Korea Development Bank 424B5 Prospectus supplement for primary offering

Korea Development Bank 424B5Prospectus supplement for primary offering

Filed Pursuant to Rule 424(b)(5)
Registration No. 333-265886

The information in this preliminary prospectus supplement is not complete and may be changed. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. This preliminary prospectus supplement and the accompanying prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED OCTOBER 13, 2023

PRELIMINARY PROSPECTUS SUPPLEMENT

(To Prospectus Dated July 25, 2023)

LOGO

The Korea Development Bank

US$ % Notes due 20

US$ Floating Rate Notes due 20

Our US$ aggregate principal amount of notes due 20 (the “20 Notes”) will bear interest at a rate of % per annum, our US$ aggregate principal amount of notes due 20 (the “20 Notes”) will bear interest at a rate of % per annum, our US$ aggregate principal amount of notes due 20 (the “20 Notes”) will bear interest at a rate of % per annum and our US$ aggregate principal amount of floating rate notes due 20 (the “Floating Rate Notes,” and together with the 20 Notes, the 20 Notes and the 20 Notes, the “Notes”) will bear interest at a rate equal to Compounded Daily SOFR (as defined herein) plus % per annum.

Interest on the 20 Notes, the 20 Notes and the 20 Notes is payable semi-annually in arrear on April and October of each year, beginning on April , 2024. Interest on the Floating Rate Notes is payable quarterly in arrear on January , April , July and October of each year, subject in each case to adjustment in accordance with the Modified Following Business Day Convention, as explained herein (each, a “Floating Rate Notes Interest Payment Date”). The first interest payment on the Floating Rate Notes will be made on the Floating Rate Notes Interest Payment Date falling on or nearest to January , 2024 in respect of the period from (and including) October , 2023 to (but excluding) the Floating Rates Notes Interest Payment Date falling on or nearest to January , 2024. The 20 Notes will mature on October , 20 , the 20 Notes will mature on October , 20 , the 20 Notes will mature on October and the Floating Rate Notes will mature on the Floating Rate Notes Interest Payment Date falling on or nearest to October , 20 .

The Notes will be issued in minimum denominations of US$200,000 principal amount and integral multiples of US$1,000 in excess thereof. The Notes will be represented by one or more global securities registered in the name of a nominee of The Depository Trust Company, as depositary.

The payment of interest and the repayment of principal on the Notes will not be guaranteed by the Government (as defined herein).

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

20 Notes

Floating Rate Notes

Per Note

Total

Per Note

Total

Per Note

Total

Per Note

Total

Public offering price

US$

Underwriting discounts

US$

Proceeds to us, before expenses

US$

In addition to the initial public offering price, you will have to pay for accrued interest, if any, from and including October , 2023.

Applications will be made to the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for the listing and quotation of the Notes on the SGX-ST. The SGX-ST assumes no responsibility for the correctness of any of the statements made, opinions expressed or reports contained in this prospectus supplement and the accompanying prospectus. Approval in-principle from, admission to the Official List of, and listing and quotation of the Notes on, the SGX-ST are not to be taken as an indication of the merits of us or the Notes. Currently, there is no public market for the Notes.

We expect to make delivery of the Notes to investors through the book-entry facilities of The Depositary Trust Company on or about October , 2023.

Joint Bookrunners and Lead Managers

BofA Securities

Crédit Agricole CIB

HSBC

J.P. Morgan

KDB Asia

Mizuho

UBS

Co-Managers

Hana Securities Co., Ltd. KEXIM Asia Limited

Prospectus Supplement Dated October , 2023

You should rely only on the information contained in or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with different information. We are not making an offer to sell these securities in any state or jurisdiction where the offer or sale is not permitted.

TABLE OF CONTENTS

Prospectus Supplement


	Page
Summary of the Offering		S-6
Use of Proceeds		S-8
Recent Developments		S-9
Description of the Notes		S-162
Clearance and Settlement		S-169
Taxation		S-172
Underwriting		S-173
Legal Matters		S-181
Official Statements and Documents		S-181
General Information		S-181

Prospectus


	Page
CERTAIN DEFINED TERMS AND CONVENTIONS		1
USE OF PROCEEDS		2
THE KOREA DEVELOPMENT BANK		3
Overview		3
Capitalization		5
Business		6
Selected Financial Statement Data		8
Operations		15
Sources of Funds		22
Debt		23
Overseas Operations	��	25
Property		26
Directors and Management; Employees		26
Tables and Supplementary Information		26
Financial Statements and the Auditors		33
THE REPUBLIC OF KOREA		172
Land and History		172
Government and Politics		174
The Economy		177
Principal Sectors of the Economy		186
The Financial System		193
Monetary Policy		198
Balance of Payments and Foreign Trade		202
Government Finance		210
Debt		212
Tables and Supplementary Information		214

S-1


	Page
DESCRIPTION OF THE SECURITIES		217
Description of Debt Securities		217
Description of Warrants		224
Terms Applicable to Debt Securities and Warrants		224
Description of Guarantees to be Issued by Us		225
Description of Guarantees to be Issued by The Republic of Korea		226
LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES AND BEARER WARRANTS		227
TAXATION		228
Korean Taxation		228
U.S. Federal Income Tax Considerations		230
PLAN OF DISTRIBUTION		239
LEGAL MATTERS		240
AUTHORIZED REPRESENTATIVES IN THE UNITED STATES		240
OFFICIAL STATEMENTS AND DOCUMENTS		240
EXPERTS		240
FORWARD-LOOKING STATEMENTS		241
FURTHER INFORMATION		243

S-2

Certain Defined Terms

All references to “we” or “us” mean The Korea Development Bank. All references to “Korea” or the “Republic” contained in this prospectus supplement mean The Republic of Korea. All references to the “Government” mean the government of Korea. Terms used but not defined in this prospectus supplement shall have the same meanings given to them in the accompanying prospectus.

Our separate financial information as of December 31, 2022 and June 30, 2023 and for the six months ended June 30, 2022 and 2023 included in this prospectus supplement has been prepared in accordance with International Financial Reporting Standards as adopted in Korea (“Korean IFRS” or “K-IFRS”). References in this prospectus supplement to “separate” financial statements and information are to financial statements and information prepared on a non-consolidated basis. Unless specified otherwise, our financial and other information included in this prospectus supplement is presented on a separate basis in accordance with Korean IFRS and does not include such information with respect to our subsidiaries.

In this prospectus supplement and the accompanying prospectus, where information has been provided in units of thousands, millions or billions, such amounts have been rounded up or down. Accordingly, actual numbers may differ from those contained herein due to rounding. Any discrepancy between the stated total amount and the actual sum of the itemized amounts listed in a table is due to rounding.

Additional Information

The information in this prospectus supplement is in addition to the information contained in our prospectus dated July 25, 2023. The accompanying prospectus contains information regarding us and Korea, as well as a description of some terms of the Notes. You can find further information regarding us, Korea and the Notes in registration statement no. 333-265886, as amended, relating to our debt securities, with or without warrants, and guarantees, which is on file with the U.S. Securities and Exchange Commission.

We are Responsible for the Accuracy of the Information in this Document

We are responsible for the accuracy of the information in this document and confirm that to the best of our knowledge we have included all facts that should be included not to mislead potential investors. The SGX-ST assumes no responsibility for the correctness of any of the statements made, opinions expressed or reports contained in this prospectus supplement and the accompanying prospectus. Approval in-principle from, admission to the Official List of, and listing and quotation of the Notes on, the SGX-ST are not to be taken as an indication of the merits of us or the Notes.

Not an Offer if Prohibited by Law

The distribution of this prospectus supplement and the accompanying prospectus, and the offer of the Notes, may be legally restricted in some countries. If you wish to distribute this prospectus supplement or the accompanying prospectus, you should observe any restrictions. This prospectus supplement and the accompanying prospectus should not be considered an offer and should not be used to make an offer, in any state or country which prohibits the offering.

The Notes may not be offered or sold in Korea, directly or indirectly, or to any resident of Korea, except as permitted by Korean law. For more information, see “Underwriting—Foreign Selling Restrictions.”

S-3

Information Presented Accurate as of Date of Document

This prospectus supplement and the accompanying prospectus are the only documents on which you should rely for information about the offering. We have authorized no one to provide you with different information. You should not assume that the information in this prospectus supplement or the accompanying prospectus is accurate as of any date other than the date on the front of each document.

S-4

IMPORTANT NOTICE TO PROSPECTIVE INVESTORS

Prospective investors should be aware that certain intermediaries in the context of this offering of the Notes, including certain underwriters, are “capital market intermediaries” (“CMIs”) subject to Paragraph 21 of the SFC Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission of Hong Kong (the “SFC Code”). This notice to prospective investors is a summary of certain obligations the SFC Code imposes on such CMIs, which require the attention and cooperation of prospective investors. Certain CMIs may also be acting as “overall coordinators” (“OCs”) for this offering and are subject to additional requirements under the SFC Code.

Prospective investors who are the directors, employees or major shareholders of The Korea Development Bank (the “Issuer”), a CMI or its group companies would be considered under the SFC Code as having an association (“Association”) with the Issuer, the CMI or the relevant group company. Prospective investors associated with the Issuer or any CMI (including its group companies) should specifically disclose this when placing an order for the Notes and should disclose, at the same time, if such orders may negatively impact the price discovery process in relation to this offering.

Prospective investors who do not disclose their Associations are hereby deemed not to be so associated. Where prospective investors disclose their Associations but do not disclose that such order may negatively impact the price discovery process in relation to this offering, such order is hereby deemed not to negatively impact the price discovery process in relation to this offering. Prospective investors should ensure, and by placing an order prospective investors are deemed to confirm, that orders placed are bona fide, are not inflated and do not constitute duplicated orders (i.e., two or more corresponding or identical orders placed via two or more CMIs). If a prospective investor is an asset management arm affiliated with any underwriter, such prospective investor should indicate when placing an order if it is for a fund or portfolio where the underwriter or its group company has more than a 50% interest, in which case it will be classified as a “proprietary order” and subject to appropriate handling by CMIs in accordance with the SFC Code and should disclose, at the same time, if such “proprietary order” may negatively impact the price discovery process in relation to this offering.

Prospective investors who do not indicate this information when placing an order are hereby deemed to confirm that their order is not a “proprietary order”. If a prospective investor is otherwise affiliated with any underwriter, such that its order may be considered to be a “proprietary order” (pursuant to the SFC Code), such prospective investor should indicate to the relevant underwriter when placing such order. Prospective investors who do not indicate this information when placing an order are hereby deemed to confirm that their order is not a “proprietary order”. Where prospective investors disclose such information but do not disclose that such “proprietary order” may negatively impact the price discovery process in relation to this offering, such “proprietary order” is hereby deemed not to negatively impact the price discovery process in relation to this offering.

Prospective investors should be aware that certain information may be disclosed by CMIs (including private banks) which is personal and/or confidential in nature to the prospective investor. By placing an order, prospective investors are deemed to have understood and consented to the collection, disclosure, use and transfer of such information by the underwriters and/or any other third parties as may be required by the SFC Code, including to the Issuer, any OCs, relevant regulators and/or any other third parties as may be required by the SFC Code, it being understood and agreed that such information shall only be used for the purpose of complying with the SFC Code, during the bookbuilding process for this offering. Failure to provide such information may result in that order being rejected.

S-5

SUMMARY OF THE OFFERING

This summary highlights selected information from this prospectus supplement and the accompanying prospectus and may not contain all of the information that is important to you. To understand the terms of our Notes, you should carefully read this prospectus supplement and the accompanying prospectus.

The Notes

We are offering US$ aggregate principal amount of % notes due October , 20 (the “20 Notes”), US$ aggregate principal amount of % notes due October , 20 (the “20 Notes”), US$ aggregate principal amount of % notes due October , 20 (the “20 Notes”) and US$ aggregate principal amount of floating rate notes due on the Floating Rate Notes Interest Payment Date (as defined below) falling on or nearest to October , 20 (the “Floating Rate Notes,” and together with the 20 Notes, the 20 Notes and the 20 Notes, the “Notes”).

The 20 Notes will bear interest at a rate of % per annum, the 20 Notes will bear interest at a rate of % per annum and the 20 Notes will bear interest at a rate of % per annum, in each case payable semi-annually in arrear on April and October of each year, beginning on April , 2024. Interest on the 20 Notes, the 20 Notes and the 20 Notes will be computed based on a 360-day year consisting of twelve 30-day months. See “Description of the Notes—Payment of Principal and Interest—Fixed Rate Notes.”

The Floating Rate Notes will bear interest at a rate equal to Compounded Daily SOFR (as defined herein) plus % per annum, payable quarterly in arrear on January , April , July and October of each year, subject in each case to adjustment in accordance with the Modified Following Business Day Convention, as explained herein (each, a “Floating Rate Notes Interest Payment Date”). The first interest payment on the Floating Rate Notes will be made on the Floating Rate Notes Interest Payment Date falling on or nearest to January , 2024 in respect of the period from (and including) October , 2023 to (but excluding) the Floating Rate Notes Interest Payment Date falling on or nearest to January , 2024. Interest on the Floating Rate Notes will accrue from (and including) October , 2023 and will be computed on the basis of the actual number of days in the applicable Floating Rate Notes Interest Period (as defined herein) divided by 360. See “Description of the Notes—Payment of Principal and Interest—Floating Rate Notes”.

The payment of interest and the repayment of principal on the Notes will not be guaranteed by the Government.

We do not have any right to redeem the Notes prior to maturity.

Listing

Applications will be made to the SGX-ST for the listing and quotation of the Notes on the SGX-ST. Settlement of the Notes is not conditioned on obtaining the listing. For so long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, the Notes, if traded on the SGX-ST, will be traded in a minimum board lot size of S$200,000 (or its equivalent in foreign currencies). Accordingly, the Notes, if traded on the SGX-ST, will be traded in a minimum board lot size of US$200,000.

S-6

Form and Settlement

We will issue each series of the Notes in the form of one or more fully registered global notes, registered in the name of a nominee of DTC, as depositary. Except as described in the accompanying prospectus under “Description of the Securities—Description of Debt Securities—Global Securities,” the global notes will not be exchangeable for Notes in definitive registered form, and will not be issued in definitive registered form. Financial institutions, acting as direct and indirect participants in DTC, will represent your beneficial interests in the global notes. These financial institutions will record the ownership and transfer of your beneficial interest through book-entry accounts. You may hold your beneficial interests in the Notes through Euroclear Bank S.A./ N.V. (“Euroclear”) or Clearstream Banking, société anonyme (“Clearstream”) if you are a participant in such systems, or indirectly through organizations that are participants in such systems. Any secondary market trading of book-entry interests in the Notes will take place through DTC participants, including Euroclear and Clearstream. See “Clearance and Settlement—Transfers Within and Between DTC, Euroclear and Clearstream”.

Further Issues

We may from time to time, without the consent of the holders of the Notes, create and issue additional debt securities with the same terms and conditions as either series of the Notes in all respects so that such further issue shall be consolidated and form a single series with the relevant series of the Notes. We will not issue any such additional debt securities unless such additional securities have less than a de minimis amount of original issue discount or such issuance would otherwise constitute a “qualified reopening” for U.S. federal income tax purposes.

Delivery of the Notes

We expect to make delivery of the Notes, against payment in same-day funds on or about October , 2023, which we expect will be the th business day following the date of this prospectus supplement, referred to as “T+ ,” for the Notes. You should note that initial trading of the Notes may be affected by the T+ settlement. See “Underwriting—Delivery of the Notes”.

Underwriting

KDB Asia Limited, one of the underwriters, is our affiliate and has agreed to offer and sell the Notes only outside the United States to non-U.S. persons. Hana Securities Co., Ltd. and KEXIM Asia Limited, each an underwriter, have also agreed to offer and sell the Notes only outside the United States to non-U.S. persons. See “Underwriting—Relationship with the Underwriters”.

S-7

USE OF PROCEEDS

The net proceeds from the issue of the Notes, after deducting the underwriting discount but not estimated expenses, will be US$ for the Notes. We will use the net proceeds from the sale of the Notes for our general operations, including extension of foreign currency loans and repayment of our maturing debt and other obligations.

S-8

RECENT DEVELOPMENTS

This section provides information that supplements the information about our bank and the Republic included under the headings corresponding to the headings below in the accompanying prospectus dated July 25, 2023. Defined terms used in this section have the meanings given to them in the accompanying prospectus. If the information in this section differs from the information in the accompanying prospectus, you should rely on the information in this section.

THE KOREA DEVELOPMENT BANK

Unless specified otherwise, the information provided below is stated on a separate basis in accordance with Korean IFRS (“K-IFRS”).

Overview

As of June 30, 2023, we hadW192,241.0 billion of loans outstanding (including loans, call loans, domestic usance, bills of exchange bought, local letters of credit negotiation and loan-type suspense accounts pursuant to the applicable guidelines without adjusting for allowance for loan losses, present value discounts and deferred loan fees), total assets ofW319,300.0 billion and total equity ofW38,944.4 billion, as compared toW202,032.2 billion of loans outstanding,W312,845.3 billion of total assets andW35,668.4 billion of total equity as of December 31, 2022. For the six months ended June 30, 2023, we recorded interest income ofW5,573.4 billion, interest expense ofW4,699.2 billion and net income ofW2,814.6 billion, as compared toW2,558.1 billion of interest income,W1,659.3 billion of interest expense andW469.5 billion of net income for the six months ended June 30, 2022. See “—Selected Financial Statement Data.”

Capitalization

As of June 30, 2023, our authorized capital wasW30,000 billion and our capitalization was as follows:


	June 30, 2023⁽¹⁾
	(billions of won)
	(unaudited)
Long-term debt⁽²⁾⁽³⁾:
Won currency borrowings		4,340.3
Industrial finance bonds		150,232.8
Foreign currency borrowings		3,905.0

Total long-term debt		158,478.1

Capital:
Paid-in capital		23,706.6
Capital surplus		2,469.8
Retained earnings⁽⁴⁾		9,890.5
Accumulated other comprehensive income		2,877.5

Total capital		38,944.4

Total capitalization		197,422.5

(1)	[Except as disclosed in this prospectus supplement, there has been no material change in our capitalization since June 30, 2023.] [KDB to confirm closer to launch]

(2)	We have translated borrowings in foreign currencies into Won at the rate ofW1,312.80 to US$1.00, which was the market average exchange rate, as announced by the Seoul Money Brokerage Services Ltd., on June 30, 2023.

(3)

As of June 30, 2023, we had confirmed acceptances and guarantees totalingW10,155.5 billion under outstanding guarantees issued on behalf of our clients. See Note 39 of the notes to our unaudited separate financial statements as of June 30, 2023 and for the six months ended June 30, 2023 and 2022 included in this prospectus supplement.

S-9

(4)

Includes planned regulatory reserve for credit losses ofW212.0 billion as of June 30, 2023. If our allowance for credit losses is deemed insufficient for regulatory purposes, we compensate for the difference by recording a regulatory reserve for credit losses, which is shown as a separate item included in retained earnings.

Business

Government Support and Supervision

As of June 30, 2023, our paid-in capital wasW23,706.6 billion compared toW23,151.6 billion as of December 31, 2022. In October 2023, the Government contributedW220 billion in cash to our capital.

Selected Financial Statement Data

Separate Financial Statement Data

The following tables present our selected separate financial information as of December 31, 2022 and June 30, 2023 and for the six months ended June 30, 2023 and 2022, which has been derived from our unaudited separate financial statements as of June 30, 2023 and for the six months ended June 30, 2023 and 2022 prepared in accordance with K-IFRS and included in this prospectus supplement.

Separate K-IFRS Financial Statement Data


	Six Months Ended June 30,
	2022		2023
	(billions of won) (unaudited)
Income Statement Data
Total Interest Income		2,558.1		5,573.4
Total Interest Expenses		1,659.3		4,699.2
Net Interest Income		898.9		874.2
Operating Income		522.8		2,387.0
Income before Income Tax		566.9		3,425.4
Income Tax Expense (Benefit)		97.5		610.8
Net Income		469.5		2,814.6


	As of December 31, 2022		As of June 30, 2023
	(billions of won) (unaudited)
Statements of Financial Position Data
Total Loans⁽¹⁾		202,032.2		192,241.0
Total Borrowings⁽²⁾		253,937.5		245,319.3
Total Assets		312,845.3		319,300.0
Total Liabilities		277,176.9		280,355.6
Equity		35,668.4		38,944.4

(1)

Gross amount, which includes loans for facility development, loans for working capital, loans for households, inter-bank loans, private loans, off-shore loan receivables, bills bought in foreign currencies, advance payments on acceptances and guarantees and other loans without adjusting for allowance for loan losses, present value discounts and deferred loan origination costs and fees. See Note 9 of the notes to our unaudited separate financial statements as of June 30, 2023 and for the six months ended June 30, 2023 and 2022 included in this prospectus supplement.

(2)	Total borrowings include financial liabilities designated at fair value through profit or loss, deposits, borrowings and debt issued.

S-10

Six Months Ended June 30, 2023

In the first half of 2023, we had net income ofW2,814.6 billion compared to net income ofW469.5 billion in the corresponding period of 2022, on a separate basis. The principal factors for the increase in net income included:

•

a significant increase in reversal of impairment loss on investments in subsidiaries and associates toW1,044.9 billion in the first half of 2023 fromW45.1 billion in the corresponding period of 2022, primarily due to an increase in the recoverable amount of our investment in Hanwha Ocean Co., Ltd. (formerly, DSME), resulting from an increase in the fair value of such investment following its acquisition by the Hanwha Group;

•

a reversal of provisions for payment guarantees ofW389.2 billion in the first half of 2023 compared to provisions for payment guarantees ofW493.6 billion in the corresponding period of 2022, primarily due to increases in the credit ratings of Korean shipbuilding companies for which we guarantee payment, including Hanwha Ocean, K Shipbuilding Co., Ltd. (formerly, STX Offshore & Shipbuilding) and Daehan Shipbuilding Co., Ltd.;

•

a reversal of provisions for loan loss allowance ofW636.7 billion in the first half of 2023 compared to provisions for loan loss allowance ofW153.3 billion in the corresponding period of 2022, primarily due to a decrease in our expected credit losses resulting from an improvement in the overall asset quality of our loan portfolio, which was mainly due to the increases in the credit ratings of Korean shipbuilding companies as described above, to which we have provided loans; and

•

a decrease in net loss on derivatives toW129.9 billion in the first half of 2023 fromW600.2 billion in the corresponding period of 2022, primarily due to a decrease in net loss on fair value hedged items resulting from fluctuations in interest rates, foreign exchange rates and the prices of stocks and derivatives.

The above factors were partially offset by an increase in income tax expense toW610.8 billion in the first half of 2023 fromW97.5 billion in the corresponding period of 2022, primarily due to the increase in our profit before income taxes, as well as a net loss on financial liabilities measured at fair value through profit or loss ofW5.9 billion in the first half of 2023 compared to a net gain ofW374.4 billion in the corresponding period of 2022, primarily due to a significant decrease in our gain on the valuation of such financial liabilities.

Allowances for Loan Losses and Loans in Arrears

As of June 30, 2023, we had established allowances ofW3,063.3 billion for loan losses under Korean IFRS.

Certain of our customers have restructured loans with their creditor banks. As of June 30, 2023, we have provided loans ofW384.8 billion for companies under workout, court receivership, court mediation and other restructuring procedures. As of June 30, 2023, we had established allowances ofW246.8 billion for loan losses with respect to such companies. We cannot assure you that actual credit losses from the loans to these customers will not exceed the allowances established.

S-11

The following table provides information on our loan loss allowances.


		As of June 30, 2023⁽¹⁾
		Loan Amount		Loan Loss Allowances
		(in billions of won, except percentages)
Loan Classification	Normal⁽²⁾	W	190,755.6	W	2,245.0
	Precautionary		415.9		114.0
	Substandard		551.7		239.2
	Doubtful		80.6		76.7
	Expected Loss		437.2		388.4

	Total	W	192,241.0	W	3,063.3

(1)	These figures include loans for facility development, loans for working capital, loans for households, inter-bank loans, private loans, off-shore loan receivables, bills bought in foreign currencies, advance payments on acceptances and guarantees and other loans.

(2)	Includes loans guaranteed by the Government. Under Korean IFRS, we establish loan loss allowances for all loans including loans guaranteed by the Government.

As of June 30, 2023, our non-performing loans totaledW1,069.6 billion, representing 0.6% of our outstanding loans as of such date. Non-performing loans are defined as loans that are classified as substandard or below. On June 30, 2023, our legal reserve wasW2,721.9 billion, representing 1.4% of our outstanding loans as of such date.

Loans to Financially Troubled Companies

We have credit exposure to a number of financially troubled Korean companies including Hanwha Ocean Co., Ltd., HMM Company Limited (formerly, Hyundai Merchant Marine Co., Ltd.), HJ Shipbuilding & Construction Co., Ltd. (formerly, Hanjin Heavy Industries and Construction Co., Ltd.), Daehan Shipbuilding Co., Ltd., K Shipbuilding Co., Ltd. and GM Korea Company. As of June 30, 2023, our credit extended to these companies totaledW19,905.5 billion, accounting for 6.2% of our total assets as of such date.

The following table provides the loan amounts (including loans classified as substandard or below and equity investment classified as estimated loss or below) extended to these companies as of the dates indicated:


Company	As of December 31, 2022		As of June 30, 2023		Primary Reason for Change
	(billions of won)
Hanwha Ocean	W	7,954.9	W	9,781.2	Increase due to a decrease in the value of the Won against the U.S. dollar, as well as a reversal of impairment loss resulting from an increase in the value of the shares of Hanwha Ocean
HMM Company Limited		7,265.7		7,254.3	Decrease due to a decrease in the value of perpetual bonds and a recognition of impairment loss resulting from a decrease in the value of the shares of HMM Company Limited
HJ Shipbuilding & Construction		996.5		912.7	Decrease due to a decrease in refund guarantees resulting from the delivery of ships
Daehan Shipbuilding		859.9		862.0	Increase due to an increase in refund guarantees and a decrease in the value of the Won against the U.S. dollar

S-12


Company	As of December 31, 2022		As of June 30, 2023		Primary Reason for Change
	(billions of won)
K Shipbuilding		659.4		705.3	Increase due to an increase in refund guarantees and a decrease in the value of the Won against the U.S. dollar
GM Korea Company		376.5		390.0	Increase due to a reversal of impairment loss resulting from an increase in the value of shares of GM Korea Company

Total	W	18,112.9	W	19,905.5

As of June 30, 2023, we established allowances ofW683.5 billion for our exposure to Hanwha Ocean,W0.9 billion for HMM Company Limited,W45.9 billion for HJ Shipbuilding & Construction,W96.7 billion for Daehan Shipbuilding,W36.0 billion for K Shipbuilding and none for GM Korea Company.

During 2015, DSME (now Hanwha Ocean Co., Ltd.), one of the largest shipbuilding and offshore construction companies in Korea, suffered from financial difficulties primarily due to significant losses incurred in connection with the construction of offshore plants resulting from a prolonged slowdown in the global shipbuilding industry. In October 2015, we announced that we, along with The Export-Import Bank of Korea, would extend additional financing of up toW4.2 trillion to DSME by the end of 2016 in the form of debt-to-equity swaps, extension of additional loans and provision of other forms of liquidity support. In this connection, in December 2015, we acquiredW382.9 billion of new equity shares of DSME, which increased our equity interest in DSME from 31.5% to 49.7%, and we became its largest shareholder. In December 2016, we increased our equity interest in DSME to 79.0% through an additional debt for equity swap. In March 2017, we and The Export-Import Bank of Korea announced a second joint plan to provide an additionalW2.9 trillion in financial support to DSME, which was approved by the other creditors in April 2017. Based on such plan, we provided additional debt-to-equity swaps ofW0.3 trillion in June 2017 and The Export-Import Bank of Korea exchanged a term loan in the amount ofW1.28 trillion provided by it to DSME for perpetual bonds issued by DSME. Other creditors also provided debt-to-equity swaps for up to 80% of their debt with DSME and rescheduled the maturities of the remainder. Subsequently, in March 2019, Hyundai Heavy Industries entered into a definitive agreement with us to acquire DSME. However, in January 2022, the European Commission announced that it would not grant approval for such acquisition due to anti-competition concerns for LNG carriers. In December 2022, Hanwha Group entered into a definitive agreement with us to acquire a 49.3% equity stake in DSME for approximatelyW2 trillion, which has since received regulatory approval from all relevant jurisdictions. The acquisition closed in May 2023, upon which DSME was renamed to Hanwha Ocean Co., Ltd. As of June 30, 2023, our equity stake in Hanwha Ocean amounted to 27.6%.

In July 2016, HMM Company Limited executed a debt-to-equity swap with us and other creditors, as part of its continued restructuring led by us as its largest creditor, and affiliates of the Hyundai group reduced their shareholdings in HMM Company Limited, which resulted in us becoming the largest shareholder of HMM Company Limited. In October 2018, we injectedW1 trillion in emergency aid into HMM Company Limited in order to normalize its operations by purchasing bonds with warrants and convertible bonds issued by HMM Company Limited. We also concurrently entered into an agreement to jointly manage HMM Company Limited together with Korea Ocean Business Corporation until December 2020, which was subsequently extended to January 2022. In June 2021, we exercised our right to convertW300 billion of our convertible bonds into 60 million common shares of HMM Company Limited. Following an improvement in the financial performance of HMM Company Limited, we ended our joint management of HMM Company Limited in January 2022, upon which Korea Ocean Business Corporation became its sole manager. We and Korea Ocean Business Corporation are each pursuing the sale of our respective equity shares in HMM Company Limited. In July 2023, we and Korea Ocean Business Corporation jointly announced a combined sale of an aggregate of approximately 38.9% of the equity interest of HMM Company Limited through a competitive bidding process, and we and Korea Ocean Business Corporation are currently evaluating eligible buyer candidates. As of June 30, 2023, our equity stake in HMM Company Limited amounted to 20.7%.

S-13

In January 2019, HJ Shipbuilding & Construction Philippines, a subsidiary of HJ Shipbuilding & Construction at Subic Bay in the Philippines, declared bankruptcy and filed for corporate rehabilitation with a regional trial court following its failure to comply with loan obligations to its Philippine lenders. In March 2019, creditors in Korea (including us) and lenders in the Philippines agreed on, and executed, a business normalization plan including a debt-to-equity swap and capital reduction for HJ Shipbuilding & Construction, as a result of which we became the largest shareholder of HJ Shipbuilding & Construction. In September 2021, creditors of HJ Shipbuilding & Construction (including us) sold a 66.85% interest in the company to a consortium led by Dongbu Corporation.

K Shipbuilding has faced financial difficulties for the past several years due to prolonged slowdowns in the Korean shipbuilding and shipping industries. K Shipbuilding, which had filed for court receivership in May 2016 and executed debt-to-equity swaps with their creditors (including us) in December 2016 under a rehabilitation plan through which we increased our equity interest to 43.9% and became its largest shareholder, exited court receivership in July 2017. In November 2020, we selected a consortium consisting of KH Investment and UAMCO., Ltd. as the preferred bidder for the sale of shares of K Shipbuilding. In July 2021, the consortium acquired a 97% interest in K Shipbuilding forW250 billion. In December 2021, we terminated our creditor management of K Shipbuilding, and in December 2022, sold all of our equity stake in K Shipbuilding.

In the first half of 2023, we sold non-performing loans worthW271.7 billion to Kiwoom F&I Co., Ltd.

Our large exposure to financially troubled companies in Korea means that we are also exposed to financial difficulties experienced by our borrowers as a result of, among other things, adverse economic conditions in Korea and globally, which could disrupt the business, activities and operations of many of our borrowers, which in turn could have an adverse impact on the ability of our borrowers to meet existing payment or other obligations to us. For example, COVID-19, an infectious disease that was first reported to have been transmitted to humans in late 2019 and was declared a “pandemic” by the World Health Organization in March 2020, has since spread globally and has led to significant global and domestic economic and financial disruptions. See “The Republic of Korea—The Economy—Worldwide Economic and Financial Difficulties.” The COVID-19 pandemic has had an especially direct negative impact on certain of our borrowers, among them the airline industry, which required significant liquidity following a sharp decline in aircraft traffic and a dramatic increase in the number of suspended flights due to entry restrictions imposed by many countries in response to COVID-19 during the course of the pandemic.

In April 2020, we provided Asiana Airlines, a subsidiary of Kumho Asiana Group and the second-largest airline in Korea, with liquidity support in the aggregate amount of approximatelyW1.2 trillion, in the form of the provision of a credit line and an investment in its perpetual convertible bonds. Our decision to take such measure was largely driven by a need to address Asiana Airlines’ financial difficulties resulting from the negative impact of the COVID-19 pandemic on the airline industry, although we had previously provided Asiana Airlines with liquidity support in similar amount and form in 2019 as well with the aim of enhancing its financial condition. In the fourth quarter of 2020, as the administrator of the Key Industry Stabilization Fund (explained further below), we injectedW0.3 trillion from such fund into Asiana Airlines in order to normalize its operations following the cancellation of plans by a consortium led by HDC Hyundai Development to acquire Asiana Airlines. In November 2020, we signed an investment agreement with Hanjin KAL, the parent company of Korean Air Lines, to injectW800 billion (consisting ofW500 billion through participation in a rights offering andW300 billion through purchase of exchangeable bonds) into Hanjin KAL in connection with Korean Air Lines’ contemplated acquisition of a 63.9% stake in Asiana Airlines through a transaction valued atW1.8 trillion (the “Acquisition”), subsequent to which we expect our equity interest in Hanjin KAL to amount to approximately 10.6%. In December 2020, Asiana Airlines’ shareholders approved a 3-to-1 share capital reduction plan, which was aimed at offsetting part of Asiana Airlines’ deficits and improving its capital structure. However, the consummation of the Acquisition currently remains subject to a number of factors, including uncertainties regarding approval of the Acquisition from antitrust authorities of a number of jurisdictions, which have yet to be obtained. If the Acquisition is completed, Asiana Airlines would become Korean Air Lines’ consolidated subsidiary.

S-14

In addition, the COVID-19 pandemic has prompted the Government in recent years to implement various emergency aid initiatives involving Korean banks, including us, to provide liquidity assistance to a range of financially troubled companies. Such initiatives include, among others, the provision of new loans to financially troubled companies, extension of maturity dates for existing loans and suspension of interest payment obligations for an extended period of time. In May 2020, the Government provided for the establishment of the Key Industry Stabilization Fund, a fund that amounted toW40 trillion to be administered by us mainly through the issuance of industrial finance bonds, to support businesses in certain key industries that face financial difficulties resulting from the COVID-19 pandemic, such as the air transport and maritime industries. The Key Industry Stabilization Fund has supported those businesses that meet certain pre-determined criteria, including those aimed at stabilizing the job markets. Our participation in such Government-led initiatives may lead us to extend credit to financially troubled borrowers that we would not otherwise extend, or offer terms for such credit that we would not otherwise offer, in the absence of such initiatives. Furthermore, there is no guarantee that the financial condition and liquidity position of our financially troubled borrowers benefiting from such initiatives will improve sufficiently for them to service their debt on a timely basis, or at all. Accordingly, increases in our exposure to financially troubled borrowers resulting from such Government-led initiatives may have a material adverse effect on our financial condition and results of operations.

A deterioration in the financial condition of our borrowers, including those under workout, court receivership, court mediation or other restructuring procedures, could result in a deterioration in the quality of our loan portfolio. This, in turn, could result in an increase in delinquency ratios, increased charge-offs and higher provisioning, as well as an increase in impairment losses on such loans, which could have a material adverse impact on our business, financial condition or results of operations.

Operations

Loan Operations

The following table sets out, by currency and category of loan, our total outstanding loans as of June 30, 2023:

Loans⁽¹⁾


	June 30, 2023
	(billions of won)
Equipment Capital Loans:
Domestic currency	W	57,757.7
Foreign currency		11,953.0

		69,710.7

Working Capital Loans:
Domestic currency⁽²⁾		67,592.3
Foreign currency		16,436.9

		84,029.2

Other Loans⁽³⁾		38,501.1

Total loans	W	192,241.0

(1)	Includes loans extended to affiliates.

(2)	Includes loans on households.

(3)	Includes inter-bank loans, private loans, off-shore loan receivables, loans borrowed from overseas financial institutions, bills bought in foreign currencies, advance payments on acceptances and guarantees and other loans.

S-15

As of June 30, 2023, we hadW192,241.0 billion in outstanding loans, which represents a 4.8% decrease fromW202,032.2 billion of outstanding loans as of December 31, 2022.

Maturities of Outstanding Loans

The following table categorizes our outstanding equipment capital and working capital loans by their remaining maturities:

Outstanding Equipment Capital and Working Capital Loans by Remaining Maturities⁽¹⁾


	June 30, 2023		As % of June 30, 2023 Total
	(billions of won, except percentages)
Loans with remaining maturities of one year or less	W	62,074.9		40.4	%
Loans with remaining maturities of more than one year		91,665.0		59.6

Total	W	153,739.9		100.0	%

(1)	Includes loans extended to affiliates.

Loans by Industrial Sector

The following table sets out the total amount of our outstanding equipment capital and working capital loans, categorized by industry sector as of June 30, 2023:

Outstanding Equipment Capital and Working Capital Loans by Industry Sector⁽¹⁾


	June 30, 2023			As % of June 30, 2023 Total
	(billions of won, except percentages)
Manufacturing	W	71,125.7			46.3	%
Finance and Insurance		34,763.9			22.6
Transportation		10,702.7			7.0
Electric, Gas and Water Supply Industry		5,642.4			3.7
Public Administration		490.4			0.3
Others⁽²⁾		31,014.8			20.2

Total	W	153,739.9			100.0	%

Percentage increase (decrease) from December 31, 2022		(2.5	)%

(1)	Includes loans extended to affiliates.

(2)	Includes wholesale and retail trade, real estate and leasing, and construction.

S-16

Industrial Bank of Korea was our single largest borrower as of June 30, 2023, accounting for 4.0% of our outstanding equipment capital and working capital loans. As of June 30, 2023, our five largest borrowers and 20 largest borrowers accounted for 9.8% and 20.3%, respectively, of our outstanding equipment capital and working capital loans.

The following table breaks down the equipment capital and working capital loans to our 20 largest borrowers outstanding as of June 30, 2023 by industry sector:

20 Largest Borrowers by Industry Sector


	As % of June 30, 2023 Total Outstanding Equipment Capital and Working Capital Loans to Our 20 Largest Borrowers
Finance and Insurance		48.7	%
Manufacturing		31.1
Transportation		12.4
Others⁽¹⁾		7.8

Total		100.0

(1)	Includes wholesale and retail trade, real estate and leasing, and construction.

Loans by Categories

The following table sets out equipment capital and working capital loans by categories as of June 30, 2023:


	Equipment Capital Loans				Working Capital Loans
	June 30, 2023%				June 30, 2023%
	(billions of won, except percentages)
Industrial fund loans	W	51,947.4	74.5	%	W	53,495.0	63.7	%
On-lending loans		2,586.9	3.7			13,226.6	15.7
Foreign currency loans		8,065.4	11.6			1,714.4	2.0
Local currency loans denominated in foreign currencies		0.8	0.0			20.7	0.0
Offshore loans in foreign currencies		3,658.5	5.2			12,063.7	14.4
Government fund loans		84.3	0.1			0.0	0.0
Overdraft		0.0	0.0			115.3	0.1
Others⁽¹⁾		3,367.4	4.8			3,393.5	4.0

Total	W	69,710.7	100.0	%	W	84,029.2	100.0	%

(1)	Includes loans on households and loans extended to affiliates.

S-17

Guarantee Operations

The following table shows our outstanding guarantees as of June 30, 2023:


	June 30, 2023
	(billions of won)
Acceptances	W	291.8
Guarantees on local borrowings		792.3
Guarantees on foreign borrowings		9,043.5
Letters of guarantee for importers		27.9

Total	W	10,155.5

Investments

Our equity investments increased toW43,682.0 billion as of June 30, 2023 fromW41,768.4 billion as of December 31, 2022. As of June 30, 2023, the cost basis of our equity investments subject to restriction under the KDB Act and our Articles of Incorporation totaledW20,173.8 billion, equal to 37.9% of our equity investment ceiling.

The following table sets out our equity investments by industry sector on a book value basis as of June 30, 2023:

Equity Investments


	Book Value as of June 30, 2023
	(billions of won)
Electric, Gas and Water Supply Industry	W	16,998.1
Finance and Insurance		11,741.4
Transportation		2,795.8
Real Estate Business		9.2
Construction		964.3
Manufacturing		3,254.1
Others		7,919.1

Total	W	43,682.0

As of June 30, 2023, we held total equity investments, on a book value basis, ofW593.6 billion in one of our five largest borrowers andW924.0 billion in two of our 20 largest borrowers.

When possible, we use the prevailing market price of a security to determine the value of our interest. However, if no readily ascertainable market value exists for our holdings, we record these investments at the cost of acquisition. With respect to our equity interests in enterprises in which we hold more than 15% of interest, we value these investments annually, with certain exceptions, on a net asset value basis when the investee company releases its financial statements. As of June 30, 2023, the aggregate value of our equity investments accounted for approximately 96.0% of their aggregate cost basis.

Other Activities

As of June 30, 2023, we held in trust cash and other assets totalingW29,083.4 billion, and we generated in the first half of 2023 trust fee income equalingW214.1 billion.

S-18

Source of Funds

Borrowings from the Government

The following table sets out our Government borrowings as of June 30, 2023:


Type of Funds Borrowed	As of June 30, 2023
	(billions of won)
General purpose	W	85.6
Special purpose		4,780.7

Total	W	4,866.3

Domestic and International Capital Markets

The following table sets out the outstanding balance of our industrial finance bonds as of June 30, 2023:


Outstanding Balance	As of June 30, 2023
	(billions of won)
Denominated in Won	W	111,013.6
Denominated in other currencies		42,408.5

Total	W	153,422.1

As of June 30, 2023, the aggregate amount of our industrial finance bonds and guarantee obligations (including guarantee obligations relating to loans that had not been borrowed as of June 30, 2023) wasW171,155.1 billion, equal to 21.4% of our authorized amount under the KDB Act, which wasW799,213.2 billion.

Foreign Currency Borrowings

As of June 30, 2023, the outstanding amount of our foreign currency borrowings was US$15.6 billion. Our long-term and short-term foreign currency borrowings decreased toW20,539.3 billion as of June 30, 2023 fromW20,820.6 billion as of December 31, 2022.

Deposits

As of June 30, 2023, demand deposits held by us totaledW1,941.3 billion and time and savings deposits held by us totaledW57,794.4 billion.

S-19

Debt

Debt Repayment Schedule

The following table sets out our principal repayment schedule as of June 30, 2023:

Debt Principal Repayment Schedule⁽¹⁾


	Maturing on or before December 31,
Currency⁽²⁾⁽³⁾	2023		2024		2025		2026		Thereafter
	(billions of won)
Won	W	31,233.8	W	34,356.7	W	20,094.7	W	9,728.9	W	20,630.6
Foreign		20,797.9		12,942.4		10,354.0		7,190.7		11,662.8

Total Won Equivalent	W	52,031.7	W	47,299.1	W	30,448.7	W	16,919.6	W	32,293.4

(1)	Excludes bonds sold under repurchase agreements and call money.

(2)	Borrowings in foreign currencies have been translated into Won at the market average exchange rates on June 30, 2023, as announced by the Seoul Money Brokerage Services Ltd.

(3)	We categorize debt with respect to which we have entered into currency swap agreements by our repayment currency under such agreements.

Directors and Management; Employees

Currently, the members of our Board of Directors are:


Position	Name	Expiration of Term
Chief Executive Officer and Chairman of the Board of Directors	Seog Hoon Kang	June 6, 2025
Chief Operating Officer and Vice Chairman of the Board of Directors	Bock Kyu Kim	March 22, 2026
Auditor	Tae Hyun Joo	March 14, 2024
Independent Non-executive Directors	Dong Il Jung	November 30, 2023
	Seog Hwan Lee	September 27, 2024
	Sam Mo Kang	September 27, 2024
	Yong Hi Lee	April 2, 2025

Financial Statements and the Auditors

Our interim separate financial statements as of June 30, 2023 and for the six months ended June 30, 2023 and 2022 appearing in this prospectus supplement were prepared in conformity with K-IFRS, as summarized in Note 2 of the notes to our unaudited separate financial statements as of June 30, 2023 and for the six months ended June 30, 2023 and 2022 included in this prospectus supplement.

S-20

Independent Auditors’ Review Report

(Based on a report originally issued in Korean)

To the Board of Directors and Shareholders of

Korea Development Bank

Reviewed Financial Statements

We have reviewed the accompanying interim separate financial statements of Korea Development Bank (the “Bank”), which comprise the interim separate statement of financial position as of June 30, 2023, the interim separate statements of comprehensive income for the three-month and six-month periods ended June 30, 2023 and 2022, the interim separate statements of changes in equity and cash flows for the six-month periods ended June 30, 2023 and 2022, and a summary of significant accounting policies and other explanatory notes to the interim separate financial statements.

Management’s Responsibility

Management is responsible for the preparation and fair presentation of these interim separate financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) 1034 Interim Financial Reporting, and for such internal control as management determines is necessary to enable the preparation of interim separate financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Review Responsibility

Our responsibility is to issue a report on these interim separate financial statements based on our reviews.

We conducted our reviews in accordance with the Review Standards for Quarterly and Semi-annual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying interim separate financial statements referred to above are not prepared, in all material respects, in accordance with K-IFRS 1034 Interim Financial Reporting.

Other Matters

We have audited the separate statement of financial position of the Bank as of December 31, 2022, and the related separate statement of comprehensive income, separate statement of changes in equity and separate statement of cash flows for the year then ended, which are not accompanying this report, in accordance with Korean Standards on Auditing, and our report dated March 28, 2023 expressed an unmodified opinion thereon. The accompanying separate statement of financial position as of December 31, 2022, presented for comparative purposes, is not different, in all material respects, from the above audited separate statement of financial position.

/s/ Nexia Samduk

Nexia Samduk

September 13, 2023

S-21

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

S-22

Korea Development Bank

Interim Separate Statements of Financial Position

June 30, 2023 (Unaudited) and December 31, 2022


(In millions of won)	Notes		June 30, 2023		December 31, 2022
Assets
Cash and due from banks		4,44,45,48	W	15,363,170		11,538,806
Securities measured at FVTPL		5,44,45,48		14,381,210		11,951,906
Securities measured at FVOCI		6,38,44,45,48		36,651,891		37,684,919
Securities measured at amortized cost		7,38,44,45,48		6,708,107		6,355,884
Loans measured at FVTPL		8,44,45,48		508,887		541,811
Loans measured at amortized cost		9,44,45,48		189,190,243		198,045,603
Derivative financial assets		10,44,45,46,48		9,087,246		9,794,455
Investments in subsidiaries and associates		11,47		29,113,844		27,992,331
Property and equipment, net		12,47		813,585		812,173
Investment property, net		13,47		75,988		81,713
Intangible assets, net		14,47		99,149		118,489
Defined benefit assets		20		76,336		87,770
Current tax assets				5,579		128,218
Other assets		15,43,45,48		17,224,760		7,711,217

Total assets			W	319,299,995		312,845,295

Liabilities
Financial liabilities measured at FVTPL		16,44,45,48	W	1,607,710		1,469,724
Deposits		17,44,45,48		67,374,517		68,326,656
Borrowings		18,44,45,48		26,111,536		25,429,244
Debentures		19,44,45,48		150,225,557		158,711,896
Derivative financial liabilities		10,44,45,46,48		10,433,290		11,317,002
Provisions		21		1,065,465		1,448,030
Deferred tax liabilities		36		3,993,463		3,465,176
Current tax liabilities				39,762		15,513
Other liabilities		22,44,45,48		19,504,301		6,993,681

Total liabilities				280,355,601		277,176,922
Equity
Issued capital		1,23		23,706,559		23,151,559
Capital surplus		23		2,469,775		2,475,310
Accumulated other comprehensive income		23		2,877,526		2,819,333
Retained earnings		23		9,890,534		7,222,171
(Regulatory reserve for credit losses ofW211,996 million as of June 30, 2023 andW247,253 million as of December 31, 2022, respectively)
(Required provision for (reversal of) regulatory reserve for credit losses ofW55,548 million as of June 30, 2023 andW(35,257) million as of December 31, 2022, respectively)
(Planned provision for (reversal of) regulatory reserve for credit losses ofW55,548 million as of June 30, 2023 andW(35,257) million as of December 31, 2022, respectively)

Total equity				38,944,394		35,668,373

Total liabilities and equity			W	319,299,995		312,845,295

See accompanying notes to the interim separate financial statements.

S-23

Korea Development Bank

Interim Separate Statements of Comprehensive Income

Six-month periods ended June 30, 2023 and 2022 (Unaudited)


			June 30, 2023						June 30, 2022
(In millions of won, except earnings per share information)	Notes		Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Interest income		24	W	2,811,567			5,573,406			1,400,953			2,558,130
Interest expense		24		(2,388,272	)		(4,699,190	)		(927,963	)		(1,659,255	)

Net interest income		47		423,295			874,216			472,990			898,875
Net fees and commission income		25		105,700			187,233			99,242			205,430
Dividend income		26		105,742			461,842			69,726			503,140
Net gain (loss) on securities measured at FVTPL		27		(2,942	)		162,462			(54,156	)		(86,701	)
Net gain (loss) on financial liabilities measured at FVTPL		28		86,520			(5,851	)		200,315			374,412
Net loss on securities measured at FVOCI		29		(3,915	)		(1,954	)		(3,592	)		(28,106	)
Net gain (loss) on derivatives		30		119,947			(129,930	)		(454,498	)		(600,209	)
Net gain on foreign currency transaction		31		4,464			356,892			210,748			270,570
Other operating income (expense), net		32		(103,840	)		(186,115	)		(146,948	)		(153,296	)

Non-interest income (expense), net				311,676			844,579			(79,163	)		485,240
Provision for (reversal of) credit losses		33		(890,339	)		(1,046,860	)		412,868			434,146
General and administrative expenses		34,47		179,024			378,619			177,340			427,141

Operating income (expense)		47		1,446,286			2,387,036			(196,381	)		522,828
Reversal of impairment loss (impairment loss) on investments in subsidiaries and associates				633,270			1,044,917			(66,246	)		45,115
Other non-operating income		35		396			2,408			982			3,085
Other non-operating expense		35		(5,020	)		(8,949	)		(1,689	)		(4,101	)

Non-operating income (expense), net				628,646			1,038,376			(66,953	)		44,099

Profit (loss) before income taxes				2,074,932			3,425,412			(263,334	)		566,927
Income tax expense (benefit)		36		351,858			610,819			(50,120	)		97,477

Profit (loss) for the period		23		1,723,074			2,814,593			(213,214	)		469,450
(Profit (loss) for the period adjusted for regulatory reserve for credit losses:W1,836,500 million andW2,759,045 million for the three-month and six-month periods ended June 30, 2023, respectively;W(136,112) million andW499,632 million for the three-month and six-month periods ended June 30, 2022, respectively)
Other comprehensive income (loss) for the period, net of tax		23
Items that are or may be reclassified subsequently to profit or loss:
Net gain (loss) on securities measured at FVOCI				10,517			160,573			(242,676	)		(464,225	)
Exchange differences on translation of foreign operations				9,248			52,561			96,620			118,674
Valuation gain (loss) on cash flow hedge				179			(527	)		1,088			3,069
Net loss on hedges of net investments in foreign operations				(6,116	)		(31,012	)		(51,156	)		(66,255	)

				13,828			181,595			(196,124	)		(408,737	)
Items that will not be reclassified to profit or loss:
Net loss on securities measured at FVOCI				(284,361	)		(94,192	)		(1,145,708	)		(524,930	)
Fair value changes on financial liabilities designated at fair value due to credit risk				(5,924	)		(10,840	)		9,879			21,380
Remeasurements of defined benefit liabilities				—			143			—			—

				(290,285	)		(104,889	)		(1,135,829	)		(503,550	)

				(276,457	)		76,706			(1,331,953	)		(912,287	)

Total comprehensive income (loss) for the period			W	1,446,617			2,891,299			(1,545,167)			(442,837)

Earnings (loss) per share
Basic and diluted earnings (loss) per share (in won)		37	W	365			601			(48	)		106

See accompanying notes to the interim separate financial statements.

S-24

Korea Development Bank

Interim Separate Statements of Changes in Equity

Six-month periods ended June 30, 2023 and 2022 (Unaudited)


(In millions of won)	Issued capital		Capital surplus			Accumulated other comprehensive income			Retained earnings			Total equity
Balance at January 1, 2022	W	21,886,559		2,479,010			4,773,474			7,363,814			36,502,857
Profit for the period		—		—			—			469,450			469,450
Net gain (loss) on securities measured at FVOCI		—		—			(1,067,445	)		78,290			(989,155	)
Exchange differences on translation of foreign operations		—		—			118,674			—			118,674
Valuation gain on cash flow hedge		—		—			3,069			—			3,069
Net loss on hedges of net investments in foreign operations		—		—			(66,255	)		—			(66,255	)
Fair value changes on financial liabilities designated at fair value due to credit risk		—		—			21,380			—			21,380

Total comprehensive income (loss) for the period		—		—			(990,577	)		547,740			(442,837	)

Dividends		—		—			—			(833,089	)		(833,089	)
Paid in capital increase		392,000		(1,885	)		—			—			390,115

Transaction with owners		392,000		(1,885	)		—			(833,089	)		(442,974	)

Balance at June 30, 2022	W	22,278,559		2,477,125			3,782,897			7,078,465			35,617,046

Balance at January 1, 2023	W	23,151,559		2,475,310			2,819,333			7,222,171			35,668,373
Profit for the period		—		—			—			2,814,593			2,814,593
Net gain on securities measured at FVOCI		—		—			47,868			18,513			66,381
Exchange differences on translation of foreign operations		—		—			52,561			—			52,561
Valuation loss on cash flow hedge		—		—			(527	)		—			(527	)
Net loss on hedges of net investments in foreign operations		—		—			(31,012	)		—			(31,012	)
Fair value changes on financial liabilities designated at fair value due to credit risk		—		—			(10,840	)		—			(10,840	)
Remeasurements of defined benefit liabilities		—		—			143			—			143

Total comprehensive income for the period		—		—			58,193			2,833,106			2,891,299

Dividends		—		—			—			(164,743	)		(164,743	)
Paid in capital increase		555,000		(5,535	)		—			—			549,465

Transaction with owners		555,000		(5,535	)		—			(164,743	)		384,722

Balance at June 30, 2023	W	23,706,559		2,469,775			2,877,526			9,890,534			38,944,394

See accompanying notes to the interim separate financial statements.

S-25

Korea Development Bank

Interim Separate Statements of Cash Flows

Six-month periods ended June 30, 2023 and 2022 (Unaudited)


(In millions of won)	Notes		2023			2022
Cash flows from operating activities
Profit for the period			W	2,814,593			469,450
Adjustments for:
Income tax expense		36		610,819			97,477
Interest income		24		(5,573,406	)		(2,558,130	)
Interest expense		24		4,699,190			1,659,255
Dividend income		26		(461,842	)		(503,140	)
Loss (gain) on valuation of securities measured at FVTPL		27		(153,455	)		60,109
Loss (gain) on disposal of securities measured at FVTPL				24,616			(17,727	)
Loss (gain) on financial liabilities measured at FVTPL		28		5,851			(374,412	)
Loss on securities measured at FVOCI		29		1,954			28,106
Impairment loss (reversal of impairment loss) on securities measured at amortized cost				4,491			(8	)
Loss on loans measured at FVTPL		32		11,625			73,069
Loss (gain) on valuation of derivatives				(284,756	)		2,489,527
Net loss (gain) on fair value hedged items		30		495,012			(923,619	)
Gain on foreign exchange translations		31		(362,873	)		(260,903	)
Gain on disposal of investments in subsidiaries and associates		32		—			(16,626	)
Reversal of impairment loss on investments in subsidiaries and associates				(1,044,917	)		(45,115	)
Provision for (reversal of) loan loss allowance		33		(636,714	)		153,271
Increase (reversal) of provision for other assets		33		2,391			(3,779	)
Increase (reversal) of provision for payment guarantees		21		(389,156	)		493,621
Reversal of provision for unused commitments		21		(39,110	)		(182,089	)
Increase (reversal) financial guarantee provision		21		15,729			(26,878	)
Reversal of provision for possible losses from lawsuits		21		(4	)		(1,492	)
Reversal of provision for restoration		21		(544	)		(1,244	)
Defined benefit costs		20		11,716			68,288
Depreciation of property and equipment		34		35,861			35,659
Loss on disposal of property and equipment		35		1,304			513
Gain on disposal of intangible assets		35		(2	)		—
Depreciation of investment property		35		1,381			1,116
Amortization of intangible assets		34		27,230			27,121
Gain on redemption of debentures				(2	)		—

				(2,997,611	)		271,970
Changes in operating assets and liabilities:
Due from banks				(368,305	)		425,204
Securities measured at FVTPL				(1,456,994	)		(233,383	)
Loans measured at FVTPL				21,299			(1,276	)
Loans measured at amortized cost				8,341,120			(11,595,400	)
Derivative financial instruments				65,522			2,983
Other assets				(9,573,434	)		(9,079,117	)
Financial liabilities measured at FVTPL				30,587			30,112
Deposits				(952,496	)		8,035,676
Defined benefit liabilities				(282	)		(11,883	)
Other liabilities				12,291,933			7,828,902

				8,398,950			(4,598,182	)

(Continued)

S-26

Korea Development Bank

Interim Separate Statements of Cash Flows

Six-month periods ended June 30, 2023 and 2022 (Unaudited)


(In millions of won)	Notes		2023			2022
Income taxes refund (paid)				60,663			(141,419	)
Interest received				5,584,000			2,467,608
Interest paid				(4,225,426	)		(1,454,056	)
Dividends received				464,797			500,896

Net cash provided by (used in) operating activities			W	10,099,966			(2,483,733	)
Cash flows from investing activities
Net increase of securities measured at FVTPL			W	(878,641	)		(1,097,551	)
Disposal of securities measured at FVOCI				4,520,563			7,407,158
Acquisition of securities measured at FVOCI		6		(2,678,618	)		(10,058,190	)
Redemption of securities measured at amortized cost		7		1,395,000			772,000
Acquisition of securities measured at amortized cost		7		(1,732,183	)		(1,507,687	)
Disposal of property and equipment				7,354			70,375
Acquisition of property and equipment		12		(10,988	)		(6,825	)
Disposal of intangible assets				269			—
Acquisition of intangible assets		14		(8,046	)		(4,519	)
Disposal of investments in subsidiaries and associates				130,614			1,648,264
Acquisition of investments in subsidiaries and associates				(211,526	)		(616,286	)

Net cash provided by (used in) investing activities				533,798			(3,393,261	)
Cash flows from financing activities
Increase of financial liabilities measured at FVTPL				100,000			115,000
Decrease of financial liabilities measured at FVTPL				(13,348	)		(127,241	)
Proceeds from borrowings				22,909,905			22,119,602
Repayment of borrowings				(22,230,187	)		(19,859,656	)
Proceeds from issuance of debentures				54,358,264			63,428,658
Repayment of debentures				(63,569,189	)		(57,457,696	)
Decrease in lease liabilities				(9,629	)		(11,756	)
Dividends				(164,743	)		(833,089	)
Paid in capital increase				117,328			390,115

Net cash provided by (used in) financing activities				(8,501,599	)		7,763,937
Effects from changes in foreign currency exchange rate for cash and cash equivalents held				136,353			226,739
Net increase in cash and cash equivalents				2,268,518			2,113,682
Cash and cash equivalents at beginning of the period				11,872,469			9,453,576

Cash and cash equivalents at end of the period		42	W	14,140,987			11,567,258

See accompanying notes to the interim separate financial statements.

S-27

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

1. Reporting Entity

Korea Development Bank (the “Bank”) was established on April 1, 1954, in accordance with The Korea Development Bank Act to finance and manage major industrial projects.

The Bank is engaged in the banking industry under The Korea Development Bank Act and other applicable statutes, and in the fiduciary in accordance with the Financial Investment Services and Capital Markets Act.

Korea Finance Corporation (“KoFC”), the former ultimate parent company, and KDB Financial Group Inc. (“KDBFG”), the former immediate parent company, were established by spin-offs of divisions of the Bank as of October 28, 2009. KoFC and KDBFG were merged into the Bank, effective as of December 31, 2014. Issued capital isW23,706,559 million with 4,741,311,768 shares of issued and outstanding as of June 30, 2023 and 100% of the Bank’s shares are owned by the government of the Republic of Korea.

The Bank’s head office is located in 14, Eunhaeng-ro (Yeouido-dong), Yeongdeungpo-gu, Seoul and its service network as of June 30, 2023 is as follows:


	Domestic				Overseas
	Head Office		Branches		Branches		Subsidiaries		Representative offices		Total
KDB		1		60		11		7		7		86

2. Basis of Preparation

(1) Application of accounting standards

These interim financial statements have been prepared in accordance with the Korean International Financial Reporting Standards (“K-IFRS”) 1034 Interim Financial Reporting and provide less information as compared with its annual financial statements. The interim financial statements have been prepared in accordance with K-IFRS effective as of June 30, 2023 and the significant accounting policies applied in the preparation of these interim financial statements have been consistently applied to all periods presented unless otherwise specified.

(2) Changes and disclosures of accounting policies

(i) New and amended standards adopted

The Bank newly applied the following amended and enacted standards for the annual period beginning on January 1, 2023. The nature and the impact of each new standard or amendment are described below:

Amendments to Korean IFRS No.1001 Presentation of Financial Statements—Accounting Policy Disclosure

Amendments to Korean IFRS No.1001 Presentation of Financial Statements—Disclosure of gains or losses on valuation of financial liabilities subject to exercise price adjustment conditions

S-28

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

2. Basis of Preparation, Continued

with warrants), if all or part of the financial instrument whose exercise price is adjusted due to the issuers’ stock price fluctuations, are classified as financial liabilities according to paragraph 11 of Korean IFRS No.1032 Financial Instruments: Presentation. These amendments do not have a significant impact on the separate financial statements.

Amendments to Korean IFRS No.1008 Accounting Policies, Changes in Accounting Estimates and Errors

Amendments to Korean IFRS No.1012 Income Taxes – Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction

Issuance of Korean IFRS No.1117 Insurance Contracts

Korean IFRS No.1117 Insurance Contracts replaced Korean IFRS No.1104 Insurance Contracts. This standard requires an entity to estimate future cash flows of an insurance contract and measure insurance liabilities using discount rates applied with assumptions and risks at the measurement date and recognize insurance revenue on an accrual basis including services (insurance coverage) provided to the policyholder by each annual reporting period. In addition, investment components (refunds due to termination and maturity) repaid to a policyholder even if an insured event does not occur, are excluded from insurance revenue. These amendments do not have a significant impact on the separate financial statements.

(ii) Change of accounting policies

The Bank had classified due from banks with restriction to use, such as reserve requirement deposits, as due from banks measured at amortized cost rather than cash and cash equivalents; however, following the IFRS Interpretations Committee’s decision that cash and cash equivalents include restricted demand deposits, some classified due from financial institutions with restriction to use, such as reserve requirement deposits, the Bank has retrospectively classified these accounts as cash and cash equivalents. The comparative separate financial statements have been restated to reflect the changes made to retrospective application.

The application of these accounting policy changes has no effect on the separate statements of financial position as of June 30, 2023 and December 31, 2022, and the separate statements of comprehensive income for the periods ended June 30, 2023 and 2022.

S-29

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

2. Basis of Preparation, Continued

The effects on the separate statement of cash flows for the period ended June 30, 2022, are as follows:

< Cash flow statement for the period ended June 30, 2022>


	Prior to accounting policy change		After accounting policy change		Increase (decrease)
Due from banks	W	1,456,721		425,204		(1,031,517	)
Effects from changes in foreign currency exchange rate for cash and cash equivalents held		204,645		226,739		22,094
Cash and cash equivalents at beginning of the period		5,066,135		9,453,576		4,387,441
Cash and cash equivalents at end of the period		8,189,240		11,567,258		3,378,018

(ii) New standards and interpretations issued but not effective

The following new standards, interpretations and amendments to existing standards have been issued but not effective for annual periods beginning after January 1, 2023, and the Bank has not early adopted them. The nature and the impact of each new standard, amendment and enactments are described below:

Amendments to K-IFRS 1001 ‘Presentation of Financial Statements’—Classification of Liabilities as Current or Non-current

The amendments clarify that liabilities are classified as either current or non-current, depending on the substantive rights that exist at the end of the reporting period. Classification is unaffected by the likelihood that an entity will exercise right to defer settlement of the liability or the management’s expectations thereof. Also, the settlement of liability includes the transfer of the entity’s own equity instruments; however, it would be excluded if an option to settle the liability by the transfer of the entity’s own equity instruments is recognized separately from the liability as an equity component of a compound financial instrument. The amendments should be applied for annual periods beginning on or after January 1, 2024, and earlier application is permitted. The Bank does not expect that these amendments have a significant impact on the separate financial statements.

(3) Basis of measurement

The financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position:

•

Derivative financial instruments measured at fair value

•

Financial instruments measured at fair value through profit or loss

•

Financial instruments measured at fair value through other comprehensive income

•

Fair value hedged financial instruments with changes in fair value, due to hedged risks, recognized in profit or loss

•

Liabilities for defined benefit plans, which are recognized as net of the total present value of defined benefit obligations less the fair value of plan assets.

S-30

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

2. Basis of Preparation, Continued

(4) Functional and presentation currency

These financial statements are presented in Korean won (“W”), which is the Bank’s functional currency and the currency of the primary economic environment in which the Bank operates.

(5) Use of estimates and judgments

The preparation of the financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and 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.

The following are the key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:

(i) Fair value of financial instruments

Financial instruments measured at fair value through profit or loss and other comprehensive income, and derivative instruments are recognized and measured at fair value. 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.

Financial instruments, which are not actively traded in the market and those with less transparent market prices, will have less objective fair values and require broad judgment on liquidity, concentration, uncertainty in market factors and assumptions in price determination and other risks.

Diverse valuation techniques are used to determine the fair value of financial instruments, from generally accepted market valuation models to internally developed valuation models that incorporate various types of assumptions and variables.

(ii) Credit losses allowance

The Bank tests impairment and recognizes loss allowances on financial assets classified at amortized cost, debt instruments measured at fair value through other comprehensive income and recognizes provisions for payment guarantee, financial guarantee and unused commitments. Accuracy of allowances and provisions for credit losses is dependent upon estimation of expected cash flows of the borrower for individually assessed allowances of loans, and upon assumptions and methodology used for collectively assessed allowances for groups of loans, guarantees and unused loan commitments.

S-31

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

2. Basis of Preparation, Continued

The pandemic of COVID-19 has had a negative impact on the global economy and may have a negative impact on the financial position and financial performance of the Bank due to the increase of the expected credit losses on specific portfolios and the potential losses on financial assets. The detail of credit risk exposures by industry affected by the pandemic of COVID-19 as of June 30, 2023 is disclosed in Note 48. (2) and the exposures by industries could be changed according to economic fluctuations.

The Bank has calculated the forward-looking information to estimate the expected credit loss in accordance with K-IFRS 1109 ‘Financial Instruments’ and has recalulated the forward-looking information by increasing the probability of a recession to reflect changes in the forward-looking information due to economic uncertainties such as rising interest rates and a slowdown in the real economy. In addition, a comprehensive review of vulnerable sectors in the event that the effects of COVID-19-related financial support policies fade has been undertaken, and the effect has been incorporated into expected credit losses in an additional way. The Bank will continue to monitor forward-looking information on a quarterly basis, taking into account internal and external economic uncertainties and the impact of COVID-19 on the economy.

(iii) Deferred taxes

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred income tax assets are recognised to the extent that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Actual income taxes in the future may not be identical to the recognised deferred tax assets and liabilities.

(iv) Defined benefit liabilities

The Bank operates a defined benefit plan. Defined benefit liability is calculated by annual actuarial valuations as of the reporting date. To perform the actuarial valuations, assumptions for discount rates, future salary increases and others are required to be estimated. Defined benefit plans contain significant uncertainties in estimations due to its long-term nature.

3. Significant Accounting Policies

The significant accounting policies applied by the Bank in preparation of its separate financial statements are included below. The accounting policies set out below have been applied consistently to all periods presented in these separate financial statements.

(1) Investments in subsidiaries and associates

Dividends received from subsidiaries and associates are recognised as income as of the time the right to receive the dividends is established.

S-32

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

3. Significant Accounting Policies, Continued

(2) Business combination of entities under common control

The assets and liabilities acquired under business combinations under common control are recognised at the carrying amounts recognised previously in the consolidated financial statements of the ultimate parent. The difference between consideration transferred and carrying amounts of net assets acquired is recognised as part of share premium.

(3) Operating segments

The Bank makes decisions regarding allocation of resources to segments and categorizes segments, based on internal reports reviewed periodically by the chief operating decision maker, to assess performance. Information on segments reported to the chief operating decision maker includes items directly attributable to segments as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise corporate assets (such as the Bank Headquarters), head office expenses, and income tax assets and liabilities. The Bank recognises the CEO as the chief operating decision maker.

(4) Foreign exchange

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the functional currency of the Bank, at exchange rates of the dates of transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the reporting period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated to the functional currency at the exchange rate at the date that the fair value was determined.

Foreign currency differences arising on transactions and translations of monetary items are recognised in profit or loss, except for differences arising on the translation of a financial instruments designated as hedges of the net investment in foreign operations, or cash flow hedge, which are recognised in other comprehensive income.

When a gain or loss on a non-monetary item is recognised in other comprehensive income, any exchange component of that gain or loss is recognised in other comprehensive income. Conversely, when a gain or loss on a non-monetary item is recognised in profit or loss, any exchange component of that gain or loss shall be recognised in profit or loss.

(ii) Foreign operations

If the presentation currency of the Bank is different from a foreign operation’s functional currency, the financial statements of the foreign operation are translated into the presentation currency using the following methods:

S-33

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

3. Significant Accounting Policies, Continued

expenses on the statement of comprehensive income are translated at the exchange rates of the date of transaction. Foreign currency differences that arise from translation are recognized as other comprehensive income, and the disposal of a foreign operation is re-categorized as profit or loss as of the moment of the disposal profit or loss is recognized.

Any goodwill arising on the acquisition of a foreign operation, and any adjustments in fair value to the carrying amounts of assets and liabilities due to such acquisition, are treated as assets and liabilities of the foreign operation. Therefore, such are expressed in the functional currency of the foreign operations and, alongside other assets and liabilities of the foreign operation, translated at the closing exchange rate.

In the case of the disposal of a foreign operation, cumulative amounts of exchange difference regarding the foreign operation, recognized separately from other comprehensive income, are re-categorized from assets to profit or loss as of the disposal profit or loss is recognized.

(iii) Foreign exchange of net investment in foreign operations

Monetary items receivable from or payable to a foreign operation, with none or little possibility of being settled in the foreseeable future, are considered a part of the net investment in the foreign operation. Therefore, the exchange difference is recognised as comprehensive income or loss in the financial statement and re-categorized to profit or loss as of the disposal of the related net investment.

(5) Recognition and measurement of financial instruments

(i) Initial recognition

The Bank recognizes a financial asset or a financial liability in its separate 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 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 on the basis of the Bank’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. The Bank classifies financial liabilities as financial liabilities at fair value through profit or loss, or financial liabilities at amortized cost.

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.

(ii) 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 is the amount at which the financial asset or financial liability is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any loss allowance.

S-34

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

3. Significant Accounting Policies, Continued

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, 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.

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.

(iii) 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.

S-35

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

3. Significant Accounting Policies, Continued

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 entirety and recognize a financial liability for the consideration received.

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 expires.

(iv) Offsetting

Financial assets and liabilities are offset and the net amount reported in the separate statements of financial position where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the assets and settle the liability simultaneously.

(6) Cash and cash equivalents

Cash and cash equivalents comprise balances with original maturities of three months or less from the date of acquisition that are subject to an insignificant risk of changes in their fair value, including cash on hand, deposits held at call with banks and other highly liquid short-term investments with original maturities of three months or less.

