credit losses						Financial instruments applying credit impaired approach
				Non-impaired			Impaired
Beginning		253,974,918			21,172,380			1,371,332			—
Transfer between stages											—
Transfer to 12-month expected credit losses		53,327,892			(53,213,792	)		(114,100	)		—
Transfer to lifetime expected credit losses (Non-impaired)		(56,075,512	)		56,600,257			(524,745	)		—
Transfer to lifetime expected credit losses (Impaired)		(371,783	)		(1,632,255	)		2,004,038			—
Write-offs		(2	)		26			(539,607	)		—
Disposal		(888,511	)		(12,223	)		(186,250	)		—
Net increase(decrease) (Execution, repayment and others)		22,527,925			(3,830,275	)		(849,553	)		—
Ending		272,494,927			19,084,118			1,161,115			—

	2018
(In millions of Korean won)	Financial instruments applying 12-month expected credit losses			Financial instruments applying lifetime expected credit losses						Financial instruments applying credit impaired approach
				Non-impaired			Impaired
Beginning1		227,614,957			22,207,255			1,517,232			—
Transfer between stages
Transfer to 12-month expected credit losses		7,505,230			(7,465,448	)		(39,782	)		—
Transfer to lifetime expected credit losses (Non-impaired)		(10,068,530	)		10,120,456			(51,926	)		—
Transfer to lifetime expected credit losses (Impaired)		(638,622	)		(761,883	)		1,400,505			—
Write-offs		—			(7	)		(526,127	)		—
Disposal		(484,646	)		(3,817	)		(190,401	)		—
Net increase(decrease) (Execution, repayment and others)		30,046,529			(2,924,176	)		(738,169	)		—
Ending		253,974,918			21,172,380			1,371,332			—

¹  Restated based on Korean IFRS 1109.

94

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

12. Financial Assets at Fair Value through Profit or Loss and Financial Investments

Details of financial assets at fair value through profit or loss and financial investments as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Financial assets at fair value through profit or loss
Debt securities
Government and public bonds		1,495,513			1,144,734
Financial bonds		3,736,943			2,888,573
Corporate bonds		382,243			336,790
Beneficiary certificates		3,543,286			3,696,533
Equity investments		209,260			164,777
Other debt securities		123,245			67,886
Equity securities
Stocks		26,922			22,167
Loans
Privately placed bonds		150,276			179,714
Other loans		37,857			32,882
Others
Financial instruments indexed to the price of gold		79,805			78,808
		9,785,350			8,612,864
Financial Investments
Financial assets at fair value through other comprehensive  income
Debt securities
Government and public bonds		8,117,221			2,941,069
Financial bonds		18,070,253			16,838,663
Corporate bonds		9,031,234			6,909,162
Asset-backed securities		615,890			867,997
Equity securities
Stocks		1,954,143			1,861,873
Equity instruments		39,501			37,043
Loans
Privately placed bonds		344,292			349,547
		38,172,534			29,805,354
Financial assets at amortized cost
Debt securities
Government and public bonds		538,968			544,926
Financial bonds		7,509,614			6,206,924
Corporate bonds		1,753,941			1,413,022
Asset-backed securities		4,065,105			4,590,107
Allowance		(1,134	)		(1,255	)
		13,866,494			12,753,724
		52,039,028			42,559,078

95

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Dividend incomes from the equity securities designated at fair value through other comprehensive income for the years ended December 31, 2019 and 2018, are as follows:

		2019
(In millions of Korean won)		From the financial asset derecognized		From the remaining financial asset
Stocks	Listed		—		26,121
	Unlisted		—		16,996
			—		—
Equity investments			—		43,117

		2018
(In millions of Korean won)		From the financial asset derecognized		From the remaining financial asset
Stocks	Listed		—		22,173
	Unlisted		—		14,504
Equity investments			—		2,256
			—		38,933

The derecognized equity securities at fair value through other comprehensive income for the years ended December 31, 2019 and 2018, are as follows:

		2019
(In millions of Korean won)		Disposal price1		Accumulated OCI as at disposal date
Stocks	Listed		18,342		(25,652	)
	Unlisted		1,671		169
			20,013		(25,483	)

		2018
(In millions of Korean won)		Disposal price1		Accumulated OCI as at disposal date
Stocks	Listed		26,877		18,330
	Unlisted		480		480
			27,357		18,810

¹ In accordance with the resolution of the creditor groups and the joint sales agreement, the Bank disposed of stocks acquired by a debt to equity swap.

Provision and reversal for the allowance of financial investments for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Impairment losses			Reversal of impairment		Total
Debt instruments at fair value through other comprehensive income		(1,279	)		347		(932	)
Loans at fair value through other comprehensive income		(170	)		947		777
Securities at amortized cost		(145	)		266		121
		(1,594	)		1,560		(34	)

96

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Impairment losses			Reversal of impairment		Total
Debt instruments at fair value through other comprehensive income		(835	)		328		(507	)
Loans at fair value through other comprehensive income		(905	)		825		(80	)
Securities at amortized cost		(159	)		280		121
		(1,899	)		1,433		(466	)

Changes in the allowances for financial investments for the years ended December 31, 2019 and 2018, are as follows:

	2019
	Financial instruments applying 12- month expected credit  losses			Financial instruments applying lifetime expected credit losses
(In millions of Korean won)				Non-impaired			Impaired
Beginning		3,668			193			—
Transfer between stages
Transfer to 12-month expected credit losses		189			(189	)		—
Transfer to lifetime expected credit losses		(669	)		669			—
Disposal		(329	)		—			—
Provision (reversal) for credit losses		735			(701	)		—
Others (change of currency ratio, etc.)		38			28			—
Ending		3,632			—			—

	2018
	Financial instruments applying 12- month expected credit  losses			Financial instruments applying lifetime expected credit losses
(In millions of Korean won)				Non-impaired			Impaired
Beginning1		2,505			435			—
Transfer between stages
Transfer to 12-month expected credit losses		125			(125	)		—
Transfer to lifetime expected credit losses		—			—			—
Disposal		(171	)		—			—
Provision (reversal) for credit losses		646			(180	)		—
Others (change of currency ratio, etc.)		563			63			—
Ending		3,668			193			—

¹  Restated based on Korean IFRS 1109.

97

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

13. Investments in Associates and Subsidiaries

Investments in associates and subsidiaries as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of  Korean won, In thousands of US  dollars)	Ownership (%)		Acquisition cost		Share of net asset amount			Carrying amount		Industry	Location
Associates
Korea Credit Bureau Co., Ltd.1		9.00		4,500		5,991			2,769	Credit information	Korea
Balhae Infrastructure Fund1		12.61		105,213		101,390			108,875	Investment finance	Korea
KB GwS Private Securities Investment Trust		20.93		89,124		108,026			89,124	Investment finance	Korea
Incheon Bridge Co., Ltd.1		14.99		9,159		(14,746	)		9,159	Operation of highways and related facilities	Korea
KB Sprott Renewables No.1. Private Equity Fund1		30.00		1,327		1,031			1,327	Investment finance	Korea
KB digital innovation & growth New Technology Business Investment Fund1		45.00		2,250		2,030			2,250	Discovery of and investment in promising FinTech-business venture	Korea
KB12-1 Venture Investment Partnership2		80.00		14,000		53,535			14,000	Investment finance	Korea
Future Planning KB Start-up Creation Fund2		50.00		9,900		15,021			9,900	Investment finance	Korea
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund		20.00		10,376		10,892			10,376	Investment finance	Korea
KB High-tech Company Investment Fund2		50.00		13,350		31,904			13,350	Investment finance	Korea
Aju Good Technology Venture Fund		38.46		19,998		23,016			19,998	Investment finance	Korea
KB-KDBC Pre-IPO New Technology Business Investment Fund2		33.33		10,000		9,494			10,000	Investment finance	Korea
KB-TS Technology Venture Private Equity Fund2		30.00		10,620		10,570			10,620	Investment finance	Korea
KB Intellectual Property Fund 22		37.50		9,000		8,514			9,000	Investment finance	Korea
KB Digital Innovation Investment Fund Limited partnership 2		25.74		32,200		31,371			32,200	Investment finance	Korea
KB-Brain KOSDAQ Scale-up Fund2		21.28		11,000		10,252			11,000	Investment finance	Korea
KB Global Platform Fund2		22.73		19,500		18,779			19,500	Investment finance	Korea
KB-UTC Inno-Tech Venture Fund2		29.53		300		278			300	Investment finance	Korea
Shinla Construction Co., Ltd.4		20.17		—		(551	)		—	Specialty construction	Korea
Terra Corporation4		24.06		—		2			—	Manufacture of fabricated and processed metal products	Korea
MJT&I Corp.4		22.89		—		(613	)		—	Wholesale of other merchandise	Korea
Jungdong Steel Co., Ltd.4		42.65		—		(433	)		—	Wholesale of primary metal	Korea
Doosung Metal Co., Ltd.4		26.49		—		(62	)		—	Manufacture of metal door, windows, shutter and relevant products	Korea

98

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Shinhwa Underwear Co., Ltd.4	26.05	—	16		—	Manufacture of underwear and sleepwear	Korea
DPAPS Co., Ltd.4	38.62	—	—		—	Wholesale of paper	Korea
Jaeyang Industry Co., Ltd.4	20.86	—	(552	)	—	Manufacture of luggage and other protective cases	Korea
Kendae Co., Ltd.4	41.01	—	(252	)	—	Screen printing	Korea
Jinseung Tech Co., Ltd.4	30.04	—	(194	)	—	Manufacture of other general-purpose machinery n.e.c.	Korea
Dongjo Co., Ltd.4	29.29	—	806		—	Wholesale of agricultural and forestry machinery and equipment	Korea
Korea NM Tech Co., Ltd.4	22.41	—	552		—	Manufacture of motor vehicles, trailers and semitrailers	Korea
Jungdo Co., Ltd.4	25.34	—	1,492		—	Office, commercial and institutional building construction	Korea
Dae-A Leisure Co., Ltd.4	49.36	—	1,613		—	Earth works	Korea
Chong Il Machine & Tools Co., Ltd.4	20.40	—	(126	)	—	Wholesale machinery and equipment	Korea
Imt Technology Co., Ltd.4	25.29	—	22		—	Computer peripherals distribution	Korea
Iwon Alloy Co., Ltd.4	23.20	—	394		—	Manufacture of smelting, refining and alloys	Korea
Carlife Co., Ltd.4	24.39	—	(75	)	—	Publishing of magazines and periodicals (publishing industry)	Korea
Computerlife Co., Ltd.4	45.71	—	(260	)	—	Publishing of magazines and periodicals (publishing industry)	Korea
SKYDIGITAL INC.4	20.40	—	(248	)	—	Manufacture of multimedia and video devices	Korea
Jo Yang Industrial Co., Ltd.4	22.77	—	75		—	Manufacture of special glass	Korea
IL-KWANG ELECTRONIC MATERIALS CO.,LTD.4	29.06	—	(398	)		Manufacture of electronic parts	Korea
SO-MYUNG RECYCLING CO.,LTD. 4	20.23	—	184		—	Manufacture of nonferrous metal	Korea
IDTECK CO., LTD4	32.80	—	(103	)	—	Other manufacturing of wireless telecommunications equipment	Korea
Seyoon Development Company4	26.95	—	2		—	Civil engineering facility construction industry	Korea
PIP System CO., LTD4	20.72	—	27		—	Print equipment	Korea

99

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

PT Bank Bukopin TBK5,6	22.00		116,422	115,321	116,422	Banking	Indonesia
			488,239	543,987	490,170
Subsidiaries
Kookmin Bank Int’l Ltd.(London) 3	100.00	USD	30,392	36,517	32,916	Banking	United Kingdom
Kookmin Bank Cambodia PLC. 3	100.00	USD	76,259	98,934	86,761	Banking	Cambodia
Kookmin Bank(China) Ltd. 3	100.00	USD	383,875	433,126	418,155	Banking	China
KB Microfinance Myanmar Co., Ltd. 3	100.00	USD	20,000	21,629	22,405	Micro finance services	Myanmar
		USD	510,526	590,206	560,237
				1,134,193	1,050,407

	2018
(In millions of  Korean won, In thousands of US  dollars)	Ownership (%)		Acquisition cost		Share of net asset amount			Carrying amount		Industry	Location
Associates
Korea Credit Bureau Co., Ltd.1		9.00		4,500		5,941			2,769	Credit information	Korea
Balhae Infrastructure Fund1		12.61		104,621		108,050			108,282	Investment finance	Korea
KB GwS Private Securities Investment Trust		20.93		89,124		106,613			89,124	Investment finance	Korea
Incheon Bridge Co., Ltd.1		14.99		9,158		(16,689	)		9,158	Operation of highways and related facilities	Korea
KB Digital innovation & growth New Technology Business Investment Fund1		45.00		1,125		1,079			1,125	Discovery of and investment in promising FinTech-business venture	Korea
KB12-1 Venture Investment Partnership2		80.00		17,400		49,912			17,400	Investment finance	Korea
Future Planning KB Start-up Creation Fund2		50.00		14,300		18,069			14,300	Investment finance	Korea
KoFC KBIC Frontier Champ 2010-5(PEF)		30.00		90		140			37	Investment finance	Korea
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund		20.00		10,376		11,681			10,376	Investment finance	Korea
KB High-tech Company Investment Fund 2		50.00		20,300		22,563			20,300	Investment finance	Korea
Aju Good Technology Venture Fund		38.46		18,038		18,134			18,038	Investment finance	Korea
KB-KDBC Pre-IPO New Technology Business Investment Fund2		33.33		7,500		7,297			7,500	Investment finance	Korea
KB-TS Technology Venture Private Equity Fund2		30.00		7,620		7,381			7,620	Investment finance	Korea
KB Intellectual Property Fund 22		37.50		3,000		2,942			3,000	Investment finance	Korea
KB Digital Innovation Investment Fund Limited partnership2		25.74		7,700		7,617			7,700	Investment finance	Korea
KB-Brain KOSDAQ Scale-up Fund2		21.28		4,000		3,966			4,000	Investment finance	Korea
Shinla Construction Co., Ltd.4		20.17		—		(551	)		—	Specialty construction	Korea
Terra Corporation4		24.06		—		2			—	Manufacture of fabricated and processed metal products	Korea
MJT&I Corp.4		22.89		—		(606	)		—	Wholesale of other merchandise	Korea
Jungdong Steel Co., Ltd.4		42.65		—		(433	)		—	Wholesale of primary metal	Korea

100

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Doosung Metal Co., Ltd.4	26.49	—	(16	)	—	Manufacture of metal door, windows, shutter and relevant products	Korea
Shinhwa Underwear Co., Ltd.4	26.05	—	(57	)	—	Manufacture of underwear and sleepwear	Korea
DPAPS Co., Ltd.4	38.62	—	14		—	Wholesale of paper	Korea
Jaeyang Industry Co., Ltd.4	20.86	—	(552	)	—	Manufacture of luggage and other protective cases	Korea
Kendae Co., Ltd.4	41.01	—	(252	)	—	Screen printing	Korea
Jinseung Tech Co., Ltd.4	30.04	—	(176	)	—	Manufacture of other general-purpose machinery n.e.c.	Korea
Dongjo Co., Ltd.4	29.29	—	806		—	Wholesale of agricultural and forestry machinery and equipment	Korea
Korea NM Tech Co., Ltd.4	22.41	—	552		—	Manufacture of motor vehicles, trailers and semitrailers	Korea
Jungdo Co., Ltd.4	25.34	—	1,492		—	Office, commercial and institutional building construction	Korea
Dae-A Leisure Co., Ltd.4	49.36	—	1,613		—	Earth works	Korea
Chong Il Machine & Tools Co., Ltd.4	20.40	—	(107	)	—	Wholesale machinery and equipment	Korea
Imt Technology Co., Ltd.4	25.29	—	18		—	Computer Peripherals Distribution	Korea
Iwon Alloy Co., Ltd.4	23.20	—	394		—	Manufacture of smelting, refining and alloys	Korea
Carlife Co., Ltd.4	24.39	—	(75	)	—	Publishing of magazines and periodicals (publishing industry)	Korea
Computerlife Co., Ltd.4	45.71	—	(329	)	—	Publishing of magazines and periodicals (publishing industry)	Korea
SKYDIGITAL INC.4	20.40	—	(142	)	—	Manufacture of multimedia and video devices	Korea
Jo Yang Industrial Co., Ltd.4	22.77	—	75		—	Manufacture of special glass	Korea
PT Bank Bukopin TBK5,6	22.00	116,422	106,484		116,422	Banking	Indonesia
		435,274	462,850		437,151

101

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Subsidiaries
Kookmin Bank Int’l Ltd.(London) 3	100.00	USD	30,392	34,983	32,917	Banking	United Kingdom
Kookmin Bank Cambodia PLC. 3	100.00	USD	76,259	92,807	86,761	Banking	Cambodia
Kookmin Bank(China) Ltd. 3	100.00	USD	383,875	412,564	418,155	Banking	China
KB Microfinance Myanmar Co., Ltd. 3	100.00	USD	20,000	20,062	22,405	Micro finance services	Myanmar
		USD	510,526	560,416	560,238
				1,023,266	997,389

¹ As at December 31, 2019 and 2018, the Bank is represented in the governing bodies of its associates. Therefore, the Bank has significant influence over the decision-making process relating to their financial and business policies.

² As at December 31, 2019 and 2018, the Bank is a partner in a limited partnership and does not have the right to control over these entities.

³ Acquisition costs of investments in subsidiaries are presented in US dollars.

⁴ The investment in associates was reclassified from financial instruments at fair value through other comprehensive income due to termination of rehabilitation procedures.

⁵ The Bank has entered into an agreement with PT Bosowa Corporindo, the major shareholder of PT Bank Bukopin TBK. Under this agreement, both parties have a right of first refusal, a tag-along right and a drag-along right. The Bank additionally has the drag-along right that can be exercised for the duration of two years after three-years from acquisition date(July 27, 2018), subject to the occurrence of certain situations as defined in the agreement.

⁶ The fair value of PT Bank Bukopin TBK’s common stock based on its quoted market price is W 47,709 million and W 53,540 million as at December 31, 2019 and 2018.

Although the Bank holds more than 20% of ownership in many investment trusts including Hanbando BTL Private Special Asset Fund, those investment trusts are not recognized as associates of the Bank because the Bank’s influence to those trust is limited according to the trust agreement. In addition, the Bank holds more than 20% of its ownership in nine companies including Orient shipyard Co., Ltd., but those companies are not recogniazed as associates of the Bank bacause the Bank’s influence to those companies is limited due to the status of those companies such as bankruptcy and rehabilitation.

Changes in investments in associates and subsidiaries for the years ended December 31, 2019 and 2018, are as follows

	2019
(In millions of Korean won)	Beginning		Acquisition and others		Disposal and others			Impairment		Ending
Associates
Korea Credit Bureau Co., Ltd.		2,769		—		—			—		2,769
Balhae Infrastructure Fund		108,282		593		—			—		108,875
KB GwS Private Securities Investment Trust		89,124		—		—			—		89,124
Incheon Bridge Co., Ltd.		9,159		—		—			—		9,159
KB Sprott Renewables No.1. Private Equity Fund		—		1,327		—			—		1,327
KB Digital Innovation & Growth New Technology Business Investment Fund		1,125		1,125		—			—		2,250
KB12-1 Venture Investment Partnership		17,400		—		(3,400	)		—		14,000
Future Planning KB Start-up Creation Fund		14,300		—		(4,400	)		—		9,900
KoFC KBIC Frontier Champ 2010-5 (PEF)		36		—		(36	)		—		—
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund		10,376		—		—			—		10,376
KB High-tech Company Investment Fund		20,300		—		(6,950	)		—		13,350
Aju Good Technology Venture Fund		18,038		1,960		—			—		19,998
KB-KDBC Pre-IPO New Technology Business Investment Fund		7,500		2,500		—			—		10,000
KBTS Technology Venture Private Equity Fund		7,620		4,200		(1,200	)		—		10,620
KB Intellectual Property Fund 2		3,000		6,000		—			—		9,000
KB Digital Innovation Investment Fund Limited partnership		7,700		24,500		—			—		32,200
KB-Brain KOSDAQ Scale-up Fund		4,000		7,000		—			—		11,000
KB Global Platform Fund		—		19,500		—			—		19,500
KB-UTC Inno-Tech Venture Fund		—		300		—			—		300
PT Bank Bukopin TBK 1		116,422		—		—			—		116,422
Subsidiaries
Kookmin Bank Int’l Ltd.(London)		32,916		—		—			—		32,916
Kookmin Bank Cambodia PLC.		86,761		—		—			—		86,761
Kookmin Bank(China) Ltd.		418,155		—		—			—		418,155
KB Microfinance Myanmar Co., Ltd.		22,405		—		—			—		22,405
		997,388		69,005		(15,986	)		—		1,050,407

102

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Beginning		Acquisition and others		Disposal and others			Impairment			Ending
Associates
Korea Credit Bureau Co., Ltd.		2,769		—		—			—			2,769
Balhae Infrastructure Fund		105,455		4,646		(1,819	)		—			108,282
KB GwS Private Securities Investment Trust		89,124		—		—			—			89,124
Incheon Bridge Co., Ltd.		8,393		—		—			765			9,158
KB Digital Innovation & Growth New Technology Business Investment Fund		—		1,125		—			—			1,125
KB12-1 Venture Investment Partnership		22,800		—		(5,400	)		—			17,400
Future Planning KB Start-up Creation Fund		14,700		—		(400	)		—			14,300
KoFC KBIC Frontier Champ 2010-5 (PEF)		1,585		—		(1,548	)		—			37
KoFC POSCO HANWHA KB Shared Growth No.2. Private Equity Fund		10,376		—		—			—			10,376
KB High-tech Company Investment Fund		25,000		—		(4,700	)		—			20,300
Aju Good Technology Venture Fund		8,230		9,808		—			—			18,038
KB-KDBC New Technology Business Investment Fund		2,500		5,000		—			—			7,500
KBTS Technology Venture Private Equity Fund		—		7,620		—			—			7,620
KB Intellectual Property Fund 2		—		3,000		—			—			3,000
KB Digital Innovation Investment Fund Limited partnership		—		7,700		—			—			7,700
KB-Brain KOSDAQ Scale-up Fund		—		4,000		—			—			4,000
PT Bank Bukopin TBK1		—		116,422		—			—			116,422
Subsidiaries
Kookmin Bank Int’l Ltd.(London)2		67,396		—		—			(34,479	)		32,917
Kookmin Bank Hongkong Ltd.		23,451		—		(23,451	)		—			—
Kookmin Bank Cambodia PLC.		55,711		31,050		—			—			86,761
Kookmin Bank(China) Ltd.		418,155		—		—			—			418,155
KB Microfinance Myanmar Co., Ltd.		11,428		10,977		—			—			22,405
		867,073		201,348		(37,318	)		(33,714	)		997,389

¹  The goodwill of PT Bank Bukopin TBK as at December 31, 2019 and 2018, are W 4,437 million and W 4,101 million, respectively.

²  Impairment losses were recognized during the current and prior periods due to a decrease in net asset value according to dividends from local subsidiaries.

103

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

14. Property and Equipment, and Investment Properties

Details of property and equipment as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Acquisition cost		Accumulated depreciation			Accumulated impairment losses			Carrying amount
Land		1,985,369		—			(1,018	)		1,984,351
Buildings		1,478,343		(476,154	)		(5,859	)		996,330
Leasehold improvements		782,903		(692,545	)		—			90,358
Equipment and vehicles		1,250,978		(992,067	)		—			258,911
Construction in-progress		85,803		—			—			85,803
Right-of-use assets		582,365		(228,091	)		—			354,274
		6,165,761		(2,388,857	)		(6,877	)		3,770,027

	2018
(In millions of Korean won)	Acquisition cost		Accumulated depreciation			Accumulated impairment losses			Carrying amount
Land		1,979,811		—			(1,018	)		1,978,793
Buildings		1,256,234		(442,317	)		(5,859	)		808,058
Leasehold improvements		788,444		(694,884	)		—			93,560
Equipment and vehicles		1,136,854		(985,842	)		—			151,012
Construction in-progress		81,268		—			—			81,268
Finance lease assets		32,709		(21,788	)		—			10,921
		5,275,320		(2,144,831	)		(6,877	)		3,123,612

Changes in property and equipment for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Beginning1		Acquisition		Transfers2			Disposal			Depreciation			Others			Ending
Land		1,978,793		184		5,483			(124	)		—			15			1,984,351
Buildings		808,058		67		224,747			(3,095	)		(33,481	)		34			996,330
Leasehold improvements		88,501		2,343		62,263			—			(62,792	)		43			90,358
Equipment and vehicles		151,012		228,207		—			(216	)		(120,104	)		12			258,911
Construction-in-progress		81,268		292,702		(288,119	)		—			—			(48	)		85,803
Right-of-use assets		363,098		327,228		—			(138,642	)		(213,191	)		15,781			354,274
		3,470,730		850,731		4,374			(142,077	)		(429,568	)		15,837			3,770,027

104

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Beginning		Acquisition		Transfers2			Disposal			Depreciation			Others		Ending
Land		1,948,314		124		31,027			(691	)		—			19		1,978,793
Buildings		786,960		—		54,904			(4,079	)		(29,771	)		44		808,058
Leasehold improvements		75,257		15		69,646			(242	)		(61,345	)		10,229		93,560
Equipment and vehicles		146,921		100,958		247			(795	)		(96,378	)		59		151,012
Construction-in-progress		11,975		229,521		(160,684	)		—			—			456		81,268
Finance lease assets		5,229		9,640		—			—			(3,948	)		—		10,921
		2,974,656		340,258		(4,860	)		(5,807	)		(191,442	)		10,807		3,123,612

¹  Restated based on Korean IFRS 1116.

²  Including transfers from investment properties and assets held for sale.

Changes in accumulated impairment losses of property and equipment for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)			2019
Beginning	Impairment		Reversal		Others		Ending
(6,877)		—		—		—		(6,877	)

(In millions of Korean won)

2018
Beginning	Impairment		Reversal		Others		Ending
(6,877)		—		—		—		(6,877	)

Details of investment properties as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Acquisition cost		Accumulated depreciation			Carrying amount
Land		28,309		—			28,309
Buildings		16,490		(6,399	)		10,091
		44,799		(6,399	)		38,400

	2018
(In millions of Korean won)	Acquisition cost		Accumulated depreciation			Carrying amount
Land		33,793		—			33,793
Buildings		22,521		(7,848	)		14,673
		56,314		(7,848	)		48,466

105

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

The valuation technique and input variables that are used to measure the fair value of investment property as at December 31, 2019, are as follows:

	2019
(In millions of Korean won)	Fair Value		Valuation technique		Inputs
Land and Buildings		47,623		Cost approach value	- Price per square meter - Replacement cost

As at December 31, 2019 and 2018, fair values of the investment properties amount to W 47,623 million and W 57,025 million, respectively. The investment properties were measured by qualified independent appraisers with experience in valuing similar properties in the same area. In addition, per the fair value hierarchy on Note 6.1, the fair value hierarchy of all investment properties has been categorized and classified as Level 3.

Rental income from the above investment properties for the years ended December 31, 2019 and 2018, amounts to W 580 million and W 667 million, respectively.

Changes in investment properties for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Beginning		Acquisitions		Transfers			Depreciation			Ending
Land		33,793		—		(5,484	)		—			28,309
Buildings		14,673		—		(4,195	)		(387	)		10,091
		48,466		—		(9,679	)		(387	)		38,400

	2018
(In millions of Korean won)	Beginning		Acquisitions		Transfers			Depreciation			Ending
Land		40,621		—		(6,828	)		—			33,793
Buildings		15,817		—		(599	)		(545	)		14,673
		56,438		—		(7,427	)		(545	)		48,466

106

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

15. Intangible Assets

Details of intangible assets as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Acquisition cost		Accumulated amortization			Accumulated impairment losses			Carrying amount
Goodwill		65,288		—			—			65,288
Other intangible assets		1,026,895		(824,021	)		(2,166	)		200,708
		1,092,183		(824,021	)		(2,166	)		265,996

	2018
(In millions of Korean won)	Acquisition cost		Accumulated amortization			Accumulated impairment losses			Carrying amount
Goodwill		65,288		—			—			65,288
Other intangible assets		922,023		(760,448	)		(5,107	)		156,468
		987,311		(760,448	)		(5,107	)		221,756

The goodwill arose from the merger of Housing & Commercial Bank (“H&CB”), and there is no change in goodwill for the years ended December 31, 2019 and 2018.

Details of allocation of goodwill to cash-generating units and related information for impairment testing as at December 31, 2019, are as follows:

(In millions of Korean won)	Housing & Commercial Bank
	Retail Banking		Corporate Banking		Total
Carrying amounts		49,315		15,973		65,288
Recoverable amount exceeded carrying amount		3,424,398		3,142,439		6,566,837
Discount rate (%)		13.02		13.09
Permanent growth rate (%)		1.00		1.00

Goodwill is allocated to cash-generating units that are expected to benefit from the synergies of the combination for impairment testing, and cash-generating units consist of an operating segment or units which are not larger than an operating segment. The Bank recognized the amount of W 65,288 million related to goodwill acquired in the merger of Housing & Commercial Bank. Of this amount, the amount of W 49,315 million and W 15,973 million were allocated to the Retail Banking and Corporate Banking, respectively. Cash-generating units, to which goodwill has been allocated, is tested for impairment annually and whenever there is an indication that the unit may be impaired by comparing the carrying amount of the unit, including the goodwill, with the recoverable amount of the unit.

107

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

The recoverable amount of a cash-generating unit is measured at the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell is the amount obtainable from the sale in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal. If it is difficult to measure the amount obtainable from the sale of the cash-generating unit, the Bank measures the fair value less costs to sell by reflecting the characteristics of the measured cash-generating unit. If it is not possible to obtain the reliable information to measure the fair value less costs to sell, the Bank uses the asset’s value in use as its recoverable amount. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit. The projections of the future cash flows are based on the most recent financial budget approved by management and generally cover a period of five years. The future cash flows after projection period are estimated on the assumption that the future cash flows will increase by 1.0% annually for Retail Banking and Corporate Banking. The key assumptions used for the estimation of the future cash flows are the market size and the Bank’s market share. The discount rate is a pre-tax rate that reflects assumptions regarding risk-free interest rate, market risk premium and the risks specific to the asset for which the future cash flow estimates have not been adjusted.

Details of intangible assets, excluding goodwill, as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Acquisition cost		Accumulated amortization			Accumulated impairment losses			Carrying Amount
Industrial property rights		1,643		(1,350	)		—			293
Software		850,384		(717,401	)		—			132,983
Other intangible assets		139,741		(79,782	)		(2,166	)		57,793
Right-of-use assets		35,127		(25,488	)		—			9,639
		1,026,895		(824,021	)		(2,166	)		200,708

	2018
(In millions of Korean won)	Acquisition cost		Accumulated amortization			Accumulated impairment losses			Carrying Amount
Industrial property rights		1,494		(1,243	)		—			251
Software		765,802		(671,084	)		—			94,718
Other intangible assets		120,596		(69,152	)		(5,107	)		46,337
Finance leases assets		34,131		(18,969	)		—			15,162
		922,023		(760,448	)		(5,107	)		156,468

108

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Changes in intangible assets, excluding goodwill, for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Beginning		Acquisition		Disposal			Amortization			Others		Ending
Industrial property rights		251		148		—			(106	)		—		293
Software		94,718		88,712		—			(50,452	)		5		132,983
Other intangible assets		46,337		29,945		(7,125	)		(11,448	)		84		57,793
Right-of-use assets		15,162		996		—			(6,519	)		—		9,639
		156,468		119,801		(7,125	)		(68,525	)		89		200,708

	2018
(In millions of Korean won)	Beginning		Acquisition		Disposal			Amortization			Others			Ending
Industrial property rights		281		59		—			(89	)		—			251
Software		87,398		45,500		—			(38,224	)		44			94,718
Other intangible assets		49,446		7,160		(2,825	)		(5,698	)		(1,746	)		46,337
Finance leases assets		12,539		8,025		—			(5,402	)		—			15,162
		149,664		60,744		(2,825	)		(49,413	)		(1,702	)		156,468

Changes in accumulated impairment losses on intangible assets for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Beginning			Impairment			Reversal		Others		Ending
Accumulated impairment losses on other intangible assets		(5,107	)		(50	)		112		2,879		(2,166	)

	2018
(In millions of Korean won)	Beginning			Impairment			Reversal		Others		Ending
Accumulated impairment losses on other intangible assets		(3,597	)		(1,806	)		31		265		(5,107	)

109

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

16. Deferred Income Tax Assets and Liabilities

Details of deferred income tax assets and liabilities as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Assets			Liabilities			Net amount
Other provisions		60,244			—			60,244
Impairment losses on property and equipment		2,656			—			2,656
Share-based payments		12,114			—			12,114
Provisions for guarantees		20,959			—			20,959
Gains on valuation of derivatives		—			(59,827	)		(59,827	)
Present value discount		—			(118	)		(118	)
Losses on fair value hedged item		12,123			—			12,123
Accrued interest		—			(48,979	)		(48,979	)
Deferred loan origination fees and costs		—			(136,178	)		(136,178	)
Gains on revaluation		—			(286,268	)		(286,268	)
Investments in subsidiaries and associates		14,983			—			14,983
Gains on valuation of security investment		—			(100,400	)		(100,400	)
Defined benefit liabilities		422,800			—			422,800
Accrued expenses		173,023			—			173,023
Retirement insurance expense		—			(375,300	)		(375,300	)
Adjustments to the prepaid contributions		—			(22,897	)		(22,897	)
Others		221,933			(111,280	)		110,653
		940,835			(1,141,247	)		(200,412	)
Offsetting of deferred income tax assets and liabilities		(940,835	)		940,835			—
		—			(200,412	)		(200,412	)

	2018
(In millions of Korean won)	Assets			Liabilities			Net amount
Other provisions		62,179			—			62,179
Impairment losses on property and equipment		4,132			—			4,132
Share-based payments		11,868			—			11,868
Provisions for guarantees		20,298			—			20,298
Gains on valuation of derivatives		—			(13,188	)		(13,188	)
Present value discount		—			(34	)		(34	)
Losses on fair value hedged item		—			(25,873	)		(25,873	)
Accrued interest		—			(41,687	)		(41,687	)
Deferred loan origination fees and costs		—			(139,697	)		(139,697	)
Gains on revaluation		—			(286,739	)		(286,739	)
Investments in subsidiaries and associates		13,018			—			13,018
Gains on valuation of security investment		—			(53,384	)		(53,384	)
Defined benefit liabilities		387,667			—			387,667
Accrued expenses		202,220			—			202,220
Retirement insurance expense		—			(343,176	)		(343,176	)
Adjustments to the prepaid contributions		—			(19,033	)		(19,033	)
Others		163,719			(20,357	)		143,362
		865,101			(943,168	)		(78,067	)
Offsetting of deferred income tax assets and liabilities		(865,101	)		865,101			—
		—			(78,067	)		(78,067	)

110

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Unrecognized deferred income tax liabilities

As at December 31, 2018 and 2019, no deferred income tax liabilities have been recognized for the taxable temporary difference of W 65,288 million arising from the initial recognition of goodwill from the merger of Housing and Commercial Bank in 2001.

Unrecognized deferred income tax assets

No deferred income tax assets have been recognized for the deductible temporary difference of W 5,923 million associated with investments in associates and subsidiaries as at December 31, 2019 and 2018, because it is not probable that the temporary differences will be reversed in the foreseeable future.

No deferred income tax assets have been recognized for deductible temporary differences of W19,388 million associated with others as at December 31, 2019 (W 363 million and W15,030 million associated with accrued expenses and others respectively as at December 31, 2018), due to the uncertainty that these will be realized in the future.

Changes in cumulative temporary differences for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Beginning		Decrease		Increase		Ending
Deductible temporary differences
Gains and Losses on fair value hedged item		—		—		44,085		44,085
Other provisions		226,103		226,103		219,069		219,069
Impairment losses on property and equipment		15,027		15,027		9,659		9,659
Share-based payments		43,156		43,156		44,049		44,049
Provisions for guarantees		73,809		73,809		76,214		76,214
Investment in subsidiaries and associates		53,261		—		7,146		60,407
Defined benefit liabilities		1,409,700		112,517		240,272		1,537,455
Accrued expenses		735,712		735,712		629,175		629,175
Others		610,370		128,960		345,006		826,416
		3,167,138		1,335,284		1,614,675		3,446,529
Unrecognized deferred income tax assets
Accrued expenses		363						—
Investment in subsidiaries and associates		5,923						5,923
Others		15,030						19,388
		3,145,822						3,421,218
Tax rate (%)		27.50						27.50
Total deferred income tax assets from deductible temporary differences		865,101						940,835

111

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	2019
(In millions of Korean won)	Beginning			Decrease			Increase			Ending
Taxable temporary differences
Gains and Losses on fair value hedged item		(94,085	)		(94,085	)		—			—
Accrued interest		(151,589	)		(102,728	)		(129,246	)		(178,107	)
Deferred loan origination fees and costs		(507,988	)		(507,988	)		(495,193	)		(495,193	)
Gains on valuation of derivatives		(47,956	)		(47,956	)		(217,552	)		(217,552	)
Present value discount		(124	)		(124	)		(429	)		(429	)
Goodwill from merger		(65,288	)		—			—			(65,288	)
Gains on revaluation		(1,042,687	)		(1,712	)		—			(1,040,975	)
Retirement insurance expenses		(1,247,911	)		(112,517	)		(229,333	)		(1,364,727	)
Adjustments to the prepaid contributions		(69,212	)		(69,212	)		(83,262	)		(83,262	)
Gains on valuation of security investment		(194,124	)		(194,124	)		(365,092	)		(365,092	)
Others		(74,026	)		(16,380	)		(347,007	)		(404,653	)
		(3,494,990	)		(1,146,826	)		(1,867,114	)		(4,215,278	)
Unrecognized deferred income tax liabilities
Goodwill from merge		(65,288	)								(65,288	)
		(3,429,702	)								(4,149,990	)
Tax rate (%)		27.5									27.5
Total deferred income tax liabilities from taxable temporary differences		(943,168	)								(1,141,247	)

	2018
(In millions of Korean won)	Beginning1		Decrease		Increase		Ending
Deductible temporary differences
Other provisions		256,282		256,282		226,103		226,103
Impairment losses on property and equipment		19,678		19,678		15,027		15,027
Interest on equity index-linked deposits		155		155		—		—
Share-based payments		61,870		61,870		43,156		43,156
Provisions for guarantees		98,294		98,294		73,809		73,809
Loss on SPE repurchase		80,204		80,204		—		—
Investment in subsidiaries and associates		39,634		—		13,627		53,261
Gains on valuation of security investment		75,642		75,642		—		—
Defined benefit liabilities		1,210,654		114,562		313,608		1,409,700
Accrued expenses		467,999		467,999		735,712		735,712
Others		797,433		325,886		138,823		610,370
		3,107,845		1,500,572		1,559,865		3,167,138
Unrecognized deferred income tax assets
Accrued expenses		—						363
Loss on SPE repurchase		80,204						—
Investment in subsidiaries and associates		5,923						5,923
Others		12,500						15,030
		3,009,218						3,145,822
Tax rate (%)2		27.50						27.50
Total deferred income tax assets from deductible temporary differences		827,535						865,101

112

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Beginning1			Decrease			Increase			Ending
Taxable temporary differences
Losses from fair value hedge		(57,083	)		(57,083	)		(94,085	)		(94,085	)
Accrued interest		(157,556	)		(116,532	)		(110,565	)		(151,589	)
Deferred loan origination fees and costs		(479,671	)		(479,671	)		(507,988	)		(507,988	)
Gains on valuation of derivatives		(52,764	)		(52,764	)		(47,956	)		(47,956	)
Present value discount		(209	)		(209	)		(124	)		(124	)
Goodwill from merger		(65,288	)		—			—			(65,288	)
Gains on revaluation		(1,113,979	)		(71,292	)		—			(1,042,687	)
Investments in subsidiaries and associates		(105,534	)		(105,534	)		—			—
Retirement insurance expenses		(1,095,495	)		(82,468	)		(234,884	)		(1,247,911	)
Adjustments to the prepaid contributions		(59,040	)		(59,040	)		(69,212	)		(69,212	)
Gains on valuation of security investment		—			—			(194,124	)		(194,124	)
Others		(68,946	)		(10,679	)		(15,759	)		(74,026	)
		(3,255,565	)		(1,035,272	)		(1,274,697	)		(3,494,990	)
Unrecognized deferred income tax liabilities
Goodwill from merger		(65,288	)								(65,288	)
		(3,190,277	)								(3,429,702	)
Tax rate (%)2		27.50									27.50
Total deferred income tax liabilities from taxable temporary differences		(877,326	)								(943,168	)

¹  Restated based on Korean IFRS 1109.

²  As the corporate tax rate was changed due to the revision of the tax law at the end of 2017, deferred tax assets (liabilities) expected to be realized after 2018 are calculated using 27.5%.

17. Other Assets

Details of other assets as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Other financial assets
Other receivables		3,057,390			1,912,455
Accrued income		873,095			802,972
Guarantee deposits		994,489			1,017,948
Domestic exchange settlement debits		523,182			476,349
Others		31,970			11,312
Allowances for loan losses		(11,184	)		(21,417	)
Present value discount		(2,890	)		(1,910	)
		5,466,052			4,197,709
Other non-financial assets
Other receivables		85			61
Prepaid expenses		108,491			125,363
Guarantee deposits		3,037			3,050
Others		118,883			74,872
Allowances on other assets		(16,525	)		(16,992	)
		213,971			186,354
		5,680,023			4,384,063

113

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Changes in allowances for loan losses on other assets for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Other financial assets			Other non- financial assets			Total
Beginning		21,417			16,992			38,409
Provision		(7,664	)		(315	)		(7,979	)
Written-off		(3,379	)		(152	)		(3,531	)
Others		810			—			810
Ending		11,184			16,525			27,709

	2018
(In millions of Korean won)	Other financial assets			Other non- financial assets			Total
Beginning1		53,805			22,575			76,380
Provision		1,197			(3,720	)		(2,523	)
Written-off		(34,764	)		(1,863	)		(36,627	)
Others		1,179			—			1,179
Ending		21,417			16,992			38,409

¹  Restated based on Korean IFRS 1109.