(7) Non-derivative financial assets

(i) Financial assets at fair value through profit or loss

Any non-derivative financial asset classified as held for trading or not classified as financial assets at fair value through other comprehensive income or financial assets measured at amortized cost is categorized under 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 and dividend income from financial assets at fair value through profit or loss are also recognized in profit or loss.

(ii) Financial assets at fair value through other comprehensive income

S-36

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

3. Significant Accounting Policies, Continued

payments of principal and interest on the principal amount outstanding or 2) equity instruments, 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. Gain and loss from changes in fair value, other than dividend income and interest income amortized 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.

At disposal of financial assets at fair value through other comprehensive income, cumulative gain or loss is recognized as profit or loss for the reporting period. However, cumulative gain or loss of equity instrument designated as fair value through other comprehensive income are not recycled 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 resulting from changes in amortized cost are recognized in profit or loss, and other changes are recognized as equity.

(iii) Financial assets measured 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. Financial assets at amortized cost are subsequently measured at amortized cost using the effective interest method after initial recognition and interest income is recognized using the effective interest method.

(8) Expected credit loss of financial assets

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

The expected credit loss (“ECL”) is the weighted average amount of possible outcomes within a certain range, reflecting the time value of money, estimates on the past, current and future situations, and information accessible without excessive cost of effort.

The Bank uses the following three measurement techniques in accordance with K-IFRS:

•

General approach: for financial assets and off-balance-sheet unused credit line that are not applied below two approaches

•

Simplified approach: for receivables, contract assets and lease receivables

•

Credit-impaired approach: for purchased or originated credit-impaired financial assets

The general approach is applied differently depending on the significance of the increase of the credit risk. If, at the reporting date, the credit risk on a financial instrument has not increased significantly since initial recognition, an entity shall measure the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. If the credit risk on that financial instrument has increased significantly since

S-37

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

3. Significant Accounting Policies, Continued

initial recognition, an entity shall measure the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses at each reporting date.

The Bank applies the simplified approach to 1) trade receivables and contract assets that do not have a significant financing component or 2) trade receivables, contract assets and lease receivables upon determining the Bank’s accounting policies as the application of the simplified approach. The approach requires expected lifetime losses to be recognized from initial recognition of the financial assets. Under credit-impaired approach, the Bank shall only recognize the cumulative changes in lifetime expected credit losses since initial recognition as a loss allowance for purchased or originated credit-impaired financial assets.

The following non-exhaustive list of information may be relevant in assessing changes in credit risk:

•

Significant changes in internal price indicators of credit risk as a result of a change in credit risk since inception

•

Other changes in the rates or terms of an existing financial instrument that would be significantly different if the instrument was newly originated or issued at the reporting date

•

An actual or expected significant change in the financial instrument’s external credit rating

•

An actual or expected internal credit rating downgrade for the borrower or decrease in behavioural scoring used to assess credit risk internally

•

An actual or expected significant change in the operating results of the borrower

•

Past due information

(i) Forward-looking information

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

The Bank assumes the risk component has a certain correlation with the business cycle, and calculates the expected credit loss by reflecting the forward-looking information with macroeconomic variables on the measurement inputs.

Forward looking information used in calculation of expected credit loss is derived after comprehensive consideration of a variety of factors including scenario in management planning, worst-case scenario used for stress testing, third party forecast, and others.

(ii) Measuring expected credit losses on financial assets at amortized cost

The amount of the loss on financial assets at amortized cost is measured as the difference between the asset’s carrying amount 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).

S-38

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

3. Significant Accounting Policies, Continued

Individual assessment of impairment

Individual assessment of impairment losses is calculated using management’s best estimate on present value of expected future cashflows. The Bank uses all the available information including operating cash flow of the borrower and net realizable value of any collateral held.

Collective assessment of impairment

Collective assessment of loss allowance involves historical loss experience along with incorporation of forward-looking information. Such process incorporates factors such as type of collateral, product and borrowers, credit rating, size of portfolio and recovery period and applies probability of default on a group of assets and loss given default by type of recovery method. Also, the expected credit loss model involves certain assumption to determine input based on loss experience and forward-looking information. These models and assumptions are periodically reviewed to reduce gap between loss estimate and actual loss experience.

The expected credit loss for financial assets measured at amortized cost is recognized as the loss allowance, and when the financial asset is determined to be irrecoverable, the carrying amount and loss allowance are decreased. If financial assets previously written off are recovered, the loss allowance is increased and the difference is recognized in the current profit or loss.

(iii) 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 the method of financial assets at amortized cost, except for changes in loss allowances that are recognized as other comprehensive income. Amounts recognized in other comprehensive income for sale or repayment of financial assets at fair value through other comprehensive income are reclassified to profit or loss.

(9) Derivative financial instruments including hedge accounting

Derivative financial instruments are initially recognised at fair value at the inception of the contract and re-estimated at fair value subsequently. The recognition of profit or loss due to changes in fair value of derivative instruments is as described below:

(i) Hedge accounting

Derivative financial instruments are accounted differently depending on whether hedge accounting is applied, and therefore, are classified into trading purpose derivatives and hedging purpose derivatives.

Upon the transaction of hedging purpose derivatives, two different types of hedge accounting are applied; a fair value hedge, and a cash flow hedge. A fair value hedge is a hedge of the exposure to changes in fair value of a recognised asset or liability or an unrecognised firm commitment, or an identified portion of such an asset, liability or firm commitment, that is attributable to a particular risk and could affect profit or loss. A cash flow hedge is a hedge of the exposure to variability in cash flows that (i) is attributable to a particular risk associated with a recognised asset or liability (such as all or some future interest payments on variable rate debt) or a highly probable forecast transaction and (ii) could affect profit or loss.

S-39

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

3. Significant Accounting Policies, Continued

At the inception of the hedge relationship, the Bank formally documents the relationship between the hedged item and the hedging instrument, including the nature of the risk, the objective and strategy for undertaking the hedge, and the method that will be used to assess the effectiveness of the hedging relationship.

Fair value hedge

For designated and qualifying fair value hedges, the change in the fair value of a hedging derivative is recognised in profit or loss in the statement of comprehensive income. Meanwhile, the change in the fair value of the hedged item, attributable to the risk hedged, is recorded as part of the carrying value of the hedged item and is also recognised in profit or loss in the statement of comprehensive income. When the hedge no longer meets the criteria for hedge accounting, the hedge relationship is terminated. For hedged item recorded at amortized cost, the difference between the carrying value of the hedged item on termination and the face value is amortized over the remaining term of the original hedge using the EIR.

Cash flow hedge

When a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the hedged forecasted transaction is ultimately recognised in the statement of comprehensive income. When a forecasted transaction is no longer expected to occur, the cumulative gain and loss that was reported in equity is immediately transferred to profit or loss in the statement of comprehensive income.

Hedges of net investments in foreign operations

The Bank designates non-derivative financial instruments as hedging instruments for foreign currency risk arising from net investments in foreign operations and recognises the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge in other comprehensive income. The cumulative amounts recognised in other comprehensive income relating to both the foreign exchange differences arising on translation of the results and financial position of the foreign operation and the gain or loss on the hedging instrument that is determined to be an effective hedge of the net investment are reclassed from equity to profit or loss as a reclassification adjustment when the Bank disposes of the foreign operation.

(ii) Trading purpose derivatives

For trading purpose derivatives transaction, changes in the fair value of derivatives are recognised in net income.

S-40

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

3. Significant Accounting Policies, Continued

(10) Day one profit or loss recognition

For financial instruments classified as level 3 on the fair value level hierarchy measured using assess variables not observable in the market, the difference between the fair value at initial recognition and the transaction price, which is equivalent to Day one profit or loss, is amortized by using the straight-line method over time.

(11) Property and equipment

The Bank’s property and equipment are recognised at the carrying amount at historical costs less accumulated depreciation and accumulated impairment in value. Historical costs include the expenditures directly related to the acquisition of assets.

Subsequent costs are recognised in the carrying amount of assets or, if appropriate, as separate assets if the probabilities future economic benefits associated with the assets will flow into the Bank and the costs can be measured reliably; the carrying amount of the replaced part is derecognised. Furthermore, any other repairs or maintenances are charged to profit or loss as incurred.

Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to the amount of residual value less acquisition cost over the following estimated useful lives:


Type		Useful lives (years)
Buildings		20 ~ 50
Structure		10 ~ 40
Movable property		4

Property and equipment are impaired when the carrying amount exceeds the recoverable amount. The Bank assesses residual value and economic life of its assets at each reporting date and adjusts useful lives when necessary. Any gain or loss arising from the disposal of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognised in non-operating income (expense) in the statement of comprehensive income.

(12) Investment property

The Bank classifies property held for rental income or benefits from capital appreciation as investment property. Investment property is measured initially at cost, including transaction costs. Subsequent to initial recognition, the cost model is applied. Subsequent to initial recognition, an item of investment property is carried at its cost less any accumulated depreciation and any accumulated impairment loss.

Investment properties are derecognised either when they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the statement of comprehensive income in the period of de-recognition. Reclassification to other account is made if there is a change in use of corresponding investment property.

S-41

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

3. Significant Accounting Policies, Continued

Depreciation of investment property is calculated using the straight-line method over its estimated useful lives as follows:


Type	Useful lives (years)
Buildings		20 ~ 50
Structure		10 ~ 40

(13) Intangible assets

An intangible asset is recognised only when its cost can be measured reliably, and the probabilities future economic benefits from the asset will flow into the Bank are high. Separately acquired intangible assets are recognised at the acquisition cost, and subsequently, the cost less accumulated depreciation and accumulated impairment is recognised as the carrying amount.

Intangible assets with finite lives are amortized over the four-year to 30-year period of useful economic lives using the straight-line method. At the end of each reporting period, the Bank reviews intangible assets for any evidence that indicate impairment, and upon the presence of such evidence, the Bank estimates the amount recoverable and recognises the loss accordingly.

Intangible assets with indefinite useful lives are not amortized but are tested for impairment annually. Furthermore, the Bank reviews such intangible assets to determine whether it is appropriate to consider these assets to have indefinite useful lives. If in the case the Bank concludes an asset is not qualified to be classified as non-finite, prospective measures are taken to consider such an asset as finite.

(14) Leases

The Bank recognizes a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments at the commencement date of the lease. The Bank elected not to apply the requirements to the short-term leases and leases of low value assets.

Right-of-use asset

The right-of-use asset is measured at its cost less subsequent accumulated depreciation and accumulated impairment loss with adjustments reflected arising from remeasurements of the lease liability. The cost of the right-of-use asset comprise the amount of the initial measurement of the lease liability, any initial direct costs incurred by the lessee and any lease payments made at or before the commencement date, less any lease incentive received. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis from the commencement date of the lease.

Lease liabilities

At the commencement date, the lease liability is measured at present value of the lease payments that are not paid at that date. Lease payments include fixed payments (including in-substance fixed payments), less any lease incentives receivable, variable lease payments that depend 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

S-42

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

3. Significant Accounting Policies, Continued

lessee exercising an option to terminate the lease. The variable lease payments that do not depend on an index or a rate are recognized as an expense in the period in which the event or condition that triggers those payments occurs.

When measuring the present value, the lease payments are discounted using the interest rate implicit in the lease. If such implicit rate cannot be readily determined, the Bank uses the Bank’s incremental borrowing rate. The lease liability is subsequently increased by the amount of interest expenses recognized on the lease liability and reduced by the lease payments made.

Short-term lease and lease of low-value assets

The Bank does not apply the requirements of lessee accounting to short-term leases and leases of low-value assets. The Bank recognizes the lease payments associated with these leases as expenses on a straight-line basis over the lease term.

(15) Impairment of non-financial assets

The Bank tests for any evidence of impairment in assets and reviews whether the impairment has taken place by estimating the recoverable amount, at the end of each reporting period. The recoverable amount is the higher of the fair value less cost and value in use of an asset.

Except for impairment losses in respect of goodwill which are never reversed, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceeds the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.

(16) Assets held for sale

Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale. To be classified 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. The assets or disposal group that are classified as assets held for sale are measured at the lower of their carrying amount and fair value less cost to sell. The Bank recognizes an impairment loss for any initial or subsequent write-down of an asset (or disposal group) to fair value less costs to sell, and a gain for any subsequent increase in fair value less costs to sell, up to the cumulative impairment loss previously recognized.

Non-current assets that are classified as held for sale or part of a disposal group classified as held for sale are not depreciated (or amortized).

(17) Non-derivative 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 liability. The Bank recognizes these financial liabilities in the statement of financial position when the Bank becomes a party to the contractual provisions of the financial liability.

S-43

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

3. Significant Accounting Policies, Continued

(i) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated at FVTPL upon initial recognition. Financial liabilities and derivatives are classified as financial instruments held for trading if they are acquired for repurchasing soon. Financial liabilities are classified as financial liabilities at FVTPL upon initial recognition, if the profit or loss from the liabilities indicates to be more purpose-appropriate to be recognised as profit or loss. Financial liabilities at FVTPL are designated at fair value in subsequent measurements, and any related un-realized profit or loss is recognised as profit or loss. In addition, for the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability, the Bank present this change in other comprehensive income, and does not recycle this other comprehensive income to profit or loss, subsequently.

(ii) Financial liabilities measured at amortized cost

Financial liabilities measured at amortized cost are recognised at fair value less cost less transaction cost upon initial recognition, and subsequently at amortized costs. The difference between the proceeds (net of transaction cost) and the redemption value is recognised in the statement of comprehensive income over the periods of the liabilities using the effective interest method.

Fees paid on the establishment of a loan facility are recognised as transaction costs of the loan, if the probability that some or all the facility will be drawn down is high. If, however, there is not enough evidence to conclude a draw-down of some or all the facility will occur, the fee is capitalized as a prepayment for liquidity services and amortized over the period of the facility to which it relates.

(18) Employee benefits

(i) Short-term employee benefits

Short-term employee benefits are employee benefits that are due to be settled wholly before 12 months after the end of the period in which the employees render the related service. When an employee has rendered service to the Bank during an accounting period, the Bank recognises the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.

(ii) Retirement benefits: defined contribution plans

A defined contribution plan is a pension plan under which the Bank pays fixed contributions into a separate fund. The Bank is no longer responsible for any foreseeable future liability after a certain amount or percentage of money is set aside for defined contribution plans. If the pension plan allows for early retirement, payments are recognised as employee benefits. If the contribution already paid exceeds the contribution due for service before the end of the reporting period, the Bank recognises that excess as an asset to the extent that the prepayment will lead to a reduction in future payments or a cash refund.

(iii) Retirement benefits: defined benefit plans

S-44

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

3. Significant Accounting Policies, Continued

employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets. The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and have terms to maturity like the terms of the related pension liability.

Remeasurements of the net defined benefit liabilities (assets), which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other comprehensive income.

(19) Provisions

Provisions are recognized when the Bank has a present legal or constructive obligation because of a past event, 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.

(20) Financial guarantees

Financial guarantee contracts are contracts that require the issuer (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, in accordance with the original or changed terms of a debt instrument. Financial guarantees are initially recognized in the financial statements at fair value on the date the guarantee was given. Subsequent to initial recognition, the Bank’s liabilities under such guarantees are measured at the higher of:

•

The amount determined in accordance with K-IFRS 1109 ‘Financial Instruments’ and

•

The initial amount recognized, less, when appropriate, cumulative amortization recognized in accordance with K-IFRS 1115 ‘Revenue from Contracts with Customers’.

(21) Securities under resale or repurchase agreements

Securities purchased under agreements to resell are recorded as other loans and receivables and the related interest from these securities is recorded as interest income; securities sold under agreements to repurchase are recorded as other borrowings, and the related interest from these securities is recorded as interest expense.

(22) Interest income and expense

Interest income and expense are recognized in profit or loss using the effective interest method. The effective interest method measures the amortized costs of financial instruments and allocates the interest income or expense during the related period.

Upon the calculation of the effective interest rate, the Bank estimates future cash flows by taking into consideration all contractual terms of the financial instrument, but not future credit loss. The calculation also reflects any fees or points paid or received, transaction costs and any related premiums or discounts. In the case that the cash flow and expected duration of a financial instrument cannot be estimated reliably, the effective interest rate is calculated by the contractual cash flow during the contract period.

S-45

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

3. Significant Accounting Policies, Continued

Once an impairment loss has been recognized on a financial asset or a group of similar assets, subsequent interest income is recognized on the interest rate that was used to discount future cash flow for measuring the impairment loss.

(23) Fees and commission income

Fees and commission income and expense are classified as follows according to related regulations:

(i) Fees and commission from financial instruments

Fees and commission income and expense that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the effective interest rate. It includes those related to evaluation of the borrowers’ financial status, guarantee, collateral, other agreements and related evaluation as well as business transaction, rewards for activities, such as document preparation and recording and setup fees incurred during issuance of financial liabilities. However, when financial instruments are classified as financial instruments at fair value through profit or loss, fees and commission are recognized as revenue upon initial recognition.

(ii) Fees and commission from services

Fees and commission income charged in exchange for services to be performed during a certain period of time such as asset management fees, consignment fees and assurance service fees are recognized as the related services are performed. When a loan commitment is not expected to result in the draw-down of a loan and K-IFRS 1039 ‘Financial Instrument: Recognition and Measurement’ is not applied for the commitment, the related loan commitment fees are recognized as revenue proportionally to time over the commitment period.

(iii) Fees and commission from significant transaction

Fees and commission from significant transactions, such as trading stocks and other securities, negotiation and mediation activities for third parties, for instance business transfer and takeover, are recognized when transactions are completed.

(24) Dividend income

Dividend income is recognized upon the establishment of the Bank’s right to receive the payment.

(25) Income tax expense

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

The Bank recognizes deferred income tax liabilities for all taxable temporary differences associated with investments in subsidiaries, associates, except to the extent that the Bank can control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The Bank recognizes deferred income tax assets for all deductible temporary differences arising from investments in associates, to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.

S-46

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

3. Significant Accounting Policies, Continued

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the reporting period when the assets are realized, or the liabilities 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 income tax assets and liabilities reflects the income tax effects 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 carrying amount of a deferred income tax asset is reviewed at the end of each reporting period and reduced 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 income tax assets and liabilities are off-set only if the Bank has a legally enforceable right to off-set the related current income tax assets and liabilities, and the assets and liabilities relate to income tax levied by the same tax authority and are intended to be settled on a net basis.

(26) Accounting for trust accounts

The Bank, for financial reporting, differentiates trust assets from identifiable assets according to the Financial Investment Services and Capital Markets Act. Furthermore, the Bank receives trust fees from the application, management and disposal of trust assets, and appropriates such amounts for fees from trust accounts.

Meanwhile, in the case the fee from an unspecified principal or interests guaranteed money in trust does not meet the principal or interest amount, even after appropriating deficit with trust fees and special reserve, the Bank fills in the remaining deficit in the trust account and appropriates such amounts for losses on trust accounts.

(27) Regulatory reserve for credit losses

When the total sum of allowance for possible credit losses is lower than the amount prescribed in Article 29(1) of the Regulations on Supervision of Banking Business, the Bank records the difference as regulatory reserve for credit losses at the end of each reporting period.

In the case that the existing regulatory reserve for credit losses exceeds the amount needed to be set aside at the reporting date, the surplus may be reversed. Furthermore, in the case that undisposed deficit exists, regulatory reserve for credit losses is saved from the time the undisposed deficit is disposed.

(28) Earnings per share

The Bank represents its diluted and basic earnings per common share in the separate statement of comprehensive income. Basic earnings per share (EPS) is calculated by dividing net profit attributable to shareholders of the Bank by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share is calculated by adjusting net profit attributable to common shareholders of the Bank, considering dilution effects from all potential common shares, and the weighted average number of common shares outstanding.

S-47

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

3. Significant Accounting Policies, Continued

(29) Corrections of errors

Prior period errors shall be corrected by retrospective restatement in the first set of financial statements authorised for issue after their discovery except to the extent that it is impracticable to determine either the period-specific effects or the cumulative effect of the error.

4. Cash and Due from Banks

(1)	Cash and due from banks as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023		December 31, 2022
Cash	W	65,574		70,525
Due from banks in Korean won:
Due from Bank of Korea		6,490,766		3,360,908
Other due from banks in Korean won		810,710		570,295

		7,301,476		3,931,203
Due from banks in foreign currencies / off-shores		7,996,120		7,537,078

	W	15,363,170		11,538,806

(2)	Restricted due from banks as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023		December 31, 2022
Reserve deposit	W	4,088,136		1,181,823
Deposit of monetary stabilization account		2,800,000		2,470,000
Others		375,600		405,682

	W	7,263,736		4,057,505

S-48

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

5. Securities Measured at FVTPL

(1)	Details of securities measured at fair value through profit or loss as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Face value		Acquisition cost		Fair value (Carrying amounts)
Securities denominated in Korean won:
Stocks	W	—		1,891,623		1,721,007
Equity investments		—		756,732		869,984
Beneficiary certificates		—		9,002,590		9,391,148
Government and public bonds		1,621,000		1,526,251		1,521,426
Financial bonds		280,000		279,617		281,704
Others		871		871		862

		1,901,871		13,457,684		13,786,131
Securities denominated in foreign currencies/off-shores:
Stocks		—		13,948		14,279
Equity investments		—		80,909		137,040
Beneficiary certificates		—		395,144		410,118
Debt securities		34,133		40,440		33,642

		34,133		530,441		595,079

	W	1,936,004		13,988,125		14,381,210


	December 31, 2022
	Face value		Acquisition cost			Fair value (Carrying amounts)
Securities denominated in Korean won:
Stocks	W	—		1,800,273			1,666,930
Equity investments		—		719,153			839,331
Beneficiary certificates		—		7,467,720			7,665,755
Government and public bonds		648,000		611,954			623,264
Financial bonds		403,000		401,715	��		401,127
Corporate bonds		10,470		10,470			10,392

		1,061,470		11,011,285			11,206,799
Securities denominated in foreign currencies/off-shores:
Stocks		—		13,407			13,784
Equity investments		—		66,367			109,011
Beneficiary certificates		—		649,641			622,312

		—		729,415			745,107

	W	1,061,470		11,740,700			11,951,906

S-49

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

5. Securities Measured at FVTPL, Continued

(2)	Securities measured at fair value through profit or loss with disposal restrictions as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
Company	Number of shares		Carrying amount		Restricted period
National Happiness Fund Co., Ltd.		34,066	W	14,884	Undecided
SEMITECH Co., Ltd.		33,187		368	Undecided

		67,253	W	15,252


	December 31, 2022
Company	Number of shares		Carrying amount		Restricted period
National Happiness Fund		34,066	W	28,873	Undecided

6. Securities Measured at FVOCI

(1)	Details of securities measured at FVOCI as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Face value		Acquisition cost		Fair value (Carrying amounts)
Securities denominated in Korean won:
Stocks and equity investments	W	—		11,297,677		11,640,389
Government and public bonds		1,985,000		1,967,730		1,947,809
Financial bonds		1,810,000		1,797,682		1,800,478
Corporate bonds		5,502,287		5,498,518		5,329,078
Others		2,040,680		2,040,679		5,721,438

		11,337,967		22,602,286		26,439,192
Securities denominated in foreign currencies/off-shores:
Equity securities		—		497		1,582
Debt securities		10,909,918		11,050,147		10,182,077

		10,909,918		11,050,644		10,183,659
Loaned securities:
Loaned securities		30,000		29,778		29,040

	W	22,277,885		33,682,708		36,651,891

S-50

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

6. Securities Measured at FVOCI, Continued



	December 31, 2022
	Face value		Acquisition cost		Fair value (Carrying amounts)
Securities denominated in Korean won:
Stocks and equity investments	W	—		10,857,462		11,145,371
Government and public bonds		2,345,000		2,325,251		2,283,060
Financial bonds		2,690,000		2,673,516		2,657,525
Corporate bonds		7,086,079		7,083,618		6,781,202
Others		1,828,729		1,828,729		5,723,053

		13,949,808		24,768,576		28,590,211
Securities denominated in foreign currencies/off-shores:
Equity securities		—		495		1,631
Debt securities		9,808,493		9,976,279		9,093,077

		9,808,493		9,976,774		9,094,708
Loaned securities:
Debt securities		—		—		—

	W	23,758,301		34,745,350		37,684,919

Equity instruments that are acquired due to debt-to-equity swap, investment in kind and investment in ventures and small and medium-sized enterprises are designated as measured at FVOCI. The realized pre-tax income and loss on disposal of equity securities for the six-month periods ended June 30, 2023 and 2022 andW25,153 million of gain andW107,986 million of gain, respectively, which are directly recognized in retained earnings.

(2)	Changes in securities measured at FVOCI for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023			2022
Beginning balance	W	37,684,919			37,875,136
Acquisition		3,110,755			10,058,190
Disposal		(4,491,963	)		(7,325,468	)
Change due to amortization		8,627			(9,565	)
Change in fair value		36,782			(1,701,035	)
Reclassification		—			9,268
Foreign exchange differences		302,770			642,166
Others (*)		1			1,047

Ending balance	W	36,651,891			39,549,739

(*)

For the six-month period ended June 30, 2023, others represent the increase in securities measured at FVOCI including shares of Dae Yeong Metal Co., Ltd., Chew Young Roo Co., Ltd. For the six-month period ended June 30, 2022, others represent the increase in securities measured at FVOCI including ordinary shares of TETOS CO., LTD. and others acquired through exercise of stock warrants of the

S-51

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

6. Securities Measured at FVOCI, Continued

privately placed corporate bonds and shares of BUWON INDUSTRIAL CO., LTD. and EN TECHNOLOGIES INC. acquired in accordance with the rehabilitation plan under the Debtor Rehabilitation and Bankruptcy Act.

(3)	Securities measured at FVOCI with disposal restrictions in securities measured at FVOCI as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
Company	Number of shares		Carrying amount		Restricted period
UAMCO., Ltd.		113,050	W	189,698		Undecided
High Gain Antenna Co., Ltd.		18,138		376		Undecided
Daehan Shipbuilding Co., Ltd.		231,459		3,024		Until August 31, 2023
Kumho Tire Co., Inc.		21,339,320		101,362		Until July 6, 2024 (*)

		21,701,967	W	294,460

(*)	From July 6, 2021, 50% of the shares may be sold every year.


	December 31, 2022
*Company (1)**	Number of shares		Carrying amount		Restricted period
UAMCO., Ltd.		113,050	W	188,721		Undecided
High Gain Antenna Co., Ltd.		18,138		270		Undecided
Kumho Tire Co., Inc.		21,339,320		71,167		Until July 6, 2023 (*)
Daehan Shipbuilding Co., Ltd.		231,459		2,871		Until August 31, 2023

		21,701,967	W	263,029

(*)	From July 6, 2021, 50% of the shares may be sold every year.

(4)	Changes in the loss allowance in relation to securities measured at FVOCI for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023
	Lifetime expected credit loss
	12-month expected credit loss			Non credit- impaired			Credit- impaired		Total
Beginning balance	W	11,041			2,398			72,740		86,179
Transfer to 12-month expected credit loss		1,209			(1,209	)		—		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		—			—			—		—
Transfer to credit-impaired		—			—			—		—
Provision for loss allowance		4,658			(330	)		275		4,603
Disposal		(137	)		—			—		(137	)
Foreign currency translation and others		132			183			344		659

Ending balance	W	16,903			1,042			73,359		91,304

S-52

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

6. Securities Measured at FVOCI, Continued


	2022
	Lifetime expected credit loss
	12-month expected credit loss			Non credit- impaired			Credit- impaired		Total
Beginning balance	W	11,661			3,120			71,668		86,449
Transfer to 12-month expected credit loss		156			(156	)		—		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		(2,185	)		2,185			—		—
Transfer to credit-impaired		—			—			—		—
Provision for loss allowance		829			334			439		1,602
Disposal		(371	)		—			—		(371	)
Foreign currency translation and others		1,820			(1,156	)		983		1,647

Ending balance	W	11,910			4,327			73,090		89,327

7. Securities Measured at Amortized Cost

(1)	Securities measured at amortized cost as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Amortized cost			Fair value
Securities denominated in Korean won:
Government and public bonds	W	3,123,852			3,123,852
Financial bonds		2,490,008			2,489,852
Corporate bonds		1,098,947			1,094,403

		6,712,807			6,708,107
Less: loss allowance		(4,700	)

	W	6,708,107			6,708,107


	December 31, 2022
	Amortized cost			Fair value
Securities denominated in Korean won:
Government and public bonds	W	2,964,285			2,964,285
Financial bonds		2,961,887			2,961,788
Corporate bonds		429,921			429,811

		6,356,093			6,355,884
Less: loss allowance		(209	)

	W	6,355,884			6,355,884

S-53

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

7. Securities Measured at Amortized Cost, Continued

(2)	Changes in securities measured at amortized cost for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023			2022
Beginning balance	W	6,355,884			2,968,877
Acquisition		1,732,183			1,507,687
Redemption		(1,395,000	)		(772,000	)
Change due to amortization		19,531			861
Impairment loss		(4,491	)		—
Reversal of impairment losses		—			8

Ending balance	W	6,708,107			3,705,433

8. Loans Measured at FVTPL

(1)	Loans measured at FVTPL as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023				December 31, 2022
	Amortized cost		Fair value (Carrying amounts)		Amortized cost		Fair value (Carrying amounts)
Loans in Korean won:
Privately placed corporate bonds	W	439,594		508,887		459,064		541,811
Loans denominated in foreign currencies/off-shores:
Privately placed corporate bonds		2,798		—		—		—

		442,392		508,887		459,064		541,811

(2)	Gains (losses) related to loans measured at FVTPL for the six-month periods ended June 30, 2023 and 2022 are as follows:


	June 30, 2023						June 30, 2022
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Transaction gains (losses) on loans measured at FVTPL:
Transaction gains	W	4,217			5,707			76			1,035
Transaction losses		(3,828	)		(4,082	)		(1,557	)		(3,189	)

		389			1,625			(1,481	)		(2,154	)
Valuation gains (losses) on loans measured at FVTPL:
Valuation gains		(5,908	)		3,750			(10,343	)		5,591
Valuation losses		(10,544	)		(15,375	)		(73,347	)		(78,660	)

		(16,452	)		(11,625	)		(83,690	)		(73,069	)

	W	(16,063	)		(10,000	)		(85,171	)		(75,223	)

S-54

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

9. Loans Measured at Amortized Cost

(1)	Loans measured at amortized cost and loss allowance for loan as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023					December 31, 2022
	Amortized cost			Fair value		Amortized cost			Fair value
Loans in Korean won:
Loans for working capital	W	67,429,612			66,429,557		69,723,242			68,263,234
Loans for facility development		57,757,737			56,158,316		60,391,588			58,443,101
Loans for households		162,665			159,117		183,676			175,347
Inter-bank loans		3,154,210			2,908,237		3,037,471			2,746,516

		128,504,224			125,655,227		133,335,977			129,628,198
Loans in foreign currencies:
Loans		28,866,117			28,789,445		27,770,598			27,462,025
Inter-bank loans		2,825,066			2,802,574		4,296,005			4,281,978
Off-shore loans		21,186,137			20,999,993		20,961,290			20,421,515

		52,877,320			52,592,012		53,027,893			52,165,518
Other loans:
Bills bought in foreign currency		1,803,585			1,767,462		2,275,189			2,252,927
Advances for customers on acceptances and guarantees		10,966			6,923		8,954			1,286
Privately placed corporate bonds		2,442,084			2,412,767		2,227,012			2,191,115
Others		6,602,860			6,475,705		11,157,205			11,000,638

		10,859,495			10,662,857		15,668,360			15,445,966

		192,241,039			188,910,096		202,032,230			197,239,682

Less:
Loss allowance for loan		(3,063,317	)				(3,997,231	)
Present value discount		(10,424	)				(10,620	)
Deferred loan origination costs and fees		22,945					21,224

	W	189,190,243					198,045,603

S-55

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

9. Loans Measured at Amortized Cost, Continued

(2)	Changes in loss allowance for loan for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	289,254			2,340,836			1,367,141			3,997,231
Transfer to 12-month expected credit loss		73,175			(56,173	)		(17,002	)		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		(134,586	)		168,934			(34,348	)		—
Transfer to credit-impaired		(10,627	)		(122,398	)		133,025			—
Provision for (reversal of) loss allowance		269,291			(789,489	)		(116,516	)		(636,714	)
Write-offs		—			—			(47,615	)		(47,615	)
Recovery		—			—			33,570			33,570
Disposal		—			—			(188,127	)		(188,127	)
Debt-to-equity swap		—			—			(99,205	)		(99,205	)
Foreign currency translation		4,887			15,152			6,576			26,615
Other		720			5,587			(28,745	)		(22,438	)

Ending balance	W	492,114			1,562,449			1,008,754			3,063,317


	2022
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	342,959			2,242,499			1,568,872			4,154,330
Transfer to 12-month expected credit loss		17,392			(17,075	)		(317	)		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		(188,032	)		207,437			(19,405	)		—
Transfer to credit-impaired		(33,567	)		(137,812	)		171,379			—
Provision for (reversal of) loss allowance		132,039			(70,240	)		91,472			153,271
Write-offs		—			—			(92,696	)		(92,696	)
Recovery		—			—			19,970			19,970
Disposal		—			—			(148,282	)		(148,282	)
Debt-to-equity swap		—			—			(363,719	)		(363,719	)
Foreign currency translation		4,910			(21,366	)		87,285			70,829
Other		586			3,500			(884	)		3,202

Ending balance	W	276,287			2,206,943			1,313,675			3,796,905

S-56

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

9. Loans Measured at Amortized Cost, Continued

(3)	Gains (losses) related to loans measured at amortized cost for the three-month and six-month periods ended June 30, 2023 and 2022 are as follows:


	June 30, 2023				June 30, 2022
	Three-month period ended		Six-month period ended		Three-month period ended			Six-month period ended
Reversal of (provision for) loan allowance for loan	W	134,733		636,714		(497,671	)		(153,271	)
Gains on disposal of loan		11,341		11,341		21,516			21,516

	W	146,074		648,055		(476,155	)		(131,755	)

(4)	Changes in net deferred loan origination costs and fees for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023			2022
Beginning balance	W	21,224			16,425
New deferrals		9,314			9,011
Amortization		(7,593	)		(6,257	)

Ending balance	W	22,945			19,179

10. Derivative Financial Instruments

The Bank’s derivative financial instruments consist of trading derivatives and hedging derivatives, depending on the nature of each transaction. The Bank enters into hedging derivative transactions mainly for the purpose of hedging risk related to changes in fair values of the underlying assets and liabilities and future cash flows.

The Bank enters into trading derivative transactions such as futures, forwards, swaps and options for arbitrage transactions by speculating on the future value of the underlying asset. Derivatives held-for trading transactions include contracts with the Bank’s clients and its liquidation position.

For the purpose of hedging the exposure to the variability of fair values and cash flows of funds in Korean won by changes in interest rate, the Bank mainly uses interest swaps or currency swaps. The main counterparties are foreign financial institutions and local banks. In addition, to hedge the exposure to the variability of fair values of bonds in foreign currencies by changes in interest rate or foreign exchange rate, the Bank mainly uses interest swaps or currency swaps.

The Bank applies net investment hedge accounting by designating non-derivative financial instruments as hedging instruments and any gain or loss on the hedging instruments relating to the effective portion of the hedge is recognised in other comprehensive income and accumulated in the foreign currency translation reserve.

Gains and losses on the hedging instrument accumulated in the foreign currency translation reserve are reclassified to profit or loss on the disposal or partial disposal of the foreign operation.

S-57

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

10. Derivative Financial Instruments, Continued

(1)	The notional amounts outstanding for derivative contracts and the carrying amounts of the derivative financial instruments as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Notional amounts				Carrying amounts
	Buy		Sell		Asset			Liability
Trading purpose derivative financial instruments:
Interest rate:
Futures	W	—		546,532		—			—
Forwards		—		740,000		17,178			—
Swaps		303,987,639		303,987,639		1,470,272			2,089,130
Options		7,611,908		14,690,965		441,104			521,267

		311,599,547		319,965,136		1,928,554			2,610,397
Currency:
Forwards		53,468,442		35,668,512		1,887,767			605,885
Swaps		55,910,411		73,021,822		4,994,505			5,968,049
Options		207,424		209,417		1,835			1,971

		109,586,277		108,899,751		6,884,107			6,575,905
Stock:
Options		61,052		164,663		11,628			46
Allowance and other adjustments		—		—		(23,374	)		(1,331	)

		421,246,876		429,029,550		8,800,915			9,185,017
Hedging purpose derivative financial instruments:
Interest rate (*):
Swaps		34,951,545		34,951,545		56,671			530,334
Currency:
Swaps		11,006,351		11,167,904		229,714			721,539
Allowance and other adjustments		—		—		(54	)		(3,600	)

		45,957,896		46,119,449		286,331			1,248,273

	W	467,204,772		475,148,999		9,087,246			10,433,290

S-58

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

10. Derivative Financial Instruments, Continued

(*)	The expected maximum period for which derivative contracts, applied the cash flow hedge accounting, are exposed to risk of cash flow fluctuation is until April 29, 2025.


	December 31, 2022
	Notional amounts				Carrying amounts
	Buy		Sell		Asset			Liability
Trading purpose derivative financial instruments:
Interest rate
Futures	W	—		1,232,323		—			—
Forwards		—		50,000		1,384			—
Swaps		294,150,122		294,150,122		1,573,784			2,088,963
Options		7,881,911		14,728,387		473,586			536,364

		302,032,033		310,160,832		2,048,754			2,625,327
Currency
Forwards		50,944,418		37,554,484		2,432,523			1,307,942
Swaps		58,740,494		74,899,023		5,225,899			6,174,071
Options		330,066		329,052		1,991			6,452

		110,014,978		112,782,559		7,660,413			7,488,465
Stock
Options		48,904		493,689		12,762			6,003
Allowance and other adjustments		—		—		(112,903	)		(1,447	)

		412,095,915		423,437,080		9,609,026			10,118,348
Hedging purpose derivative financial instruments:
Interest rate (*)
Swaps		31,141,774		31,141,774		48,881			542,268
Currency
Swaps		10,217,257		10,417,222		136,596			660,189
Allowance and other adjustments		—		—		(48	)		(3,803	)

		41,359,031		41,558,996		185,429			1,198,654

	W	453,454,946		464,996,076		9,794,455			11,317,002

(*)	The expected maximum period for which derivative contracts, applied the cash flow hedge accounting, are exposed to risk of cash flow fluctuation is until April 29, 2025.

S-59

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

10. Derivative Financial Instruments, Continued

(2)	The notional amounts outstanding for the hedging instruments by period as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Interest rate:
Notional amounts outstanding	W	803,858		295,639		6,643,797		20,418,778		6,789,473		34,951,545
Currency:
Notional amounts outstanding		1,141,240		326,020		2,522,969		5,785,572		1,230,550		11,006,351


	December 31, 2022
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Interest rate:
Notional amounts outstanding	W	—		1,629,878		4,135,405		20,411,219		4,965,272		31,141,774
Currency:
Notional amounts outstanding		310,198		175,155		2,851,071		5,790,132		1,090,701		10,217,257

S-60

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

10. Derivative Financial Instruments, Continued

(3)	Details of the balances of the hedging instruments by risk type as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Notional amounts				Balances				Changes in fair value for the period
	Buy		Sell		Assets		Liabilities		Changes in fair value for the period
Cash flow hedge accounting:
Interest rate risk:
Swaps	W	91,896		91,896		—		—		(753	)
Fair value hedge accounting:
Interest rate risk:
Swaps		34,859,649		34,859,649		56,671		530,334		27,628
Currency risk:
Swaps		11,006,351		11,167,904		229,714		721,539		36,630

		45,866,000		46,027,553		286,385		1,251,873		64,258

	W	45,957,896		46,119,449		286,385		1,251,873		63,505


	December 31, 2022
	Notional amounts				Balances				Changes in fair value for 2022
	Buy		Sell		Assets		Liabilities		Changes in fair value for 2022
Cash flow hedge accounting:
Interest rate risk:
Swaps	W	88,711		88,711		—		—		5,044
Fair value hedge accounting:
Interest rate risk:
Swaps		31,053,063		31,053,063		48,881		542,268		(1,570,665	)
Currency risk
Swaps		10,217,257		10,417,222		136,596		660,189		(610,843	)

		41,270,320		41,470,285		185,477		1,202,457		(2,181,508	)

	W	41,359,031		41,558,996		185,477		1,202,457		(2,176,464	)

S-61

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

10. Derivative Financial Instruments, Continued

(4)	Details of the balances of the hedged items by risk type as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Carrying amounts				Change in value of the hedged item						Changes in fair value for the period			Cash flow hedge reserve
	Assets		Liabilities		Assets			Liabilities			Changes in fair value for the period			Cash flow hedge reserve
Cash flow hedge accounting:
Interest rate risk:
Debt debentures	W	—		91,896		—			—			—			6,514
Fair value hedge accounting:
Interest rate risk:
Securities measured at FVOCI		4,951,553		—		5,630			—			(18,402	)		—
Debt debentures		—		28,492,990		—			(1,921,958	)		(9,604	)		—
Other liabilities (Deposits, etc.)		—		110,254		—			(21,026	)		1,271			—

		4,951,553		28,603,244		5,630			(1,942,984	)		(26,735	)		—

Currency risk:
Debt debentures		—		10,587,973		—			213,576			(33,435	)		—

		4,951,553		39,191,217		5,630			(1,729,408	)		(60,170	)		—

	W	4,951,553		39,283,113		5,630			(1,729,408	)		(60,170	)		6,514


	December 31, 2022
	Carrying amounts				Change in value of the hedged item						Changes in fair value for 2022			Cash flow hedge reserve
	Assets		Liabilities		Assets			Liabilities			Changes in fair value for 2022			Cash flow hedge reserve
Cash flow hedge accounting:
Interest rate risk:
Debt debentures	W	—		88,711		—			—			—			7,240
Fair value hedge accounting:
Interest rate risk:
Securities measured at FVOCI		3,932,336		—		(314,591	)		—			(313,189	)		—
Debt debentures		—		25,497,582		—			(1,900,489	)		1,890,055			—
Other liabilities (Deposits, etc.)		—		107,660		—			(19,070	)		22,323			—

		3,932,336		25,605,242		(314,591	)		(1,919,559	)		1,599,189			—

Currency risk:
Debt debentures		—		9,816,395		—			(89,179	)		611,221			—

		3,932,336		35,421,637		(314,591	)		(2,008,738	)		2,210,410			—

	W	3,932,336		35,510,348		(314,591	)		(2,008,738	)		2,210,410			7,240

S-62

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

10. Derivative Financial Instruments, Continued

(5)	Details of hedge ineffectiveness recognized in profit or loss from derivatives for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023		2022
Interest rate risk	W	893		14,120
Currency risk		3,195		(642	)

	W	4,088		13,478

(6)	The summary of the amounts that have affected the statement of comprehensive income as a result of applying cash flow hedge accounting for the six-month periods ended June 30, 2023 and 2022 is as follows:


	2023
	Change in the value of the hedging instrument recognized in other comprehensive income			Hedge ineffectiveness recognized in profit or loss (*)			Amount reclassified from other comprehensive income to profit or loss (*)
Interest rate risk	W	(727	)		(27	)		—

(*)	Recognized in gains or losses related to hedging purpose derivatives.

2022

Change in the value of the
hedging instrument
recognized in other
comprehensive income

Hedge ineffectiveness
recognized in profit or
loss (*)

Amount reclassified from
other comprehensive
income to profit or
loss (*)

Interest rate risk

4,233

—

(*)	Recognized in gains or losses related to hedging purpose derivatives.

(7)	Details of net investments in foreign operations as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Changes in fair value		Other comprehensive income for hedges of net investments in foreign operations
Currency (foreign exchange risk)	W	42,004		(138,877	)


	December 31, 2022
	Changes in fair value		Other comprehensive income for hedges of net investments in foreign operations
Currency (foreign exchange risk)	W	67,754		(96,874	)

S-63

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

10. Derivative Financial Instruments, Continued

(8)	Details of hedging instruments in hedge of net investments in foreign operations as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Carrying amount		Changes in fair value for the period			Change in the value of the hedging instrument recognized in other comprehensive income for the period			Hedge ineffectiveness recognized in profit or loss for the period
Debentures in foreign currencies	W	1,132,184		(42,004	)		(42,004	)		—


	December 31, 2022
	Carrying amount		Changes in fair value for the year			Change in the value of the hedging instrument recognized in other comprehensive income for the year			Hedge ineffectiveness recognized in profit or loss for the year
Debentures in foreign currencies	W	1,097,225		(67,754	)		(67,754	)		—

S-64

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

11. Investments in Subsidiaries and Associates

(1)	Investments in subsidiaries and associates as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023		December 31, 2022
Subsidiaries:
KDB Asia Ltd.	W	332,907		332,907
KDB Bank Europe Ltd.(*1)		140,181		125,452
KDB Ireland Ltd.		62,389		62,389
KDB Bank Uzbekistan Ltd.		47,937		47,937
Banco KDB Do Brazil S.A.(*2)		48,421		39,761
PT KDB Tifa Finance Tbk		85,288		85,288
KDB Silicon Valley LLC		118,615		118,615
KDB OCCASIO II, L.P.		93,102		22,096
KDB Synergy, L.P.		19,872		19,872
KDB Investment Co., Ltd.		70,000		70,000
KDB Biz Co., Ltd.		1,500		1,500
KDB Capital Corporation		597,290		597,290
Hanwha Ocean Co., Ltd. (priorly known as Daewoo Shipbuilding & Marine Engineering Co., Ltd.)(*3)		—		1,129,769
Korea BTL Financing 1		122,188		129,136
Korea Railroad Financing 1		75,794		78,715
Korea Education Financing		38,244		40,697
KDB Infrastructure Investment Asset Management Co., Ltd.		16,843		16,843
KDB Consus Value PEF(*4)		109,785		170,462
KDB-IAP OBOR PEF(*5)		—		—
Green Initiative 2nd Private Equity Fund		72,987		72,987
KDBC Co-investment Private Equity Fund		26,690		12,627
KDB Asia PEF		88,066		84,112
KDB Small Medium Mezzanine PEF		33,350		44,350
Corporate Liquidity Assistance Agency Co., Ltd.		1,000,000		1,000,000

		3,201,449		4,302,805

Associates:
Korea Electric Power Co., Ltd.		16,921,067		16,921,067
Korea Tourism Organization		337,286		337,286
Korea Infrastructure Financing 2 Co.		212,662		212,808
Korea Ocean Business Corporation		631,777		631,777
Korea Real Estate Board		58,492		58,492
Hanwha Ocean Co., Ltd. (priorly known as Daewoo Shipbuilding & Marine Engineering Co., Ltd.)(*3)		2,244,664		—
HMM Co., Ltd.(*6)		1,903,761		1,974,499
GM Korea Company(*7)		390,044		376,454
HANJIN KAL(*8)		367,465		352,761
Korean Airlines Co., Ltd.		330,477		330,477
Others(*9)		2,514,700		2,493,905

		25,912,395		23,689,526

	W	29,113,844		27,992,331

S-65

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

11. Investments in Subsidiaries and Associates, Continued

(*1)

The Bank recognized a reversal of impairment loss amounting toW14,729 million for the period ended June 30, 2023 due to an increase in value in use resulting from the enhancement of expected cash flows from the shares held by the Bank. Additionally, the Bank recognized an impairment loss amounting toW11,999 million for the year ended December 31, 2022.

(*2)	The Bank recognized a reversal of impairment losses amounting toW8,659 million for the period ended June 30, 2023 andW3,527 million for the year ended December 31, 2022 due to a decrease in value in use resulting from the decline in expected cash flows from the shares held by the Bank.

(*3)

Daewoo Shipbuilding & Marine Engineering Co., Ltd. changed its name to Hanwha Ocean Co., Ltd. as Hanwha Group acquired the status of a majority shareholder through a third-party allotment capital increase on May 24, 2023. The Bank changed the classification from a subsidiary to an associate due to the decrease in shareholding and recognized a reversal of impairment loss ofW1,114,895 million for the period ended June 30, 2023, due to the increase in the recoverable value of the shares held by the Bank. Additionally, the Bank recognized an impairment loss amounting toW241,283 million for the year ended December 31, 2022.

(*4)

The Bank recognized impairment losses amounting toW60,677 million due to a decrease in value in use resulting from the decline of expected cash flows from the shares held by the Bank for the period ended June 30, 2023. Additionally, the Bank recognized a reversal of impairment loss amounting toW13,074 million for the year ended December 31, 2022.

(*5)	The decrease in the net asset value due to the decrease in the fair value of assets held prior to the previous year was considered as objective evidence of impairment and an impairment loss was recognized, resulting in a carrying value of “0”.

(*6)	The Bank recognized impairment losses amounting toW70,738 million for the period ended June 30, 2023 andW762,335 million for the years ended December 31, 2022, due to a decline in the recoverable value resulting from a decrease in fair value of the shares.

(*7)

The Bank recognized a reversal of impairment loss amounting toW13,590 million for the period ended June 30, 2023 due to the increase in value in use based on the operating cash flow. Additionally, the Bank recognized an impairment loss amounting toW6,281 million for the year ended December 31, 2022.

(*8)

The Bank recognized a reversal of impairment loss amounting toW14,703 million for the period ended June 30, 2023 due to the increase in value in use based on the operating cash flow. Additionally, the Bank recognized an impairment loss amounting toW147,239 million for the year ended December 31, 2022.

(*9)

The Bank recognized a reversal of impairment losses amounting toW9,756 million for AJU PRIVATE EQUITY FUND NO.2 and 10 other companies for the year ended June 30, 2023. The Bank recognizedW16,082 million of impairment losses for AJU PRIVATE EQUITY FUND NO.2 and 14 other companies for the year ended December 31, 2022.

S-66

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

11. Investments in Subsidiaries and Associates, Continued

(2) The market value of marketable investments in subsidiaries and associates as of June 30, 2023 and December 31, 2022 are as follows:


	Market value				Carrying amounts
	June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022
Korea Electric Power Co., Ltd.	W	4,351,446		4,604,929		16,921,067		16,921,067
HMM Co., Ltd.		1,907,607		1,978,446		1,903,761		1,974,499
HANJIN KAL		330,862		263,771		367,465		352,761
Korean Airlines Co., Ltd.		298,042		270,502		330,477		330,477
Hanwha Ocean Co., Ltd. (priorly known as Daewoo Shipbuilding & Marine Engineering Co., Ltd.)		2,252,131		1,132,039		2,244,664		1,129,769

S-67

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

11. Investments in Subsidiaries and Associates, Continued

(3)	The key financial information of subsidiaries and associates invested and ownership ratios as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Country		Fiscal year end		Industry		Assets		Liabilities		Equity			Operating revenue		Net income (loss)			Total compre- hensive income (loss)			Owner- ship (%)
Subsidiaries:
KDB Asia (HK) Ltd.		Hong Kong		December		Finance	W	3,643,846		2,953,395		690,451			155,847		35,147			58,842			100.00
KDB Bank Europe Ltd.		Hungary		December		Finance		1,179,538		1,039,329		140,209			57,745		18,106			24,581			100.00
KDB Ireland Ltd.		Ireland		December		Finance		1,073,944		941,074		132,870			36,194		4,202			8,721			100.00
KDB Bank Uzbekistan Ltd.		Uzbekistan		December		Finance		930,363		802,717		127,646			37,342		21,213			21,217			86.32
Banco KDB Do Brazil S.A.		Brazil		December		Finance		634,276		516,261		118,015			69,587		10,252			22,967			100.00
PT KDB Tifa Finance Tbk		Indonesia		December		Finance		143,233		45,139		98,094			6,957		1,952			9,339			84.65
KDB Silicon Valley LLC		USA		December		Finance		131,707		1,407		130,300			2,634		715			5,216			100.00
KDB OCCASIO II, L.P.		Cayman Islands		December		Financial investment		106,298		5,578		100,720			12,400		10,353			11,292			90.00
KDB Synergy, L.P.		Cayman Islands		December		Financial investment		19,416		25		19,391			21		(944	)		(252	)		100.00
KDB Capital Corporation		Korea		December		Specialized Credit Finance		9,409,450		7,934,733		1,474,717			365,631		128,699			129,838			99.92
Korea BTL Financing 1 (*2)		Korea		Semi- annually		Financial investment		312,557		201		312,356			8,017		5,648			5,648			41.67
Korea Railroad Financing 1 (*2)		Korea		Semi- annually		Financial investment		156,532		9		156,523			7,018		6,819			6,819			50.00
Korea Education Financing (*2)		Korea		Semi- annually		Financial investment		90,703		6		90,697			1,723		1,542			1,542			50.00
KDB Infrastructure Investment Asset Management Co., Ltd.		Korea		December		Asset management		60,995		7,610		53,385			19,175		9,282			9,282			84.16
KDB Investment Co., Ltd.		Korea		December		Finance		129,338		1,708		127,630			4,580		892			892			100.00
KDB Biz Co., Ltd.		Korea		December		Services		9,211		3,761		5,450			14,677		1,789			1,789			100.00
KDB Consus Value PEF		Korea		December		Financial investment		16,818,386		16,287,632		530,754			837,816		(91,055	)		1,876,975			68.20
KDB-IAP OBOR PEF (*3)		Korea		December		Financial investment		60,956		67,942		(6,986	)		—		(5,658	)		(5,779	)		33.52
KDB Asia PEF (*3)		Korea		December		Financial investment		224,803		178		224,625			—		(312	)		22,500			50.00
KDB Small Medium Mezzanine PEF		Korea		December		Financial investment		87,865		92		87,773			2,555		2,229			2,229			66.67
Green Initiative 2nd Private Equity Fund (*3)		Korea		December		Financial investment		180,547		4,028		176,519			7,581		(6,569	)		(6,569	)		38.00
KDBC Co-investment Private Equity Fund		Korea		December		Financial investment		38,341		47		38,294			1,667		708			708			70.00
Corporate Liquidity Assistance Agency Co., Ltd.		Korea		December		Financial investment		2,818,703		1,755,292		1,063,411			34,756		(1,551	)		(1,551	)		100.00

Associates:
Korea Electric Power Co., Ltd.		Korea		December		Electricity Generation	W	236,422,893		201,350,005		35,072,888			41,216,517		(6,849,287	)		(6,838,038	)		32.90

S-68

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

11. Investments in Subsidiaries and Associates, Continued


	June 30, 2023
	Country	Fiscal year end	Industry	Assets		Liabilities		Equity		Operating revenue		Net income (loss)			Total compre- hensive income (loss)			Owner- ship (%)
Korea Tourism Organization	Korea	December	Culture and Tourism		1,222,363		393,656		828,707		344,478		5,508			5,568			43.58
Korea Infrastructure Financing 2 Co.	Korea	December	administration Financial investment		888,853		76,989		811,864		80,374		77,024			77,024			26.67
Korea Ocean Business Corporation	Korea	December	Finance		11,786,734		4,348,006		7,438,728		198,553		(69,162	)		48,611			21.78
Korea Real Estate Board	Korea	December	Appraisal		330,039		77,576		252,463		116,745		18,666			18,526			30.60
GM Korea Company (*4)	Korea	December	Manufacturing		6,578,914		4,666,560		1,912,354		6,018,182		196,847			196,847			17.02
HMM Co., Ltd.	Korea	December	Foreign cargo transportation		26,643,990		5,161,760		21,482,230		4,211,549		610,246			1,375,901			20.69
HANJIN KAL (*4)	Korea	December	Holding compnay		3,847,434		1,160,953		2,686,481		128,501		139,365			133,031			10.58
Korean Airlines Co., Ltd. (*4)	Korea	December	Air passenger transportation		29,568,998		19,972,469		9,596,529		7,469,369		588,272			563,710			3.32
Hanwha Ocean Co., Ltd. (priorly known as Daewoo Shipbuilding & Marine Engineering Co., Ltd.)	Korea	December	Manufacturing		13,640,746		11,308,539		2,332,207		3,260,536		(357,619	)		(410,019	)		27.55

S-69

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

11. Investments in Subsidiaries and Associates, Continued


	December 31, 2022
	Country		Fiscal year end		Industry		Assets		Liabilities		Equity			Operating revenue		Net income (loss)			Total compre- hensive income (loss)			Owner- ship (%)
Subsidiaries:
KDB Asia (HK) Ltd.		Hong Kong		December		Finance	W	3,660,944		3,029,336		631,608			218,171		53,881			75,373			100.00
KDB Bank Europe Ltd.		Hungary		December		Finance		1,197,124		1,082,057		115,067			101,071		7,415			(4,360	)		100.00
KDB Ireland Ltd.		Ireland		December		Finance		985,414		861,265		124,149			54,874		7,036			11,258			100.00
KDB Bank Uzbekistan Ltd.		Uzbekistan		December		Finance		981,301		874,872		106,429			55,269		25,765			23,614			86.32
Banco KDB Do Brazil S.A.		Brazil		December		Finance		481,207		386,159		95,048			84,252		27,132			33,709			100.00
PT KDB Tifa Finance Tbk		Indonesia		December		Finance		130,098		41,343		88,755			13,738		5,284			2,639			84.65
KDB Silicon Valley LLC		USA		December		Finance		126,606		1,522		125,084			2,237		(1,055	)		7,105			100.00
KDB OCCASIO II, L.P.		USA		December		Finance		60,554		49,495		11,059			20		(16,446	)		(15,908	)		90.00
KDB Synergy, L.P.		USA		December		Finance		19,643		—		19,643			—		(596	)		(328	)		100.00
Daewoo Shipbuilding & Marine Engineering Co., Ltd.		Korea		December		Manufacturing		12,235,665		11,490,693		744,972			4,860,150		(1,744,778	)		(1,472,612	)		55.68
Sam Woo Heavy Industries Co., Ltd. (*1)		Korea		December		Manufacturing		268,614		264,893		3,721			121,249		(10,237	)		(9,681	)		100.00
KDB Capital Corporation		Korea		December		Specialized Credit Finance		8,792,535		7,427,546		1,364,989			542,270		135,968			136,090			99.92
Korea BTL Financing 1 (*2)		Korea		Semi- annually		Financial investment		329,286		215		329,071			14,607		11,773			11,773			41.67
Korea Railroad Financing 1 (*2)		Korea		Semi- annually		Financial investment		158,318		9		158,309			7,492		(3,569	)		(3,569	)		50.00
Korea Education Financing (*2)		Korea		Semi- annually		Financial investment		95,445		7		95,438			9,675		9,442			9,442			50.00
KDB Infrastructure Investment Asset Management Co., Ltd.		Korea		December		Asset management		70,706		10,403		60,303			39,151		19,057			19,104			84.16
KDB Investment Co., Ltd.		Korea		December		Finance		152,004		19,866		132,138			84,468		54,032			54,034			100.00
KDB Biz Co., Ltd.		Korea		December		Services		6,899		3,238		3,661			26,291		325			624			100.00
KDB Consus Value PEF		Korea		December		Financial investment		17,083,463		16,587,729		495,735			1,331,031		(76,437	)		(24,360	)		68.20
KDB-IAP OBOR PEF (*3)		Korea		December		Financial investment		58,878		60,084		(1,206	)		—		(1,024	)		(1,017	)		33.52
KDB Asia PEF (*3)		Korea		December		Financial investment		194,389		172		194,217			1		(494	)		20,532			50.00
KDB Small Medium Mezzanine PEF		Korea		December		Financial investment		96,666		122		96,544			4,620		3,432			3,432			66.67
Green Initiative 2nd Private Equity Fund (*3)		Korea		December		Financial investment		190,404		5,316		185,088			2		(5,795	)		(5,795	)		38.00
KDBC Co-investment Private Equity Fund		Korea		December		Financial investment		17,522		27		17,495			—		(544	)		(544	)		70.00
Corporate Liquidity Assistance Agency Co., Ltd.		Korea		December		Financial investment		3,280,515		2,215,553		1,064,962			90,631		32,625			32,625			100.00

S-70

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

11. Investments in Subsidiaries and Associates, Continued


	December 31, 2022
	Country	Fiscal year end	Industry	Assets		Liabilities		Equity		Operating revenue		Net income (loss)			Total compre- hensive income (loss)			Owner- ship (%)

Associates:
Korea Electric Power Co., Ltd.	Korea	December	Electricity Generation	W	234,804,994		192,804,738		42,000,256		71,257,863		(24,429,108	)		(23,182,239	)		32.90
Korea Tourism Organization	Korea	December	Culture and Tourism administration		1,201,900		393,608		808,292		737,973		(28,798	)		(8,610	)		43.58
Korea Infrastructure Financing 2 Co.	Korea	December	Financial investment		829,121		65,397		763,724		62,465		19,105			19,105			26.67
Korea Ocean Business Corporation	Korea	December	Finance		11,782,946		4,393,822		7,389,124		324,012		(1,986,514	)		(1,915,571	)		21.78
Korea Real Estate Board	Korea	December	Appraisal		288,236		49,791		238,445		215,197		11,583			19,805			30.60
GM Korea Company (*4)	Korea	December	Manufacturing		5,916,955		4,503,620		1,413,335		9,013,561		282,760			282,760			17.02
HMM Co., Ltd.	Korea	December	Foreign cargo transportation		25,973,455		5,285,543		20,687,912		18,582,770		10,085,271			10,655,184			20.69
HANJIN KAL (*4)	Korea	December	Holding compnay		3,915,078		1,339,021		2,576,057		200,336		659,568			851,925			10.58
Korean Air Lines Co., Ltd. (*4)	Korea	December	Air passenger transportation		28,997,701		19,705,241		9,292,460		14,096,095		1,728,363			2,268,959			3.32

(*1)	The Bank consolidates the investees which were subsidiaries of Daewoo Shipbuilding & Marine Engineering Co., Ltd. as the Bank has had control over the investees through the commencement of the administrative proceeding since the past.

(*2)

The investees are financed by the Bank and managed by KDB Infrastructure Investments Asset Management Co., Ltd. They were included in the scope of consolidation even though the Bank holds less than half of the voting rights because the Bank is exposed to variable returns and has the ability to affect those returns through its power over the investee.

(*3)	Although the Bank’s shareholding in the investee is less than 50%, it controls the investee since it is exposed, or has right to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

(*4)	Although the Bank’s shareholding is less than 20%, the Bank has significant influence considering the right to elect the investees’ directors and the Bank classifies the companies as associates.

S-71

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

12. Property and Equipment

Changes in property and equipment for the six-month periods ended June 30, 2023 and 2022 are as follows:


					2023
	January 1, 2023		Acquisition/ depreciation		Disposal			Reclassifi- cation		Foreign exchange differences			June 30, 2023
Acquisition cost:
Land	W	301,959		—		—			4,678		—			306,637
Buildings and structures		627,664		1,159		—			4,327		—			633,150
Leasehold improvements		44,856		47		(730	)		625		658			45,456
Vehicles		719		—		(140	)		—		7			586
Equipment		60,156		1,626		(519	)		—		133			61,396
Construction in progress		—		2,791		—			(2,791)		—			—
Right-of-use assets (Real estate)		126,035		27,022		(27,199	)		—		1,715			127,573
Right-of-use assets (Vehicles)		7,977		10,436		(1,464	)		—		(8,523	)		8,426
Right-of-use assets (Others)		93		—		—			—		3			96
Others		157,730		5,365		(453	)		—		188			162,830

		1,327,189		48,446		(30,505	)		6,839		(5,819	)		1,346,150
Accumulated depreciation:
Buildings and structures (*)		233,783		9,595		—			2,495		—			245,873
Leasehold improvements		36,391		1,400		(731	)		—		432			37,492
Vehicles		628		36		(141	)		—		5			528
Equipment (*)		47,728		2,278		(491	)		—		71			49,586
Right-of-use assets (Real estate)		45,968		16,677		(18,633	)		—		410			44,422
Right-of-use assets (Vehicles)		4,154		1,243		(1,437	)		—		8			3,968
Right-of-use assets (Others)		9		20		—			—		1			30
Others		140,971		4,612		(414	)		—		113			145,282

		509,632		35,861		(21,847	)		2,495		1,040			527,181
Accumulated impairment losses:
Land		3,023		—		—			—		—			3,023
Buildings and structures		2,361		—		—			—		—			2,361

		5,384		—		—			—		—			5,384

	W	812,173		12,585		(8,658	)		4,344		(6,859	)		813,585

(*)	The amounts include government grants.

S-72

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

12. Property and Equipment, Continued


	2022
	January 1, 2022		Acquisition/ depreciation		Disposal			Reclassifi- cation			Foreign exchange differences			June 30, 2022
Acquisition cost:
Land	W	302,959		—		(55	)		(903	)		—			302,001
Buildings and structures		628,393		783		(1,979	)		(1,254	)		—			625,943
Leasehold improvements		40,637		2,308		(96	)		473			80			43,402
Vehicles		769		—		—			—			39			808
Equipment		59,812		1,237		(2,350	)		—			157			58,856
Construction in progress		34		738		—			(772	)		—			—
Right-of-use assets (Real estate)		162,089		35,825		(85,641	)		—			4,875			117,148
Right-of-use assets (Vehicles)		7,447		1,328		(2,081	)		—			54			6,748
Right-of-use assets (Others)		29		15		(29	)		—			—			15
Others		154,052		1,759		(248	)		—			257			155,820

		1,356,221		43,993		(92,479	)		(2,456	)		5,462			1,310,741
Accumulated depreciation:
Buildings and structures (*)		217,027		8,741		—			(577	)		—			225,191
Leasehold improvements		34,621		1,523		(600)			—			(127	)		35,417
Vehicles		616		34		—			—			27			677
Equipment (*)		45,395		2,250		(2,175	)		—			115			45,585
Right-of-use assets (Real estate)		48,501		14,642		(16,391	)		—			1,587			48,339
Right-of-use assets (Vehicles)		4,279		1,052		(2,171	)		—			38			3,198
Right-of-use assets (Others)		29		—		(29	)		—			—			—
Others		128,212		7,417		(225	)		—			161			135,565

		478,680		35,659		(21,591	)		(577	)		1,801			493,972
Accumulated impairment losses:
Land		3,023		—		—			—			—			3,023
Buildings and structures		2,361		—		—			—			—			2,361

		5,384		—		—			—			—			5,384

	W	872,157		8,334		(70,888	)		(1,879	)		3,661			811,385

(*)	The amounts include government grants.

S-73

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

13. Investment Property

Changes in investment property for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023
	January 1, 2023		Acquisition/ depreciation			Reclassification			June 30, 2023
Acquisition cost:
Land	W	61,008		—			(4,678	)		56,330
Buildings and structures		59,414		—			(2,161	)		57,253

		120,422		—			(6,839	)		113,583
Accumulated depreciation:
Buildings and structures		35,734		1,381			(2,495	)		34,620
Accumulated impairment losses:
Land		1,197		—			—			1,197
Buildings and structures		1,778		—			—			1,778

		2,975		—			—			2,975

	W	81,713		(1,381	)		(4,344	)		75,988


	2022
	January 1, 2022		Acquisition/ depreciation			Reclassification		June 30, 2022
Acquisition cost:
Land	W	60,593		—			903		61,496
Buildings and structures		58,388		—			1,553		59,941

		118,981		—			2,456		121,437
Accumulated depreciation:
Buildings and structures		33,146		1,116			577		34,839
Accumulated impairment losses:
Land		1,197		—			—		1,197
Buildings and structures		1,778		—			—		1,778

		2,975		—			—		2,975

	W	82,860		(1,116	)		1,879		83,623

The fair value of the Bank’s investment property, as determined based on valuation by an independent appraiser, amounts toW93,819 million andW99,084 million as of June 30, 2023 and December 31, 2022, respectively. Additionally, fair value of investment in property is classified as level 3 according to the fair value hierarchy in Note 44.

S-74

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

14. Intangible Assets

Changes in intangible assets for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023
	January 1, 2023		Acquisition		Disposal			Amortization			Foreign exchange differences		June 30, 2023
Development expense	W	87,593		6,047		—			(22,073	)		12		71,579
Equipment usage right		452		—		—			(25	)		15		442
Other deposits provided		11,789		—		(267	)		—			32		11,554
Others		18,655		1,999		—			(5,132	)		52		15,574

	W	118,489		8,046		(267	)		(27,230	)		111		99,149


	2022
	January 1, 2022		Acquisition		Disposal			Amortization			Foreign exchange differences		June 30, 2022
Development expense	W	119,775		2,053		—			(22,176	)		13		99,665
Equipment usage right		472		—		—			(24	)		36		484
Other deposits provided		11,922		—		—			—			13		11,935
Others		15,530		2,466		—			(4,921	)		45		13,120

	W	147,699		4,519		—			(27,121	)		107		125,204

15. Other Assets

Other assets as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023			December 31, 2022
Accounts receivable	W	14,114,209			2,747,057
Unsettled domestic exchange receivables		1,744,078			3,747,333
Accrued income		996,795			914,618
Guarantee deposits		355,782			315,563
Financial guarantee asset		43,810			25,826
Prepaid expenses		17,955			18,374
Advance payments		8,527			9,036
Others		24,668			12,102

		17,305,824			7,789,909
Loss allowance for other assets		(76,940	)		(75,323	)
Present value discount		(4,124	)		(3,369	)

	W	17,224,760			7,711,217

The carrying amounts of financial assets included in other assets above amounted toW17,184,105 million andW7,676,612 million as of June 30, 2023 and December 31, 2022, respectively, and their fair value amounted toW17,179,268 million andW7,674,324 million as of June 30, 2023 and December 31, 2022, respectively.

S-75

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

16. Financial Liabilities Measured at FVTPL

(1)	Financial liabilities designated at fair value through profit or loss as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023		December 31, 2022
Debentures	W	1,239,189		1,131,310
Deposits		368,521		338,414

	W	1,607,710		1,469,724

Changes in fair value of structured debentures and deposits which hedge accounting are applied, are recognized in profit or loss, but structured debentures with no hedge accounting applied to, are measured at amortized costs. Therefore, such structured debentures and deposits, not applied to hedge accounting, have been designated at FVTPL to eliminate mismatch in measurements of accounting profit and loss.

(2)	The difference between the carrying amount and contractual cash flow amount of financial liabilities designated at fair value through profit or loss as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023			December 31, 2022
Carrying amount	W	1,607,710			1,469,724
Contractual cash flow amounts		2,220,688			2,101,133

Difference	W	(612,978	)		(631,409	)

17. Deposits

Deposits as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023				December 31, 2022
	Amortized cost		Fair value		Amortized cost		Fair value
Deposits in Korean won:
Demand deposits	W	135,933		135,933		123,617		123,617
Time and savings deposits		51,725,975		51,718,734		54,389,265		54,328,886
Certificates of deposit		985,342		986,373		757,471		758,937

		52,847,250		52,841,040		55,270,353		55,211,440
Deposits in foreign currencies:
Demand deposits		912,007		911,452		1,312,008		1,312,057
Time and savings deposits		6,068,425		6,061,366		3,955,130		3,949,240
Certificates of deposit		6,404,554		6,378,313		6,187,960		6,195,534

		13,384,986		13,351,131		11,455,098		11,456,831
Off-shore deposits in foreign currencies:
Demand deposits		893,384		893,384		835,904		835,904
Certificates of deposit		248,897		248,868		765,301		765,794

		1,142,281		1,142,252		1,601,205		1,601,698

	W	67,374,517		67,334,423		68,326,656		68,269,969

S-76

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

18. Borrowings

(1)	Borrowings as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Minimum interest rate (%)		Maximum interest rate (%)		Amortized cost			Fair value
Borrowings in Korean won		0.20		3.81	W	4,866,337			4,802,075
Borrowings in foreign currencies		0.19		7.24		14,149,856			14,103,142
Off-shore borrowings in foreign currencies		2.34		5.53		4,598,664			4,561,343
Others		0.05		5.64		2,496,879			2,494,119

						26,111,736			25,960,679

Deferred borrowing costs						(200	)

					W	26,111,536


	December 31, 2022
	Minimum interest rate (%)		Maximum interest rate (%)		Amortized cost			Fair value
Borrowings in Korean won		—		3.23	W	4,551,011			4,507,549
Borrowings in foreign currencies		0.06		6.57		14,220,220			14,148,918
Off-shore borrowings in foreign currencies		0.16		5.16		5,205,830			5,157,170
Others		0.05		3.25		1,452,656			1,453,711

						25,429,717			25,267,348

Deferred borrowing costs						(473	)

					W	25,429,244

S-77

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

18. Borrowings, Continued

(2)	Borrowings in Korean won before adjusting for gains and losses on deferred borrowing costs as of June 30, 2023 and December 31, 2022 are as follows:

Lender

Classification

Annual
interest rate (%)

June 30, 2023

December 31,
2022

Ministry of Economy and Finance

Borrowings from government fund(*)

3.01 ~ 3.06

85,567

93,155

Korea SMEs and Startups Agency

Borrowings from small and medium enterprise promotion fund

1.56 ~ 3.81

64,657

57,569

Ministry of Culture, Sports and Tourism

Borrowings from tourism promotion fund

1.26 ~ 3.01

3,285,764

3,182,920

Korea Energy Agency

Borrowings from fund for rational use of energy

0.50 ~ 1.75

266,421

268,659

Local governments

Borrowings from local small and medium enterprise promotion fund

0.20 ~ 3.69

23,945

27,167

The Bank of Korea

Borrowings from Bank of Korea

0.25 ~ 2.00

395,186

375,350

Others

Borrowings from petroleum enterprise fund and others

1.55 ~ 2.80

744,797

546,191

4,866,337

4,551,011

(*)	Borrowings from government fund are subordinated borrowings.

S-78

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

18. Borrowings, Continued

(3)	Borrowings and off-shore borrowings in foreign currencies before adjusting for gains and losses on deferred borrowing costs as of June 30, 2023 and December 31, 2022 are as follows:

Lender

Classification

Annual
interest rate (%)

June 30,
2023

December 31,
2022

Mizuho and others

Bank loans from foreign funds

5.67 ~ 6.11

1,706,640

1,394,030

Ministry of Strategy and Finance

Exchange equalization fund borrowings in foreign currencies

5.94 ~ 6.22

24,366

120,761

Central Bank of the Republic Uzbekistan and others

Off-shore short term borrowings

3.39 ~ 5.53

3,073,299

3,682,012

China Development Bank and others

Off-shore long term borrowings

2.34 ~ 5.52

1,525,365

1,523,818

Others

Short-term borrowings in foreign currencies

0.19 ~ 7.24

11,694,828

12,150,612

Long term borrowings in foreign currencies

0.41 ~ 7.19

724,022

554,817

18,748,520

19,426,050

S-79

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

19. Debentures

Details of debentures as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Minimum interest rate (%)		Maximum interest rate (%)		Amortized cost			Fair value
Debentures in Korean won:
Debentures		0.93		6.60	W	109,973,207			108,583,889
Discount on debentures						(152,410	)
Valuation adjustment for fair value hedges						(402,014	)

						109,418,783
Debentures in foreign currencies:
Debentures		0.38		10.87		22,966,539			23,294,914
Discount on debentures						(40,739	)
Premium on debentures						72
Valuation adjustment for fair value hedges						(968,298	)

						21,957,574
Off-shore debentures:
Debentures		—		11.15		19,243,173			18,969,053
Discount on debentures						(55,903	)
Valuation adjustment for fair value hedges						(338,070	)

						18,849,200

					W	150,225,557			150,847,856

S-80

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

19. Debentures, Continued


	December 31, 2022
	Minimum interest rate (%)		Maximum interest rate (%)		Amortized cost			Fair value
Debentures in Korean won:
Debentures		0.88		6.60	W	121,351,724			118,883,372
Discount on debentures						(334,416	)
Valuation adjustment for fair value hedges						(419,107	)

						120,598,201
Debentures in foreign currencies:
Debentures		0.05		10.87		20,910,800			21,072,312
Discount on debentures						(37,691	)
Premium on debentures						91
Valuation adjustment for fair value hedges						(1,000,475	)

						19,872,725
Off-shore debentures:
Debentures		—		11.15		18,859,840			18,272,508
Discount on debentures						(48,784	)
Valuation adjustment for fair value hedges						(570,086	)

						18,240,970

					W	158,711,896			158,228,192

20. Net Defined Benefit Assets

The Bank implements a defined benefit retirement pension plan based on employee compensation benefits and service periods. The plan assets are in trusts with Kookmin Bank, Samsung Life Insurance Co., Ltd., etc.

(1)	Details of net defined benefit assets as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023			December 31, 2022
Present value of defined benefit obligation	W	358,006			354,703
Fair value of plan assets		(434,342	)		(442,473	)

Net defined benefit assets	W	(76,336	)		(87,770	)

S-81

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

20. Net Defined Benefit Assets, Continued

(2)	Changes in net defined benefit liabilities (assets) for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023
	Present value of defined benefit obligation			Fair value of plan assets			Net defined benefit liabilities
Beginning balance	W	354,703			(442,473	)		(87,770	)
Current service costs		14,181			—			14,181
Interest expense (income)		9,110			(11,575	)		(2,465	)
Benefits paid by the plan		(19,988	)		19,706			(282	)

Ending balance	W	358,006			(434,342	)		(76,336	)


	2022
	Present value of defined benefit obligation			Fair value of plan assets			Net defined benefit liabilities
Beginning balance	W	391,015			(400,368	)		(9,353	)
Current service costs		18,750			—			18,750
Interest expense (income)		5,898			(6,033	)		(135	)
Past service costs		49,673			—			49,673
Benefits paid by the plan		(29,219	)		17,369			(11,850	)
Others		(33	)		—			(33	)

Ending balance	W	436,084			(389,032	)		47,052

(3)	Fair value of plan assets for each type as of June 30, 2023 and December 31, 2022 are as follows:

June 30, 2023

December 31, 2022

Quoted
market
prices

Unquoted
market
prices

Quoted
market
prices

Unquoted
market
Prices

Due from banks

—

434,342

—

442,473

(4)	Defined benefit costs recognized in profit or loss for the three-month and six-month periods ended June 30, 2023 and 2022 are as follows:


	June 30, 2023						June 30, 2022
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Current service costs	W	7,087			14,181			9,415			18,750
Interest expense, net		(1,233	)		(2,465	)		(67	)		(135	)
Past service costs		—			—			—			49,673

	W	5,854			11,716			9,348			68,288

S-82

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

20. Net Defined Benefit Assets, Continued

(5)	The principal actuarial assumptions used as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023		December 31, 2022
Discount rate (%)		5.35		5.35
Future salary increasing rate (%)		5.50		5.50

(6)	The present value sensitivity of defined benefit obligation as changes in principal actuarial assumptions as of December 31, 2022 is as follows:


	Sensitivity
	1% increase in assumption		1% decrease in assumption
Discount rate		8.09% decrease		9.36% increase
Future salary increasing rate		9.25% increase		8.15% decrease

(7)	The weighted average duration of defined benefit obligation is 9.63 years as of December 31, 2022.

21. Provisions

(1)	Details of provisions as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023		December 31, 2022
Provision for unused commitments	W	396,547		431,390
Provision for financial guarantee		58,470		42,741
Provision for payment guarantees		593,039		953,425
Provision for possible losses from lawsuits		168		239
Provision for restoration		13,850		14,206
Other provision		3,391		6,029

	W	1,065,465		1,448,030

(2) Changes in provision for unused commitments for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	121,771			300,309			9,310			431,390
Transfer to 12-month expected credit loss		22,814			(16,639	)		(6,175	)		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		(12,443	)		55,758			(43,315	)		—
Transfer to credit-impaired		—			(4,220	)		4,220			—
Impairment loss (gain)		(30,899	)		(50,417	)		42,206			(39,110	)
Foreign currency translation		2,283			68			1,916			4,267

Ending balance	W	103,526			284,859			8,162			396,547

S-83

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

21. Provisions, Continued


	2022
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	332,151			327,085			7,865			667,101
Transfer to 12-month expected credit loss		134,189			(134,189	)		—			—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		(21,442	)		22,356			(914	)		—
Transfer to credit-impaired		(926	)		(4,650	)		5,576			—
Impairment loss (gain)		(281,197	)		102,037			(2,929	)		(182,089	)
Foreign currency translation		23,994			3,294			337			27,625

Ending balance	W	186,769			315,933			9,935			512,637

(3)	Changes in provision for financial guarantee for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	661			36,682			5,398			42,741
Transfer to 12-month expected credit loss		802			(553	)		(249	)		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		(56	)		121			(65	)		—
Transfer to credit-impaired		—			(8,418	)		8,418			—
Impairment loss (gain)		1,686			15,665			(1,622	)		15,729

Ending balance	W	3,093			43,497			11,880			58,470


	2022
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	2,721			31,427			38,272			72,420
Transfer to 12-month expected credit loss		222			(222	)		—			—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired		(758	)		1,755			(997	)		—
Transfer to credit-impaired		(149	)		(234	)		383			—
Impairment loss (gain)		144			4,528			(31,550	)		(26,878	)

Ending balance	W	2,180			37,254			6,108			45,542

S-84

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

21. Provisions, Continued

(4)	Changes in provision for payment guarantees for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	64,150			537,255			352,020			953,425
Transfer to 12-month expected credit loss		193,158			(133,509	)		(59,649	)		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired exposures		(12,652	)		99,180			(86,528	)		—
Transfer to credit-impaired exposures		—			(1,883	)		1,883			—
Impairment gain		(3,831	)		(183,453	)		(201,872	)		(389,156	)
Foreign currency translation		12,180			16,422			168			28,770

Ending balance	W	253,005			334,012			6,022			593,039


	2022
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	179,232			199,694			378,695			757,621
Transfer to 12-month expected credit loss		154,095			(154,095	)		—			—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired exposures		(211,620	)		212,910			(1,290	)		—
Transfer to credit-impaired exposures		(1,056	)		(4,169	)		5,225			—
Impairment loss		157,571			264,413			71,637			493,621
Foreign currency translation		10,646			18,577			16,936			46,159

Ending balance	W	288,868			537,330			471,203			1,297,401

S-85

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

21. Provisions, Continued

(5)	Changes of lawsuit provision and other provision for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023
	Lawsuit provision			Provision for restoration			Other provision
Beginning balance	W	239			14,206			6,029
Decrease of provision		(4	)		(544	)		—
Provision used and others		(67	)		188			(2,638	)

Ending balance	W	168			13,850			3,391


	2022
	Lawsuit provision			Provision for restoration			Other provision
Beginning balance	W	1,731			14,620			54,037
Decrease of provision		(1,492	)		(1,244	)		—
Provision used and others		—			1,741			(43,962	)

Ending balance	W	239			15,117			10,075

(6)	Provision for payment guarantees and financial guarantee

Confirmed acceptances and guarantees, unconfirmed acceptances and guarantees and bills endorsed are not recognized on the statement of financial position, but are disclosed as off-statement of financial position items in the notes to the financial statements. The Bank provides a provision for such off-statement of financial position items, applying a Credit Conversion Factor (“CCF”) and provision rates under the Bank’s expected credit loss model, and records the provision as a reserve for expected credit losses on acceptances and guarantees.

In the case of financial guarantee contracts, when the amount calculated using the same method as above is greater than the initial amount less amortization of fees recognized, the difference is recorded as provision for financial guarantee.

(7)	Provision for unused commitments

The Bank records a provision for a certain portion of unused credit lines which is calculated using a CCF as provision for unused commitments applying provision rates under the Bank’s expected credit loss model.

(8)	Provision for possible losses from lawsuits

As of June 30, 2023, the Bank is involved in 10 lawsuits as a plaintiff and 20 lawsuits as a defendant. The aggregate amounts of claims as a plaintiff and a defendant amounted toW142,121 million andW205,346 million, respectively. The Bank provided a provision against contingent loss from pending lawsuits as of June 30, 2023 and additional losses may be incurred depending on the result of pending lawsuits.

S-86

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

21. Provisions, Continued

Major lawsuits in progress as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Contents	Amounts		Status of lawsuit
Plaintiff:
Korea Trade Insurance Corporation and one other	Claim for guarantee insurance	W	136,538	1^st and 2^nd trial ruled against the Bank; 3^rd trial in progress
Hyunjin Construction Co., Ltd.	Transfer of the absence of a lien		3,088	Retrial in progress
Hana Bank and 6 others	Claim for undue benefit		1,637	1^st trial ruled against the Bank; 2^nd trial in progress

Defendant:
Shinhan Bank and one other	Claim for damages		58,474	1^st trial in progress
169 individuals	Claim for salaries		42,267	1^st trial ruled in favor of the Bank; 2^nd trial in progress
Dongbu Corporation	Claim for nullity of table of rehabilitation creditor		33,997	1^st trial ruled in favor of the Bank; 2^nd trial ruled against the Bank; 3^rd trial in progress
Dongbu Corporation	Claim for objection of request (participation to support)		19,658	1^st trial in progress
Woori Bank	Claim for profit and loss settlement		14,500	1^st and 2^nd trial ruled against the Bank; 3^rd trial in progress
Export-Import Bank of Korea	Claim for undue benefit and others		8,929	1^st trial ruled in favor of the Bank; 2^nd trial in progress
One individual	Claim for cancellation of pledge		8,610	1^st trial in progress

S-87

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

21. Provisions, Continued


	December 31, 2022
	Contents	Amounts		Status of lawsuit
Plaintiff:
Korea Trade Insurance Corporation and one other	Claim for guarantee insurance	W	136,538	1^st, 2^ndtrial ruled against the Bank; 3^rdtrial in progress
KAMCO 1st JV Securitization Specialty Co., Ltd.	Transfer of claim		8,792	1^st, 2^ndtrial ruled partially in favor of the Bank; 3^rdtrial in progress
Hana Bank and 6 others	Claim for undue benefit		1,647	1^sttrial ruled against the Bank, 2^ndtrial in progress
e-RAP KOREA Co., Ltd. and one other	Claim for loans (participate in succession)		1,238	1^sttrial in progress

Defendant:
Shinhan Bank and one other	Claim for damages		58,474	1^sttrial in progress
169 individuals including Mr. Kim	Claim for wage		36,573	1^sttrial ruled in favor of the Bank, 2^ndtrial in progress
Dongbu Corporation	Claim for nullity of table of rehabilitation creditor		33,997	1^sttrial ruled in favor of the Bank; 2^ndtrial ruled against the Bank; 3^rdtrial in progress
Woori Bank	Claim for profit and loss settlement		21,246	1^st, 2^ndtrial ruled against the Bank
Dongbu Corporation	Claim for objection of request (participation to support)		19,658	1^sttrial in progress
Export-Import Bank of Korea	Claim for undue benefit		9,797	1^sttrial ruled in favor of the Bank, 2^ndtrial in progress
KAMCO 1st JV Securitization Specialty Co., Ltd.	Claim for transaction amount (counterclaim)		7,000	1^st, 2^ndtrial ruled partially in favor of the Bank; 3^rdtrial in progress

(9)	Other provision

The Bank recognised other provision as a reserve for other miscellaneous purpose.

S-88

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

22. Other Liabilities

(1)	Other liabilities as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023			December 31, 2022
Accounts payable	W	14,192,673			2,740,749
Lease liabilities		108,587			167,070
Accrued expense		2,286,083			1,863,498
Unearned income		87,632			115,598
Deposits withholding tax		39,175			43,823
Guarantee money received		812,780			832,614
Foreign exchanges payable		22,234			40,557
Domestic exchanges payable		302,585			242,266
Borrowing from trust accounts		1,478,165			755,127
Financial guarantee liability		48,238			28,886
Others		153,806			254,627

		19,531,958			7,084,815
Present value discount		(27,657	)		(91,134	)

	W	19,504,301			6,993,681

The carrying amount of financial liabilities included in other liabilities above amounted toW19,237,005 million andW6,717,731 million as of June 30, 2023 and December 31, 2022, respectively, and their fair value amounted toW19,218,881 million andW6,704,736 million as of June 30, 2023 and December 31, 2022, respectively.

(2)	Details of lease liabilities as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Face value		Discount			Carrying amounts
Real estate	W	103,609		(25,815	)		77,794
Vehicles		4,915		(394	)		4,521
Others		63		(3	)		60

	W	108,587		(26,212	)		82,375


	December 31, 2022
	Face value		Discount			Carrying amounts
Real estate	W	162,676		(89,084	)		73,592
Vehicles		4,321		(411	)		3,910
Others		73		(3	)		70

	W	167,070		(89,498	)		77,572

S-89

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

22. Other Liabilities, Continued

(3)	The amount related to lease recognized in the separate statement of comprehensive income for the six-month periods ended June 30, 2023 and 2022 is as follows:


	June 30, 2023				June 30, 2022
	Three-month period ended		Six-month period ended		Three-month period ended		Six-month period ended
Depreciation of right-of-use assets
Real estate	W	8,498		16,677		7,895		14,642
Vehicles		649		1,243		509		1,052
Others		10		20		—		—

		9,157		17,940		8,404		15,694
Interest expenses on the lease liabilities		719		1,310		307		556
Expense relating to leases of low-value assets		2,529		4,395		1,996		4,035

	W	12,405		23,645		10,707		20,285

(4)	Cash flows used in lease liabilities for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023		2022
Decrease in lease liabilities	W	9,629		11,756
Lease payments relating to leases of low-value assets		4,395		4,035

	W	14,024		15,791

(5)	Maturity analysis of undiscounted lease payments relating to lease liabilities as of June 30, 2023 and December 31, 2022 are as follows:

June 30, 2023

Within
3 months

3 months
~ 1 year

1 year ~
5 years

Over
5 years

Total

Lease payments

9,869

25,890

58,616

14,212

108,587

December 31, 2022

Within
3 months

3 months
~ 1 year

1 year ~
5 years

Over
5 years

Total

Lease payments

12,931

36,044

103,576

14,519

167,070

23. Equity

(1) Issued capital

The Bank is authorized to issue up to 6,000 million shares of common stock and has 4,741,311,768 shares issued and 4,630,311,768 shares issued as of June 30, 2023 and December 31, 2022, respectively, and outstanding with a total par value (W 5,000 of par value per share) ofW23,706,559 million andW23,151,559 million as of June 30, 2023 and December 31, 2022, respectively.

S-90

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

23. Equity, Continued

(2) Capital surplus

Capital surplus as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023		December 31, 2022
Paid-in capital in excess of par value	W	34,907		40,442
Surplus from capital reduction (*1)		44,373		44,373
Other capital surplus (*2)		2,390,495		2,390,495

	W	2,469,775		2,475,310

(*1)	The Bank reducedW5,178,600 million of its issued capital in 1998 and 2000 to offset its accumulated deficit amounting toW5,134,227 million. As the result of the capital reduction,W44,373 million of surplus exceeding accumulated deficit was recorded in capital surplus in equity.

(*2)	The difference in the amount of shares issued and the carrying value of net asset acquired occurring from the merger of the Bank with KDB Financial Group Inc. and Korea Finance Corporation are recognized as other capital surplus.

(3) Accumulated other comprehensive income

(i)	Accumulated other comprehensive income as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023			December 31, 2022
Net gain on securities measured at FVOCI
Valuation gain on securities measured at FVOCI (before tax)	W	3,448,628			3,393,442
Loss allowance for securities measured at FVOCI (before tax)		91,304			86,178
Income tax effect		(934,542	)		(922,099	)

		2,605,390			2,557,521
Exchange differences on translation of foreign operations:
Exchange differences on translation of foreign operations (before tax)		184,687			132,126
Income tax effect		—			—

		184,687			132,126
Valuation gain on cash flow hedge:
Valuation gain on cash flow hedge (before tax)		6,514			7,241
Income tax effect		(1,720	)		(1,919	)

		4,794			5,322
Net loss on hedges of net investments in foreign operations:
Net loss on hedges of net investments in foreign operations (before tax)		(138,878	)		(96,874	)
Income tax effect		36,664			25,672

		(102,214	)		(71,202	)
Remeasurements of defined benefit liabilities:
Remeasurements of defined benefit liabilities (before tax)		142,678			142,678
Income tax effect		(37,665	)		(37,808	)

		105,013			104,870
Fair value changes on financial liabilities designated at fair value due to credit risk:
Valuation gain on financial liabilities designated at fair value due to credit risk (before tax)		108,502			123,398
Income tax effect		(28,646	)		(32,702	)

		79,856			90,696

	W	2,877,526			2,819,333

S-91

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

23. Equity, Continued

(ii)	Changes in accumulated other comprehensive income for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023
	January 1, 2023			Increase (Decrease)			Tax Effect			June 30, 2023
Gain (loss) on Securities Measured at FVOCI	W	2,557,521			60,312			(12,443	)		2,605,390
Exchange differences on translation of foreign operations		132,126			52,561			—			184,687
Valuation gain (loss) on cash flow hedge		5,322			(727	)		199			4,794
Valuation gain (loss) on hedges of net investments in foreign operations		(71,202	)		(42,004	)		10,992			(102,214	)
Remeasurements of defined benefit liabilities		104,870			—			143			105,013
Valuation gain (loss) on financial liabilities designated at fair value due to credit risk		90,696			(14,896	)		4,056			79,856

	W	2,819,333			55,246			2,947			2,877,526


	2022
	January 1, 2022			Increase (Decrease)			Tax Effect			June 30, 2022
Gain (loss) on Securities Measured at FVOCI	W	4,701,972			(1,473,361	)		405,916			3,634,527
Exchange differences on translation of foreign operations		39,000			118,674			—			157,674
Valuation gain (loss) on cash flow hedge		1,399			4,233			(1,164	)		4,468
Valuation gain (loss) on hedges of net investments in foreign operations		(21,112	)		(91,386	)		25,131			(87,367	)
Remeasurements of defined benefit liabilities		51,739			—			—			51,739
Valuation gain (loss) on financial liabilities designated at fair value due to credit risk		476			29,490			(8,110	)		21,856

	W	4,773,474			(1,412,350	)		421,773			3,782,897

(4) Retained earnings

In accordance with the Korea Development Bank Act, the Bank is required to appropriate at least 40% of net income as a legal reserve. This reserve can be transferred to paid-in capital or offset an accumulated deficit.

In accordance with the Korea Development Bank Act, the Bank offsets an accumulated deficit with reserves. If the reserve is insufficient to offset the accumulated deficit, the Korean government is responsible for the deficit.

(i)	Retained earnings as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023		December 31, 2022
Legal reserve	W	2,721,885		2,535,892
Voluntary reserve
Regulatory reserve for loan losses		211,997		247,253
Unappropriated retained earnings		6,956,652		4,439,026

	W	9,890,534		7,222,171

S-92

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

23. Equity, Continued

(ii)	Changes in legal reserve for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023		2022
Beginning balance	W	2,535,892		1,551,154
Transfer from retained earnings		185,993		984,738

Ending balance	W	2,721,885		2,535,892

(iii)

Changes in unappropriated retained earnings for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023			2022
Beginning balance	W	4,439,026			5,329,775
Contribution to legal reserve		(185,993	)		(984,738	)
Transfer from regulatory reserve for credit losses		35,256			235,633
Dividends		(164,743	)		(833,089	)
Reclassification of gain or loss on equity securities measured at FVOCI		18,513			78,290
Profit for the period		2,814,593			469,450

Ending balance	W	6,956,652			4,295,321

(5) Regulatory reserve for credit losses

The Bank is required to provide a regulatory reserve for credit losses in accordance with Regulations on Supervision of Banking Business 29(1) and (2). The details of regulatory reserve for credit losses are as follows:

(i)	Regulatory reserve for credit losses as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023		December 31, 2022
Beginning balance	W	211,996		247,253
Provision for (reversal of) regulatory reserve for credit losses		55,548		(35,257	)

Ending balance	W	267,544		211,996

(ii)	Required reversal of regulatory reserve for credit losses and profit (loss) after adjusting regulatory reserve for loan losses for the three-month and six-month periods ended June 30, 2023 and 2022 are as follows:


	June 30, 2023					June 30, 2022
	Three-month period ended		Six-month period ended			Three-month period ended			Six-month period ended
Profi (loss)t for the period	W	1,723,074		2,814,593			(213,214	)		469,450
Obligated amount of reversal of (provision for) regulatory reserve for credit losses		113,426		(55,548	)		77,102			30,182

Profit (loss) after adjusting regulatory reserve for credit losses	W	1,836,500		2,759,045			(136,112	)		499,632

Earnings (loss) per share after adjusting regulatory reserve for credit losses (in won)	W	389		590			(31	)		113

S-93

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

24. Net Interest Income

Net interest income for the three-month and six-month periods ended June 30, 2023 and 2022 are as follows:


	June 30, 2023						June 30, 2022
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Interest income:
Due from banks	W	97,008			216,699			14,625			23,360
Securities measured at FVTPL		11,324			20,190			6,230			11,173
Securities measured at FVOCI		201,611			387,302			123,842			226,038
Securities measured at amortized cost		56,006			103,977			12,975			23,058
Loans measured at FVTPL		3,679			6,880			2,922			6,313
Loans measured at amortized cost		2,441,939			4,838,358			1,240,359			2,268,188

		2,811,567			5,573,406			1,400,953			2,558,130
Interest expense:
Financial liabilities measured at FVTPL		(20,603	)		(39,739	)		(21,407	)		(44,136	)
Deposits		(573,558	)		(1,156,016	)		(213,942	)		(368,293	)
Borrowings		(338,040	)		(644,822	)		(78,544	)		(120,438	)
Debentures		(1,456,071	)		(2,858,613	)		(614,070	)		(1,126,388	)

		(2,388,272	)		(4,699,190	)		(927,963	)		(1,659,255	)

	W	423,295			874,216			472,990			898,875

25. Net Fees and Commission Income

Net fees and commission income for the three-month and six-month periods ended June 30, 2023 and 2022 are as follows:


	June 30, 2023						June 30, 2022
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Fees and commission income:
Loan commissions	W	42,175			78,100			34,575			64,524
Underwriting and investment consulting commissions		23,254			40,140			25,029			59,006
Brokerage and agency commissions		1,786			3,475			1,960			3,611
Trust and retirement pension plan commissions		9,553			19,444			8,681			17,630
Fees on asset management		398			1,112			760			1,189
Other fees		36,238			62,055			37,818			76,184

		113,404			204,326			108,823			222,144
Fees and commission expenses:
Brokerage and agency fees		(2,225	)		(5,539	)		(2,278	)		(3,685	)
Other fees		(5,479	)		(11,554	)		(7,303	)		(13,029	)

		(7,704	)		(17,093	)		(9,581	)		(16,714	)

	W	105,700			187,233			99,242			205,430

S-94

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

26. Dividend Income

Dividend income for the three-month and six-month periods ended June 30, 2023 and 2022 are as follows:


	June 30, 2023				June 30, 2022
	Three-month period ended		Six-month period ended		Three-month period ended		Six-month period ended
Securities measured at FVTPL	W	53,646		87,682		30,242		68,795
Securities measured at FVOCI		85		121,754		791		171,706
Investments in subsidiaries and associates		52,011		252,406		38,693		262,639

	W	105,742		461,842		69,726		503,140

27. Net Gain (Loss) on Securities Measured at FVTPL

Net gain (loss) related to securities measured at FVTPL for the three-month and six-month periods ended June 30, 2023 and 2022 are as follows:


	June 30, 2023						June 30, 2022
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Gains on securities measured at FVTPL:
Gains on sale	W	25,090			56,610			19,525			41,779
Gains on valuation		77,244			290,771			143,033			268,808

		102,334			347,381			162,558			310,587
Losses on securities measured at FVTPL:
Losses on sale		(41,281	)		(47,587	)		(43,589	)		(68,048	)
Losses on valuation		(63,991	)		(137,316	)		(173,090	)		(328,917	)
Purchase related expense		(4	)		(16	)		(35	)		(323	)

		(105,276	)		(184,919	)		(216,714	)		(397,288	)

	W	(2,942	)		162,462			(54,156	)		(86,701	)

S-95

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

28. Net Gain (Loss) on Financial Liabilities Measured at FVTPL

Net gain (loss) related to financial liabilities designated at fair value through profit or loss (“FVTPL”) for the three-month and six-month periods ended June 30, 2023 and 2022 are as follows:


	June 30, 2023					June 30, 2022
	Three-month period ended		Six-month period ended			Three-month period ended			Six-month period ended
Gains on financial liabilities measured at FVTPL:
Gains on redemption	W	—		—			3,327			3,728
Gains on valuation		7,988		9,995			197,095			370,979

		7,988		9,995			200,422			374,707
Losses on financial liabilities measured at FVTPL:
Losses on redemption		—		(698	)		—			—
Losses on valuation		78,532		(15,148	)		(107	)		(295	)

		78,532		(15,846	)		(107	)		(295	)

	W	86,520		(5,851	)		200,315			374,412

29. Net Loss on Securities Measured at FVOCI

Net loss related to securities measured at FVOCI for the three-month and six-month periods ended June 30, 2023 and 2022 are as follows:


	June 30, 2023						June 30, 2022
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Gains on securities measured at FVOCI:
Gains on sale	W	1,523			2,834			2,474			3,722
Reversal of impairment losses		(925	)		—			(319	)		—

		598			2,834			2,155			3,722
Losses on securities measured at FVOCI:
Losses on sale		(185	)		(185	)		(4,389	)		(30,226	)
Impairment losses		(4,328	)		(4,603	)		(1,358	)		(1,602	)

		(4,513	)		(4,788	)		(5,747	)		(31,828	)

	W	(3,915	)		(1,954	)		(3,592	)		(28,106	)

S-96

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

30. Net Loss on Derivatives

Net loss on derivatives for the three-month and six-month periods ended June 30, 2023 and 2022 are as follows:


	June 30, 2023						June 30, 2021
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Net gain (loss) on trading purpose derivatives:
Gains on trading purpose derivatives:
Interest	W	753,685			2,266,670			1,424,541			2,945,321
Currency		2,926,521			7,904,937			8,062,817			11,238,186
Stock		230			1,756			749			4,730
Gains on adjustment of derivatives		63,629			66,875			(1,077	)		10,095

		3,744,065			10,240,238			9,487,030			14,198,332
Losses on trading purpose derivatives:
Interest		(611,081	)		(2,084,634	)		(1,401,853	)		(2,661,469	)
Currency		(2,979,020)			(7,915,216	)		(7,823,405	)		(11,184,533	)
Stock		(257	)		(1,801	)		(358	)		(612	)
Losses on adjustment of derivatives		26,581			(2,047	)		(96,022	)		(124,890	)

		(3,563,777	)		(10,003,698	)		(9,321,638	)		(13,971,504	)

		180,288			236,540			165,392			226,828
Net gain (loss) on hedging purpose derivatives:
Gains on hedging purpose derivatives:
Interest		(242,615	)		71,522			80,327			95,905
Currency		117,510			305,418			(160,579	)		188,320
Gains on adjustment of derivatives		28			44			153			302

		(125,077	)		376,984			(80,099	)		284,527
Losses on hedging purpose derivatives:
Interest		(2,957	)		(7,861	)		(524,510	)		(1,314,303	)
Currency		(189,865	)		(240,328	)		(523,683	)		(720,653	)
Losses on adjustment of derivatives		(92	)		(253	)		(68	)		(227	)

		(192,914	)		(248,442	)		(1,048,261	)		(2,035,183	)

		(317,991	)		128,542			(1,128,360	)		(1,750,656	)
Net gain (loss) on fair value hedged items:
Gains on fair value hedged items:
Gains on valuation		125,532			184,410			641,602			1,618,148
Gains on redemption		99,227			132,827			5,299			11,061

		224,759			317,237			646,901			1,629,209
Losses on fair value hedged items:
Losses on valuation		175,147			(615,955	)		(72,579	)		(639,441	)
Losses on redemption		(142,256	)		(196,294	)		(65,852	)		(66,149	)

		32,891			(812,249	)		(138,431	)		(705,590	)

		257,650			(495,012	)		508,470			923,619

	W	119,947			(129,930	)		(454,498	)		(600,209	)

S-97

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

30. Net Loss on Derivatives, Continued

Related with cash flow hedge, the Bank recognizedW27 million of loss andW75 million of gain in the statement of comprehensive income as the ineffective portion for the period ended June 30, 2023 and 2022, respectively.

31. Net Gain on Foreign Currency Transaction

Net gain on foreign currency transaction for the three-month and six-month periods ended June 30, 2023 and 2022 are as follows:


	June 30, 2023						June 30, 2022
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Net gain (loss) on foreign exchange transactions:
Gains on foreign exchange transactions	W	253,776			507,172			276,641			448,559
Losses on foreign exchange transactions		(253,981	)		(513,153	)		(268,583	)		(438,892	)

		(205	)		(5,981	)		8,058			9,667
Net gain on foreign exchange translations:
Gains on foreign exchange translations		2,433,360			8,374,573			8,215,894			11,467,784
Losses on foreign exchange translations		(2,428,691	)		(8,011,700	)		(8,013,204	)		(11,206,881	)

		4,669			362,873			202,690			260,903

	W	4,464			356,892			210,748			270,570

S-98

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

32. Other Operating Income (Expense), net

Other operating income and expense for the three-month and six-month periods ended June 30, 2023 and 2022 are as follows:


	June 30, 2023						June 30, 2022
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Other operating income:
Gains on sale of loans	W	28,597			28,597			30,620			30,620
Gains on disposal of loans measured at FVTPL		4,217			5,707			76			1,035
Gains on valuation of loans measured at FVTPL		(5,908	)		3,750			(10,343	)		5,591
Gains on disposal of investments in subsidiaries and associates		—			—			—			19,042
Reversal of provisions		158			630			883			46,785
Others		9,839			23,102			7,410			11,089

		36,903			61,786			28,646			114,162
Other operating expenses:
Losses on sale of loans		(17,256	)		(17,256	)		(9,104	)		(9,104	)
Losses on disposal of loans measured at FVTPL		(3,828	)		(4,082	)		(1,557	)		(3,189	)
Losses on valuation of loans measured at FVTPL		(10,544	)		(15,375	)		(73,347	)		(78,660	)
Losses on disposal of investments in subsidiaries and associates		—			—			(76	)		(2,416	)
Increase of provisions		(36	)		(82	)		(48	)		(86	)
Insurance expenses		(25,435	)		(51,202	)		(22,247	)		(43,061	)
Credit guarantee fund salary		(53,704	)		(107,765	)		(48,711	)		(95,681	)
Educational taxes		(13,538	)		(27,460	)		(8,653	)		(16,267	)
Foreign security contributions		(8,476	)		(10,792	)		(4,589	)		(6,323	)
Others		(7,926	)		(13,887	)		(7,262	)		(12,671	)

		(140,743	)		(247,901	)		(175,594	)		(267,458	)

	W	(103,840	)		(186,115	)		(146,948	)		(153,296	)

33. Provision for (reversal of) Credit Losses

Provision for credit losses for the three-month and six-month periods ended June 30, 2023 and 2022 are as follows:


	June 30, 2023						June 30, 2022
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Provision for (reversal of) loss allowance for loan	W	(134,733	)		(636,714	)		497,671			153,271
Provision for (reversal of) loss allowance for other assets		1,734			2,391			(6,475	)		(3,779	)
Provision for (reversal of) payment guarantees		(685,927	)		(389,156	)		21,878			493,621
reversal of unused commitments		(87,288	)		(39,110	)		(98,209	)		(182,089	)
Provision for (reversal of) financial guarantee		15,875			15,729			(1,997	)		(26,878	)

	W	(890,339	)		(1,046,860	)		412,868			434,146

S-99

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

34. General and Administrative Expenses

General and administrative expenses for the three-month and six-month periods ended June 30, 2023 and 2022 are as follows:


	June 30, 2023				June 30, 2022
	Three-month period ended		Six-month period ended		Three-month period ended		Six-month period ended
Payroll costs:
Short-term employee benefits	W	83,855		178,051		83,340		176,780
Defined benefit costs		5,854		11,716		9,348		68,288
Defined contribution costs		434		2,155		753		2,745

		90,143		191,922		93,441		247,813
Depreciation and amortization:
Depreciation of property and equipment		18,812		35,861		18,403		35,659
Amortization of intangible assets		13,563		27,230		13,420		27,121

		32,375		63,091		31,823		62,780
Other:
Employee welfare benefits		9,286		16,714		9,770		18,671
Rent expenses		1,007		2,663		1,521		3,151
Taxes and dues		5,914		13,400		5,851		13,260
Advertising expenses		2,347		3,676		2,570		4,337
Electronic data processing expenses		24,302		46,414		20,435		40,259
Fees and charges		2,987		21,351		2,696		20,387
Others		10,663		19,388		9,233		16,483

		56,506		123,606		52,076		116,548

	W	179,024		378,619		177,340		427,141

S-100

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

35. Other Non-Operating Income and Expense

Other non-operating income and expense for the three-month and six-month periods ended June 30, 2023 and 2022 are as follows:


	June 30, 2023						June 30, 2022
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Other non-operating income:
Gains on disposal of property and equipment	W	40			385			274			416
Gains on disposal of intangible assets		2			2			—			—
Rental income on investment property		212			433			153			305
Others		142			1,588			555			2,364

		396			2,408			982			3,085
Other non-operating expenses:
Losses on disposal of property and equipment		(608	)		(1,689	)		(485	)		(929	)
Depreciation of investment property		(932	)		(1,381	)		(622	)		(1,116	)
Donations		(3,424	)		(3,562	)		(431	)		(647	)
Others		(56	)		(2,317	)		(151	)		(1,409	)

		(5,020	)		(8,949	)		(1,689	)		(4,101	)

	W	(4,624)			(6,541)			(707	)		(1,016	)

36. Income Tax Expense (Benefit)

(1)	Income tax expense (benefit) for the three-month and six-month periods ended June 30, 2023 and 2022 are as follows:


	June 30, 2023						June 30, 2022
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Current income tax (*)	W	12,695			109,333			438,244			573,223
Net adjustments for prior years		(10,905	)		(23,108	)		(1,642	)		(149,746	)
Changes in deferred income taxes on temporary differences		247,587			371,669			(1,029,617	)		(718,077	)
Deficit effect		—			156,618			—			—
Deferred income tax recognized directly to equity
Other comprehensive income		104,528			2,947			570,251			421,773
Retained earnings		(2,047	)		(6,640	)		(27,356	)		(29,696	)

Income tax expense (benefit)	W	351,858			610,819			(50,120	)		97,477

(*)	Includes changes such as those that arise from final tax returns.

S-101

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

36. Income Tax Expense (Benefit), Continued

(2)	Profit before income taxes and income tax expense for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023			2022
Profit before income taxes	W	3,425,412			566,927
Income taxes calculated using enacted tax rates		904,309			155,905
Adjustments:
Non-deductible losses and tax-free gains		(35,813	)		(28,668	)
Non-recognition effect of deferred income taxes and others		(293,874	)		(8,166	)
Net adjustments for prior years		21,913			(32,570	)
Others		14,284			10,976

		(293,490	)		(58,428	)

Income tax expense	W	610,819			97,477

Effective tax rate (%)		17.83			17.19

(3)	Changes in deferred income taxes recognized directly to equity for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023
	June 30, 2023						January 1, 2023						Changes in tax effect
	Amounts before tax			Tax effect			Amounts before tax			Tax effect			Changes in tax effect
Net gain on securities measured at FVOCI	W	2,605,390			(934,542	)		2,557,521			(922,099	)		(12,443	)
Exchange differences on translation of foreign operations		184,687			—			132,126			—			—
Net gain on valuation of cash flow hedge		4,794			(1,720	)		5,322			(1,919	)		199
Net loss on hedges of net investments in foreign operations		(102,214	)		36,664			(71,202	)		25,672			10,992
Remeasurements of defined benefit liabilities		105,013			(37,665	)		104,870			(37,808	)		143
Fair value changes on financial liabilities designated at fair value due to credit risk		79,856			(28,646	)		90,696			(32,702	)		4,056

	W	2,877,526			(965,909	)		2,819,333			(968,856	)		2,947

S-102

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

36. Income Tax Expense (Benefit), Continued

Income tax benefit recognized direct to retained earnings amounting toW6,640 million is the tax effect of realized income amounting toW25,153 million from disposal of equity securities measured at FVOCI.


	2022
	June 30, 2022						January 1, 2022						Changes in tax effect
	Amounts before tax			Tax effect			Amounts before tax			Tax effect			Changes in tax effect
Net gain on securities measured at FVOCI	W	3,634,527			(1,377,590	)		4,701,972			(1,783,506	)		405,916
Exchange differences on translation of foreign operations		157,674			—			39,000			—			—
Net gain on valuation of cash flow hedge		4,468			(1,695	)		1,399			(531	)		(1,164	)
Net loss on hedges of net investments in foreign operations		(87,367	)		33,139			(21,112	)		8,008			25,131
Remeasurements of defined benefit liabilities		51,739			(19,623	)		51,739			(19,623	)		—
Fair value changes on financial liabilities designated at fair value due to credit risk		21,856			(8,291	)		476			(181	)		(8,110	)

	W	3,782,897			(1,374,060	)		4,773,474			(1,795,833	)		421,773

Income tax benefit recognized direct to retained earnings amounting toW29,696 million is the tax effect of realized income amounting toW107,986 million from disposal of equity securities measured at FVOCI.

37. Earnings (Loss) per Share

(1) Basic earnings (loss) per share

The Bank’s basic earnings (loss) per share for the three-month and six-month periods ended June 30, 2023 and 2022 are computed as follows:

(i) Basic earnings per share


	2023				2022
	Three-month period ended		Six-month period ended		Three-month period ended			Six-month period ended
Profit (loss) attributable to ordinary shareholders of the Bank (A) (in won)	W	1,723,074,760,031		2,814,593,464,464		(213,214,193,137	)		469,450,220,673
Weighted-average number of ordinary shares outstanding (B)		4,726,806,273		4,679,306,243		4,455,711,768			4,435,353,757

Basic earnings (loss) per share (A/B) (in won)	W	365		601		(48	)		106

S-103

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

37. Earnings (Loss) per Share, Continued

(ii) Weighted-average number of ordinary shares outstanding


	2023
	Number of ordinary shares		Days		Cumulative shares
Three-month period ended:
Number of ordinary shares outstanding (A)		4,630,311,768		91		421,358,370,888
Increased paid-in capital (B)		87,000,000		91		7,917,000,000
Increased paid-in capital (C)		24,000,000		36		864,000,000

Cumulative shares (D = A+B+C)						430,139,370,888

Weighted-average number of ordinary shares outstanding (D/91)						4,726,806,273

Six-month period ended:
Number of ordinary shares outstanding (A)		4,630,311,768		181		838,086,430,008
Increased paid-in capital (B)		87,000,000		92		8,004,000,000
Increased paid-in capital (C)		24,000,000		36		864,000,000

Cumulative shares (D = A+B+C)						846,954,430,008

Weighted-average number of ordinary shares outstanding (D/181)						4,679,306,243


	2022
	Number of ordinary shares		Days		Cumulative shares
Three-month period ended:
Number of ordinary shares outstanding (A)		4,377,311,768		91		398,335,370,888
Increased paid-in capital (B)		78,400,000		91		7,134,400,000

Cumulative shares (C = A+B)						405,469,770,888

Weighted-average number of ordinary shares outstanding (C/91)						4,455,711,768

Six-month period ended:
Number of ordinary shares outstanding (A)		4,377,311,768		181		792,293,430,008
Increased paid-in capital (B)		78,400,000		134		10,505,600,000

Cumulative shares (C = A+B)						802,799,030,008

Weighted-average number of ordinary shares outstanding (C/181)						4,435,353,757

(2) Diluted earnings (loss) per share

Diluted and basic earnings (loss) per share for the three-month and six-month periods ended June 30, 2023 and 2022 are equal because there is no potential dilutive instrument.

S-104

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

38. Pledged Assets

Assets pledged by the Bank as collateral as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023				December 31, 2022
	Pledged assets		Related liabilities		Pledged assets		Related liabilities
Securities measured at FVOCI (*)	W	3,371,618		690,713		3,721,125		432,969
Securities measured at amortized cost (*)		3,504,889				3,196,592

	W	6,876,507		690,713		6,917,717		432,969

(*)	Pledged as collateral related to bonds sold under repurchase agreements and borrowings.

39. Guarantees and Commitments

Guarantees and commitments as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023		December 31, 2022
Confirmed acceptances and guarantees:
Acceptances in foreign currency	W	291,799		220,420
Guarantees for bond issuance		2,045,826		1,860,754
Guarantees for loans		563,756		560,129
Letter of guarantee		27,855		64,924
Guarantees for on-lending debt		4,356		4,877
Others		7,221,864		6,219,285

		10,155,456		8,930,389
Unconfirmed acceptances and guarantees:
Letter of credit		1,658,471		1,940,855
Others		5,564,456		5,836,016

		7,222,927		7,776,871
Commitments:
Commitments on loans		53,675,670		47,205,974
Others		2,020,595		2,020,595

		55,696,265		49,226,569

	W	73,074,648		65,933,829

40. Trust Accounts

(1)	Trust accounts as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023		December 31, 2022
Accrued trust fee	W	15,562		10,052
Borrowings from trust accounts		1,210,708		583,034
Accrued expense		2,745		511

S-105

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

40. Trust Accounts, Continued

(2)	Transactions with trust accounts for the three-month and six-month periods ended June 30, 2023 and 2022 are as follows:


	June 30, 2023						June 30, 2022
	Three-month period ended			Six-month period ended			Three-month period ended			Six-month period ended
Trust management fee	W	8,795			17,725			7,982			16,026
Interest expenses of borrowings from trust accounts		(16,713	)		(24,464	)		(3,663	)		(6,205	)

(3)	The carrying amounts of principals guaranteed trust and principals and interest guaranteed trust as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023		December 31, 2022
Principals guaranteed trust	W	221,156		224,876
Principals and interest guaranteed trust		224,531		229,324

	W	445,687		454,200

Principal of money and property trust	W	409,717		421,623
Accrued trust profit		35,970		32,577

41. Related Party Transactions

(1)	The Bank’s related parties as of June 30, 2023 are as follows:


Classification		Corporate name
Subsidiaries		KDB Capital Corporation, KDB Infrastructure Investment Asset Management Co., Ltd., KDB Asia Ltd., KDB Ireland Ltd., KDB Bank Europe Ltd., Banco KDB Do Brazil S.A., KDB Bank Uzbekistan, PT KDB Tifa Finance Tbk and 6 others, KDB Investment PEF No. 2, KDB Consus Value PEF, KDB Small Medium Mezzanine PEF and 7 others, Principals guaranteed trust accounts of KDB, Principals and interests guaranteed interest trust accounts of KDB, KDB ESG 1ST INC. and 14 others, KIAMCO Road Investment Private Fund Special Asset Trust 2 and 16 others
Associates		Korea Electric Power Co., Ltd., Korea Tourism Organization, Korea Real Estate Board, GM Korea Company, HMM Co., Ltd., Hanjin KAL, Korea Air Lines Co., Ltd., Hanwha Ocean Co., Ltd. (priorly known as Daewoo Shipbuilding & Marine Engineering Co., Ltd.), Korea Ocean Business Corporation and 11 others, Keistone Value Investment 2nd PEF and 99 others, Hana K-NewDeal Unicorn Fund and 114 others
Others		Key management personnel

S-106

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

41. Related Party Transactions, Continued

(2)	Significant balances with related parties as of June 30, 2023 and December 31, 2022 are as follows:


	Account	June 30, 2023			December 31, 2022
Subsidiaries:
KDB Capital Corporation	Loans	W	1,380			1,924
	Allowance for loan losses		(1	)		(1	)
	Derivative financial assets		1,517			1,305
	Other assets		1			2
	Deposits		16,459			100,255
	Derivative financial liabilities		346			—
	Other liabilities		34,180			35,408
KDB Infrastructure Investment Asset Management Co., Ltd.	Deposits		7,353			606
	Other liabilities		100			1
KDB Ireland Ltd.	Loans		834,588			753,188
	Allowance for loan losses		(381	)		(241	)
	Derivative financial assets		234			18
	Other assets		6,110			3,138
	Derivative financial liabilities		21,283			19,778
KDB Bank Europe Ltd.	Cash and due from banks		422,832			365,513
	Loans		42,797			40,536
	Allowance for loan losses		(19	)		(13	)
	Other assets		2,419			2,854
	Derivative financial liabilities		499			501
Banco KDB Do Brazil S.A.	Cash and due from banks		90,583			87,444
	Loans		300,631			234,451
	Allowance for loan losses		(161	)		(75	)
	Other assets		6,956			2,802
	Allowance of other assets		(3	)		(1	)
PT KDB Tifa Finance Tbk	Loans		26,256			25,346
	Allowance for loan losses		(12	)		(8	)
	Other assets		106			92
KDB Silicon Valley LLC	Deposits		107,650			107,721
	Other liabilities		276			321
KDB Asia Ltd.	Cash and due from banks		1,327,946			1,346,583
	Loans		105,024			228,114
	Allowance for loan losses		(48	)		(73	)
	Derivative financial assets		60			25
	Other assets		7,684			8,872
	Allowance of other assets		—			(1	)
	Deposits		2			2
	Borrowings		20,198			32,967
	Derivative financial liabilities		8,788			14,551
	Other liabilities		28			146

S-107

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

41. Related Party Transactions, Continued


	Account	June 30, 2023			December 31, 2022
KDB Consus Value PEF	Securities	W	19,027			18,494
	Derivative financial assets		15,126			13,564
	Other assets		25,512			149
	Deposits		106			139
	Derivative financial liabilities		3,382			8,302
	Other liabilities		48,767			708
Hanwha Ocean Co., Ltd. (priorly known as Daewoo Shipbuilding & Marine Engineering Co., Ltd.)	Loans		—			1,549,024
	Allowance for loan losses		—			(821,394	)
	Derivative financial assets		—			460,879
	Other assets		—			10,650
	Deposits		—			169,965
	Derivative financial liabilities		—			18
	Other liabilities		—			13,144
	Other provisions		—			786,164
Corporate Liquidity Assistance Agency	Loans		440,000			440,000
	Allowance for loan losses		(228	)		(152	)
	Other assets		54,567			44,544
	Allowance of other assets		(28	)		(15	)
	Deposits		104,563			444,924
	Other liabilities		98			507
	Other provisions		216			144
Others	Loans		346,220			1,336,253
	Allowance for loan losses		(62,932	)		(141,003	)
	Derivative financial assets		7,111			5,473
	Other assets		1,047			3,105
	Allowance of other assets		(7	)		(344	)
	Deposits		122,691			136,609
	Borrowings		61,797			44,553
	Derivative financial liabilities		596			850
	Other liabilities		1,858			6,078
	Other provisions		5,374			3,728
Associates:
Korea Electric Power Co., Ltd.	Securities		183,706			177,317
	Loans		252,919			227,477
	Allowances for loan losses		(1,307	)		(1,151	)
	Derivative financial assets		64,811			92,381
	Other assets		19,224			4,409
	Deposits		58,474			23,196
	Borrowings		1,991			2,253

S-108

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

41. Related Party Transactions, Continued


	Account	June 30, 2023			December 31, 2022
	Derivative financial liabilities		230,627			223,611
	Other liabilities		71,935			57,487
	Other provisions		146			59
HMM Co., Ltd.	Securities	W	5,045,174			5,233,622
	Loans		153,862			164,292
	Allowances for loan losses		(914	)		(2,243	)
	Other assets		10,018			7,123
	Deposits		1,051,240			509,920
	Other liabilities		35,301			10,468
Hanjin KAL	Loans		365,675			373,445
	Other assets		981			481
	Deposits		—			70,000
	Other liabilities		302			1,050
Korea Air Lines Co., Ltd.	Loans		1,154,196			1,189,100
	Allowances for loan losses		(3,381	)		(8,798	)
	Other assets		11,082			11,989
	Deposits		1,602,454			1,716,833
	Other liabilities		24,315			23,075
	Derivative financial liabilities		92,884			73,131
	Other provisions		651			—
Korea Ocean Business Corporation	Securities		55,071			—
	Other assets		408			—
	Deposits		25,000			25,000
	Other liabilities		241			386
Hanwha Ocean Co., Ltd. (priorly known as Daewoo Shipbuilding & Marine Engineering Co., Ltd.) (*)	Loans		1,430,502			—
	Allowances for loan losses		(166,087	)		—
	Derivative financial assets		634,461			—
	Other assets		5,160			—
	Deposits		405,345			—
	Other liabilities		12,795			—
	Borrowings		36,999			—
	Other provisions		517,628			—
Others	Loans		309,298			209,978
	Allowances for loan losses		(594	)		(480	)
	Other assets		6,073			6,472
	Deposits		422,297			323,333
	Other liabilities		2,464			2,215
	Other provisions		18			46

(*)	For the six-month period ended June 30, 2023, Hanwha Ocean Co., Ltd. (priorly known as Daewoo Shipbuilding & Marine Engineering Co., Ltd.) was reclassified as investments in associates due to the loss of control.

S-109

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

41. Related Party Transactions, Continued

(3)	Significant profit or loss with related parties for the six-month periods ended June 30, 2023 and 2022 are as follows:


	Account	2023			2022
Subsidiaries:
KDB Capital Corporation	Interest income	W	13			62
	Dividend income		21,060			69,766
	Reversal of allowance for loan losses		—			34
	Fees and commission income, other income		1,049			3,773
	Interest expenses		(711	)		(266	)
	Other operating expenses		(425	)		(43	)
KDB Infrastructure Investments Asset Management Co., Ltd.	Dividend income		13,634			13,499
	Interest expenses		(119	)		(58	)
KDB Ireland Ltd.	Interest income		19,081			1,492
	Fees and commission income, other income		2,199			2,971
	Interest expenses		(29	)		(1	)
	Provision for loan losses		(130	)		(4	)
	Other operating expenses		(7,904	)		(15,703	)
KDB Bank Europe Ltd.	Interest income		9,328			943
	Fees and commission income, other income		652			119
	Interest expenses		—			(1	)
	Provision for loan losses		(6	)		—
	Other operating expenses		(1,562	)		(2,198	)
Banco KDB Do Brazil S.A.	Interest income		9,056			752
	Reversal of allowance for loan losses		—			23
	Provision for loan losses		(83	)		—
	Other operating expenses		(3	)		—
KDB Indonesia Ltd.	Interest income		699			134
	Provision for loan losses		(4	)		(1	)
KDB Silicon Valley LLC	Fees and commission income, other income		—			150
	Interest expenses		(2,563	)		(636	)
KDB Asia Ltd.	Interest income		40,771			7,556
	Reversal of allowance for loan losses		27			77
	Fees and commission income, other income		1,415			671
	Interest expenses		(229	)		(464	)
	Other operating expenses		(3,059	)		(10,435	)

S-110

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

41. Related Party Transactions, Continued


	Account	2023			2022
KDB Investment PEF No.1 (*1)	Interest income		—			2,926
	Fees and commission income, other income		—			2,949
	Interest expenses		—			(230	)
KDB Consus Value PEF	Interest income	W	2,182			799
	Fees and commission income, other income		13,130			26,455
	Interest expenses		(8	)		(1	)
	Other operating expenses		(2,849	)		(918	)
Hanwha Ocean Co., Ltd. (priorly known as Daewoo Shipbuilding & Marine Engineering Co., Ltd.) (*2)	Interest income		—			24,187
	Reversal of allowance for loan losses		—			75,597
	Fees and commission income, other income		—			855,004
	Interest expenses		—			(2,834	)
	Other operating expenses		—			(463,272	)
Corporate Liquidity Assistance Agency Co., Ltd.	Interest income		10,023			10,023
	Interest expenses		(1,478	)		(2,545	)
	Provision for loan losses		(76	)		—
	Other operating expenses		(86	)		(4	)
Others	Interest income		13,647			21,404
	Dividend income		25,259			24,829
	Reversal of allowance for loan losses		4,629			253,603
	Fees and commission income, other income		9,023			210,696
	Interest expenses		(2,296	)		(1,047	)
	Provision for loan losses		(1,723	)		(375,664	)
	Other operating expenses		(5,981	)		(181,367	)
Associates:
Korea Electric Power Co., Ltd.	Interest income		11,446			2,038
	Reversal of allowance for loan losses		—			164
	Fees and commission income, other income		70,253			21,263
	Interest expenses		(4,294	)		(1,277	)
	Provision for loan losses		(1,307	)		—
	Other operating expenses		(188,779	)		(242,014	)
HMM Co., Ltd.	Interest income		21,051			21,118
	Dividend income		121,439			60,720
	Reversal of allowance for loan losses		—			28,101

S-111

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

41. Related Party Transactions, Continued


	Account	2023			2022
	Fees and commission income, other income		1,320			4,251
	Interest expenses		(31,913	)		(3,906	)
	Provision for loan losses		(914	)		—
	Other operating expenses		(82,543	)		(141,355	)
HANJIN KAL	Interest income	W	3,347			3,347
	Dividend income		1,201			—
	Fees and commission income, other income		—			15
	Interest expenses		(780	)		(70	)
	Other operating expenses		(7,769	)		(61,600	)
Korea Air Lines Co., Ltd.	Interest income		31,386			—
	Dividend income		9,180			—
	Fees and commission income, other income		39,499	��		—
	Interest expenses		(30,663	)		—
	Provision for loan losses		(3,381	)		—
	Other operating expenses		(68,919	)		—
Korea Ocean Business Corporation	Interest income		395			140
	Fees and commission income, other income		—			1,350
	Interest expenses		(76	)		(4	)
	Other operating expenses		(1,753	)		—
Hanwha Ocean Co., Ltd. (priorly known as Daewoo Shipbuilding & Marine Engineering Co., Ltd.) (*2)	Interest income		67,155			—
	Fees and commission income, other income		426,846			—
	Interest expenses		(3,299	)		—
	Provision for loan losses		(166,087	)		—
	Other operating expenses		(566,392	)		—
Others	Interest income		12,719			2,739
	Dividend income		73,913			110,624
	Reversal of allowance for loan losses		—			43
	Fees and commission income, other income		787			478
	Interest expenses		(4,261	)		(1,468	)
	Provision for loan losses		(594	)		(132	)
	Other operating expenses		(307	)		(82	)

(*1)	Daewoo Engineering & Construction Co., Ltd. that was the subsidiary of KDB Investment PEF No.1 is disposed and is excluded from the Bank’s related parties for the period ended June 30, 2022.

S-112

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

41. Related Party Transactions, Continued

(*2)	For the six-month period ended June 30, 2023, Hanwha Ocean Co., Ltd. (priorly known as Daewoo Shipbuilding & Marine Engineering Co., Ltd.) was reclassified as investments in associates due to the loss of control.

(4)	Details of guarantees and commitments to the related parties as of June 30, 2023 and December 31, 2022 are as follows:


	Account	June 30, 2023		December 31, 2022
Subsidiaries:
KDB Capital Corporation	Commitments	W	500,000		500,000
Hanwha Ocean Co., Ltd. (priorly known as Daewoo Shipbuilding & Marine Engineering Co., Ltd.) (*)	Confirmed acceptances and guarantees		—		2,560,260
	Unconfirmed acceptances and guarantees		—		2,781,317
	Commitments		—		2,337,089
Corporate Liquidity Assistance Agency	Commitments		560,000		560,000
Others	Unconfirmed acceptances and guarantees		—		5,885
	Commitments		1,038,300		85,625
Associates:
Korea Air Lines Co., Ltd.	Confirmed acceptances and guarantees		179,915		177,367
	Commitments		30,000		—
Hanwha Ocean Co., Ltd. (priorly known as Daewoo Shipbuilding & Marine Engineering Co., Ltd.) (*)	Confirmed acceptances and guarantees		3,254,423		—
	Unconfirmed acceptances and guarantees		2,851,619		—
	Commitments		2,281,203		—
Others	Unconfirmed acceptances and guarantees		14,075		—
	Commitments		408,409		426,085

		W	11,117,944		9,433,628

(*)	The Bank loses cotrol on Hanwha Ocean Co., Ltd. (priorly known as Daewoo Shipbuilding & Marine Engineering Co., Ltd.) and classifies Hanwha Ocean Co., Ltd. as the Bank’s associate for the period ended June 30, 2023.

S-113

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

41. Related Party Transactions, Continued

(5)	Details of compensation to key management personnel for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023		2022
Short-term employee benefits	W	295		346

(6)	The Bank are not pledged any assets as collaterals to the related parties and from the related parties as of June 30, 2023 and December 31, 2022.

42. Statements of Cash Flows

(1)	Cash and cash equivalents in the separate statements of cash flows as of June 30, 2023 and 2022 are as follows:


	June 30, 2023			June 30, 2022
Cash and due from banks:
Cash and foreign currencies	W	65,574			61,531
Due from banks in Korean won		7,301,476			4,203,533
Due from banks in foreign currencies		7,996,120			7,620,758

		15,363,170			11,885,822
Less: Restricted due from banks, others		(4,818,547	)		(2,962,131	)
Add: Financial instruments reaching maturity within three months from date of acquisition
Loans measured at amortized cost:
Call-loans		2,324,507			1,956,759
Inter-bank loans		1,271,857			686,808

		3,596,364			2,643,567

	W	14,140,987			11,567,258

S-114

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

42. Statements of Cash Flows, Continued

(2)	Significant transactions not involving cash flows for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023			2022
Decrease in loans due to write-offs	W	47,615			92,696
Increase in securities measured at FVOCI due to debt-to-equity swap		1			1,047
Increase (decrease) in accumulated other comprehensive income due to securities valuation		60,312			(1,473,361	)
Deferred income tax effect due to securities valuation		(12,443	)		405,916
Reclassification from assets held for sale to investments in subsidiaries and associates		—			1,371,052
Reclassification from investments in subsidiaries and associates to securities measured at FVPL		4,800			—
Reclassification from investments in subsidiaries and associates to securities measured at FVOCI		—			9,268
Transfer from property and equipment to investment property		(4,344	)		1,879
Recognition of right-of-use assets and lease liabilities		37,458			37,168
In-kind equity		432,137			—

43. Transfers of Financial Instruments

Details of financial assets and liabilities related to repurchase agreements and loaned securities that do not qualify for derecognition as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023				December 31, 2022
Characteristics of transactions	Carrying amounts for transferred assets		Carrying amounts for related liabilities		Carrying amounts for transferred assets		Carrying amounts for related liabilities
Repurchase agreements	W	1,721,316		295,527		2,373,401		57,619
Loaned securities		29,040		—		—		—

	W	1,750,356		295,527		2,373,401		57,619

44. Fair Value of Financial Assets and Liabilities

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

•

Level 1: Financial instruments measured at quoted prices from active markets are classified as level 1.

•

Level 2: Financial instruments measured using valuation techniques where all significant inputs are observable market data are classified as level 2.

•

Level 3: Financial instruments measured using valuation techniques where one or more significant inputs are not based on observable market data are classified as level 3.

S-115

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

44. Fair Value of Financial Assets and Liabilities, Continued

(1) Fair value hierarchy of financial instruments measured at fair value

(i)

The fair value hierarchy of financial instruments measured at fair value as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Level 1		Level 2		Level 3		Total
Financial assets:
Securities measured at FVTPL	W	1,521,816		1,274,762		11,584,632		14,381,210
Securities measured at FVOCI		2,687,705		17,311,632		16,652,554		36,651,891
Loans measured at FVTPL		—		—		508,887		508,887
Derivative financial assets		1		9,075,619		11,626		9,087,246

	W	4,209,522		27,662,013		28,757,699		60,629,234

Financial liabilities:
Financial liabilities designated at FVTPL	W	—		1,607,710		—		1,607,710
Derivative financial liabilities		9		10,402,542		30,739		10,433,290

	W	9		12,010,252		30,739		12,041,000

	December 31, 2022
	Level 1		Level 2		Level 3		Total
Financial assets:
Securities measured at FVTPL	W	623,264		718,103		10,610,539		11,951,906
Securities measured at FVOCI		2,929,043		18,531,804		16,224,072		37,684,919
Loans measured at FVTPL		—		—		541,811		541,811
Derivative financial assets		—		9,781,693		12,762		9,794,455

	W	3,552,307		29,031,600		27,389,184		59,973,091

Financial liabilities:
Financial liabilities measured at FVTPL	W	—		1,469,724		—		1,469,724
Derivative financial liabilities		34		11,276,609		40,359		11,317,002

	W	34		12,746,333		40,359		12,786,726

S-116

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

44. Fair Value of Financial Assets and Liabilities, Continued

(ii)

Changes in the fair value of level 3 financial instruments for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023
	Financial assets															Financial liabilities
	Securities measured at FVTPL			Securities measured at FVOCI			Loans measured at FVTPL			Derivative financial assets			Total			Derivative financial liabilities
January 1, 2023	W	10,610,539			16,224,072			541,811			12,762			27,389,184			40,359
Profit or loss		179,012			—			(11,625	)		(1,136	)		166,251			(3,655	)
Other comprehensive income		—			(148,755	)		—			—			(148,755	)		—
Acquisition / Issue		1,087,211			702,878			6,737			—			1,796,826			—
Sale / Settlement		(292,130	)		(43,066	)		(28,036	)		—			(363,232	)		(5,965	)
Transfer out(*)		—			(82,575	)		—			—			(82,575	)		—

June 30, 2023	W	11,584,632			16,652,554			508,887			11,626			28,757,699			30,739


	2022
	Financial assets															Financial liabilities
	Securities measured at FVTPL			Securities measured at FVOCI			Loans measured at FVTPL			Derivative financial assets			Total			Derivative financial liabilities
January 1, 2022	W	7,864,436			18,635,704			644,412			10,067			27,154,619			11,223
Profit or loss		108,476			—			(73,069	)		3,936			39,343			20,915
Other comprehensive income		—			(670,767	)		—			—			(670,767	)		—
Acquisition / Issue		1,185,438			201,171			28,119			—			1,414,728			—
Sale / Settlement		(109,191	)		(486,494	)		(26,843	)		—			(622,528	)		—
Transfer out(*)		(10,135	)		—			—			—			(10,135	)		—
Transfer in(*)		—			10,916			—			—			10,916			—

June 30, 2022	W	9,039,024			17,690,530			572,619			14,003			27,316,176			32,138

(*)	When significant inputs become observable market data, the financial instruments are transferred to (from) other levels.

(iii)

Changes in deferred day one profit or loss for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023			2022
Beginning balance	W	3,604			3,989
Amortization		(193	)		(191	)

Ending balance	W	3,411			3,798

S-117

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

44. Fair Value of Financial Assets and Liabilities, Continued

(iv)	Details of valuation technique and inputs used in the fair value measurement categorized within level 2 of the fair value hierarchy of financial instruments measured at fair value as of June 30, 2023 and December 31, 2022 are as follows:


	Valuation technique	Input
Securities measured at FVTPL
Equity securities	Net asset value approach	Underlying asset price
Debt securities	Discounted cash flow method	Discount rate
Securities measured at FVOCI
Equity securities	Net asset value approach	Underlying asset price
Debt securities	Discounted cash flow method	Discount rate
Derivatives financial assets:
Interest rate swaps	Discounted cash flow method, Black-Scholes model, Modified Black model, Formula model	Discount rate, exchange rate, volatility, commodity index, etc.
Currency forwards and swaps
Currency options
Commodities options
Financial liabilities measured at FVTPL:
Debentures	Discounted cash flow method	Discount rate

(v)	Details of valuation technique and quantitative information about unobservable inputs used in the fair value measurement categorized within level 3 of the fair value hierarchy of financial instruments measured at fair value as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Valuation technique	Unobservable input	Range (%)
Securities measured at FVTPL
Equity securities	Discounted cash flow	Discount rate	7.06 ~ 10.85
	method, Relative value	Rate of increase in
	approach, Net asset	liquidation value	—
	value approach, etc	Rate of increase in	—
		property disposal price	15.71 ~ 49.75
		Volatility
Securities measured at FVOCI
Equity securities	Discounted cash flow method, Relative value approach, Net asset value approach, etc	Discount rate	9.44 ~ 19.25
		Growth rate	—
		Volatility	24.45 ~ 33.42
		Interest Volatility	0.54 ~ 0.99
Loans measured at FVTPL
Convertible bonds, etc.	Binomial model, LSMC	Volatility	15.71 ~ 49.75
Derivatives financial assets
Interest rate swaps	Discounted cash flow	Volatility	75.44 ~ 89.15

S-118

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

44. Fair Value of Financial Assets and Liabilities, Continued


	June 30, 2023
	Valuation technique	Unobservable input	Range (%)
		Correlation coefficient	0.86 ~ 0.92
Interest rate options	Modified Black model	Volatility	75.44 ~ 89.15
Stock index options	Black-Scholes model	Volatility	9.80 ~ 28.20
	December 31, 2022
	Valuation technique	Unobservable input	Range (%)
Securities measured at FVTPL
Equity securities	Discounted cash flow	Discount rate	6.35 ~ 41.31
	method, Relative value	Rate of increase in property disposal price	—
	approach, Net asset	Rate of increase in property disposal price
	value approach, etc.	Rate of increase in liquidation value	—
		Volatility	16.89 ~ 44.54
Securities measured at FVOCI
Equity securities	Discounted cash flow	Growth rate	—
	method, Relative value	Discount rate	9.08 ~ 18.51
	approach, Net asset	Volatility	16.52 ~ 46.53
	value approach, etc.
Loans measured at FVTPL
Convertible bonds, etc.	LSMC, Binomial model	Volatility	16.89 ~ 44.54
Derivatives financial assets
Interest rate swaps	Discounted cash flow	Volatility	80.87 ~ 102.80
		Correlation coefficient	0.87 ~ 0.95
Interest rate options	Modified Black model	Volatility	80.87 ~ 102.80
Stock index options	Black-Scholes model	Volatility	8.70 ~ 72.20

(vi)	The sensitivity analysis on changes in unobservable inputs for financial instruments categorized within level 3 of the fair value hierarchy of financial instruments measured at fair value as of June 30, 2023 and December 31, 2022 is as follows:


	June 30, 2023
	Profit (loss)					Other comprehensive income(loss)
	Favorable change		Unfavorable change			Favorable change		Unfavorable change
Securities measured at FVTPL (*1)	W	59,042		(54,873	)		—		—
Securities measured at FVOCI (*1)		—		—			43,236		(36,913	)
Loans measured at FVTPL (*2)		6,732		(5,500	)		—		—
Derivative financial assets (*2)		263		(254	)		—		—

	W	66,037		(60,627	)		43,236		(36,913	)

S-119

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

44. Fair Value of Financial Assets and Liabilities, Continued


	June 30, 2023
	Profit (loss)					Other comprehensive income(loss)
	Favorable change		Unfavorable change			Favorable change		Unfavorable change
	December 31, 2022
	Profit(loss) for the year					Other comprehensive income(loss)
	Favorable change		Unfavorable change			Favorable change		Unfavorable change
Securities measured at FVTPL (*1)	W	50,112		(47,080	)		—		—
Securities measured at FVOCI (*1)		—		—			36,873		(29,480	)
Loans measured at FVTPL (*2)		10,372		(9,957	)		—		—
Derivative financial assets (*2)		218		(217	)		—		—

	W	60,702		(57,254	)		36,873		(29,480	)

(*1)

Sensitivity amounts of equity securities are calculated by increasing and decreasing the correlations between the discount rates and the growth rates (0~1%) or the rate of increase in liquidation value (-1~1%) which are significant unobservable inputs. Sensitivity amounts for beneficiary certificates are calculated by increasing and decreasing the correlations between the discount rate of rent cash flow (-1~1%) and the rate of increase in property disposal price (-1~1%), only when they consist of real properties. Other than that, it is difficult to measure the sensitivity amounts of beneficiary certificates for practical reasons. Also, for financial instruments categorized within level 3 as of June 30, 2023 and December 31, 2022,W20,454,549 million andW18,704,023 million, respectively, are excluded from the sensitivity disclosure because it is impossible to calculate the sensitivity due to changes in unobservable variables for practical reasons.

(*2)	Sensitivity amounts of loans measured at FVTPL and derivatives financial instruments are calculated by increasing and decreasing the correlation coefficient and volatility (-10~10%) which are significant unobservable inputs.

(2)	Fair value hierarchy of financial instruments measured at amortized cost

(i)	The Bank’s policies for measuring fair value of financial instruments at amortized costs are as follows:

Cash and due from banks: Fair value of cash is considered equivalent to the carrying amount. In the case of due from banks on demand, which do not have a set maturity and can be realized instantly, the carrying amount is a close estimate of the fair value and is assumed so. In the case of other ordinary due from banks, the cash flow discount method is used to estimate the fair value.

Securities measured at amortized cost: The fair value of securities measured at amortized cost is computed by widely-accepted appraisal agencies upon request.

Loans measured at amortized cost: The fair value of loans measured at amortized cost is the expected future cash flows, reflecting premature redemption ratio, discounted by the market interest rate, adjusted by a spread sheet considering the probability of default. Exceptions to this method include loans with credit line facilities, loans with a maturity of three months or less left and impaired loans, which the Bank assumes the carrying amount as the fair value.