18. Assets Held for Sale

Details of assets held for sale as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Acquisition cost1		Accumulated impairment losses			Carrying amount		Fair value less costs to sell
Land		7,210		(1,530	)		5,680		6,467
Buildings		2,513		(1,252	)		1,261		1,261
		9,723		(2,782	)		6,941		7,728

	2018
(In millions of Korean won)	Acquisition cost1		Accumulated impairment losses			Carrying amount		Fair value less costs to sell
Land		16,048		(3,442	)		12,606		16,552
Buildings		9,054		(4,708	)		4,346		4,403
		25,102		(8,150	)		16,952		20,955

¹ Acquisition cost of buildings held for sale is net of accumulated depreciation before classified as assets held for sale.

114

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

The valuation technique and input variables that are used to measure the fair value of assets held for sale as at December 31, 2019, are as follows:

2019
(In millions of Korean won)	Fair value	Valuation technique1	Unobservable inputs2	Estimated range of unobservable inputs(%)	Effect of unobservable inputs on fair value
Land and buildings	7,728	Market comparison approach model and others	Adjustment index	0.44 ~ 1.36	Fair value increases as the adjustment index rises

¹ The appraisal value is adjusted by the adjustment ratio in the event the public sale is unsuccessful.

² Adjustment index is calculated by using the time factor correction, regional factors or individual factors.

Among assets held for sale, real estates were measured by an independent evaluator who has recently assessed similar properties in the area of the qualifying real estates. All of assets held for sale are included in level 3 in accordance with Note 6-1. (2).

Changes in accumulated impairment losses of assets held for sale for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)						2019
Beginning			Provision			Reversal		Others		Ending
	(8,150	)		(333	)		—		5,701		(2,782	)

(In millions of Korean won)						2018
Beginning			Provision			Reversal		Others		Ending
	(12,801	)		(5,281	)		286		9,646		(8,150	)

As at December 31, 2019, assets held for sale consist of three real estates of closed offices, which were committed to sell by the management, but not yet sold as at December 31, 2019. Negotiation with buyers is in process for the one assets and the remaining two assets are also being actively marketed.

115

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

19. Deposits

Details of deposits as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Demand deposits
Demand deposits in Korean won		124,467,157			112,780,132
Demand deposits in foreign currencies		7,849,177			6,161,617
		132,316,334			118,941,749
Time deposits
Time deposits in Korean won		152,880,734			140,591,165
Time deposits in foreign currencies		6,272,250			4,550,602
Fair value adjustments on fair value hedged time deposits in foreign currencies		(18,391	)		(89,265	)
		159,134,593			145,052,502
Certificates of deposits		4,239,969			3,531,719
		295,690,896			267,525,970

20. Debts

Details of debts as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Borrowings		17,900,031		16,747,057
Bonds sold under repurchase agreements and others		553,095		358,366
Call money		253,202		306,562
Total		18,706,328		17,411,985

Details of borrowings as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)		Lenders	Annual interest rate (%)		2019		2018
Borrowings in Korean won	Borrowings from the Bank of Korea	Bank of Korea		0.50~0.75		2,649,851		1,672,714
	Borrowings from the Government	SEMAS and others		0.00~3.00		1,658,810		1,745,940
	Borrowings from non - banking financial institutions	Korea Development Bank		0.20~2.20		408,042		372,853
	Other borrowings	Korea Development Bank and others		0.00~3.88		4,076,111		3,845,256
						8,792,814		7,636,763
Borrowings in foreign currencies	Due to banks	KEB Hana Bank and others		—		4,685		38,403
	Borrowings from banking institutions	Central Bank of Uzbekistan and others		0.00 ~ 2.94		7,437,041		7,039,389
	Borrowings from other financial institutions	Export Import Bank of Korea and others		2.28 ~ 3.08		7,081		18,725
	Other borrowings in foreign currencies	Standard Chartered Bank and others		0.00 ~ 2.63		1,658,410		2,013,777
						9,107,217		9,110,294
						17,900,031		16,747,057

116

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Details of bonds sold under repurchase agreements and others as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	Lenders	Annual interest rate (%)		2019		2018
Bonds sold under repurchase agreements	Individuals, groups, corporations		0.91 ~ 1.18		548,710		350,771
Bills sold	Counter sale		0.70 ~ 1.05		4,385		7,595
					553,095		358,366

Details of call money as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	Lenders	Annual interest rate (%)	2019		2018
Call money in foreign currencies	Central Bank of Uzbekistan and others	0.00 ~ 4.30		253,202		306,562

21. Debentures

Details of debentures as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	Annual interest rate (%)		2019			2018
Debentures in Korean won
Structured debentures		5.65~5.86		33,310			34,320
Subordinated fixed rate debentures		2.96~4.35		3,416,590			3,422,729
Fixed rate debentures		1.47~2.44		9,190,014			13,660,045
Floating rate debentures		1.54		300,000			640,000
				12,939,914			17,757,094
Fair value adjustments on fair value hedged debentures in Korean won				21,070			19,252
Discount on debentures in Korean won				(3,588	)		(11,792	)
				12,957,396			17,764,554
Debentures in foreign currencies
Floating rate debentures		2.31 ~ 2.84		1,301,367			1,344,628
Fixed rate debentures		2.13 ~ 4.50		2,857,545			2,725,700
				4,158,912			4,070,328
Fair value adjustments on fair value hedged debentures in foreign currencies				41,406			(24,073	)
Discount on debentures in foreign currencies				(15,322	)		(11,724	)
				4,184,996			4,034,531
				17,142,392			21,799,085

117

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Changes in debentures based on face value for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Beginning		Issues		Repayments			Others			Ending
Debentures in Korean won
Structured debentures		34,320		—		(1,010	)		—			33,310
Subordinated fixed rate debentures		3,422,729		—		(6,139	)		—			3,416,590
Fixed rate debentures		13,660,045		3,820,000		(8,290,031	)		—			9,190,014
Floating rate debentures		640,000		300,000		(640,000	)		—			300,000
		17,757,094		4,120,000		(8,937,180	)		—			12,939,914
Debentures in foreign currencies
Floating rate debentures		1,344,628		60,780		(33,199	)		(70,842	)		1,301,367
Fixed rate debentures		2,725,700		595,490		(590,950	)		127,305			2,857,545
		4,070,328		656,270		(624,149	)		56,463			4,158,912
		21,827,422		4,776,270		(9,561,329	)		56,463			17,098,826

	2018
(In millions of Korean won)	Beginning		Issues		Repayments			Others		Ending
Debentures in Korean won
Structured debentures		135,800		—		(101,480	)		—		34,320
Subordinated fixed rate debentures		2,888,411		600,000		(65,682	)		—		3,422,729
Fixed rate debentures		12,220,065		6,860,000		(5,420,020	)		—		13,660,045
Floating rate debentures		—		640,000		—			—		640,000
		15,244,276		8,100,000		(5,587,182	)		—		17,757,094
Debentures in foreign currencies
Floating rate debentures		835,692		725,638		(274,130	)		57,428		1,344,628
Fixed rate debentures		2,142,800		493,022		—			89,878		2,725,700
		2,978,492		1,218,660		(274,130	)		147,306		4,070,328
		18,222,768		9,318,660		(5,861,312	)		147,306		21,827,422

118

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

22. Provisions

Details of provisions as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Provisions for unused loan commitments		95,264		102,975
Provisions for acceptances and guarantees		76,214		73,809
Provisions for asset retirement obligation		106,269		95,396
Others		32,919		35,199
		310,666		307,379

Changes in provisions for unused loan commitments, acceptances and guarantees for the years ended December 31, 2019 and 2018, are as follows:

	2019
	Provisions for unused loan commitments									Provisions for acceptances and guarantees
	12-month expected credit losses			Lifetime expected credit losses						12-month expected credit losses			Lifetime expected credit losses
(In millions of Korean won)				Non- impaired			Impaired						Non- impaired			Impaired
Beginning		74,088			28,887			—			26,203			29,625			17,981
Transfer between stages
Transfer to 12-month expected credit losses		15,262			(15,235	)		(27	)		365			(365	)		—
Transfer to lifetime expected credit losses		(13,691	)		13,749			(58	)		(976	)		1,705			(729	)
Impairment		(118	)		(800	)		918			(24	)		(280	)		304
Provision (reversal) for loan losses		(15,235	)		7,823			(833	)		(1,922	)		4,644			(892	)
Others (effects of changes in foreign exchange rate, etc.)		320			214			—			193			259			123
Ending		60,626			34,638			—			23,839			35,588			16,787

	2018
	Provisions for unused loan commitments									Provisions for acceptances and guarantees
	12-month expected credit losses			Lifetime expected credit losses						12-month expected credit losses			Lifetime expected credit losses
(In millions of Korean won)				Non- impaired			Impaired						Non- impaired			Impaired
Beginning1		74,317			27,174			—			39,922			39,628			18,744
Transfer between stages
Transfer to 12-month expected credit losses		10,002			(9,935	)		(66	)		661			(661	)		—
Transfer to lifetime expected credit losses		(7,701	)		7,784			(83	)		(534	)		676			(142	)
Impairment		(201	)		(667	)		867			(6	)		(87	)		93
Provision (reversal) for loan losses		(2,541	)		4,369			(718	)		(14,244	)		(10,174	)		(898	)
Others (effects of changes in foreign exchange rate, etc.)		212			162			—			404			243			184
Ending		74,088			28,887			—			26,203			29,625			17,981

¹ Restated based on Korean IFRS 1109.

119

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Changes in provisions for asset retirement obligation for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Beginning		95,396			85,575
Increase		3,584			1,780
Reversal		(6,054	)		(154	)
Used		(3,658	)		(2,534	)
Unwinding of discount		1,981			2,305
Effects of changes in interest rate		15,020			8,424
Ending		106,269			95,396

Provisions for asset retirement obligation are present value of estimated costs to be incurred for restoration of the leased properties. Actual expenses are expected to be incurred at the end of each lease contract. Three-year historical data of expired leases were used to estimate the average lease year. Also, the average restoration expense based on actual three-year historical data and the three-year historical average inflation rate were used to estimate the present value of estimated costs.

Changes in other provisions for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Membership rewards program			Dormant accounts			Litigations			Financial guarantee liabilities		Others			Total
Beginning		61			4,376			6,478			2,391		21,893			35,199
Provision		61			2,296			8,160			3,079		710			14,306
Used and Others		(69	)		(3,094	)		(3,976	)		—		(9,447	)		(16,586	)
Ending		53			3,578			10,662			5,470		13,156			32,919

	2018
(In millions of Korean won)	Membership rewards program			Dormant accounts			Litigations			Financial guarantee liabilities1		Greenhouse Gas Emission liabilities			Others			Total
Beginning		138			5,050			7,482			2,218		177			62,137			77,202
Provision (Reversal)		110			2,657			184			173		(177	)		(10,621	)		(7,674	)
Used and Others		(187	)		(3,331	)		(1,188	)		—		—			(29,623	)		(34,329	)
Ending		61			4,376			6,478			2,391		—			21,893			35,199

¹ Restated based on Korean IFRS 1109

23. Net Defined Benefit Liabilities

Defined benefit plan

The Bank operates defined benefit plans which have the following characteristics:

• The Bank has the obligation to pay the agreed benefits to all its current and former employees.

• Actuarial risk (that benefits will cost more than expected) and investment risk fall, in substance, on the Bank.

120

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

The net defined benefit liabilities recognized in the statements of financial position is calculated in accordance with actuarial valuation methods. Data such as discount rates, future salary growth rates, and mortality rates based on market data and historical data are used. Actuarial assumptions may differ from actual results, due to changes in the market, economic trends and mortality trends.

Changes in the net defined benefit liabilities(assets) for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Present value of defined benefit obligation			Fair value of plan assets			Net defined benefit liabilities (assets)
Beginning		1,549,012			(1,382,487	)		166,525
Current service cost		151,845			—			151,845
Past service cost		2,276			—			2,276
Interest expense (income)		35,227			(31,403	)		3,824
Remeasurements :
-Actuarial gains and losses arising from experience adjustment		10,219			—			10,219
-Actuarial gains and losses arising from changes in demographic assumptions		(5,128	)		—			(5,128	)
-Actuarial gains and losses arising from changes in financial assumptions		42,426			—			42,426
-Return on plan assets (excluding amounts included in interest income)		—			8,165			8,165
Contributions		—			(196,100	)		(196,100	)
Payments from plans (benefit payments)		(112,516	)		112,516			—
Payments from the Bank		(5,323	)		—			(5,323	)
Transfer in		4,406			(4,102	)		304
Transfer out		(2,558	)		2,558			—
Effects of changes in foreign exchange rate		13			—			13
Ending		1,669,899			(1,490,853	)		179,046

	2018
(In millions of Korean won)	Present value of defined benefit obligation			Fair value of plan assets			Net defined benefit liabilities (assets)
Beginning		1,318,665			(1,310,097	)		8,568
Current service cost		136,192			—			136,192
Past service cost1		26,663			—			26,663
Interest expense (income)		37,568			(37,327	)		241
Remeasurements :
-Actuarial gains and losses arising from experience adjustment		26,780			—			26,780
-Actuarial gains and losses arising from changes in demographic assumptions		9,775			—			9,775
-Actuarial gains and losses arising from changes in financial assumptions		77,611			—			77,611
-Return on plan assets (excluding amounts included in interest income)		—			17,967			17,967
Contributions		—			(133,000	)		(133,000	)
Payments from plans (benefit payments)		(77,785	)		77,785			—
Payments from the Bank		(4,469	)		—			(4,469	)
Transfer in		2,677			(2,497	)		180
Transfer out		(4,682	)		4,682			—
Effects of changes in foreign exchange rate		17			—			17
Ending		1,549,012			(1,382,487	)		166,525

¹ Other provisions of W 22,306 million were transferred to the account as at December 31, 2017.

121

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Details of the net defined benefit liabilities as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Present value of defined benefit obligation		1,669,899			1,549,012
Fair value of plan assets		(1,490,853	)		(1,382,487	)
Net defined benefit liabilities		179,046			166,525

Details of post-employment benefits recognized in profit or loss as employee compensation and benefits for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Current service cost		151,845		136,192
Past service cost		2,276		4,357
Interest expenses of net defined benefit liabilities		3,824		241
Total		157,945		140,790

Remeasurements of net defined benefit liabilities recognized as other comprehensive income for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Remeasurements:
-Actuarial gains and losses arising from experience adjustment		5,128			(9,775	)
-Actuarial gains and losses arising from changes in demographic assumptions		(10,219	)		(26,780	)
-Actuarial gains and losses arising from changes in financial assumptions		(42,426	)		(77,611	)
-Return on plan assets (excluding amounts included in interest income)		(8,165	)		(17,967	)
Income tax effects		15,313			36,336
Remeasurements after income tax		(40,369	)		(95,797	)

Details of fair value of plan assets as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Assets quoted in an active market		Assets not quoted in an active market		Total
Time deposits		—		1,490,590		1,490,590
Others		—		263		263
		—		1,490,853		1,490,853

122

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	2018
(In millions of Korean won)	Assets quoted in an active market		Assets not quoted in an active market		Total
Time deposits		—		1,382,487		1,382,487

Key actuarial assumptions used as at December 31, 2019 and 2018, are as follows:

	Ratio (%)
	2019		2018
Discount rate		2.00		2.30
Salary growth rate		3.75		3.75
Turnover		1.00		1.00

Expected mortality assumptions are based on the experience-based mortality table of Korea Insurance Development Institute of 2019.

The sensitivity of the defined benefit obligation to changes in the principal assumptions as at December 31, 2019, is as follows:

			Effect on defined benefit obligation
	Changes in principal assumption		Increase in principal assumption		Decrease in principal assumption
Discount rate		0.5%p		4.20% decrease		4.51% increase
Salary growth rate		0.5%p		4.12% increase		3.88% decrease
Turnover		0.5%p		0.49% decrease		0.52% increase

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 significant actuarial assumptions is calculated using the projected unit credit method which is used to calculate the defined benefit obligation.

Expected maturity analysis of undiscounted pension benefits as at December 31, 2019, is as follows:

(In millions of Korean won)	Less than 1 year		Between 1 and 2 years		Between 2 and 5 years		Between 5 and 10 years		Over 10 years		Total
Pension benefits		43,470		112,459		484,102		992,573		2,672,924		4,305,528

The weighted average duration of the defined benefit obligations is 8.88 and 8.86 years as at December 31, 2019 and December 31, 2018, respectively.

Expected contributions to plan assets for the period after December 31, 2019, are estimated to be approximately W 156,000 million.

123

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

24. Other Liabilities

Details of other liabilities as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Other financial liabilities
Other payables		3,269,885		2,093,647
Prepaid card and debit cards		2,038		2,351
Accrued expenses		2,349,313		2,305,494
Financial guarantee liabilities		66,123		44,256
Deposits for letter of guarantees and others		269,745		148,032
Domestic exchange settlement credits		2,073,263		1,679,914
Foreign exchanges settlement credits		114,316		102,170
Borrowings from other business accounts		256		13,166
Payables to trust accounts		5,313,845		5,403,198
Liabilities incurred from agency relationship		771,609		605,076
Account for agency businesses		407,475		460,949
Lease liabilities		334,037		—
Others		18,266		29,202
		14,990,171		12,887,455
Other non-financial liabilities
Other payables		557,775		847,346
Unearned revenue		31,826		31,941
Accrued expenses		389,977		450,493
Withholding taxes		116,905		92,962
Others		64,392		77,775
		1,160,875		1,500,517
		16,151,046		14,387,972

25. Equity

25.1 Capital Stock

Details of outstanding shares as at December 31, 2019 and 2018, are as follows:

	Ordinary shares
	2019		2018
Number of shares authorized		1,000,000,000		1,000,000,000
Face value per share (in Korean won)		5,000		5,000
Number of shares		404,379,116		404,379,116
Capital stock1		2,021,896		2,021,896

¹  In millions of Korean won.

25.2 Hybrid Security

Details of hybrid security classified as equity as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	Issuance date		Maturity		Interest rate (%)		2019		2018
Amortized Conditional Capital Securities		July 2, 2019		Permanent		4.35		574,523		—

124

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Above security is redeemable at the option of the Bank on July 2, 2024 and each Interest payment date thereafter.

25.3 Capital Surplus

Details of capital surplus as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Paid-in capital in excess of face value		4,604,417		4,604,417
Gain on business combination		397,669		397,669
Revaluation increment		177,229		177,229
Other capital surplus		40,716		40,716
Total		5,220,031		5,220,031

The gain on business combination is a gain from a bargain purchase related to the merger with Korea Long Term Credit Bank on December 31, 1998, in accordance with previous Korean GAAP.

25.4 Accumulated Other Comprehensive Income

Details of accumulated other comprehensive income as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Remeasurements of net defined benefit liabilities		(216,067	)		(175,698	)
Currency translation differences		4,654			3,873
Gains and losses on debt instruments at fair value through other comprehensive income		55,154			21,648
Gains and losses on equity instruments at fair value through other comprehensive income		303,338			302,014
Gains on cash flow hedging instruments		(3,691	)		11,539
Total		143,388			163,376

25.5 Retained Earnings

Retained earnings as at December 31, 2019 and 2018, consist of:

(In millions of Korean won)	2019		2018
Legal reserves		2,041,625		2,033,926
Regulatory reserve for credit losses		2,270,125		2,137,264
Voluntary reserves		14,173,349		12,441,522
Retained earnings before appropriation		2,416,309		2,552,704
Total		20,901,408		19,165,416

With respect to the allocation of net profit earned in a fiscal term, the Bank must set aside in its legal reserve an amount equal to at least 10% of its net income after tax as reported in the separate statement of comprehensive income each time it pays dividends on its net profits earned until its legal reserve reaches at least the aggregate amount of its paid-in capital in accordance with Article 40 of

125

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

the Banking Act. The reserves can only be transferred to capital stock or be used to reduce deficit. With respect to the Bank’s branches overseas, a portion of the branch’s net income is appropriated into legal reserves, in line with the financial legislation of the country where the overseas branch is located.

The appropriation of retained earnings for the years ended December 31, 2019 and 2018, (Dates of appropriation: March 19, 2020 and March 21, 2019 for the years ended December 31, 2019 and 2018, respectively) is follows:

(In millions of Korean won)	2019				2018
Retained earnings before appropriation				2,416,309			2,552,703
Unappropriated retained earnings carried forward from prior year		13,091				94
Effect of change in accounting policies (The adoption of Korean IFRS 1109 Financial Instruments)		—				286,616
Effect of change in accounting policies(Other, Note 2)		—				13,038
Reclassification of sale of securities at fair value through other comprehensive income		(18,475	)			13,638
Net income		2,421,693				2,239,317
Transfers such as voluntary reserves				1,683			57,874
Reserve for research and manpower development		—				487
Revaluation of property and equipment		1,683				56,387
Reserve for electronic financial transaction accidents		—				1,000
Appropriation				2,417,902			2,597,486
Legal reserve		—				—
Voluntary reserves		1,551,000				1,789,700
Regulatory reserve for credit losses		134,199				132,861
Cash dividends		731,926				667,226
(dividends per share(%) 2019 : W1,810(36.20%) 2018 : W1,650(33.00%)		731,926				667,226
Other reserve		777				7,699
Unappropriated retained earnings carried forward to subsequent year				90			13,091

Regulatory Reserve for Credit Losses

Measurement and disclosure of regulatory reserve for credit losses are required in accordance with Articles 29.1 through 29.2 of Regulation on Supervision of Banking Business.

Details of the amounts estimated to be appropriated as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Beginning		2,270,125		2,137,264
Amounts estimated to be appropriated		134,199		132,861
Ending		2,404,324		2,270,125

126

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Adjustments to the regulatory reserve for credit losses for the year ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Provision of regulatory reserve for credit losses1		134,199		239,973
Adjusted profit after provision of regulatory reserve for credit losses2		2,287,494		1,999,344

¹  The previous amount expected to be appropriated is the amount required to reserve for credit losses, calculated based on the beginning balance of regulatory reserve for credit losses (including unearned reserves) that reflects the effect of adoption of Korean IFRS 1109 retrospectively.

² Adjusted profit after provision of regulatory reserve for credit losses is calculated on the assumption that expected provision of regulatory reserve for credit losses which is measured in accordance with Banking Supervision Regulations would be reflected in net profit for the periods without consideration of income tax effect.

26. Interest Income and Expense

Details of interest income, expense, and net interest income for the year ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Interest income
Securities at fair value through profit or loss		97,912		81,156
Loans at fair value through profit or loss		9,686		7,850
Securities at fair value through other comprehensive income		593,977		498,189
Loan receivables measured at fair value through other comprehensive income		13,670		2,138
Due from financial institutions at amortized cost		28,231		30,854
Securities at amortized cost		299,188		319,563
Loans at amortized cost		9,357,154		8,692,723
Others		133,924		104,683
		10,533,742		9,737,156
Interest expenses
Deposits		3,314,115		2,884,339
Debts		334,022		306,288
Debentures		491,537		477,150
Others		104,024		81,292
		4,243,698		3,749,069
Net interest income		6,290,044		5,988,087

Interest income recognized on impaired loans is W 22,993 million (December 31, 2018: W 23,042 million) for the year ended December 31, 2019.

127

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

27. Net Fee and Commission Income

Details of fee and commission income, and fee and commission expense for the year ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Fee and commission income
Banking activity fees		221,600		209,499
Lending activity fees		76,481		73,005
Credit card related fees		920		1,030
Debit card related fees and commissions		594		554
Agent activity fees		321,426		312,497
Trust and other fiduciary fees		325,467		305,893
Guarantee fees		39,000		32,256
Foreign currency related fees		94,678		85,424
Security activity commissions		128,918		146,928
Other business account commission on consignment		36,813		36,947
Others		259,446		239,806
		1,505,343		1,443,839
Fee and commission expense
Trading activity related fees1		12,773		11,952
Lending activity fees		31,613		30,661
Credit card related fees		29,303		18,478
Outsourcing related fees		95,952		78,464
Foreign currency related fees		21,128		17,585
Management fees of written-off loans		15,140		12,624
Contributions to external institutions		24,558		23,949
Others		107,284		90,426
		337,751		284,139
Net fee and commission income		1,167,592		1,159,700

¹ Fees from financial assets/liabilities at fair value through profit or loss.

128

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

28. Net Gains or Losses from Financial Assets/Liabilities at Fair Value through Profit or Loss

Net gains or losses from financial assets/liabilities at fair value through profit or loss are composed of dividend income and gains or losses arising from changes in the fair values, sales and redemptions.

Details of net gains or losses from financial assets/liabilities at fair value through profit or loss for the year ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Revenue from financial instruments at fair value through profit or loss
Financial assets at fair value through profit or loss
Debt instruments		250,939		216,321
Equity instruments		7,041		1,937
		257,980		218,258
Derivatives held for trading
Interest rate		1,674,203		1,415,631
Currency		4,959,840		3,380,603
Stock or stock index		241		906
Other		938		298
		6,635,222		4,797,438
Financial liabilities at fair value through profit or loss		394		377
Other financial instruments		5,810		22
		6,899,406		5,016,095
Expense from financial instruments at fair value through profit or loss
Financial assets at fair value through profit or loss
Debt instruments		42,520		148,576
Equity instruments		1,274		2,483
		43,794		151,059
Derivatives held for trading
Interest rate		1,738,161		1,409,686
Currency		4,689,543		3,095,659
Stock or stock index		163		1,079
Other		435		779
		6,428,302		4,507,203
Financial liabilities at fair value through profit or loss		466		193
Other financial instruments		5,704		60
		6,478,266		4,658,515
Net gains or losses from financial assets/liabilities at fair value through profit or loss		421,140		357,580

129

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

29. Other Operating Income and Expenses

Details of other operating income and expenses for the year ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Other operating income
Revenue related to financial assets at fair value through other comprehensive income
Gains on redemption of the securities at fair value through other comprehensive income		524			230
Gains on sale of the securities at fair value through other comprehensive income		99,195			93,899
Revenue related to financial assets at amortized cost
Gains on sale of loans at amortized cost		19,346			15,691
Gains on foreign exchange transactions		1,533,125			1,112,384
Dividend income		43,116			38,933
Others		183,634			84,381
		1,878,940			1,345,518
Other operating expenses
Expenses related to financial assets at fair value through other comprehensive income
Losses on sale of the securities at fair value through other comprehensive income		4,195			7,135
Expenses related to financial assets at amortized cost
Losses on sale of loans at amortized cost		15,015			6,674
Losses on foreign exchanges transactions		1,486,762			1,160,270
Others		967,542			826,202
		2,473,514			2,000,281
Net other operating expenses		(594,574	)		(654,763	)

130

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

30. General and Administrative Expenses

30.1 General and Administrative Expenses

Details of general and administrative expenses for the year ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Employee Benefits
Salaries and short-term employee benefits - salaries		1,475,076		1,509,641
Salaries and short-term employee benefits - welfare expense		635,145		649,848
Post-employment benefits - defined benefit plans		157,946		140,790
Post-employment benefits - defined contribution plans		7,220		6,719
Termination benefits		213,749		209,737
Share-based payments		15,173		4,051
		2,504,309		2,520,786
Depreciation and amortization		498,480		241,400
Other general and administrative expenses
Rental expense		61,686		253,302
Tax and dues		125,588		106,563
Communication		25,934		23,038
Electricity and utilities		22,236		21,456
Publication		8,858		9,667
Repairs and maintenance		11,963		11,194
Vehicle		6,625		7,172
Travel		4,693		3,683
Training		19,031		17,460
Service fees		122,508		107,036
Others		440,063		410,951
		849,185		971,522
		3,851,974		3,733,708

30.2 Share-based Payments

30.2.1 Stock Grant

The Bank changed the scheme of share-based payment from share option to share grants in November 2007. The share grant award program is an incentive plan that sets, on grant date, the maximum number of shares that can be awarded. Actual shares to be granted is determined in accordance with achievement of performance targets over the vesting period.

131

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Details of the share grants as at December 31, 2019, are as follows:

(In number of shares)
Share grants	Grant date		Number of granted shares1,  2		Vesting conditions
Series 72		2017.08.28		6,742	Services fulfillment, TSR 30~50%, Company and work performance 50~70%
Series 73		2017.11.21		27,786	Services fulfillment, TSR 30%, EPS and Asset Quality 70%
Series 74		2018.01.01		134,465	Services fulfillment, TSR 30~50%, Company and work performance 50~70%
Series 75		2019.01.01		192,170	Services fulfillment, TSR 30~50%, Company and work performance 50~70%
Series 76		2019.04.01		5,380	Services fulfillment, TSR 30~50%, Company and work performance 50~70%
Series 77		2019.05.27		5,569	Services fulfillment, TSR 30~50%, Company and work performance 50~70%
Series 78		2019-11-21		36,443	Services fulfillment, TSR 30% Company and work performance 70%
Deferred grant in 2015		—		4,756
Deferred grant in 2016		—		65,419
Deferred grant in 2017		—		95,697
Deferred grant in 2018		—		97,244
				671,671

¹ Granted shares in relation to Series 72 ~ 78 represent the total number of shares granted to directors and employees but not vested at the end of reporting period. The number of deferred grants represents residual shares that have been vested at the end of reporting period.

² Certain percentages among the granted shares are deferred for over five years from the time of initial exercising. Accordingly, a certain percentage of the granted amount is deferred for up to five years after the date of retirement after the deferred grant has been confirmed.

Details of share grants linked to short-term performance as at December 31, 2019, are as follows:

(In number of shares)
Share grants	Grant date	Number of vested shares		Vesting conditions
Stock grants1	Granted Shares for 2015		15,831	Vested
	Granted Shares for 2016		52,855	Vested
	Granted Shares for 2017		55,490	Vested
	Granted Shares for 2018		109,296	Vested
	Granted Shares for 2019		112,445	Proportional to service period

¹ Executives and employees were given the option of deferred payment of the granted shares (after the date of retirement), payment ratio, and payment period. Accordingly, a certain percentage of the granted amount is deferred for up to five years after the date of retirement after the deferred grant has been confirmed.

132

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Share grants are measured at fair value using the MonteCarlo Simulation Model and assumptions used in determining the fair value as at December 31, 2019, are as follows:

(In Korean won)	Expected exercise period (Years)		Risk free rate (%)			Fair value (Market performance- condition)		Fair value (Non-market performance- condition)
Linked to long-term performance
Series 72		0.00~3.00		1.34	%		43,659~47,631		43,659~47,631
Series 73		0.00~2.89		1.34	%		41,253~43,741		43,803~46,445
Series 74		0.00~3.00		1.34	%		41,279~45,035		43,659~47,631
Series 75		0.00~4.00		1.34	%		41,506~46,021		42,336~47,631
Series 76		1.25~5.01		1.34	%		41,070~44,926		41,070~44,926
Series 77		1.40~5.01		1.34	%		41,070~44,926		41,070~44,926
Series 78		1.89~5.01		1.34	%		38,303~41,900		41,070~44,926
Grant deferred in 2015		0.00~2.00		1.34	%		—		44,926~47,631
Grant deferred in 2016		0.00~4.00		1.34	%		—		42,336~47,631
Grant deferred in 2017		0.00~4.00		1.34	%		—		42,336~47,631
Grant deferred in 2018		0.00~4.00		1.34	%		—		42,336~47,631
Linked to short-term performance
Share granted in 2015		0.00~4.00		1.34	%		—		42,336~47,631
Share granted in 2016		0.00~5.01		1.34	%		—		41,070~47,631
Share granted in 2017		0.00~4.00		1.34	%		—		42,336~47,631
Share granted in 2018		0.00~4.00		1.34	%		—		42,336~47,631
Share granted in 2019		1.00~3.00		1.34	%		—		43,659~46,281

The Bank used the volatility of the stock price over the previous year as the expected volatility and used the dividend yield as the arithmetic mean of the dividend rate of one year before, two years before, and three years before the base year, in order to calculate fair value. Fair value is calculated based on 1 year-KTB rate.

As at December 31, 2019 and 2018, the accrued expenses related to share-based payments including share grants, amounted to W 41,344 million and W 40,873 million, respectively, and the compensation costs from share grants amounting to W15,173 million and W 4,051 million were incurred during the years ended December 31, 2019 and 2018, respectively.

133

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

30.2.2 Mileage Stock

Details of Mileage Stock as at December 31, 2019, are as follows:

(In number of shares)	Grant date		Number of granted shares1		Expected exercise period (Years)2		Number of exercisable shares
Share granted in 2017		2017-01-09		28,925		0.00~0.02		11,365
		2017-02-03		43		0.00~0.09		28
		2017-04-03		82		0.00~0.25		61
		2017-05-22		20		0.00~0.39		20
		2017-07-03		52		0.00~0.50		52
		2017-08-07		29		0.00~0.60		19
		2017-08-08		5		0.00~0.60		2
		2017-08-16		204		0.00~0.62		151
		2017-08-17		40		0.00~0.63		24
		2017-08-24		387		0.00~0.65		288
		2017-09-08		83		0.00~0.69		73
		2017-11-01		120		0.00~0.84		103
		2017-11-06		106		0.00~0.85		101
		2017-12-06		105		0.00~0.93		83
		2017-12-26		255		0.00~0.99		175
		2017-12-29		114		0.00~0.99		58
Share granted in 2018		2018-01-10		19,197		0.00~1.03		15,430
		2018-02-12		9		0.00~1.12		7
		2018-04-02		115		0.00~1.25		99
		2018-04-30		86		0.00~1.33		62
		2018-05-08		170		0.00~1.35		150
		2018-06-01		140		0.00~1.42		121
		2018-07-02		180		0.00~1.50		123
		2018-08-07		194		0.00~1.60		175
		2018-08-09		47		0.00~1.61		38
		2018-08-14		30		0.00~1.62		30
		2018-08-16		130		0.00~1.62		112
		2018-09-07		106		0.00~1.68		82
		2018-10-04		129		0.00~1.76		106
		2018-11-01		258		0.00~1.84		248
		2018-11-06		236		0.00~1.85		206
		2018-12-03		132		0.00~1.92		132
		2018-12-04		21		0.00~1.93		21
		2018-12-07		91		0.00~1.93		91
		2018-12-12		64		0.00~1.95		57
		2018-12-18		271		0.00~1.96		271
		2018-12-19		42		0.00~1.97		42
		2018-12-31		127		0.00~2.00		127
Share granted in 2019		2019-01-11		26,580		0.00~2.03		25,563
		2019-02-01		12		0.00~2.09		12
		2019-04-01		167		0.00~2.25		167
		2019-04-18		105		0.00~2.30		105
		2019-04-22		33		0.00~2.31		33
		2019-07-01		109		0.00~2.50		109
		2019-08-29		39		0.00~2.66		39
		2019-09-02		50		0.00~2.67		50
		2019-11-01		119		0.00~2.84		119
		2019-11-08		14		0.00~2.85		14
		2019-12-05		56		0.00~2.93		56
		2019-12-06		84		0.00~2.93		84
		2019-12-31		87		0.00~3.00		87
				79,800				56,771

¹ Mileage stock is exercisable for two years after one year from the grant date. When the mileage stock is exercised, the closing price of prior month is applied. However, in case of transfer or retirement during the vesting period, mileage stock is exercisable at the closing price of the last month prior to transfer or retirement.

134

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

² The exercisable shares are assessed based on the stock price as at December 31, 2019. These shares are vested immediately at grant date.

The accrued expenses for share-based payments in regard to mileage stock as at December 31, 2019 and 2018, are W2,705 million and W 2,283 million, respectively. The compensation costs amounting to W1,334 million and W 1,350 million were recognized as an expense for the years ended December 31, 2019 and 2018, respectively.

31. Non-operating Income and Expenses

Details of non-operating income and expenses for the year ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Non-operating income
Gains on disposal in property and equipment and assets held for sale		3,340			120,137
Rental income		9,557			8,934
Dividend income from associates and subsidiaries		14,266			78,206
Others		57,259			20,762
		84,422			228,039
Non-operating expenses
Losses on disposal in property and equipment and assets held for sale		4,572			5,590
Donation		84,211			91,943
Restoration cost		3,017			1,854
Others		27,258			87,285
		119,058			186,672
Net non-operating income (expenses)		(34,636	)		41,367

135

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

32. Income Tax Expense

Income tax expense for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Tax payable
Current tax expense		788,809			798,523
Adjustments for current tax of prior years		(24,034	)		(4,856	)
		764,775			793,667
Changes in deferred income tax assets (liabilities)		122,345			28,276
Income tax expense of overseas branches		8,615			6,863
Income tax recognized directly in equity
Net losses on debt instruments at fair value through other comprehensive income		(12,709	)		(21,618	)
Remeasurements of net defined benefit liabilities		15,313			36,336
Net losses on equity instruments at fair value through other comprehensive income		(502	)		13,660
Gains (losses) on cash flow hedging instruments		5,777			(1,437	)
		7,879			26,941
Other comprehensive income transferred to retained earnings-fair value measurement of equity instruments		7,007			(5,172	)
Consolidated tax return effect		(37,692	)		(31,431	)
Tax expense		872,929			819,144

An analysis of the net profit before income tax and income tax expense for the years ended December 31, 2019 and 2018, follows:

(In millions of Korean won)	2019			2018
Profit before income tax		3,294,622			3,058,461
Tax at the applicable tax rate1		895,702			830,745
Non-taxable income		(4,035	)		(2,967	)
Non-deductible expense		12,174			12,964
Tax credit and tax exemption		(381	)		(275	)
Temporary difference for which no deferred tax is recognized		1,253			1,112
Tax supplementary pay (rebate) for tax of prior years		(9,938	)		(2,771	)
Income tax expense of overseas branch		8,615			6,863
Consolidated tax effect		(37,692	)		(31,431	)
Others		7,231			4,904
Tax expense		872,929			819,144
Tax expense / Profit before income tax (%)		26.50			26.78

¹ Applicable income tax rate for W200 million and below is 11%, for over W200 million to W20 billion is 22%, and for over W20 billion to W300 billion is 24.2%, for over W300 billion is 27.5% as at December 31, 2019 and 2018.

136

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Details of current tax liabilities (income tax payables) and current tax assets (income tax refund receivables) before offsetting, as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Tax payables after offsetting1, 2		404,370			622,156
Adjustment on consolidated tax payable and others3		(37,692	)		(31,431	)
Accounts payables4		(359,864	)		(586,699	)
Current tax payable		6,814			4,026

¹ Current tax assets of W 9,692 million (December 31, 2018: W 486 million) and current tax assets of W 1,681 million (December 31, 2018: W 2,147 million) for overseas branches were excluded due to an uncertain tax position which does not qualify for offsetting.

² Includes income tax payable of W 6,814 million (December 31, 2018: W 4,026 million) under current tax liabilities as at December 31, 2019, which are not to be offset against any income tax refund receivables, such as those of overseas branches.

³ Tax expense reduced due to the adoption of consolidated tax return was recognized as tax benefit.

⁴ The amount of income tax payable by the Bank is reclassified as accounts payable, not to the tax authority, but to KB Financial Group Inc. due to the adoption of consolidated tax return.

33. Dividends

The dividend to the shareholder of the Bank in respect of the year ended December 31, 2019, of W1,810 per share, amounting to total dividends of W 731,926 million, is to be proposed at the annual general shareholder’s meeting on March 19, 2020. The Bank’s financial statements as at December 31, 2019, do not reflect this dividend payable.

137

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

34. Accumulated Other Comprehensive Income

Details of accumulated other comprehensive income for the years ended December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Beginning			Changes (excluding reclassification)			Reclassification to loss			Tax effect			Transfer to retained earnings		Ending
Remeasurements of net defined benefit liabilities		(175,698	)		(55,682	)		—			15,313			—		(216,067	)
Currency translation differences		3,873			781			—			—			—		4,654
Net gains (losses) on debt instruments at fair value through other comprehensive income		21,648			97,455			(51,240	)		(12,709	)		—		55,154
Net gains (losses) on equity instruments at fair value through other comprehensive income		302,014			(23,657	)		—			(502	)		25,483		303,338
Gains (losses) on cash flow hedging instruments		11,539			(18,108	)		(2,899	)		5,777			—		(3,691	)
		163,376			789			(54,139	)		7,879			25,483		143,388

	2018
(In millions of Korean won)	Beginning1			Changes (excluding reclassification)			Reclassification to profit or loss			Tax effect			Transfer to retained earnings			Others		Ending
Remeasurements of net defined benefit liabilities		(79,902	)		(132,132	)		—			36,336			—			—		(175,698	)
Currency translation differences		3,017			856			—			—			—			—		3,873
Net gains (losses) on debt instruments at fair value through other comprehensive income		(35,344	)		72,021			6,455			(21,618	)		—			134		21,648
Net gains (losses) on equity instruments at fair value through other comprehensive income		338,027			(30,863	)		—			13,660			(18,810	)		—		302,014
Gains(losses) on cash flow hedging instruments		7,751			6,980			(1,755	)		(1,437	)		—			—		11,539
		233,549			(83,138	)		4,700			26,941			(18,810	)		134		163,376

¹  Restated based on Korean IFRS 1109.

138

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

35. Trust Accounts

Financial information of the trust accounts the Bank manages as at December 31, 2019 and 2018, and for the years ended December 31, 2019 and 2018, is as follows:

	Total assets				Operating revenues
(In millions of Korean won)	2019		2018		2019		2018
Consolidated		4,384,959		4,259,441		137,017		127,994
Unconsolidated		51,685,885		47,644,193		2,206,184		1,609,587
		56,070,844		51,903,634		2,343,201		1,737,581

¹ Financial information of the trust accounts has been prepared in accordance with the Statement of Korea Accounting Standard 5004, Trust Accounts, and enforcement regulations of Financial Investment Services under the Financial Investment Services and Capital Markets Act.