S-120

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

44. Fair Value of Financial Assets and Liabilities, Continued

Deposits: The fair value of deposits is computed using the discounted cash flow method. However, for deposits, whose cash flows cannot be estimated reasonably, the Bank assumes the carrying amount as the fair value.

Borrowings: The fair value of industrial financial debentures is computed using the discounted cash flow method by the Bank’s Fair Value Evaluation System. However, for borrowings including call money whose contractual maturity is three months or less, the Bank assumes the carrying amount as the fair value.

Debentures: The fair value of industrial financial debentures is computed using the discounted cash flow method by the Bank’s Fair Value Evaluation System.

Other financial assets and liabilities: The fair value of other financial assets and liabilities is computed using the discounted cash flow method. However, in cases cash flow cannot be estimated reasonably, the Bank assumes the carrying amount as the fair value.

(ii)	The fair value hierarchy of financial instruments measured at amortized cost as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks (*)	W	10,544,623		4,818,547		—		15,363,170
Securities measured at amortized cost		3,123,852		3,584,255		—		6,708,107
Loans measured at amortized cost (*)		—		2,324,507		186,585,589		188,910,096
Other financial assets (*)		—		15,612,570		1,566,698		17,179,268

	W	13,668,475		26,339,879		188,152,287		228,160,641

Financial liabilities:
Deposits (*)	W	—		1,940,768		65,393,655		67,334,423
Borrowings (*)		—		2,201,352		23,759,327		25,960,679
Debentures		—		150,847,856		—		150,847,856
Other financial liabilities (*)		—		14,176,568		5,042,313		19,218,881

	W	—		169,166,544		94,195,295		263,361,839

S-121

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

44. Fair Value of Financial Assets and Liabilities, Continued


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks (*)	W	7,088,563		4,450,243		—		11,538,806
Securities measured at amortized cost		2,964,285		3,391,599		—		6,355,884
Loans measured at amortized cost (*)		—		2,249,447		194,990,235		197,239,682
Other financial assets (*)		—		6,344,790		1,329,534		7,674,324

	W	10,052,848		16,436,079		196,319,769		222,808,696

Financial liabilities:
Deposits (*)	W	—		2,271,579		65,998,390		68,269,969
Borrowings (*)		—		1,395,037		23,872,311		25,267,348
Debentures		—		158,228,192		—		158,228,192
Other financial liabilities (*)		—		2,836,258		3,868,478		6,704,736

	W	—		164,731,066		93,739,179		258,470,245

(*)	For financial instruments categorized as level 2, the carrying amount is considered as a reasonable approximation of the fair value and is thus, disclosed by fair value.

(iii)

Details of valuation technique and inputs used in the fair value measurement categorized within level 2 and level 3 of the fair value hierarchy of financial instruments measured at amortized cost as of June 30, 2023 and December 31, 2022 are as follows:


	Valuation technique	Input
Level 2
Financial assets:
Securities measured at amortized cost	Discounted cash flow method	Discount rate
Financial liabilities:
Debentures	Discounted cash flow method	Discount rate
Level 3
Financial assets:
Loans measured at amortized cost	Discounted cash flow method	Credit spread, Other spread, Prepayment rate
Other financial assets	Discounted cash flow method	Other spread
Financial liabilities:
Deposits	Discounted cash flow method	Other spread
Borrowings	Discounted cash flow method	Other spread
Other financial liabilities	Discounted cash flow method	Other spread

S-122

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

45. Categories of Financial Assets and Liabilities

Categories of financial assets and liabilities as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Cash and cash equivalents		Financial instruments measured at FVTPL		Financial instruments designated at FVTPL		Financial instruments measured at FVOCI		Financial instruments designated at FVOCI		Financial instruments measured at amortized cost		Hedging purpose derivative instruments		Total
Financial assets:
Cash and due from banks	W	10,544,623		—		—		—		—		4,818,547		—		15,363,170
Securities measured at FVTPL		—		14,381,210		—		—		—		—		—		14,381,210
Securities measured at FVOCI		—		—		—		19,288,482		17,363,409		—		—		36,651,891
Securities measured at amortized cost		—		—		—		—		—		6,708,107		—		6,708,107
Loans measured at FVTPL		—		508,887		—		—		—		—		—		508,887
Loans measured at amortized cost		3,596,364		—		—		—		—		185,593,879		—		189,190,243
Derivative financial assets		—		8,800,915		—		—		—		—		286,331		9,087,246
Other financial assets		—		—		—		—		—		17,184,105		—		17,184,105

	W	14,140,987		23,691,012		—		19,288,482		17,363,409		214,304,638		286,331		289,074,859

Financial liabilities:
Financial liabilities measured at FVTPL	W	—		—		1,607,710		—		—		—		—		1,607,710
Deposits		—		—		—		—		—		67,374,517		—		67,374,517
Borrowings		—		—		—		—		—		26,111,536		—		26,111,536
Debentures		—		—		—		—		—		150,225,557		—		150,225,557
Derivative financial liabilities		—		9,185,017		—		—		—		—		1,248,273		10,433,290
Other financial liabilities		—		—		—		—		—		19,237,005		—		19,237,005

	W	—		9,185,017		1,607,710		—		—		262,948,615		1,248,273		274,989,615


	December 31, 2022
	Cash and cash equivalents		Financial instruments measured at FVTPL		Financial instruments designated at FVTPL		Financial instruments measured at FVOCI		Financial instruments designated at FVOCI		Financial instruments measured at amortized cost		Hedging purpose derivative instruments		Total
Financial assets:
Cash and due from banks	W	7,088,563		—		—		—		—		4,450,243		—		11,538,806
Securities measured at FVTPL		39,903		11,912,003		—		—		—		—		—		11,951,906
Securities measured at FVOCI		—		—		—		20,814,864		16,870,055		—		—		37,684,919
Securities measured at amortized cost		—		—		—		—		—		6,355,884		—		6,355,884
Loans measured at FVTPL		—		541,811		—		—		—		—		—		541,811
Loans measured at amortized cost		4,744,002		—		—		—		—		193,301,601		—		198,045,603
Derivative financial assets		—		9,609,026		—		—		—		—		185,429		9,794,455
Other financial assets		—		—		—		—		—		7,676,612		—		7,676,612

	W	11,872,468		22,062,840		—		20,814,864		16,870,055		211,784,340		185,429		283,589,996

Financial liabilities:
Financial liabilities measured at FVTPL	W	—		—		1,469,724		—		—		—		—		1,469,724
Deposits		—		—		—		—		—		68,326,656		—		68,326,656
Borrowings		—		—		—		—		—		25,429,244		—		25,429,244
Debentures		—		—		—		—		—		158,711,896		—		158,711,896
Derivative financial liabilities		—		10,118,348		—		—		—		—		1,198,654		11,317,002
Other financial liabilities		—		—		—		—		—		6,717,731		—		6,717,731

	W	—		10,118,348		1,469,724		—		—		259,185,527		1,198,654		271,972,253

S-123

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

46. Offsetting of Financial Assets and Liabilities

Details of financial instruments subject to offsetting, enforceable master netting agreements or similar agreements as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Gross amounts of recognized financial asset		Gross amounts of recognized financial liabilities set off in the statement of financial position		Net amounts of financial assets presented in the statement of financial position		Related amounts not set off in the statement of financial position				Net amounts
	Gross amounts of recognized financial asset						Financial instruments		Cash collateral received		Net amounts
Derivative financial assets (*)	W	9,087,246		—		9,087,246		5,902,870		45,230		3,139,146
Unsettled spot exchange receivables (*)		13,868,492		—		13,868,492		13,864,234		—		4,258
Unsettled domestic exchange receivables		4,607,523		2,863,445		1,744,078		—		—		1,744,078
Security pledged as collateral for repurchase agreements		1,721,316		—		1,721,316		295,527		—		1,425,789
Reverse repurchase agreements		540,000		—		540,000		540,000		—		—
Loaned securities		29,040		—		29,040		29,040		—		—
Receivables from securities transaction		18,648		—		18,648		18,648		—		—

	W	29,872,265		2,863,445		27,008,820		20,650,319		45,230		6,313,271


	June 30, 2023
	Gross amounts of recognized financial liabilities		Gross amounts of recognized financial assets set off in the statement of financial position		Net amounts of financial liabilities presented in the statement of financial position		Related amounts not set off in the statement of financial position				Net amounts
							Financial instruments		Cash collateral pledged		Net amounts
Derivative financial liabilities (*)	W	10,433,290		—		10,433,290		5,903,257		236,265		4,293,768
Unsettled spot exchange payables (*)		13,873,983		—		13,873,983		13,864,234		—		9,749
Unsettled domestic exchange payables		3,166,030		2,863,445		302,585		—		—		302,585
Repurchase agreements		295,527		—		295,527		295,527		—		—
Payables from securities transaction		110,521		—		110,521		110,521		—		—

	W	27,879,351		2,863,445		25,015,906		20,173,539		236,265		4,606,102

S-124

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

46. Offsetting of Financial Assets and Liabilities, Continued


	December 31, 2022
	Gross amounts of recognized financial asset		Gross amounts of recognized financial liabilities set off in the statement of financial position		Net amounts of financial assets presented in the statement of financial position		Related amounts not set off in the statement of financial position				Net amounts
	Gross amounts of recognized financial asset						Financial instruments		Cash collateral received		Net amounts
Derivative financial assets (*)	W	9,794,455		—		9,794,455		5,814,449		71,536		3,908,470
Unsettled spot exchange receivables (*)		2,597,457		—		2,597,457		2,593,577		—		3,880
Unsettled domestic exchange receivables		6,008,639		2,261,306		3,747,333		—		—		3,747,333
Security pledged as collateral for repurchase agreements		2,373,401		—		2,373,401		57,619		—		2,315,782
Reverse repurchase agreements		2,240,000		—		2,240,000		2,240,000		—		—
Loaned securities		—		—		—		—		—		—
Receivables from securities transaction		11,940		—		11,940		11,940		—		—

	W	23,025,892		2,261,306		20,764,586		10,717,585		71,536		9,975,465


	December 31, 2022
	Gross amounts of recognized financial liabilities		Gross amounts of recognized financial assets set off in the statement of financial position		Net amounts of financial liabilities presented in the statement of financial position		Related amounts not set off in the statement of financial position				Net amounts
							Financial instruments		Cash collateral pledged		Net amounts
Derivative financial liabilities (*)	W	11,317,002		—		11,317,002		5,552,654		501		5,763,847
Unsettled spot exchange payables (*)		2,593,992		—		2,593,992		2,593,577		—		415
Unsettled domestic exchange payables		2,503,572		2,261,306		242,266		—		—		242,266
Repurchase agreements		57,619		—		57,619		57,619		—		—
Payables from securities transaction		18,305		—		18,305		18,305		—		—

	W	16,490,490		2,261,306		14,229,184		8,222,155		501		6,006,528

(*)	For the derivatives covered by the ISDA derivative contracts, all contracts are settled and the net amount of derivative contracts is measured and paid based on the liquidation value if the counterparty files for bankruptcy or has any credit issues.

S-125

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

47. Operating Segments

(1)

The Bank has four reportable segments, as described below, which are the Bank’s strategic business units. They are managed separately because each business requires different technology and marketing strategies. The following summary describes general information about each of the Bank’s reportable segments:


Segments		General information
Corporate finance		Provides trade finance and loans to corporate customers
Investment finance		Provides consulting services to corporate such as capital finance, restructuring, etc.
Asset management		Provides asset management services to individual and corporate customers
Others		Any other segment not mentioned above

(2)	Operating income (loss) from external customers and among operating segments for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023
	Corporate finance			Investment finance			Asset management		Others			Total
Operating income from external customers	W	813,513			891,670			21,523		660,330			2,387,036
Operating income (loss) from intersegment sales		6,843			(156,692	)		—		149,849			—

	W	820,356			734,978			21,523		810,179			2,387,036

	2022
	Corporate finance			Investment finance			Asset management		Others			Total
Operating income from external customers	W	348,740			(2,229,168	)		14,913		2,388,343			522,828
Operating income (loss) from intersegment sales		(11,257	)		1,765,364			—		(1,754,107	)		—

	W	337,483			(463,804	)		14,913		634,236			522,828

(3)	Details of segment results for the Bank’s reportable segments for the six-month periods ended June 30, 2023 and 2022 are as follows:


	2023
	Corporate finance			Investment finance			Asset management			Others			Total
Net interest income	W	410,546			(303,171	)		6,949			759,892			874,216
Non-interest income
Income related to securities (*1)		20,504			57,997			—			77,562			156,063
Other non-interest income		204,013			479,544			20,375			(25,272	)		678,660

		224,517			537,541			20,375			52,290			834,723
Provision for loan losses and others (*2)		510,878			546,456			—			(618	)		1,056,716
General and administrative expenses		(325,585	)		(45,848	)		(5,801	)		(1,385	)		(378,619	)

Operating income	W	820,356			734,978			21,523			810,179			2,387,036

S-126

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

47. Operating Segments, Continued


	2022
	Corporate finance			Investment finance			Asset management			Others			Total
Net interest income	W	468,945			(192,035	)		2,996			618,969			898,875
Non-interest income
Income related to securities (*1)		(52,601	)		(80,891	)		—			18,685			(114,807	)
Other non-interest income		391,328			356,364			18,672			(44	)		766,320

		338,727			275,473			18,672			18,641			651,513
Provision for loan losses and others (*2)		(105,802	)		(492,540	)		—			(2,077	)		(600,419	)
General and administrative expenses		(364,387	)		(54,702	)		(6,755	)		(1,297	)		(427,141	)

Operating income	W	337,483			(463,804	)		14,913			634,236			522,828

(*1)	Income related to securities is composed of net gain (loss) on securities measured at FVTPL, securities measured at FVOCI and securities measured at amortized cost.

(*2)	Provision for loan losses and others comprises of provision for loan losses, provision for derivative credit risks, gains (losses) on sales of loans, and increase (reversal) of provision.

(4)	Geographical revenue information about the Bank’s operating segments for the six-month periods ended June 30, 2023 and 2022 and the geographical non-current asset information as of June 30, 2023 and December 31, 2022 are as follows:


	*Revenues (1)**				*Non-current assets (2)**
	2023		2022		June 30, 2023		December 31, 2022
Domestic	W	24,838,259		29,983,161		29,990,835		28,918,343
Overseas		2,708,772		2,192,382		111,731		86,363

	W	27,547,031		32,175,543		30,102,566		29,004,706

(*1)	Revenues consist of interest income, fees and commission income, dividend income, income related to securities, foreign currency transaction gain, gain on derivatives, other operating income and provision for loan losses.

(*2)	Non-current assets consist of investments in subsidiaries and associates, property and equipment, investment property and intangible assets.

48. Risk Management

(1) Introduction

(i) Objectives and principles

The Bank’s risk management aims to maintain financial soundness and effectively manage various risks pertinent to the nature of the Bank’s business. The Bank has set up and fulfilled policies to manage risks timely and effectively. Pursuant to the policies, the Bank’s risks shall be

•

managed comprehensively and independently,

•

recognized timely, evaluated exactly and managed effectively,

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Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued

•

maintained to the extent that the risks balance with profit,

•

diversified appropriately to avoid concentration on specific segments,

•

managed to prevent excessive exposure by the setting up and managing of tolerance limits and guidelines.

(ii) Risk management strategy and process

The Bank’s risk management business is separated into two different stages; the ‘metrification stage,’ in which risks are estimated and monitored, and the ‘integration stage,’ in which information gained during the risk management process is integrated and used in management strategies. Risk management is recognized as a key component of the Bank’s management and seeks to change from its previously adaptive and limited role to more leading and comprehensive role.

Furthermore, the Bank focuses on consistent communication among different departments to establish a progressive consensus on risk management.

(iii) Risk management governance

Risk Management Committee

The Bank’s Risk Management Committee is the highest decision-making committee on risk management (a subcommittee within the Board of Directors) and is composed of four people, including the President of the committee (an outside director). The Committee performs the function of deciding on major matters related to risk management, such as establishing basic risk management policies, assessing capital adequacy and the management system, and setting exposure limits by country.

The CEO of the Bank and the head of Risk Management Segment

The CEO of the Bank, according to the policies of risk management, performs his or her role to manage and direct risk management in order to sustain efficiency and internal control. The head of the Risk Management Segment is responsible for supervising the overall administration of the Bank’s risk management business and providing risk-related information to members of the board of directors and the Bank’s management.

Risk Management Policy Committee

The Bank’s Risk Management Policy Committee is composed of the leaders of all business segments, and exercises its role to decide important matters relating to the Bank’s portfolio including allocating internal capital limits by segment and setting exposure limits by industry, and to preliminarily review matters for main decision of the Risk Management Committee.

(iv) Performance of risk management committee

The Risk Management Committee performs comprehensive reviews of all the affairs related to risk management and deliberates the decisions of the board of directors. For the year ended June 30, 2023, the key activities of the Risk Management Committee are as follows:

•

Major decision

•

Risk management plan for 2023

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Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued

•

Contingency funding plan for 2023

•

Setting and managing exposure limits by country for 2023

•

Major reporting

•

Resolution of Credit Committee for the fourth quarter of 2022

•

Result of ex-post validation of credit rating system and default rates, and verification of risk measurement factors for internal purposes

•

Setting management limit of credit portfolios of 2023

•

Allocation of internal capital limits of 2023

•

Resolution of Credit Committee for the first quarter of 2023

•

Adjustment of limit of credit portfolio (industry, policy)

•

Adjustment of exposure limits by country

(v) Improvement of risk management system

For the continuous improvement of risk management, financial soundness and capital adequacy, the Bank performs the following:

•

Continuous improvement of Basel

•

Improvements in the internal capital adequacy assessment system, in line with the guidelines set by the Financial Supervisory Service (FSS) in 2008, to manage capital adequacy more effectively

•

Improvements in the credit assessment system on Low Default Portfolio (LDP)

•

Elaboration of risk measuring criteria including credit risk parameters and measurement logics

•

Development of the application system for timely calculation of LCR and NSFR

•

Rebuilding the Corporate Credit Rating System (approved by Financial Supervisory Services on October 26, 2017)

•

Establishment of the system to calculate Basel Interest Rate Risk in the Banking Book coming to domestic in September 2018

•

Establishment of the system to comply with the amended regulation relating to risk-weighted assets under Basel III in December 2020

•

Development of system related to Fundamental Review of the Trading Book (FRTB) under Basel III in August 2022

•

Development of system related to operational risk under Basel III in September 2022

•

Expansion of risk management infrastructure

•

Establishment of the RAPM system to reflect risks to the Bank’s business and support decision-making upon management, and application of performance assessment at the branch level since 2010

S-129

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued

•

Enforcement of risk management related to irregular compound derivatives and validation of the derivative pricing model developed by the Bank’s Front Office

•

Establishment of IFRS 9 accounting system to calculate a loan loss allowances under IFRS 9 in March 2017 and, since then, run of IFRS 9 accounting system in January 2018

(vi) Risk management reporting and measuring system

The Bank endeavours consistently to objectively and rationally measure and manage all significant risks considering the characteristics of operational areas, assets and risks. In relation to reporting and measurement, the Bank has developed application systems as follows:


Application system	Approach	Completion date	Major function
Corporate Credit Rating System	Logit Model	Oct. 2017	Rebuilding the Corporate Credit Rating System
Market Risk Management System	Risk Watch	Jun. 2002 Feb. 2019	Summarize position, manage exposure limits and calculate Market VaR
	RS Model	Sep. 2012	Calculate regulatory capital by Standardized Approach
	Murex M/O	Apr. 2013	Supplement of RiskWatch to calculate VaR
Interest/Liquidity Risk Management System	In-house	May. 2019	Calculation of interest risk, liquidity risk, etc.
Operational Risk Management System	Standardized Approach	May. 2006	Manage process and calculate CSA, KRI and OP VaR, etc.
BIS Capital Ratio Calculation/Credit Risk Measurement System	Fermat RaY	Sep. 2006 Dec. 2013	Calculate equity, credit risk-weighted assets and credit risk, etc.
Loan Loss Allowance	IFRS	Jan. 2011	Incurred loss model
Calculation System	IFRS 9	Mar. 2017	Expected loss model

(vii) Response to Basel

The Korean financial authorities have implemented Basel II since January 2008, and the Standardized Approach and the Foundation Internal Ratings-Based Approach for calculating credit risk are applicable.

In conformity with the implementation roadmap of Basel II, the Bank obtained the approval to use the Foundation Internal Ratings-Based Approach on credit risk from the FSS in July 2008 and has applied the approach since late June 2008. The Bank applies the Standardized Approach on market risks and operational risks.

The Bank completed the Basel III standard risk management system in preparation of the adoption of the Basel III regulations announced on December 1, 2013. Starting from 2013 year-end, the BIS capital adequacy ratio has been measured in accordance to the Basel III regulations.

S-130

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued

Responding to the requirements of the financial authorities, the Bank recognizes interest rate risk, liquidity risk, credit bias risk and reputation risk besides Pillar I risks (credit risk, market risk and operational risk). The Bank has actively responded to the Pillar 2 regulation, including additional capital requirements based on comprehensive assessment of risk management levels since 2015. In addition, from the end of 2015, the Bank has applied the uniform standards for the public announcement of financial business for Basel compliance.

The Bank completed revised standards such as capital requirements for banks’ investments in funds in 2017, capital requirements for securitization in 2018, and the Standardised Approach for measuring counterparty credit risk (SA-CCR) in 2019.

To comply with the amended regulation relating to risk-weighted assets under Basel III, the Bank completed the consultation and the development of the relevant systems and the amended regulation has been applied since the calculation of the BIS ratio at the end of 2020.

The Bank has completed IT consulting and system development related to Market Risk Regulation (Fundamental Review of the Trading Book , FRTB) and Operational Risk Regulation under Basel III during the second half of 2022.

(viii) Internal capital adequacy assessment process

Internal capital adequacy assessment process is defined as the process that the Bank aggregates significant risks, calculates its internal capital, compares the internal capital with the available capital and assesses its internal capital adequacy. The internal capital adequacy report including the assessment results at the end of the year is prepared and reported to the Risk Management Policy Committee.

•

Internal capital adequacy assessment

For the internal capital adequacy assessment, the Bank calculates its aggregated internal capital by evaluating all significant risks and available capital considering the quality and components of capital, and then assesses the internal capital adequacy by comparing the aggregated internal capital with the available capital.

In addition, the Bank conducts periodic stress tests more than once every six months to assess potential weakness in crisis situations and uses its results to assess the internal capital adequacy. The Bank assumes the macroeconomic situation as three stages of ‘normal- pessimistic-serious’ and is preparing countermeasures such as checking the adequacy of capital by each stage.

•

Goal setting of internal capital management

The Bank sets up and manages an internal capital limit on an annual basis, through the approval of the Risk Management Committee, to maintain internal capital adequacy by managing internal capital (integrated risks) within the extent of available capital.

The prior year’s internal capital, analysis of domestic and foreign environment changes in the current year, and the direction and size of operations are all reflected in the goal setting of internal capital management to calculate the integrated internal capital scale. Moreover, Bank for International Settlements(BIS) capital adequacy ratio and risk appetite are taken into consideration in the goal setting of internal capital management.

S-131

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued

•

Allocation of internal capital

The Bank’s Risk Management Committee approves entire internal capital and the Risk Management Policy Committee allocates the capital to each segment and department, considering the extent of possible risk faced and size of operations. The allocated internal capital is monitored regularly and managed using various management methods. The results of monitoring and managing the allocated internal capital are reported to the Risk Management Committee. In case of any material changes in the Bank’s business plan or risk operation strategy, the Bank adjusts the allocations elastically.

•

Composition of internal capital

Internal capital comprises all the significant risks of the Bank and is composed of quantifiable and non-quantifiable risks. Quantifiable risks are composed of credit risk, market risk, interest rate risk, operational risk and credit concentration risk, foreign currency settlement risk, and are risks measured quantitatively by applying reasonable methodology using objective data. Non-quantifiable risks are composed of strategy risk, reputation risk, residual risk on asset securitization and furthermore. Non-quantifiable risks are those risks that cannot be measured quantitatively because of lack of data or the absence of appropriate measuring methodologies.

(2) Credit Risk

(i) Concept

Credit risk can be defined as potential loss resulting from the refusal to perform obligations or default of counterparties. More generally, it is used to refer to the possibility of loss from engaged bonds that cannot be redeemed properly or from substitute payments.

(ii) Approach to credit risk management

Summary of credit risk management

The Bank regards credit risk as the most significant risk area in its business operations, and accordingly, closely monitors its credit risk exposure. The Bank manages both credit risks at portfolio level and at individual credit level. At portfolio level, the Bank reduces credit concentration and restructures the portfolio in such a way to maximize profitability considering the risk level. To avoid credit concentration on a particular sector, the Bank manages credit limits by client, group, and industry. The Bank also resets exposure management directives for each industry by conducting an industry credit evaluation twice a year.

At the individual credit level, the relationship manager (RM), the credit officer (CO) and the Credit Review Committee manage each borrowers’ credit risk.

Post management and insolvent borrower management

The Bank monitors the borrower’s credit rating from the date of the loan to the date of the final collection of debt consistently and inspects the borrower’s status regularly and frequently to prevent the generation of new bad debts and to stabilize the number of debt recoveries.

S-132

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued

market information of the borrower, and such information is used by the RM and the CO to monitor and manage changes in the borrower’s credit rating.

A borrower that is likely to be insolvent is classified as an early warning borrower or a precautionary borrower, depending on the level of insolvency risk. The Bank sets up a specific and applicable stabilization plan for such a borrower considering the borrower’s characteristics. Furthermore, sub-standard borrowers are classified as insolvent borrowers, and are managed intensively by the Bank, which takes legal proceedings, disposals or corporate turnaround measures if necessary.

Classification of asset soundness and provision of allowance for loss

Classification of asset soundness is fulfilled by the analysis and assessment of credit risk. The classification is used to provide an appropriate allowance, prevent further occurrences of insolvent assets and promote the normalization of existing insolvent assets to enhance the stabilization of asset operations.

Based on the Financial Supervisory Regulations of the Republic of Korea, the Bank has established standards and guidelines on the classification of asset soundness, according to the Forward-Looking Criteria, which reflects not only the borrower’s past records of repayment but also their future debt repayment capability.

In conformity with these standards, the Bank classifies the soundness of its assets as “normal”, “precautionary”, “substandard”, “doubtful”, or “estimated loss” and differentiates the coverage ratio by the level of classification.

Details of loans by credit rating as of June 30, 2023 and December 31, 2022 are as follows:


< Corporate >

	June 30, 2023
	Carrying amounts		12-month expected credit loss		Lifetime expected credit losses
	Carrying amounts		12-month expected credit loss		Non credit- impaired		Credit- impaired
AAA ~ BBB1	W	161,409,030		142,040,280		19,368,750		—
BBB2 ~ CCC		29,614,531		10,049,144		18,091,148		1,474,239
Below CC		1,054,812		—		52,285		1,002,527

	W	192,078,373		152,089,424		37,512,183		2,476,766


	December 31, 2022
	Carrying amounts		12-month expected credit loss		Lifetime expected credit losses
	Carrying amounts		12-month expected credit loss		Non credit- impaired		Credit- impaired
AAA ~ BBB1	W	169,982,892		150,604,520		19,378,372		—
BBB2 ~ CCC		30,582,238		8,314,570		20,210,063		2,057,605
Below CC		1,283,425		—		52,693		1,230,732

	W	201,848,555		158,919,090		39,641,128		3,288,337

S-133

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued


< Retail >

	June 30, 2023
	Carrying amounts		12-month expected credit loss		Lifetime expected credit losses
	Carrying amounts		12-month expected credit loss		Non credit- impaired		Credit- impaired
Grade 1~ Grade 6	W	159,569		152,900		6,669		—
Grade 7~ Grade 8		2,190		—		2,071		119
Grade 9~ Grade 10		907		—		—		907

	W	162,666		152,900		8,740		1,026


	December 31, 2022
	Carrying amounts		12-month expected credit loss		Lifetime expected credit losses
	Carrying amounts		12-month expected credit loss		Non credit- impaired		Credit- impaired
Grade 1~ Grade 6	W	181,023		173,381		7,642		—
Grade 7~ Grade 8		2,116		—		2,084		32
Grade 9~ Grade 10		536		—		—		536

	W	183,675		173,381		9,726		568

Details of payment guarantees (including financial guarantees) and unused commitments by credit rating as of June 30, 2023 and December 31, 2022 are as follows:

< Corporate >


	June 30, 2023
	Exposures		12-month expected credit loss		Lifetime expected credit losses
	Exposures		12-month expected credit loss		Non credit- impaired		Credit- impaired
Unused commitments:
AAA ~ BBB1	W	48,282,630		44,637,360		3,645,270		—
BBB2 ~ CCC		5,352,248		1,998,424		3,296,261		57,563
Below CC		—		—		—		—

	W	53,634,878		46,635,784		6,941,531		57,563

Payment guarantees (including financial guarantees):
AAA ~ BBB1	W	6,868,841		5,945,364		923,477		—
BBB2 ~ CCC		10,491,044		5,165,278		5,305,218		20,548
Below CC		18,497		—		120		18,377

	W	17,378,382		11,110,642		6,228,815		38,925

S-134

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued


	December 31, 2022
	Exposures		12-month expected credit loss		Lifetime expected credit losses
	Exposures		12-month expected credit loss		Non credit- impaired		Credit- impaired
Unused commitments:
AAA ~ BBB1	W	42,065,612		38,276,358		3,789,254		—
BBB2 ~ CCC		5,108,112		1,943,066		3,112,816		52,230
Below CC		—		—		—		—

	W	47,173,724		40,219,424		6,902,070		52,230

Payment guarantees (including financial guarantees):
AAA ~ BBB1	W	6,921,986		6,008,602		913,384		—
BBB2 ~ CCC		9,773,163		4,598,273		3,826,826		1,348,064
Below CC		12,110		—		154		11,956

	W	16,707,259		10,606,875		4,740,364		1,360,020


< Retail >

	June 30, 2023
	Exposures		12-month expected credit loss		Lifetime expected credit losses
	Exposures		12-month expected credit loss		Non credit- impaired		Credit- impaired
Unused commitments:
Grade 1~ Grade 6	W	40,764		39,892		872		—
Grade 7~ Grade 8		28		—		28		—
Grade 9~ Grade 10		—		—		—		—

	W	40,792		39,892		900		—


	December 31, 2022
	Exposures		12-month expected credit loss		Lifetime expected credit losses
	Exposures		12-month expected credit loss		Non credit- impaired		Credit- impaired
Unused commitments:
Grade 1~ Grade 6	W	32,230		31,779		451		—
Grade 7~ Grade 8		20		—		20		—
Grade 9~ Grade 10		—		—		—		—

	W	32,250		31,779		471		—

(iii) Measurement methodology of credit risk

Pursuant to Basel III, the Bank selects the measurement methodology of credit risk considering the complexity of measurement, measurement factors, estimating methods and others. Measurement approaches are divided into Standardized Approach and Internal Ratings-Based Approach.

S-135

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued

Standardized Approach (“SA”)

In the case of the Standardized Approach, the risk weights are applied according to the credit rating assessed by External Credit Assessment Institution (“ECAI”). Risk weights in each credit rating are as follows:


Credit rating	Corporate	Country	Bank
AAA ~ AA-	20.0%	0.0%	20.0%
A+ ~ A-	50.0%	20.0%	30.0%
BBB+ ~ BBB-	75.0%	50.0%	50.0%
BB+ ~ BB-	100.0%	100.0%	100.0%
B+ ~ B-	150.0%	100.0%	100.0%
Below B-	150.0%	150.0%	150.0%
Unrated	100.0% (*)	100.0%	Rating based on due diligence

(*)	In case of small and medium-sized business, 85.0% is applied.

The OECD is designated as foreign ECAI and Korea Investrors Service Co., Ltd., NICE Investors Services Co., Ltd. and the Korea Ratings Co., Ltd. are designated as domestic ECAI.

The Bank applies the credit rating based on the corresponding loan and same borrower’s unsecured senior loans. In the case the borrower’s risk weight is higher than the unrated exposure’s risk weight (100%), the higher weight is applied. In the case the borrower has more than one rating, the higher weight of the two lowest weights (Second Best Criteria) is applied.

Internal Ratings-Based Approach (IRB)

To use the Internal Ratings-Based Approach, a bank must be approved by the FSS and should also meet the requirement pre-set by the FSS.

In relation to Basel II that has been adopted domestically as of January 2008, the Bank gained approval from the FSS to use the Foundation Internal Ratings-Based Approach in July 2008. The Bank has calculated credit risk-weighted assets using the approach since late June 2008.

Measurement method of credit risk-weighted asset

The Bank calculates credit risk-weighted assets of corporate exposures and asset securitization exposures using the Foundation Internal Ratings-Based Approach as of June 30, 2023.

The Standardized Approach is applied to country exposures, public institution exposures and bank exposures permanently and applied to overseas subsidiary and the Bank’s branch pursuant to prior consultation with the FSS.

S-136

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued


<Approved measurement method>
Measurement method		Exposure
Standardized Approach	Permanent SA	— Countries, public institutions, banks, equity
Standardized Approach	SA	— Overseas subsidiaries and branches, and other assets, retail, residential mortgage, commercial properties
Foundation Internal Ratings-Based Approach		— Corporate, small and medium enterprises, asset securitization (at each credit level)
Application of IRB by phase		— Special lending, non-residence and others

The mitigated effect of credit risks reflects the related policies which consider eligible collateral and guarantees. The Bank calculates the credit risk-weighted assets using the capital adequacy ratio.

Upon the calculation of credit risk-weighted assets for derivatives, the Bank takes into consideration the set-off effects of transactions under legally enforceable rights to set-off to calculate exposures.

Credit rating model

The results of credit rating are presented as grades through an assessment of the debt repayment capacity that the principal and interest of debt securities or loans are redeemed while complying with contractual redemption schedule.

Using the Bank’s internal credit rating model, the Bank classifies debtors’ credit rating into 14 grades (AAA~D). To distinguish the difference between credits in the same grade, the Bank uses 20 stages as auxiliaries to 14 grades.

The Bank’s regular credit rating process is carried out once a year and in the case of the change of debtor’s credit condition, the credit rating is frequently adjusted as necessary to retain the adequacy of credit rating.

The results of credit rating are applied to various areas such as discrimination of loan processes, loan limit, loan interest rate, post loan management standard process, credit risk measurement, and allowance for loan losses assessment.

Credit rating process control structure

According to the Principle of Checks and Balances, the Bank has established the credit rating process control structure by which the credit rating system operates appropriately.

•

Independent assessment of credit rating: The Bank’s business segment (RM) and credit rating assessment segment (Senior Rating Officer) are independently operated.

•

Independent control of credit rating system: The control of credit rating system including the development of credit rating model is independently implemented by the Bank’s Risk Management Department.

•

Independent verification of credit rating system: Credit rating system is independently verified by Risk Validation Team of the Financial Planning Department.

S-137

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued

•

Internal audit of credit rating process: Credit rating process is regularly audited by the Bank’s internal audit department.

•

Role of the Board of Directors and the Bank’s management: Major issues relating to credit process are approved by the Board of Directors and are regularly monitored by the Bank’s top management.

The Bank reviews debt repayability based on a credit analysis when handling loans. Depending on the results, credit loan preservation is executed as necessary using such methods as interest rate preservation due to credit risk.

The Bank evaluates the value of the collateral, performing ability and legal validity of the guarantee at the initial acquisition. The Bank re-evaluates the provided collateral and guarantees regularly for them to be reasonably preserved.

For guarantees, the Bank demands a corresponding written guarantee according to loan handling standards and the guarantor’s credit rating is independently calculated when in conformance with the credit rating endowment method.

The quantification of the extent to which collateral and other credit enhancements mitigate credit risk of impaired financial assets as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023		December 31, 2022
Securities measured at FVOCI	W	73,359		72,739
Loans measured at amortized cost		2,540,722		3,345,216
Other assets		11,713		14,221

(iv) Credit exposure

Geographical information of credit exposure as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Korea		Hong Kong		Ireland		Uzbekistan		Brazil		Hungary		UK		USA		Ohers		Total
Due from banks (excluding due from BOK)	W	866,646		1,435,056		—		39,384		90,583		422,833		750,293		3,578,358		1,555,626		8,738,779
Securities measured at FVOCI:
Bonds (excluding government bonds)		11,478,780		224,447		13,063		—		—		—		290,920		5,261,552		3,069,100		20,337,862
Securities measured at amortized cost
Bonds (excluding government bonds)		1,166,145		—		—		—		—		—		—		—		—		1,166,145
Loans		152,336,665		1,626,735		1,583,319		613,365		802,131		1,001,433		1,622,364		5,768,897		42,019,538		207,374,447
Derivative financial assets		93,244		5,793		—		—		—		—		45,500		536		141,311		286,384
Other assets		7,312,234		—		—		—		—		—		—		—		9,990,001		17,302,235

		173,253,714		3,292,031		1,596,382		652,749		892,714		1,424,266		2,709,077		14,609,343		56,775,576		255,205,852

S-138

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued


	June 30, 2023
	Korea		Hong Kong		Ireland		Uzbekistan		Brazil		Hungary		UK		USA		Ohers		Total
Guarantees (including financial guarantees)		17,028,117		—		—		—		—		49,886		—		245,141		55,239		17,378,383
Commitments		46,301,579		126,644		139,652		—		26,256		2,855		381,292		3,631,488		3,065,904		53,675,670

		63,329,696		126,644		139,652		—		26,256		52,741		381,292		3,876,629		3,121,143		71,054,053

	W	236,583,410		3,418,675		1,736,034		652,749		918,970		1,477,007		3,090,369		18,485,972		59,896,719		326,259,905


	December 31, 2022
	Korea		Hong Kong		Ireland		Uzbekistan		Brazil		Hungary		UK		USA		Ohers		Total
Due from banks (excluding due from BOK)	W	1,449,224		1,405,648		—		38,019		87,444		365,514		536,418		3,329,355		1,031,286		8,242,908
Securities measured at FVOCI:
Bonds (excluding government bonds)		13,531,541		241,512		12,533		—		—		—		297,115		4,953,262		2,807,821		21,843,784
Loans		164,692,863		1,913,983		1,534,814		687,498		339,476		929,402		1,471,985		5,616,327		44,228,252		221,414,600
Derivative financial assets		108,797		3,572		—		—		—		—		8,681		18,656		45,771		185,477
Other assets		1,559,148		—		—		—		—		—		—		—		6,233,425		7,792,573

		181,341,573		3,564,715		1,547,347		725,517		426,920		1,294,916		2,314,199		13,917,600		54,346,555		259,479,342
Guarantees (including financial guarantees)		16,226,813		—		—		—		—		48,285		—		241,660		190,503		16,707,261
Commitments		42,293,299		166,993		110,971		—		126,730		20,268		416,056		2,281,667		1,789,989		47,205,973

		58,520,112		166,993		110,971		—		126,730		68,553		416,056		2,523,327		1,980,492		63,913,234

	W	239,861,685		3,731,708		1,658,318		725,517		553,650		1,363,469		2,730,255		16,440,927		56,327,047		323,392,576

S-139

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued

Industry information of credit exposure as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Manufacturing		Service		Others		Total
Due from banks (excluding due from BOK)	W	—		7,997,202		741,577		8,738,779
Securities measured at FVOCI:
Bonds (excluding government bonds)		3,154,124		13,443,573		3,740,165		20,337,862
Securities measured at amortized cost
Bonds (excluding government bonds)		179,445		544,449		442,251		1,166,145
Loans		85,649,619		102,523,066		19,201,762		207,374,447
Derivative financial assets		—		286,384		—		286,384

Other assets		259,387		587,607		16,455,241		17,302,235
		89,242,575		125,382,281		40,580,996		255,205,852
Guarantees (including financial guarantees)		15,106,622		2,131,857		139,903		17,378,382
Commitments		23,358,315		25,883,333		4,434,023		53,675,671

		38,464,937		28,015,190		4,573,926		71,054,053

	W	127,707,512		153,397,471		45,154,922		326,259,905


	December 31, 2022
	Manufacturing		Service		Others		Total
Due from banks (excluding due from BOK)	W	—		7,636,352		606,556		8,242,908
Securities measured at FVOCI:
Bonds (excluding government bonds)		3,642,461		14,432,050		3,769,273		21,843,784
Loans		84,698,134		117,538,177		19,178,289		221,414,600
Derivative financial assets		—		185,477		—		185,477
Other assets		244,043		468,531		7,079,999		7,792,573

	88,584,638		140,260,587		30,634,117		259,479,342
Guarantees (including financial guarantees)		14,244,265		2,070,682		392,314		16,707,261
Commitments		22,153,544		23,477,561		1,574,868		47,205,973

	36,397,809		25,548,243		1,967,182		63,913,234

	W 124,982,447		165,808,830		32,601,299		323,392,576

S-140

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued

The detail of credit exposures by industry affected by the pandemic of COVID-19 as of June 30, 2023 and December 31, 2022 are as follows and the exposures by industries could be changed according to economic fluctuations.



	Due from banks (excluding due from BOK)		Securities measured at FVOCI		Securities measured at amortized cost Bonds (excluding government bonds)
	Due from banks (excluding due from BOK)		Bonds (excluding government bonds)				Loans		Derivative financial assets		Other assets		Subtotal		Guarantees (including financial guarantees)		Commitments		Subtotal		Total
Manufacturing:
Display	W	—		9,677		—		693,499		—		5,242		708,418		89		662,249		662,338		1,370,756
Semiconductor /Mobile phone		—		258,572		—		4,330,318		—		18,948		4,607,838		120,521		1,651,043		1,771,564		6,379,402
Automotive		—		292,732		—		11,966,866		—		30,133		12,289,731		568,364		1,605,337		2,173,701		14,463,432
Refinery/Chemical/Energy		—		828,150		139,498		18,013,669		—		70,165		19,051,482		147,446		5,766,272		5,913,718		24,965,200
Steel/Metal		—		210,719		—		10,037,974		—		22,635		10,271,328		663,931		3,007,658		3,671,589		13,942,917
Others		—		1,554,274		39,947		40,607,293		—		112,264		42,313,778		13,606,271		10,665,756		24,272,027		66,585,805

		—		3,154,124		179,445		85,649,619		—		259,387		89,242,575		15,106,622		23,358,315		38,464,937		127,707,512
Service:
Air transportation		—		5,831		—		3,063,621		—		13,692		3,083,144		225,280		33,000		258,280		3,341,424
Sea transportation		—		—		—		2,301,239		—		34,633		2,335,872		82,421		432,113		514,534		2,850,406
Other transportation		—		184,065		—		8,691,173		—		33,467		8,908,705		13,696		2,690,826		2,704,522		11,613,227
Leisure/Travel industry		—		—		—		10,424		—		45		10,469		—		1,700		1,700		12,169
Food/Accommodation		—		27,575		—		1,727,685		—		5,297		1,760,557		32,672		400,426		433,098		2,193,655
Automotive-related		—		—		—		549,430		—		1,697		551,127		6,587		123,728		130,315		681,442
Finance/Insurance and others		7,997,202		13,226,102		544,449		86,179,494		286,384		498,776		108,732,407		1,771,201		22,201,540		23,972,741		132,705,148

		7,997,202		13,443,573		544,449		102,523,066		286,384		587,607		125,382,281		2,131,857		25,883,333		28,015,190		153,397,471
Other:
Construction		—		142,475		422,308		3,671,114		—		10,174		4,246,071		102,390		1,638,092		1,740,482		5,986,553
Others		741,577		3,597,690		19,943		15,530,648		—		16,445,067		36,334,925		37,514		2,795,930		2,833,444		39,168,369

		741,577		3,740,165		442,251		19,201,762		—		16,455,241		40,580,996		139,904		4,434,022		4,573,926		45,154,922

	W	8,738,779		20,337,862		1,166,145		207,374,447		286,384		17,302,235		255,205,852		17,378,383		53,675,670		71,054,053		326,259,905

S-141

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued


	December 31, 2022
	Due from banks (excluding due from BOK)		Securities measured at FVOCI
	Due from banks (excluding due from BOK)		Bonds (excluding government bonds)		Loans		Derivative financial assets		Other assets		Subtotal		Guarantees (including financial guarantees)		Commitments		Subtotal		Total
Manufacturing:
Display	W	—		—		1,289,473		—		5,100		1,294,573		382		33,564		33,946		1,328,519
Semiconductor/Mobile phone		—		226,042		4,267,310		—		16,770		4,510,122		152,023		1,564,613		1,716,636		6,226,758
Automotive		—		325,472		12,191,177		—		29,695		12,546,344		580,123		1,716,017		2,296,140		14,842,484
Refinery/Chemical/Energy		—		1,077,431		18,430,754		—		60,552		19,568,737		201,296		6,409,868		6,611,164		26,179,901
Steel/Metal		—		182,739		10,022,074		—		22,002		10,226,815		650,497		2,873,421		3,523,918		13,750,733
Others		—		1,830,777		38,497,346		—		109,924		40,438,047		12,659,944		9,556,061		22,216,005		62,654,052

		—		3,642,461		84,698,134		—		244,043		88,584,638		14,244,265		22,153,544		36,397,809		124,982,447
Service:
Air transportation		—		5,624		3,085,579		—		13,785		3,104,988		221,159		3,000		224,159		3,329,147
Sea transportation		—		—		2,493,475		—		31,018		2,524,493		78,278		374,025		452,303		2,976,796
Other transportation	��	—		166,659		8,724,268		—		23,326		8,914,253		16,597		2,583,356		2,599,953		11,514,206
Leisure/Travel industry		—		—		12,277		—		59		12,336		—		1,700		1,700		14,036
Food/Accommodation		—		11,589		2,043,522		—		4,873		2,059,984		39,249		347,915		387,164		2,447,148
Automotive-related		—		—		563,657		—		1,672		565,329		7,127		112,440		119,567		684,896
Finance/Insurance and others		7,636,352		14,248,178		100,615,399		185,477		393,798		123,079,204		1,708,272		20,055,125		21,763,397		144,842,601

		7,636,352		14,432,050		117,538,177		185,477		468,531		140,260,587		2,070,682		23,477,561		25,548,243		165,808,830
Other:
Construction		—		285,970		4,067,049		—		8,889		4,361,908		348,557		1,561,312		1,909,869		6,271,777
Others		606,556		3,483,303		15,111,240		—		7,071,110		26,272,209		43,757		13,556		57,313		26,329,522

		606,556		3,769,273		19,178,289		—		7,079,999		30,634,117		392,314		1,574,868		1,967,182		32,601,299

	W	8,242,908		21,843,784		221,414,600		185,477		7,792,573		259,479,342		16,707,261		47,205,973		63,913,234		323,392,576

Responding to the COVID-19 pandemic, the Bank recalculates the forward-looking information and recognises additional allowance for loan losses and provisions amounting toW220,618 million for the year ended December 31, 2022.

Credit exposures of debt securities by credit rating as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Carrying amounts		12-month expected credit loss		Lifetime expected credit losses
	Carrying amounts		12-month expected credit loss		Non credit- impaired		Credit- impaired
AAA ~ BBB1	W	25,899,450		25,641,809		257,641		—
BBB2 ~ CCC		101,839		18,961		82,878		—
Below CC		—		—		—		—

	W	26,001,289		25,660,770		340,519		—

S-142

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued


	December 31, 2022
	Carrying amounts		12-month expected credit loss		Lifetime expected credit losses
	Carrying amounts		12-month expected credit loss		Non credit- impaired		Credit- impaired
AAA ~ BBB1	W	27,133,598		26,789,221		344,377		—
BBB2 ~ CCC		37,359		14,927		22,432		—
Below CC		—		—		—		—

	W	27,170,957		26,804,148		366,809		—

(3) Capital management activities

(i) Capital adequacy

The FSS approved the Bank’s use of the Foundation Internal Ratings-Based Approach in July 2008. The Bank has been using the same approach when calculating credit risk-weighted assets since the end of June 2008. The equity capital ratio and equity capital according to the standards of the Bank for International Settlements are calculated for such disclosure. The equity capital ratio and equity capital are calculated on a consolidated basis. In conformity with the Banking Act, which is based on the implementation of Basel III on December 1, 2013, the regulatory capital is divided into the following two categories.

Tier 1 capital

- Common Equity Tier 1

Regulatory capital that represents the most subordinated claim in liquidation of the Bank, takes the first and proportionately greatest share of any losses as they occur, and which principal is never repaid outside of liquidation meets the criteria for classification as common equity, including capital stock, capital surplus, retained earnings and accumulated other comprehensive income as common equity Tier 1.

- Additional Tier 1 capital

Capital stock and capital surplus related to issuance of capital securities that are subordinated, have non-cumulative and conditional dividends or interests, and have no maturity or step-up conditions.

Tier 2 capital (Supplementary Tier 2 capital)

Regulatory capital that fulfills supplementary capital adequacy requirements, and includes subordinated debt with maturities over 5 years and allowance for loan losses in conformity with external regulatory standards and internal standards.

S-143

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued

The BIS capital adequacy ratio and capital in accordance to Basel III standards as of June 30, 2023 and December 31, 2022 are as follows:

BIS capital adequacy ratio


	June 30, 2023			December 31, 2022
Equity capital based on BIS (A):
Tier 1 capital:
Common Equity Tier 1	W	37,344,180			35,125,348
Additional Tier 1 capital		—			—

		37,344,180			35,125,348
Tier 2 capital		3,511,975			3,197,936

	W	40,856,155			38,323,284

Risk-weighted assets (B):
Credit risk-weighted assets	W	272,255,911			277,265,026
Market risk-weighted assets		3,380,708			1,329,603
Operational risk-weighted assets		13,902,477			7,458,674

	W	289,539,096			286,053,303

BIS capital adequacy ratio (A/B):		14.11	%		13.40	%
Tier 1 capital ratio:		12.90	%		12.28	%
Common Equity Tier 1 ratio		12.90	%		12.28	%
Additional Tier 1 capital ratio		—			—
Tier 2 capital ratio		1.21	%		1.12	%

Equity capital based on BIS


	June 30, 2023			December 31, 2022
Tier 1 capital (A):
Common Equity Tier 1
Capital stock	W	23,706,559			23,151,559
Capital surplus, etc.		1,455,539			748,121
Retained earnings		7,907,321			7,355,027
Accumulated other comprehensive income		4,408,538			4,185,537
Common stock deductibles		(133,777	)		(314,896	)

		37,344,180			35,125,348
Tier 2 capital (B):
Allowance for doubtful accounts, etc.		933,188			972,578
Qualified capital securities		2,816,000			2,244,000
Non-qualified capital securities		—			—
Additional stock deductibles		(237,213	)		(18,642	)

		3,511,975			3,197,936

Equity capital (A+B)	W	40,856,155			38,323,284

S-144

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued

(4) Market risk

(i) Concept

Market risk is defined as the possibility of potential loss resulting from fluctuations in interest rates, foreign exchange rates and the price of stocks and commodities. Trading position is exposed to risks, such as interest rate, stock price, and foreign exchange rate, etc. Non-trading position is mostly exposed to interest rates. Accordingly, the Bank classifies market risks into those exposed from trading position or those exposed from non-trading position.

(ii) Market risks of trading positions

Management method on market risks arising from trading positions

In response to the full implementation of Basel III market risk regulations, the Bank has been calculating and managing market risk capital in accordance with the Standardized Approach under Basel III since January 2023. The Standardized Approach under Basel III measures market risk by three components: sensitivity risk, default risk and residual risk. Sensitivity risk measures the market risk by five risk classes, which are general interest rate, credit spread, equity, foreign exchange and commodity. Default risk quantifies losses in the event of a default that exceeds normal market price fluctuations. Lastly, residual risk quantifies risk that cannot be measured by sensitivity risk and default risk. These components are then simply added together to calculate the total required capital.

The Bank sets total limit of market risk based on annual business plan, risk appetite and others and monitors Market Risk limit of each trading department on a daily basis.

Capital Requirements for Market risk

The Bank’s Capital Requirements for Market risk as of June 30, 2023 are as follows:


	June 30, 2023
Sensitivity risk:
General interest rate	W	79,468
Credit spread		68,924
Equity		2,674
Foreign exchange (FX)		92,309
Commodity		235

		243,610
Default risk		6,201
Residual risk		3,650

	W	253,461

The year ended December 31, 2022 were prior to the adoption of Basel III and therefore there is no comparable Basel III market risk required equity calculation for the current period.

S-145

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued

For reference, the market risk capital under Basel 2.5 is as follows:


	December 31, 2022
Interest rate	W	62,386
Stock		93
Foreign exchange (FX)		17,235
Option		11,249

	W	90,963

(iii) Market risks of non-trading positions

Management method on market risks arising from non-trading positions

The most critical market risk that arises in non-trading position is the interest rate risk. Interest rate risk is defined as the likely loss resulting from the unfavorable fluctuation of interest rate in the Bank’s financial condition and is measured by IRRBB (Interest Rate Risk in Banking Book), ΔEVE (change in Economic Value of Equity) and ΔNII (change in Net Interest Income).

ΔEVE represents fluctuations in the economic value of equity capital that may occur due to changes in interest rates affecting the present values of assets, liabilities and off-balance sheet items. ΔNII represents changes in net interest income that may occur over a certain period of time (e.g. one year) in the future due to changes in interest rates.

The Bank’s Risk Management Committee sets and manages interest rate risk limits on a yearly basis and interest rate risk is monthly measured and monitored.

ΔEVE and ΔNII of the Bank’s non-trading positions as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023		December 31, 2022
ΔEVE	W	1,395,801		1,484,769
ΔNII		250,890		389,249

S-146

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued

(iv) Foreign currency risk

Outstanding balances by currency with significant exposure as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	KRW		USD		EUR		JPY		GBP		Others			Total
Financial assets:
Cash and due from banks	W	7,340,536		7,549,277		103,013		92,603		27,906		249,835			15,363,170
Securities measured at FVTPL		13,786,131		531,164		—		2,565		—		61,350			14,381,210
Securities measured at FVOCI		26,468,232		9,074,805		26		466,534		—		642,294			36,651,891
Securities measured at amortized cost		6,708,107		—		—		—		—		—			6,708,107
Loans measured at FVTPL		508,887		—		—		—		—		—			508,887
Loans measured at amortized cost		129,660,594		50,775,960		4,247,463		1,737,968		1,048,683		1,719,575			189,190,243
Derivative financial assets		6,129,157		2,603,965		71,863		23,863		210,238		48,160			9,087,246
Other financial assets		8,967,033		5,445,753		72,011		27,275		1,390		2,670,643			17,184,105

		199,568,677		75,980,924		4,494,376		2,350,808		1,288,217		5,391,857			289,074,859
Financial liabilities:
Financial liabilities measured at FVTPL		1,408,897		198,813		—		—		—		—			1,607,710
Deposits		52,847,250		14,057,091		45,831		423,369		107		869			67,374,517
Borrowings		5,572,408		17,466,370		358,592		1,295,715		7,466		1,410,985			26,111,536
Debentures		109,632,361		29,290,427		3,846,317		124,110		97,197		7,235,145			150,225,557
Derivative financial liabilities		6,814,631		3,146,501		122,817		29,722		258,339		61,280			10,433,290
Other financial liabilities		10,763,234		5,534,398		110,669		20,619		20,430		2,787,655			19,237,005

		187,038,781		69,693,600		4,484,226		1,893,535		383,539		11,495,934			274,989,615

Net financial position	W	12,529,896		6,287,324		10,150		457,273		904,678		(6,104,077	)		14,085,244

S-147

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued


	December 31, 2022
	KRW		USD		EUR		JPY		GBP		Others			Total
Financial assets:
Cash and due from banks	W	3,980,664		7,358,901		24,870		52,023		14,083		108,265			11,538,806
Securities measured at FVTPL		11,206,799		691,367		—		2,218		—		51,522			11,951,906
Securities measured at FVOCI		28,590,211		8,016,390		25		376,526		—		701,767			37,684,919
Securities measured at amortized cost		6,355,884		—		—		—		—		—			6,355,884
Loans measured at FVTPL		541,811		—		—		—		—		—			541,811
Loans measured at amortized cost		138,177,034		51,883,126		3,573,847		1,682,518		1,051,281		1,677,797			198,045,603
Derivative financial assets		6,804,262		2,674,562		64,348		22,321		175,820		53,142			9,794,455
Other financial assets		5,194,841		2,330,511		45,396		51,070		16,868		37,926			7,676,612

		200,851,506		72,954,857		3,708,486		2,186,676		1,258,052		2,630,419			283,589,996
Financial liabilities:
Financial liabilities measured at FVTPL		1,289,717		180,007		—		—		—		—			1,469,724
Deposits		55,270,353		12,572,982		34,059		448,083		78		1,101			68,326,656
Borrowings		4,609,133		18,257,698		62,662		1,101,058		—		1,398,693			25,429,244
Debentures		120,509,021		27,774,042		2,752,363		181,000		97,197		7,398,273			158,711,896
Derivative financial liabilities		7,858,410		3,056,382		114,369		8,662		218,257		60,922			11,317,002
Other financial liabilities		4,197,192		2,264,017		34,930		31,419		16,893		173,280			6,717,731

		193,733,826		64,105,128		2,998,383		1,770,222		332,425		9,032,269			271,972,253

Net financial position	W	7,117,680		8,849,729		710,103		416,454		925,627		(6,401,850	)		11,617,743

(v) Interest rate risk management

The Bank is closely monitoring the outputs prepared by the industrial working groups which is managing the transition to alternative benchmark rates and the markets related the rates. The outputs include the information published by regulatory authorities related to IBORs. The authorities have made it clear that after the end of 2021, they will no longer persuade or force banks to submit IBORs. Responding the transition, the Bank organized a task force led by the head of the risk management division and the task force has established the LIBOR transition plan that consists of work flows such as alternative interest rate determination, application development, customer communication management, risk management, taxation, finance, legal, and accounting system establishment. The important progress of the plan is reported to the management and may also be reported to the board of directors if necessary. The purpose of the task force is to review where exposure to IBOR occurs within the Bank’s business, and to develop and implement the plan to transit to the alternative benchmark rates. As of June 30, 2023, we have finalized the introduction of conversion and replacement rates for the majority of our U.S. dollar-denominated contracts. However, we aim to complete the conversion of certain unconverted contracts with maturities after June 2023 by the first interest rate rebalancing date that occurs.

S-148

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued

The financial instruments that have yet to transition to alternative benchmark rates as of June 30, 2023 and December 31, 2022 are as follows. The amounts of the non-derivative financial instruments are the carrying amounts and the amounts of the derivatives, the commitments and the guarantees are the nominal amounts.


	June 30, 2023
	USD
Non-derivative financial assets:
Financial assets measured at amortized cost	W	5,068,103
Non-derivative financial liabilities:
Financial liabilities measured at amortized cost		1,203,838
Derivative:
Trading purpose:
Interest rate		79,715,979
Currency		43,884,433
Hedging purpose:
Interest rate		16,767,340
Currency		5,206,039

		145,573,791


	December 31, 2022
	USD
Non-derivative financial assets:
Financial assets measured at FVOCI	W	6,342
Financial assets measured at amortized cost		10,932,787
Privately placed corporate bonds		19,010

		10,958,139
Non-derivative financial liabilities:
Financial liabilities measured at amortized cost		781,924
Derivative:
Trading purpose:
Interest rate		76,158,628
Currency		42,669,517
Hedging purpose:
Interest rate		16,209,017
Currency		5,025,604

		140,062,766
Commitments and guarantees		75,022

(5) Liquidity risk management

(i) Concept

Liquidity risk is defined as the possibility of potential loss due to a temporary shortage in funds caused by a maturity mismatch or an unexpected capital outlay. Liquidity risk soars when funding rates rise, assets are sold below a normal price, or a good investment opportunity is missed.

S-149

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued

(ii) Approach to liquidity risk management

The Bank manages its liquidity risks as follows:

Allowable limit for liquidity risk

•

The allowable limit for liquidity risk sets LCR, NSFR and Mid- to long-term foreign currency fund management ratio

•

The management standards with regards to the allowable limit for liquidity risk should be set using separate and stringent set ratios in accordance with the FSS guidelines.

•

LCR: (High quality liquid assets / Total net cash outflows over the next 30 calendar days) X 100

•

NSFR: Available Stable Funding / Required Stable Funding X 100

•

Mid- to long-term foreign currency fund management ratio: Foreign currency funding being repaid after 1 year / Foreign currency lending being collected after 1 year X 100

Early warning indicator

To identify prematurely and cope with worsening liquidity risk trends, the Bank has set up 15 indexes such as the “Foreign Exchange Stabilization Bond CDS Premium,” and measures the trend monthly as a means for establishing the allowable liquidity risk limit complementary measures.

Stress-Test analysis and contingency plan

•

The Bank evaluates the effects on the liquidity risk and identifies the inherent flaws. In the case where an unpredictable and significant liquidity crisis occurs, the Bank executes risk situation analysis quarterly based on crisis specific to the Bank, market risk and complex emergency, and reports to the Risk Management Committee for the Bank’s solvency securitization.

•

The Bank established detailed contingency plan to manage the liquidity risks at every risk situations.

S-150

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued

(iii) Analysis on remaining contractual maturity of financial instruments

Remaining contractual maturity risks of non-derivative financial instruments including interest payment as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Financial assets:
Cash and due from banks	W	13,226,592		437,514		1,035,144		663,050		—		15,362,300
Securities measured at FVTPL		88,512		83,227		1,081,383		354,860		12,772,833		14,380,815
Securities measured at FVOCI		387,253		894,475		4,746,936		11,028,892		15,911,780		32,969,336
Securities measured at amortized cost		194,998		710,575		2,188,672		3,618,562		—		6,712,807
Loans		13,440,209		17,468,770		64,211,433		77,170,453		17,262,032		189,552,897
Other financial assets		15,612,342		—		—		—		1,641,963		17,254,305

	W	42,949,906		19,594,561		73,263,568		92,835,817		47,588,608		276,232,460

Financial liabilities:
Financial liabilities measured at FVTPL	W	398,648		86,328		480,254		443,668		198,812		1,607,710
Deposits		26,820,407		15,234,043		18,761,591		6,448,308		131,284		67,395,633
Borrowings		5,123,467		6,462,359		8,895,807		4,530,697		960,058		25,972,388
Debentures		7,041,099		13,936,287		39,813,122		84,078,554		6,015,918		150,884,980
Other financial liabilities		15,807,327		2,619,212		—		—		6,009,606		24,436,145

	W	55,190,948		38,338,229		67,950,774		95,501,227		13,315,678		270,296,856

S-151

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued



	December 31, 2022
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Financial assets:
Cash and due from banks	W	9,025,666		430,095		1,031,942		930,574		—		11,418,277
Securities measured at FVTPL		117,102		99,673		184,468		412,498		11,157,484		11,971,225
Securities measured at FVOCI		188,333		1,164,031		4,422,058		12,510,195		15,487,979		33,772,596
Securities measured at amortized cost		249,997		500,011		1,777,966		3,828,118		—		6,356,092
Loans		15,068,406		21,683,856		68,144,918		77,451,592		15,820,283		198,169,055
Other financial assets		6,344,790		—		—		—		1,447,354		7,792,144

	W	30,994,294		23,877,666		75,561,352		95,132,977		43,913,100		269,479,389

Financial liabilities:
Financial liabilities measured at FVTPL	W	60,946		123,271		388,312		290,403		88,371		951,303
Deposits		30,564,386		12,664,843		20,632,157		4,364,976		126,939		68,353,301
Borrowings		3,632,166		5,829,318		11,367,549		3,528,097		967,068		25,324,198
Debentures		4,841,503		11,647,424		54,655,589		83,734,150		4,151,709		159,030,375
Other financial liabilities		3,837,948		2,057,141		—		—		946,270		6,841,359

	W	42,936,949		32,321,997		87,043,607		91,917,626		6,280,357		260,500,536

Remaining contractual maturity risks of derivative financial instruments as of June 30, 2023 and December 31, 2022 are as follows:

Net settlement of derivative financial instruments


	June 30, 2023
	Within 1 month			1~3 months		3~12 months			1~5 years			Over 5 years		Total
Trading purpose derivatives:
Currency	W	(778	)		—		—			—			—		(778	)
Interest rate		61,199			25,533		(62,638	)		(312,536	)		509,072		220,630
Stock		8			—		—			—			—		8
Hedging purpose derivatives:
Interest rate		(73,860	)		34,919		400,220			1,345,943			1,180,225		2,887,447

	W	(13,431	)		60,452		337,582			1,033,407			1,689,297		3,107,307

S-152

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued


	December 31, 2022
	Within 1 month			1~3 months			3~12 months		1~5 years			Over 5 years		Total
Trading purpose derivatives:
Currency	W	14,310			56,466			123,397		(231,289	)		329,021		291,905
Interest rate		1			—			—		—			—		1
Hedging purpose derivatives:
Interest rate		(43,682	)		(20,611	)		265,185		907,552			912,990		2,021,434

	W	(29,371	)		35,855			388,582		676,263			1,242,011		2,313,340

Gross settlement of derivative financial instruments


	June 30, 2023
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Trading purpose derivatives:
Currency
Inflow	W	61,835,250		34,291,377		52,669,128		81,652,860		6,581,694		237,030,309
Outflow		61,792,991		34,472,724		52,211,440		80,900,744		6,565,669		235,943,568
Hedging purpose derivatives:
Currency
Inflow		3,699,150		1,086,353		5,724,648		17,824,505		4,098,679		32,433,335
Outflow		3,799,558		1,127,358		6,675,366		17,614,734		3,991,381		33,208,397

Total inflow	W	65,534,400		35,377,730		58,393,776		99,477,365		10,680,373		269,463,644

Total outflow	W	65,592,549		35,600,082		58,886,806		98,515,478		10,557,050		269,151,965


	December 31, 2022
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Trading purpose derivatives:
Currency
Inflow	W	52,226,487		31,340,410		63,562,432		77,160,037		7,031,148		231,320,514
Outflow		52,120,608		31,419,674		63,702,102		76,526,053		6,968,341		230,736,778

Hedging purpose derivatives:
Currency
Inflow		382,466		331,653		8,692,048		15,738,325		3,653,029		28,797,521
Outflow		727,331		518,563		8,825,328		16,632,521		3,577,128		30,280,871

Total inflow	W	52,608,953		31,672,063		72,254,480		92,898,362		10,684,177		260,118,035

Total outflow	W	52,847,939		31,938,237		72,527,430		93,158,574		10,545,469		261,017,649

S-153

Korea Development Bank

Notes to the Interim Separate Financial Statements

June 30, 2023 and 2022 (Unaudited), and December 31, 2022

(In millions of won)

48. Risk Management, Continued

Remaining contractual maturity risks of guarantees and commitments as of June 30, 2023 and December 31, 2022 are as follows:


	June 30, 2023
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Guarantees	W	1,561,852		1,765,655		3,998,819		9,685,360		366,697		17,378,383
Commitments		1,315		278,990		1,085,792		2,831,347		51,498,821		55,696,265

	W	1,563,167		2,044,645		5,084,611		12,516,707		51,865,518		73,074,648


	December 31, 2022
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Guarantees	W	1,004,990		1,588,345		3,883,351		9,810,539		420,035		16,707,260
Commitments		100,641		51,336		761,191		1,500,964		46,812,437		49,226,569

	W	1,105,631		1,639,681		4,644,542		11,311,503		47,232,472		65,933,829

S-154

THE REPUBLIC OF KOREA

The Economy

The following table sets forth information regarding certain of the Republic’s key economic indicators for the periods indicated.


	As of or for the year ended December 31,
	2018			2019			2020			2021			2022
	(billions of dollars and trillions of Won, except percentages)
GDP Growth (at current prices)		3.4	%		1.4	%		0.8	%		7.2	%		3.9	%⁽⁷⁾
GDP Growth (at chained 2015 year prices)		2.9	%		2.2	%		(0.7	)%		4.3	%		2.6	%⁽⁷⁾
Inflation⁽¹⁾		1.5	%		0.4	%		0.5	%		2.5	%		5.1	%⁽⁷⁾
Unemployment⁽²⁾		3.8	%		3.8	%		4.0	%		3.7	%		2.9	%⁽⁷⁾
Trade Surplus (Deficit)⁽³⁾	$	69.7		$	38.9		$	44.9		$	29.4		$	(47.8	)⁽⁷⁾
Foreign Currency Reserves	$	403.7		$	408.8		$	443.1		$	463.1		$	423.2
External Liabilities⁽⁴⁾	$	441.2		$	470.7		$	550.6		$	632.4		$	664.5	⁽⁷⁾
Fiscal Balance	W	31.2		W	(12.0	)	W	(71.2	)	W	(30.5	)	W	(64.6	)⁽⁷⁾
Direct Internal Debt of the Government⁽⁵⁾(as % of GDP⁽⁶⁾)		35.6	%		37.3	%		44.0	%		48.4	%		51.9	%
Direct External Debt of the Government⁽⁵⁾(as % of GDP⁽⁶⁾)		0.4	%		0.4	%		0.5	%		0.6	%		0.6	%

(1)	Measured by the year-on-year change in the consumer price index with base year 2020, as announced by The Bank of Korea.

(2)	Average for year.

(3)	Derived from customs clearance statistics on a C.I.F. basis, meaning that the price of goods includes insurance and freight cost.

(4)	Calculated under the criteria based on the sixth edition of the Balance of Payment Manual published by the International Monetary Fund in December 2010.

(5)	Does not include guarantees by the Government. See “—Debt—External and Internal Debt of the Government—Guarantees by the Government” for information on outstanding guarantees by the Government.

(6)	At chained 2015 year prices.

(7)	Preliminary.

Source: The Bank of Korea

S-155

Gross Domestic Product

The following table sets out the composition of the Republic’s GDP at current market and chained 2015 year prices and the annual average increase in the Republic’s GDP.

Gross Domestic Product


	2018			2019			2020			2021			2022⁽¹⁾			As % of GDP 2022⁽¹⁾
	(billions of Won)
Gross Domestic Product at Current Market Prices:
Private		911,576.1			935,933.8			900,320.9			956,017.6			1,039,397.8			48.1
Government		304,692.7			328,663.2			350,094.3			377,759.9			405,704.6			18.8
Gross Capital Formation		597,687.4			606,119.4			618,792.5			672,469.8			717,305.9			33.2
Exports of Goods and Services		791,798.6			755,863.2			705,640.1			871,129.5			1,043,526.4			48.3
Less Imports of Goods and Services		(707,562.2	)		(702,081.5	)		(634,121.7	)		(797,178.4	)		(1,043,372.5	)		(48.3	)
Statistical Discrepancy		0.0			0.0			0.0			0.0			(788.3	)		0.0
Expenditures on Gross Domestic Product		1,898,192.6			1,924,498.1			1,940,726.2			2,080,198.5			2,161,773.9			100.0
Net Factor Income from the Rest of the World		7,644.9			16,609.8			16,943.8			23,413.6			31,753.7			1.5
Gross National Income⁽²⁾		1,905,837.5			1,941,107.9			1,957,669.9			2,103,612.0			2,193,527.5			101.5
Gross Domestic Product at Chained 2015 Year Prices:
Private		875,577.9			894,074.8			850,956.9			881,396.3			917,796.5			46.6
Government		285,892.6			304,189.9			319,677.8			337,191.8			350,749.1			17.8
Gross Capital Formation		569,403.6			558,468.9			563,419.4			579,842.4			578,412.3			29.4
Exports of Goods and Services		777,514.9			779,368			766,065.7			851,058.7			880,237.5			44.7
Less Imports of Goods and Services		(697,841.1	)		(684,516.8	)		(663,103.3	)		(730,044.1	)		(755,884.8	)		(38.4	)
Statistical Discrepancy		(1,324.7	)		(1,432.8	)		(1,118.9	)		(1,312.6	)		(1,635.8	)		(0.1	)
Expenditures on Gross Domestic Product⁽³⁾		1,812,005.4			1,852,666.4			1,839,523.3			1,918,709.9			1,968,839.5			100.0
Net Factor Income from the Rest of the World in the Terms of Trade		7,105.6			15,242.3			15,648.6			20,902.8			26,802.1			1.4
Trading Gains and Losses from Changes in the Terms of Trade		3,009.2			(39,420.2	)		(25,611.8	)		(46,225.4	)		(115,340.2	)		(5.9	)
Gross National Income⁽⁴⁾		1,822,153.4			1,828,546.7			1,829,580.0			1,893,465.7			1,880,416			95.5
Percentage Increase (Decrease) of GDP over Previous Year:
At Current Prices		3.4			1.4			0.8			7.2			3.9
At Chained 2015 Year Prices		2.9			2.2			(0.7	)		4.3			2.6

(1)	Preliminary.

(2)	GDP plus net factor income from the rest of the world is equal to the Republic’s gross national income.

(3)	Under the “chain-linked” measure of GDP, the components of GDP will not necessarily add up to total GDP.

(4)	Under the “chain-linked” measure of Gross National Income, the components of Gross National Income will not necessarily add up to the total Gross National Income.

Source: The Bank of Korea

S-156

The following table sets out the Republic’s GDP by economic sector at current market prices:

Gross Domestic Product by Economic Sector

(at current market prices)


	2018		2019		2020		2021		2022⁽¹⁾		As % of GDP 2022⁽¹⁾
	(billions of Won)
Industrial Sectors:		679,405.1		661,008.8		665,744.4		713,251.7		721,339.7		33.4
Agriculture, Forestry and Fishing		33,150.1		32,099.3		34,267.8		38,601.5		35,488.7		1.6
Manufacturing, Mining and Quarrying		507,778.5		487,410.0		482,774.6		532,037.8		555,941.9		25.7
Mining and Quarrying		2,128.2		2,008.9		1,857.2		1,868.3		1,836.7		0.1
Manufacturing		505,650.2		485,401.2		480,917.4		530,169.6		554,105.1		25.6
Electricity, Gas and Water Supply		35,153.4		36,644.3		43,069.7		35,676.5		17,847.1		0.8
Construction		103,323.1		104,855.2		105,632.3		106,935.9		112,062.0		5.2
Services:		1,057,135.6		1,101,624.1		1,106,359.9		1,182,008.3		1,254,564.2		58.0
Wholesale and Retail Trade, Accommodation and Food Services		180,424.1		184,603.8		172,154.9		177,391.9		191,220.7		8.8
Transportation and Storage		57,925.7		60,688.7		54,956.0		66,627.9		74,832.6		3.5
Finance and Insurance		104,189.5		104,251.7		110,874.1		124,455.5		136,754.8		6.3
Real Estate		138,192.6		141,409.0		146,391.0		148,151.5		146,793.7		6.8
Information and Communication		79,536.2		83,040.6		88,417.0		97,188.8		99,179.1		4.6
Business Activities		165,545.5		175,384.5		180,600.8		192,737.3		205,351.5		9.5
Public Administration, Defense and Social Security		114,862.8		121,818.0		128,020.2		136,112.7		145,242.8		6.7
Education		90,676.5		94,401.2		93,046.1		98,794.6		102,188.8		4.7
Human Health and Social Work		81,128.2		89,510.8		92,680.3		99,169.0		105,301.4		4.9
Cultural and Other Services		44,654.5		46,515.8		39,219.5		41,379.1		47,699.0		2.2
Taxes Less Subsidies on Products		161,651.9		161,865.1		168,621.8		184,938.4		185,870.0		8.6
Gross Domestic Product at Current Market Prices		1,898,192.6		1,924,498.1		1,940,726.2		2,080,198.5		2,161,773.9		100.0
Net Factor Income from the Rest of the World		7,644.9		16,609.8		16,943.8		23,413.6		31,753.7		1.5
Gross National Income at Current Market Price		1,905,837.5		1,941,107.9		1,957,669.9		2,103,612.0		2,193,527.5		101.5

(1)	Preliminary.

Source: The Bank of Korea

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The following table sets out the Republic’s GDP per capita:

Gross Domestic Product per capita

(at current market prices)


	2018		2019		2020		2021		2022⁽¹⁾
GDP per capita (thousands of Won)		36,782		37,218		37,440		40,201		41,872
GDP per capita (U.S. dollar)		33,429		31,929		31,727		35,128		32,410
Average Exchange Rate (in Won per U.S. dollar)		1,100.3		1,165.7		1,180.1		1,144.4		1,292.1

(1)	Preliminary.

Source: The Bank of Korea

The following table sets out the Republic’s Gross National Income, or GNI, per capita:

Gross National Income per capita

(at current market prices)


	2018		2019		2020		2021		2022⁽¹⁾
GNI per capita (thousands of Won)		36,930		37,539		37,766		40,654		42,487
GNI per capita (U.S. dollar)		33,564		32,204		32,004		35,523		32,886
Average Exchange Rate (in Won per U.S. dollar)		1,100.3		1,165.7		1,180.1		1,144.4		1,292.1

(1)	Preliminary.

Source: The Bank of Korea

The following table sets out the Republic’s GDP by economic sector:

Gross Domestic Product by Economic Sector

(at chained 2015 year prices)


	2018		2019		2020		2021		2022⁽¹⁾		As % of GDP 2022⁽¹⁾
	(billions of Won)
Industrial Sectors:		652,499.9		658,512.3		651,934.8		687,397.3		696,064.9		35.4
Agriculture, Forestry and Fishing		32,109.2		33,373.0		31,441.7		33,070.8		32,736.0		1.7
Manufacturing, Mining and Quarrying		485,567.2		490,846.2		485,538.2		519,805.5		527,287.6		26.8
Mining and Quarrying		2,041.6		1,915.7		1,853.4		1,939.9		1,834.5		0.1
Manufacturing		483,530.2		488,934.6		483,691.2		517,872.8		525,452.5		26.7
Electricity, Gas and Water Supply		43,082.6		44,927.6		46,762.2		48,045.1		48,938.2		2.5
Construction		91,740.9		89,365.5		88,192.7		86,475.9		87,103.1		4.4
Services:		1,010,422.7		1,044,553.5		1,036,168.9		1,075,565.9		1,120,754.2		56.9
Wholesale and Retail Trade, Accommodation and Food Services		172,543.2		178,609.6		168,669.4		171,001.2		182,997.1		9.3
Transportation and Storage		62,521.7		63,574.1		52,547.3		56,043.7		61,129.6		3.1
Finance and Insurance		98,999.6		102,359.9		112,144.8		119,973.2		123,605.1		6.3
Real Estate		133,422.5		135,309.3		138,375.2		140,325.4		140,309.9		7.1

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	2018		2019		2020		2021		2022⁽¹⁾		As % of GDP 2022⁽¹⁾
	(billions of Won)
Information and Communication		79,245.6		82,893.8		86,521.7		90,951.0		94,166.2		4.8
Business Activities		153,604.6		157,571.7		157,729.0		162,750.8		167,563.5		8.5
Public Administration, Defense and Social Security		104,100.5		108,116.5		111,463.5		115,519.0		118,963.4		6.0
Education		86,222.9		87,582.3		85,878.5		90,074.4		92,872.0		4.7
Human Health and Social Work		78,267.5		85,931.7		86,884.5		91,800.1		97,622.7		5.0
Cultural and Other Services		41,604.3		42,682.6		35,388.4		36,744.3		41,065.6		2.1
Taxes Less Subsidies on Products		149,011.6		150,146.3		152,185.4		158,055.5		154,621.9		7.9
Gross Domestic Product⁽²⁾		1,812,005.4		1,852,666.4		1,839,523.3		1,918,709.9		1,968,839.5		100.0

(1)	Preliminary.

(2)	Under the “chain-linked” measure of GDP, the components of GDP will not necessarily add up to total GDP.

Source: The Bank of Korea

GDP growth in 2018 was 2.9% at chained 2015 year prices, as aggregate private and general government consumption expenditures increased by 3.7% and exports of goods and services increased by 4.0%, which more than offset a decrease in gross domestic fixed capital formation by 2.2% and an increase in imports of goods and services by 1.7%, each compared with 2017.

GDP growth in 2019 was 2.2% at chained 2015 year prices, as aggregate private and general government consumption expenditures increased by 3.2%, imports of goods and services decreased by 1.9% and exports of goods and services increased by 0.2%, which more than offset a decrease in gross domestic fixed capital formation by 2.1%, each compared with 2018.

GDP in 2020 contracted by 0.7% at chained 2015 year prices, primarily due to a 4.8% decrease in private consumption expenditures and a 1.7% decrease in exports of goods and services, which were offset in part by a 5.1% increase in general government consumption expenditures, a 3.5% increase in gross domestic fixed capital formation and a 3.1% decrease in imports of goods and services, each compared with 2019. The contraction of the Republic’s GDP in 2020 was primarily due to the COVID-19 pandemic.

GDP growth in 2021 was 4.3% at chained 2015 year prices, as exports of goods and services increased by 11.1%, aggregate private and general government consumption expenditures increased by 4.1% and gross domestic fixed capital formation increased by 3.2%, which more than offset an increase in imports of goods and services by 10.1%, each compared with 2020.

Based on preliminary data, GDP growth in 2022 was 2.6% at chained 2015 year prices, as aggregate private and general government consumption expenditures increased by 4.1% and exports of goods and services increased by 3.4%, which more than offset an increase in imports of goods and services by 3.5% and a decrease in gross fixed capital formation by 0.5%, each compared with 2021.

Based on preliminary data, GDP growth in the first half of 2023 was 0.9% at chained 2015 year prices, primarily due to an increase in aggregate private and general government consumption expenditures by 2.9% and an increase in gross fixed capital formation by 3.1%, the effects of which were offset in large part by an increase in imports of goods and services by 4.1% and a decrease in exports of goods and services by 1.3%, each compared with the corresponding period of 2022.

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Principal Sectors of the Economy

Prices, Wages and Employment

Based on preliminary data, the inflation rate was 4.0% and the unemployment rate was 3.0% in the first half of 2023.

The Financial System

Securities Markets

The Korea Composite Stock Price Index was 2,564.3 on June 30, 2023, 2,632.6 on July 31, 2023, 2,556.3 on August 31, 2023, 2,465.1 on September 27, 2023 and 2,479.8 on October 12, 2023.

Monetary Policy

Foreign Exchange

The market average exchange rate between the Won and the U.S. Dollar (in Won per one U.S. Dollar) as announced by the Seoul Money Brokerage Service Ltd. was Won 1,312.8 to US$1.00 on June 30, 2023, Won 1,280.0 to US$1.00 on July 31, 2023, Won 1,321.4 to US$1.00 on August 31, 2023, Won 1,344.8 to US$1.00 on September 27, 2023 and Won 1,339.6 to US$1.00 on October 12, 2023.

Balance of Payments and Foreign Trade

Balance of Payments

Based on preliminary data, the Republic recorded a current account surplus of US$2.4 billion in the first half of 2023. The current account surplus in the first half of 2023 decreased from the current account surplus of US$24.9 billion in the corresponding period of 2022, primarily due to a change from a surplus to a deficit from the goods account and an increase in deficit from the services account, the effects of which were offset in part by an increase in surplus from the income account.

Trade Balance

The following table summarizes the Republic’s trade balance for the periods indicated:

Trade Balance


	Exports⁽¹⁾		As % of GDP⁽²⁾			Imports⁽¹⁾		As % of GDP⁽²⁾			Balance of Trade			Exports as % of Imports
	(billions of dollars, except percentages)
2018		604.9		35.1	%		535.2		31.0	%		69.7			113.0
2019		542.2		32.8	%		503.3		30.5	%		38.9			107.7
2020		512.5		31.2	%		467.6		28.4	%		44.9			109.6
2021		644.4		35.5	%		615.1		33.8	%		29.3			104.8
2022⁽³⁾		683.6		40.9	%		731.4		43.7	%		(47.8	)		93.5

(1)	These entries are derived from customs clearance statistics on a C.I.F. basis, meaning that the price of goods includes insurance and freight cost.

(2)	At current market prices.

(3)	Preliminary.

Source: The Bank of Korea; Korea Customs Service

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Based on preliminary data, the Republic recorded a trade deficit of US$26.5 billion in the first half of 2023. Exports decreased by 12.4% to US$307.2 billion in the first half of 2023 from US$350.5 billion in the corresponding period of 2022, primarily due to a deterioration in the domestic economic conditions of the Republic’s major trading partners and a downturn in the semiconductor industry. Imports decreased by 7.7% to US$333.6 billion in the first half of 2023 from US$361.4 billion in the corresponding period of 2022, primarily due to a decrease in energy and commodity prices, which also led to decreased unit prices of other major raw materials.

Foreign Currency Reserves

The amount of the Government’s foreign currency reserves was US$414.1 billion as of September 30, 2023.

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DESCRIPTION OF THE NOTES

The following is a description of some of the terms of the Notes we are offering. Since it is only a summary, we urge you to read the fiscal agency agreement described below and the forms of global note before deciding whether to invest in the Notes. We have filed a copy of these documents with the United States Securities and Exchange Commission as exhibits to the registration statement no. 333-265886.

The general terms of our Notes are described in the accompanying prospectus. The description in this prospectus supplement further adds to that description or, to the extent inconsistent with that description, replaces it.

Governed by Fiscal Agency Agreement

We will issue the Notes under the fiscal agency agreement, dated as of February 15, 1991, as amended and supplemented from time to time, between us and The Bank of New York (now The Bank of New York Mellon), as fiscal agent (the “Fiscal Agency Agreement”). The fiscal agent will maintain a register for the Notes.

Payment of Principal and Interest

Fixed Rate Notes

The 20 Notes are initially limited to US$ aggregate principal amount, the 20 Notes are initially limited to US$ aggregate principal amount and the 20 Notes (together with the 20 Notes and the 20 Notes, the “Fixed Rate Notes”) are initially limited to US$ aggregate principal amount. The 20 Notes will mature on October , 20 (the “20 Notes Maturity Date”), the 20 Notes will mature on October , 20 (the “20 Notes Maturity Date”) and the 20 Notes will mature on October , 20 (the “20 Notes Maturity Date”, and together with the 20 Notes Maturity Date and the 20 Notes Maturity Date, the “Fixed Rate Notes Maturity Dates”). The 20 Notes will bear interest at the rate of % per annum, the 20 Notes will bear interest at the rate of % per annum and the 20 Notes will bear interest at the rate of % per annum, in each case payable semi-annually in arrear on April and October of each year (each, a “Fixed Rate Notes Interest Payment Date”), beginning on April , 2024. Interest on the Fixed Rate Notes will accrue from October , 2023. If any Fixed Rate Notes Interest Payment Date or any Fixed Rate Notes Maturity Date shall be a day on which banking institutions in The City of New York or Seoul are authorized or obligated by law to close, then such payment will not be made on such date but will be made on the next succeeding day which is not a day on which banking institutions in The City of New York or Seoul are authorized or obligated by law to close, with the same force and effect as if made on the date for such payment, and no interest shall be payable in respect of any such delay. We will pay interest to the person who is registered as the owner of a 20 Note, 20 Note or 20 Note, as applicable, at the close of business on the fifteenth day (whether or not a business day) preceding the related Fixed Rate Notes Interest Payment Date. Interest on the 20 Notes, the 20 Notes and the 20 Notes will be computed on the basis of a 360-day year consisting of twelve 30-day months. We will make principal and interest payments on the 20 Notes, the 20 Notes and the 20 Notes in immediately available funds in U.S. dollars.

Floating Rate Notes

The Floating Rate Notes are initially limited to US$ aggregate principal amount. The Floating Rate Notes will mature on the Floating Rate Notes Interest Payment Date (as defined below) on or nearest to October , 20 (the “Floating Rate Notes Maturity Date”). The Floating Rate Notes will

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bear interest at a rate equal to Compounded Daily SOFR (as defined herein) plus % per annum, payable quarterly in arrears on January , April , July and October of each year, subject in each case to adjustment in accordance with the Modified Following Business Day Convention, as explained herein (each, a “Floating Rate Notes Interest Payment Date”), beginning on the Floating Rate Notes Interest Payment Date falling on or nearest to January , 2024, and if redeemed early, the date of such redemption. In no event shall the rate of interest for the Floating Rate Notes be less than 0% for any Floating Rate Notes Interest Period (as defined herein).

Interest on the Floating Rate Notes will accrue from (and including) October , 2023 to (but excluding) the Floating Rate Notes Maturity Date. If any Floating Rate Notes Interest Payment Date or the Floating Rate Notes Maturity Date falls on a day that is not a business day (as defined below), that Floating Rate Notes Interest Payment Date or the Floating Rate Notes Maturity Date will be adjusted in accordance with the Modified Following Business Day Convention. The term “Modified Following Business Day Convention” means that the relevant date shall be postponed to the first following day that is a business day (and interest will continue to accrue to but excluding such following date that is a business day) unless that day falls in the next calendar month in which case that date will be the first preceding day that is a business day and interest shall accrue to but excluding such preceding business day. The term “business day” as used herein means a U.S. Government Securities Business Day (as defined herein) and a day other than a Saturday, a Sunday or any other day on which banking institutions in Seoul are authorized or required by law or executive order to remain closed.

We will pay interest to the person who is registered as the owner of a Floating Rate Note at the close of business on the fifteenth day (whether or not a business day) preceding the related Floating Rate Notes Interest Payment Date. Interest on the Floating Rate Notes will be computed on the basis of the actual number of days in the applicable Floating Rate Notes Interest Period (as defined herein) divided by 360. We will make principal and interest payments on the Floating Rate Notes in immediately available funds in U.S. dollars.

1. Definition of Compounded Daily SOFR

“Compounded Daily SOFR” means the rate of return of a daily compound interest investment (with the daily secured overnight financing rate as the reference rate for the calculation of interest) and will be determined by the Calculation Agent (as defined herein) on the Floating Rate Notes Interest Determination Date in accordance with the following formula, and the resulting percentage will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, 0.000005 being rounded upwards:

LOGO

where:

“d” means the number of calendar days in the Floating Rate Notes Interest Period;

“d₀” for any Floating Rate Notes Interest Period, means the number of U.S. Government Securities Business Days (as defined herein) in the Floating Rate Notes Interest Period;

“i” is a series of whole numbers from one to d₀, each representing the relevant U.S. Government Securities Business Days in chronological order from, and including, the first U.S. Government Securities Business Day in the Floating Rate Notes Interest Period;

“n_i” for any U.S. Government Securities Business Day “i” means the number of calendar days from, and including, such U.S. Government Securities Business Day “i” up to, but excluding, the following U.S. Government Securities Business Day;

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“SOFR_i-5USBD” means the SOFR Reference Rate for the U.S. Government Securities Business Day (being a U.S. Government Securities Business Day falling in the Floating Rate Notes Interest Period) falling five U.S. Government Securities Business Days prior to the relevant U.S. Government Securities Business Day “i”; and

“SOFR Reference Rate” means, in respect of any U.S. Government Securities Business Day, a reference rate equal to the daily secured overnight financing rate (“SOFR”) for such U.S. Government Securities Business Day as provided by the Federal Reserve Bank of New York, as the administrator of such rate (or any successor administrator of such rate) on the website of the Federal Reserve Bank of New York currently at http://www.newyorkfed.org, or any successor website of the Federal Reserve Bank of New York (the “New York Fed’s Website”) in each case, on or about 5:00 p.m., New York City time, on the U.S. Government Securities Business Day immediately following such U.S. Government Securities Business Day (the “SOFR Determination Time”).

“Floating Rate Notes Interest Determination Date” means the date five U.S. Government Securities Business Days before each Floating Rate Notes Interest Payment Date;

“Floating Rate Notes Interest Period” refers to the period from (and including) October , 2023 to (but excluding) the first Floating Rate Notes Interest Payment Date and each successive period from (and including) a Floating Rate Notes Interest Payment Date to (but excluding) the next Floating Rate Notes Interest Payment Date; and

“U.S. Government Securities Business Day” means any day except for a Saturday, a Sunday or a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in U.S. government securities.

The Bank of New York Mellon will serve as the “Calculation Agent” for the Floating Rate Notes. In the absence of manifest error, the Calculation Agent’s determination of Compounded Daily SOFR and its calculation of the applicable interest rate for each Floating Rate Notes Interest Period will be final and binding. The Calculation Agent will make available the interest rates for current and preceding Floating Rate Notes Interest Periods by delivery of such notice through such medium as is available to participants in DTC, Euroclear and Clearstream, or any successor thereof, and in accordance with such applicable rules and procedures as long as the Floating Rate Notes are held in global form. In the event that the Floating Rate Notes are held in certificated form, the interest rates for current and preceding Floating Rate Notes Interest Periods will be published in the manner described below under “—Notices”. We have the right to replace the Calculation Agent with another leading commercial bank or investment bank in New York or London. If the appointed office of the Calculation Agent is unable or unwilling to continue to act as the Calculation Agent or fails to determine the interest rate for any Floating Rate Notes Interest Period, we have a duty to appoint such other leading commercial bank or investment bank in New York or London.

2. Benchmark Transition

Notwithstanding anything to the contrary in the documentation relating to the Floating Rate Notes, if the Calculation Agent is notified by the Determination Agent on or prior to the relevant Reference Time that a Benchmark Transition Event and its related Benchmark Replacement Date (each as defined herein) have occurred with respect to the then-current Benchmark, then the Benchmark Replacement will replace the then-current Benchmark for all purposes relating to the Floating Rate Notes in respect of all determinations on such date and for all determinations on all subsequent dates.

In connection with the implementation of a Benchmark Replacement, the Determination Agent will have the right to make Benchmark Replacement Conforming Changes (as defined herein) from time to time.

Any determination, decision or election that may be made by the Determination Agent or us pursuant to the Benchmark Replacement provisions described herein, including any determination with respect to tenor, rate or

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adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection:

will be conclusive and binding absent manifest error, may be made in the Determination Agent’s sole discretion, and, notwithstanding anything to the contrary herein relating to the Floating Rate Notes;

if made by us, will be made in our sole discretion;

if made by the Determination Agent, will be made after consultation with us, and the Determination Agent will not make any such determination, decision or election to which we object; and

shall become effective without consent from any other party.

Any determination, decision or election pursuant to the Benchmark Replacement provisions not made by the Determination Agent will be made by us on the basis as described above. The Calculation Agent shall have no liability for not making any such determination, decision or election. In addition, we may designate an entity (which may be our affiliate) to make any determination, decision or election that we have the right to make in connection with the benchmark replacement provisions set forth herein.

None of the fiscal agent, paying agent or calculation agent shall be under any obligation (i) to monitor, determine or verify the unavailability or cessation of SOFR or Compounded Daily SOFR, or whether or when there has occurred, or to give notice to any other transaction party of the occurrence of, any Benchmark Transition Event or related Benchmark Replacement Date, (ii) to select, determine or designate any Benchmark Replacement, or other successor or replacement benchmark index, or whether any conditions to the designation of such a rate or index have been satisfied, (iii) to select, determine or designate any Benchmark Replacement Adjustment, or other modifier to any replacement or successor index, or (iv) to determine whether or what Benchmark Replacement Conforming Changes are necessary or advisable, if any, in connection with any of the foregoing, including, but not limited to, adjustments as to any alternative spread thereon, the business day convention, interest determination dates or any other relevant methodology applicable to such substitute or successor benchmark. In connection with the foregoing, each of the fiscal agent, paying agent and calculation agent shall be entitled to conclusively rely on any determinations made by us or the Determination Agent without independent investigation, and none of the fiscal agent, paying agent or the calculation agent will have any liability for actions taken at our direction in connection therewith. None of the fiscal agent, paying agent or calculation agent shall be liable for any inability, failure or delay on its part to perform any of its duties as a result of the unavailability of SOFR, Compounded Daily SOFR or other applicable Benchmark Replacement, including as a result of any failure, inability, delay, error or inaccuracy on the part of any other transaction party in providing any direction, instruction, notice or information required or contemplated by the terms hereof and reasonably required for the performance of such duties. None of the fiscal agent, paying agent or calculation agent shall be responsible or liable for our actions or omissions or for those of the Determination Agent, or for any failure or delay in the performance by us or the Determination Agent, nor shall any of the fiscal agent, paying agent or calculation agent be under any obligation to oversee or monitor our performance or that of the Determination Agent.

For purposes of these Benchmark Replacement provisions:

“Benchmark” means, initially, Compounded Daily SOFR, as such term is defined above; provided that if the Determination Agent determines on or prior to the Reference Time that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to Compounded Daily SOFR (including the daily published component used in the calculation thereof) or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement;

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“Benchmark Replacement” means the first alternative set forth in the order below that can be determined by us or the Determination Agent as of the Benchmark Replacement Date:

the sum of: (a) the alternate rate of interest that has been selected or recommended by the Relevant Governmental Body (as defined herein) as the replacement for the then-current Benchmark and (b) the Benchmark Replacement Adjustment (as defined herein);

II.

the sum of: (a) the ISDA Fallback Rate (as defined herein) and (b) the Benchmark Replacement Adjustment; or

III.

the sum of: (a) the alternate rate of interest that has been selected by us or the Determination Agent as the replacement for the then-current Benchmark giving due consideration to any industry-accepted rate of interest as a replacement for the then-current Benchmark for U.S. dollar-denominated floating rate notes at such time and (b) the Benchmark Replacement Adjustment;

“Benchmark Replacement Adjustment” means the first alternative set forth in the order below that can be determined by us or the Determination Agent as of the Benchmark Replacement Date:

the spread adjustment (which may be a positive or negative value or zero), or method for calculating or determining such spread adjustment that has been selected or recommended by the Relevant Governmental Body for the applicable Unadjusted Benchmark Replacement (as defined herein);

II.

if the applicable Unadjusted Benchmark Replacement is equivalent to the ISDA Fallback Rate, then the ISDA Fallback Adjustment (as defined herein); and

III.

the spread adjustment (which may be a positive or negative value or zero) that has been selected by us or the Determination Agent giving due consideration to any industry-accepted spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the then-current Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated floating rate notes at such time;

“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definitions or interpretations of interest period, the timing and frequency of determining rates and making payments of interest, the rounding of amounts or tenors, and other administrative matters) that the Determination Agent decides may be appropriate to reflect the adoption of such Benchmark Replacement in a manner substantially consistent with market practice (or, if the Determination Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Determination Agent determines that no market practice for use of the Benchmark Replacement exists, in such other manner as the Determination Agent determines is reasonably practicable);

“Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark (including the daily published component used in the calculation thereof):

in the case of clause (I) or (II) of the definition of “Benchmark Transition Event,” the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of the Benchmark permanently or indefinitely ceases to provide the Benchmark (or such component); or

II.

in the case of clause (III) of the definition of “Benchmark Transition Event,” the date of the public statement or publication of information referenced therein.

For the avoidance of doubt, if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for such determination.

For the avoidance of doubt, for purposes of the definitions of Benchmark Replacement Date and Benchmark Transition Event, references to Benchmark also include any reference rate underlying such Benchmark;

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“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark (including the daily published component used in the calculation thereof):

a public statement or publication of information by or on behalf of the administrator of the Benchmark (or such component) announcing that such administrator has ceased or will cease to provide the Benchmark (or such component), permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark (or such component);

II.

a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark (or such component), the central bank for the currency of the Benchmark (or such component), an insolvency official with jurisdiction over the administrator for the Benchmark (or such component), a resolution authority with jurisdiction over the administrator for the Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator for the Benchmark (or such component), which states that the administrator of the Benchmark (or such component) has ceased or will cease to provide the Benchmark (or such component) permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark (or such component); or

III.

a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark announcing that the Benchmark is no longer representative;

“Determination Agent” means an independent bank of international repute selected by and acting as our agent for the purposes of the conditions of the Floating Rate Notes and notified to the Fiscal Agent and Calculation Agent in writing. Neither the Calculation Agent nor the Fiscal Agent shall be responsible for the calculations made by, or the actions or omissions of, the Determination Agent and shall not be liable for any losses caused thereby.

“ISDA Definitions” means the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time;

“ISDA Fallback Adjustment” means the spread adjustment (which may be a positive or negative value or zero) that would apply for derivatives transactions referencing the ISDA Definitions to be determined upon the occurrence of an index cessation event with respect to the Benchmark for the applicable tenor;

“ISDA Fallback Rate” means the rate that would apply for derivatives transactions referencing the ISDA Definitions to be effective upon the occurrence of an index cessation date with respect to the Benchmark for the applicable tenor excluding the applicable ISDA Fallback Adjustment;

“Reference Time” with respect to any determination of the Benchmark means (1) if the Benchmark is Compounded Daily SOFR, the SOFR Determination Time, as such time is defined herein, and (2) if the Benchmark is not Compounded Daily SOFR, the time determined by the Determination Agent in accordance with the Benchmark Replacement Conforming Changes;

“Relevant Governmental Body” means the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto; and

“Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the Benchmark Replacement Adjustment.

The payment of interest and the repayment of principal on the Notes will not be guaranteed by the Government.

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Denomination

The Notes will be issued in minimum denominations of US$200,000 principal amount and integral multiples of US$1,000 in excess thereof.

Redemption

We may not redeem the Notes prior to maturity. At maturity, we will redeem the Notes at par.

Form and Registration

We will issue each series of the Notes in the form of one or more fully registered global notes, registered in the name of a nominee of and deposited with the custodian for DTC. Except as described in the accompanying prospectus under “Description of the Securities—Description of Debt Securities—Global Securities,” the global notes will not be exchangeable for Notes in definitive registered form, and will not be issued in definitive registered form. Financial institutions, acting as direct and indirect participants in DTC, will represent your beneficial interests in the global notes. These financial institutions will record the ownership and transfer of your beneficial interest through book-entry accounts. You may hold your beneficial interests in the Notes through Euroclear or Clearstream if you are a participant in such systems, or indirectly through organizations that are participants in such systems. Any secondary market trading of book-entry interests in the Notes will take place through DTC participants, including Euroclear and Clearstream. See “Clearance and Settlement—Transfers Within and Between DTC, Euroclear and Clearstream.”

General

The fiscal agent will not charge you any fees for the Notes, other than reasonable fees for the replacement of lost, stolen, mutilated or destroyed Notes. However, you may incur fees for the maintenance and operation of the book-entry accounts with the clearing systems in which your beneficial interests are held.

For so long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require, in the event that any of the global notes are exchanged for Notes in definitive registered form, we will appoint and maintain a paying agent in Singapore, where the certificates representing the Notes may be presented or surrendered for payment or redemption. In addition, in the event that any of the global notes are exchanged for Notes in definitive registered form, an announcement of such exchange will be made through the SGX-ST by or on behalf of us. Such announcement will include all material information with respect to the delivery of the certificates representing the Notes, including details of the paying agent in Singapore.

Further Issues

We may from time to time, without the consent of the holders of the Notes, create and issue additional debt securities with the same terms and conditions as either series of the Notes in all respects so that such further issue shall be consolidated and form a single series with the relevant series of the Notes. We will not issue any such additional debt securities unless such additional securities have less than a de minimis amount of original issue discount or such issuance would otherwise constitute a “qualified reopening” for U.S. federal income tax purposes.

Notices

All notices regarding the Notes will be published by us in London in the Financial Times and in New York in The Wall Street Journal (U.S. Edition). If we cannot, for any reason, publish notice in any of those newspapers, we will choose an appropriate alternate English language newspaper of general circulation, and notice in that newspaper will be considered valid notice. Notice will be considered made on the first date of its publication.

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CLEARANCE AND SETTLEMENT

We have obtained the information in this section from sources we believe to be reliable, including DTC, Euroclear and Clearstream. We accept responsibility only for accurately extracting information from such sources. DTC, Euroclear and Clearstream are under no obligation to perform or continue to perform the procedures described below, and they may modify or discontinue them at any time. Neither we nor the registrar will be responsible for DTC’s, Euroclear’s or Clearstream’s performance of their obligations under their rules and procedures. Nor will we or the registrar be responsible for the performance by direct or indirect participants of their obligations under their rules and procedures.

Introduction

The Depository Trust Company

DTC is:

•

a limited-purpose trust company organized under the New York Banking Law;

•

a “banking organization” under the New York Banking Law;

•

a member of the Federal Reserve System;

•

a “clearing corporation” under the New York Uniform Commercial Code; and

•

a “clearing agency” registered under Section 17A of the Securities Exchange Act of 1934.

DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between its participants. It does this through electronic book-entry changes in the accounts of its direct participants, eliminating the need for physical movement of securities certificates.

Euroclear and Clearstream

Like DTC, Euroclear and Clearstream hold securities for their participants and facilitate the clearance and settlement of securities transactions between their participants through electronic book-entry changes in their accounts. Euroclear and Clearstream provide various services to their participants, including the safekeeping, administration, clearance and settlement and lending and borrowing of internationally traded securities. Participants in Euroclear and Clearstream are financial institutions such as underwriters, securities brokers and dealers, banks and trust companies. Some of the underwriters participating in this offering are participants in Euroclear or Clearstream. Other banks, brokers, dealers and trust companies have indirect access to Euroclear or Clearstream by clearing through or maintaining a custodial relationship with a Euroclear or Clearstream participant.

Ownership of the Notes through DTC, Euroclear and Clearstream

We will issue the Notes in the form of one or more fully registered global notes, registered in the name of a nominee of DTC. Financial institutions, acting as direct and indirect participants in DTC, will represent your beneficial interests in the global notes. These financial institutions will record the ownership and transfer of your beneficial interests through book-entry accounts. You may hold your beneficial interests in the global notes through Euroclear or Clearstream, if you are a DTC participant in such systems, or indirectly through organizations that are DTC participants in such systems. Euroclear and Clearstream will hold their Euroclear/Clearstream participants’ beneficial interests in the global notes in their customers’ securities accounts with their depositaries. These depositaries of Euroclear and Clearstream in turn will hold such interests in their customers’ securities accounts with DTC.

We and the fiscal agent generally will treat the registered holder of the Notes, initially Cede & Co., as the absolute owner of the Notes for all purposes. Once we and the fiscal agent make payments to the registered holder, we and the fiscal agent will no longer be liable on the Notes for the amounts so paid. Accordingly, if you

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own a beneficial interest in the global notes, you must rely on the procedures of the institutions through which you hold your interests in the Notes, including DTC, Euroclear, Clearstream and their respective participants, to exercise any of the rights granted to holders of Notes. Under existing industry practice, if you desire to take any action that Cede & Co., as the holder of the global notes, is entitled to take, then Cede & Co. would authorize the DTC participant through which you own your beneficial interest to take such action. The DTC participant would then either authorize you to take the action or act for you on your instructions.

DTC may grant proxies or authorize its DTC participants, or persons holding beneficial interests in the Notes through such DTC participants, to exercise any rights of a holder or take any actions that a holder is entitled to take under the fiscal agency agreement or the Notes. Euroclear’s or Clearstream’s ability to take actions as holder under the Notes or the fiscal agency agreement will be limited by the ability of their respective depositaries to carry out such actions for them through DTC. Euroclear and Clearstream will take such actions only in accordance with their respective rules and procedures.

The fiscal agent will not charge you any fees for the Notes, other than reasonable fees and indemnity satisfactory to the fiscal agent for the replacement of lost, stolen, mutilated or destroyed Notes. However, you may incur fees for the maintenance and operation of the book-entry accounts with the clearing systems in which your beneficial interests are held.

Transfers Within and Between DTC, Euroclear and Clearstream

Trading Between DTC Purchasers and Sellers

DTC participants will transfer interests in the Notes among themselves in the ordinary way according to DTC rules. Participants will pay for such transfers by wire transfer. The laws of some states require certain purchasers of securities to take physical delivery of the securities in definitive form. These laws may impair your ability to transfer beneficial interests in the global notes to such purchasers. DTC can act only on behalf of its direct participants, who in turn act on behalf of indirect participants and certain banks. Thus, your ability to pledge a beneficial interest in the global notes to persons that do not participate in the DTC system, and to take other actions, may be limited because you will not possess a physical certificate that represents your interest.

Trading Between Euroclear and/or Clearstream Participants

Participants in Euroclear and Clearstream will transfer interests in the Notes among themselves according to the rules and operating procedures of Euroclear and Clearstream.

Trading Between a DTC Seller and a Euroclear or Clearstream Purchaser

When the Notes are to be transferred from the account of a DTC participant to the account of a Euroclear or Clearstream participant, the purchaser must first send instructions to Euroclear or Clearstream through a participant at least one business day prior to the settlement date. Euroclear or Clearstream will then instruct its depositary to receive the Notes and make payment for them. On the settlement date, the depositary will make payment to the DTC participant’s account, and the Notes will be credited to the depositary’s account. After settlement has been completed, DTC will credit the Notes to Euroclear or Clearstream, Euroclear or Clearstream will credit the Notes, in accordance with its usual procedures, to the participant’s account, and the participant will then credit the purchaser’s account. These securities credits will appear the next day (European time) after the settlement date. The cash debit from the account of Euroclear or Clearstream will be back-valued to the value date, which will be the preceding day if settlement occurs in New York. If settlement is not completed on the intended value date (i.e., the trade fails), the cash debit will instead be valued at the actual settlement date.

Participants in Euroclear and Clearstream will need to make funds available to Euroclear or Clearstream to pay for the Notes by wire transfer on the value date. The most direct way of doing this is to pre-position funds (i.e., have funds in place at Euroclear or Clearstream before the value date), either from cash on hand or existing

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lines of credit. Under this approach, however, participants may take on credit exposure to Euroclear and Clearstream until the Notes are credited to their accounts one day later.

As an alternative, if Euroclear or Clearstream has extended a line of credit to a participant, the participant may decide not to pre-position funds, but to allow Euroclear or Clearstream to draw on the line of credit to finance settlement for the Notes. Under this procedure, Euroclear or Clearstream would charge the participant overdraft charges for one day, assuming that the overdraft would be cleared when the Notes were credited to the participant’s account. However, interest on the Notes would accrue from the value date. Therefore, in many cases the interest income on the Notes which the participant earns during that one-day period will substantially reduce or offset the amount of the participant’s overdraft charges. Of course, this result will depend on the cost of funds (i.e., the interest rate that Euroclear or Clearstream charges) to each participant.

Since the settlement will occur during New York business hours, a DTC participant selling an interest in the Notes can use its usual procedures for transferring global securities to the depositories of Euroclear or Clearstream for the benefit of Euroclear or Clearstream participants. The DTC seller will receive the sale proceeds on the settlement date. Thus, to the DTC seller, a cross-market sale will settle no differently than a trade between two DTC participants.

Finally, day traders who use Euroclear or Clearstream and who purchase Notes from DTC participants for credit to Euroclear participants or Clearstream participants should note that these trades will automatically fail unless one of three steps is taken:

•

borrowing through Euroclear or Clearstream for one day, until the purchase side of the day trade is reflected in the day trader’s Euroclear or Clearstream account, in accordance with the clearing system’s customary procedures;

•

borrowing the Notes in the United States from DTC participants no later than one day prior to settlement, which would allow sufficient time for the Notes to be reflected in the Euroclear or Clearstream account in order to settle the sale side of the trade; or

•

staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC participant is at least one day prior to the value date for the sale to the Euroclear or Clearstream participant.

Trading Between a Euroclear or Clearstream Seller and a DTC Purchaser

Due to time-zone differences in their favor, Euroclear and Clearstream participants can use their usual procedures to transfer Notes through their depositaries to a DTC participant. The seller must first send instructions to Euroclear or Clearstream through a participant at least one business day prior to the settlement date. Euroclear or Clearstream will then instruct its depositary to credit the Notes to the DTC participant’s account and receive payment. The payment will be credited in the account of the Euroclear or Clearstream participant on the following day, but the receipt of the cash proceeds will be back-valued to the value date, which will be the preceding day if settlement occurs in New York. If settlement is not completed on the intended value date (i.e., the trade fails), the receipt of the cash proceeds will instead be valued at the actual settlement date.

If the Euroclear or Clearstream participant selling the Notes has a line of credit with Euroclear or Clearstream and elects to be in debit for the Notes until it receives the sale proceeds in its account, then the back-valuation may substantially reduce or offset any overdraft charges that the participant incurs over that period.

Settlement in other currencies between DTC and Euroclear and Clearstream is possible using free-of-payment transfers to move the Notes, but funds movement will take place separately.

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TAXATION

Korean Taxation

For a discussion of certain Korean tax considerations that may be relevant to you if you invest in the Notes, see “Taxation—Korean Taxation” in the accompanying prospectus.

U.S. Federal Income Tax Considerations

The sixth paragraph under the heading “Purchase, Sale and Retirement of Debt Securities” under “Taxation—U.S. Federal Income Tax Considerations” in the accompanying prospectus shall be hereby deleted in its entirety and replaced with the following:

Under the new foreign tax credit requirements adopted by the IRS in regulations promulgated in December 2021, you generally will not be entitled to credit any Korean tax imposed on the sale or other disposition of the debt securities against such U.S. holder’s U.S. federal income tax liability, unless you consistently elect to apply a modified version of the U.S. foreign tax credit rules that is permitted under recently issued temporary guidance and that is currently available only for tax years ending before January 1, 2024, subject to various requirements. Additionally, capital gain or loss that you recognize on the sale or other disposition of the debt securities generally will be U.S. source gain or loss for U.S. foreign tax credit purposes. Consequently, even if the Korean tax qualifies as a creditable tax, you may not be able to credit the tax against your U.S. federal income tax liability unless such credit can be applied (subject to generally applicable conditions and limitations) against tax due on other income treated as derived from foreign sources. If the Korean tax is not a creditable tax, the tax would reduce the amount realized on the sale or other disposition of the debt security even if you have elected to claim a foreign tax credit for other taxes in the same year. The temporary guidance discussed above also indicates that the Treasury and the IRS are considering proposing amendments to the December 2021 regulations and whether, and under what conditions, to provide additional temporary relief for later taxable years. You should consult your tax advisor regarding the application of the foreign tax credit rules to a sale or other disposition of the debt security and any Korean tax imposed on such sale or disposition.

For a discussion of additional U.S. federal income tax considerations that may be relevant to you if you are a beneficial owner of the Notes and are a U.S. holder, see “Taxation—U.S. Federal Income Tax Considerations” in the accompanying prospectus.

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UNDERWRITING

Relationship with the Underwriters

We and the underwriters named below (the “Underwriters”) have entered into a Terms Agreement dated October , 2023 (the “Terms Agreement”) with respect to the Notes relating to the Underwriting Agreement—Standard Terms (together with the Terms Agreement, the “Underwriting Agreement”) filed as an exhibit to the registration statement. Subject to the terms and conditions set forth in the Underwriting Agreement, we have agreed to sell to each of the Underwriters, severally and not jointly, and each of the Underwriters has, severally and not jointly, agreed to purchase, the following principal amount of the Notes set out opposite its name below:

Names of the Underwriters

Principal Amount of
the 20 Notes

Principal Amount of
the Floating Rate
Notes

BofA Securities, Inc

US$

Crédit Agricole Corporate and Investment Bank

The Hongkong and Shanghai Banking Corporation Limited

J.P. Morgan Securities PLC

KDB Asia Limited

Mizuho Securities USA LLC

UBS AG Hong Kong Branch

KEXIM Asia Limited

—

Hana Securities Co., Ltd.

—

Total

US$

KDB Asia Limited, one of the underwriters, is our affiliate and has agreed to offer and sell the Notes only outside the United States to non-U.S. persons. KEXIM Asia Limited and Hana Securities Co., Ltd., each an underwriter, have also agreed to offer and sell the Notes only outside the United States to non-U.S. persons.

Under the terms and conditions of the Underwriting Agreement, if the Underwriters take any series of the Notes, then the Underwriters are obligated to take and pay for all of the Notes of such series.

The Underwriters initially propose to offer the Notes directly to the public at the offering price described on the cover page of this prospectus supplement. After the initial offering of the Notes, the Underwriters may from time to time vary the offering price and other selling terms.

If a jurisdiction requires that the offering be made by a licensed broker or dealer and the Underwriters or any affiliate of the Underwriters is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by that Underwriter or its affiliate on our behalf in such jurisdiction.

The Notes are a new class of securities with no established trading market. Applications will be made to the SGX-ST for the listing and quotation of the Notes on the SGX-ST. The Underwriters have advised us that they intend to make a market in the Notes. However, they are not obligated to do so and they may discontinue any market making activities with respect to the Notes at any time without notice. Accordingly, we cannot assure you as to the liquidity of any trading market for the Notes.

We have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments which the Underwriters may be required to make in respect of any such liabilities.

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The amount of our net proceeds from the 20 Notes is US$ after deducting underwriting discounts but not estimated expenses. Expenses associated with the 20 Notes offering are estimated to be US$100,000. The Underwriters have agreed to pay certain of our expenses incurred in connection with the offering of the 20 Notes.

The amount of our net proceeds from the Floating Rate Notes is US$ after deducting underwriting discounts but not estimated expenses. Expenses associated with the Floating Rate Notes offering are estimated to be US$100,000. The Underwriters have agreed to pay certain of our expenses incurred in connection with the offering of the Floating Rate Notes.

The Underwriters and certain of their affiliates may have performed certain commercial banking, investment banking and advisory services for us and/or our affiliates from time to time for which they have received customary fees and expenses and may, from time to time, engage in transactions with and perform services for us and/or our affiliates in the ordinary course of their business.

The Underwriters or certain of their affiliates may purchase Notes and be allocated Notes for asset management and/or proprietary purposes but not with a view to distribution. The Underwriters or their respective affiliates may purchase Notes for their own account and enter into transactions, including credit derivatives, such as asset swaps, repackaging and credit default swaps relating to Notes and/or other securities of us or our subsidiaries or affiliates at the same time as the offer and sale of Notes or in secondary market transactions. Such transactions would be carried out as bilateral trades with selected counterparties and separately from any existing sale or resale of Notes to which this prospectus supplement relates (notwithstanding that such selected counterparties may also be purchasers of Notes).

Important Notice to CMIs (including private banks)

This notice to CMIs (including private banks) is a summary of certain obligations the SFC Code imposes on CMIs, which require the attention and cooperation of other CMIs (including private banks). Certain CMIs may also be acting as OCs for this offering and are subject to additional requirements under the SFC Code.

Prospective investors who are the directors, employees or major shareholders of the Issuer, a CMI or its group companies would be considered under the SFC Code as having an Association with the Issuer, the CMI or the relevant group company. CMIs should specifically disclose whether their investor clients have any Association when submitting orders for the Notes. In addition, private banks should take all reasonable steps to identify whether their investor clients may have any Associations with the Issuer or any CMI (including its group companies) and inform the Underwriters accordingly.

CMIs are informed that the marketing and investor targeting strategy for this offering includes institutional investors, sovereign wealth funds, pension funds, hedge funds, family offices and high net worth individuals, in each case, subject to the selling restrictions set out elsewhere in this prospectus supplement.

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CMIs should ensure that orders placed are bona fide, are not inflated and do not constitute duplicated orders (i.e., two or more corresponding or identical orders placed via two or more CMIs). CMIs should enquire with their investor clients regarding any orders which appear unusual or irregular. CMIs should disclose the identities of all investors when submitting orders for the Notes (except for omnibus orders where underlying investor information may need to be provided to any OCs when submitting orders). Failure to provide underlying investor information for omnibus orders, where required to do so, may result in that order being rejected. CMIs should not place “X-orders” into the order book.

CMIs should segregate and clearly identify their own proprietary orders (and those of their group companies, including private banks as the case may be) in the order book and book messages.

CMIs (including private banks) should not offer any rebates to prospective investors or pass on any rebates provided by the Issuer. In addition, CMIs (including private banks) should not enter into arrangements which may result in prospective investors paying different prices for the Notes.

The SFC Code requires that a CMI disclose complete and accurate information in a timely manner on the status of the order book and other relevant information it receives to targeted investors for them to make an informed decision. In order to do this, those Underwriters in control of the order book should consider disclosing order book updates to all CMIs.

When placing an order for the Notes, private banks should disclose, at the same time, if such order is placed other than on a “principal” basis (whereby it is deploying its own balance sheet for onward selling to investors). private banks who do not provide such disclosure are hereby deemed to be placing their order on such a “principal” basis. Otherwise, such order may be considered to be an omnibus order pursuant to the SFC Code. private banks should be aware that placing an order on a “principal” basis may require the Underwriters to apply the “proprietary orders” of the SFC Code to such order and will require the Underwriters to apply the “rebates” requirements of the SFC Code (if applicable) to such order.

In relation to omnibus orders, when submitting such orders, CMIs (including private banks) that are subject to the SFC Code should disclose underlying investor information in respect of each order constituting the relevant omnibus order (failure to provide such information may result in that order being rejected). Underlying investor information in relation to omnibus orders should consist of:

•

The name of each underlying investor;

•

A unique identification number for each investor;

•

Whether an underlying investor has any “Associations” (as used in the SFC Code);

•

Whether any underlying investor order is a “Proprietary Order” (as used in the SFC Code);

•

Whether any underlying investor order is a duplicate order.

Underlying investor information in relation to omnibus orders should be sent to: bofa_dcm_syndicate_pb_orders@bofa.com; HKG-Syndicate@ca-cib.com; FIG-Syndicate@ca-cib.com; hk_syndicate_omnibus@hsbc.com.hk; Investor.info.hk.bond.deals@jpmorgan.com; AS_DBSYN@hk.mizuho-sc.com; MizuhoSynDesk@mizuhogroup.com; ol-ubs-dcm-hk-syndicate@ubs.com; kdb_syndicate@kdb.co.kr.

To the extent information being disclosed by CMIs and investors is personal and/or confidential in nature, CMIs (including private banks) agree and warrant: (A) to take appropriate steps to safeguard the transmission of such information to any OCs; and (B) that they have obtained the necessary consents from the underlying investors to disclose such information to any OCs. By submitting an order and providing such information to any OCs, each CMI (including private banks) further warrants that they and the underlying investors have understood and consented to the collection, disclosure, use and transfer of such information by any OCs and/or any other third parties as may be required by the SFC Code, including to the Issuer, relevant regulators and/or any other

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third parties as may be required by the SFC Code, for the purpose of complying with the SFC Code, during the bookbuilding process for this offering. CMIs that receive such underlying investor information are reminded that such information should be used only for submitting orders in this offering. The Underwriters may be asked to demonstrate compliance with their obligations under the SFC Code, and may request other CMIs (including private banks) to provide evidence showing compliance with the obligations above (in particular, that the necessary consents have been obtained). In such event, other CMIs (including private banks) are required to provide the Underwriters with such evidence within the timeline requested.

Delivery of the Notes

We expect to make delivery of the Notes, against payment in same-day funds on or about September 8, 2022, which we expect will be the th business day following the date of this prospectus supplement. Under Rule 15c6-1 promulgated under the Securities Exchange Act of 1934, as amended, U.S. purchasers are generally required to settle trades in the secondary market in two business days, unless they and the other parties to any such trade expressly agree otherwise. Accordingly, if you wish to trade in the Notes on any day prior to the second business day from the settlement, because the Notes will initially settle in T+ , you may be required to specify an alternate settlement cycle at the time of your trade to prevent a failed settlement. Purchasers in other countries should consult with their own advisors.

Foreign Selling Restrictions

Each Underwriter has agreed, severally and not jointly, to the following selling restrictions in connection with the offering with respect to the following jurisdictions:

Korea

Each Underwriter has severally represented and agreed that (i) it has not offered, sold or delivered and will not offer, sell or deliver, directly or indirectly, any Notes in Korea, or to, or for the account or benefit of, any resident of Korea, except as otherwise permitted by applicable Korean laws and regulations, and (ii) any securities dealer to whom the Underwriters may sell the Notes will agree that it will not offer any Notes, directly or indirectly, in Korea, or to any resident of Korea, except as permitted by applicable Korean laws and regulations, or to any other dealer who does not so represent and agree.

United Kingdom

Each Underwriter has severally represented and agreed that (i) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act of 2000 (the “FSMA”)) received by it in connection with the issue or sale of any Notes in circumstances in which Section 21(1) of the FSMA does not apply to us, and (ii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom.

Spain

The proposed offer of Notes has not been registered with the Comisión Nacional del Mercado de Valores (the “CNMV”). Accordingly, each of the Underwriters has represented and agreed that Notes can only be offered in Spain to qualified investors pursuant to and in compliance with the consolidated text of the Securities Market Law approved by Spanish Royal Legislative Decree 4/2015, Spanish Royal Decree 1310/2005, both as amended from time to time, and any regulation issued thereunder.

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Japan

Each Underwriter has severally represented and agreed that the Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended, the “Financial Instruments and Exchange Act”). Accordingly, each Underwriter has severally represented and agreed that it has not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell any Notes in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan) or to others for re-offering or re-sale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and other relevant laws and regulations of Japan.

Hong Kong

Each Underwriter has severally represented and agreed that:

•

it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Notes other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong (the “SFO”) and any rules made under the SFO; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong (the “C(WUMP)O”) or which do not constitute an offer to the public within the meaning of the C(WUMP)O; and

•

it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Notes, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the SFO and any rules made under the SFO.

Singapore

Each Underwriter has acknowledged that this prospectus supplement and the accompanying prospectus have not been and will not be registered as a prospectus with the Monetary Authority of Singapore under the Securities and Futures Act 2001 of Singapore (the “SFA”).

Accordingly, each Underwriter has severally represented and agreed that it has not offered or sold any Notes or caused the Notes to be made the subject of an invitation for subscription or purchase and will not offer or sell any Notes or cause the Notes to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this prospectus supplement or the accompanying prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor under Section 274 of the SFA; (ii) to a relevant person pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA and (where applicable) Regulation 3 of the Securities and Futures (Classes of Investors) Regulations 2018 of Singapore; or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

(a)

a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

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(b)

a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,

securities or securities-based derivatives contracts (each term as defined in the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except:

(i)

to an institutional investor or to a relevant person defined in Section 275(2) of the SFA or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(c)(ii) of the SFA;

(ii)

where no consideration is or will be given for the transfer;

(iii)

where the transfer is by operation of law;

(iv)

as specified in Section 276(7) of the SFA; or

(v)

as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018 of Singapore.

Notification under Section 309B(1)(c) of the SFA — We have determined, and hereby notify all relevant persons (as defined in Section 309A(1) of the SFA), that the Notes are prescribed capital markets products (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018 of Singapore) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).

Australia

No prospectus or other disclosure document (as defined in the Corporations Act 2001 of Australia) in relation to the offering of the Notes has been or will be lodged with or registered by Australian Securities and Investments Commission or the Australian Securities Exchange Limited. Each Underwriter has represented and agreed that it has not:

(a)

made or invited, and will not make or invite, an offer of the Notes for issue or sale in Australia (including an offer or invitation which is received by a person in Australia); and

(b)

distributed or published and will not distribute or publish any draft, preliminary or final form offering memorandum, advertisement or other offering material relating to the Notes in Australia,

unless:

(i)

the minimum aggregate consideration payable by each offeree is at least AUD 500,000 (or its equivalent in an alternate currency) (disregarding money lent by the offeror or its associates) or the offer otherwise does not require disclosure to investors in accordance with Part 6D.2 and Part 7 of the Corporations Act 2001 of Australia; and

(ii)

such action complies with all applicable laws, directives and regulations and does not require any document to be lodged with, or registered by, the Australian Securities and Investments Commission.

Each Underwriter has agreed that it will not sell the Notes in circumstances where employees of the Underwriter aware of, or involved in, the sale know, or have reasonable grounds to suspect, that the Notes, or an interest in or right in respect of the Notes, was being, or would later be, acquired either directly or indirectly by a resident of Australia, or a non-resident who is engaged in carrying on business in Australia at or through a permanent establishment of that non-resident in Australia (the expressions “resident of Australia”, “non-resident” and “permanent establishment” having the meanings given to them by the Australian Tax Act).

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Canada

Prospective Canadian investors are advised that the information contained within the preliminary prospectus and prospectus has not been prepared with regard to matters that may be of particular concern to Canadian investors. Accordingly, prospective Canadian investors should consult with their own legal, financial and tax advisers concerning the information contained within the preliminary prospectus and prospectus and as to the suitability of an investment in the Notes in their particular circumstances.

Each Underwriter has severally represented and agreed that the Notes may only be offered or sold in the provinces of Alberta, British Columbia, Ontario and Québec or to or for the benefit of a resident of these provinces pursuant to an exemption from the requirement to file a prospectus in such province in which such offer or sale is made, and only by a dealer duly registered under the applicable securities laws of that province or by a dealer that is relying in that province on the “international dealer” exemption provided by section 8.18 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103). Furthermore, the Notes may only be offered or sold to or for the benefit of a resident of any such province provided that such resident is both an “accredited investor” as defined in National Instrument 45-106 Prospectus Exemptions (NI 45-106) or subsection 73.3 (1) of the Securities Act (Ontario) and a “permitted client” as defined in NI 31-103. By purchasing any Notes and accepting delivery of a purchase confirmation a purchaser is representing to the underwriters and the dealer from whom the purchase confirmation is received that it is an “accredited investor” and “permitted client” as defined above. The distribution of the Notes in Canada is being made on a private placement basis only and any resale of the Notes must be made in accordance with applicable Canadian securities laws, which will vary depending on the relevant jurisdiction, and which may require resales to be made in accordance with prospectus and registration requirements or exemptions from the prospectus and registration requirements.

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this preliminary prospectus or prospectus (including any amendment hereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.

Under Canadian securities law, National Instrument 33-105 Underwriting Conflicts (NI 33-105) provides disclosure requirements with respect to potential conflicts of interest between an issuer and underwriters, dealers or placement agents, as the case may be. To the extent any conflict of interest between us and any of the Underwriters (or any other placement agent acting in connection with this offering) may exist in respect of this offering, the applicable parties to this offering are relying on the exemption from these disclosure requirements provided to them by section 3A.3 of NI 33-105 (exemption based on U.S. disclosure).

Upon receipt of this prospectus, each Canadian purchaser hereby confirms that it has expressly requested that all documents evidencing or relating in any way to the sale of the securities described herein (including for greater certainty any purchase confirmation or any notice) be drawn up in the English language only. Par la réception de ce prospectus, chaque acheteur canadien confirme par les présentes qu’il a expressément exigé que tous les documents faisant foi ou se rapportant de quelque manière que ce soit à la vente des valeurs mobilières décrites aux présentes (incluant, pour plus de certitude, toute confirmation d’achat ou tout avis) soient rédigés en anglais seulement.

Price Stabilization and Short Position

In connection with this offering, any of the Underwriters appointed and acting in its capacity as stabilizing manager (the “Stabilizing Manager”) or any person acting for it, on behalf of the Underwriters, may purchase and sell the Notes in the open market. These transactions may include over-allotment, covering transactions, penalty

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bids and stabilizing transactions. Over-allotment involves sales of the Notes in excess of the principal amount of Notes to be purchased by the Underwriters in this offering, which creates a short position for the Underwriters. Covering transactions involve purchases of the Notes in the open market after the distribution has been completed in order to cover short positions. A penalty bid occurs when a particular Underwriter repays to the Underwriters a portion of the underwriting discount received by it because the Underwriters or the Stabilizing Manager has repurchased Notes sold by or for the account of such Underwriter in stabilizing or short covering transactions. Stabilizing transactions consist of certain bids or purchases of Notes in the open market for the purpose of preventing or retarding a decline in the market price of the Notes while the offering is in progress. Any of these activities may have the effect of preventing or retarding a decline in the market price of the Notes. They may also cause the price of the Notes to be higher than the price that otherwise would exist in the open market in the absence of these transactions. The Stabilizing Manager may conduct these transactions in the over-the-counter market or otherwise. If the Stabilizing Manager commences any of these transactions, it may discontinue them at any time, and must discontinue them after a limited period.

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LEGAL MATTERS

The validity of the Notes is being passed upon for us by Cleary Gottlieb Steen & Hamilton LLP, New York, New York, and by Shin & Kim LLC, Seoul, Korea. Certain legal matters will also be passed upon for the Underwriters by Linklaters LLP, Seoul, Korea. In giving their opinions, Cleary Gottlieb Steen & Hamilton LLP and Linklaters LLP may rely as to matters of Korean law upon the opinion of Shin & Kim LLC, and Shin & Kim LLC may rely as to matters of New York law upon the opinions of Cleary Gottlieb Steen & Hamilton LLP.

OFFICIAL STATEMENTS AND DOCUMENTS

Our Chief Executive Officer and Chairman of the Board of Directors, in his official capacity, has supplied the information set forth in this prospectus supplement under “Recent Developments—The Korea Development Bank.” Such information is stated on his authority. The documents identified in the portion of this prospectus supplement captioned “Recent Developments—The Republic of Korea” as the sources of financial or statistical data are derived from official public documents of the Republic and of its agencies and instrumentalities.

GENERAL INFORMATION

We were established in 1954 as a government-owned financial institution pursuant to The Korea Development Bank Act, as amended. The address of our registered office is 14, Eunhaeng-ro, Yeongdeungpo-gu, Seoul 07242, The Republic of Korea.

Our Board of Directors can be reached at the address of our registered office: c/o 14, Eunhaeng-ro, Yeongdeungpo-gu, Seoul 07242, The Republic of Korea.

The issue of the Notes has been authorized by a resolution of our Board of Directors passed on December 27, 2022 and a decision of our Chief Executive Officer and Chairman of the Board of Directors dated September 25, 2023. On October 5, 2023, we filed our reports on the proposed issuance of the Notes with the Ministry of Economy and Finance of Korea.

The registration statement with respect to us and the Notes has been filed with the U.S. Securities and Exchange Commission in Washington, D.C. under the Securities Act of 1933, as amended. Additional information concerning us and the Notes is contained in the registration statement and post-effective amendments to such registration statement, including their various exhibits, which may be inspected at the public reference facilities maintained by the Securities and Exchange Commission at Room 1580, 100 F Street N.E., Washington, D.C. 20549, United States.

The Notes have been accepted for clearance through DTC, Euroclear and Clearstream:


	ISIN	CUSIP
20 Notes	US500630DZ86	500630 DZ8
20 Notes	US500630EA27	500630 EA2
20 Notes	US500630EB00	500630 EB0
Floating Rate Notes	US500630DY12	500630 DY1

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PROSPECTUS

LOGO

US$11,847,380,000

The Korea Development Bank

Debt Securities

Warrants to Purchase Debt Securities

Guarantees

The Republic of Korea

Guarantees

We will provide the specific terms of these securities in supplements to this prospectus. You should read this prospectus and any prospectus supplement carefully before you invest.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

This prospectus is dated July 25, 2023

TABLE OF CONTENTS


	Page
CERTAIN DEFINED TERMS AND CONVENTIONS		1
USE OF PROCEEDS		2
THE KOREA DEVELOPMENT BANK		3
Overview		3
Capitalization		5
Business		6
Selected Financial Statement Data		8
Operations		15
Sources of Funds		22
Debt		23
Overseas Operations		25
Property		26
Directors and Management; Employees		26
Tables and Supplementary Information		26
Financial Statements and the Auditors		33
THE REPUBLIC OF KOREA		172
Land and History		172
Government and Politics		174
The Economy		177
Principal Sectors of the Economy		186
The Financial System		193
Monetary Policy		198
Balance of Payments and Foreign Trade		202
Government Finance		210
Debt		212
Tables and Supplementary Information		214
DESCRIPTION OF THE SECURITIES		217
Description of Debt Securities		217
Description of Warrants		224
Terms Applicable to Debt Securities and Warrants		224
Description of Guarantees to be Issued by Us		225
Description of Guarantees to be Issued by The Republic of Korea		226
LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES AND BEARER WARRANTS		227
TAXATION		228
Korean Taxation		228
U.S. Federal Income Tax Considerations		230
PLAN OF DISTRIBUTION		239
LEGAL MATTERS		240
AUTHORIZED REPRESENTATIVES IN THE UNITED STATES		240
OFFICIAL STATEMENTS AND DOCUMENTS		240
EXPERTS		240
FORWARD-LOOKING STATEMENTS		241
FURTHER INFORMATION		243

CERTAIN DEFINED TERMS AND CONVENTIONS

All references to the “Bank”, “we”, “our” or “us” mean The Korea Development Bank. All references to “Korea” or the “Republic” contained in this prospectus mean The Republic of Korea. All references to the “Government” mean the government of Korea.

Unless otherwise indicated, all references to “won”, “Won” or “W” contained in this prospectus are to the currency of Korea, references to “U.S. dollars”, “Dollars”, “$”, “USD” or “US$” are to the currency of the United States of America, references to “Euro”, “EUR” or “€” are to the currency of the European Union, references to “Japanese Yen”, “JPY” or “¥” are to the currency of Japan, references to “Singapore dollar” or “SGD” are to the currency of Singapore, references to “Swiss franc” or “CHF” are to the currency of Switzerland, references to “pound sterling”, “GBP” or “£” are to the currency of the United Kingdom, references to “Chinese offshore renminbi” or “CNH” are to the currency of the People’s Republic of China traded outside of mainland China, references to “Hong Kong dollar” or “HKD” are to the currency of Hong Kong, S.A.R., references to “Mexican Peso” or “MXN” are to the currency of the United Mexican States, references to “New Zealand Dollar” or “NZD” are to the currency of New Zealand, references to “Australian dollar” or “AUD” are to the currency of Australia, references to “Norwegian krone” or “NOK” are to the currency of Norway, references to “Brazilian real” or “BRL” are to the currency of the Federative Republic of Brazil, references to “Indonesian Rupiah” or “IDR” are to the currency of Indonesia, references to “Indian Rupee” or “INR” are to the currency of India and references to “Swedish Krona” or “SEK” are to the currency of Sweden.

All discrepancies in any table between totals and the sums of the amounts listed are due to rounding.

Our separate financial information as of and for the years ended December 31, 2022 and 2021 included in this prospectus has been prepared in accordance with International Financial Reporting Standards as adopted in Korea, or Korean IFRS or K-IFRS. References in this prospectus to “separate” financial statements and information are to financial statements and information prepared on a non-consolidated basis. Unless specified otherwise, our financial and other information included in this prospectus is presented on a separate basis in accordance with Korean IFRS and does not include such information with respect to our subsidiaries. KDB Financial Group, or KDBFG, a financial holding company, and Korea Finance Corporation, or KoFC, a public policy financing vehicle and the parent company of KDBFG, both of which had originally been established by spinning off a portion of our assets, liabilities and equity in October 2009, merged with and into us on December 31, 2014.

USE OF PROCEEDS

Unless otherwise specified in the applicable prospectus supplement, we will use the net proceeds from the sale of the securities for our general operations.

THE KOREA DEVELOPMENT BANK

Overview

We were established in 1954 as a government-owned financial institution pursuant to The Korea Development Bank Act, as amended, or the KDB Act. Since our establishment, we have been the leading bank in the Republic with respect to the provision of long-term financing for projects designed to assist the nation’s economic growth and development. The Government directly owns all of our paid-in capital. Our registered office is located at 14, Eunhaeng-ro, Yeongdeungpo-gu, Seoul, The Republic of Korea. Our primary purpose, as stated in the KDB Act, the KDB Decree and our Articles of Incorporation, is to “furnish funds in order to expedite the development of the national economy.” We make loans available to major industries for equipment, capital investment and the development of high technology, as well as for working capital.

As of December 31, 2022, we hadW202,032.2 billion of loans outstanding (including loans, call loans, domestic usance, bills of exchange bought, local letters of credit negotiation and loan-type suspense accounts pursuant to the applicable guidelines without adjusting for allowance for loan losses, present value discounts and deferred loan fees), total assets ofW312,845.3 billion and total equity ofW35,668.4 billion, as compared toW174,917.2 billion of loans outstanding,W276,421.9 billion of total assets andW36,502.9 billion of total equity as of December 31, 2021. In 2022, we recorded interest income ofW6,846.7 billion, interest expense ofW5,102.9 billion and net income ofW465.0 billion, as compared toW4,125.3 billion of interest income,W2,466.7 billion of interest expense andW2,461.8 billion of net income in 2021. See “—Selected Financial Statement Data.”

Currently, the Government directly holds 100% of our paid-in capital. In addition to contributions to our capital, the Government provides direct financial support for our financing activities, in the form of loans or guarantees. The Government has the power to elect or dismiss our Chairman and Chief Executive Officer, members of our Board of Directors and Auditor. The Government may dismiss each such person if he/she (i) violates the KDB Act, an order issued thereunder, or the Articles of Incorporation or (ii) is unable to perform his/her duties due to physical or mental disability. The Chairman may be dismissed by the President of the Republic at the recommendation of the chairman of the Financial Services Commission. The Chief Executive Officer and members of the Board of Directors may be dismissed by the Financial Services Commission at the recommendation of the Chairman and the Auditor may be dismissed by the Financial Services Commission. There is no prescribed timeline for dismissal. Pursuant to the KDB Act, the Financial Services Commission has supervisory power and authority over matters relating to our general business including, but not limited to, capital adequacy and managerial soundness.

The Government supports our operations pursuant to Article 32 of the KDB Act. Article 32 provides that “the annual net losses of the Korea Development Bank shall be offset each year by the reserve, and if the reserve be insufficient, the deficit shall be replenished by the Government.” As a result of the KDB Act, the Government is generally responsible for our operations and is legally obligated to replenish any deficit that arises if our reserve, consisting of our surplus and capital surplus items, is insufficient to cover our annual net losses. In light of the above, if we had insufficient funds to make any payment under any of our obligations, including the debt securities and guarantees covered by this prospectus, the Government would take appropriate steps, such as by making a capital contribution, by allocating funds or by taking other action, to enable us to make such payment when due. The provisions of Article 32 do not, however, constitute a direct guarantee by the Government of our obligations under the debt securities or the guarantees, and the provisions of the KDB Act, including Article 32, may be amended at any time by action of the National Assembly.

In January 1998, the Government amended the KDB Act to:

•

subordinate our borrowings from the Government to other indebtedness incurred in our operations;

•

allow the Government to offset any deficit that arises if our reserve fails to cover our annual net losses by transferring Government-owned property, including securities held by the Government, to us; and

•

allow direct injections of capital by the Government without prior National Assembly approval.

The Government amended the KDB Act in May 1999 and the KDB Decree in March 2000, to allow the Financial Services Commission to supervise and regulate us in terms of capital adequacy and managerial soundness.

In March 2002, the Government amended the KDB Act to enable us, among other things, to:

•

obtain low-cost funds from The Bank of Korea and from the issuance of debt securities (in addition to already permitted industrial finance bonds), which funds may be used for increased levels of lending to small- and medium-sized enterprises;

•

broaden the scope of borrowers to which we may extend working capital loans to include companies in the manufacturing industry, enterprises which are “closely related” to enhancing the corporate competitiveness of the manufacturing industry and leading-edge high-tech companies; and

•

extend credits to mergers and acquisitions projects intended to facilitate corporate restructuring efforts.

In July 2005 and May 2009, the Government amended the KDB Act to provide that:

(1)

our annual net profit, after adequate allowances are made for depreciation in assets, shall be distributed as follows:

(i)

40% or more of the net profit shall be credited to reserve, until the reserve amounts equal the total amount of paid-in capital; and

(ii)

any net profit remaining following the apportionment required under subparagraph (i) above shall be distributed in accordance with the resolution of our Board of Directors and the approval of our shareholders;

(2)

accumulated amounts in reserve may be capitalized after offsetting any net losses; and

(3)

any distributions made in accordance with paragraph (1)(ii) above may be in the form of cash dividends or dividends in kind, provided that any distributions of dividends in kind must be made in accordance with applicable provisions of the KDB Decree.

In February 2008, the Government further amended the KDB Act, primarily to transfer most of the Government’s supervisory authority over us from the Ministry of Economy and Finance to the Financial Services Commission.

In May 2009, the Government amended the KDB Act to facilitate our privatization. The amendment provided for, among others:

•

the preparation for the transformation of us from a special statutory entity into a corporation, including the application of the Banking Act as applicable;

•

the expansion of our operation scope that enables us to engage in commercial banking activities, including retail banking (which was subsequently adjusted due to a change in the Government’s decision to halt its plan for our privatization and to consolidate and strengthen our public financing role, utilizing our rich experience and expertise in public policy financing);

•

the provision of government guarantees for our mid-to-long term foreign currency debt outstanding at the time of initial sale of the Government’s stake in KDBFG (subject to the National Assembly’s authorization of the Government guarantee amount) and possible guarantees for our foreign currency debt incurred for the refinancing of such mid-to-long term foreign currency debt with the government guarantee during the period when the Government owns more than 50% of our shares; and

•

the establishment of KDBFG and KoFC and application of the Financial Holding Company Act to KDBFG.