Significant receivables and payables related to the Bank’s trust accounts as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)		2019		2018
Trust Segment	Assets
	Accrued trust fees		60,946		53,618
	Other accrued income		23,976		23,658
			84,922		77,276
	Liabilities
	Due to trust accounts		1,365,786		1,278,243
	Accrued interest on due to trust accounts		7,267		6,531
	Deposits		278,975		345,873
	Accrued interest on deposits		2,481		24,868
			1,654,509		1,655,515
Custody Segment	Assets
	Accrued trust fees		6,387		5,549
	Liabilities
	Due to trust accounts		3,948,059		4,124,955
	Accrued interest on due to trust accounts		3,055		4,280
			3,951,114		4,129,235

139

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Significant revenue and expenses related to the Bank’s trust for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)		2019		2018
Trust Segment	Revenues
	Fees and commissions from trust accounts		294,368		277,677
	Management fees and commissions from retirement pension		25,741		25,321
	Commissions from early termination in trust accounts		119		87
			320,228		303,085
	Expenses
	Interest expense on due to trust accounts		23,119		20,742
	Interest expense on deposits		12,926		21,389
			36,045		42,131
Custody Segment	Revenues
	Fees and commissions from trust accounts		31,099		28,216
	Expenses
	Interest expense on due to trust accounts		45,191		43,613

As at December 31, 2019 and 2018, the carrying amounts of the trust accounts for which the Bank guarantees payment of principal or payment of principal and fixed rate of return are as follows:

(In millions of Korean won)		2019		2018
Trust accounts guaranteeing repayment of principal	Old age pension		1,724		1,791
	Personal pension		1,895,981		1,883,905
	Pension		2,333,799		2,218,351
	Retirement		9,180		9,705
	New personal pension		91,535		90,893
	New old age pension		4,222		4,801
	Retail		12,133		12,940
	Corporate		1,315		1,344
	Installment		16,622		18,025
			4,366,511		4,241,755
Trust accounts guaranteeing repayment of principal and fixed rate of return	Development money		18,356		17,594
	Unspecified monetary		92		92
			18,448		17,686
			4,384,959		4,259,441

¹ Financial information of the trust accounts has been prepared in accordance with the Statement of Korea Accounting Standard 5004, Trust Accounts, and enforcement regulations of Financial Investment Services under the Financial Investment Services and Capital Markets Act.

As at December 31, 2019 and 2018, there is no amount the Bank has to pay in relation to the management results of the trust accounts in accordance with the guarantees of payment of principal or payment of principal and fixed rate of return.

140

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

36. Supplemental Cash Flow Information

Cash and cash equivalents as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019			2018
Cash		2,306,220			2,179,255
Checks with other banks		383,501			872,166
Due from Bank of Korea		8,336,097			8,911,607
Due from other financial institutions		2,067,187			1,450,752
		13,093,005			13,413,780
Restricted due from financial institutions		(8,497,052	)		(9,005,204	)
Due from financial institutions with original maturities over three months		(50,321	)		—
		(8,547,373	)		(9,005,204	)
		4,545,632			4,408,576

Significant non-cash transactions for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Decrease in loans due to the write-offs		539,584		526,134
Changes in accumulated other comprehensive income due to gains and losses on debt instruments at fair value through other comprehensive income		33,506		56,992
Changes in financial investments due to debt-for-equity swap		88,958		22,286

Cash inflows and outflows from income tax, interest and dividends for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	Activities		2019		2018
Income tax paid		Operating		955,973		388,897
Interest received		Operating		10,734,648		9,995,892
Interest paid		Operating		4,182,876		3,390,941
Dividends received		Operating		117,052		173,812
Dividends paid		Financing		667,226		640,132

141

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Changes in liabilities arising from financial activities for the years ended December 31, 2019 are as follows:

(In millions of Korean won)	2019
	Derivative financial instrument for hedging purposes1			Debts		Debentures			Payables to trust accounts			Lease liabilities			Deposits for letter of guarantees and others		Total
Beginning		14,643			17,411,985		21,799,084			5,403,198			327,102			148,031		45,104,043
Cash flow		(28,631	)		955,745		(4,794,761	)		(89,353	)		(158,547	)		121,698		(3,993,849	)
Lease newly acquired and disposal		—			—		—			—			158,122			—		158,122
Exchange differences		—			338,019		56,463			—			—			—		394,482
Changes in fair values		(108,220	)		—		67,297			—			—			—		(40,923	)
Other changes from non-cash transactions		7,618			579		14,309			—			7,360			16		29,882
Ending		(114,590	)		18,706,328		17,142,392			5,313,845			334,037			269,745		41,651,757

¹  Derivative financial instruments held for hedging are shown at net amounts of liabilities and assets.

(In millions of Korean won)	2018
	Derivative financial instrument for hedging purposes1			Debts			Debentures		Payables to trust accounts		Finance lease liabilities			Deposits for letter of guarantees and others			Total
Beginning		(3,659	)		15,854,911			18,167,498		5,126,752		1,642			340,866			39,488,010
Cash flow		(17,698	)		1,346,037			3,447,178		276,446		(11,242	)		(201,236	)		4,839,485
Lease newly acquired		—			—			—		—		17,555			—			17,555
Exchange differences		—			179,864			147,306		—		—			—			327,170
Changes in fair values		30,679			—			4,067		—		—			—			34,746
Changes from business combination		—			31,998			—		—		—			—			31,998
Other changes from non-cash transactions		5,321			(825	)		33,035		—		109			8,401			46,041
Ending		14,643			17,411,985			21,799,084		5,403,198		8,064			148,031			44,785,005

¹  Derivative financial instruments held for hedging are shown at net amounts of liabilities and assets.

142

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

37. Contingent Liabilities and Commitments

Acceptances and guarantees as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Confirmed acceptances and guarantees
Confirmed acceptances and guarantees in Korean won
Acceptances and guarantees for KB purchasing loan		161,314		196,517
Performance bond		3,686		—
Refund guarantees		28,021		—
Others		715,116		597,636
		908,137		794,153
Confirmed acceptances and guarantees in foreign currencies
Acceptances of letter of credit		155,151		208,926
Letter of guarantees		49,754		53,210
Bid bond		37,765		51,528
Performance bond		718,097		604,311
Refund guarantees		1,022,646		592,925
Others		2,878,210		2,513,553
		4,861,623		4,024,453
Financial guarantees
Acceptances and guarantees for mortgage		47,384		50,497
Overseas debt guarantees		581,438		463,245
International financing guarantees in foreign currencies		231,686		110,070
Others		230,000		270,000
		1,090,508		893,812
		6,860,268		5,712,418
Unconfirmed acceptances and guarantees
Guarantees of letter of credit		1,826,028		1,744,612
Refund guarantees		654,496		686,843
		2,480,524		2,431,455
		9,340,792		8,143,873

143

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Guarantee exposure by credit ratings

The credit quality of the guarantees exposure as at December 31, 2019 and 2018, can be categorized as follows:

	2019
	Financial instruments applying 12-month expected credit  losses		Financial instruments applying lifetime expected credit losses				Total
(In millions of Korean won)			Non-impaired		Impaired
Confirmed acceptances and guarantees1
Grade 1		4,335,231		2,486		—		4,337,717
Grade 2		2,109,085		38,271		—		2,147,356
Grade 3		89,681		81,317		—		170,998
Grade 4		18,773		172,440		—		191,213
Grade 5		—		2,873		10,111		12,984
		6,552,770		297,387		10,111		6,860,268
Unconfirmed acceptances and guarantees1
Grade 1		1,209,351		1,289		—		1,210,640
Grade 2		1,121,159		32,413		—		1,153,572
Grade 3		16,517		20,957		—		37,474
Grade 4		4,236		62,964		—		67,200
Grade 5		—		170		11,468		11,638
		2,351,263		117,793		11,468		2,480,524
		8,904,033		415,180		21,579		9,340,792

¹  Applied same criteria as the credit quality classification of loans.

144

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	2018
	Financial instruments applying 12-month expected credit  losses		Financial instruments applying lifetime expected credit losses				Total
(In millions of Korean won)			Non-impaired		Impaired
Confirmed acceptances and guarantees1
Grade 1		3,864,908		—		—		3,864,908
Grade 2		1,579,619		29,034		—		1,608,653
Grade 3		62,522		13,585		—		76,107
Grade 4		30,443		117,166		420		148,029
Grade 5		—		171		14,550		14,721
		5,537,492		159,956		14,970		5,712,418
Unconfirmed acceptances and guarantees1
Grade 1		1,102,294		1,747		—		1,104,041
Grade 2		1,180,137		17,795		—		1,197,932
Grade 3		25,205		16,225		—		41,430
Grade 4		9,627		66,186		—		75,813
Grade 5		—		219		12,020		12,239
		2,317,263		102,172		12,020		2,431,455
		7,854,755		262,128		26,990		8,143,873

¹  Applied same criteria as the credit quality classification of loans.

Acceptances and guarantees by counterparty as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Confirmed guarantees		Unconfirmed guarantees		Total		Proportion (%)
Large companies		6,099,209		1,904,253		8,003,462		85.68
Small and medium sized companies		630,438		397,539		1,027,977		11.01
Public and others		130,621		178,732		309,353		3.31
		6,860,268		2,480,524		9,340,792		100.00

	2018
(In millions of Korean won)	Confirmed guarantees		Unconfirmed guarantees		Total		Proportion (%)
Large companies		4,914,524		1,901,767		6,816,291		83.70
Small and medium sized companies		603,874		423,947		1,027,821		12.62
Public and others		194,020		105,741		299,761		3.68
		5,712,418		2,431,455		8,143,873		100.00

145

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Acceptances and guarantees by industry as at December 31, 2019 and 2018, are as follows:

	2019
(In millions of Korean won)	Confirmed guarantees		Unconfirmed guarantees		Total		Proportion (%)
Financial institutions		263,453		5,184		268,637		2.88
Manufacturing		3,482,521		1,627,173		5,109,694		54.70
Service		1,210,318		88,158		1,298,476		13.90
Wholesale and retail		1,104,793		597,998		1,702,791		18.23
Construction		471,745		20,590		492,335		5.27
Public		107,481		81,896		189,377		2.03
Others		219,957		59,525		279,482		2.99
		6,860,268		2,480,524		9,340,792		100.00

	2018
(In millions of Korean won)	Confirmed guarantees		Unconfirmed guarantees		Total		Proportion (%)
Financial institutions		72,991		3,736		76,727		0.94
Manufacturing		3,085,119		1,450,929		4,536,048		55.70
Service		951,988		84,586		1,036,574		12.73
Wholesale and retail		998,333		723,367		1,721,700		21.14
Construction		280,146		40,988		321,134		3.94
Public		165,571		36,256		201,827		2.48
Others		158,270		91,593		249,863		3.07
		5,712,418		2,431,455		8,143,873		100.00

Commitments as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Commitments
Corporate loan commitments		41,077,604		36,695,640
Retail loan commitments		42,492,181		41,283,734
Other commitments in Korean won		1,300,000		1,300,000
Purchase of securities		2,825,674		1,858,405
		87,695,459		81,137,779
Financial Guarantees
Credit line		1,797,802		1,956,426
Purchase of securities		2,189,100		1,786,300
		3,986,902		3,742,726
		91,682,361		84,880,505

146

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Other Matters (including litigation)

a) The Bank has filed 58 lawsuits (excluding minor lawsuits in relation to the collection or management of loans), as the plaintiff, involving aggregate claims of W 293,254 million, and faces 97 lawsuits as the defendant (excluding minor lawsuits in relation to the collection or management of loans) involving aggregate damages of W156,914 million, which arose in the normal course of the business and are still pending as at December 31, 2019.

b) As at December 31, 2019, the Bank has construction contracts amounting to W 155,546 million related to the construction of integrated headquarter building and expenditures made up to December 31, 2019 amount to W 41,598 million.

c) As at December 31, 2019, the Bank has entered into construction contracts amounting to W 250,458 million related to the construction of The K Project(IT infrastructure construction business needed KB’s Digital Transformation to cope with change of IT technology and finance environment), and payments made until December 31, 2019 amount to W 60,462 million.

d) The Bank has entered into a share purchase agreement to acquire a 70 percent share in PRASAC(PRASAC Microfinance Institution Limited), a microfinance deposit taking institution in Cambodia, for US$ 603 million from the existing shareholders on January 6, 2020. The consummation of the acquisition is subject to approvals by the domestic and foreign financial authorities.

The Bank has signed a shareholders’ agreement with the existing shareholders of PRASAC. Each of the existing shareholders has a put option to sell the remaining 30% shares to the Bank at the exercise price calculated on the basis of the adjusted book value as of December 31, 2021. The put option will expire within six months following the finalization of the audited financial statements for the period ending December 31, 2021 and the confirmation of the adjusted book value. If the put option is not exercised until its expiry, the Bank may exercise a call option during the six months following the expiry of such put option. All shareholders are restricted from selling shares or additional pledge before exercising the put option and call option.

e) The face values of the securities sold to general customers through tellers’ sale amount to W 372 million and W 372 million for the years ended at December 31, 2019 and 2018, respectively.

147

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

38. Subsidiaries

Details of subsidiaries as at December 31, 2019, are as follows:

Investor	Investee	Ownership (%)		Location	Industry
Kookmin Bank	Kookmin Bank Int’l Ltd.(London)1		100.00	United Kingdom	Banking and foreign exchange transaction
Kookmin Bank	Kookmin Bank Cambodia PLC.		100.00	Cambodia	Banking and foreign exchange transaction
Kookmin Bank	Kookmin Bank (China) Ltd.		100.00	China	Banking and foreign exchange transaction
Kookmin Bank	KB Microfinance Myanmar Co., Ltd		100.00	Myanmar	Micro finance services
Kookmin Bank	Personal pension trust and 10 others2		0.00	Korea	Trust
Kookmin Bank	KH the 2nd L.L.C. and 39 others3		0.00	Korea	Asset-backed securitization and others
Kookmin Bank	KB Wise Star Private Real Estate Feeder Fund 13		86.00	Korea	Investment Trust
KB Wise Star Private Real Estate Feeder Fund 1	KB Star Office Private Real Estate Master Fund 23		44.44	Korea	Investment Trust
Kookmin Bank	KB Haeorum Private Securities 833		99.94	Korea	Investment Trust
Kookmin Bank	Kiwoom Frontier Private placement fund 10(Bond)3		99.90	Korea	Investment Trust
Kookmin Bank	Woori Safe Plus Qualified Private Trust S-8(Bond)3		99.96	Korea	Investment Trust
Kookmin Bank	Mirae Asset Triumph Global Privately placed Feeder Investment Trust 13		99.92	Korea	Investment Trust
Mirae Asset Triumph Global Privately placed Feeder Investment Trust 1	Mirae Asset Triumph Global Privately placed Master Investment Trust 1		100.00	Korea	Investment Trust
Mirae Asset Triumph Global Privately placed Feeder Investment Trust 1	Mirae Asset Triumph Global Privately placed Master Investment Trust 2		100.00	Korea	Investment Trust
Kookmin Bank	NH-Amundi Global Private Securities Investment Trust 13		77.78	Korea	Investment Trust
Kookmin Bank	Meritz Private Real Estate fund No.9-23		99.98	Korea	Investment Trust
Kookmin Bank	AIP US Red Private Real Estate Trust NO.103		99.97	Korea	Investment Trust
Kookmin Bank	KB KBSTAR 3-Year Futures Inverse Securities ETF (Debt-Derivative) 3		87.53	Korea	Investment Trust
Kookmin Bank	KODEX 10Y F-SKTB Inverse ETF(Bond-Derivatives)3		98.56	Korea	Investment Trust
Kookmin Bank	KB Core Blind Private Estate Fund 1st3		90.09	Korea	Investment Trust
KB Core Blind Private Estate Fund 1st	KB Wise Star Private Real Estate Feeder Fund 3rd3		46.65	Korea	Investment Trust
Kookmin Bank	KB Global Private Real Estate Debt Fund 3rd(USD) 3		99.50	Korea	Investment Trust

¹  On May 16, 2018, the Bank converted Kookmin Bank Int’I Ltd. into a London branch of the Bank. This conversion is a business

148

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

combination of entities under common control. The Bank accounted the business combination under carrying amount method, and the transferred assets and liabilities are measured at the carrying amount included in the consolidated financial statements. At the date of the combination, the transferred assets and liabilities amounted to W 480,161 million and W 480,023 million, respectively.

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 or payment of principal and fixed rate of return.

³ The Bank controls these investees because it is exposed to variable returns from its involvement with the investees and has ability to affect those returns through its power.

KB Western Inland highway Private Special Asset Fund(SOC) and Koratevien Specialist Private Equity Fund 1 as structured companies that hold more than half of their ownership percentage but do not have the strength to related activities in accordance with agreements with trust and other sharerholders are excluded from the consolidation.

The condensed financial information of major subsidiaries as at December 31, 2019 and 2018, and for the years ended December 31, 2019 and 2018, are as follows:

	2019						2019
(In millions of Korean won)	Assets		Liabilities		Equity		Operating revenue		Profit for the year
Kookmin Bank Int’l Ltd.(London)		37,404		887		36,517		558		293
Kookmin Bank Cambodia PLC.		307,604		208,670		98,934		15,815		2,851
Kookmin Bank (China) Ltd.		3,032,642		2,599,516		433,126		135,117		12,462
KB Microfinance Myanmar Co.,Ltd		24,188		2,559		21,629		4,349		(149	)
Personal pension trust and 10 others		4,413,755		4,299,288		114,467		141,162		3,515

	2018						2018
(In millions of Korean won)	Assets		Liabilities		Equity		Operating revenue		Profit for the year
Kookmin Bank Int’l Ltd.(London)		35,923		940		34,983		7,330		1,331
Kookmin Bank Hongkong Ltd.1		—		—		—		5,716		5,434
Kookmin Bank Cambodia PLC.		197,135		104,328		92,807		10,307		1,621
Kookmin Bank (China) Ltd.		2,605,033		2,192,469		412,564		138,453		14,819
KB Microfinance Myanmar Co.,Ltd		20,941		879		20,062		2,783		538
Personal pension trust and 10 others		4,284,440		4,173,488		110,952		144,767		3,966

¹ Liquidation was completed during the year ended December 31, 2018.

149

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Nature of the risks associated with interests in consolidated structured entities

Terms of contractual arrangements that provide financial support to a consolidated structured entity are as follows:

• The Bank provides the capital commitments of W172,000 million to KB Wise Star Private Real Estate Feeder Fund 1st, of which W 817 million has not been utilized, of W 57,878 million to Meritz Private Real Estate fund No.9-2, of which W 24,258 million has not been utilized, and of W 100,000 million to KB Core Blind Private Estate Fund 1st, of which W 66,842 million has not been utilized. Based on the investment agreement, the Bnak is subject to increase its investment upon the request of the asset management company or agreement among existing investors.

• The Bank has provided purchase commitment and grant of credit to the structured entities that are considered as subsidiaries. The Bank should purchase unsold commercial paper securities if there is a shortage of the investors for the commercial paper securities issued by the structured entity. If events causing the cessation of the issuance of commercial paper securities occur or if the structured entities become insolvent, the Bank should provide loans to the structured entities under certain conditions.

(In millions of Korean won)	2019
KH the 2nd L.L.C.		41,309
Silver Investment 2nd Inc.		50,000
KH the 3rd L.L.C.		30,100
KBH the 1st L.L.C.		8,070
HLD the 3rd L.L.C.		111,600
KBH the 3rd L.L.C.		30,217
KBC the 2nd L.L.C.		30,186
KLD the 1st L.L.C.		13,100
LOG the 3rd L.L.C.		24,300
KBL Incheon 1st L.L.C.		101,000
KB DTower 1st L.L.C.		50,151
KB Display 1st L.L.C.		100,303
KB First Park L.L.C.		48,450
KB Aluminium the 1st L.L.C.		50,236
KB INO 2nd L.L.C.		30,131
KBH the 5th L.L.C.		25,072
KB Happy 1st L.L.C.		50,138
KL Industrial the 2nd L.L.C.		30,164
KB Socio the 1st L.L.C.		30,187
KL Industrial the 1st L.L.C.		30,158
KBST the 1st L.L.C.		30,078
KBH the 4th L.L.C.		30,168
KB Geumjeong Hill L.L.C.		65,130
KBM the 1st L.L.C.		45,220
KB Future the 1st L.L.C.		30,127
Great Forest the 1st L.L.C		25,149
KBC the 3rd L.L.C.		35,074
KBH the 6th L.L.C.		50,064
KB industry 2nd L.L.C.		30,151
Beomuh Landmark the 2nd L.L.C.		60,216
KB Firstville the 1st L.L.C.		19,081
KB Handok the 1st L.L.C.		30,029
KB Heracles the 1st L.L.C.		25,131
KB World Vista the 1st L.L.C.		19,790
SLT Gamsam Co., Ltd.		24,300
K Plus the 1st L.L.C		200,369

150

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

• The Bank provides the guarantees of payment of principal or principal and fixed rate of return, in case the operating results of the trusts are less than the guaranteed principal or principal and a fixed rate of return.

Changes in subsidiaries

KBH the 5th L.L.C and 26 other subsidiaries were newly included in the consolidation scope, and KL the 1st L.L.C. and 19 other subsidiaries were excluded from the scope of consolidation due to resale during the year ended December 31, 2019.

39. Leases

The amounts recognized in the separate statements of financial position

The separate statement of financial position shows the following amounts relating to leases:

(In millions of Korean won)	December 31, 2019		January 1, 2019
Right-of-use property and equipment1
Real estate		331,108		341,286
Vehicles		7,847		10,860
Others		15,319		10,952
		354,274		363,098
Right-of-use intangible assets1		9,639		15,162
		9,639		15,162
		363,913		378,260
Lease liabilities		334,037		327,102

¹  It is included in property and equipment, intangible assets and other liabilities.