In May 2014, the Government and the National Assembly amended the KDB Act to streamline the financial policy roles among Government-owned banks and financial corporations in order to better respond systematically to rapidly changing domestic and international economic conditions by merging KDBFG and KoFC into us. The amended KDB Act provides, among others, that:

•

the Government will halt its plan for our privatization;

•

public policy financing will be consolidated and strengthened through the newly merged entity;

•

we will comprehensively succeed to the properties, rights and obligations of KDBFG and KoFC upon the consummation of the merger;

•

the bonds issued by KDBFG and the policy bank bonds issued by the KoFC shall be deemed as the industrial financial bonds issued by us;

•

the business engaged in by KoFC in accordance with the Korea Finance Corporation Act or other laws and decrees will be continuously performed by us; and

•

the repayment of the principal of and interest on foreign currency debt (with an original maturity of one year or more at the time of issuance) incurred by KoFC and us before this amended KDB Act comes into force shall be guaranteed by the Government at the time of initial sale by the Government of its equity interest in us, subject to the approval by the National Assembly.

In May 2020, the Government amended the KDB Act in order to provide statutory grounds for the establishment of the Key Industry Stabilization Fund to support businesses in certain key industries that face financial difficulties resulting from the ongoing COVID-19 pandemic. See “The Republic of Korea—The Economy—Worldwide Economic and Financial Difficulties” and “—Selected Financial Statement Data—Loans to Financially Troubled Companies.”

The Minister of Economy and Finance of the Republic has, on behalf of the Republic, signed the registration statement of which this prospectus forms a part.

Capitalization

As of December 31, 2022, our authorized capital wasW30,000 billion and our capitalization was as follows:


	December 31, 2022⁽¹⁾
	(billions of won)
Long-term debt⁽²⁾:
Won currency borrowings	W	4,175.7
Industrial finance bonds		156,383.7
Foreign currency borrowings		3,655.4

Total long-term debt		164,214.8	⁽³⁾⁽⁴⁾

Capital:
Paid-in capital		23,151.6
Capital surplus		2,475.3
Retained earnings⁽⁵⁾		7,222.2
Accumulated other comprehensive income		2,819.3

Total capital		35,668.4

Total capitalization	W	199,883.2

(1)	Except as disclosed in this prospectus, there has been no material adverse change in our capitalization since December 31, 2022.

(2)	Defined as debt that has a maturity at issuance of one year or more.

(3)	We have translated borrowings in foreign currencies into Won at the rate ofW1,267.3 to US$1.00, which was the market average exchange rate, as announced by the Seoul Monetary Brokerage Services Ltd., on December 30, 2022.

(4)	As of December 31, 2022, we had confirmed acceptances and guarantees totalingW8,930.4 billion under outstanding guarantees issued on behalf of our clients. See “—Financial Statements and the Auditors—Notes to Separate Financial Statements of December 31, 2022 and 2021—Note 40.”

(5)

Includes regulatory reserve for credit losses ofW247.3 billion as of December 31, 2022. If our allowance for credit losses is deemed insufficient for regulatory purposes, we compensate for the difference by recording a regulatory reserve for credit losses, which is shown as a separate item included in retained earnings. See “—Financial Statements and the Auditors—Notes to Separate Financial Statements of December 31, 2022 and 2021—Note 24.”

Business

Purpose and Authority

Since our establishment, we have been the leading bank in the Republic in providing long-term financing for projects designed to assist the nation’s economic growth and development.

Under the KDB Act, the KDB Decree and our Articles of Incorporation, our primary purpose is to “contribute to the sound development of the financial industry and the national economy by supplying and managing funds necessary for the development and promotion of industries, expansion of social infrastructure, development of regions, stabilization of the financial markets and facilitation of sustainable growth.” Since we serve the public policy objectives of the Government, we do not seek to maximize profits. We do, however, strive to maintain a level of profitability to strengthen our equity base and support growth in the volume of our business.

Under the KDB Act, we may:

•

carry out activities necessary to accomplish the expansion of the national economy, subject to the approval of the Financial Services Commission;

•

provide loans or discount notes;

•

subscribe to, underwrite or invest in securities;

•

guarantee or assume indebtedness;

•

raise funds by accepting demand deposits and time and savings deposits from the general public, issuing securities, borrowing from the Government, The Bank of Korea or other financial institutions, and borrowing from overseas;

•

execute foreign exchange transactions, including currency and interest swap transactions;

•

provide planning, management, research and other support services at the request of the Government, public bodies, financial institutions or enterprises;

•

manage and operate various funds established pursuant to Government-led initiatives; and

•

carry out other businesses incidental to the foregoing (subject to the approval of the Financial Services Commission).

Government Support and Supervision

The Government owns directly all of our paid-in capital. Since our establishment, the Government has made capital contributions not only in cash but also in the form of shares of common stock of Government-affiliated entities. Recent examples include the Government’s contributions to our capital of (i)W170 billion in cash in June 2018, (ii)W500 billion in cash andW55 billion in cash in March 2019 and September 2019, respectively,

(iii)W451 billion in cash andW1,652 billion in cash in April 2020 and July 2020, respectively, (iv)W510 billion in cash andW611 billion in cash in January 2021 and May 2021, respectively, and (v)W392 billion in cash in March 2022,W308 billion in cash in July 2022 andW565 billion in the form of shares of common stock of Korea Land and Housing Corporation in December 2022. Taking into account these capital contributions, as of December 31, 2022, our total paid-in capital wasW23,151.6 billion. See “—Financial Statements and the Auditors—Notes to Separate Financial Statements of December 31, 2022 and 2021—Note 24.” In March 2023, the Government contributedW435 billion in the form of shares of common stock of Korea Land and Housing Corporation to our capital, and in May 2023, the Government contributedW120 billion in cash to our capital.

In addition to capital contributions, the Government directly supports our financing activities by:

•

lending us funds to on-lend;

•

allowing us to administer Government loans made from a range of special Government funds;

•

allowing us to administer some of The Bank of Korea’s surplus foreign exchange holdings; and

•

allowing us to receive credit from The Bank of Korea.

The Government also supports our operations pursuant to Articles 31 and 32 of the KDB Act. Article 31 provides that “40% or more of the annual net profit of the Korea Development Bank shall be transferred to reserve, until the reserve amounts equal the total amount of authorized capital” and that accumulated amounts in reserve may be capitalized. Article 32 provides that “the net losses of the Korea Development Bank shall be offset each fiscal year by the reserve, and if the reserve be insufficient, the deficit shall be replenished by the Government.”

As a result of the KDB Act, the Government is generally responsible for our operations and is legally obligated to replenish any deficit that arises if our reserve, consisting of our surplus and capital surplus items, is insufficient to cover our annual net losses. In light of the above, if we had insufficient funds to make any payment under any of our obligations, including the debt securities and the guarantees covered by this prospectus, the Government would take appropriate steps, such as by making a capital contribution, by allocating funds or by taking other action, to enable us to make such payment when due. The provisions of Article 32 do not, however, constitute a direct guarantee by the Government of our obligations under the debt securities or the guarantees, and the provisions of the KDB Act, including Article 32, may be amended at any time by action of the National Assembly.

The Government closely supervises our operations in the following ways:

•

the Government has the power to elect or dismiss our Chairman and Chief Executive Officer, members of our Board of Directors and Auditor;

•

within three months after the end of each fiscal year, we must submit our financial statements for the fiscal year to the Financial Services Commission;

•

the Financial Services Commission has broad authority to require reports from us on any matter and to examine our books, records and other documents. On the basis of the reports and examinations, the Financial Services Commission may issue any orders deemed necessary to enforce the KDB Act;

•

the Financial Services Commission must approve our operating manual, which sets out the guidelines for all principal operating matters;

•

the Financial Services Commission may supervise our operations to ensure managerial soundness based upon the KDB Decree and the Bank Supervisory Regulations of the Financial Services Commission and may issue orders deemed necessary for such supervision; and

•

we may amend our Articles of Incorporation only with the approval of the Financial Services Commission.

We have had our annual financial statements for years commencing 1998 audited by an external auditor. See “—Financial Statements and the Auditors” and “Experts.”

Pursuant to our most recently approved program of operations, we expect to support the reform and restructuring of the Republic’s economic and industrial structure, including financing of promising small- and medium-sized enterprises, providing export finance and encouraging investments in infrastructure necessary to promote consumer demand and industrial reorganization.

Selected Financial Statement Data

Unless specified otherwise, the information provided below is stated on a separate basis in accordance with Korean IFRS.

Consolidated Financial Statement Data

The following table presents selected statements of financial position data regarding our assets, liabilities and shareholders’ equity on a consolidated basis as of December 31, 2022 and 2021, which have been derived from our audited consolidated financial statements as of and for the years ended December 31, 2022 and 2021.


	As of December 31,
	2021		2022

	(billions of won)
Statements of Financial Position Data
Total Loans (measured at amortized cost)⁽¹⁾	W	182,507.3	W	214,151.6
Total Borrowings⁽²⁾		234,482.2		266,349.8
Total Assets		333,898.2		354,125.1
Total Liabilities		287,740.1		318,234.4
Equity		46,158.2		35,890.8

(1)

Gross amount, which includes loans for facility development, loans for working capital, loans for households, inter-bank loans, private loans, off-shore loan receivables, loans borrowed from overseas financial institutions, bills bought in foreign currencies, advance payments on acceptances and guarantees and other loans without adjusting for allowance for loan losses, present value discounts and deferred loan fees.

(2)	Total Borrowings include deposits, financial liabilities measured at fair value through profit or loss, borrowings and debentures.

Our selected income statement data included in the following table have been derived from our audited consolidated financial statements as of and for the years ended December 31, 2022 and 2021.


	Year Ended December 31,
	2021		2022

	(billions of Won)
Income Statement Data
Total Interest Income	W	5,142.3	W	8,128.6
Total Interest Expense		2,651.7		5,369.1
Net Interest Income		2,490.6		2,759.6
Operating Income		2,621.1		1,334.2
Non-operating Income (Expense)		726.9		(9,938.5	)
Profit (Loss) before Income Taxes		3,348.0		(8,604.3	)
Income Tax Expense (Benefit)		985.4		(2,050.2	)
Net Income (Loss)		1,323.5		(7,624.6	)

Separate Financial Statement Data

The following tables present selected separate financial information as of and for the years ended December 31, 2022 and 2021, which has been derived from our audited separate financial statements as of and for the years ended December 31, 2022 and 2021 and included in this prospectus. You should read the following financial statement data together with the financial statements and notes included in this prospectus.


	As of December 31,
	2021		2022

	(billions of won)
Statements of Financial Position Data
Total Loans (measured at amortized cost)⁽¹⁾	W	174,917.2	W	202,032.2
Total Borrowings⁽²⁾		222,288.3		253,937.5
Total Assets		276,421.9		312,845.3
Total Liabilities		239,919.0		277,176.9
Equity		36,502.9		35,668.4

(1)

(2)	Total Borrowings include deposits, financial liabilities measured at fair value through profit or loss, borrowings and debentures.

As of December 31, 2022, our total assets increased by 13.2% toW312,845.3 billion fromW276,421.9 billion as of December 31, 2021, primarily due to an increase in loans measured at amortized cost toW198,045.6 billion as of December 31, 2022 fromW170,763.4 billion as of December 31, 2021 and, to lesser extents, an increase in derivative financial assets toW9,794.5 billion as of December 31, 2022 fromW5,305.6 billion as of December 31, 2021 and an increase in securities measured at amortized cost toW6,355.9 billion as of December 31, 2022 fromW2,968.9 billion as of December 31, 2021.

As of December 31, 2022, our total liabilities increased by 15.5% toW277,176.9 billion fromW239,919.0 billion as of December 31, 2021, primarily due to an increase in deposits toW68,326.7 billion as of December 31, 2022 fromW52,792.1 billion as of December 31, 2021 and an increase in debentures toW158,711.9 billion as of December 31, 2022 fromW145,365.3 billion as of December 31, 2021, and to a lesser extent, an increase in derivative financial liabilities toW11,317.0 billion as of December 31, 2022 fromW4,757.8 billion as of December 31, 2021.

As of December 31, 2022, our total equity decreased by 2.3% toW35,668.4 billion fromW36,502.9 billion as of December 31, 2021, primarily due to a decrease in accumulated other comprehensive income toW2,819.3 billion as of December 31, 2022 fromW4,773.5 billion as of December 31, 2021, which was offset in part by an increase in our paid-in capital toW23,151.6 billion as of December 31, 2022 fromW21,886.6 billion as of December 31, 2021.

Our selected income statement data included in the following table have been derived from our audited separate financial statements as of and for the years ended December 31, 2022 and 2021 included in this prospectus.


	Year Ended December 31,
	2021		2022

	(billions of Won)
Income Statement Data
Total Interest Income	W	4,125.3	W	6,846.7
Total Interest Expense		2,466.7		5,102.9
Net Interest Income		1,658.6		1,743.8
Operating Income		3,550.2		1,757.7
Profit before Income Taxes		3,655.4		592.7
Income Tax Expense		1,193.5		127.7
Net Income		2,461.8		465.0

2022

We had net income ofW465.0 billion in 2022 compared toW2,461.8 billion in 2021, on a separate basis. The principal factors for the decrease in net income included:

•

a change in net other operating income (expense) to a net expense ofW349.8 billion in 2022 from a net income ofW1,738.6 billion in 2021, primarily due to a change in net gain (loss) on disposal of loans measured at fair value through profit or loss to a net loss ofW0.6 billion in 2022 from a net gain ofW1,850.7 billion in 2021, which in turn was primarily due to the gains recognized in connection with the conversion of our convertible bonds issued by HMM Company Limited into common shares in 2021, which was not repeated in 2022; and

•

an impairment loss on investments in subsidiaries and associates ofW1,168.6 billion in 2022, primarily due to decreases in the recoverable amounts of our investments in HMM Company Limited, DSME and Hanjin KAL, each resulting from decreases in the fair value of such investments, compared to a reversal of impairment loss on investments in subsidiaries and associates ofW363.1 billion in 2021.

The above factors were partially offset by the following factors:

•

a decrease in income tax expense toW127.7 billion in 2022 fromW1,193.5 billion in 2021, primarily due to a decrease in profit before income taxes toW592.7 billion in 2022 fromW3,655.4 billion in 2021; and

•

a decrease in provisions for credit losses toW260.4 billion in 2022 fromW847.4 billion in 2021, primarily due to a decrease in expected credit losses in anticipation of an improvement in the overall asset quality of our loan portfolio resulting from a recovery from the COVID-19 pandemic.

2021

We had net income ofW2,461.8 billion in 2021 compared toW487.5 billion in 2020, on a separate basis. The principal factors for the increase in net income included:

•

an increase in net other operating income toW1,738.6 billion in 2021 fromW227.0 billion in 2020, primarily due to a change in net gain (loss) on disposal of loans measured at fair value through profit or loss to a net gain ofW1,850.7 billion in 2021 from a net loss ofW24.6 billion in 2020 resulting primarily from gains recognized in connection with the exercise of our right to convert our convertible bonds issued by HMM Company Limited into common shares, which took place in June 2021;

•

a reversal of impairment loss on investments in subsidiaries and associates ofW363.1 billion in 2021, primarily due to a reversal of impairment losses recognized in connection with the upcoming sale of our

stake in Daewoo Engineering & Construction, compared to an impairment loss on investments in subsidiaries and associates ofW239.5 billion in 2020; and

•

an increase in dividend income toW1,259.6 billion in 2021 fromW670.6 billion in 2020, primarily due to an increase in dividends received from Korea Electric Power Corporation during 2021 compared to 2020.

The above factors were partially offset by an increase in income tax expense toW1,193.5 billion in 2021 fromW133.3 billion in 2020, primarily due to an increase in income before income taxes toW3,655.4 billion in 2021 fromW620.9 billion in 2020.

Allowances for Loan Losses and Loans in Arrears

We establish allowances for losses from problem loans, including guarantees and other extensions of credit, based on the length of the delinquent periods and the nature of the loans, including guarantees and other extensions of credit. Under K-IFRS 1109, for annual periods commencing on or after January 1, 2018, we establish allowances for credit losses based on expected credit losses instead of incurred losses (as was the case under K-IFRS 1039) by assessing changes in expected credit losses and recognizing such changes as impairment loss (or reversal of impairment loss) in profit or loss. Under K-IFRS 1109, the allowance required to be established with respect to a loan or receivable is the amount of the expected 12-month credit loss or the expected lifetime credit loss for the applicable loan or receivable, according to three stages of credit risk deterioration since initial recognition.

As of December 31, 2022, we established allowances ofW3,997.2 billion for loan losses, which was 3.8% lower than the allowances as of December 31, 2021 ofW4,154.3 billion, primarily due to a decrease in expected credit losses in light of an improvement in the overall asset quality of our loan portfolio following a recovery from the COVID-19 pandemic. Allowances for loan losses under K-IFRS are recorded for loans based on expected credit losses, depending on whether there has been a significant increase in credit risk or a credit impairment since initial recognition and, if our allowances for loan losses are deemed insufficient for regulatory purposes, we compensate for the difference by recording a regulatory reserve for loan losses within retained earnings. See “—Financial Statements and the Auditors—Notes to Separate Financial Statements of December 31, 2022 and 2021—Notes 3(27), 9(1), 24(4) and 24(5).”

Certain of our customers have restructured loans with their creditor banks. As of December 31, 2022, we have provided loans ofW552.0 billion for companies under workout, court receivership, court mediation and other restructuring procedures. As of December 31, 2022, we had established allowances ofW321.4 billion for loan losses with respect to such companies. We cannot assure you that actual results of the credit loss from the loans to these customers will not exceed the allowances established.

The following table provides information on our loan loss allowances.


		As of December 31, 2021⁽¹⁾				As of December 31, 2022⁽¹⁾
		Loan Amount		Loan Loss Allowances		Loan Amount		Loan Loss Allowances

		(billions of won)
Loan Classification	Normal⁽²⁾	W	169,518.3	W	2,045.2	W	197,801.8	W	1,931.8
	Precautionary		3,182.5		901.2		2,944.3		1,213.0
	Substandard		1,326.4		542.1		572.0		274.8
	Doubtful		148.9		119.2		130.9		119.1
	Expected Loss		741.1		546.6		583.2		458.5

	Total	W	174,917.2	W	4,154.3	W	202,032.2	W	3,997.2

(1)

These figures include loans for facility development, loans for working capital, loans for households, inter-bank loans, private loans, off-shore loan receivables, loans borrowed from overseas financial institutions, bills bought in foreign currencies, advance payments on acceptances and guarantees and other loans.

(2)	Includes loans guaranteed by the Government. Under Korean IFRS, we establish loan loss allowances for all loans including loans guaranteed by the Government.

As of December 31, 2022, our non-performing loans totaledW1,286.1 billion, representing 0.6% of our outstanding loans as of such date. Non-performing loans are defined as loans that are classified as substandard or below. On December 31, 2022, our legal reserve wasW2,535.9 billion, representing 1.3% of our outstanding loans as of such date.

Loans to Financially Troubled Companies

We have credit exposure to a number of financially troubled Korean companies including DSME, HMM Company Limited (formerly, Hyundai Merchant Marine Co., Ltd.), HJ Shipbuilding & Construction Co., Ltd. (formerly, Hanjin Heavy Industries and Construction Co., Ltd.), Daehan Shipbuilding Co., Ltd., K Shipbuilding Co., Ltd. (formerly, STX Offshore & Shipbuilding) and GM Korea Company. As of December 31, 2022, our credit extended to these companies totaledW18,112.9 billion, accounting for 5.8% of our total assets as of such date.

The following table shows the changes in credit exposure (including loans classified as substandard or below, guarantees and equity investment classified as estimated loss or below) extended to these companies as of the dates indicated:


	As of December 31,
Company	2021		2022		Primary Reason for Change

	(billions of won)
DSME	W	6,016.3	W	7,954.9	Increase due to an increase in refund guarantees
HMM Company Limited		10,452.0		7,265.7	Decrease due to a decrease in the value of perpetual bonds and repayment of loans
HJ Shipbuilding & Construction		854.0		996.5	Increase due to an increase in refund guarantees
Daehan Shipbuilding		1,226.6		859.9	Decrease due to decreases in foreign currency refund guarantees and letters of credit
K Shipbuilding		394.6		659.4	Increase due to increases in short-term loans and refund guarantees
GM Korea Company		402.9		376.5	Decrease due to a decline in the value of stocks

Total	W	19,346.4	W	18,112.9

As of December 31, 2022, we established allowances ofW1,270.8 billion for our exposure to DSME,W2.2 billion for HMM Company Limited,W25.9 billion for HJ Shipbuilding & Construction,W187.7 billion for Daehan Shipbuilding,W172.5 billion for K Shipbuilding and none for GM Korea Company.

During 2015, DSME, one of the largest shipbuilding and offshore construction companies in Korea, suffered from financial difficulties primarily due to significant losses incurred in connection with the construction of offshore plants resulting from a prolonged slowdown in the global shipbuilding industry. In October 2015, we announced that we, along with The Export-Import Bank of Korea, would extend additional financing of up to

W4.2 trillion to DSME by the end of 2016 in the form of debt-to-equity swaps, extension of additional loans and provision of other forms of liquidity support. In this connection, in December 2015, we acquiredW382.9 billion of new equity shares of DSME, which increased our equity interest in DSME from 31.5% to 49.7%, and we became its largest shareholder. In December 2016, we increased our equity interest in DSME to 79.0% through an additional debt for equity swap. In March 2017, we and The Export-Import Bank of Korea announced a second joint plan to provide an additionalW2.9 trillion in financial support to DSME, which was approved by the other creditors in April 2017. Based on such plan, we provided additional debt-to-equity swaps ofW0.3 trillion in June 2017 and The Export-Import Bank of Korea exchanged a term loan in the amount ofW1.28 trillion provided by it to DSME for perpetual bonds issued by DSME. Other creditors also provided debt-to-equity swaps for up to 80% of their debt with DSME and rescheduled the maturities of the remainder. Subsequently, in March 2019, Hyundai Heavy Industries entered into a definitive agreement with us to acquire DSME. However, in January 2022, the European Commission announced that it would not grant approval for such acquisition due to anti-competition concerns for LNG carriers. In December 2022, Hanwha Group entered into a definitive agreement with us to acquire a 49.3% equity stake in DSME for approximatelyW2 trillion, which has since received regulatory approval from all relevant jurisdictions. The acquisition closed in May 2023, upon which our equity stake in DSME amounted to 28.2%.

In July 2016, HMM Company Limited executed a debt-to-equity swap with us and other creditors, as part of its continued restructuring led by us as its largest creditor, and affiliates of the Hyundai group reduced their shareholdings in HMM Company Limited, which resulted in us becoming the largest shareholder of HMM Company Limited. In October 2018, we injectedW1 trillion in emergency aid into HMM Company Limited in order to normalize its operations by purchasing bonds with warrants and convertible bonds issued by HMM Company Limited. We also concurrently entered into an agreement to jointly manage HMM Company Limited together with Korea Ocean Business Corporation until December 2020, which was subsequently extended to January 2022. In June 2021, we exercised our right to convertW300 billion of our convertible bonds into 60 million common shares of HMM Company Limited. Following an improvement in the financial performance of HMM Company Limited, we ended our joint management of HMM Company Limited in January 2022, upon which Korea Ocean Business Corporation became its sole manager. We and Korea Ocean Business Corporation are currently each pursuing the sale of our respective equity shares in HMM Company Limited. As of December 31, 2022, our equity stake in HMM Company Limited amounted to 20.7%.

In 2022, we sold non-performing loans worthW368.1 billion to UAMCO., Ltd.

Korea and globally, which could disrupt the business, activities and operations of many of our borrowers, which in turn could have an adverse impact on the ability of our borrowers to meet existing payment or other obligations to us. For example, COVID-19, an infectious disease that was first reported to have been transmitted to humans in late 2019 and was declared a “pandemic” by the World Health Organization in March 2020, has since spread globally and has led to significant global and domestic economic and financial disruptions. See “The Republic of Korea—The Economy—Worldwide Economic and Financial Difficulties.” The COVID-19 pandemic has had an especially direct negative impact on certain of our borrowers, among them the airline industry, which required significant liquidity following a sharp decline in aircraft traffic and a dramatic increase in the number of suspended flights due to entry restrictions imposed by many countries in response to COVID-19 during the course of the pandemic.

higher provisioning, as well as an increase in impairment losses on such loans, which could have a material adverse impact on our business, financial condition or results of operations.

Operations

Loan Operations

We mainly provide equipment capital loans, project loans and working capital loans to private Korean enterprises that undertake major industrial projects either directly or indirectly through on-lending. The loans generally cover over 50%, and in some cases as much as 100%, of the total project cost. Equipment capital loans include loans to major industries for development of high technology and for acquisition, improvement or repair of machinery and equipment. We disburse loan proceeds in installments to ensure that the borrower uses the loan for its intended purpose.

Before approving a loan, we consider:

•

the economic benefits of the project to the Republic;

•

the extent to which the project serves priorities established by the Government’s industrial policy;

•

the project’s operational feasibility;

•

the loan’s and the project’s profitability; and

•

the quality of the borrower’s management.

The interest rate we charge on our loans varies based on a number of factors, including the purpose of the loan, maturity date and the borrower’s credit ratings. Certain loans bear interest at below market rates. Equipment capital loans generally have original maturities of three to five years, although we occasionally make equipment capital loans with longer maturities. Working capital loans usually mature within two years.

The Business Planning Department functions as our centralized policy-making and planning division with respect to our lending activities. The Business Planning Department formulates and revises our internal regulations on loan programs as well as setting basic lending guidelines.

We have multiple levels of loan approval authority, depending on the loan amount and other factors such as the availability of collateral or guarantee, debt repayment ability and business prospects. The Credit Review Committee, Division Credit Review Committee, Division Credit Review Sub-Committee, General Manager each has authority to approve loans up to a specified amount. The amount differs depending on the type of loan and certain other factors, for example, whether a loan is collateralized or guaranteed.

In recent years, many of our corporate borrowers experienced financial difficulties due to the COVID-19 pandemic. See “The Republic of Korea—The Economy—Worldwide Economic and Financial Difficulties.” We have significant exposure to certain industries that were particularly affected by the COVID-19 pandemic, such as the transportation (including airlines), hotel and leisure industries, the banking and insurance industries, the retail and wholesale industries and the manufacturing industry, among others. In the event that the financial condition of these companies to which we extended credits deteriorates in the future, we may be required to record additional allowances for loan losses, as well as charge-offs and impairment losses or losses on disposal, which may have a material adverse impact on our results of operations and financial condition.

Our overall risk management policy is set by the Risk Management Committee. For detailed information regarding our risk management policy and procedures, see “—Financial Statements and the Auditors—Notes to Separate Financial Statements of December 31, 2022 and 2021—Note 49.”

The following table sets out, by currency and category of loan, our total outstanding loans:

Loans⁽¹⁾


	December 31,
	2021		2022

	(billions of won)
Equipment Capital Loans:
Domestic Currency	W	56,414.4	W	60,391.6
Foreign Currency		10,088.7		11,661.1

		66,503.1		72,052.7
Working Capital Loans:
Domestic Currency⁽²⁾		65,120.5		69,906.9
Foreign Currency		11,967.5		15,702.2

		77,088.0		85,609.2
Other Loans⁽³⁾		31,326.1		44,370.3

Total Loans	W	174,917.2	W	202,032.2

(1)	Includes loans extended to affiliates.

(2)	Includes loans on households.

(3)	Includes inter-bank loans, private loans, off-shore loan receivables, loans borrowed from overseas financial institutions, bills bought in foreign currencies, advance payments on acceptances and guarantees and other loans.

As of December 31, 2022, we hadW202,032.2 billion in outstanding loans, which represents a 15.5% increase fromW174,917.2 billion of outstanding loans as of December 31, 2021.

Maturities of Outstanding Loans

The following table categorizes our outstanding equipment capital and working capital loans by their remaining maturities:

Outstanding Equipment Capital and Working Capital Loans by Remaining Maturities⁽¹⁾


	December 31,				As % of December 31, 2022 Total
	2021		2022		As % of December 31, 2022 Total

	(billions of won, except percentages)
Loans with Remaining Maturities of One Year or Less	W	59,416.3	W	66,799.3		42.4	%
Loans with Remaining Maturities of More Than One Year		84,174.8		90,862.6		57.6

Total	W	143,591.1	W	157,661.9		100.0	%

(1)	Includes loans extended to affiliates.

Loans by Industrial Sector

The following table sets out the total amount of our outstanding equipment capital and working capital loans, categorized by industry sector:

Outstanding Equipment Capital and Working Capital Loans by Industry Sector⁽¹⁾


	December 31,						As % of December 31, 2022 Total
	2021			2022			As % of December 31, 2022 Total

	(billions of won, except percentages)
Manufacturing	W	65,421.6		W	69,869.7			44.3	%
Banking and Insurance		33,979.3			37,855.0			24.0
Transportation		10,348.8			10,868.0			6.9
Public Administration		626.9			574.0			0.4
Electric, Gas and Water Supply Industry		5,211.4			5,640.2			3.6
Others⁽²⁾		28,003.2			32,855.1			20.8

Total	W	143,591.1		W	157,661.9			100.0	%

Percentage increase (decrease) from previous period		8.6	%		9.8	%

(1)	Includes loans extended to affiliates.

(2)	Includes wholesale and retail trade, real estate and leasing, and construction.

Industrial Bank of Korea was our single largest borrower as of December 31, 2022, accounting for 4.4% of our outstanding equipment capital and working capital loans. As of December 31, 2022, our five largest borrowers and 20 largest borrowers accounted for 11.0% and 21.5%, respectively, of our outstanding equipment capital and working capital loans.

The following table breaks down the equipment capital and working capital loans to our 20 largest borrowers outstanding as of December 31, 2022 by industry sector:

20 Largest Borrowers by Industry Sector


	As % of December 31, 2022 Total Outstanding Equipment Capital and Working Capital Loans to Our 20 Largest Borrowers
Manufacturing		29.4	%
Banking and Insurance		49.9
Transportation		11.1
Electric, Gas and Water Supply Industry		5.9
Others⁽¹⁾		3.7

Total		100.0	%

(1)	Includes wholesale and retail trade, real estate and leasing, and construction.

The following table categorizes the new loans made by us by industry sector:

New Loans by Industry Sector


	Year Ended December 31,						As % of Year Ended December 31, 2022 Total
	2021			2022			As % of Year Ended December 31, 2022 Total

	(billions of won, except percentages)
Manufacturing	W	42,998.5		W	34,686.9			44.7	%
Banking and Insurance		13,582.3			17,961.5			23.2
Transportation		3,768.8			3,799.3			4.9
Electric, Gas and Water Supply Industry		3,474.6			2,616.8			3.4
Public Administration		319.9			161.7			0.2
Others⁽¹⁾		16,645.0			18,303.7			23.6

Total	W	80,789.1		W	77,529.9			100.0	%

Percentage increase (decrease) from previous period		13.4	%		(4.0	)%

(1)	Includes wholesale and retail trade, real estate and leasing, and construction.

Loans by Categories

In addition to dividing our loans into equipment capital and working capital loans, we classify loans into several groupings, the most important being:

•

industrial fund loans;

•

on-lending loans;

•

foreign currency loans;

•

local currency loans denominated in foreign currencies;

•

offshore loans in foreign countries; and

•

government fund loans.

The following table sets out equipment capital and working capital loans by categories as of December 31, 2022:


	Equipment Capital Loans⁽¹⁾					Working Capital Loans⁽¹⁾
	December 31, 2022		%			December 31, 2022		%

	(billions of won, except percentages)
Industrial fund loans	W	54,234.1		75.3	%	W	53,992.3		63.1	%
On-lending loans		3,160.7		4.4			15,028.2		17.6
Foreign currency loans		7,955.8		11.0			1,732.0		2.0
Local currency loans denominated in foreign currencies		0.8		0.0			22.2		0.0
Offshore loans in foreign currencies		3,443.5		4.8			11,834.9		13.8
Government fund loans		92.1		0.1			—		—
Overdraft		—		—			117.8		0.1
Others⁽¹⁾		3,165.7		4.4			2,881.8		3.4

Total	W	72,052.7		100.0	%	W	85,609.2		100.0	%

(1)	Includes loans on households and loans extended to affiliates.

Industrial Fund Loans. Industrial fund loans are equipment capital and working capital loans denominated in Won to borrowers in major industries to finance equipment and facilities.

We currently make equipment capital industrial fund loans at floating or fixed rates for terms of up to 10 years and for up to 100% of the equipment cost being financed. We make working capital industrial fund loans at floating or fixed rates and in amounts constituting up to 40% of the borrower’s estimated annual sales, excluding depreciation expenses.

On-lending Loans. On-lending is a form of indirect financing that involves intermediary financial institutions which on-lend the funds provided by us to industrial borrowers and are responsible for repayment to us. Most of the funds provided by us through on-lending are ultimately lent to small- and medium-sized enterprises for their equipment purchases and working capital. We explicitly set detailed guidelines (including scope of borrowers, maturity and interest rates) for intermediary financial institutions to be followed when on-lending to the ultimate borrowers. We monitor our exposure to, and the credit standing of, each financial institution to which we lend. Borrowers do not apply directly to us and may only apply for our on-lending loans through their regular bank or another bank of their choice. The intermediary bank appraises the financial and business situation of the applicant and generally assumes liability for repayment to us. Although the processing of individual loans requires two formally separate loan approvals for each borrower, first by the intermediary bank and then by us, the ultimate borrower need only apply to the intermediary bank for approval.

Foreign Currency Loans. We extend loans denominated in U.S. dollars, Japanese Yen or other foreign currencies principally to finance the purchase of industrial equipment from abroad or the implementation of overseas industrial development projects by Korean companies. We make these loans at floating interest rates with original maturities, in the case of equipment capital foreign currency loans, of up to 10 years and, in the case of working capital foreign currency loans, of up to three years.

Local Currency Loans Denominated in Foreign Currencies. We make local currency loans denominated in foreign currencies for the same purposes, and to the same borrowers, as foreign currency loans. Although we denominate the loans in foreign currency, the borrower receives and repays the loans in Won based on foreign exchange rates at the time of receipt and repayment. We currently make loans of this type at floating interest rates, with original maturities, in the case of equipment capital loans, of up to 10 years and, in the case of working capital loans, of up to three years.

Offshore Loans in Foreign Currencies. We extend offshore loans in foreign currencies to finance:

•

the purchase of industrial equipment and the implementation of overseas industrial projects by overseas subsidiaries and branches of Korean companies; and

•

the overseas industrial development projects of foreign government entities, international organizations and foreign companies.

We make these loans at floating interest rates with original maturities, in the form of equipment capital foreign currency loans, generally of up to 10 years and, working capital foreign currency loans, generally of up to three years. However, longer maturities may be negotiated on an individual basis.

Government Fund Loans. We make government fund loans primarily to finance:

•

water supply and drainage facilities;

•

the Seoul subway system;

•

freight terminal facilities;

•

hospitals; and

•

other facilities.

Government fund loans that are equipment capital loans require approval by the appropriate Government ministry. We currently make government fund loans in Won at floating interest rates with original maturities of 10 to 20 years.

Other Loans. We also make special purpose fund loans for particular industries or projects using funds lent to us by the Government and foreign financial institutions. The Government funds that finance these loans include, among others:

•

the Tourism Promotion Fund (hotel and resort projects);

•

the Rational Use of Energy Fund (energy conservation projects and collective energy supply projects); and

•

the Small- and Medium-sized Enterprises Promotion Fund (small- and medium-sized enterprises).

For further information relating to such loans, see “—Sources of Funds.”

Guarantee Operations

We extend guarantees to our clients to facilitate their other borrowings and to finance major industrial projects. We guarantee Won-denominated corporate debentures, local currency loans, and other Won liabilities and foreign currency loans from domestic and overseas Korean financial institutions and from foreign institutions. The KDB Act and our Articles of Incorporation limit the aggregate amount of our industrial finance bond obligations and guarantee obligations. See “—Sources of Funds.”

We generally obtain collateral valued in excess of the original guarantee. We appraise the value of our collateral at least once a year. Depending on the borrower, the collateral may be industrial plants, real estate and/or marketable securities.

The following table shows our outstanding guarantees:

Guarantees Outstanding


	As of December 31,
	2021		2022

	(billions of won)
Acceptances	W	276.0	W	220.4
Guarantees on local borrowing		896.9		816.2
Guarantees on foreign borrowing		6,538.5		7,828.8
Letter of guarantee for importers		37.3		64.9

Total	W	7,748.8	W	8,930.4

Investments

We invest in a range of Korean private and Government-owned enterprises but we will not take a controlling interest in a company unless the acquisition is necessary for the corporate restructuring of the company. Although generally a long-term investor, we sell investments from time to time. In recent years, sales resulted principally from the Government’s privatization program, and we expect to continue such sales in the future. The Government plans to sell its direct or indirect interest in certain private sector companies acquired during previous restructuring programs, including Daewoo Engineering & Construction Co., Ltd., depending on market conditions. In accordance with such plan, we expect to sell our equity holdings in certain private sector companies if favorable opportunities for sale arise. Our equity investments decreased toW41,768.4 billion as of December 31, 2022 fromW41,998.7 billion as of December 31, 2021.

The KDB Act and our Articles of Incorporation provide that the cost basis of our total equity investments may not exceed twice the sum of our paid-in capital and our reserve from profit. In addition, pursuant to the KDB Decree, we may not acquire equity securities of a single company in excess of 15% of its entire voting shares. The 15% limit, however, does not apply to certain investments, including those in Government-controlled companies financed by capital contributions from the Government. As of December 31, 2022, the cost basis of our equity investments subject to restriction under the KDB Act and our Articles of Incorporation totaledW18,724.8 billion, equal to 36.1% of our equity investment ceiling. For a discussion of Korean accounting principles relating to our equity investments, see “—Financial Statements and the Auditors.”

The following table sets out our equity investments by industry sector on a book value basis as of December 31, 2022:

Equity Investments


	Book Value as of December 31, 2022
	(billions of won)
Electric, Gas and Water Supply Industry	W	16,988.2
Construction		964.8
Banking and Insurance		11,547.5
Real Estate Business		9.2
Manufacturing		2,085.6
Transportation and Communication		2,693.5
Others		7,479.6

Total	W	41,768.4

As of December 31, 2022, we held total equity investments, on a book value basis, ofW563.7 billion in one of our five largest borrowers andW2,024.0 billion in three of our 20 largest borrowers. We have not established a policy addressing loans to enterprises in which we hold equity interests or equity interests in enterprises to which we have extended loans.

When possible, we use the prevailing market price of a security to determine the value of our interest. However, if no readily ascertainable market value exists for our holdings, we record these investments at the cost of acquisition. With respect to our equity interests in enterprises in which we hold more than 15% of interest, we value these investments annually, with certain exceptions, on a net asset value basis when the investee company releases its financial statements. As of December 31, 2022, the aggregate value of our equity investments accounted for approximately 92.9% of their aggregate cost basis.

As part of our investment activities, we underwrite straight and convertible bond issuances in Won for domestic corporations. We also invest in municipal bonds, extending funds to municipalities at subsidized interest rates, mostly to finance water supply and drainage infrastructure projects.

Other Activities

We engage in a range of industrial development activities in addition to providing loans and guarantees, including:

•

conducting economic and industrial research;

•

performing engineering surveys;

•

providing business analyses and managerial assistance; and

•

offering trust services.

As of December 31, 2022, we held in trust cash and other assets totalingW28,806.9 billion, and we generated in 2022 trust fee income equalingW181.9 billion. As of December 31, 2021, we held in trust cash and other assets totalingW31,703.8 billion, and we generated in 2021 trust fee income equalingW139.9 billion. Pursuant to Korean law, we segregate trust assets from our other assets; trust assets are not available to satisfy claims of our depositors or other creditors. Accordingly, we account for our trust accounts separately from our banking accounts. However, if our trust operations fail to preserve the principal of our clients’ trust assets, we are responsible for covering the deficit either from previously established provisions in our trust accounts or by a transfer from our banking accounts. In 2021 and 2022, we did not transfer any funds from our banking accounts to cover deficits in our trust accounts. Surplus funds generated by the trust assets may be deposited into the clients’ accounts and earn interest. We reflect trust fees earned by us on our trust account management services as other operating revenues in the income statement of the banking accounts.

Sources of Funds

In addition to our capital and reserves, we obtain funds primarily from:

•

borrowings from the Government;

•

issuances of bonds in the domestic and international capital markets;

•

borrowings from international financial institutions or foreign banks; and

•

deposits.

All of our borrowings are unsecured.

Borrowings from the Government

We borrow from the Government’s general purpose funds and its special purpose funds. General purpose loans generally are in Won and have fixed interest rates and maturities ranging from five to 20 years. We incur special purpose loans, principally from the Tourism Promotion Fund, the Rational Use of Energy Fund and the Small- and Medium-sized Enterprises Promotion Fund, in connection with specific projects we finance. The Government links the interest rate and maturity of each special purpose borrowing to the terms of the financing we provide for the specific project.

The following table sets out our Government borrowings as of December 31, 2022:


Type of Funds Borrowed	As of December 31, 2022
	(billions of won)
General Purpose	W	93.2
Special Purpose		4,457.8

Total	W	4,551.0

Domestic and International Capital Markets

We issue industrial finance bonds both in Korea and abroad, some of which the Government directly guarantees. We generally issue domestic bonds at fixed interest rates with original maturities of one to ten years.

The following table sets out the outstanding balance of our industrial finance bonds as of December 31, 2022:


Outstanding Balance	As of December 31, 2022
	(billions of won)
Denominated in Won	W	122,303.0
Denominated in Other Currencies		39,950.7

Total	W	162,253.7

The KDB Act provides that the aggregate outstanding principal amount of our industrial finance bonds, other than those directly guaranteed or purchased by the Government, plus the aggregate outstanding amount of debt (including bonds and loans) guaranteed or purchased by us, other than those excepted by the KDB Act, may not exceed 30 times the sum of our paid-in capital and our reserve from profit. As of December 31, 2022, the aggregate amount of our industrial finance bonds and guarantee obligations (including guarantee obligations relating to loans that had not been borrowed as of December 31, 2022) wasW175,590.5 billion, equal to 22.6% of our authorized amount under the KDB Act, which wasW778,041.1 billion.

In 2022, we issuedW65.3 trillion in Won-denominated industrial finance bonds andW11.5 trillion in industrial finance bonds denominated in other currencies. In 2023, we are targeting to issue approximatelyW60 trillion in Won-denominated industrial finance bonds and approximatelyW12 trillion in industrial finance bonds denominated in other currencies, subject to change depending on our funding needs and market conditions.

Foreign Currency Borrowings

We borrow money from institutions, principally syndicates of commercial banks, outside the Republic in foreign currencies. We frequently enter into related interest rate and currency swap transactions. The loans generally have original maturities of one to five years. As of December 31, 2022, the outstanding amount of our foreign currency borrowings was US$16.4 billion.

Our long term and short term foreign currency borrowings increased toW20,820.6 billion as of December 31, 2022 fromW16,426.4 billion as of December 31, 2021.

Deposits

We take demand deposits and time and savings deposits from the general public. Time and savings deposits generally have maturities shorter than three years and bear interest at fixed rates. As of December 31, 2022, demand deposits held by us totaledW2,271.5 billion and time and savings deposits held by us totaledW58,344.4 billion.

Debt

Debt Repayment Schedule

The following table sets out our principal repayment schedule as of December 31, 2022:

Debt Principal Repayment Schedule⁽¹⁾


	Maturing on or before December 31,
Currency⁽²⁾⁽³⁾	2023		2024		2025		2026		Thereafter

	(billions of won)
Won	W	61,062.5	W	29,720.1	W	17,002.1	W	4,588.7	W	14,320.0
Foreign		28,957.8		9,055.5		9,878.7		5,496.8		7,382.4

Total Won Equivalent	W	90,020.3	W	38,775.6	W	26,880.8	W	10,085.5	W	21,702.4

(1)	Excludes bonds sold under repurchase agreements and call money.

(2)	Borrowings in foreign currencies have been translated into Won at the market average exchange rates on December 31, 2022, as announced by the Seoul Money Brokerage Services Ltd.

(3)	We categorize debt with respect to which we have entered into currency swap agreements by our repayment currency under such agreements.

The following table summarizes, as of December 31 of the years indicated, our outstanding direct internal debt:

Direct Internal Debt


	(billions of Won)
2018		103,443.1
2019		97,087.8
2020		113,091.4
2021		115,318.8
2022		126,854.0

The following table summarizes, as of December 31 of the years indicated, our outstanding direct external debt:

Direct External Debt


	(billions of Won)
2018		41,873.4
2019		41,640.2
2020		42,207.6
2021		52,412.9
2022		60,771.2

The following table sets out, by currency and the equivalent amount in U.S. Dollars, our outstanding external bonds as of December 31, 2022:

External Bonds


	Amount in Original Currency		Equivalent Amount in U.S. Dollars⁽¹⁾

	(millions)
US$		US$ 23,183		23,183
Euro (EUR)		EUR 2,110		2,250
New Zealand Dollar (NZD)		NZD 110		70
Hong Kong dollar (HKD)		HKD5,566		714
Chinese offshore renminbi (CNH)		CNH5,822		835
Swiss franc (CHF)		CHF925		1,002
Brazilian real (BRL)		BRL 5,683		1,075
Australian dollar (AUD)		AUD 2,537		1,719
Great Britain Sterling (GBP)		GBP86		104
Norwegian Krone (NOK)		NOK 400		40
Indonesian Rupiah (IDR)		IDR2,719,800		174
Indian Rupee (INR)		INR6,913		84
Swedish Krona (SEK)		SEK1,410		135
Mexican Peso (MXN)		MXN 4,700		242
Thai Baht (THB)		THB4,580		132
Singapore Dollar (SGD)		SGD28		21

Total			US$	31,780

(1)	Amounts expressed in currencies other than US$ are converted to US$ at the exchange rate announced by the Seoul Money Brokerage Services, Ltd. in effect on December 31, 2022.

For further information on our outstanding indebtedness, see “—Tables and Supplementary Information.”

Debt Record

We have never defaulted in the payment of principal or interest on any of our obligations.

Overseas Operations

We operate overseas subsidiaries in Hong Kong, Dublin, Budapest, Sao Paulo, Tashkent, Jakarta and Mountain View. The subsidiaries engage in a variety of banking and merchant banking services, including:

•

managing and underwriting new securities issues;

•

syndicating medium and long-term loans;

•

trading securities;

•

trading in the money market; and

•

providing investment management and advisory services.

We currently maintain eleven branches in Tokyo, Shanghai, Singapore, New York City, London, Beijing, Guangzhou, Qingdao, Shenyang, Yangon and Hong Kong, and seven overseas representative offices in Frankfurt, Ho Chi Minh City, Abu Dhabi, Moscow, Sydney, Bangkok and Jakarta.

Property

Our head office is located at 14 Eunhaeng-ro, Yeongdeungpo-gu, Seoul, Korea, a 35,996 square meter building completed in July 2001 and owned by us. In addition to the head office, we maintain 60 branches in major cities throughout the Republic, including 18 in Seoul. We generally lease our domestic and overseas offices under long-term leases.

Directors and Management; Employees

Our Board of Directors has ultimate responsibility for management of our affairs. Under the KDB Act and our Articles of Incorporation, our Board of Directors is to consist of one Chief Executive Officer (who also serves as the Chairman of the Board of Directors), one Chief Operating Officer and not more than eight directors. Under the KDB Act, the President of the Republic appoints our Chief Executive Officer and Chairman of the Board of Directors upon the recommendation of the Chairman of the Financial Services Commission. The Financial Services Commission appoints all of our directors upon the recommendation of our Chief Executive Officer. Under our Articles of Incorporation, our executive directors serve for three-year terms and they may be re-appointed, and our independent non-executive directors serve for two-year terms and they may be re-appointed; provided, however, that our independent non-executive directors shall not serve more than one year for each reappointment and shall not serve more than five years consecutively.

Currently, the members of our Board of Directors are:


Position	Name	Expiration of Term
Chief Executive Officer and Chairman of the Board of Directors	Seog Hoon Kang	June 6, 2025
Chief Operating Officer and Vice Chairman of the Board of Directors	Bock Kyu Kim	March 22, 2026
Auditor	Tae Hyun Joo	March 14, 2024
Independent Non-executive Directors	Dong Il Jung	November 30, 2023
	Seog Hwan Lee	September 27, 2024
	Sam Mo Kang	September 27, 2024
	Yong Hi Lee	April 2, 2025

As of December 31, 2022, we employed 3,582 persons with 2,097 persons located in our Seoul head office.

Tables and Supplementary Information

A. External Debt of KDB

(1) External Bonds of KDB


Currency	Original Principal Amount		Interest Rate (%)	Issue Date	Maturity Date	Principal Amount Outstanding as of December 31, 2022
USD		40,000,000	3.810	October 30, 2013	October 30, 2023		40,000,000
USD		30,000,000	4.000	November 1, 2013	November 1, 2023		30,000,000
USD		50,000,000	3.740	November 5, 2013	November 5, 2023		50,000,000
USD		50,000,000	3.700	November 6, 2013	November 6, 2023		50,000,000
USD		50,000,000	3.800	November 13, 2013	November 13, 2023		50,000,000
USD		30,000,000	3.790	November 13, 2013	November 13, 2023		30,000,000
USD		50,000,000	3.750	November 15, 2013	November 15, 2023		50,000,000
USD		30,000,000	3.680	November 26, 2013	November 26, 2023		30,000,000


Currency	Original Principal Amount		Interest Rate (%)	Issue Date	Maturity Date	Principal Amount Outstanding as of December 31, 2022
USD		20,000,000	3.660	November 26, 2013	November 26, 2023		20,000,000
USD		30,000,000	3.680	November 26, 2013	November 26, 2023		30,000,000
USD		50,000,000	3.800	December 12, 2013	December 12, 2023		50,000,000
USD		20,000,000	3.800	December 18, 2013	December 18, 2023		20,000,000
USD		20,000,000	3.810	December 18, 2013	December 18, 2023		20,000,000
USD		750,000,000	3.750	January 22, 2014	January 22, 2024		750,000,000
USD		200,000,000	3.850	February 20, 2014	February 20, 2024		200,000,000
USD		20,000,000	3.720	April 9, 2014	April 9, 2024		20,000,000
USD		30,000,000	3.720	April 10, 2014	April 10, 2024		30,000,000
USD		30,000,000	3.700	April 11, 2014	April 11, 2024		30,000,000
USD		50,000,000	3.700	April 11, 2014	April 11, 2024		50,000,000
USD		30,000,000	3.605	April 29, 2014	April 29, 2024		30,000,000
USD		50,000,000	3.620	April 29, 2014	April 29, 2024		50,000,000
USD		20,000,000	3.615	April 30, 2014	April 30, 2024		20,000,000
USD		50,000,000	3.250	November 14, 2014	November 14, 2024		50,000,000
USD		50,000,000	2.730	February 6, 2015	February 6, 2027		50,000,000
USD		30,000,000	3.010	June 24, 2015	June 24, 2025		30,000,000
USD		50,000,000	3.376	July 9, 2015	July 9, 2025		50,000,000
USD		50,000,000	3.330	July 22, 2015	July 22, 2025		50,000,000
USD		50,000,000	3.200	August 6, 2015	August 6, 2025		50,000,000
USD		350,000,000	3.375	September 16, 2015	September 16, 2025		350,000,000
USD		400,000,000	3.375	September 16, 2015	September 16, 2025		400,000,000
USD		1,000,000,000	3.000	January 13, 2016	January 13, 2026		1,000,000,000
USD		50,000,000	2.690	March 30, 2016	March 30, 2026		50,000,000
USD		53,000,000	2.180	August 10, 2016	August 10, 2026		53,000,000
USD		500,000,000	2.000	September 12, 2016	September 12, 2026		500,000,000
USD		50,000,000	2.530	November 10, 2016	November 10, 2028		50,000,000
USD		50,000,000	3.088	January 17, 2017	January 17, 2027		50,000,000
USD		350,000,000	2.750	September 19, 2017	March 19, 2023*		350,000,000
USD		50,000,000	3.800	January 29, 2018	January 29, 2038		50,000,000
USD		20,000,000	3M USD Libor+0.6	February 12, 2018	February 12, 2023*		20,000,000
USD		500,000,000	3.375	March 12, 2018	March 12, 2023*		500,000,000
USD		50,000,000	4.100	March 19, 2018	March 19, 2048		50,000,000
USD		20,000,000	3M USD Libor+0.61	May 14, 2018	May 14, 2023*		20,000,000
USD		500,000,000	3.250	February 19, 2019	February 19, 2024		500,000,000
USD		500,000,000	2.125	October 1, 2019	October 1, 2024		500,000,000
USD		50,000,000	3M USD Libor+0.37	January 23, 2020	January 24, 2023*		50,000,000
USD		30,000,000	3M USD Libor+0.35	January 29, 2020	January 29, 2023*		30,000,000
USD		750,000,000	3M USD Libor+0.35	February 18, 2020	February 18, 2023*		750,000,000
USD		750,000,000	1.750	February 18, 2020	February 18, 2025		750,000,000
USD		500,000,000	3M USD Libor+1.45	April 16, 2020	April 16, 2023*		500,000,000
USD		32,000,000	3M USD Libor+1.35	April 22, 2020	October 22, 2025		32,000,000
USD		30,000,000	3M USD Libor+1.3	April 22, 2020	April 22, 2024		30,000,000
USD		50,000,000	3M USD Libor+1.3	April 28, 2020	April 28, 2025		50,000,000
USD		20,000,000	3M USD Libor+1.1	April 28, 2020	April 28, 2023*		20,000,000
USD		40,000,000	3M USD Libor+1.25	April 29, 2020	April 29, 2025		40,000,000
USD		50,000,000	3M USD Libor+1.2	May 7, 2020	May 7, 2025		50,000,000
USD		50,000,000	3M USD Libor+1.13	May 15, 2020	May 15, 2025		50,000,000
USD		50,000,000	1.360	May 15, 2020	May 15, 2023*		50,000,000
USD		58,000,000	3M USD Libor+1.13	May 18, 2020	May 18, 2023*		58,000,000
USD		50,000,000	3M USD Libor+1	May 19, 2020	May 27, 2023*		50,000,000
USD		15,000,000	3M USD Libor+1	May 26, 2020	May 26, 2023*		15,000,000
USD		50,000,000	1.350	May 27, 2020	May 27, 2023*		50,000,000
USD		500,000,000	1.250	June 3, 2020	June 3, 2025		500,000,000
USD		500,000,000	1.250	June 3, 2020	June 3, 2025		500,000,000
USD		50,000,000	3M USD Libor+0.55	June 23, 2020	June 23, 2023*		50,000,000
USD		25,000,000	3M USD Libor+0.7	June 23, 2020	June 23, 2023*		25,000,000
USD		45,000,000	3M USD Libor+0.55	August 11, 2020	August 11, 2023		45,000,000
USD		50,000,000	0.720	September 22, 2020	September 22, 2023		50,000,000
USD		500,000,000	0.800	October 27, 2020	April 27, 2026		500,000,000
USD		150,000,000	0.500	October 27, 2020	October 27, 2023		150,000,000
USD		350,000,000	0.500	October 27, 2020	October 27, 2023		350,000,000
USD		30,000,000	0.520	December 9, 2020	December 8, 2023		30,000,000
USD		700,000,000	0.400	January 19, 2021	June 19, 2024		700,000,000


Currency	Original Principal Amount		Interest Rate (%)	Issue Date	Maturity Date	Principal Amount Outstanding as of December 31, 2022
USD		500,000,000	0.800	January 19, 2021	July 19, 2026		500,000,000
USD		300,000,000	1.625	January 19, 2021	January 19, 2031		300,000,000
USD		100,000,000	0.470	January 29, 2021	January 29, 2024		100,000,000
USD		100,000,000	3M USD Libor+0.17	February 26, 2021	February 26, 2024		100,000,000
USD		100,000,000	3M USD Libor+0.14	February 26, 2021	February 26, 2023*		100,000,000
USD		400,000,000	0.400	March 9, 2021	March 9, 2024		400,000,000
USD		300,000,000	SOFR+0.25	March 9, 2021	March 9, 2024		300,000,000
USD		500,000,000	1.000	March 9, 2021	September 9, 2026		500,000,000
USD		50,000,000	0.645	March 15, 2021	March 15, 2024		50,000,000
USD		50,000,000	0.590	March 26, 2021	March 26, 2024		50,000,000
USD		300,000,000	2.000	April 1, 2021	April 1, 2031		300,000,000
USD		30,000,000	0.590	April 1, 2021	April 1, 2024		30,000,000
USD		200,000,000	SOFR+0.29	May 18, 2021	May 18, 2025		200,000,000
USD		100,000,000	1.146	May 18, 2021	May 18, 2026		100,000,000
USD		100,000,000	1.035	June 18, 2021	June 18, 2026		100,000,000
USD		50,000,000	0.610	June 2, 2021	June 2, 2024		50,000,000
USD		100,000,000	1.015	June 4, 2021	December 4, 2025		100,000,000
USD		100,000,000	1.145	June 4, 2021	June 4, 2026		100,000,000
USD		100,000,000	3M USD Libor+0.25	June 11, 2021	June 11, 2026		100,000,000
USD		50,000,000	0.380	July 15, 2021	July 15, 2023		50,000,000
USD		50,000,000	0.710	July 8, 2021	July 8, 2024		50,000,000
USD		50,000,000	2.470	August 24, 2021	August 24, 2051		50,000,000
USD		50,000,000	0.710	August 19, 2021	August 19, 2024		50,000,000
USD		200,000,000	1.750	September 27, 2021	September 27, 2031		200,000,000
USD		50,000,000	0.700	September 2, 2021	September 2, 2024		50,000,000
USD		20,000,000	2.850	October 12, 2021	October 12, 2051		20,000,000
USD		20,000,000	2.925	October 18, 2021	October 18, 2051		20,000,000
USD		700,000,000	0.750	October 25, 2021	January 25, 2025		700,000,000
USD		500,000,000	1.375	October 25, 2021	April 25, 2027		500,000,000
USD		300,000,000	2.000	October 25, 2021	October 25, 2031		300,000,000
USD		20,000,000	2.870	November 19, 2021	November 19, 2051		20,000,000
USD		20,000,000	1.448	December 2, 2021	December 2, 2025		20,000,000
USD		38,000,000	1.950	January 25, 2022	January 25, 2027		38,000,000
USD		200,000,000	2.250	January 26, 2022	January 26, 2032		200,000,000
USD		750,000,000	2.000	February 24, 2022	February 24, 2025		750,000,000
USD		250,000,000	2.000	February 24, 2022	February 24, 2025		250,000,000
USD		500,000,000	2.250	February 24, 2022	February 24, 2027		500,000,000
USD		40,000,000	2.643	March 18, 2022	March 18, 2032		40,000,000
USD		50,000,000	SOFR+0.37	April 1, 2022	October 2, 2023		50,000,000
USD		100,000,000	SOFR+0.37	April 7, 2022	October 10, 2023		100,000,000
USD		100,000,000	SOFR+0.37	April 18, 2022	October 18, 2023		100,000,000
USD		50,000,000	SOFR+0.40	April 19, 2022	April 19, 2024		50,000,000
USD		100,000,000	3.130	April 21, 2022	April 21, 2025		100,000,000
USD		20,000,000	3.050	April 29, 2022	April 29, 2024		20,000,000
USD		50,000,000	3.110	May 13, 2022	November 13, 2023		50,000,000
USD		50,000,000	3.170	May 13, 2022	May 13, 2024		50,000,000
USD		50,000,000	3.400	May 18, 2022	May 18, 2027		50,000,000
USD		50,000,000	3.240	May 18, 2022	November 18, 2024		50,000,000
USD		300,000,000	3.125	June 7, 2022	June 7, 2025		300,000,000
USD		35,000,000	2.940	June 14, 2022	June 14, 2023*		35,000,000
USD		100,000,000	3.680	August 11, 2022	August 11, 2023		100,000,000
USD		50,000,000	3.660	August 11, 2022	August 11, 2023		50,000,000
USD		20,000,000	3.830	August 22, 2022	February 22, 2024		20,000,000
USD		20,000,000	3.700	August 16, 2022	August 16, 2023		20,000,000
USD		25,000,000	SOFR+0.48	August 17, 2022	August 17, 2024		25,000,000
USD		1,000,000,000	4.000	September 8, 2022	September 8, 2025		1,000,000,000
USD		450,000,000	4.250	September 8, 2022	September 8, 2032		450,000,000
USD		50,000,000	4.280	September 16, 2022	November 16, 2023		50,000,000
USD		50,000,000	4.340	September 20, 2022	November 20, 2023		50,000,000
USD		50,000,000	SOFR+1.00	October 14, 2022	October 14, 2027		50,000,000
USD		50,000,000	SOFR+1.005	October 17, 2022	October 17, 2027		50,000,000
USD		50,000,000	SOFR+0.995	October 17, 2022	October 17, 2027		50,000,000
USD		50,000,000	SOFR+1.00	October 19, 2022	October 19, 2027		50,000,000
USD		50,000,000	SOFR+1.03	October 26, 2022	October 26, 2027		50,000,000


Currency	Original Principal Amount		Interest Rate (%)	Issue Date	Maturity Date	Principal Amount Outstanding as of December 31, 2022
USD		50,000,000	SOFR+1.03	October 27, 2022	October 27, 2027		50,000,000
USD		50,000,000	SOFR+1.03	October 28, 2022	October 28, 2027		50,000,000
USD		50,000,000	SOFR+0.75	November 3, 2022	November 3, 2025		50,000,000
USD		200,000,000	3.125	November 3, 2022	June 7, 2025		200,000,000
USD		20,000,000	SOFR+1.30	November 4, 2022	November 4, 2027		20,000,000
USD		130,000,000	5.450	November 21, 2022	November 21, 2028		130,000,000
USD		35,000,000	SOFR+1.30	November 22, 2022	November 22, 2027		35,000,000
USD		50,000,000	5.355	November 25, 2022	November 25, 2023		50,000,000
USD		20,000,000	5.450	November 28, 2022	November 28, 2028		20,000,000
USD		20,000,000	SOFR+1.30	November 28, 2022	November 28, 2027		20,000,000
USD		20,000,000	5.630	November 30, 2022	November 30, 2023		20,000,000
USD		20,000,000	SOFR+1.30	December 8, 2022	December 8, 2027		20,000,000
USD		150,000,000	SOFR+0.65	November 30, 2022	November 30, 2023		150,000,000
USD		50,000,000	5.630	November 30, 2022	November 30, 2023		50,000,000
USD		200,000,000	SOFR+0.80	December 13, 2022	November 13, 2024		200,000,000
USD		60,000,000	SOFR+1.29	December 14, 2022	December 14, 2027		60,000,000
USD		20,000,000	5.050	December 19, 2022	December 19, 2024		20,000,000

			Subtotal in Original Currency			USD	23,251,000,000

			Subtotal in Equivalent Amount of Won⁽¹⁾			W	29,465,992,300,000

NZD		27,000,000	2.600	June 1, 2021	June 1, 2031		27,000,000
NZD		27,000,000	2.600	June 9, 2021	June 9, 2031		27,000,000
NZD		27,000,000	2.600	June 16, 2021	June 16, 2031		27,000,000
NZD		29,000,000	3.000	October 8, 2021	October 8, 2031		29,000,000

			Subtotal in Original Currency			NZD	110,000,000

			Subtotal in Equivalent Amount of Won⁽²⁾			W	88,465,300,000

HKD		350,000,000	2.060	October 25, 2016	October 25, 2023		350,000,000
HKD		390,000,000	2.053	November 8, 2019	November 8, 2024		390,000,000
HKD		243,000,000	2.214	November 26, 2019	November 26, 2024		243,000,000
HKD		201,000,000	1.850	February 27, 2020	February 27, 2023*		201,000,000
HKD		160,000,000	2.100	March 25, 2020	March 25, 2025		160,000,000
HKD		300,000,000	2.100	April 14, 2020	April 14, 2023*		300,000,000
HKD		250,000,000	3M Hibor+1.03	April 27, 2020	April 27, 2024		250,000,000
HKD		200,000,000	0.740	September 1, 2021	September 12, 2025		200,000,000
HKD		390,000,000	3.450	May 10, 2022	May 10, 2029		390,000,000
HKD		169,000,000	3.600	May 12, 2022	May 12, 2029		169,000,000
HKD		390,000,000	2.675	June 8, 2022	January 8, 2024		390,000,000
HKD		390,000,000	3.460	June 23, 2022	January 23, 2024		390,000,000
HKD		160,000,000	3.235	June 23, 2022	June 23, 2023*		160,000,000
HKD		349,000,000	4.200	June 28, 2022	June 17, 2032		349,000,000
HKD		260,000,000	3.100	July 15, 2022	July 15, 2024		260,000,000
HKD		264,000,000	3.615	July 28, 2022	July 28, 2024		264,000,000
HKD		390,000,000	3.510	August 16, 2022	August 16, 2024		390,000,000
HKD		390,000,000	3.490	August 16, 2022	August 16, 2023		390,000,000
HKD		320,000,000	4.150	September 23, 2022	September 25, 2025		320,000,000

			Subtotal in Original Currency			HKD	5,566,000,000

			Subtotal in Equivalent Amount of Won⁽³⁾			W	904,753,300,000

CNH		150,000,000	4.450	November 8, 2013	November 8, 2023		150,000,000
CNH		210,000,000	4.100	December 18, 2013	December 18, 2023		210,000,000
CNH		287,000,000	3.010	May 6, 2020	May 6, 2025		287,000,000
CNH		355,000,000	2.700	May 14, 2020	May 14, 2023*		355,000,000
CNH		250,000,000	2.600	May 15, 2020	May 15, 2023*		250,000,000
CNH		250,000,000	2.650	May 15, 2020	May 15, 2023*		250,000,000
CNH		250,000,000	3.510	March 28, 2022	March 28, 2024		250,000,000
CNH		150,000,000	3.550	April 7, 2022	April 7, 2024		150,000,000
CNH		215,000,000	3.570	April 11, 2022	April 11, 2024		215,000,000
CNH		200,000,000	3.570	April 12, 2022	April 12, 2024		200,000,000
CNH		140,000,000	3.460	May 19, 2022	May 19, 2026		140,000,000
CNH		330,000,000	3.300	June 7, 2022	June 7, 2024		330,000,000
CNH		600,000,000	3.200	June 16, 2022	June 16, 2023*		600,000,000
CNH		150,000,000	3.550	June 16, 2022	June 16, 2024		150,000,000


Currency	Original Principal Amount		Interest Rate (%)	Issue Date	Maturity Date	Principal Amount Outstanding as of December 31, 2022
CNH		150,000,000	3.590	June 22, 2022	June 15, 2024		150,000,000
CNH		400,000,000	3.315	June 28, 2022	June 28, 2023*		400,000,000
CNH		150,000,000	3.720	June 28, 2022	June 15, 2024		150,000,000
CNH		260,000,000	3.300	June 30, 2022	June 20, 2032		260,000,000
CNH		230,000,000	3.400	July 29, 2022	July 29, 2025		230,000,000
CNH		235,000,000	3.200	August 19, 2022	August 19, 2025		235,000,000
CNH		130,000,000	3.310	August 19, 2022	August 19, 2025		130,000,000
CNH		400,000,000	3.490	September 22, 2022	September 22, 2025		400,000,000
CNH		330,000,000	3.700	November 30, 2022	November 30, 2027		330,000,000

			Subtotal in Original Currency			CNH	5,822,000,000

			Subtotal in Equivalent Amount of Won⁽⁴⁾			W	1,056,343,680,000

EUR		500,000,000	0.625	July 17, 2018	July 17, 2023		500,000,000
EUR		300,000,000	0.625	November 6, 2018	July 17, 2023		300,000,000
EUR		300,000,000	0.000	July 10, 2019	July 10, 2024		300,000,000
EUR		200,000,000	0.000	July 10, 2019	July 10, 2024		200,000,000
EUR		10,000,000	3M Euribor+0.7	December 12, 2019	December 12, 2024		10,000,000
EUR		500,000,000	2.625	September 8, 2022	September 8, 2027		500,000,000
EUR		50,000,000	2.810	October 13, 2022	October 13, 2026		50,000,000
EUR		50,000,000	2.810	October 14, 2022	October 14, 2026		50,000,000
EUR		100,000,000	3.180	October 19, 2022	October 19, 2026		100,000,000
EUR		100,000,000	3.180	October 19, 2022	October 19, 2026		100,000,000

			Subtotal in Original Currency			EUR	2,110,000,000

			Subtotal in Equivalent Amount of Won⁽⁵⁾			W	2,851,032,000,000

CHF		200,000,000	0.303	June 14, 2018	June 14, 2023*		200,000,000
CHF		300,000,000	0.445	May 8, 2020	May 8, 2025		300,000,000
CHF		200,000,000	0.170	July 22, 2021	July 22, 2031		200,000,000
CHF		225,000,000	0.940	April 28, 2022	April 28, 2027		225,000,000

			Subtotal in Original Currency			CHF	925,000,000

			Subtotal in Equivalent Amount of Won⁽⁶⁾			W	1,269,904,750,000

BRL		1,294,000,000	6.618	July 30, 2021	January 26, 2023*		1,294,000,000
BRL		200,000,000	6.400	July 12, 2021	February 27, 2023*		200,000,000
BRL		190,000,000	6.440	July 13, 2021	February 27, 2023*		190,000,000
BRL		562,500,000	10.865	December 10, 2021	January 4, 2024		562,500,000
BRL		371,000,000	9.880	February 14, 2022	February 20, 2024		371,000,000
BRL		506,000,000	10.480	March 3, 2022	January 26, 2024		506,000,000
BRL		1,285,000,000	11.150	March 3, 2022	March 4, 2024		1,285,000,000
BRL		517,500,000	10.410	March 8, 2022	March 7, 2024		517,500,000
BRL		250,500,000	10.725	May 12, 2022	May 13, 2024		250,500,000
BRL		253,000,000	10.750	May 13, 2022	May 13, 2024		253,000,000
BRL		253,500,000	10.800	May 24, 2022	May 24, 2024		253,500,000

			Subtotal in Original Currency			BRL	5,683,000,000

			Subtotal in Equivalent Amount of Won⁽⁷⁾			W	1,362,328,760,000

AUD		100,000,000	3.966	November 30, 2016	November 30, 2026		100,000,000
AUD		60,000,000	3.760	January 18, 2018	January 18, 2028		60,000,000
AUD		100,000,000	3M BBSW+0.98	October 19, 2018	October 19, 2023		100,000,000
AUD		300,000,000	3M BBSW+0.98	October 19, 2018	October 19, 2023		300,000,000
AUD		100,000,000	3M BBSW+0.78	August 29, 2019	August 29, 2024		100,000,000
AUD		400,000,000	3M BBSW+0.78	August 29, 2019	August 29, 2024		400,000,000
AUD		200,000,000	1.500	August 29, 2019	August 29, 2024		200,000,000
AUD		74,000,000	1.460	February 24, 2020	February 24, 2025		74,000,000
AUD		74,000,000	1.460	February 24, 2020	February 24, 2025		74,000,000
AUD		74,000,000	1.450	February 25, 2020	February 25, 2025		74,000,000
AUD		74,000,000	1.450	February 25, 2020	February 25, 2025		74,000,000
AUD		300,000,000	0.833	August 25, 2020	August 25, 2023		300,000,000
AUD		200,000,000	3M BBSW+0.62	August 25, 2020	August 25, 2023		200,000,000
AUD		56,000,000	2.565	April 7, 2021	April 1, 2036		56,000,000
AUD		30,000,000	2.550	September 28, 2021	September 28, 2041		30,000,000
AUD		40,000,000	2.500	September 28, 2021	September 28, 2041		40,000,000
AUD		40,000,000	3M BBSW+0.70	September 28, 2021	September 28, 2031		40,000,000


Currency	Original Principal Amount		Interest Rate (%)	Issue Date	Maturity Date	Principal Amount Outstanding as of December 31, 2022
AUD		60,000,000	2.550	September 30, 2021	September 30, 2036		60,000,000
AUD		50,000,000	2.780	October 18, 2021	October 18, 2041		50,000,000
AUD		30,000,000	3.190	November 26, 2021	November 26, 2041		30,000,000
AUD		50,000,000	3.240	November 30, 2021	November 30, 2041		50,000,000
AUD		28,000,000	3.04	February 8, 2022	February 8, 2032		28,000,000
AUD		30,000,000	3.00	March 17, 2022	March 17, 2027		30,000,000
AUD		40,000,000	5.55	June 23, 2022	June 23, 2032		40,000,000
AUD		27,000,000	4.03	August 10, 2022	August 10, 2027		27,000,000

			Subtotal in Original Currency			AUD	2,537,000,000

			Subtotal in Equivalent Amount of Won⁽⁸⁾			W	2,177,786,170,000

IDR		680,000,000,000	6.000	January 22, 2020	January 22, 2025		680,000,000,000
IDR		615,000,000,000	6.000	January 23, 2020	January 23, 2025		615,000,000,000
IDR		1,424,800,000,000	4.800	June 10, 2021	June 10, 2023*		1,424,800,000,000

			Subtotal in Original Currency			IDR	2,719,800,000,000

			Subtotal in Equivalent Amount of Won⁽⁹⁾			W	220,031,820,000

INR		3,200,000,000	6.900	February 20, 2018	February 20, 2023*		3,200,000,000
INR		3,712,500,000	5.980	October 13, 2021	October 13, 2026		3,712,500,000

			Subtotal in Original Currency			INR	6,912,500,000

			Subtotal in Equivalent Amount of Won⁽¹⁰⁾			W	105,830,375,000

NOK		400,000,000	2.905	July 21, 2015	July 21, 2025		400,000,000

			Subtotal in Original Currency			NOK	400,000,000

			Subtotal in Equivalent Amount of Won⁽¹¹⁾			W	51,248,000,000

THB		1,500,000,000	1.580	January 14, 2020	January 14, 2025		1,500,000,000
THB		1,500,000,000	1.530	January 15, 2020	January 15, 2025		1,500,000,000
THB		1,580,000,000	1.170	March 3, 2020	March 3, 2025		1,580,000,000

			Subtotal in Original Currency			THB	4,580,000,000

			Subtotal in Equivalent Amount of Won⁽¹²⁾			W	167,902,800,000

GBP		36,000,000	2.045	March 18, 2022	March 18, 2029		36,000,000
GBP		25,000,000	2.190	April 6, 2022	April 6, 2032		25,000,000
GBP		25,000,000	SONIA+0.45	January 15, 2022	January 15, 2024		25,000,000

			Subtotal in Original Currency			GBP	86,000,000

			Subtotal in Equivalent Amount of Won⁽¹³⁾			W	131,379,620,000

SGD		28,000,000	3.05	August 16, 2022	June 28, 2024		28,000,000

			Subtotal in Original Currency			SGD	28,000,000

			Subtotal in Equivalent Amount of Won⁽¹³⁾			W	26,407,080,000

SEK		400,000,000	1.83	August 10, 2017	August 10, 2027		400,000,000
SEK		400,000,000	1.815	August 16, 2017	August 16, 2027		400,000,000
SEK		410,000,000	1.74	November 30, 2017	November 30, 2027		410,000,000
SEK		200,000,000	2.01	February 27, 2018	February 27, 2028		200,000,000

			Subtotal in Original Currency			SEK	1,410,000,000

			Subtotal in Equivalent Amount of Won⁽¹⁴⁾			W	170,849,700,000

MXN		1,200,000,000	6.000	May 7, 2020	May 7, 2023*		1,200,000,000
MXN		3,500,000,000	TIIE28+0.20	July 14, 2022	July 9, 2026		3,500,000,000

			Subtotal in Original Currency			MXN	4,700,000,000

			Subtotal in Equivalent Amount of Won⁽¹⁵⁾			W	306,205,000,000

Total External Bonds of KDB in Equivalent Amount of Won						W	40,356,460,655,000

*	Repaid on the respective maturity dates.

(1)	U.S. dollar amounts are converted to Won amounts at the rate of US$1.00 to Won 1,267.30, the market average exchange rate in effect on December 31, 2022, as announced by Seoul Money Brokerage Services, Ltd.

(2)	New Zealand dollar amounts are converted to Won amounts at the rate of NZD 1.00 to Won 804.23, the market average exchange rate in effect on December 31, 2022, as announced by Seoul Money Brokerage Services, Ltd.

(3)	Hong Kong dollar amounts are converted to Won amounts at the rate of HKD 1.00 to Won 162.55, the market average exchange rate in effect on December 31, 2022, as announced by Seoul Money Brokerage Services, Ltd.

(4)	Chinese offshore renminbi amounts are converted to Won amounts at the rate of CNH 1.00 to Won 181.44, the market average exchange rate in effect on December 31, 2022, as announced by Seoul Money Brokerage Services, Ltd.

(5)	Euro amounts are converted to Won amounts at the rate of EUR 1.00 to Won 1,351.20, the market average exchange rate in effect on December 31, 2022, as announced by Seoul Money Brokerage Services, Ltd.

(6)	Swiss franc amounts are converted to Won amounts at the rate of CHF 1.00 to Won 1,372.87, the market average exchange rate in effect on December 31, 2022, as announced by Seoul Money Brokerage Services, Ltd.

(7)	Brazilian real amounts are converted to Won amounts at the rate of BRL 1.00 to Won 239.72, the prevailing market rate on December 31, 2022.

(8)	Australian dollar amounts are converted to Won amounts at the rate of AUD 1.00 to Won 858.41, the market average exchange rate in effect on December 31, 2022, as announced by Seoul Money Brokerage Services, Ltd.

(9)	Indonesian rupiah amounts are converted to Won amounts at the rate of IDR 100.00 to Won 8.09, the market average exchange rate in effect on December 31, 2022, as announced by Seoul Money Brokerage Services, Ltd.

(10)	Indian Rupee amounts are converted to Won amounts at the rate of INR 1.00 to Won 15.31, the market average exchange rate in effect on December 31, 2022, as announced by Seoul Money Brokerage Services, Ltd.

(11)	Norwegian Krone amounts are converted to Won amounts at the rate of NOK 1.00 to Won 128.12, the market average exchange rate in effect on December 31, 2022, as announced by Seoul Money Brokerage Services, Ltd.

(12)	Thai Baht amounts are converted to Won amounts at the rate of THB 1.00 to Won 36.66, the market average exchange rate in effect on December 31, 2022, as announced by Seoul Money Brokerage Services, Ltd.

(13)	Great Britain Sterling amounts are converted to Won amounts at the rate of GBP 1.00 to Won 1,527.67, the market average exchange rate in effect on December 31, 2022, as announced by Seoul Money Brokerage Services, Ltd.

(14)	Swedish Krona amounts are converted to Won amounts at the rate of SEK 1.00 to Won 121.17, the market average exchange rate in effect on December 31, 2022, as announced by Seoul Money Brokerage Services, Ltd.

(15)	Mexican Peso amounts are converted to Won amounts at the rate of MXN 1.00 to Won 65.15, the market average exchange rate in effect on December 31, 2022, as announced by Seoul Money Brokerage Services, Ltd.

(2) External Borrowings of KDB

Lender

Classifications

Range of
Interest Rates

Range of
Years of
Issue

Range of
Years of
Maturity

Principal Amount
Outstanding as of
December 31, 2022⁽¹⁾

(%)

(millions of Won)

Mizuho and others

Borrowings from foreign banks

3M Libor + 0.29 ~ 6M

Libor + 0.24

2021~2022

2023~2027

1,394,030

Ministry of Economy and Finance

Exchange equalization fund borrowings in foreign currencies

3M Libor + 0.65 ~ 3M
Libor + 0.74

2014~2015

2023~2024

120,761

Central Bank of the Republic of Uzbekistan and others

Off-shore short-term borrowings

0.16 ~ 5.16

2022

2023

3,682,012

China Development Bank and others

Off-shore long-term borrowings

2.34 ~ 3.36

2021~2022

2023

1,523,818

Others

Short-term borrowings in foreign currency

0.06 ~6.57

2022

2023

12,150,612

Long-term borrowings in foreign currency

0.10 ~ 5.41

2021~2022

2023~2025

554,817

Total External Borrowings of KDB

19,426,050

(1)	Converted to Won amounts at the relevant market average exchange rates in effect on December 31, 2022 as announced by Seoul Money Brokerage Services, Ltd.

B. Internal Debt of KDB

Title

Range of
Interest Rates

Range of
Years of Issue

Range of Years
of Original
Maturity

Principal
Amounts
Outstanding as
of December 31,
2022

(%)

(millions of Won)

1. Bonds

Short-term Industrial Finance Bonds

2.21~4.70

2022

2023

5,870,000

Long-term Industrial Finance Bonds

0.88~6.60

2007~2022

2013~2052

116,433,028

Total Bonds

0.88~6.6

2007~2021

2013~2051

122,303,028

2. Borrowings

Borrowings from the Ministry of Economy and Finance

2.94~3.23

2003~2012

2023~2032

93,155

Borrowings from Small & Medium Business Corp.

0.66~2.91

2015~2022

2023~2032

57,569

Borrowings from the Ministry of Culture and Tourism

0.09~2.44

2010~2022

2023~2034

3,182,920

Borrowings from Korea Energy Management Corporation

0.25~1.85

2008~2022

2023~2036

268,659

Others⁽¹⁾

0.00~3.23

2003~2022

2019~2044

948,708

Total Borrowings⁽²⁾

4,551,011

3. Other Debt⁽³⁾

57,619

Total Internal Floating Debt⁽⁴⁾

6,302,969

Total Internal Funded Debt⁽⁵⁾

120,608,688

Total Internal Debt

126,911,657

(1)	Includes borrowings from local governments, The Bank of Korea, the petroleum enterprises support fund and others.

(2)	Consist of short term borrowings in the amount ofW375,350 million and long term borrowings in the amount ofW4,175,661 million.

(3)	Other debt includes bonds sold under repurchase agreements and call money.

(4)	Floating debt is debt that has a maturity at issuance of less than one year.

(5)	Funded debt is debt that has a maturity at issuance of one year or more.

Financial Statements and the Auditors

The Government elects our Auditor who is responsible for examining our financial operations and auditing our financial statements and records. The present Auditor is Tae Hyun Joo, who was appointed by the Financial Services Commission for a three-year term on March 15, 2021.

We prepare our financial statements annually for submission to the Financial Services Commission, accompanied by an opinion of the Auditor. Although we are not legally required to have financial statements audited by external independent auditors, an independent public accounting firm has audited our separate and consolidated financial statements commencing with such financial statements as of and for the year ended December 31, 1998. As of the date of this prospectus, our external independent auditor is Nexia Samduk, located at 12th Floor, S&S Building, 48 Ujeongguk-ro, Jongno-gu, Seoul 03145, Korea, which has audited our separate financial statements as of and for the years ended December 31, 2022 and 2021 included in this prospectus.

Our separate financial statements appearing in this prospectus were prepared in conformity with Korean IFRS, as summarized in “—Financial Statements and the Auditors—Notes to Separate Financial Statements of December 31, 2022 and 2021—Note 2.” These principles and procedures differ in certain material respects from generally accepted accounting principles in the United States.

Independent Auditors’ Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders

Korea Development Bank

Opinion

We have audited the accompanying separate financial statements of Korea Development Bank (the “Bank”), which comprise the separate statements of financial position as of December 31, 2022 and 2021 and the separate statements of comprehensive income, the separate statements of changes in equity and the separate statements of cash flows for the years then ended, and notes to the separate financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying separate financial statements present fairly, in all material respects, the separate financial position of the Bank as of December 31, 2022 and 2021, and its separate financial performance and its separate 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 separate 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.

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 separate 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 separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with 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 separate 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 separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our 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 report. However, future events or conditions may cause the Bank to cease to continue as a going concern.

•

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

We communicate with 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/ Nexia Samduk

Nexia Samduk

Seoul, Korea

March 28, 2023

This report is effective as of March 28, 2023, 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 the above audit report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

Korea Development Bank

Separate Statements of Financial Position

December 31, 2022 and 2021


(In millions of won)	Notes		December 31, 2022		December 31, 2021
Assets
Cash and due from banks		4,45,46,49	W	11,538,806		11,975,767
Securities measured at FVTPL		5,45,46,49		11,951,906		9,818,811
Securities measured at FVOCI		6,39,45,46,49		37,684,919		37,875,136
Securities measured at amortized cost		7,39,45,46,49		6,355,884		2,968,877
Loans measured at FVTPL		8,45,46,49		541,811		644,412
Loans measured at amortized cost		9,45,46,49		198,045,603		170,763,394
Derivative financial assets		10,45,46,47,49		9,794,455		5,305,572
Investments in subsidiaries and associates		11,48		27,992,331		28,710,062
Property and equipment, net		12,48		812,173		872,157
Investment property, net		13,48		81,713		82,860
Intangible assets, net		14,48		118,489		147,699
Defined benefit assets		21		87,770		9,353
Current tax assets				128,218		2,841
Assets held for sale		16		—		1,371,052
Other assets		15,45,46,49		7,711,217		5,873,907

Total assets			W	312,845,295		276,421,900

Liabilities
Financial liabilities measured at FVTPL		17,45,46,49	W	1,469,724		2,067,144
Deposits		18,45,46,49		68,326,656		52,792,121
Borrowings		19,45,46,49		25,429,244		22,063,777
Debentures		20,45,46,49		158,711,896		145,365,330
Derivative financial liabilities		10,45,46,47,49		11,317,002		4,757,841
Provisions		22		1,448,030		1,567,530
Deferred tax liabilities		37		3,465,176		3,957,522
Current tax liabilities				15,513		254,882
Other liabilities		23,45,46,49		6,993,681		7,092,896

Total liabilities				277,176,922		239,919,043
Equity
Issued capital		1,24		23,151,559		21,886,559
Capital surplus		24		2,475,310		2,479,010
Accumulated other comprehensive income		24		2,819,333		4,773,474
Retained earnings		24		7,222,171		7,363,814
(Regulatory reserve for credit losses ofW247,252 million andW482,885 million as of December 31, 2022 and 2021, respectively)
(Required reversal of regulatory reserve for credit losses ofW35,257 million andW235,632 million as of December 31, 2022 and 2021, respectively)
(Planned reversal of regulatory reserve for credit losses ofW35,257 million andW235,632 million as of December 31, 2022 and 2021, respectively)

Total equity				35,668,373		36,502,857

Total liabilities and equity			W	312,845,295		276,421,900

See accompanying notes to the separate financial statements.

Korea Development Bank

Separate Statements of Comprehensive Income

Years ended December 31, 2022 and 2021


(In millions of won, except earnings per share information)	Notes		2022			2021
Interest income		25	W	6,846,735			4,125,276
Interest expense		25		(5,102,920	)		(2,466,667	)

Net interest income		48		1,743,815			1,658,609
Net fees and commission income		26		453,909			346,706
Dividend income		27		857,502			1,259,645
Net gain (loss) on securities measured at FVTPL		28		(39,423	)		135,448
Net gain on financial liabilities measured at FVTPL		29		465,099			149,880
Net loss on securities measured at FVOCI		30		(57,194	)		(27,921	)
Net gain (loss) on derivatives		31		121,439			(202,091	)
Net foreign currency transaction gain (loss)		32		(300,890	)		154,367
Other operating income (expense), net		33		(349,827	)		1,738,616

Non-interest income, net				1,150,615			3,554,650
Provision for credit losses		34		260,361			847,357
General and administrative expenses		35,48		876,371			815,746

Operating income		48		1,757,698			3,550,156
Reversal of impairment loss (impairment loss) on investments in subsidiaries and associates				(1,168,617	)		363,055
Other non-operating income		36		13,906			14,530
Other non-operating expense		36		(10,328	)		(272,379	)

Non-operating expense, net				(1,165,039	)		105,206

Profit before income taxes				592,659			3,655,362
Income tax expense		37		127,678			1,193,516

Profit for the year		24		464,981			2,461,846
(Profit for the year adjusted for regulatory reserve for credit losses:W500,238 million andW2,697,478 million for the years ended December 31, 2022 and 2021, respectively)
Other comprehensive income for the year, net of tax Items that are or may be reclassified subsequently to profit or loss:		24
Net loss on securities measured at FVOCI				(483,138	)		(111,768	)
Exchange differences on translation of foreign operations				93,126			99,912
Valuation gain on cash flow hedge				3,923			1,365
Net loss on hedges of net investments in foreign operations				(50,090	)		(56,620	)

				(436,179	)		(67,111	)
Items that will not be reclassified to profit or loss:
Net gain (loss) on securities measured at FVOCI				(1,434,848	)		2,777,436
Fair value changes on financial liabilities designated at fair value due to credit risk				90,220			6,246
Remeasurements of defined benefit liabilities				53,131			36,106

				(1,291,497	)		2,819,788

				(1,727,676	)		2,752,677

Total comprehensive income for the year			W	(1,262,695)			5,214,523

Earnings per share
Basic and diluted earnings per share (in won)		38	W	104			570

See accompanying notes to the separate financial statements.

Korea Development Bank

Separate Statements of Changes in Equity

Years ended December 31, 2022 and 2021


(In millions of won)	Issued capital		Capital surplus			Accumulated other comprehensive income			Retained earnings			Total equity
Balance at January 1, 2021	W	20,765,729		2,484,398			2,064,371			5,068,032			30,382,530
Profit for the year		—		—			—			2,461,846			2,461,846
Net gain on securities measured at FVOCI		—		—			2,622,094			43,574			2,665,668
Exchange differences on translation of foreign operations		—		—			99,912			—			99,912
Valuation gain on cash flow hedge		—		—			1,365			—			1,365
Net loss on hedges of net investments in foreign operations		—		—			(56,620	)		—			(56,620	)
Fair value changes on financial liabilities designated at fair value due to credit risk		—		—			6,246			—			6,246
Remeasurements of defined benefit liabilities		—		—			36,106			—			36,106

Total comprehensive income for the year		—		—			2,709,103			2,505,420			5,214,523
Dividends		—		—			—			(209,638	)		(209,638	)
Paid in capital increase		1,120,830		(5,388	)		—			—			1,115,442

Transaction with owners		1,120,830		(5,388	)		—			(209,638	)		905,804

Balance at December 31, 2021	W	21,886,559		2,479,010			4,773,474			7,363,814			36,502,857

Balance at January 1, 2022	W	21,886,559		2,479,010			4,773,474			7,363,814			36,502,857
Profit for the year		—		—			—			464,981			464,981
Net gain on securities measured at FVOCI		—		—			(2,144,451	)		226,465			(1,917,986	)
Exchange differences on translation of foreign operations		—		—			93,126			—			93,126
Valuation gain on cash flow hedge		—		—			3,923			—			3,923
Net loss on hedges of net investments in foreign operations		—		—			(50,090	)		—			(50,090	)
Fair value changes on financial liabilities designated at fair value due to credit risk		—		—			90,220			—			90,220
Remeasurements of defined benefit liabilities		—		—			53,131			—			53,131

Total comprehensive income for the year		—		—			(1,954,141	)		691,446			(1,262,695	)
Dividends		—		—			—			(833,089	)		(833,089	)
Paid in capital increase		1,265,000		(3,700	)		—			—			1,261,300

Transaction with owners		1,265,000		(3,700	)		—			(833,089	)		428,211

Balance at December 31, 2022	W	23,151,559		2,475,310			2,819,333			7,222,171			35,668,373

See accompanying notes to the separate financial statements.

Korea Development Bank

Separate Statements of Cash Flows

Years ended December 31, 2022 and 2021


(In millions of won)	Notes		2022			2021
Cash flows from operating activities
Profit for the year			W	464,981			2,461,846
Adjustments for:
Income tax expense		37		127,678			1,193,516
Interest income		25		(6,846,735	)		(4,125,276	)
Interest expense		25		5,102,920			2,466,667
Dividend income		27		(857,502	)		(1,259,645	)
Loss (gain) on valuation of securities measured at FVTPL		28		52,935			(144,635	)
Gain on disposal of securities measured at FVTPL				(120,455	)		(6,654	)
Net gain on financial liabilities measured at FVTPL		29		(465,099	)		(149,880	)
Loss on disposal of securities measured at FVOCI		30		57,194			27,921
Impairment loss on securities measured at amortized cost		7		50			149
Net loss (gain) on loans measured at FVTPL		33		78,954			(1,895,878	)
Loss on valuation of derivatives				1,993,887			1,255,411
Net gain on fair value hedged items		31		(1,528,187	)		(497,269	)
Loss (gain) on foreign exchange translations		32		289,321			(163,901	)
Gain on disposal of investments in subsidiaries and associates		33		(5,424	)		(90,009	)
Reversal of impairment loss (impairment loss) on investments in subsidiaries and associates				1,168,617			(363,055	)
Provision for loan loss allowance		34		410,450			855,548
Increase (reversal) of provision for other assets		34		(579	)		1,076
Increase of provision for payment guarantees		22		136,989			133,641
Reversal of provision for unused commitments		22		(256,820	)		(137,830	)
Reversal of financial guarantee provision		22		(29,679	)		(5,078	)
Increase (reversal) of provision for possible losses from lawsuits		22		(1,492	)		1,408
Reversal of provision for restoration		22		(2,008	)		(1,820	)
Increase of other provisions				—			8,266
Defined benefit costs		21		70,092			39,994
Depreciation of property and equipment		12		71,584			70,860
Impairment loss on assets held for sale				—			258,401
Gain on disposal of property and equipment		36		(740	)		(1,482	)
Loss on disposal of intangible assets		36		2			—
Gain on disposal of assets held for sale				—			(3,608	)
Depreciation of investment property		13		2,084			2,209
Amortization of intangible assets		14		54,262			53,837
Gain on redemption of debentures				(4	)		—

				(497,705	)		(2,477,116	)
Changes in operating assets and liabilities:
Due from banks				(1,054,373	)		(856,356	)
Securities measured at FVTPL				560,407			146,996
Loans measured at FVTPL				23,647			27,980
Loans measured at amortized cost				(24,241,420	)		(16,678,716	)
Derivative financial instruments				13,948			144,735
Other assets				(1,116,960	)		(1,050,940	)
Financial liabilities measured at FVTPL				30,721			290,136
Deposits				15,482,874			6,871,809
Defined benefit liabilities (assets)				(77,192	)		(50,093	)
Other liabilities				(845,996	)		68,970

				(11,224,344	)		(11,085,479	)

(Continued)

Korea Development Bank

Separate Statements of Cash Flows, Continued

Years ended December 31, 2022 and 2021


(In millions of won)	Notes		2022			2021
Income taxes refund (paid)				(243,693	)		264,756
Interest received				6,230,685			4,110,377
Interest paid				(4,424,200	)		(2,556,079	)
Dividends received				855,259			1,263,418

Net cash used in operating activities			W	(8,839,017)			(8,018,277	)
Cash flows from investing activities
Net increase of securities measured at FVTPL			W	(2,590,301)			(1,497,404	)
Disposal of securities measured at FVOCI		6		12,325,062			37,451,107
Acquisition of securities measured at FVOCI		6		(14,118,389	)		(36,914,523	)
Redemption of securities measured at amortized cost		7		1,522,000			700,000
Acquisition of securities measured at amortized cost		7		(4,895,925	)		(2,888,991	)
Disposal of property and equipment		12		67,505			9,697
Acquisition of property and equipment		12		(14,768	)		(36,321	)
Disposal of intangible assets		14		1,521			858
Acquisition of intangible assets		14		(25,993	)		(13,883	)
Disposal of investments in subsidiaries and associates				1,845,131			884,296
Acquisition of investments in subsidiaries and associates				(939,632	)		(929,733	)
Disposal of assets held for sale				—			87,502

Net cash used in investing activities				(6,823,789	)		(3,147,395	)
Cash flows from financing activities
Increase of financial liabilities measured at FVTPL				125,000			319,690
Decrease of financial liabilities measured at FVTPL				(165,302	)		(79,143	)
Proceeds from borrowings				49,384,998			44,507,510
Repayment of borrowings				(46,137,184	)		(41,404,496	)
Proceeds from issuance of debentures				134,409,386			117,504,007
Repayment of debentures				(119,518,136	)		(110,135,030	)
Decrease in lease liabilities		23		(27,893	)		(25,020	)
Dividends				(833,089	)		(209,638	)
Paid in capital increase				696,300			1,115,442

Net cash provided by financing activities				17,934,080			11,593,322
Effects from changes in foreign currency exchange rate for cash and cash equivalents held				147,619			243,849
Net increase in cash and cash equivalents				2,418,893			671,499
Cash and cash equivalents at beginning of the year				9,453,576			8,782,077

Cash and cash equivalents at end of the year		43	W	11,872,469			9,453,576

See accompanying notes to the separate financial statements.

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

1. Reporting Entity

Korea Development Bank (the “Bank”) was established on April 1, 1954, in accordance with The Korea Development Bank Act to finance and manage major industrial projects.

Korea Finance Corporation (KoFC), the former ultimate parent company, and KDB Financial Group Inc. (KDBFG), the former immediate parent company, were established by spin-offs of divisions of the Bank as of October 28, 2009. KoFC and KDBFG were merged into the Bank, effective as of December 31, 2014. Issued capital isW23,151,559 million with 4,630,311,768 shares of issued and outstanding as of December 31, 2022 and 100% of the Bank’s shares are owned by the government of the Republic of Korea.

The Bank’s head office is located in 14, Eunhaeng-ro (Yeouido-dong), Yeongdeungpo-gu, Seoul and its service network as of December 31, 2022 is as follows:


	Domestic				Overseas
	Head Office		Branches		Branches		Subsidiaries		Representative offices		Total
KDB		1		60		11		7		7		86

2. Basis of Preparation

(1) Application of accounting standards

These separate financial statements have been prepared in accordance with the Korean International Financial Reporting Standards (“K-IFRS”) enacted by the Act on External Audit of Stock Companies.

(2) Changes and disclosures of accounting policies

(i) New and amended standards adopted

The Bank newly applied the following amended and enacted standards for the annual period beginning on January 1, 2022. The nature and the impact of each new standard or amendment are described below:

Amendments to K- IFRS 1116 ‘Lease’—Covid-19-Related Rent Concessions etc. beyond June 30, 2021

The application of the practical expedient, a lessee may elect not to assess whether a rent concession occurring as a direct consequence of the COVID-19 pandemic is a lease modification, is extended to lease payments originally due on or before 30 June 2022. A lessee shall apply the practical expedient consistently to eligible contracts with similar characteristics and in similar circumstances. The amendment does not have a significant impact on the separate financial statements.

Amendments to K-IFRS 1103 ‘Business Combination’—Reference to the Conceptual Framework

The amendments update a reference of definition of assets and liabilities to qualify for recognition in revised Conceptual Framework for Financial Reporting. However, the amendments add an exception for the recognition of liabilities and contingent liabilities within the scope of K-IFRS 1037 ‘Provisions, Contingent Liabilities and

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

2. Basis of Preparation, Continued

Contingent Assets’, and K-IFRS 2121 ‘Levies’. The amendments also confirm that contingent assets should not be recognized at the acquisition date. The amendment does not have a significant impact on the separate financial statements.

Amendments to K-IFRS 1016 ‘Property, Plant and Equipment’—Proceeds before intended use

The amendments prohibit an entity from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while the entity is preparing the asset for its intended use. Instead, the entity will recognize and disclose the proceeds from selling such items, and the costs of producing those items, as profit or loss. The amendment does not have a significant impact on the separate financial statements.

Amendments to K-IFRS 1037 ‘Provisions, Contingent Liabilities and Contingent Assets’—Onerous Contracts: Cost of Fulfilling a Contract

The amendments clarify that the direct costs of fulfilling a contract include both the incremental costs of fulfilling the contract and an allocation of other costs directly related to fulfilling contracts when assessing whether the contract is onerous. The amendment does not have a significant impact on the separate financial statements.

Annual improvements to K-IFRS 2018-2020

The amendment does not have a significant impact on the separate financial statements.

•

K-IFRS 1101 ‘First time Adoption of Korean International Financial Reporting Standards’—Subsidiaries that are first-time adopters

•

K-IFRS 1109 ‘Financial Instruments’—Fees related to the 10% test for derecognition of financial liabilities The amendment clarifies that in applying the ‘10 per cent’ test to assess whether to derecognise a financial liability, an entity includes only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the other’s behalf.

•

K-IFRS 1116 ‘Leases’—Lease incentives

•

K-IFRS 1041 ‘Agriculture’—Measuring fair value

(ii) Change of accounting policies

The Bank has changed the following accounting policy for its annual reporting period commencing January 1, 2022.

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

2. Basis of Preparation, Continued

has retrospectively classified these accounts as cash and cash equivalents from January 1, 2022. The comparative separate financial statements have been restated to reflect the changes made to retrospective application.

The application of these accounting policy changes has no effect on the separate statements of financial position as of December 31, 2022 and 2021, and the separate statements of comprehensive income for the years ended December 31, 2022 and 2021.

The effects on the consolidated statements of cash flows for the years ended December 31, 2022 and 2021, are as follows:


	December 31, 2022		December 31, 2021
Increase (decrease) in due from banks	W	(3,219,178)		1,316,120
Increase in effects from changes in foreign currency exchange rate for cash and cash equivalents held		13,560		18,438
Increase in cash and cash equivalents at beginning of the year		4,387,441		3,052,883
Increase in cash and cash equivalents at end of the year		1,181,823		4,387,441

< Cash flow statement for year ended December 31, 2022>


	Prior to accounting policy change		After accounting policy change			Increase (decrease)
Due from banks	W	2,164,805		(1,054,373	)		(3,219,178	)
Effects from changes in foreign currency exchange rate for cash and cash equivalents held		134,059		147,619			13,560
Cash and cash equivalents at beginning of the year		5,066,135		9,453,576			4,387,441
Cash and cash equivalents at end of the year		10,690,646		11,872,469			1,181,823

< Cash flow statement for year ended December 31, 2021>


	Prior to accounting policy change			After accounting policy change			Increase (decrease)
Due from banks	W	(2,172,476	)		(856,356	)		1,316,120
Effects from changes in foreign currency exchange rate for cash and cash equivalents held		225,411			243,849			18,438
Cash and cash equivalents at beginning of the year		5,729,194			8,782,077			3,052,883
Cash and cash equivalents at end of the year		5,066,135			9,453,576			4,387,441

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

2. Basis of Preparation, Continued

(iii) New standards and interpretations issued but not effective

The following new standards, interpretations and amendments to existing standards have been issued but not effective for annual periods beginning after January 1, 2022, and the Bank has not early adopted them. The nature and the impact of each new standard, amendment and enactments are described below:

Amendments to K-IFRS 1001 ‘Presentation of Financial Statements’—Classification of Liabilities as Current or Non-current

The amendments clarify that liabilities are classified as either current or non-current, depending on the substantive rights that exist at the end of the reporting period. Classification is unaffected by the likelihood that an entity will exercise right to defer settlement of the liability or the management’s expectations thereof. Also, the settlement of liability includes the transfer of the entity’s own equity instruments; however, it would be excluded if an option to settle the liability by the transfer of the entity’s own equity instruments is recognized separately from the liability as an equity component of a compound financial instrument. The amendments should be applied for annual periods beginning on or after January 1, 2023, and earlier application is permitted. The Bank does not expect that these amendments have a significant impact on the separate financial statements.

Issuance of K-IFRS 1117 Insurance Contracts

K-IFRS 1117 Insurance Contracts will replace K- IFRS 1104 Insurance Contracts. This standard requires an entity to estimate future cash flows of an insurance contract and measure insurance liabilities using discount rates applied with assumptions and risks at the measurement date and recognize insurance revenue on an accrual basis including services (insurance coverage) provided to the policyholder by each annual reporting period. In addition, investment components (refunds due to termination and maturity) repaid to a policyholder even if an insured event does not occur, are excluded from insurance revenue, and net insurance income and net investment income are presented separately to enable users of the information to understand the sources of net income. This standard should be applied for annual reporting periods beginning on or after January 1, 2023, and earlier application is permitted for entities that applied K-IFRS 1109 Financial Instruments. The Bank is scheduled to apply this standard for annual reporting period beginning on January 1, 2023. The Bank does not expect that these applications have a significant impact on the separate financial statements.

Amendments to K-IFRS 1001 Presentation of Financial Statements—Accounting Policy Disclosure

The amendments require an entity to define and disclose their material accounting policy information. IFRS Practice Statement 2 Making Materiality Judgements was amended to explain and demonstrate how to apply the concept of materiality. The amendments should be applied for annual reporting periods beginning on or after January 1, 2023, and earlier application is permitted. The Bank does not expect that these amendments have a significant impact on the separate financial statements.

Amendments to K-IFRS 1008 Accounting Policies, Changes in Accounting Estimates and Errors

The amendments introduce the definition of accounting estimates and clarify how to distinguish changes in accounting estimates from changes in accounting policies. The amendments should be applied for annual reporting periods beginning on or after January 1, 2023, and earlier application is permitted. The Bank does not expect that these amendments have a significant impact on the separate financial statements.

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

2. Basis of Preparation, Continued

Amendments to K-IFRS 1012 Income Taxes—Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction

The amendments narrow the scope of the deferred tax recognition exemption so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. The amendments should be applied for annual reporting periods beginning on or after January 1, 2023, and earlier application is permitted. The Bank does not expect that these amendments have a significant impact on the separate financial statements.

Amendments to K-IFRS 1001 Presentation of Financial Statements—Disclosure of gains or losses on valuation of financial liabilities with exercise price adjustment conditions

The amendments require disclosures about gains or losses on valuation occurred for the reporting period (but are limited to those included in profit or loss) for the conversion options or warrants (or financial liabilities with warrants), if all or part of the financial instrument whose exercise price is adjusted due to the issuers’ stock price fluctuations, are classified as financial liabilities according to paragraph 11 of K-IFRS 1032 Financial Instruments: Presentation. The amendments should be applied for annual reporting periods beginning on or after January 1, 2023, and earlier application is permitted. The Bank does not expect that these amendments have a significant impact on the consolidated financial statements.

(3) Basis of measurement

The financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position:

•

Derivative financial instruments measured at fair value

•

Financial instruments measured at fair value through profit or loss

•

Financial instruments measured at fair value through other comprehensive income

•

Fair value hedged financial instruments with changes in fair value, due to hedged risks, recognized in profit or loss

•

Liabilities for defined benefit plans, which are recognized as net of the total present value of defined benefit obligations less the fair value of plan assets.

(4) Functional and presentation currency

These financial statements are presented in Korean won (“W”), which is the Bank’s functional currency and the currency of the primary economic environment in which the Bank operates.

(5) Use of estimates and judgments

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

2. Basis of Preparation, Continued

(i) Fair value of financial instruments

(ii) Credit losses allowance

The pandemic of COVID-19 has a negative impact on the global economy despite of the Korean government’s financial and economic stabilization packages. It may have a negative impact on the financial position and financial performance of the Bank due to the increase of the expected credit losses on specific portfolios and the potential losses on financial assets. The detail of credit risk exposures by industry affected by the pandemic of COVID-19 as of December 31, 2022 is disclosed in Note 49. (2) and the exposures by industries could be changed according to economic fluctuations.

Taking these circumstances into account comprehensively, the Bank recalculated the forward-looking information used to estimate the expected credit loss in accordance with K-IFRS 1109 ‘Financial Instruments’ as of December 31, 2022. During the 12-month period since the previous year ended, there have been changes in forward-looking information that affect expected credit losses. It is predicted that major economic factors, such

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

2. Basis of Preparation, Continued

as the unemployment rate and economic growth rate, will deteriorate due to the impact of COVID-19. To reflect these changes, the Bank recalculated the forward-looking information by means of increasing the probability of recession used in generating future economic scenarios and will continue to monitor the forward-looking information on a quarterly basis.

(iii) Deferred taxes

(iv) Defined benefit liabilities

(6) Approval date for the separate financial statements

The separate financial statements were authorized for issue by the Board of Directors on March 28, 2023, which will be submitted for approval to the shareholders’ meeting to be held on March 29, 2023.

3. Significant Accounting Policies

(1) Investments in subsidiaries and associates

The accompanying financial statements are separate financial statements in accordance with K-IFRS 1027 ‘Separate Financial Statements’ and investments in subsidiaries and associates are accounted for at cost, not by performance and net asset reported by the investee. Dividends received from subsidiaries and associates are recognised as income as of the time the right to receive the dividends is established.

(2) Business combination of entities under common control

(3) Operating segments

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

3. Significant Accounting Policies, Continued

on segments reported to the chief operating decision maker includes items directly attributable to segments as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise corporate assets (such as the Bank Headquarters), head office expenses, and income tax assets and liabilities. The Bank recognises the CEO as the chief operating decision maker.

(4) Foreign exchange

(i) Foreign currency transactions

(ii) Foreign operations

Unless the functional currency of foreign operations is in a state of hyperinflation, assets and liabilities of foreign operations are translated at the closing exchange rate at the end of the reporting period. Revenues and expenses on the statement of comprehensive income are translated at the exchange rates of the date of transaction. Foreign currency differences that arise from translation are recognized as other comprehensive income, and the disposal of a foreign operation is re-categorized as profit or loss as of the moment of the disposal profit or loss is recognized.

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

3. Significant Accounting Policies, Continued

(iii) Foreign exchange of net investment in foreign operations

(5) Recognition and measurement of financial instruments

(i) Initial recognition

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 on the basis of the Bank’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. The Bank classifies financial liabilities as financial liabilities at fair value through profit or loss, or financial liabilities at amortized cost.

(ii) Subsequent measurement

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

Amortized cost

Fair value

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

3. Significant Accounting Policies, Continued

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.

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, 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.

(iii) Derecognition

Derecognition of financial assets

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

3. Significant Accounting Policies, Continued

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 expires.

(iv) Offsetting

(6) Cash and cash equivalents

(7) Non-derivative financial assets

(i) Financial assets at fair value through profit or loss

(ii) Financial assets at fair value through other comprehensive income

The Bank classifies financial assets as financial assets at fair value through other comprehensive income if they meet the following conditions: 1) debt instruments that are a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and consistent with representing solely payments of principal and interest on the principal amount outstanding or 2) equity instruments, 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. Gain and loss from changes in fair value, other than dividend income and interest income amortized 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.

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

3. Significant Accounting Policies, Continued

(iii) Financial assets measured at amortized cost

(8) Expected credit loss of financial assets

The Bank uses the following three measurement techniques in accordance with K-IFRS:

•

General approach: for financial assets and off-balance-sheet unused credit line that are not applied below two approaches

•

Simplified approach: for receivables, contract assets and lease receivables

•

Credit-impaired approach: for purchased or originated credit-impaired financial assets

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

3. Significant Accounting Policies, Continued

The following non-exhaustive list of information may be relevant in assessing changes in credit risk:

•

Significant changes in internal price indicators of credit risk as a result of a change in credit risk since inception

•

Other changes in the rates or terms of an existing financial instrument that would be significantly different if the instrument was newly originated or issued at the reporting date

•

An actual or expected significant change in the financial instrument’s external credit rating

•

An actual or expected internal credit rating downgrade for the borrower or decrease in behavioural scoring used to assess credit risk internally

•

An actual or expected significant change in the operating results of the borrower

•

Past due information

(i) Forward-looking information

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

(ii) Measuring expected credit losses on financial assets at amortized cost

Individual assessment of impairment

Collective assessment of impairment

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

3. Significant Accounting Policies, Continued

credit rating, size of portfolio and recovery period and applies probability of default on a group of assets and loss given default by type of recovery method. Also, the expected credit loss model involves certain assumption to determine input based on loss experience and forward-looking information. These models and assumptions are periodically reviewed to reduce gap between loss estimate and actual loss experience.

(iii) Measuring expected credit losses on financial assets at fair value through other comprehensive income

(9) Derivative financial instruments including hedge accounting

(i) Hedge accounting

Fair value hedge

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

3. Significant Accounting Policies, Continued

the criteria for hedge accounting, the hedge relationship is terminated. For hedged item recorded at amortized cost, the difference between the carrying value of the hedged item on termination and the face value is amortized over the remaining term of the original hedge using the EIR.

Cash flow hedge

For designated and qualifying cash flow hedges, the effective portion of gain or loss on the hedging instruments is initially recognised directly in equity. The ineffective portion of the gain or loss on the hedging instrument is recognised immediately in the statement of comprehensive income. When the hedged cash flow affects the profit or loss in statement of comprehensive income, the gain or loss on the hedging instrument is recorded in the corresponding income or expense line in profit or loss in the statement of comprehensive income. When a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the hedged forecasted transaction is ultimately recognised in the statement of comprehensive income. When a forecasted transaction is no longer expected to occur, the cumulative gain and loss that was reported in equity is immediately transferred to profit or loss in the statement of comprehensive income.

Hedges of net investments in foreign operations

(ii) Trading purpose derivatives

For trading purpose derivatives transaction, changes in the fair value of derivatives are recognised in net income.

(10) Day one profit or loss recognition

(11) Property and equipment

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

3. Significant Accounting Policies, Continued

Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to the amount of residual value less acquisition cost over the following estimated useful lives:


Type		Useful lives (years)
Buildings		20 ~ 50
Structure		10 ~ 40
Movable property		4

(12) Investment property

Depreciation of investment property is calculated using the straight-line method over its estimated useful lives as follows:


Type	Useful lives (years)
Buildings		20 ~ 50
Structure		10 ~ 40

(13) Intangible assets

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

3. Significant Accounting Policies, Continued

(14) Leases

Right-of-use asset

Lease liabilities

Short-term lease and lease of low-value assets

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

3. Significant Accounting Policies, Continued

(15) Impairment of non-financial assets

(16) Assets held for sale

The Bank recognizes an impairment loss for any initial or subsequent write-down of an asset (or disposal group) to fair value less costs to sell, and a gain for any subsequent increase in fair value less costs to sell, up to the cumulative impairment loss previously recognized.

Non-current assets that are classified as held for sale or part of a disposal group classified as held for sale are not depreciated (or amortized).

(17) Non-derivative financial liabilities

(i) Financial liabilities at fair value through profit or loss

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

3. Significant Accounting Policies, Continued

(ii) Financial liabilities measured at amortized cost

(18) Employee benefits

(i) Short-term employee benefits

(ii) Retirement benefits: defined contribution plans

(iii) Retirement benefits: defined benefit plans

The Bank classifies all the pensions as defined benefit plans except defined contribution plans. The Bank’s net obligation in respect of defined benefit plans is calculated by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets. The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and have terms to maturity like the terms of the related pension liability.

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

3. Significant Accounting Policies, Continued

(19) Provisions

(20) Financial guarantees

•

The amount determined in accordance with K-IFRS 1109 ‘Financial Instruments’ and

•

The initial amount recognized, less, when appropriate, cumulative amortization recognized in accordance with K-IFRS 1115 ‘Revenue from Contracts with Customers’.

(21) Securities under resale or repurchase agreements

(22) Interest income and expense

(23) Fees and commission income

Fees and commission income and expense are classified as follows according to related regulations:

(i) Fees and commission from financial instruments

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

3. Significant Accounting Policies, Continued

the borrowers’ financial status, guarantee, collateral, other agreements and related evaluation as well as business transaction, rewards for activities, such as document preparation and recording and setup fees incurred during issuance of financial liabilities. However, when financial instruments are classified as financial instruments at fair value through profit or loss, fees and commission are recognized as revenue upon initial recognition.

(ii) Fees and commission from services

(iii) Fees and commission from significant transaction

(24) Dividend income

Dividend income is recognized upon the establishment of the Bank’s right to receive the payment.

(25) Income tax expense

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

3. Significant Accounting Policies, Continued

(26) Accounting for trust accounts

The Bank, for financial reporting, differentiates trust assets from identifiable assets according to the Financial Investment Services and Capital Markets Act. Furthermore, the Bank receives trust fees from the application, management and disposal of trust assets, and appropriates such amounts for fees from trust accounts.

(27) Regulatory reserve for credit losses

When the total sum of allowance for possible credit losses is lower than the amount prescribed in Article 29(1) of the Regulations on Supervision of Banking Business, the Bank records the difference as regulatory reserve for credit losses at the end of each reporting period.

(28) Earnings per share

(29) Corrections of errors

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

4. Cash and Due from Banks

(1)	Cash and due from banks as of December 31, 2022 and 2021 are as follows:


	December 31, 2022		December 31, 2021
Cash	W	70,525		55,083
Due from banks in Korean won:
Due from Bank of Korea		3,360,908		5,673,412
Other due from banks in Korean won		570,295		334,272

		3,931,203		6,007,684

Due from banks in foreign currencies / off-shores		7,537,078		5,913,000

	W	11,538,806		11,975,767

(2)	Restricted due from banks as of December 31, 2022 and 2021 are as follows:


	December 31, 2022		December 31, 2021
Reserve deposit	W	1,181,823		4,387,441
Deposit of monetary stabilization account		2,470,000		1,500,000
Others		405,682		518,886

	W	4,057,505		6,406,327

5. Securities Measured at FVTPL

(1)	Details of securities in financial assets at fair value through profit or loss as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Face value		Acquisition cost		Fair value (Carrying amounts)
Securities denominated in Korean won:
Stocks	W	—		1,800,273		1,666,930
Equity investments		—		719,153		839,331
Beneficiary certificates		—		7,467,720		7,665,755
Government and public bonds		648,000		611,954		623,264
Financial bonds		403,000		401,715		401,127
Others		10,470		10,470		10,392

		1,061,470		11,011,285		11,206,799
Securities denominated in foreign currencies/off-shores:
Stocks		—		13,407		13,784
Equity investments		—		66,367		109,011
Beneficiary certificates		—		649,641		622,312
Debt securities		—		—		—

		—		729,415		745,107

	W	1,061,470		11,740,700		11,951,906

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

5. Securities Measured at FVTPL, Continued


	December 31, 2021
	Face value		Acquisition cost		Fair value (Carrying amounts)
Securities denominated in Korean won:
Stocks	W	—		1,011,501		884,330
Equity investments		—		451,937		490,230
Beneficiary certificates		—		6,559,758		6,835,319
Government and public bonds		632,000		605,809		606,007
Financial bonds		165,000		164,048		163,787
Others		50,470		50,659		50,436

		847,470		8,843,712		9,030,109
Securities denominated in foreign currencies/off-shores:
Equity investments		—		37,157		62,286
Beneficiary certificates		—		671,071		673,050
Debt securities		53,348		52,985		53,366

		53,348		761,213		788,702

	W	900,818		9,604,925		9,818,811

(2)	Equity securities with disposal restrictions in financial assets at fair value through profit or loss as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
Company	Number of shares		Carrying amount		Restricted period
National Happiness Fund		34,066	W	28,873	Undecided

	December 31, 2021
Company	Number of shares		Carrying amount		Restricted period
National Happiness Fund		34,066	W	47,647	Undecided
Shinhan Metal Co., Ltd.		7,692		—	Until December 31, 2022

		41,758	W	47,647

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

6. Securities Measured at FVOCI

(1)	Details of securities measured at FVOCI as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Face value		Acquisition cost		Fair value (Carrying amounts)
Securities denominated in Korean won:
Stocks and equity investments	W	—		10,857,462		11,145,371
Government and public bonds		2,345,000		2,325,251		2,283,060
Financial bonds		2,690,000		2,673,516		2,657,525
Corporate bonds		7,086,079		7,083,618		6,781,202
Others		1,828,729		1,828,729		5,723,053

		13,949,808		24,768,576		28,590,211
Securities denominated in foreign currencies/off-shores:
Equity securities		—		495		1,631
Debt securities		9,808,493		9,976,279		9,093,077

		9,808,493		9,976,774		9,094,708
Loaned securities:
Debt securities		—		—		—

	W	23,758,301		34,745,350		37,684,919


	December 31, 2021
	Face value		Acquisition cost		Fair value (Carrying amounts)
Securities denominated in Korean won:
Stocks and equity investments	W	—		10,202,849		10,473,759
Government and public bonds		1,160,000		1,158,713		1,157,222
Financial bonds		1,820,000		1,820,839		1,817,298
Corporate bonds		8,444,966		8,445,272		8,343,980
Others		2,137,849		2,137,850		8,399,919

		13,562,815		23,765,523		30,192,178
Securities denominated in foreign currencies/off-shores:
Equity securities		—		7,594		6,955
Debt securities		7,179,340		7,393,555		7,258,363

		7,179,340		7,401,149		7,265,318
Loaned securities:
Debt securities		420,000		416,002		417,640

	W	21,162,155		31,582,674		37,875,136

Equity instruments that are acquired due to debt-to-equity swap, investment in kind and investment in ventures and small and medium-sized enterprises are designated as measured at FVOCI. The realized pre-tax income and loss on disposal of equity securities for the years ended December 31, 2022 and 2021 are the amount ofW312,364 million of gain andW60,102 million of gain, respectively, which is directly recognized in retained earnings.

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

6. Securities Measured at FVOCI, Continued

(2)	Changes in securities measured at FVOCI for the years ended December 31, 2022 and 2021 are as follows:


	2022			2021
Beginning balance	W	37,875,136			34,141,325
Acquisition		14,683,389			36,914,523
Disposal		(12,076,298	)		(37,413,898	)
Change due to amortization		(5,575	)		(46,622	)
Change in fair value		(3,318,776	)		3,559,286
Reclassification		19,125			—
Foreign exchange differences		494,413			574,339
Others (*)		13,505			146,183

Ending balance	W	37,684,919			37,875,136

(*)

For the year ended December 31, 2022, others represent the increase in securities measured at FVOCI including shares of FADU Inc., TETOS Co., Ltd. and others acquired through exercise of conversion rights of the convertible bonds and shares of Boowon Industry Co., Ltd., ENTECHNOLOGIES Co., Ltd. and others acquired in accordance with the rehabilitation plan under the Debtor Rehabilitation and Bankruptcy Act. For the year ended December 31, 2021, others represent the increase in securities measured at FVOCI including shares of DAE SUN SHIPBUILDING & ENGINEERING CO., LTD., HEUNG-A SHIPPING CO., LTD. and others acquired in accordance with the workout plan decided by the Council of Financial Creditors, shares of Woongjin Energy Co., Ltd. and others acquired in accordance with the rehabilitation plan under the Debtor Rehabilitation and Bankruptcy Act. and shares of L&F CO., LTD., NKMAX Co., Ltd., KASA NETWORK PTE. LTD. and others acquired through exercise of conversion rights of the convertible bonds.

(3)	Equity securities with disposal restrictions in securities measured at FVOCI as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
*Company (1)**	Number of shares		Carrying amount		Restricted period
UAMCO., Ltd.		113,050	W	188,721		Undecided
High Gain Antenna Co., Ltd.		18,138		270		Undecided
Kumho Tire Co., Inc.		21,339,320		71,167		Until July 6, 2023 (*2)
Daehan Shipbuilding Co., Ltd.		231,459		2,871		Until August 31, 2023

		21,701,967	W	263,029

(*1)	The Bank sold all of its shares in HEUNG-A SHIPPING CO., LTD. and K Shipbuilding Co., Ltd. for the year ended December 31, 2022.

(*2)	From July 6, 2021, 50% of the shares may be sold every year.

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

6. Securities Measured at FVOCI, Continued


	December 31, 2021
Company	Number of shares		Carrying amount		Restricted period
UAMCO., Ltd.		113,050	W	176,628		Undecided
High Gain Antenna Co., Ltd.		18,138		273		Undecided
DNGV., Co. Ltd. (*2)		500,000		1		Undecided
HEUNG-A SHIPPING CO., LTD.		3,019,800		8,153		Until July 11, 2022
K Shipbuilding Co., Ltd.		1,115,242		1,258		Until August 3, 2022
WOOJEON CO., LTD.		591,118		1		Until November 12, 2022
Kumho Tire Co., Inc.		21,339,320		98,374		Until July 6, 2023 (*)
POSCO Plantec Co., Ltd.		1,838,744		1,806		Until December 31, 2023 or listing date

		28,535,412	W	286,494

(*)	From July 6, 2021, 50% of the shares may be sold every year.

(4)	Changes in the loss allowance in relation to securities measured at FVOCI for the years ended December 31, 2022 and 2021 are as follows:


	2022
	Lifetime expected credit loss
	12-month expected credit loss			Non credit- Impaired			Credit- impaired			Total
Beginning balance	W	11,661			3,120			71,668			86,449
Transfer to 12-month expected credit loss		157			(157	)		—			—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired debt securities		(1,127	)		1,127			—			—
Transfer to credit-impaired debt securities		—			—			—			—
Provision for loss allowance		(1,511	)		532			(139	)		(1,118	)
Disposal		(642	)		—			—			(642	)
Foreign currency translation, etc.		2,503			(2,224	)		1,211			1,490

Ending balance	W	11,041			2,398			72,740			86,179

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

6. Securities Measured at FVOCI, Continued


	2021
	Lifetime expected credit loss
	12-month expected credit loss			Non credit- Impaired			Credit- impaired		Total
Beginning balance	W	9,671			1,209			70,398		81,278
Transfer to 12-month expected credit loss		400			(400	)		—		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired debt securities		(1,786	)		1,786			—		—
Transfer to credit-impaired debt securities		—			—			—		—
Provision for loss allowance		2,472			1,469			822		4,763
Disposal		(423	)		—			—		(423	)
Foreign currency translation, etc.		1,327			(944	)		448		831

Ending balance	W	11,661			3,120			71,668		86,449

7. Securities Measured at Amortized Cost

(1)	Securities measured at amortized cost as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Amortized cost			Fair value
Securities denominated in Korean won:
Government and public bonds	W	2,964,285			2,964,285
Financial bonds		2,961,887			2,961,788
Corporate bonds		429,921			429,811

		6,356,093			6,355,884
Less: loss allowance		(209	)

	W	6,355,884			6,355,884


	December 31, 2021
	Amortized cost			Fair value
Securities denominated in Korean won:
Government and public bonds	W	1,437,496			1,437,496
Financial bonds		1,079,249			1,079,204
Corporate bonds		452,290			452,177

		2,969,035			2,968,877
Less: loss allowance		(158	)

	W	2,968,877			2,968,877

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

7. Securities Measured at Amortized Cost, Continued

(2)	Changes in securities measured at amortized cost for the years ended December 31, 2022 and 2021 are as follows:


	2022			2021
Beginning balance	W	2,968,877			785,264
Acquisition		4,895,925			2,888,991
Redemption		(1,522,000	)		(700,000	)
Change due to amortization		13,132			(5,229	)
Impairment loss		(50	)		(149	)

Ending balance	W	6,355,884			2,968,877

8. Loans Measured at FVTPL

(1)	Loans measured at FVTPL as of December 31, 2022 and 2021 are as follows:

December 31, 2022

December 31, 2021

Amortized cost

Fair value
(Carrying amounts)

Amortized cost

Fair value
(Carrying amounts)

Loans in Korean won:

Privately placed corporate bonds

459,064

541,811

471,645

644,412

(2)	Gains (losses) related to loans measured at FVTPL for the years ended December 31, 2022 and 2021 are as follows:


	2022			2021
Transaction gains (losses) on loans measured at FVTPL
Transaction gains	W	8,100			1,860,411
Transaction losses		(8,709	)		(9,692	)

		(609	)		1,850,719
Valuation gains (losses) on loans measured at FVTPL
Valuation gains		9,294			83,760
Valuation losses		(88,248	)		(4,349	)

		(78,954	)		79,411

	W	(79,563	)		1,930,130

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

9. Loans Measured at Amortized Cost

(1)	Loans measured at amortized cost and loss allowance for loan as of December 31, 2022 and 2021 are as follows:


	December 31, 2022					December 31, 2021
	Amortized cost			Fair value		Amortized cost			Fair value
Loans in Korean won:
Loans for working capital	W	69,723,242			68,263,234		64,913,903			63,346,107
Loans for facility development		60,391,588			58,443,101		56,414,412			55,263,451
Loans for households		183,676			175,347		206,579			204,895
Inter-bank loans		3,037,471			2,746,516		2,827,972			2,639,400

		133,335,977			129,628,198		124,362,866			121,453,853
Loans in foreign currencies:
Loans		27,770,598			27,462,025		22,276,205			21,974,270
Inter-bank loans		4,296,005			4,281,978		2,391,409			2,390,650
Off-shore loans		20,961,290			20,421,515		16,990,941			16,581,263

		53,027,893			52,165,518		41,658,555			40,946,183
Other loans:
Bills bought in foreign currency		2,275,189			2,252,927		2,581,399			2,579,637
Advances for customers on acceptances and guarantees		8,954			1,286		17,416			7,068
Privately placed corporate bonds		2,227,012			2,191,115		1,039,406			1,022,432
Others		11,157,205			11,000,638		5,257,538			5,130,169

		15,668,360			15,445,966		8,895,759			8,739,306

		202,032,230			197,239,682		174,917,180			171,139,342

Less:
Loss allowance for loan		(3,997,231	)				(4,154,330	)
Present value discount		(10,620	)				(15,881	)
Deferred loan origination costs and fees		21,224					16,425

	W	198,045,603					170,763,394

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

9. Loans Measured at Amortized Cost, Continued

(2)	Changes in loss allowance for loan for the years ended December 31, 2022 and 2021 are as follows:


	2022
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	342,959			2,242,499			1,568,872			4,154,330
Transfer to 12-month expected credit loss		23,391			(12,442	)		(10,949	)		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired loans		(184,211	)		206,209			(21,998	)		—
Transfer to credit-impaired loans		(71,631	)		(198,640	)		270,271			—
Provision for (reversal of) loss allowance		177,224			95,349			137,877			410,450
Write-offs		—			—			(85,067	)		(85,067	)
Recovery		—			—			20,783			20,783
Sale		—			—			(148,285	)		(148,285	)
Debt-to-equity swap		—			—			(355,903	)		(355,903	)
Foreign currency translation		2,941			41,538			12,165			56,644
Other		(1,419	)		(33,677	)		(20,625	)		(55,721	)

Ending balance	W	289,254			2,340,836			1,367,141			3,997,231


	2021
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	640,094			1,398,461			1,737,936			3,776,491
Transfer to 12-month expected credit loss		629			(629	)		—			—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired loans		(2,108,521	)		2,108,521			—			—
Transfer to credit-impaired loans		(1,400,818	)		(3,526	)		1,404,344			—
Provision for (reversal of) loss allowance		3,235,702			(1,312,045	)		(1,068,109	)		855,548
Write-offs		—			—			(33,671	)		(33,671	)
Recovery		—			—			57,778			57,778
Sale		—			—			(195,397	)		(195,397	)
Debt-to-equity swap		—			—			(402,680	)		(402,680	)
Foreign currency translation		15,036			7,947			39,620			62,603
Other		(39,163	)		43,770			29,051			33,658

Ending balance	W	342,959			2,242,499			1,568,872			4,154,330

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

9. Loans Measured at Amortized Cost, Continued

(3)	Gains (losses) related to loans measured at amortized cost for the years ended December 31, 2022 and 2021 are as follows:


	2022		2021
Provision for allowance for loan losses	W	(410,450)		(855,548	)
Gains on disposal of loan		27,820		32,025

	W	(382,630)		(823,523	)

(4)	Changes in net deferred loan origination costs and fees for the years ended December 31, 2022 and 2021 are as follows:


	2022			2021
Beginning balance	W	16,425			9,003
New deferrals		18,817			21,189
Amortization		(14,018	)		(13,767	)

Ending balance	W	21,224			16,425

10. Derivative Financial Instruments

Gains and losses on the hedging instrument accumulated in the foreign currency translation reserve are reclassified to profit or loss on the disposal or partial disposal of the foreign operation.

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

10. Derivative Financial Instruments, Continued

(1)	The notional amounts outstanding for derivative contracts and the carrying amounts of the derivative financial instruments as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Notional amounts				Carrying amounts
	Buy		Sell		Asset			Liability
Trading purpose derivative financial instruments:
Interest rate
Futures	W	—		1,232,323		—			—
Forwards		—		50,000		1,384			—
Swaps		294,150,122		294,150,122		1,573,784			2,088,963
Options		7,881,911		14,728,387		473,586			536,364

		302,032,033		310,160,832		2,048,754			2,625,327
Currency
Forwards		50,944,418		37,554,484		2,432,523			1,307,942
Swaps		58,740,494		74,899,023		5,225,899			6,174,071
Options		330,066		329,052		1,991			6,452

		110,014,978		112,782,559		7,660,413			7,488,465
Stock
Options		48,904		493,689		12,762			6,003
Allowance and other adjustments		—		—		(112,903	)		(1,447	)

		412,095,915		423,437,080		9,609,026			10,118,348
Hedging purpose derivative financial instruments:
Interest rate (*)
Swaps		31,141,774		31,141,774		48,881			542,268
Currency
Swaps		10,217,257		10,417,222		136,596			660,189
Allowance and other adjustments		—		—		(48	)		(3,803	)

		41,359,031		41,558,996		185,429			1,198,654

	W	453,454,946		464,996,076		9,794,455			11,317,002

(*)	The expected maximum period for which derivative contracts, applied the cash flow hedge accounting, are exposed to risk of cash flow fluctuation is until April 29, 2025.

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

10. Derivative Financial Instruments, Continued


	December 31, 2021
	Notional amounts				Carrying amounts
	Buy		Sell		Asset			Liability
Trading purpose derivative financial instruments:
Interest rate
Futures	W	—		702,640		—			—
Swaps		244,579,384		244,578,686		864,321			488,956
Options		8,369,912		14,664,094		305,022			377,850

		252,949,296		259,945,420		1,169,343			866,806
Currency
Futures		17,783		—		—			—
Forwards		68,100,960		53,060,246		1,771,579			1,134,731
Swaps		57,834,161		70,349,339		1,919,679			2,499,896
Options		377,494		375,834		889			578

		126,330,398		123,785,419		3,692,147			3,635,205
Stock
Options		53,753		50,736		10,068			221
Allowance and other adjustments		—		—		(94,686	)		(854	)

		379,333,447		383,781,575		4,776,872			4,501,378
Hedging purpose derivative financial instruments:
Interest rate (*)
Swaps		23,795,059		23,795,059		330,758			45,989
Currency
Swaps		9,073,004		9,076,498		198,077			214,502
Allowance and other adjustments		—		—		(135	)		(4,028	)

		32,868,063		32,871,557		528,700			256,463

	W	412,201,510		416,653,132		5,305,572			4,757,841

(*)	The expected maximum period for which derivative contracts, applied the cash flow hedge accounting, are exposed to risk of cash flow fluctuation is until April 29, 2025.

(2)	The notional amounts outstanding for the hedging instruments by period as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Interest rate:
Notional amounts outstanding	W	—		1,629,878		4,135,405		20,411,219		4,965,272		31,141,774
Currency:
Notional amounts outstanding	W	310,198		175,155		2,851,071		5,790,132		1,090,701		10,217,257

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

10. Derivative Financial Instruments, Continued


	December 31, 2021
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Interest rate:
Notional amounts outstanding	W	224,896		1,271,477		1,279,617		17,395,158		3,623,911		23,795,059
Currency:
Notional amounts outstanding	W	—		17,178		2,412,941		5,159,516		1,483,369		9,073,004

(3)	Details of the balances of the hedging instruments by risk type as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Notional amounts				Balances				Changes in fair value for 2022
	Buy		Sell		Assets		Liabilities		Changes in fair value for 2022
Cash flow hedge accounting:
Interest rate risk:
Swaps	W	88,711		88,711		—		—		5,044
Fair value hedge accounting:
Interest rate risk:
Swaps		31,053,063		31,053,063		48,881		542,268		(1,570,665	)
Currency risk
Swaps		10,217,257		10,417,222		136,596		660,189		(610,843	)

		41,270,320		41,470,285		185,477		1,202,457		(2,181,508	)

	W	41,359,031		41,558,996		185,477		1,202,457		(2,176,464	)


	December 31, 2021
	Notional amounts				Balances				Changes in fair value for 2021
	Buy		Sell		Assets		Liabilities		Changes in fair value for 2021
Cash flow hedge accounting:
Interest rate risk:
Swaps	W	82,985		82,985		—		—		2,035
Fair value hedge accounting:
Interest rate risk:
Swaps		23,712,074		23,712,074		330,758		45,989		(599,697	)
Currency risk:
Swaps		9,073,004		9,076,498		198,077		214,502		(494,535	)

		32,785,078		32,788,572		528,835		260,491		(1,094,232	)

	W	32,868,063		32,871,557		528,835		260,491		(1,092,197	)

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

10. Derivative Financial Instruments, Continued

(4)	Details of the balances of the hedged items by risk type as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Carrying amounts				Change in value of the hedged item						Changes in fair value for 2022			Cash flow hedge reserve
	Assets		Liabilities		Assets			Liabilities			Changes in fair value for 2022			Cash flow hedge reserve
Cash flow hedge accounting:
Interest rate risk:
Debt debentures	W	—		88,711		—			—			—			7,240
Fair value hedge accounting:
Interest rate risk:
Securities measured at FVOCI		3,932,336		—		(314,591	)		—			(313,189	)		—
Debt debentures		—		25,497,582		—			(1,900,489	)		1,890,055			—
Other liabilities (Deposits, etc.)		—		107,660		—			(19,070	)		22,323			—

		3,932,336		25,605,242		(314,591	)		(1,919,559	)		1,599,189			—

Currency risk:
Debt debentures		—		9,816,395		—			(89,179	)		611,221			—

		3,932,336		35,421,637		(314,591	)		(2,008,738	)		2,210,410			—

	W	3,932,336		35,510,348		(314,591	)		(2,008,738	)		2,210,410			7,240


	December 31, 2021
	Carrying amounts				Change in value of the hedged item						Changes in fair value for 2021			Cash flow hedge reserve
	Assets		Liabilities		Assets			Liabilities			Changes in fair value for 2021			Cash flow hedge reserve
Cash flow hedge accounting:
Interest rate risk:
Debt debentures	W	—		82,985		—			—			—			1,930
Fair value hedge accounting:
Interest rate risk:
Securities measured at FVOCI		2,779,027		—		(125,411	)		—			(52,225	)		—
Debt debentures		—		21,621,572		—			(2,068	)		643,184			—
Other liabilities (Deposits, etc.)		—		121,593		—			3,043			9,589			—

		2,779,027		21,743,165		(125,411	)		975			600,548			—

Currency risk:
Debt debentures		—		9,012,029		—			170,860			504,818			—

		2,779,027		30,755,194		(125,411	)		171,835			1,105,366			—

	W	2,779,027		30,838,179		(125,411	)		171,835			1,105,366			1,930

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

10. Derivative Financial Instruments, Continued

(5)	Details of hedge ineffectiveness recognized in profit or loss from derivatives for the years ended December 31, 2022 and 2021 is as follows:


	2022		2021
Interest rate risk	W	28,524		851
Currency risk		378		10,283

	W	28,902		11,134

(6)	The summary of the amounts that have affected the statement of comprehensive income as a result of applying cash flow hedge accounting for the years ended December 31, 2022 and 2021 is as follows:


	2022
	Change in the value of the hedging instrument recognized in other comprehensive income		Hedge ineffectiveness recognized in profit or *loss ()**			Amount reclassified from other comprehensive income to profit or loss (*)
Interest rate risk	W	5,311		(267	)		—

(*)	Recognized in gains or losses related to hedging purpose derivatives.

2021

Change in the value of the
hedging instrument
recognized in other
comprehensive income

Hedge ineffectiveness
recognized in profit
or loss (*)

Amount reclassified from
other comprehensive
income to profit or
loss (*)

Interest rate risk

1,883

152

—

(*)	Recognized in gains or losses related to hedging purpose derivatives.

(7)	Details of net investments in foreign operations for the years ended December 31, 2022 and 2021 are as follows:


	2022
	Changes in fair value		Other comprehensive income for hedges of net investments in foreign operations
Currency (foreign exchange risk)	W	67,754		(96,874	)


	2021
	Changes in fair value		Other comprehensive income for hedges of net investments in foreign operations
Currency (foreign exchange risk)	W	78,095		(29,120	)

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

10. Derivative Financial Instruments, Continued

(8)	Details of hedging instruments in hedge of net investments in foreign operations as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Carrying amount		Changes in fair value for 2022			Change in the value of the hedging instrument recognized in other comprehensive income for 2022			Hedge ineffectiveness recognized in profit or loss for 2022
Debentures in foreign currencies	W	1,097,225		(67,754	)		(67,754	)		—


	December 31, 2021
	Carrying amount		Changes in fair value for 2021			Change in the value of the hedging instrument recognized in other comprehensive income for 2021			Hedge ineffectiveness recognized in profit or loss for 2021
Debentures in foreign currencies	W	1,006,263		(78,095	)		(78,095	)		—

11. Investments in Subsidiaries and Associates

(1)	Investments in subsidiaries and associates as of December 31, 2022 and 2021 are as follows:


	December 31, 2022		December 31, 2021
Subsidiaries:
KDB Asia Ltd.	W	332,907		332,907
KDB Bank Europe Ltd.(*1)		125,452		137,452
KDB Ireland Ltd.		62,389		62,389
KDB Bank Uzbekistan Ltd.		47,937		47,937
Banco KDB Do Brazil S.A.(*2)		39,761		36,234
PT KDB Tifa Finance Tbk		85,288		85,288
KDB Silicon Valley LLC		118,615		118,615
KDB OCCASIO II, L.P.		22,096		—
KDB Synergy, L.P.		19,872		—
KDB Investment Co., Ltd.		70,000		70,000
KDB Biz Co., Ltd.		1,500		1,500
KDB Capital Corporation		597,290		597,290
Daewoo Shipbuilding & Marine Engineering Co., Ltd.(*3)		1,129,769		—
Daehan Shipbuilding Co., Ltd.(*4)		—		—
Korea BTL Financing 1		129,136		142,782
Korea Railroad Financing 1		78,715		84,553
Korea Education Financing		40,697		45,553
KDB Infrastructure Investment Asset Management Co., Ltd.		16,843		16,843
KDB Investment PEF No.1(*5)		—		1,448,893
KDB Consus Value PEF(*6)		170,462		157,388
KDB-IAP OBOR PEF(*7)		—		—
Green Initiative 2nd Private Equity Fund		72,987		—
KDBC Co-investment Private Equity Fund		12,627		—
KDB Asia PEF		84,112		62,597
KDB Small Medium Mezzanine PEF		44,350		49,540
Corporate Liquidity Assistance Agency Co., Ltd.		1,000,000		1,000,000

		4,302,805		4,497,761

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

11. Investments in Subsidiaries and Associates, Continued


	December 31, 2022		December 31, 2021
Associates:
Korea Electric Power Co., Ltd.		16,921,067		16,921,067
Korea Tourism Organization		337,286		337,286
Korea Infrastructure Financing 2 Co.		212,808		212,991
Korea Ocean Business Corporation		631,777		631,777
Korea Real Estate Board		58,492		58,492
HMM Co., Ltd.(*8)		1,974,499		2,736,835
GM Korea Company(*9)		376,454		382,736
HANJIN KAL(*10)		352,761		500,000
Korean Air Lines Co., Ltd.		330,477		—
Shinbundang Railroad Co., Ltd.(*11)		—		30,999
Troika Resources Investment PEF(*12)		—		2,304
Others(*13)		2,493,905		2,397,814

		23,689,526		24,212,301

	W	27,992,331		28,710,062

(*1)	The Bank recognized impairment losses amounting toW11,999 million andW7,207 million for the years ended December 31, 2022 and 2021, respectively, due to a decrease in value in use resulting from the decline in expected cash flows from the shares held by the Bank.

(*2)	The Bank recognized reversal of impairment losses amounting toW3,527 million andW4,965 million for the years ended December 31, 2022 and 2021, respectively, due to an increase in value in use resulting from the enhancement of expected cash flows from the shares held by the Bank.

(*3)

The Bank and Hyundai Heavy Industries Co., Ltd. (“Hyundai Heavy Industries”) made the investment contract (hereinafter, “the contract”) with an investment in kind on March 8, 2019. For the year ended December 31, 2022, the European Commission did not approve the merger between Korea Shipbuilding & Marine Engineering Co., Ltd. and Daewoo Shipbuilding & Marine Engineering on January 13, 2022. As a result of the disapproval, the contract’s precondition including governmental permission of different countries was not satisfied and the Bank and Korea Shipbuilding & Marine Engineering Co., Ltd. cancelled this contract on March 8, 2022. The Bank’s shares of Daewoo Shipbuilding & Marine Engineering Co., Ltd. were transferred from assets held for sale to investments in subsidiaries and the Bank recognizedW241,283 million of impairment losses considering a decrease in the recoverable value due to a decline in the fair value of the shares.

(*4)

On May 20, 2022, Daehan Shipbuilding Co., Ltd. (“Daehan Shipbuilding”) and KHI consortium entered into an investment contract (hereinafter, “the contract”) to increase the paid-in capital for the purpose of allowing KHI consortium to acquire the status of a major shareholder of Daehan Shipbuilding. In order to facilitate the smooth transfer of the major shareholder status from the Bank to KHI consortium, the Bank converted the equity of Daehan Shipbuilding for the year ended December 31, 2022. KHI consortium completed payment for the shares on August 31, 2022, and Daehan Shipbuilding was subsequently excluded from the Bank’s subsidiaries.