151

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

The amounts recognized in statements of comprehensive income

The amounts related to lease recognized in statement of comprehensive income for the year ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	2019		2018
Depreciation and amortization of right-of-use assets
Real estate		192,816		—
Vehicles		13,403		—
Others		6,972		—
Intangible asset		6,519		—
		219,710		—
Interest expenses on the lease liabilities (Included in finance charges)		7,360		—
Expense relating to short-term leases (Included in administrative expenses)		1,996		—
Expense relating to leases of low-value assets that are not short-term leases (Included in administrative expenses)		1,034		—

The total cash outflow for leases in 2019 was W 161,756 million.

Finance Lease - 2018

The future minimum lease payments classified as a finance lease as at December 31, 2018 is as follows:

(In millions of Korean won)	2018
Net carrying amount of finance lease assets		26,083
Minimum lease payments		8,230
Within 1 year		5,824
1-5 years		2,406
Present value of minimum lease payments		8,065
Within 1 year		5,716
1-5 years		2,349

152

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Operating Lease - 2018

The Bank as an Operating Lessee

The future minimum lease payments arising from the non-cancellable lease contracts as at December 31, 2018, is as follows:

(In millions of Korean won)	2018
Minimum lease payments		330,758
Within 1 year		131,418
1-5 years		182,665
Over 5 years		16,675
Minimum sublease payments		(2,323	)

The lease payments reflected in profit or loss for the year ended December 31, 2018 is as follows:

(In millions of Korean won)	2018
Lease payments reflected in profit or loss		154,412
Minimum lease payments		156,181
Sublease payments		(1,769	)

The Bank as an Operating Lessor

The future minimum lease receipts arising from the non-cancellable lease contracts as at December 31, 2019 and 2018 is as follows:

(In millions of Korean won)	2019		2018
Minimum lease receipts		6,280		6,786
Within 1 year		4,197		4,464
1-5 years		2,083		2,322

153

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

40. Related Party Transactions

Profit or loss arising from transactions with related parties for the years ended December 31, 2019 and 2018, are as follows:

(In millions of Korean won)		2019		2018
Parent
KB Financial Group Inc.	Fee and commission income		5,355		4,644
	Other non-operating income		932		808
	Interest expense		1,574		5,178
	Fee and commission expense		1		—
	Other operating expenses		69		—
	General and administrative expenses		841		778
Subsidiaries
Kookmin Bank Int’l Ltd. (London)	Interest income		—		1,068
	Fee and commission income		—		10
	Other non-operating income		—		131
Kookmin Bank Cambodia PLC.	Interest income		2,947		1,105
	Fee and commission income		18		14
	Other non-operating income		180		212
Kookmin Bank (China) Ltd.	Interest income		31,773		17,739
	Fee and commission income		235		119
KB Microfinance Myanmar Co.,Ltd.	Other non-operating income		105		77
Trust	Fee and commission income		17,383		18,508
	Interest expense		2,603		2,901
KB Wise Star Private Real Estate Feeder Fund 1st	Fee and commission income		23		17
	Interest expense		7		7
Securitization SPE	Reversal of credit losses		200		—
	Interest expense		1		1

154

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Structured entities	Interest income	204	166
	Fee and commission income	10,242	9,026
	Gains on financial assets/liabilities at fair value through profit or loss	11,117	12,999
	Reversal of credit losses	3	—
	Interest expense	165	23
	Losses on financial assets/liabilities at fair value through profit or loss	694	595
	Provision for credit losses	63	6
KB Multi-Asset Private Securities Fund (Bond Mixed-ETF)1	Fee and commission income	—	53
KB Multi-Asset Private Securities Fund S-1(Bond Mixed) 1	Fee and commission income	2	37
KB Multi-Asset Private Securities Master Fund P-1(Bond Mixed)1	Fee and commission income	3	36
	Gains on financial assets/liabilities at fair value through profit or loss	491	15,199
	Losses on financial assets/liabilities at fair value through profit or loss	—	7,103
KB Haeoreum private securities investment trust 83(Bond)	Fee and commission income	54	91
Mirae Asset Triumph Global Privately placed Feeder Investment Trust 1	Fee and commission income	32	25
NH-Amundi Global Private Securities Investment Trust 1 (USD) (BOND)	Fee and commission income	6	3
KB Leaders Private placement fund 10[Bond]1	Fee and commission income	1	—
KB Core Blind Private Estate Fund 1st	Interest income	18	—
	Fee and commission income	1	—
	Interest expense	5	—
Parent’s subsidiaries
KB Securities Co., Ltd.	Interest income	1,325	459
	Fee and commission income	14,298	15,770
	Gains on financial assets/liabilities at fair value through profit or loss	39,373	8,583
	Reversal for credit losses	6	—
	Other non-operating income	3,658	2,667
	Interest expense	6,163	3,771
	Fee and commission income	684	957
	Losses on financial assets/liabilities at fair value through profit or loss	13,616	8,448
	Other operating expense	134	—
	Provision for credit losses	—	21
	General and administrative expenses	—	8,361

155

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

KB Asset Management Co., Ltd.	Fee and commission income	1,201	1,085
	Other non-operating income	4	4
	Interest expense	90	95
	General and administrative expenses	500	458
KB Real Estate Trust Co., Ltd.	Fee and commission income	211	134
	Other non-operating income	45	42
	Interest expense	328	197
	Fee and commission expense	1,899	2,282
KB Investment Co., Ltd.	Fee and commission income	42	23
	Interest expense	1,019	376
KB Credit Information Co., Ltd.	Fee and commission income	64	58
	Other non-operating income	232	205
	Interest expense	134	85
	Fee and commission expense	20,485	16,738
KB Data System Co., Ltd.	Fee and commission income	225	202
	Other non-operating income	92	98
	Interest expense	309	250
	General and administrative expenses	50,074	50,803
KB Life Insurance Co., Ltd.	Fee and commission income	14,075	12,471
	Gains on financial assets/liabilities at fair value through profit or loss	14,612	14,064
	Other non-operating income	37	82
	Interest expense	9	8
	Fee and commission expense	8	12
	Losses on financial assets/liabilities at fair value through profit or loss	2,853	3,421
	Other operating expenses	11	—
	General and administrative expenses	1,286	1,582
KB Kookmin Card Co., Ltd.	Interest income	3,910	3,855
	Fee and commission income	211,806	211,328
	Gains on financial assets/liabilities at fair value through profit or loss	2,348	2,730
	Reversal of credit losses	53	7
	Other non-operating income	1,314	983
	Interest expense	1,073	870
	Fee and commission expense	1,732	1,587
	Losses on financial assets/liabilities at fair value through profit or loss	38	400
	General and administrative expenses	153	216
KB Savings Bank Co., Ltd.	Fee and commission income	736	379

156

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	Other non-operating income	50	44
	Interest expense	6	2
	Fee and commission expense	17	24
KB Capital Co., Ltd.	Interest income	2,907	1,989
	Fee and commission income	2,968	2,311
	Other non-operating income	167	208
	Interest expense	670	1,138
	Fee and commission expense	44	61
	Other operating expense	—	5
	Provision for credit losses	46	163
	General and administrative expenses	—	16
KB Insurance Co., Ltd.	Interest income	79	45
	Fee and commission income	23,458	22,948
	Gains on financial instruments at fair value through profit or loss	74,576	24,999
	Other non-operating income	361	363
	Interest expense	1,123	1,265
	Fee and commission expense	1	967
	Losses on financial instruments at fair value through profit or loss	7,468	4,328
	Other operating expense	—	16
	Provision for credit losses	6	—
	General and administrative expenses	15,576	15,667
Hanbando BTL Private Special Asset Fund	Fee and commission income	149	160
KB Senior Loan Private Fund No.1	Fee and commission income	8	20
KB Evergreen Private Securities Fund 98(Bond)1	Fee and commission income	—	5
KB AMP Infra Private Special Asset Fund 1(FoFs)	Fee and commission income	11	5
KB Onkookmin 2020 TDF Fund(FoFs)1	Fee and commission income	—	1
KB Onkookmin 2025 TDF Fund(FoFs) 1	Fee and commission income	2	1
KB Onkookmin 2030 TDF Fund(FoFs)	Fee and commission income	2	1
KB Onkookmin 2035 TDF Fund(FoFs) 1	Fee and commission income	—	2
KB Onkookmin 2040 TDF Fund(FoFs) 1	Fee and commission income	—	1
KB Onkookmin 2045 TDF Fund(FoFs)	Fee and commission income	1	1
KB Onkookmin 2050 TDF Fund(FoFs) 1	Fee and commission income	—	1
KB Muni bond Private Securities Fund 1(USD)(Bond)	Fee and commission income	11	10

157

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

KB Global Private Real Estate Debt Fund 1	Fee and commission income	10	5
KB Na Compass Energy Private Special Asset Fund	Fee and commission income	8	5
KB Star Office Private Real Estate Master Fund 3	Interest income	619	433
	Interest expense	110	48
KB Star Office Private Real Estate Master Fund 4	Interest income	760	396
	Fee and commission income	19	10
	Interest expense	33	13
KB Korea Short Term Premium Private Securities 4(USD) 1	Fee and commission income	2	—
	Losses on financial assets/liabilities at fair value through profit or loss	2,931	—
KB Korea Short Term Premium Private Securities 5(USD) 1	Fee and commission income	9	2
	Gains on financial assets/liabilities at fair value through profit or loss	1,347	—
	Losses on financial assets/liabilities at fair value through profit or loss	12,104	—
KB Korea Short Term Premium Private Securities 10(USD)	Fee and commission income	1	—
KB Global Core Bond Securities Master Fund(Bond)	Fee and commission income	23	2
	Gains on financial assets/liabilities at fair value through profit or loss	1,276	—
	Losses on financial assets/liabilities at fair value through profit or loss	28	—
KB AU Infigen Energy Private Special Asset Fund	Fee and commission income	4	—
KB AU Infigen Energy Private Special Asset Fund 2	Fee and commission income	6	—
KB NA Loan Specialty Private Real Estate Investment Trust 1	Fee and commission income	1	—
	Gains on financial assets/liabilities at fair value through profit or loss	4	—
	Losses on financial assets/liabilities at fair value through profit or loss	335	—
KB NA Loan Specialty Private Real Estate Investment Trust 3	Fee and commission income	1	—
	Gains on financial assets/liabilities at fair value through profit or loss	209	—
	Losses on financial assets/liabilities at fair value through profit or loss	14	—

158

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Associates
Korea Credit Bureau Co., Ltd.	Fee and commission income	—		4
	Interest expense	21		127
	Fee and commission expense	1,601		1,486
Incheon Bridge Co., Ltd.	Interest income	8,612		9,426
	Fee and commission income	—		9
	Gains on financial assets/liabilities at fair value through profit or loss	4,975		2,655
	Reversal of credit losses	5		—
	Interest expense	483		296
	Fee and commission expense	7		2
	Provision for credit losses	—		1
Dongjo Co., Ltd.	Reversal of credit losses	—		31
Dae-A Leisure Co., Ltd.	Interest expense	8		9
KB12-1 Venture Investment Partnership	Interest expense	3		24
Future Planning KB Start-up Creation Fund	Interest expense	—		18
KB High-tech Company Investment Fund	Interest expense	26		27
Aju Good Technology Venture Fund	Interest expense	22		30
KB-KDBC Pre-IPO New Technology Business Investment Fund	Interest expense	58		39
KB Digital Innovation & Growth New Technology Business Investment Fund	Interest expense	8		7
KB-Brain KOSDAQ Scale-up Fund	Interest expense	89		21
KB Global Platform Fund	Interest expense	193		—
Associate of Parent
KB Star Office Private Real Estate Investment Trust No.1	Interest expense	208		93
Associates of Parent’s subsidiaries
SY Auto Capital Co., Ltd.	Interest income	191		189
	Fee and commission income	—		1
	Reversal of credit losses	13		—
	Interest expense	1		—
	Provision for credit losses	—		14
KB No.8 Special Purpose Acquisition Company1	Interest expense	—		17
KB No.9 Special Purpose Acquisition Company1	Interest expense	(23	)	43
KB No.10 Special Purpose Acquisition Company1	Interest expense	18		30
KB No.11 Special Purpose Acquisition Company1	Interest expense	9		12
KB No.17 Special Purpose Acquisition Company	Interest expense	28		—

159

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

KB No.18 Special Purpose Acquisition Company	Interest expense	28	—
KB No.19 Special Purpose Acquisition Company	Interest expense	8	—
KB No.20 Special Purpose Acquisition Company	Interest expense	3	—
RAND Bio Science Co., Ltd.	Interest expense	5	3
Wise Asset Management Co., Ltd.	Interest expense	2	9
Food Factory Co., Ltd.	Interest income	41	9
	Fee and commission expense	12	1
	Provision for credit losses	1	1
Acts CO.,LTD	Interest income	1	—
APRO CO.,LTD.	Interest income	19	—
	Interest expense	4	1
	Fee and commission expense	17	—
JLK Inspection Co., Ltd1	Interest expense	1	—
Rainist Co., Ltd.	Fee and commission income	39	—
	Interest expense	—	2
Spark Biopharma Inc.1	Interest expense	59	25
Stratio, Inc.	Interest expense	1	—
NEXELON Inc.1	Interest expense	2	—
CellinCells. Co. Ltd.	Interest expense	19	—
Bomap, Inc	Interest expense	1	—
BNF Corporation Ltd.	Provision for credit losses	1	—
KB Pre IPO Secondary Venture Fund 1st	Interest expense	7	27
POSCO-KB Shipbuilding Fund	Interest expense	—	81
Ino Landing Lab Inc.1	Fee and commission income	—	1
Other
Retirement pension	Fee and commission income	939	876
	Interest expense	4	3

¹ Not considered to be the Bank’s related party as at December 31, 2019.

160

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Details of receivables and payables, and related allowances for loan losses arising from the related party transactions as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)		2019		2018
Parent
KB Financial Group Inc.	Other assets		35		4,545
	Deposits		18,537		69,621
	Other liabilities		418,286		643,010
Subsidiaries
Kookmin Bank Int’l Ltd. (London)	Other assets		601		580
	Deposits		37,387		—
Kookmin Bank Cambodia PLC.	Cash and due from financial institutions		1,990		228
	Loans at amortized cost (Gross amount)		115,780		55,905
	Other assets		1,266		739
	Deposits		9,126		2,017
	Other liabilities		88		19
Kookmin Bank (China) Ltd.	Cash and due from financial institutions		19,611		14,717
	Loans at amortized cost (Gross amount)		1,169,378		860,937
	Other assets		9,940		41,518
	Deposits		758		1,963
	Debts		139,382		248,398
	Other liabilities		—		210
KB Microfinance Myanmar Co., Ltd.	Other liabilities		14		10
Trust	Other assets		20,939		17,446
	Other liabilities		97,572		118,355
KB Wise Star Private Real Estate Feeder Fund 1st	Other assets		7		5
	Deposits		422		413
	Other liabilities		2		2
Securitization SPE	Deposits		1,095		1,310
Structured entities	Derivative assets		13,164		6,519
	Loans at amortized cost (Gross amount)		3,682		3,129
	Allowances		6		5
	Other assets		6		187
	Derivative liabilities		—		746
	Deposits		32,124		31,866
	Provisions		64		4
	Other liabilities		2,758		1,931
KB Multi-Asset Private Securities Fund S-1(Bond Mixed)1	Other assets		—		4
KB Multi-Asset Private Securities Master Fund P-1 (Bond Mixed)1	Derivative liabilities		—		4,058
KB Haeoreum private securities investment trust 83 (Bond)	Other assets		8		6

161

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Mirae Asset Triumph Global Privately placed Feeder Investment Trust 1	Other assets	7	7
NH-Amundi Global Private Securities Investment Trust 1(USD)(BOND)	Other assets	1	3
KB Core Blind Private Estate Fund 1st	Loans at amortized cost(Gross amount)	10,000	—
	Other assets	19	—
	Deposits	5,063	—
	Other liabilities	5	—
Parent’s subsidiaries
KB Securities Co., Ltd.	Derivative assets	9,424	3,935
	Loans at amortized cost(Gross amount)	65,289	25,617
	Allowances	23	21
	Other assets	18,320	8,644
	Derivative liabilities	3,979	1,412
	Deposits	423,053	334,470
	Provisions	30	37
	Other liabilities	14,825	15,473
KB Asset Management Co., Ltd.	Other assets	260	209
	Deposits	6,929	3,284
	Other liabilities	6	6
KB Real Estate Trust Co., Ltd.	Other assets	2	—
	Deposits	49,708	27,321
	Other liabilities	368	350
KB Investment Co., Ltd.	Other assets	41	—
	Deposits	62,686	20,784
	Other liabilities	53	17
KB Credit Information Co., Ltd.	Deposits	4,047	4,240
	Other liabilities	6,022	5,659
KB Data System Co., Ltd.	Other assets	886	322
	Deposits	21,642	18,059
	Other liabilities	5,372	4,397
KB Life Insurance Co., Ltd.	Derivative assets	—	270
	Other assets	3,804	1,827
	Derivative liabilities	1,532	1,197
	Deposits	571	1,576
	Other liabilities	506	507
KB Kookmin Card Co., Ltd.	Derivative assets	676	—
	Loans at amortized cost(Gross amount)	16,209	—
	Allowances	6	—
	Other assets	30,936	24,582
	Derivative liabilities	—	612
	Deposits	65,518	84,089
	Provisions	237	296

162

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	Other liabilities	59,277	59,748
KB Savings Bank Co., Ltd.	Other assets	144	2
	Other liabilities	389	391
KB Capital Co., Ltd.	Loans at amortized cost (Gross amount)	64,489	54,787
	Allowances	269	227
	Other assets	1,804	574
	Deposits	126,878	64,283
	Provision	12	—
	Other liabilities	1,337	57
KB Insurance Co., Ltd.	Derivative assets	15,612	7,034
	Other assets	8,549	12,143
	Derivative liabilities	6,453	5,265
	Deposits	5,485	2,745
	Debentures	29,991	30,002
	Provisions	6	—
	Other liabilities	3,168	1,929
Hanbando BTL Private Special Asset Fund	Other assets	36	39
KB Senior Loan Private Fund No.1	Other assets	1	3
KB AMP Infra Private Special Asset Fund 1	Other assets	1	1
KB KBSTAR Mid-Long Term KTB Active ETF(Bond)		500	—
KB Onkookmin 2030 TDF Fund(FoFs)	Other assets	1	—
KB Muni bond Private Securities Fund 1 (USD)	Other assets	2	2
KB Global Private Real Estate Debt Fund 1 (FoFs)	Other assets	2	2
KB Na Compass Energy Private Special Asset Fund	Other assets	1	1
KB Star Office Private Real Estate Master Fund 3	Loans at amortized cost (Gross amount)	—	24,000
	Other assets	—	12
	Deposits	7,364	5,361
	Other liabilities	58	48
KB Star Office Private Real Estate Master Fund 4	Loans at amortized cost (Gross amount)	20,000	20,000
	Other assets	13	13
	Deposits	1,983	1,629
	Other liabilities	16	13
KB Korea Short Term Premium Private Securities 5(USD)(Bond)1	Other assets	—	2
KB Korea Short Term Premium Private Securities 10(USD)(Bond)	Other assets	1	—
KB Global Core Bond Securities Master Fund(Bond)	Other assets	2	2

163

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

KB AU Infigen Energy Private Special Asset Fund	Other assets	1	—
KB AU Infigen Energy Private Special Asset Fund 2	Other assets	1	—
KB NA Loan Specialty Private Real Estate Investment Trust 1	Other assets	1	—
	Derivative liabilities	335	—
KB NA Loan Specialty Private Real Estate Investment Trust 3	Other assets	1	—
	Derivative liabilities	6	—
Associates
Korea Credit Bureau Co., Ltd.	Deposits	17,966	15,674
	Other liabilities	—	33
Incheon Bridge Co., Ltd.	Financial assets at fair value through profit or loss	37,857	32,882
	Loans at amortized cost (Gross amount)	147,700	158,200
	Allowances	11	14
	Other assets	520	736
	Deposits	45,447	43,666
	Provisions	6	7
	Other liabilities	346	24
Doosung Metal Co., Ltd.	Deposits	—	3
Jungdo Steel Co., Ltd.	Deposits	4	4
Dae-A Leisure Co., Ltd.	Deposits	753	1,229
	Other liabilities	14	7
Carlife Co., Ltd.	Deposits	—	2
Computerlife Co., Ltd.	Deposits	1	1
Skydigital INC.	Deposits	25	16
Jo Yang Industrial Co., Ltd.	Deposits	2	—
KB12-1 Venture Investment Partnership	Deposits	440	245
	Other liabilities	—	1
KB High-tech Company Investment Fund	Deposits	11,755	275
	Other liabilities	2	—
Aju Good Technology Venture Fund	Deposits	5,456	6,439
	Other liabilities	2	2
KB-KDBC Pre-IPO New Technology Business Investment Fund	Deposits	7,054	7,088
	Other liabilities	4	3
KB Digital Innovation & Growth New Technology Business Investment Fund	Deposits	12	618
KB-Brain KOSDAQ Scale-up Fund	Deposits	13,118	18,813
	Other liabilities	4	7
KB Global Platform Fund	Deposits	17,928	—
	Other liabilities	9	—
Associate of Parent
KB Star Office Private Real Estate Investment Trust No.1	Deposits	8,293	7,946
	Other liabilities	66	58

164

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Associates of Parent’s subsidiaries
SY Auto Capital Co., Ltd.	Loans at amortized cost (Gross amount)	1,900	8,300
	Allowances	4	18
	Other assets	—	9
	Deposits	8	5
	Provisions	13	11
	Other liabilities	2	2
KB No.9 Special Purpose Acquisition Company1	Deposits	—	2,275
	Other liabilities	—	42
KB No.10 Special Purpose Acquisition Company1	Deposits	—	1,666
	Other liabilities	—	11
KB No.11 Special Purpose Acquisition Company1	Deposits	—	658
	Other liabilities	—	2
KB No.17 Special Purpose Acquisition Company	Deposits	1,742	—
	Other liabilities	27	—
KB No.18 Special Purpose Acquisition Company	Deposits	2,140	—
	Other liabilities	28	—
KB No.19 Special Purpose Acquisition Company	Deposits	1,093	—   —
	Other liabilities	7
KB No.20 Special Purpose Acquisition Company	Deposits	1,984	—
	Other liabilities	3	—
RAND Bio Science Co., Ltd.	Deposits	4,452	232
Wise Asset Management Co., Ltd.	Deposits	21	696
	Other liabilities	—	2
Built On Co., Ltd. 1	Deposits	—	7
Food Factory Co., Ltd.	Loans at amortized cost (Gross amount)	1,987	200
	Allowances	2	1
	Other assets	1	1
	Deposits	1,073	68
	Other liabilities	1	—
Acts Co., Ltd.	Deposits	1	29
Paycoms Co., Ltd.	Deposits	1	1
Big Dipper Co., Ltd.	Deposits	6	182
APRO CO.,LTD.	Loans at amortized cost(Gross amount)	2,016	—
	Deposits	3,201	2,201
	Other liabilities	1	—
Rainist Co., Ltd.	Deposits	—	1
Spark Biopharma Inc.1	Deposits	—	2,630
	Other liabilities	—	19
Stratio, Inc.	Deposits	726	516
CellinCells. Co., Ltd.	Deposits	1,545	—
	Other liabilities	1	—
Fabric Types Co., Ltd.	Deposits	395	—
	Other liabilities	2	—
BNF Corporation Ltd.	Loans at amortized cost(Gross amount)	1,400	—

165

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	Other assets	2	—
	Deposits	947	—
	Other liabilities	6	—
KB IGen Private Equity Fund No.1	Deposits	147	148
KB Pre IPO Secondary Venture Fund 1	Deposits	2,955	1,115
	Other liabilities	1	1
Key management	Loans at amortized cost (Gross amount)	3,423	2,218
	Allowances	1	—
	Other assets	3	2
	Deposits	8,370	8,119
	Other liabilities	38	37
Other
Retirement pension	Other assets	366	331
	Other liabilities	17,620	16,388

¹  Not considered to be the Bank’s related party as at December 31, 2019.

Right-of-use assets and Lease liabilities with related parties as at December 31, 2019, are as follows:

((In millions of Korean won)		2019
Parent’s Subsidiaries
KB Securities Co., Ltd.	Right-of-use assets		13,863
	Lease liabilities		16,658
KB Kookmin Card Co., Ltd.	Right-of-use assets		168
	Lease liabilities		28
KB Capital Co., Ltd.	Right-of-use assets		9
	Lease liabilities		23
KB Insurance Co., Ltd.	Right-of-use assets		5,693
	Lease liabilities		5,751

166

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Notional amount of derivative assets and liabilities arising from the related party transactions as at December 31, 2019 and 2018, are as follows:

((In millions of Korean won)		2019		2018
Subsidiaries
KL the 1st L.L.C. 1	Notional amount of Derivative financial instruments		—		50,000
KH the 2nd L.L.C	Notional amount of Derivative financial instruments		40,000		40,000
Silver Investment 2nd Inc.	Notional amount of Derivative financial instruments		50,000		50,000
KL International the 1st L.L.C. 1	Notional amount of Derivative financial instruments		—		30,000
KL the 3rd L.L.C. 1	Notional amount of Derivative financial instruments		—		30,000
KBM the 1st L.L.C.	Notional amount of Derivative financial instruments		40,000		50,000
KY the 1st L.L.C. 1	Notional amount of Derivative financial instruments		—		24,000
KH the 3rd L.L.C.	Notional amount of Derivative financial instruments		30,000		70,000
KBC the 1st L.L.C. 1	Notional amount of Derivative financial instruments		—		35,000
KH the 4th L.L.C. 1	Notional amount of Derivative financial instruments		—		25,000
KDL the 1st L.L.C. 1	Notional amount of Derivative financial instruments		—		29,000
KBH the 1st L.L.C.	Notional amount of Derivative financial instruments		6,500		12,500
KBH the 2nd L.L.C.1	Notional amount of Derivative financial instruments		—		18,000
KB INO 1st L.L.C.1	Notional amount of Derivative financial instruments		—		10,000
LIIV FOR RENTAL 1st L.L.C.1	Notional amount of Derivative financial instruments		—		24,000
HLD the 3rd L.L.C.	Notional amount of Derivative financial instruments		112,500		109,200
Leecheon Albatros L.L.C. 1	Notional amount of Derivative financial instruments		—		20,000
KB HUB the 1st L.L.C. 1	Notional amount of Derivative financial instruments		—		30,000
KBH the 3rd L.L.C.	Notional amount of Derivative financial instruments		30,000		40,000
KBC the 2nd L.L.C.	Notional amount of Derivative financial instruments		30,000		50,000
KLD 1st L.L.C.	Notional amount of Derivative financial instruments		15,200		9,300
LOG the 3rd L.L.C.	Notional amount of Derivative financial instruments		24,300		24,300
KB Green 1st L.L.C. 1	Notional amount of Derivative financial instruments		—		52,500
KBL Incheon 1st L.L.C.	Notional amount of Derivative financial instruments		100,000		100,000
KB DTower 1st L.L.C.	Notional amount of Derivative financial instruments		50,000		50,000

167

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

KB Display 1st L.L.C.	Notional amount of Derivative financial instruments	100,000	100,000
KB LCC 1st L.L.C. 1	Notional amount of Derivative financial instruments	—	90,000
KB Alminium 1st L.L.C.	Notional amount of Derivative financial instruments	50,000	50,000
KB INO 2nd L.L.C.	Notional amount of Derivative financial instruments	30,000	50,000
KBH the 5th L.L.C.	Notional amount of Derivative financial instruments	25,000	—
KB Happy 1st L.L.C.	Notional amount of Derivative financial instruments	50,000	—
KL Industrial 2nd L.L.C.	Notional amount of Derivative financial instruments	30,000	—
KB Socio the 1st L.L.C.	Notional amount of Derivative financial instruments	30,000	—
KB Industry the 1st L.L.C.	Notional amount of Derivative financial instruments	30,000	—
KBST the 1st L.L.C.	Notional amount of Derivative financial instruments	30,000	—
KB Geumjeong Hill L.L.C.	Notional amount of Derivative financial instruments	64,300	—
KBH the 4th L.L.C.	Notional amount of Derivative financial instruments	30,000	—
Great Forest the 1st L.L.C.	Notional amount of Derivative financial instruments	25,000	—
KBC the 3rd L.L.C.	Notional amount of Derivative financial instruments	35,000	—
KB FUTURE the 1st L.L.C.	Notional amount of Derivative financial instruments	30,000	—
KBH the 6th L.L.C.	Notional amount of Derivative financial instruments	50,000	—
BEOMUH Landmark 2nd L.L.C	Notional amount of Derivative financial instruments	59,000	—
KB Industry the 2nd L.L.C.	Notional amount of Derivative financial instruments	30,000	—
KB Handok the 1st L.L.C.	Notional amount of Derivative financial instruments	30,000	—
KB Heracles the 1st L.L.C.	Notional amount of Derivative financial instruments	25,000	—
KB Plus the 1st L.L.C	Notional amount of Derivative financial instruments	200,000	—
KB Multi-Asset Private Securities Master Fund P-1(Bond Mixed) 1	Notional amount of Derivative financial instruments	—	231,447
Parent’s subsidiaries
KB Securities Co., Ltd.	Notional amount of Derivative financial instruments	651,372	393,515
KB Life Insurance Co., Ltd.	Notional amount of Derivative financial instruments	104,058	252,213
KB Kookmin Card Co., Ltd.	Notional amount of Derivative financial instruments	44,472	62,611
KB Insurance Co., Ltd.	Notional amount of Derivative financial instruments	799,567	1,127,722
KB NA Loan Specialty Private Real Estate Investment Trust 1	Notional amount of Derivative financial instruments	29,153	—
KB NA Loan Specialty Private Real Estate Investment Trust 3	Notional amount of Derivative financial instruments	95,519	—

¹  Not considered to be the Bank’s related party as at December 31, 2019.

168

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

In accordance with Korean IFRS 1024, the Bank includes the parent, subsidiaries, the parent’s subsidiaries, associates, associates of the parent’s subsidiaries, key management (including family members), and post-employment benefit plans of the Bank and entities regarded as its related parties in the scope of its related parties. Additionally, the Bank discloses balances (receivables and payables) and other amounts arising from the related party transactions in the notes to the separate financial statements. Refer to Note 13 for details on investments in associates and subsidiaries.

Key management includes the directors of the Bank and the executive directors (vice-presidents and above) of the Bank and companies where the directors and/or their close family members have control or joint control.

Significant loan transactions with related parties for the years ended December 31, 2019 and 2018, are as follows:

	2019 1
(In millions of Korean won)	Beginning		Loans		Repayments		Others			Ending
Subsidiaries
Kookmin Bank Cambodia PLC.		55,905		104,097		46,701		2,479			115,780
Kookmin Bank (China) Ltd.		860,937		1,847,850		1,575,046		35,637			1,169,378
Structured entities2		3,129		19,362		18,660		(149	)		3,682
KB Core Blind Private Estate Fund 1st		—		10,000		—		—			10,000
Parent’s subsidiaries
KB Securities Co., Ltd.		25,617		892,470		853,096		298			65,289
KB Kookmin Card Co., Ltd.		—		261,060		244,851		—			16,209
KB Capital Co., Ltd.		54,787		7,624		—		2,078			64,489
KB Star Office Private Real Estate Master Fund 3		24,000		—		24,000		—			—
KB Star Office Private Real Estate Master Fund 4		20,000		—		—		—			20,000
Associate
Incheon Bridge Co., Ltd.		191,082		—		10,500		4,975			185,557
Associates of parent’s subsidiaries
SY Auto Capital Co., Ltd.		8,300		27,998		34,398		—			1,900
Food Factory Co., Ltd		200		1,800		20		7			1,987
APRO CO.,LTD.		—		2,000		—		16			2,016
BNF Corporation Ltd.		—		—		—		1,400			1,400
Acts Co., Ltd.		—		68		68		—			—
Key management 4		2,218		638		555		1,122			3,423

169

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

	2018 1
(In millions of Korean won)	Beginning		Loans		Repayments		Others			Ending
Subsidiaries
Kookmin Bank Int’l Ltd. (London)		332,051		42,853		226,989		(147,915	)		—
Kookmin Bank Cambodia PLC.		42,856		55,577		43,903		1,375			55,905
Kookmin Bank (China) Ltd.		514,272		1,206,165		885,046		25,546			860,937
Structured entities3		2,077		19,162		18,110		—			3,129
Parent’s subsidiaries
KB Securities Co., Ltd.		4,346		1,369,958		1,348,687		—			25,617
KB Kookmin Card Co., Ltd.		6,806		161,281		168,087		—			—
KB Capital Co., Ltd.		19,285		33,711		—		1,791			54,787
KB Star Office Private Real Estate Master Fund 3		—		24,000		—		—			24,000
KB Star Office Private Real Estate Master Fund 4		—		20,000		—		—			20,000
Associates
Incheon Bridge Co., Ltd.		203,126		—		14,700		2,656			191,082
Dongjo Co., Ltd.		116		—		116		—			—
Associates of parent’s subsidiaries
SY Auto Capital Co., Ltd.		—		50,053		41,753		—			8,300
Food Factory Co., Ltd.		200		—		—		—			200
Key management 4		1,619		108		836		1,327			2,218

¹ Transactions between related parties, such as settlements arising from operating activities and daylight overdraft to be repaid on the day of handling, are excluded.

²  Includes details of KL the 1st L.L.C. and 13 others that are excluded from related parties.

³  Includes details of KLFood the 1st L.L.C. that are excluded from related parties during the year ended December 31, 2018.

⁴ Includes details of loan transactions that occurred before they became related parties.

170

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Significant lending transactions with related parties for the years ended December 31, 2019 and 2018, are as follows:

		2019
(In millions of Korean won)		Beginning		Increase		Decrease		Others1			Ending
Parent
KB Financial Group Inc..	Deposits		69,621		310,000		370,000		8,916			18,537
Subsidiaries
Kookmin Bank Int`l Ltd.(London)	Deposits		—		—		—		37,387			37,387
Kookmin Bank Cambodia PLC.	Deposits		2,017		—		—		7,109			9,126
Kookmin Bank (China) Ltd.	Deposits		1,963		—		—		(1,205	)		758
	Debts		248,398		—		—		(109,016	)		139,382
Securitization SPE	Deposits		1,310		—		—		(215	)		1,095
KB Wise Star Private Real Estate Feeder Fund 1st	Deposits		413		9		—		—			422
Structured entities	Deposits		31,866		24,053		—		(23,795	)		32,124
KB Core Blind Private Estate Fund 1st	Deposits		—		5,063		—		—			5,063
Parent’s subsidiaries
KB Asset Management Co., Ltd.	Deposits		3,284		—		—		3,645			6,929
KB Real Estate Trust Co., Ltd.	Deposits		27,321		—		—		22,387			49,708
KB Investment Co., Ltd.	Deposits		20,784		410,000		365,000		(3,098	)		62,686
KB Credit Information Co., Ltd.	Deposits		4,240		1,611		1,425		(379	)		4,047
KB Data System Co., Ltd.	Deposits		18,059		18,500		13,500		(1,417	)		21,642
KB Life Insurance Co., Ltd.	Deposits		1,576		—		—		(1,005	)		571
KB Kookmin Card Co., Ltd.	Deposits		84,089		22,000		22,000		(18,571	)		65,518
KB Capital Co., Ltd.	Deposits		64,283		—		—		62,595			126,878
KB Insurance Co., Ltd.	Deposits		2,745		—		—		2,740			5,485
	Debentures		30,002		—		—		(11	)		29,991
KB Securities Co., Ltd.	Deposits		334,470		96,445		75,000		67,138			423,053
KB Star Office Private Real Estate Master Fund 3	Deposits		5,361		2,003		—		—			7,364

171

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

KB Star Office Private Real Estate Master Fund 4	Deposits	1,629	354	—	—		1,983
Associates
Korea Credit Bureau Co., Ltd.	Deposits	15,674	—	3,000	5,292		17,966
Incheon Bridge Co., Ltd.	Deposits	43,666	25,260	5,260	(18,219	)	45,447
Doosung Metal Co., Ltd.	Deposits	3	—	—	(3	)	—
Jungdo Co., Ltd.	Deposits	4	—	—	—		4
Dae-A Leisure Co., Ltd.	Deposits	1,229	—	—	(476	)	753
Carlife Co., Ltd.	Deposits	2	—	—	(2	)	—
Computerlife Co., Ltd.	Deposits	1	—	—	—		1
Skydigital INC.	Deposits	16	—	—	9		25
Jo Yang Industrial Co., Ltd.	Deposits	—	—	—	2		2
KB12-1 Venture Investment Partnership	Deposits	245	—	—	195		440
KB High-tech Company Investment Fund	Deposits	275	5,500	5,500	11,480		11,755
Aju Good Technology Venture Fund	Deposits	6,439	—	—	(983	)	5,456
KB-KDBC Pre-IPO New Technology Business Investment Fund	Deposits	7,088	15,000	10,000	(5,034	)	7,054
KB Digital Innovation & Growth New Technology Business Investment Fund	Deposits	618	—	—	(606	)	12
KB-Brain KOSDAQ Scale-up Fund	Deposits	18,813	—	—	(5,695	)	13,118
KB Global Platform Fund	Deposits	—	—	—	17,928		17,928
Associate of Parent
KB Star Office Private Real Estate Investment Trust No.1	Deposits	7,946	5,018	5,072	401		8,293
Associates of parent’s subsidiaries
SY Auto Capital Co., Ltd.	Deposits	5	—	—	3		8

172

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

KB No.9 Special Purpose Acquisition Company2	Deposits	2,275	—	2,266	(9	)	—
KB No.10 Special Purpose Acquisition Company 2	Deposits	1,666	—	1,618	(48	)	—
KB No.11 Special Purpose Acquisition Company2	Deposits	658	—	530	(128	)	—
KB No.17 Special Purpose Acquisition Company	Deposits	—	1,500	—	242		1,742
KB No.18 Special Purpose Acquisition Company	Deposits	—	2,200	100	40		2,140
KB No.19 Special Purpose Acquisition Company	Deposits	—	1,000	—	93		1,093
KB No.20 Special Purpose Acquisition Company	Deposits	—	1,500	—	484		1,984
RAND Bio Science Co., Ltd.	Deposits	232	1,900	—	2,320		4,452
Wise Asset Management Co., Ltd.	Deposits	696	—	682	7		21
Built On Co., Ltd. 2	Deposits	7	—	—	(7	)	—
Food Factory Co., Ltd.	Deposits	68	—	—	1,005		1,073
Acts Co., Ltd.	Deposits	29	—	—	(28	)	1
Paycoms Co., Ltd.	Deposits	1	—	—	—		1
Big Dipper Co., Ltd.	Deposits	182	—	—	(176	)	6
APRO CO.,LTD.	Deposits	2,201	—	—	1,000		3,201
Rainist Co., Ltd.	Deposits	1	—	—	(1	)	—
Spark Biopharma Inc.2	Deposits	2,630	17,000	9,000	(10,630	)	—
Stratio, Inc.	Deposits	516	—	—	210		726
Nexelon Inc.2	Deposits	—	—	200	200		—
CellinCells Co., Ltd	Deposits	—	—	—	1,545		1,545
KB IGen Private Equity Fund No.1	Deposits	148	—	—	(1	)	147
KB Pre IPO Secondary	Deposits	1,115	—	—	1,840		2,955
Fabric Types Co., Ltd	Deposits	—	—	—	395		395
BNF Corporation Ltd.	Deposits	—	—	—	947		947
Key management3	Deposits	8,119	8,724	8,232	(241	)	8,370

173

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

		2018
(In millions of Korean won)		Beginning		Increase		Decrease		Others1			Ending
Parent
KB Financial Group Inc..	Deposits		46,062		1,555,000		1,495,000		(36,441	)		69,621
Subsidiaries
Kookmin Bank Hongkong Ltd.2	Deposits		22,209		—		—		(22,209	)		—
Kookmin Bank Int’l Ltd. (London)	Debts		124,543		—		—		(124,543	)		—
Kookmin Bank Cambodia PLC.	Deposits		5,096		—		—		(3,079	)		2,017
	Debts		1,342		—		—		(1,342	)		—
Kookmin Bank (China) Ltd.	Deposits		1,064		—		—		899			1,963
	Debts		173,892		—		—		74,506			248,398
Securitization SPE	Deposits		1,323		—		—		(13	)		1,310
KB Wise Star Private Real Estate Feeder Fund 1st	Deposits		405		8		—		—			413
Structured entities	Deposits		384		—		—		31,482			31,866
Parent’s subsidiaries
KB Asset Management Co., Ltd.	Deposits		8,958		—		—		(5,674	)		3,284
KB Real Estate Trust Co., Ltd.	Deposits		16,187		—		—		11,134			27,321
KB Investment Co., Ltd.	Deposits		19,816		56,200		68,200		12,968			20,784
KB Credit Information Co., Ltd.	Deposits		4,444		1,569		1,409		(364	)		4,240
KB Data System Co., Ltd.	Deposits		15,036		11,500		10,700		2,223			18,059
KB Life Insurance Co., Ltd.	Deposits		372		—		—		1,204			1,576
KB Kookmin Card Co., Ltd.	Deposits		85,091		22,000		22,000		(1,002	)		84,089
KB Capital Co., Ltd.	Deposits		73,906		—		—		(9,623	)		64,283
KB Insurance Co., Ltd.	Deposits		2,941		—		—		(196	)		2,745
	Debentures		49,981		—		—		(19,979	)		30,002
KB Securities Co., Ltd.	Deposits		436,508		111,996		82,512		(131,522	)		334,470

174

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

KB Star Office Private Real Estate Master Fund 3	Deposits	—	5,361	—	—		5,361
KB Star Office Private Real Estate Master Fund 4	Deposits	—	1,629	—	—		1,629
Associates
Korea Credit Bureau Co., Ltd.	Deposits	25,513	8,000	16,000	(1,839	)	15,674
Incheon Bridge Co., Ltd.	Deposits	48,795	1,260	1,270	(5,119	)	43,666
Terra Co., Ltd.	Deposits	10	—	—	(10	)	—
Jungdong Steel Co., Ltd.	Deposits	3	—	—	(3	)	—
Doosung Metal Co., Ltd.	Deposits	—	—	—	3		3
Jungdo Co., Ltd.	Deposits	4	—	—	—		4
Dae-A Leisure Co., Ltd.	Deposits	466	479	466	750		1,229
Daesang Techlon Co., Ltd.2	Deposits	2	—	—	(2	)	—
Carlife Co., Ltd.	Deposits	—	—	—	2		2
Computerlife Co., Ltd.	Deposits	—	—	—	1		1
Skydigital INC.	Deposits	—	—	—	16		16
KB12-1 Venture Investment Partnership	Deposits	4,963	—	—	(4,718	)	245
Future Planning KB Start-up Creation Fund	Deposits	—	9,000	9,000	—		—
KB High-tech Company Investment Fund	Deposits	7,212	—	—	(6,937	)	275
Aju Good Technology Venture Fund	Deposits	2,771	—	—	3,668		6,439
KB-KDBC New Technology Business Investment Fund	Deposits	7,500	—	—	(412	)	7,088
KB Digital Innovation & Growth New Technology Business Investment Fund	Deposits	—	—	—	618		618

175

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

KB-Brain KOSDAQ Scale-up Fund	Deposits	—	—	—	18,813		18,813
Associate of Parent
KB Star Office Private Real Estate Investment Trust No.1	Deposits	6,962	351	—	633		7,946
Associates of parent’s subsidiaries
SY Auto Capital Co., Ltd.	Deposits	6	—	—	(1	)	5
KB No.8 Special Purpose Acquisition Company 12	Deposits	2,339	—	2,300	(39	)	—
KB No.9 Special Purpose Acquisition Company2	Deposits	2,309	2,266	2,234	(66	)	2,275
KB No.10 Special Purpose Acquisition Company2	Deposits	1,698	1,618	1,618	(32	)	1,666
KB No.11 Special Purpose Acquisition Company2	Deposits	530	530	530	128		658
RAND Bio Science Co., Ltd.	Deposits	1,032	—	500	(300	)	232
Wise Asset Management Co., Ltd.	Deposits	340	2,366	2,008	(2	)	696
Built On Co., Ltd.2	Deposits	26	—	—	(19	)	7
Food Factory Co., Ltd.	Deposits	1	—	—	67		68
Acts Co., Ltd.	Deposits	4	—	—	25		29
Paycoms Co., Ltd.	Deposits	—	—	—	1		1
Big Dipper Co., Ltd.	Deposits	473	—	—	(291	)	182
APRO CO., LtD.	Deposits	—	—	—	2,201		2,201
Rainist Co., Ltd.	Deposits	—	—	—	1		1
Spark Biopharma Inc.2	Deposits	—	4,300	3,300	1,630		2,630
Stratio, Inc.	Deposits	—	—	—	516		516
KB IGen Private Equity Fund No. 1	Deposits	—	—	—	148		148

176

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

KB Pre IPO Secondary Venture Fund 1st	Deposits	2,690	2,000	4,000	425		1,115
POSCO-KB Shipbuilding Fund	Deposits	—	32,800	32,800	—		—
Inno Lending Co., Ltd. 2	Deposits	41	—	—	(41	)	—
Key management3	Deposits	6,179	6,605	5,140	475		8,119

¹  Transactions between related parties, such as settlements arising from operating activities and deposits that can deposit and withdraw frequently, are presented in net amounts.

²  Not considered to be the Bank’s related party as at December 31, 2019.

³  Includes details of lending transactions that occurred before they became related parties.

Significant contribution and collection arising from transactions with related parties for the year ended December 31, 2019, are as follows:

	2019
(In millions of Korean won)	Contribution		Collection and others
Subsidiaries
KB Wise Star Private Real Estate Feeder Fund 1		55,900		5,724
KB Multi-Asset Private Securities Fund S-1 (Bond Mixed-FoFs)1		—		235,095
KB Multi-Asset Private Securities Fund P-1 (Bond Mixed-FoFs)1		—		234,804
SAMSUNG KODEX 10Y F-LKTB INV ETF		399,624		327,414
KB Haeoreum private securities investment trust 83(Bond)		100,000		—
KB KBSTAR KTB 3Y Futures Inverse ETF		309,522		369,248
Kiwoom Frontier Private placement fund 10(Bond)		100,000		—
Woori Safe lified Private Trust S-8(Bond)		100,000		4,134
Mirae Asset Triumph Global Privately placed Feeder Investment Trust1		40,000		40,000
NH-Amundi Global investment Private Securities No.1 (USD)(Bond)		—		34,460
Meritz Private Real Estate fund No.9-2		13,273		1,691
AIP US Red Private Real Estate Trust No.101		—		1,388
KB Leaders Private placement fund 10(Bond)1		200,000		200,108
KB Core Blind Private Estate Fund 1st		33,158		—
KB Global Private Real Estate Debt Fund 3rd (USD)		23,224		—
Parent’s subsidiaries
Hanbando BTL Private Special Asset Fund		—		21,563
Hope Sharing BTL Private Special Asset Fund		—		1,653
KB Intellectual Property Investment Association		—		182
KB Senior Loan Private Fund No.1		—		13,458
KB Evergreen Private Securities Fund 98(Bond)1		—		52,302
KB KBSTAR Mid-Long Term KTB Active ETF(Bond)		—		500
KB Onkookmin 2025 TDF Fund(FoFs)1		5,500		—
KB Onkookmin 2030 TDF Fund(FoFs)		5,500		—
KB Onkookmin 2035 TDF Fund(FoFs) 1		—		2,289
KB Onkookmin 2045 TDF Fund(FoFs)		—		2,184
KB Star Office Private Investment Real Estate Investment Trust No. 4		—		1,713
KB Korea Short Term Premium Private Securities 4(USD)(Bond)1		—		48,050

177

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

KB Korea Short Term Premium Private Securities 5(USD)(Bond)1	92,776	211,053
KB Korea Short Term Premium Private Securities 10(USD)(Bond)	70,176	—
KB Global Core Bond Securities Master Fund(Bond)	30,000	22,220
KB Haeoreum private securities investment trust 96(Bond)1	—	50,656
KB New Renewable Energy Private Special Asset Fund 1	858	4
KB Mezzanine Private Securities Fund 3rd	22,000	—
Korate Bien Specialized Investment and Criminal Mortgage Trust No. 1	35,000	—
KB Europe Renewable Specialized Private Equity Private Asset Investment Trust No. 2	3,767	—
KB Global Infra Private Special Asset Fund No.5	1	—
KB Global Infra Private Special Asset Fund No.6	1	—
Associates
Korea Credit Bureau Co., Ltd.	—	135
Balhae Infrastructure Fund	592	6,855
KoFC KBIC Frontier Champ 2010-5 (PEF)1	—	138
KB GwS Private Securities Investment Trust	—	7,276
KB12-1 Venture Investment Partnership	—	3,400
Future Planning KB Start-up Creation Fund	—	4,400
KB Investment Association to Excellent Tech. Compony	—	6,950
Aju Good Technology Venture Fund	1,960	—
KB-KDBC Pre-IPO New Technology Business Investment Fund	2,500	—
KB-TS Technology Venture Private Equity Fund	4,200	1,200
KB Digital Innovation & Growth New Technology Business Investment Fund	1,125	—
KB Intellectual Property Fund 2	6,000	—
KB Digital Innovation Growth New Technology Business Investment Association	24,500	—
KB-Brain KOSDAQ Scale-up Fund	7,000	—
KB Sprott Renewables No.1. Private Equity Fund	1,327	—
KB Global Platform Fund	19,500	—
KB-UTC Inno-Tech Venture Fund	300	—
Associates of Parent’s subsidiaries
KB Stone Bridge Secondary Private Equity Fund	4,040	1,060

¹  Not considered to be the Bank’s related party as at December 31, 2019.

178

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Acceptances and guarantees and unused commitments to related parties as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)		2019		2018
Subsidiaries
KB Wise Star Private Real Estate Feeder Fund 1st	Purchase of securities		817		56,717
Structured entities	Loan commitment in Korean won		7,349		6,151
	Purchase of securities		1,597,600		1,349,500
Meritz Private Real Estate fund No.9-2	Purchase of securities		24,258		36,243
KB Core Blind Private Estate Fund 1st	Purchase of securities		66,842		—
Parent’s subsidiaries
KB Securities Co., Ltd.	Loan commitment in Korean won		140,000		137,509
KB Investment Co., Ltd.	Loss sharing agreements		1,000		1,000
KB Kookmin Card Co., Ltd.	Loan commitment in Korean won		820,000		820,000
	Other commitments in Korean won		1,300,000		1,300,000
KB Insurance Co., Ltd.	Loan commitment in Korean won		20,000		—
KB Mezzanine Private Security Investment Trust No.2	Purchase of securities		11,141		11,141
KB Mezzanine Private Securities Fund 3rd	Purchase of securities		48,260		—
KB Senior Loan Private Fund No.1	Purchase of securities		3,770		3,770
KB New Renewable Energy Private Special Asset Fund 1	Purchase of securities		39,142		—
KB Europe Renewable Specialized Private Equity Private Asset Investment Trust No. 2	Purchase of securities		14,454		—
KB Global Infra Private Special Asset Fund No.5	Purchase of securities		24,999		—
KB Global Infra Private Special Asset Fund No.6	Purchase of securities		24,999		—
Associates
Balhae Infrastructure Fund	Purchase of securities		7,327		10,453
Incheon Bridge Co., Ltd.	Loan commitment in Korean won		20,000		20,000
KoFC KBIC Frontier Champ 2010-5 (PEF)1	Purchase of securities		—		1,290
KB GwS Private Securities Investment Trust	Purchase of securities		876		876
KoFC POSCO HANWHA KB Shared Growth No.2 Private Equity Fund	Purchase of securities		10,040		10,040
Aju Good Technology Venture Fund	Purchase of securities		1,154		1,960

179

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

KB-KDBC Pre-IPO New Technology Business Investment Fund	Purchase of securities	—	2,500
KB-TS Technology Venture Private Equity Fund	Purchase of securities	3,180	7,380
KB digital Innovation&Growth New Technology Business Investment Fund	Purchase of securities	2,250	3,375
KB Intellectual Property Fund 2	Purchase of securities	6,000	12,000
KB Digital Innovation Investment Fund Limited partnership	Purchase of securities	2,800	27,300
KB-Brain KOSDAQ Scale-up Fund	Purchase of securities	9,000	16,000
KB Sprott Renewables No.1. Private Equity Fund	Purchase of securities	18,173	—
KB Global Platform Fund	Purchase of securities	30,500	—
KB-UTC Inno-Tech Venture Fund	Purchase of securities	14,700	—
Associates of Parent’s subsidiaries
SY Auto Capital Co., Ltd.	Loan commitment in Korean won	8,100	6,700
BNF Corporation Ltd.	Loan commitment in Korean won	360	—
KB Stone Bridge Secondary Private Equity Fund	Purchase of securities	15,960	—
Key management	Loan commitment in Korean won	564	894

¹  Not considered to be the Bank’s related party as at December 31, 2019.

Acceptances and guarantees and unused commitments received from related parties as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)		2019		2018
Parent’s subsidiaries
KB Investment Co., Ltd.	Loss sharing agreements		12,209		14,474
KB Kookmin Card Co., Ltd.	Loan commitment in Korean won		86,400		87,922

180

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Compensation to key management for the years ended December 31, 2019 and 2018, consists of:

(In millions of Korean won)	2019
	Short-term employee benefits		Post- employment benefits		Share-based payments		Total
Registered directors (executive)		1,833		49		1,594		3,476
Registered directors (non-executive)		402		—		—		402
Non-registered directors		5,767		213		4,235		10,215
		8,002		262		5,829		14,093

(In millions of Korean won)	2018
	Short-term employee benefits		Post- employment benefits		Share-based payments		Total
Registered directors (executive)		1,278		51		1,022		2,351
Registered directors (non-executive)		337		—		—		337
Non-registered directors		4,807		183		3,217		8,207
		6,422		234		4,239		10,895

Significant operating transactions occurring between the Bank and related parties include the establishment of deposit accounts, issuance of general purpose loans, loans on business transactions and trade receivables, and providing foreign currency remittances and related services. Other significant transactions include the grant of credit due to acceptance of banker’s usance that the Bank issues and overdraft credit accounts arising from net settlement agreement between the Bank and KB Kookmin Card Co., Ltd.

Collateral offered to related parties as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)			2019				2018
	Assets pledged1		Carrying amount		Collateralized amount		Carrying amount		Collateralized amount
Parent’s subsidiaries
KB Securities Co., Ltd.		Securities		50,471		50,000		62,006		62,000
KB Life Insurance Co., Ltd.		Securities		25,977		25,000		26,055		25,000
KB Insurance Co., Ltd.		Securities		49,990		50,000		50,000		50,000

¹ Collaterals related to lease contracts arising from operating activities between related parties are excluded.

181

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

Collateral received from related parties as at December 31, 2019 and 2018, are as follows:

(In millions of Korean won)	Assets pledged as collateral1	2019		2018
Subsidiary
Taejon Samho The First Co., Ltd.	Beneficiary certificate of land development trust		130,000		130,000
KB Core Blind Private Estate Fund 1st	Real estate		12,000		—
Parent’s subsidiaries
KB Securities Co., Ltd.	Time deposits / Beneficiary right certificate		167,000		178,178
	Securities		27,948		20,000
	Real estate2		12,000		—
KB Life Insurance Co., Ltd.	Securities		10,000		10,000
KB Kookmin Card Co., Ltd.	Time deposits		22,000		22,000
KB Insurance Co., Ltd.	Securities		135,500		66,500
KB Credit Information Co., Ltd.	Time deposits and others		1,611		1,425
KB Star Office Private Real Estate Master Fund 3	Real estate		—		28,800
KB Star Office Private Real Estate Master Fund 4	Real estate		24,000		24,000
Key management	Time deposits and others		192		401
	Real estate		2,922		3,182

¹  Collaterals related to lease contracts arising from operating activities between related parties are excluded.

²  Related to KB Wise Star Jongno Tower Real Estate Master Fund, a subsidiary of KB Securities Co., Ltd.

As at December 31, 2019, Incheon Bridge Co., Ltd., a related party, provides fund management account, civil engineering completed risk insurance, and management rights as senior collateral amounting to W 611,000 million to a financial syndicate that consists of the Bank and five other institutions, and as subordinated collateral amounting to W 384,800 million to subordinated debt holders that consist of the Bank and two other institutions. Also, it provides certificate of credit guarantee amounting to W 400,000 million as collateral to a financial syndicate consisting of the Bank and five other institutions.

The amounts of debt securities purchased through KB securities Co., Ltd. are W12,778,602 million and W 7,920,050 million for the years ended December 31, 2019 and 2018, respectively, and the amounts of debts securities sold through KB securities Co., Ltd. are W7,799,397 million and W 3,835,245 million for the years ended December 31, 2019 and 2018, respectively. In addition, KB securities Co., Ltd. acquired W 2,120,000 million and W 160,000 million of bonds issued by the Bank for the years ended December 31, 2019 and 2018, respectively.

The amounts of intangible Assets purchased through KB Data System Co., Ltd. are W37,004 million and W 17,831 million for the years ended December 31, 2019 and 2018, respectively.

The Bank has entered CLS(Continuous Linked Settlement) service agreement with KB Securities Co., Ltd. and accordingly the Bank is able to provide USD 500 million in intraday liquidity under the terms of repayment on the day of payment.

The Bank and KB Kookmin Card Co., Ltd. are jointly and severally liable for the payables of the Bank before the spin-off date.

182

Kookmin Bank

(A wholly owned subsidiary of KB Financial Group Inc.)

Notes to the Separate Financial Statements

December 31, 2019 and 2018

41. Changes in accounting policies-adoption of Korean IFRS 1116 Leases

The Bank applied Korean IFRS 1116 retrospectively with recognizing the cumulative effect of initial adoption of the standard as at January 1, 2019. The Bank did not restate any comparative prior financial statements under the transitional provisions of Korean IFRS 1116. Therefore reclassification and adjustments under the new IFRS were recognized in the financial statements beginning on January 1, 2019

A lessee shall apply this standard to its leases either:

• retrospectively to each prior reporting period presented applying Korean IFRS 1008 Accounting Policies, Changes in Accounting Estimates and Errors (Full retrospective application); or

• retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application.

For leases previously classified as ‘finance leases’, the Bank recognized the carrying amount of the lease liabilities and lease liabilities immediately before transition as the carrying amount of the right-of-use asset and the lease liabilities at the date of initial application. The measurement principles of Korean IFRS 1116 are only applied after that date. The remeasurements to the lease liabilities were recognized as adjustments to the related right-of-use assets immediately after the date of initial application.

(In millions of Korean won)	January 1, 2019
Right-of-use asset
Operating lease commitments as at December 31, 20181		352,178
Add : Financial leased asset recognized at December 31, 2018		26,082
Right-of use asset recognized as of the date of initial application		378,260
Lease liabilities
Operating lease commitments as at December 31, 2018		332,317
Discounted amount using the lessee’s incremental borrowing rate2 at the date of initial application		319,037
Add : Financial leased liabilities recognized at December 31, 2018		8,065
Lease liabilities recognized as of the date of initial application		327,102

¹  The amount included lease contract related provisions for asset retirement obligation and other assets/liabilities according to the adoption of Korean IFRS.

² The weighted average incremental borrowing rate of interest is 2.18%.

The difference between the amount of the right-of-use asset and the lease liabilities is adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the statement of financial position immediately before the date of initial application.

The Bank did not need to make any adjustments to the accounting for assets held as lessor as a result of the adoption of Korean IFRS 1116.

42. Approval of Issuance of the Financial Statements

The issuance of the Bank’s separate financial statements as at and for the year ended December 31, 2019, was originally approved by the Board of Directors on February 5, 2020

183

Report on Independent Auditor’s

Review of Internal Control over Financial Reporting

To the President of

Kookmin Bank

We have reviewed the accompanying management’s report on the effectiveness of the Internal Control over Financial Reporting (“ICFR”) of Kookmin Bank (the “Bank”) as of December 31, 2019. The Bank’s management is responsible for designing and operating ICFR and for its assessment of the effectiveness of ICFR. Our responsibility is to review the management’s report on the effectiveness of the ICFR and issue a report based on our review. The management’s report on the effectiveness of the ICFR of the Bank states that “Based on the assessment results, Chief Executive Officer and ICFR Officer believe that the Bank’s ICFR, as at December 31, 2019, is designed and operating effectively, in all material respects, in conformity with the Best Practice Guideline”

Our review was conducted in accordance with the ICFR review standards established by the Korean Institute of Certified Public Accountants. Those standards require that we plan and perform, in all material respects, the review of management’s report on the effectiveness of the ICFR to obtain a lower level of assurance than an audit. A review is to obtain an understanding of a company’s ICFR and consists principally of inquiries of management and, when deemed necessary, a limited inspection of underlying documents, which is substantially less in scope than an audit.

A Bank’s ICFR is a system to monitor and operate those policies and procedures designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards as adopted by the Republic of Korea. Because of its inherent limitations, ICFR may not prevent or detect a material misstatement of the financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

184

Based on our review, nothing has come to our attention that causes us to believe that management’s report on the effectiveness of the ICFR, referred to above, is not presented fairly, in all material respects, in accordance with the Best Practice Guideline.

Our review is based on the Bank’s ICFR as of December 31, 2019, and we did not review management’s assessment of its ICFR subsequent to December 31, 2019. This report has been prepared pursuant to the Acts on External Audit for Stock Companies, etc. in Korea and may not be appropriate for other purposes or for other users.

Samil PricewaterhouseCoopers

March 5, 2020

185

Operating Status Report of

the Internal Control over Financial Reporting

To the Shareholders, Board of Directors and Audit Committee of

Kookmin Bank

We, as the Chief Executive Officer (“CEO”) and the Internal Control over Financial Reporting(“ICFR”) Officer of Kookmin Bank (“the Company”), assessed operating status of the Company’s Internal Control over Financial Reporting for the year ended December 31, 2019.

The Company’s management, including ourselves, is responsible for designing and operating ICFR.

We assessed whether the Company effectively designed and operated its ICFR to prevent and detect errors or frauds which may cause a misstatement in financial statements to ensure preparation and disclosure of reliable financial information.

We used the ‘Conceptual Framework for Designing and Operating Internal Control over Financial Reporting’ established by the Operating Committee of Internal Control over Financial Reporting in Korea (the “ICFR Committee”) as the criteria for design and operation of the Company’s ICFR. We also conducted an assessment of ICFR based on the ‘Management Guideline for Evaluating and Reporting Effectiveness of Internal Control over Financial Reporting’ established by the ICFR Committee.

Based on our assessment, we concluded that the Company’s ICFR is designed and operated effectively as of December 31, 2019, in all material respects, in accordance with the ‘Conceptual Framework for Designing and Operating Internal Control over Financial Reporting’.

We certify that this report does not contain any untrue statement of a fact, or omit to state a fact necessary to be presented herein. We also certify that this report does not contain or present any statements which might cause material misunderstandings, and we have reviewed and verified this report with sufficient care.

February 20, 2020

Yin Hur, Chief Executive Officer

Hwan Ju Lee Internal Control over Financial Reporting Officer

186