(*5)

For the year ended December 31, 2022, the sale of Daewoo Engineering & Construction Co., Ltd., the Bank’s sub-subsidiary, was completed and the carrying amount of KDB Investment PEF No.1 decreased through reduction of paid-in capital. The Bank recognized a reversal of impairment losses amounting toW444,642 million for the year ended December 31, 2021 based on the expected cash flows to be received through the disposal of Daewoo Engineering & Construction Co., Ltd.

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

11. Investments in Subsidiaries and Associates, Continued

(*6)

The Bank recognized a reversal of impairment losses amounting toW13,047 million due to an increase in value in use resulting from the enhancement of expected cash flows from the shares held by the Bank for the year ended December 31, 2022. However, the Bank recognized a impairment losses amounting toW372 million for the year ended December 31, 2021. In April 2022, the Bank cancelled the agreement of purchase and sale of shares with JC Partners due to the expiration of the transaction closing date.

(*7)	The Bank recognized impairment losses amounting toW6,086 million for the year ended December 31, 2021, due to a decline in net asset values resulting from a decrease in fair value of assets held as objective evidence of impairment.

(*8)	The Bank recognized impairment losses amounting toW762,335 million for the year ended December 31, 2022, due to a decrease in recoverable amount resulting from the decrease in expected cash flow from the shares held by the Bank.

(*9)	For the years ended December 31, 2022 and 2021, the Bank recognized impairment losses amounting toW6,281 million andW54,194 million due to a decrease in value in use resulting from the deterioration of operating cash flows.

(*10)

For the year ended December 31, 2022, the Bank recognized impairment losses amounting toW147,239 million due to a decrease in value in use resulting from the deterioration of operating cash flows.

(*11)

For the year ended December 31, 2022, Shinbundang Railroad Co., Ltd. was excluded from the Bank’s associates due to the loss of significant influence.

(*12)

The Bank recognized a reversal of impairment losses amounting toW93 million for the year ended December 31, 2022, due to an increase in recoverable amount resulting from the enhancement of expected cash flows from the shares held by the Bank. However, the Bank recognized a impairment losses amounting toW32 million for the year ended December 31, 2021. Troika Resources Investment PEF was liquidated for the year ended December 31, 2022.

(*13)

The Bank recognized impairment losses amounting toW16,174 million for AJU PRIVATE EQUITY FUND NO.2 and 14 other companies for the year ended December 31, 2022. The Bank recognized impairment losses amounting toW16,461 million for AJU PRIVATE EQUITY FUND NO.2 and 19 other companies for the year ended December 31, 2021.

(2)	The market value of marketable investments in subsidiaries and associates as of December 31, 2022 and 2021 are as follows:


	Market value				Carrying amounts
	December 31, 2022		December 31, 2021		December 31, 2021		December 31, 2021
Korea Electric Power Co., Ltd.	W	4,604,929		4,668,299		16,921,067		16,921,067
HMM Co., Ltd.		1,978,446		2,722,261		1,974,499		2,736,835
HANJIN KAL		264,477		433,616		352,761		500,000
Korean Air Lines Co., Ltd.		280,906		—		330,477		—
KG Dongbu Steel Co., Ltd.(*)		—		15,966		—		9,268
Daewoo Shipbuilding & Marine Engineering Co., Ltd.		1,132,039		—		1,129,769		—

(*)	KG Dongbu Steel Co., Ltd. is excluded from the Bank’s subsidiaries due to the disposal of shares for the year ended December 31, 2022.

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

11. Investments in Subsidiaries and Associates, Continued

(3)	The key financial information of subsidiaries and associates invested and ownership ratios as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Country		Fiscal year end		Industry		Assets		Liabilities		Equity			Operating revenue		Net income (loss)			Total compre- hensive income (loss)			Owner- ship (%)
Subsidiaries:
KDB Asia (HK) Ltd.		Hong Kong		December		Finance	W	3,660,944		3,029,336		631,608			218,171		53,881			75,373			100.00
KDB Bank Europe Ltd.		Hungary		December		Finance		1,197,124		1,082,057		115,067			101,071		7,415			(4,360	)		100.00
KDB Ireland Ltd.		Ireland		December		Finance		985,414		861,265		124,149			54,874		7,036			11,258			100.00
KDB Bank Uzbekistan Ltd.		Uzbekistan		December		Finance		981,301		874,872		106,429			55,269		25,765			23,614			86.32
Banco KDB Do Brazil S.A.		Brazil		December		Finance		481,207		386,159		95,048			84,252		27,132			33,709			100.00
PT KDB Tifa Finance Tbk		Indonesia		December		Finance		130,098		41,343		88,755			13,738		5,284			2,639			84.65
KDB Silicon Valley LLC		USA		December		Finance		126,606		1,522		125,084			2,237		(1,055	)		7,105			100.00
KDB OCCASIO II, L.P.		USA		December		Finance		60,554		49,495		11,059			20		(16,446	)		(15,908	)		90.00
KDB Synergy, L.P.		USA		December		Finance		19,643		—		19,643			—		(596	)		(328	)		100.00
Daewoo Shipbuilding & Marine Engineering Co., Ltd.		Korea		December		Manufacturing		12,235,665		11,490,693		744,972			5,805,906		(1,744,778	)		(1,472,612	)		55.68
Sam Woo Heavy Industries Co., Ltd. (*1)		Korea		December		Manufacturing		268,614		264,893		3,721			121,249		(10,237	)		(9,681	)		100.00
KDB Capital Corporation		Korea		December		Specialized Credit Finance		8,792,535		7,427,546		1,364,989			542,270		135,968			136,090			99.92
Korea BTL Financing 1 (*2)		Korea		Semi- annually		Financial investment		329,286		215		329,071			14,607		11,773			11,773			41.67
Korea Railroad Financing 1 (*2)		Korea		Semi- annually		Financial investment		158,318		9		158,309			7,492		(3,569	)		(3,569	)		50.00
Korea Education Financing (*2)		Korea		Semi- annually		Financial investment		95,445		7		95,438			9,675		9,442			9,442			50.00
KDB Infrastructure Investment Asset Management Co., Ltd.		Korea		December		Asset management		70,706		10,403		60,303			39,151		19,057			19,104			84.16
KDB Investment Co., Ltd.		Korea		December		Finance		152,004		19,866		132,138			84,468		54,032			54,034			100.00
KDB Biz Co., Ltd.		Korea		December		Services		6,899		3,238		3,661			26,291		325			624			100.00
KDB Consus Value PEF		Korea		December		Financial investment		18,595,875		19,958,869		(1,362,994	)		4,379,434		429,868			(1,315,065	)		68.20
KDB-IAP OBOR PEF (*3)		Korea		December		Financial investment		58,878		60,084		(1,206	)		—		(1,024	)		(1,017	)		33.52
KDB Asia PEF (*3)		Korea		December		Financial investment		194,389		172		194,217			1		(494	)		20,532			50.00
KDB Small Medium Mezzanine PEF		Korea		December		Financial investment		96,666		122		96,544			4,620		3,432			3,432			66.67
Green Initiative 2nd Private Equity Fund		Korea		December		Financial investment		190,404		5,316		185,088			2		(5,795	)		(5,795	)		38.00
KDBC Co-investment Private Equity Fund		Korea		December		Financial investment		17,522		27		17,495			—		(544	)		(544	)		70.00
Corporate Liquidity Assistance Agency Co., Ltd.		Korea		December		Financial investment		3,280,515		2,215,553		1,064,962			90,631		32,625			32,625			100.00

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

11. Investments in Subsidiaries and Associates, Continued


	December 31, 2022
	Country	Fiscal year end	Industry	Assets		Liabilities		Equity		Operating revenue		Net income (loss)			Total compre- hensive income (loss)			Owner- ship (%)

Associates:
Korea Electric Power Co., Ltd.	Korea	December	Electricity Generation		234,804,994		192,804,738		42,000,256		71,257,863		(24,429,108	)		(23,182,239	)		32.90
Korea Tourism Organization	Korea	December	Culture and Tourism administration		1,201,900		393,608		808,292		737,973		(28,798	)		(8,610	)		43.58
Korea Infrastructure Financing 2 Co.	Korea	December	Financial investment		829,121		65,397		763,724		62,465		19,105			19,105			26.67
Korea Ocean Business Corporation	Korea	December	Finance		11,782,946		4,393,822		7,389,124		324,012		(1,986,514	)		(1,915,571	)		21.78
Korea Real Estate Board	Korea	December	Appraisal		288,236		49,791		238,445		215,197		11,583			19,805			30.60
GM Korea Company (*4)	Korea	December	Manufacturing		5,916,955		4,503,620		1,413,335		9,013,561		282,760			282,760			17.02
HMM Co., Ltd.	Korea	December	Foreign cargo transportation		25,973,455		5,285,543		20,687,912		18,582,770		10,085,271			10,655,184			20.69
HANJIN KAL (*4)	Korea	December	Holding compnay		3,915,078		1,339,021		2,576,057		200,336		659,568			851,925			10.58
Korean Air Lines Co., Ltd. (*4)	Korea	December	Air passenger transportation		28,997,701		19,705,241		9,292,460		14,096,095		1,728,363			2,268,959			3.32

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

11. Investments in Subsidiaries and Associates, Continued


	December 31, 2021
	Country		Fiscal year end		Industry		Assets		Liabilities		Equity			Operating revenue		Net income (loss)			Total compre- hensive income (loss)			Owner- ship (%)
Subsidiaries:
KDB Asia (HK) Ltd.		Hong Kong		December		Finance	W	3,958,732		3,402,497		556,235			130,854		42,651			84,868			100
KDB Bank Europe Ltd.		Hungary		December		Finance		1,113,228		993,801		119,427			46,211		4,333			8,031			100
KDB Ireland Ltd.		Ireland		December		Finance		698,808		585,918		112,890			22,318		5,156			13,790			100
KDB Bank Uzbekistan Ltd.		Uzbekistan		December		Finance		838,100		755,286		82,814			28,400		10,340			16,928			86.32
Banco KDB Do Brazil S.A.		Brazil		December		Finance		369,396		308,057		61,339			49,441		1,649			2,773			100
PT KDB Tifa Finance Tbk		Indonesia		December		Finance		116,553		30,437		86,116			9,137		169			2,657			84.65
KDB Silicon Valley LLC		USA		December		Finance		119,648		1,669		117,979			24		(552	)		(552	)		100
Daewoo Shipbuilding & Marine Engineering Co., Ltd.		Korea		December		Manufacturing		10,623,210		8,405,627		2,217,583			4,486,586		(1,699,829	)		(1,650,289	)		55.68
Sam Woo Heavy Industries Co., Ltd. (*1)		Korea		December		Manufacturing		253,430		240,028		13,402			87,589		(9,176	)		(8,939	)		100
Daehan Shipbuilding Co., Ltd. (*1)		Korea		December		Manufacturing		701,881		991,844		(289,963	)		763,270		(136,391	)		(135,624	)		70.04
KDB Capital Corporation		Korea		December		Specialized Credit Finance		7,513,809		6,217,165		1,296,644			555,801		232,376			183,742			99.92
Korea BTL Financing 1 (*2)		Korea		Semi- annually		Financial investment		361,684		237		361,447			12,709		10,819			10,819			41.67
Korea Railroad Financing 1 (*2)		Korea		Semi- annually		Financial investment		178,399		110		178,289			7,172		3,806			3,806			50
Korea Education Financing (*2)		Korea		Semi- annually		Financial investment		98,376		6		98,370			3,877		2,039			2,039			50
KDB Infrastructure Investment Asset Management Co., Ltd.		Korea		December		Asset management		68,612		11,373		57,239			37,483		18,851			18,936			84.16
KDB Investment Co., Ltd.		Korea		December		Finance		81,468		2,687		78,781			10,535		4,084			4,177			100
KDB Biz Co., Ltd.		Korea		December		Services		7,478		4,441		3,037			25,580		260			737			100
KDB Investment PEF No.1		Korea		December		Financial investment		11,017,597		8,043,123		2,974,474			—		205,231			232,737			99.40
KDB Consus Value PEF		Korea		December		Financial investment		19,680,738		19,633,413		47,325			5		14,301			(385,890	)		68.20
KDB Sigma PEF II		Korea		December		Financial investment		629		12		617			39		(2,314	)		(2,314	)		60
KDB-IAP OBOR PEF (*3)		Korea		December		Financial investment		55,046		55,235		(189	)		—		(74,212	)		(70,569	)		33.52
KDB Asia PEF (*3)		Korea		December		Financial investment		130,757		102		130,655			—		(2,669	)		11,441			50
KDB Small Medium Mezzanine PEF		Korea		December		Financial investment		105,256		144		105,112			81,216		69,808			70,597			66.67
Corporate Liquidity Assistance Agency Co., Ltd.		Korea		December		Financial investment		3,947,608		2,915,271		1,032,337			83,857		29,628			29,628			100
Components and Materials M&A PEF		Korea		December		Financial investment		793		25		768			2		(15,695	)		(15,695	)		83.33

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

11. Investments in Subsidiaries and Associates, Continued


	December 31, 2021
	Country	Fiscal year end	Industry	Assets		Liabilities		Equity			Operating revenue		Net income (loss)			Total compre- hensive income (loss)			Owner- ship (%)

Associates:
Korea Electric Power Co., Ltd.	Korea	December	Electricity Generation		211,108,870		145,797,021		65,311,849			60,574,819		(5,315,055	)		(4,754,046	)		32.90
Korea Tourism Organization	Korea	December	Culture and Tourism administration		1,130,031		312,593		817,438			465,281		(71,016	)		(59,751	)		43.58
Korea Infrastructure Financing 2 Co.	Korea	December	Financial investment		851,153		51,177		799,976			70,165		40,891			40,891			26.67
Korea Ocean Business Corporation	Korea	December	Finance		15,040,759		5,845,062		9,195,697			5,499,512		4,187,673			4,207,691			22.11
Korea Real Estate Board	Korea	December	Appraisal		275,447		53,495		221,952			198,950		9,517			12,646			30.60
GM Korea Company (*4)	Korea	December	Manufacturing		5,013,939		3,496,897		1,517,042			6,973,860		(166,475	)		(166,475	)		17.02
HMM Co., Ltd.	Korea	December	Foreign cargo transportation		17,876,100		7,517,806		10,358,294			13,794,148		5,337,056			5,696,643			20.69
HANJIN KAL (*4)	Korea	December	Holding compnay		3,754,742		1,930,524		1,824,218			395,278		17,234			46,260			10.66
Troika Resources Investment PEF (*5)	Korea	December	Financial investment		5,745		1,417		4,328			286		118			118			54.94
Shinbundang Railroad Co., Ltd. (*6)	Korea	December	Other		637,906		1,000,785		(362,879	)		100,586		(235,161	)		(235,161	)		10.98

(*1)	The Bank consolidates the investees which were subsidiaries of Daewoo Shipbuilding & Marine Engineering Co., Ltd. as the Bank has had control over the investees through the commencement of the administrative proceeding since the past.

(*2)

(*3)	Although the Bank’s shareholding in the investee is less than 50%, it controls the investee since it is exposed, or has right to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

(*4)	Although the Bank’s shareholding is less than 20%, the Bank has significant influence considering the right to elect the investees’ directors and the Bank classifies the companies as associates.

(*5)	Although the Bank’s shareholding in Troika Resources Investment PEF is above 50%, the Bank as joint managing member does not have the ability to direct the relevant activities unilaterally. Troika Resources Investment PEF was liquidated for the year ended December 31, 2022.

(*6)

The Bank had significant influence over the associate as of December 31, 2021 because the shareholding is above 20% upon the consideration of shares owned by the Bank’s subsidiaries. For the year ended December 31, 2022, Shinbundang Railroad Co., Ltd. was excluded from the Bank’s associates due to the loss of significant influence.

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

12. Property and Equipment

Changes in property and equipment for the years ended December 31, 2022 and 2021 are as follows:


	2022
	January 1, 2022		Acquisition/ depreciation		Disposal			Reclassifi- cation			Foreign exchange differences			December 31, 2022
Acquisition cost:
Land	W	302,959		—		(585	)		(415	)		—			301,959
Buildings and structures		628,393		1,062		(1,979	)		188			—			627,664
Leasehold improvements		40,637		4,005		(930	)		1,366			(222	)		44,856
Vehicles		769		—		(78	)		—			28			719
Equipment		59,812		2,980		(2,696	)		—			60			60,156
Construction in progress		34		2,546		—			(2,580	)		—			—
Right-of-use assets (Real estate)		162,089		59,073		(98,426	)		—			3,299			126,035
Right-of-use assets (Vehicles)		7,447		2,928		(2,422	)		—			24			7,977
Right-of-use assets (Others)		29		98		(31	)		—			(3	)		93
Others		154,052		4,175		(559	)		—			62			157,730

		1,356,221		76,867		(107,706	)		(1,441	)		3,248			1,327,189
Accumulated depreciation:
Buildings and structures(*)		217,027		17,260		—			(504	)		—			233,783
Leasehold improvements		34,621		3,068		(780	)		—			(518	)		36,391
Vehicles		616		72		(78	)		—			18			628
Equipment		45,395		4,507		(2,258	)		—			84			47,728
Right-of-use assets (Real estate)		48,501		31,274		(34,909	)		—			1,102			45,968
Right-of-use assets (Vehicles)		4,279		2,287		(2,434	)		—			22			4,154
Right-of-use assets (Others)		29		11		(31	)		—			—			9
Others		128,212		13,105		(451	)		—			105			140,971

		478,680		71,584		(40,941	)		(504	)		813			509,632
Accumulated impairment losses:
Land		3,023		—		—			—			—			3,023
Buildings and structures		2,361		—		—			—			—			2,361

		5,384		—		—			—			—			5,384

	W	872,157		5,283		(66,765	)		(937	)		2,435			812,173

(*)	The amounts include government grants.

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

12. Property and Equipment, Continued


	2021
	January 1, 2021		Acquisition/ depreciation		Disposal			Reclassifi- cation			Foreign exchange differences			December 31, 2021
Acquisition cost:
Land	W	305,836		—		(62	)		(2,815	)		—			302,959
Buildings and structures		600,627		3,024		(693	)		25,435			—			628,393
Leasehold improvements		42,180		3,296		(5,614	)		54			721			40,637
Vehicles		734		—		—			—			35			769
Equipment		54,528		6,966		(2,653	)		851			120			59,812
Construction in progress		13,615		15,058		—			(28,639	)		—			34
Right-of-use assets (Real estate)		81,203		113,480		(24,847	)		—			(7,747	)		162,089
Right-of-use assets (Vehicles)		5,989		2,106		(705	)		—			57			7,447
Right-of-use assets (Others)		27		—		—			—			2			29
Others		179,109		7,977		(33,238	)		—			204			154,052

		1,283,848		151,907		(67,812	)		(5,114	)		(6,608	)		1,356,221
Accumulated depreciation:
Buildings and structures(*)		200,349		18,077		(289	)		(1,110	)		—			217,027
Leasehold improvements		36,025		3,030		(5,085	)		—			651			34,621
Vehicles		533		64		—			—			19			616
Equipment		44,197		3,178		(2,125	)		—			145			45,395
Right-of-use assets (Real estate)		39,533		27,208		(18,667	)		—			427			48,501
Right-of-use assets (Vehicles)		2,604		2,087		(447	)		—			35			4,279
Right-of-use assets (Others)		24		4		—			—			1			29
Others		143,817		17,212		(32,984	)		—			167			128,212

		467,082		70,860		(59,597	)		(1,110	)		1,445			478,680
Accumulated impairment losses:
Land		3,023		—		—			—			—			3,023
Buildings and structures		2,361		—		—			—			—			2,361

		5,384		—		—			—			—			5,384

	W	811,382		81,047		(8,215	)		(4,004	)		(8,053	)		872,157

(*)	The amounts include government grants.

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

13. Investment Property

Changes in investment property for the years ended December 31, 2022 and 2021 are as follows:


	2022
	January 1, 2022		Acquisition/ depreciation			Reclassification		December 31, 2022
Acquisition cost:
Land	W	60,593		—			415		61,008
Buildings and structures		58,388		—			1,026		59,414

		118,981		—			1,441		120,422
Accumulated depreciation:
Buildings and structures		33,146		2,084			504		35,734
Accumulated impairment losses:
Land		1,197		—			—		1,197
Buildings and structures		1,778		—			—		1,778

		2,975		—			—		2,975

	W	82,860		(2,084	)		937		81,713


	2021
	January 1, 2021		Acquisition/ depreciation			Reclassification		December 31, 2021
Acquisition cost:
Land	W	57,778		—			2,815		60,593
Buildings and structures		56,089		—			2,299		58,388

		113,867		—			5,114		118,981
Accumulated depreciation:
Buildings and structures		29,827		2,209			1,110		33,146
Accumulated impairment losses:
Land		1,197		—			—		1,197
Buildings and structures		1,778		—			—		1,778

		2,975		—			—		2,975

	W	81,065		(2,209	)		4,004		82,860

The fair value of the Bank’s investment property, as determined based on valuation by an independent appraiser, amounts toW99,084 million andW97,983 million as of December 31, 2022 and 2021, respectively. Additionally, fair value of investment in property is classified as level 3 according to the fair value hierarchy in Note 45.

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

14. Intangible Assets

Changes in intangible assets for the years ended December 31, 2022 and 2021 are as follows:


	2022
	January 1, 2022		Acquisition		Disposal			Amortization			Foreign exchange differences		December 31, 2022
Development expense	W	119,775		12,163		—			(44,363	)		18		87,593
Equipment usage right		472		—		—			(49	)		29		452
Other deposits provided		11,922		920		(1,523	)		—			470		11,789
Others		15,530		12,910		—			(9,850	)		65		18,655

	W	147,699		25,993		(1,523	)		(54,262	)		582		118,489


	2021
	January 1, 2021		Acquisition		Disposal			Amortization			Foreign exchange differences		December 31, 2021
Development expense	W	155,479		8,293		—			(44,011	)		14		119,775
Equipment usage right		482		—		—			(45	)		35		472
Other deposits provided		11,940		818		(858	)		—			22		11,922
Others		20,516		4,772		—			(9,781	)		23		15,530

	W	188,417		13,883		(858	)		(53,837	)		94		147,699

15. Other Assets

Other assets as of December 31, 2022 and 2021 are as follows:


	December 31, 2022			December 31, 2021
Accounts receivable	W	2,747,057			3,460,334
Unsettled domestic exchange receivables		3,747,333			1,794,806
Accrued income		914,618			408,168
Guarantee deposits		315,563			217,682
Financial guarantee asset		25,826			20,127
Prepaid expenses		18,374			15,969
Advance payments		9,036			8,889
Others		12,102			29,635

		7,789,909			5,955,610
Allowance for credit losses		(75,323	)		(80,071	)
Present value discount		(3,369	)		(1,632	)

	W	7,711,217			5,873,907

The carrying amounts of financial assets included in other assets above amounted toW7,676,612 million andW5,836,048 million as of December 31, 2022 and 2021, respectively, and their fair value amounted toW7,674,324 million andW5,835,448 million as of December 31, 2022 and 2021, respectively.

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

16. Assets Held for Sale

Assets held for sale as of December 31, 2021 are as follows:


	2021
	Acquisition cost		Fair value less costs to sell		Carrying amount		Impairment loss
Assets held for sale:
Investments in subsidiaries(*1)	W	2,244,664		1,371,052		1,371,052		258,428
Investments in associates(*2)		—		—		—		(27	)

	W	2,244,664		1,371,052		1,371,052		258,401

(*1)

As the Bank and Hyundai Heavy Industries Co., Ltd. (“Hyundai Heavy Industries”) made the investment contract (hereinafter, “the contract”) with an investment in kind on March 8, 2019 and proceeded with the sale for attracting investment in Daewoo Shipbuilding & Marine Engineering Co., Ltd. (“Daewoo Shipbuilding & Marine Engineering”) of the Bank’s subsidiary, the Bank classified the shares of Daewoo Shipbuilding & Marine Engineering as assets held for sale. The European Commission did not approve the merger between Korea Shipbuilding & Marine Engineering Co., Ltd. and Daewoo Shipbuilding & Marine Engineering on January 13, 2022. As a result of the disapproval, the contract’s precondition including governmental permission of different countries was not satisfied and the Bank and Korea Shipbuilding & Marine Engineering Co., Ltd. cancelled this contract on March 8, 2022. For the year ended December 31, 2022, the Bank’s shares of Daewoo Shipbuilding & Marine Engineering Co., Ltd. were excluded from assets held for sale.

(*2)	For the year ended December 31, 2021, the sale of the share of Hanjin Heavy Industries & Construction Co., Ltd., the Bank’s associate, has been completed.

17. Financial Liabilities Measured at FVTPL

(1)	Financial liabilities measured at fair value through profit or loss as of December 31, 2022 and 2021 are as follows:


	December 31, 2022		December 31, 2021
Debentures	W	1,131,310		1,636,163
Deposits		338,414		430,981

	W	1,469,724		2,067,144

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

17. Financial Liabilities Measured at FVTPL, Continued

(2)	The difference between the carrying amount and contractual cash flow amount of financial liabilities measured at fair value through profit or loss as of December 31, 2022 and 2021 are as follows:


	December 31, 2022			December 31, 2021
Carrying amount	W	1,469,724			2,067,144
Contractual cash flow amounts		2,101,133			2,110,955

Difference	W	(631,409	)		(43,811	)

18. Deposits

Deposits as of December 31, 2022 and 2021 are as follows:


	December 31, 2022				December 31, 2021
	Amortized cost		Fair value		Amortized cost		Fair value
Deposits in Korean won:
Demand deposits	W	123,617		123,617		86,428		86,428
Time and savings deposits		54,389,265		54,328,886		41,041,409		41,005,081
Certificates of deposit		757,471		758,937		342,105		341,901

		55,270,353		55,211,440		41,469,942		41,433,410
Deposits in foreign currencies:
Demand deposits		1,312,008		1,312,057		1,536,950		1,536,950
Time and savings deposits		3,955,130		3,949,240		4,411,690		4,410,697
Certificates of deposit		6,187,960		6,195,534		4,341,640		4,322,711

		11,455,098		11,456,831		10,290,280		10,270,358
Off-shore deposits in foreign currencies:
Demand deposits		835,904		835,904		670,777		670,777
Certificates of deposit		765,301		765,794		361,122		360,884

		1,601,205		1,601,698		1,031,899		1,031,661

	W	68,326,656		68,269,969		52,792,121		52,735,429

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

19. Borrowings

(1)	Borrowings as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Minimum interest rate (%)		Maximum interest rate (%)		Amortized cost			Fair value
Borrowings in Korean won		—		3.23	W	4,551,011			4,507,549
Borrowings in foreign currencies		0.06		6.57		14,220,220			14,148,918
Off-shore borrowings in foreign currencies		0.16		5.16		5,205,830			5,157,170
Others		0.05		3.25		1,452,656			1,453,711

						25,429,717			25,267,348

Deferred borrowing costs						(473	)

					W	25,429,244


	December 31, 2021
	Minimum interest rate (%)		Maximum interest rate (%)		Amortized cost			Fair value
Borrowings in Korean won		—		3.15	W	4,329,798			4,318,893
Borrowings in foreign currencies		—		5.31		13,265,326			13,260,468
Off-shore borrowings in foreign currencies		—		3.35		2,300,131			2,298,068
Others		0.01		3.29		2,168,670			2,167,736

						22,063,925			22,045,165

Deferred borrowing costs						(148	)

					W	22,063,777

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

19. Borrowings, Continued

(2)	Borrowings in Korean won before adjusting for gains and losses on deferred borrowing costs as of December 31, 2022 and 2021 are as follows:

Lender

Classification

Annual
interest rate
(%)

December 31,
2022

December 31,
2021

Ministry of Economy and Finance

Borrowings from government fund (*)

2.94 ~ 3.23

93,155

108,932

Korea SMEs and Startups Agency

Borrowings from small and medium enterprise promotion fund

0.66 ~ 2.91

57,569

61,240

Ministry of Culture, Sports and Tourism

Borrowings from tourism promotion fund

0.09 ~ 2.44

3,182,920

3,005,749

Korea Energy Agency

Borrowings from fund for rational use of energy

0.25 ~ 1.85

268,659

282,178

Local governments

Borrowings from local small and medium enterprise promotion fund

0.00 ~ 3.23

27,167

27,658

The Bank of Korea

Borrowings from Bank of Korea

0.25 ~ 1.75

375,350

378,160

Others

Borrowings from petroleum enterprise fund and others

0.00 ~ 3.15

546,191

465,881

4,551,011

4,329,798

(*)	Borrowings from government fund are subordinated borrowings.

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

19. Borrowings, Continued

(3)	Borrowings and off-shore borrowings in foreign currencies before adjusting for gains and losses on deferred borrowing costs as of December 31, 2022 and 2021 are as follows:

Lender

Classification

Annual
interest rate (%)

December 31,
2022

December 31,
2021

Mizuho and others

Bank loans from foreign funds

3M Libor + 0.29 ~ 6M
Libor + 0.24

1,394,030

355,650

Ministry of Strategy and Finance

Exchange equalization fund borrowings in foreign currencies

3M Libor + 0.65 ~ 3M
Libor + 0.74

120,761

199,792

Central Bank of the Republic Uzbekistan and others

Off-shore short term borrowings

0.16 ~ 5.16

3,682,012

1,292,571

China Development Bank and others

Off-shore long term borrowings

2.34 ~ 3.36

1,523,818

1,007,560

Others

Short-term borrowings in foreign currencies

0.06 ~ 6.57

12,150,612

11,775,597

Long term borrowings in foreign currencies

0.10 ~ 5.41

554,817

934,287

19,426,050

15,565,457

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

20. Debentures

Debentures as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Minimum interest rate (%)		Maximum interest rate (%)		Amortized cost			Fair value
Debentures in Korean won:
Debentures		0.88		6.60	W	121,351,724			118,883,372
Discount on debentures						(334,416	)
Valuation adjustment for fair value hedges						(419,107	)

						120,598,201
Debentures in foreign currencies:
Debentures		0.05		10.87		20,910,800			21,072,312
Discount on debentures						(37,691	)
Premium on debentures						91
Valuation adjustment for fair value hedges						(1,000,475	)

						19,872,725
Off-shore debentures:
Debentures		—		11.15		18,859,840			18,272,508
Discount on debentures						(48,784	)
Valuation adjustment for fair value hedges						(570,086	)

						18,240,970

					W	158,711,896			158,228,192

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

20. Debentures, Continued


	December 31, 2021
	Minimum interest rate (%)		Maximum interest rate (%)		Amortized cost			Fair value
Debentures in Korean won:
Debentures		0.75		6.60	W	109,608,752			109,390,833
Discount on debentures						(75,224	)
Valuation adjustment for fair value hedges						(89,080	)

						109,444,448
Debentures in foreign currencies:
Debentures		—		10.87		19,488,365			20,634,957
Discount on debentures						(40,580	)
Premium on debentures						1,338
Valuation adjustment for fair value hedges						143,805

						19,592,928
Off-shore debentures:
Debentures		—		7.00		16,242,288			16,420,828
Discount on debentures						(28,401	)
Valuation adjustment for fair value hedges						114,067

						16,327,954

					W	145,365,330			146,446,618

21. Defined Benefit Liabilities (Assets)

(1)	Details of defined benefit liabilities (assets) as of December 31, 2022 and 2021 are as follows:


	December 31, 2022			December 31, 2021
Present value of defined benefit liabilities	W	354,703			391,015
Fair value of plan assets		(442,473	)		(400,368	)

	W	(87,770	)		(9,353	)

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

21. Defined Benefit Liabilities (Assets), Continued

(2)	Changes in defined benefit liabilities (assets) for the years ended December 31, 2022 and 2021 are as follows:


	2022
	Present value of defined benefit obligation			Fair value of plan assets			Defined benefit liabilities (assets)
Beginning balance	W	391,015			(400,368	)		(9,353	)
Current service costs		35,998			—			35,998
Interest expense (income)		11,796			(12,065	)		(269	)
Past service costs		34,363			—			34,363
Remeasurements of defined benefit liabilities:
Demographic assumption		6,171			—			6,171
Financial assumption		(83,170	)		7,484			(75,686	)
Experience adjustment		(1,802	)		—			(1,802	)

		(78,801	)		7,484			(71,317	)
Payments from the plan		(39,657	)		(37,524	)		(77,181	)
Contributions to the plan		(11	)		—			(11	)

Ending balance	W	354,703			(442,473	)		(87,770	)


	2021
	Present value of defined benefit obligation			Fair value of plan assets			Defined benefit liabilities (assets)
Beginning balance	W	415,529			(364,983	)		50,546
Current service costs		39,382			—			39,382
Interest expense (income)		9,850			(9,238	)		612
Remeasurements of defined benefit liabilities:
Demographic assumption		—			—			—
Financial assumption		(44,008	)		5,540			(38,468	)
Experience adjustment		(11,332	)		—			(11,332	)

		(55,340	)		5,540			(49,800	)
Payments from the plan		(18,406	)		18,313			(93	)
Contributions to the plan		—			(50,000	)		(50,000	)

Ending balance	W	391,015			(400,368	)		(9,353	)

(3)	Fair value of plan assets for each type as of December 31, 2022 and 2021 are as follows:

December 31, 2022

December 31, 2021

Quoted
market
prices

Unquoted
market
prices

Quoted
market
prices

Unquoted
market
Prices

Due from banks

—

442,473

—

400,368

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

21. Defined Benefit Liabilities (Assets), Continued

(4)	Defined benefit costs recognized in profit or loss for the years ended December 31, 2022 and 2021 are as follows:


	2022			2021
Current service costs	W	35,998			39,382
Interest expense, net		(269	)		612
Past service costs		34,363			—

	W	70,092			39,994

(5)	The principal actuarial assumptions used as of December 31, 2022 and 2021 are as follows:


	December 31, 2022		December 31, 2021
Discount rate (%)		5.35		3.03
Future salary increasing rate (%)		5.50		5.54

(6)	The present value sensitivity of defined benefit obligation as changes in principal actuarial assumptions as of December 31, 2022 is as follows:


	Sensitivity
	1% increase in assumption		1% decrease in assumption
Discount rate		8.09% decrease		9.36% increase
Future salary increasing rate		9.25% increase		8.15% decrease

(7)	The weighted average duration of defined benefit obligation is 9.63 years and 11.63 years as of December 31, 2022 and 2021, respectively. There are no expected contributions to the plans for the next reporting period as of December 31, 2022.

22. Provisions

(1)	Details of provisions as of December 31, 2022 and 2021 are as follows:


	December 31, 2022		December 31, 2021
Provision for unused commitments	W	431,390		667,101
Provision for financial guarantee		42,741		72,420
Provision for payment guarantees		953,425		757,621
Provision for possible losses from lawsuits		239		1,731
Provision for restoration		14,206		14,620
Other provision		6,029		54,037

	W	1,448,030		1,567,530

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

22. Provisions, Continued

(2)	Changes in provision for unused commitments for the years ended December 31, 2022 and 2021 are as follows:


	2022
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	332,151			327,085			7,865			667,101
Transfer to 12-month expected credit loss		45,756			(45,756	)		—			—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired exposures		(18,733	)		20,346			(1,613	)		—
Transfer to credit-impaired exposures		(1,210	)		(4,344	)		5,554			—
Provision for (reversal of) unused commitments		(252,773	)		(1,357	)		(2,690	)		(256,820	)
Foreign currency translation		16,580			4,335			194			21,109

Ending balance	W	121,771			300,309			9,310			431,390


	2021
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	479,933			290,827			—			770,760
Transfer to 12-month expected credit loss		267,476			(267,476	)		—			—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired exposures		(34,669	)		34,669			—			—
Transfer to credit-impaired exposures		(3,793	)		(3,513	)		7,306			—
Provision for (reversal of) unused commitments		(410,437	)		272,136			471			(137,830	)
Foreign currency translation		33,641			442			88			34,171

Ending balance	W	332,151			327,085			7,865			667,101

(3)	Changes of financial guarantee provision for the years ended December 31, 2022 and 2021 are as follows:


	2022
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	2,721			31,427			38,272			72,420
Transfer to 12-month expected credit loss		—			—			—			—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired exposures		(282	)		1,494			(1,212	)		—
Transfer to credit-impaired exposures		(97	)		(243	)		340			—
Provision for (reversal of) financial guarantee		(1,681	)		4,004			(32,002	)		(29,679	)

Ending balance	W	661			36,682			5,398			42,741

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

22. Provisions, Continued


	2021
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	45,567			26,007			5,924			77,498
Transfer to 12-month expected credit loss		86			(14	)		(72	)		—
Transfer to lifetime expected credit losses:											—
Transfer to non credit-impaired exposures		(1,518	)		1,523			(5	)		—
Transfer to credit-impaired exposures		(9,227	)		(93	)		9,320			—
Provision for (reversal of) financial guarantee		(32,187	)		4,004			23,105			(5,078	)

Ending balance	W	2,721			31,427			38,272			72,420

(4)	Changes in provision for payment guarantees for the years ended December 31, 2022 and 2021 are as follows:


	2022
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	179,232			199,694			378,695			757,621
Transfer to 12-month expected credit loss		9,036			(190	)		(8,846	)		—
Transfer to lifetime expected credit losses:
Transfer to non credit-impaired exposures		(129,944	)		131,290			(1,346	)		—
Transfer to credit-impaired exposures		(164	)		(2,667	)		2,831			—
Provision for (reversal of) payment guarantees		2,486			175,279			(40,776	)		136,989
Foreign currency translation		3,504			33,849			21,462			58,815

Ending balance	W	64,150			537,255			352,020			953,425


	2021
				Lifetime expected credit losses
	12-month expected credit loss			Non credit- impaired			Credit- impaired			Total
Beginning balance	W	183,963			155,646			264,039			603,648
Transfer to 12-month expected credit loss		105,507			(105,507	)		—			—
Transfer to lifetime expected credit losses:											—
Transfer to non credit-impaired exposures		(90,952	)		90,952			—			—
Transfer to credit-impaired exposures		(4,090	)		(1,552	)		5,642			—
Provision for (reversal of) payment guarantees		(20,070	)		54,942			98,769			133,641
Foreign currency translation		4,874			5,213			10,245			20,332

Ending balance	W	179,232			199,694			378,695			757,621

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

22. Provisions, Continued

(5)	Changes of lawsuit provision and other provision for the years ended December 31, 2022 and 2021 are as follows:


	2022
	Lawsuit provision			Provision for restoration			Other provision
Beginning balance	W	1,731			14,620			54,037
Increase (reversal) of provision		(1,492	)		(2,008	)		—
Provision used and others		—			1,594			(48,008	)

Ending balance	W	239			14,206			6,029


	2021
	Lawsuit provision			Provision for restoration			Other provision
Beginning balance	W	441			15,365			47,458
Increase (reversal) of provision		1,408			(1,820	)		6,596
Provision used and others		(118	)		1,075			(17	)

Ending balance	W	1,731			14,620			54,037

(6)	Provision for payment guarantees and financial guarantee provision

(7)	Provision for unused commitments

(8)	Provision for possible losses from lawsuits

As of December 31, 2022, the Bank is involved in 13 lawsuits as a plaintiff and 23 lawsuits as a defendant. The aggregate amounts of claims as a plaintiff and a defendant amounted toW149,743 million andW208,154 million, respectively. The Bank provided a provision against contingent loss from pending lawsuits as of December 31, 2022 and additional losses may be incurred depending on the result of pending lawsuits.

100

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

22. Provisions, Continued

Major lawsuits in progress as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Contents	Amounts		Status of lawsuit
Plaintiff:
Korea Trade Insurance Corporation and one other	Claim for guarantee insurance	W	136,538	1^st, 2^nd trial ruled against the Bank; 3^rdtrial in progress
KAMCO 1st JV Securitization Specialty Co., Ltd.	Transfer of claim		8,792	1^st, 2^nd trial ruled partially in favor of the Bank; 3^rdtrial in progress
Hana Bank and 6 others	Claim for undue benefit		1,647	1^sttrial ruled against the Bank, 2^nd trial in progress
e-RAP KOREA Co., Ltd. and one other	Claim for loans (participate in succession)		1,238	1^st trial in progress

Defendant:
Shinhan Bank and one other	Claim for damages		58,474	1^st trial in progress
169 individuals including Mr. Kim	Claim for wage		36,573	1^sttrial ruled in favor of the Bank, 2^nd trial in progress
Dongbu Corporation	Claim for nullity of table of rehabilitation creditor		33,997	1^st trial ruled in favor of the Bank; 2^nd trial ruled against the Bank; 3^rd trial in progress
Woori Bank	Claim for profit and loss settlement		21,246	1^st, 2^nd trial ruled against the Bank
Dongbu Corporation	Claim for objection of request (participation to support)		19,658	1^st trial in progress
Export-Import Bank of Korea	Claim for undue benefit		9,797	1^sttrial ruled in favor of the Bank, 2^nd trial in progress
KAMCO 1st JV Securitization Specialty Co., Ltd.	Claim for transaction amount (counterclaim)		7,000	1^st, 2^nd trial ruled partially in favor of the Bank; 3^rdtrial in progress

101

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

22. Provisions, Continued


	December 31, 2021
	Contents	Amounts		Status of lawsuit
Plaintiff:
Korea Trade Insurance Corporation and one other	Claim for guarantee insurance	W	136,538	1^sttrial ruled against the Bank; 2^ndtrial in progress
KAMCO 1st JV Securitization Specialty Co., Ltd.	Transfer of claim		8,792	1^sttrial ruled partially in favor of the Bank; 2^ndtrial in progress
Hana Bank and 6 others	Claim for undue benefit		1,647	1^st trial in progress
Kappa Korea and one other	Claim for loans		1,000	1^st trial in progress

Defendant:
Shinhan Bank and one other	Claim for damages		58,474	1^st trial in progress
Dongbu Corporation	Claim for nullity of table of rehabilitation creditor		33,997	1^st trial ruled in favor of the Bank; 2^nd trial ruled against the Bank; 3^rd trial in progress
Dongbu Corporation	Claim for objection of request (participation to support)		19,658	1^st trial in progress
Hana Bank	Claim for settlement money and others		7,500	1^st, 2^nd trial ruled in favor of the Bank; 3^rd trial in progress
KAMCO 1st JV Securitization Specialty Co., Ltd.	Claim for transaction amount		7,000	1^st trial ruled partially in favor of the Bank

(9)	Other provision

The Bank recognised other provision as a reserve for other miscellaneous purpose.

102

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

23. Other Liabilities

(1)	Other liabilities as of December 31, 2022 and 2021 are as follows:


	December 31, 2022			December 31, 2021
Accounts payable	W	2,740,749			3,418,503
Lease liabilities		167,070			157,111
Accrued expense		1,863,498			1,444,423
Unearned income		115,598			39,182
Deposits withholding tax		43,823			24,111
Guarantee money received		832,614			173,264
Foreign exchanges payable		40,557			77,692
Domestic exchanges payable		242,266			617,446
Borrowing from trust accounts		755,127			1,049,712
Financial guarantee liability		28,886			23,093
Others		254,627			113,396

		7,084,815			7,137,933
Present value discount		(91,134	)		(45,037	)

	W	6,993,681			7,092,896

The carrying amount of financial liabilities included in other liabilities above amounted toW6,717,731 million andW6,817,630 million as of December 31, 2022 and 2021, respectively, and their fair value amounted toW6,704,736 million andW6,807,462 million as of December 31, 2022 and 2021, respectively.

(2)	Details of lease liabilities as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Face value		Discount			Carrying amounts
Real estate	W	162,676		(89,084	)		73,592
Vehicles		4,321		(411	)		3,910
Others		73		(3	)		70

	W	167,070		(89,498	)		77,572


	December 31, 2021
	Face value		Discount			Carrying amounts
Real estate	W	153,420		(42,796	)		110,624
Vehicles		3,691		(432	)		3,259

	W	157,111		(43,228	)		113,883

103

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

23. Other Liabilities, Continued

(3)	The amount related to lease recognized in profit or loss for the years ended December 31, 2022 and 2021 are as follows:


	2022		2021
Depreciation of right-of-use assets	W
Real estate		31,274		27,208
Vehicles		2,287		2,087
Others		11		4

		33,572		29,299
Interest expenses on the lease liabilities		1,561		483
Expense relating to leases of low-value assets		8,427		7,988

	W	43,560		37,770

(4)	Cash flows used in lease liabilities for the years ended December 31, 2022 and 2021 are as follows:


	2022		2021
Decrease in lease liabilities	W	27,893		25,020
Lease payments relating to leases of low-value assets		8,427		7,988

	W	36,320		33,008

(5)	Maturity analysis of undiscounted lease payments relating to lease liabilities as of December 31, 2022 and 2021 are as follows:

December 31, 2022

Within
3 months

3 months
~ 1 year

1 year ~
5 years

Over
5 years

Total

Lease payments

12,931

36,044

103,576

14,519

167,070

December 31, 2021

Within
3 months

3 months
~ 1 year

1 year ~
5 years

Over
5 years

Total

Lease payments

7,950

18,555

116,780

13,826

157,111

24. Equity

(1) Issued capital

The Bank is authorized to issue up to 6,000 million shares of common stock and has 4,630,311,768 shares issued and 4,377,311,768 shares issued as of December 31, 2022 and 2021, respectively, and outstanding with a total par value (W 5,000 of par value per share) ofW23,151,559 million andW21,886,559 million as of December 31, 2022 and 2021, respectively.

104

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

24. Equity, Continued

(2) Capital surplus

Capital surplus as of December 31, 2022 and 2021 are as follows:


	December 31, 2022		December 31, 2021
Paid-in capital in excess of par value	W	40,442		44,142
Surplus from capital reduction(*1)		44,373		44,373
Other capital surplus(*2)		2,390,495		2,390,495

	W	2,475,310		2,479,010

(*1)	The Bank reducedW5,178,600 million of its issued capital in 1998 and 2000 to offset its accumulated deficit amounting toW5,134,227 million. As the result of the capital reduction,W44,373 million of surplus exceeding accumulated deficit was recorded in capital surplus in equity.

(*2)	The difference in the amount of shares issued and the carrying value of net asset acquired occurring from the merger of the Bank with KDB Financial Group Inc. and Korea Finance Corporation are recognized as other capital surplus.

(3) Accumulated other comprehensive income

(i)	Accumulated other comprehensive income as of December 31, 2022 and 2021 are as follows:


	December 31, 2022			December 31, 2021
Net gain on securities measured at FVOCI
Valuation gain on securities measured at FVOCI (before tax)	W	3,393,442			6,399,029
Loss allowance for securities measured at FVOCI (before tax)		86,178			86,449
Income tax effect		(922,099	)		(1,783,506	)

		2,557,521			4,701,972
Exchange differences on translation of foreign operations:
Exchange differences on translation of foreign operations (before tax)		132,126			39,000
Income tax effect		—			—

		132,126			39,000
Valuation gain on cash flow hedge:
Valuation gain on cash flow hedge (before tax)		7,241			1,930
Income tax effect		(1,919	)		(531	)

		5,322			1,399
Net gain (loss) on hedges of net investments in foreign operations:
Net gain (loss) on hedges of net investments in foreign operations (before tax)		(96,874	)		(29,120	)
Income tax effect		25,672			8,008

		(71,202	)		(21,112	)
Remeasurements of defined benefit liabilities:
Remeasurements of defined benefit liabilities (before tax)		142,678			71,362
Income tax effect		(37,808	)		(19,623	)

		104,870			51,739
Fair value changes on financial liabilities designated at fair value due to credit risk:
Valuation gain (loss) on financial liabilities designated at fair value due to credit risk (before tax)		123,398			657
Income tax effect		(32,702	)		(181	)

		90,696			476

	W	2,819,333			4,773,474

105

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

24. Equity, Continued

(ii)	Changes in accumulated other comprehensive income for the years ended December 31, 2022 and 2021 are as follows:


	2022
	January 1, 2022			Increase (Decrease)			Tax Effect			December 31, 2022
Gain on securities measured at FVOCI	W	4,701,972			(3,005,858	)		861,407			2,557,521
Exchange differences on translation of foreign operations		39,000			93,126			—			132,126
Valuation gain on cash flow hedge		1,399			5,311			(1,388	)		5,322
Net gain (loss) on hedges of net investments in foreign operations		(21,112	)		(67,754	)		17,664			(71,202	)
Remeasurements of defined benefit liabilities		51,739			71,316			(18,185	)		104,870
Valuation gain (loss) on financial liabilities designated at fair value due to credit risk		476			122,741			(32,521	)		90,696

	W	4,773,474			(2,781,118	)		826,977			2,819,333


	2021
	January 1, 2021			Increase (Decrease)			Tax Effect			December 31, 2021
Gain on securities measured at FVOCI	W	2,079,878			3,616,681			(994,587	)		4,701,972
Exchange differences on translation of foreign operations		(60,912	)		99,912			—			39,000
Valuation gain on cash flow hedge		34			1,883			(518	)		1,399
Net gain (loss) on hedges of net investments in foreign operations		35,507			(78,095	)		21,476			(21,112	)
Remeasurements of defined benefit liabilities		15,634			49,800			(13,695	)		51,739
Valuation gain (loss) on financial liabilities designated at fair value due to credit risk		(5,770	)		8,616			(2,370	)		476

	W	2,064,371			3,698,797			(989,694	)		4,773,474

(4) Retained earnings

In accordance with the Korea Development Bank Act, the Bank is required to appropriate at least 40% of net income as a legal reserve. This reserve can be transferred to paid-in capital or offset an accumulated deficit.

106

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

24. Equity, Continued

(i)	Retained earnings as of December 31, 2022 and 2021 are as follows:


	December 31, 2022		December 31, 2021
Legal reserve	W	2,535,892		1,551,154
Voluntary reserve
Regulatory reserve for loan losses		247,252		482,885
Unappropriated retained earnings		4,439,027		5,329,775

	W	7,222,171		7,363,814

(ii)	Changes in legal reserve for the years ended December 31, 2022 and 2021 are as follows:


	2022		2021
Beginning balance	W	1,551,154		1,356,142
Transfer from retained earnings		984,738		195,012

Ending balance	W	2,535,892		1,551,154

(iii)

Changes in unappropriated retained earnings for the years ended December 31, 2022 and 2021 are as follows:


	2022			2021
Beginning balance	W	5,329,775			2,565,852
Contribution to legal reserve		(984,738	)		(195,012	)
Transfer from regulatory reserve for credit losses		235,632			663,153
Dividends		(833,089	)		(209,638	)
Reclassification of gain or loss on equity securities measured at FVOCI		226,465			43,574
Profit for the year		464,981			2,461,846

Ending balance	W	4,439,026			5,329,775

(iv)	Statements of appropriation of retained earnings for the years ended December 31, 2022 and 2021 are as follows:


	2022		2021
I. Unappropriated retained earnings:
Unappropriated retained earning carried forward from the prior year	W	3,747,580		2,824,355
Gain on disposal of securities measured at FVOCI		226,465		43,574
Profit for the year		464,981		2,461,846

		4,439,026		5,329,775
II. Transfers such as discretionary reserves
Transfer from to regulatory reserve for credit losses		35,256		235,632

		35,256		235,632
III. Appropriation of retained earnings:
Contribution to legal reserve		185,993		984,739
Dividends (W36 for 2022 andW190 for 2021 per share)		164,744		833,089

		350,737		1,817,828

IV. Unappropriated retained earnings to be carried over to subsequent year	W	4,123,545		3,747,579

107

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

24. Equity, Continued

(5) Regulatory reserve for credit losses

(i)	Regulatory reserve for credit losses as of December 31, 2022 and 2021 are as follows:


	December 31, 2022			December 31, 2021
Beginning balance	W	247,253			482,885
Planned reversal of reserve for credit losses		(35,257	)		(235,632	)

Ending balance	W	211,996			247,253

(ii)	Required reversal of regulatory reserve for credit losses and profit after adjusting regulatory reserve for loan losses for the years ended December 31, 2022 and 2021 are as follows:


	2022		2021
Profit for the year	W	464,981		2,461,846
Obligated amount of reversal of regulatory reserve for credit losses		35,257		235,632

Profit after adjusting regulatory reserve for credit losses	W	500,238		2,697,478

Earnings per share after adjusting regulatory reserve for credit losses (in won)	W	112		625

25. Net Interest Income

Net interest income for the years ended December 31, 2022 and 2021 are as follows:


	2022			2021
Interest income:
Due from banks	W	133,499			27,254
Securities measured at FVTPL		23,681			23,736
Securities measured at FVOCI		559,328			347,468
Loans measured at amortized cost		87,840			21,913
Loans measured at FVTPL		12,402			17,042
Loans measured at amortized cost		6,029,985			3,687,863

		6,846,735			4,125,276
Interest expense:
Financial liabilities measured at FVTPL		(82,977	)		(82,058	)
Deposits		(1,162,006	)		(370,202	)
Borrowings		(554,587	)		(137,662	)
Debentures		(3,303,350	)		(1,876,745	)

		(5,102,920	)		(2,466,667	)

	W	1,743,815			1,658,609

108

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

26. Net Fees and Commission Income

Net fees and commission income for the years ended December 31, 2022 and 2021 are as follows:


	2022			2021
Fees and commission income:
Loan commissions	W	141,401			120,414
Underwriting and investment consulting commissions		123,490			103,131
Brokerage and agency commissions		7,059			7,317
Trust and retirement pension plan commissions		34,240			34,561
Fees on asset management		2,049			2,502
Other fees		183,709			112,398

		491,948			380,323
Fees and commission expenses:
Brokerage and agency fees		(9,093	)		(7,635	)
Other fees		(28,946	)		(25,982	)

		(38,039	)		(33,617	)

	W	453,909			346,706

27. Dividend Income

Dividend income for the years ended December 31, 2022 and 2021 are as follows:


	2022		2021
Securities measured at FVTPL	W	297,652		218,475
Securities measured at FVOCI		171,706		112,366
Investments in subsidiaries and associates		388,144		928,804

	W	857,502		1,259,645

28. Net Gain (Loss) on Securities Measured at FVTPL

Net gain (loss) related to securities measured at FVTPL for the years ended December 31, 2022 and 2021 are as follows:


	2022			2021
Gains on securities measured at FVTPL:
Gains on sale	W	190,140			66,358
Gains on valuation		289,190			271,999

		479,330			338,357
Losses on securities measured at FVTPL:
Losses on sale		(176,304	)		(75,374	)
Losses on valuation		(342,125	)		(127,364	)
Purchase related expense		(324	)		(171	)

		(518,753	)		(202,909	)

	W	(39,423	)		135,448

109

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

29. Net Gain on Financial Liabilities Measured at FVTPL

Net gain related to financial liabilities measured at fair value through profit or loss for the years ended December 31, 2022 and 2021 are as follows:


	2022		2021
Gains on financial liabilities measured at FVTPL:
Gains on redemption	W	5,438		625
Gains on valuation		459,661		152,243

		465,099		152,868
Losses on financial liabilities measured at FVTPL:
Losses on redemption		—		(309	)
Losses on valuation		—		(2,679	)

		—		(2,988	)

	W	465,099		149,880

30. Net Loss on Securities Measured at FVOCI

Net loss related to securities measured at FVOCI for the years ended December 31, 2022 and 2021 are as follows:


	2022			2021
Gains on securities measured at FVOCI:
Gains on sale	W	6,486			14,495
Reversal of impairment losses		2,432			—

		8,918			14,495
Losses on securities measured at FVOCI:
Losses on sale		(64,798	)		(37,653	)
Impairment losses		(1,314	)		(4,763	)

		(66,112	)		(42,416	)

	W	(57,194	)		(27,921	)

110

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

31. Net Gain (Loss) on Derivatives

Net gain (loss) on derivatives for the years ended December 31, 2022 and 2021 are as follows:


	2022			2021
Net gain on trading purpose derivatives:
Gains on trading purpose derivatives:
Interest	W	5,165,418			2,485,586
Currency		17,393,137			11,370,394
Stock		7,216			13,801
Gains on adjustment of derivatives		17,241			4,336

		22,583,012			13,874,117
Losses on trading purpose derivatives:
Interest		(4,580,277	)		(2,378,834	)
Currency		(17,170,546	)		(10,910,300	)
Stock		(16,401	)		(4,194	)
Losses on adjustment of derivatives		(49,297	)		(92,276	)

		(21,816,521	)		(13,385,604	)

		766,491			488,513
Net loss on hedging purpose derivatives:
Gains on hedging purpose derivatives:
Interest		350,465			70,831
Currency		262,364			163,829
Gains on adjustment of derivatives		309			362

		613,138			235,022
Losses on hedging purpose derivatives:
Interest		(1,971,755	)		(705,149	)
Currency		(814,174	)		(717,324	)
Losses on adjustment of derivatives		(448	)		(422	)

		(2,786,377	)		(1,422,895	)

		(2,173,239	)		(1,187,873	)
Net gain on fair value hedged items:
Gains on fair value hedged items:
Gains on valuation		2,264,372			773,826
Gains on redemption		101,186			184,599

		2,365,558			958,425
Losses on fair value hedged items:
Losses on valuation		(441,181	)		(255,932	)
Losses on redemption		(396,190	)		(205,224	)

		(837,371	)		(461,156	)

		1,528,187			497,269

	W	121,439			(202,091	)

111

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

31. Net Gain (Loss) on Derivatives, Continued

Related with cash flow hedge, the Bank recognizedW267 million of loss andW152 million of gain in the statements of comprehensive income as the ineffective portion for the years ended December 31, 2022 and 2021, respectively.

32. Net Foreign Currency Transaction Gain (Loss)

Net foreign currency transaction gain (loss) for the years ended December 31, 2022 and 2021 are as follows:


	2022			2021
Net loss on foreign exchange transactions:
Gains on foreign exchange transactions	W	1,044,586			567,692
Losses on foreign exchange transactions		(1,056,155	)		(577,226	)

		(11,569	)		(9,534	)
Net gain (loss) on foreign currency translations:
Gains on foreign currency translations		14,184,182			8,839,001
Losses on foreign currency translations		(14,473,503	)		(8,675,100	)

		(289,321	)		163,901

	W	(300,890	)		154,367

33. Other Operating Income (Expense), net

Other operating income (expense) for the years ended December 31, 2022 and 2021 are as follows:


	2022			2021
Other operating income:
Gains on sale of loans	W	36,930			60,323
Gains on disposal of loans measured at FVTPL		8,100			1,860,411
Gains on valuation of loans measured at FVTPL		9,294			83,760
Gains on disposal of investments in subsidiaries and associates		9,823			90,601
Reversal of provisions		47,622			3,687
Others		21,026			16,586

		132,795			2,115,368
Other operating expenses:
Losses on sale of loans		(9,110	)		(28,298	)
Losses on disposal of loans measured at FVTPL		(8,709	)		(9,692	)
Losses on valuation of loans measured at FVTPL		(88,248	)		(4,349	)
Losses on disposal of investments in subsidiaries and associates		(4,399	)		(592	)
Increase in provisions		(159	)		(9,872	)
Insurance expenses		(91,363	)		(75,121	)
Credit guarantee fund salary		(201,730	)		(189,504	)
Educational taxes		(38,695	)		(33,842	)
Foreign security contributions		(11,256	)		(5,384	)
Others		(28,953	)		(20,098	)

		(482,622)			(376,752	)

	W	(349,827	)		1,738,616

112

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

34. Provision for Credit Losses

Provision for credit losses for the years ended December 31, 2022 and 2021 are as follows:


	2022			2021
Provision for loan loss allowance	W	410,450			855,548
Provision for (reversal of) other assets		(579	)		1,076
Provision for (reversal of) unused commitments		(256,820	)		(137,830	)
Provision for (reversal of) financial guarantee provision		(29,679	)		(5,078	)
Provision for (reversal of) payment guarantees		136,989			133,641

	W	260,361			847,357

35. General and Administrative Expenses

General and administrative expenses for the years ended December 31, 2022 and 2021 are as follows:


	2022		2021
Payroll costs:
Short-term employee benefits	W	392,968		388,800
Defined benefit costs		70,092		39,995
Defined contribution costs		9,081		7,085

		472,141		435,880
Depreciation and amortization:
Depreciation of property and equipment		71,584		70,860
Amortization of intangible assets		54,262		53,837

		125,846		124,697
Other:
Employee welfare benefits		38,684		33,955
Rent expenses		5,783		5,078
Taxes and dues		39,686		35,228
Advertising expenses		17,762		17,465
Electronic data processing expenses		86,406		83,418
Fees and charges		39,410		36,442
Others		50,653		43,583

		278,384		255,169

	W	876,371		815,746

113

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

36. Other Non-Operating Income and Expense

Other non-operating income and expense for the years ended December 31, 2022 and 2021 are as follows:


	2022			2021
Other non-operating income:
Gain on disposal of assets held for sale	W	—			3,610
Reversal of impairment loss on assets held for sale		—			27
Gain on disposal of property and equipment		1,912			2,074
Gain on disposal of intangible assets		3			—
Rental income on investment property		3,138			2,877
Others		8,853			5,942

		13,906			14,530
Other non-operating expense:
Losses of disposal of assets held for sale		—			(2	)
Impairment loss on assets held for sale		—			(258,428	)
Losses on disposal of property and equipment		(1,172	)		(592	)
Loss on disposal of intangible assets		(5	)		—
Depreciation of investment property		(2,084	)		(2,209	)
Donations		(5,578	)		(6,594	)
Others		(1,489	)		(4,554	)

		(10,328	)		(272,379	)

	W	3,578			(257,849	)

37. Income Tax Expense

(1)	Income tax expense for the years ended December 31, 2022 and 2021 are as follows:


	2022			2021
Current income tax (*)	W	35,069			312,034
Changes in income tax before the prior years		(156,122	)		(350,718	)
Changes in deferred income taxes on temporary differences		(335,728	)		2,238,422
Effect of unused tax loss		(156,618	)		—
Deferred income tax recognized directly to equity
Other comprehensive income		826,977			(989,694	)
Retained earnings		(85,900	)		(16,528	)

Income tax expense	W	127,678			1,193,516

(*)	Includes changes such as those that arise from final tax returns.

114

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

37. Income Tax Expense, Continued

(2)	Profit before income taxes and income tax expense for the years ended December 31, 2022 and 2021 are as follows:


	2022			2021
Profit before income taxes	W	592,659			3,655,362
Income taxes calculated using enacted tax rates		162,981			1,005,224
Adjustments:
Non-deductible losses and tax-free gains		(25,196	)		(45,570	)
Non-recognition effect of deferred income taxes		108,071			258,005
Net adjustments for prior years		(38,944	)		(34,694	)
Tax rate reduction effects		(94,731	)		—
Others		15,497			10,551

		(35,303	)		188,292

Income tax expense	W	127,678			1,193,516

Effective tax rate (%)		21.54			32.65

115

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

37. Income Tax Expense, Continued

(3)	Changes in temporary differences and deferred tax assets (liabilities) for the years ended December 31, 2022 and 2021 are as follows:


	2022
	January 1, *2022()**			Decrease			Increase			December 31, 2022			Deferred tax assets (liabilities)
Derivatives	W	(484,588	)		(484,588	)		1,198,740			1,198,740			317,666
Investments in subsidiaries and associates		(9,363,282	)		(164,416	)		1,168,617			(8,030,249	)		(2,863,687	)
Losses on fair value hedged items valuation		123,404			123,404			(1,797,984	)		(1,797,984	)		(476,466	)
Losses on foreign exchange translation for hedged liabilities		(162,252	)		(162,252	)		(132,878	)		(132,878	)		(35,213	)
Impairment losses on debt securities		65,933			—			—			65,933			17,472
Impairment losses on equity securities		55,831			43,931			—			11,900			3,154
Defined benefit obligation		367,092			35,937			—			331,155			87,756
Plan assets		(366,341	)		(27,677	)		(65,574	)		(404,238	)		(107,123	)
Financial assets held for trading		(50,634	)		407			(10,644	)		(61,685	)		(16,347	)
Available-for-sale financial assets		(146,364	)		—			—			(146,364	)		178
Write-off		3,461,549			2,208,028			24,555			1,278,076			332,973
Provisions		1,067,718			1,574,419			1,494,405			987,704			261,742
Property impairment losses		6,284			173			—			6,111			1,619
Dividends Receivable		13,609			—			—			13,609			3,606
Loan origination fees		(16,573	)		(16,573	)		(21,697	)		(21,697	)		(5,750	)
Gains on sales of loans		(2,396,048	)		(4,542	)		(150,102	)		(2,541,608	)		(673,526	)
Others		(674,045	)		2,043,140			1,106,100			(1,611,085	)		(469,850	)

		(8,498,707	)		5,169,391			2,813,538			(10,854,560	)		(3,621,794	)
Temporary differences from unrecognized deferred tax assets and liabilities:
Investments in subsidiaries and associates, etc.		2,512,727			—			299,860			2,812,587			—

	W	(11,011,434	)		5,169,391			3,113,398			(13,667,147	)		(3,621,794	)

Unused tax loss	W	—			—			591,011			591,011			156,618

(*)	Temporary differences as of January 1, 2022 reflected previous year’s additional tax adjustment after the financial statements were issued.

116

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

37. Income Tax Expense, Continued


	2021
	January 1, *2021 ()**			Decrease			Increase			December 31, 2021			Deferred tax assets (liabilities)
Derivatives	W	(1,478,054	)		(1,478,054	)		(484,588	)		(484,588	)		(133,262	)
Investments in subsidiaries and associates		(6,936,110	)		55,644			(2,461,274	)		(9,453,028	)		(3,248,672	)
Losses on fair value hedged items valuation		680,195			680,195			123,404			123,404			33,936
Losses on foreign exchange translation for hedged liabilities		(18,376	)		(18,376	)		(162,252	)		(162,252	)		(44,619	)
Impairment losses on debt securities		65,933			—			—			65,933			18,132
Impairment losses on equity securities		60,351			7,021			—			53,330			14,666
Defined benefit obligation		385,405			18,313			—			367,092			100,950
Plan assets		(336,831	)		(18,313	)		(24,514	)		(343,032	)		(94,334	)
Financial assets held for trading		(43,634	)		7,407			407			(50,634	)		(13,924	)
Available-for-sale financial assets		(146,364	)		—			—			(146,364	)		185
Write-off		3,443,577			277,227			293,107			3,459,457			939,146
Provisions		923,130			1,429,831			1,574,419			1,067,718			293,622
Property impairment losses		6,457			173			—			6,284			1,728
Dividends Receivable		8,365			8,365			5,245			5,245			1,442
Loan origination fees		(9,063	)		(9,063	)		(16,573	)		(16,573	)		(4,558	)
Gains on sales of loans		(63,311	)		(242	)		(2,332,979	)		(2,396,048	)		(658,913	)
Others		(825,857	)		4,672,829			1,604,388			(3,894,298	)		(1,163,047	)

		(4,284,187	)		5,632,957			(1,881,210	)		(11,798,354	)		(3,957,522	)
Temporary differences from unrecognized deferred tax assets and liabilities:
Investments in subsidiaries and associates, etc.		1,886,720			—			626,007			2,512,727			—

	W	(6,170,907	)		5,632,957			(2,507,217	)		(14,311,081	)		(3,957,522	)

(*)	Temporary differences as of January 1, 2021 reflected previous year’s additional tax adjustment after the financial statements were issued.

117

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

37. Income Tax Expense, Continued

(4)	Changes in income tax expense recognized directly to equity for the years ended December 31, 2022 and 2021 are as follows:


	2022
	December 31, 2022						January 1, 2022						Changes in tax effect
	Amounts before tax			Tax effect			Amounts before tax			Tax effect			Changes in tax effect
Net gain (loss) on securities measured at FVOCI	W	2,557,521			(922,099	)		4,701,972			(1,783,506	)		861,407
Exchange differences on translation of foreign operations		132,126			—			39,000			—			—
Net gain (loss) on valuation of cash flow hedge		5,322			(1,919	)		1,399			(531	)		(1,388	)
Net gain on hedges of net investments in foreign operations		(71,202	)		25,672			(21,112	)		8,008			17,664
Remeasurements of defined benefit liabilities		104,870			(37,808	)		51,739			(19,623	)		(18,185	)
Fair value changes on financial liabilities designated at fair value due to credit risk		90,696			(32,702	)		476			(181	)		(32,521	)

	W	2,819,333			(968,856	)		4,773,474			(1,795,833	)		826,977

Income tax benefit recognized direct to retained earnings amounting toW85,900 million is the tax effect of realized income amounting toW 312,365 million from disposal of equity securities measured at FVOCI.


	2021
	December 31, 2021						January 1, 2021						Changes in tax effect
	Amounts before tax			Tax effect			Amounts before tax			Tax effect			Changes in tax effect
Net gain (loss) on securities measured at FVOCI	W	4,701,972			(1,783,506	)		2,079,878			(788,919	)		(994,587	)
Exchange differences on translation of foreign operations		39,000			—			(60,912	)		—			—
Net gain (loss) on valuation of cash flow hedge		1,399			(531	)		34			(13	)		(518	)
Net gain on hedges of net investments in foreign operations		(21,112	)		8,008			35,507			(13,468	)		21,476
Remeasurements of defined benefit liabilities		51,739			(19,623	)		15,634			(5,928	)		(13,695	)
Fair value changes on financial liabilities designated at fair value due to credit risk		476			(181	)		(5,770	)		2,189			(2,370	)

	W	4,773,474			(1,795,833	)		2,064,371			(806,139	)		(989,694	)

Income tax benefit recognized direct to retained earnings amounting toW16,528 million is the tax effect of realized income amounting toW60,102 million from disposal of equity securities measured at FVOCI.

118

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

38. Earnings per Share

(1) Basic earnings per share

The Bank’s basic earnings per share for the years ended December 31, 2022 and 2021 are computed as follows:

(i) Basic earnings per share


	2022		2021
Profit attributable to ordinary shareholders of the Bank (A) (in won)	W	464,981,486,967		2,461,845,944,398
Weighted-average number of ordinary shares outstanding (B)		4,477,598,343		4,319,226,656

Basic earnings per share (A/B) (in won)	W	104		570

(ii) Weighted-average number of ordinary shares outstanding


	2022
	Number of ordinary shares		Days		Cumulative shares
Number of ordinary shares outstanding at the beginning of the year (A)		4,377,311,768		365		1,597,718,795,320
Increased paid-in capital (B)		78,400,000		318		24,931,200,000
Increased paid-in capital (C)		61,600,000		184		11,334,400,000
Increased paid-in capital (D)		113,000,000		3		339,000,000

Cumulative shares (D = A+B+C+D)						1,634,323,395,320

Weighted-average number of ordinary shares outstanding (D/365)						4,477,598,343


	2021
	Number of ordinary shares		Days		Cumulative shares
Number of ordinary shares outstanding at the beginning of the year (A)		4,153,145,768		365		1,515,898,205,320
Increased paid-in capital (B)		102,000,000		338		34,476,000,000
Increased paid-in capital (C)		122,166,000		214		26,143,524,000

Cumulative shares (D = A+B+C)						1,576,517,729,320

Weighted-average number of ordinary shares outstanding (D/365)						4,319,226,656

(2) Diluted earnings per share

Diluted and basic earnings per share for the years ended December 31, 2022 and 2021 are equal because there is no potential dilutive instrument.

119

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

39. Pledged Assets

Assets pledged by the Bank as collateral as of December 31, 2022 and 2021 are as follows:


	December 31, 2022				December 31, 2021
	Pledged assets		Related liabilities		Pledged assets		Related liabilities
Securities measured at FVOCI(*)	W	3,721,125		432,969		4,369,781		1,685,428
Securities measured at amortized cost(*)		3,196,592				2,455,324

	W	6,917,717		432,969		6,825,105		1,685,428

(*)	Pledged as collateral related to bonds sold under repurchase agreements and borrowings.

40. Guarantees and Commitments

Guarantees and commitments as of December 31, 2022 and 2021 are as follows:


	December 31, 2022		December 31, 2021
Confirmed acceptances and guarantees:
Acceptances in foreign currency	W	220,420		276,041
Guarantees for bond issuance		1,860,754		2,224,142
Guarantees for loans		560,129		611,091
Letter of guarantee		64,924		37,292
Guarantees for on-lending debt		4,877		6,794
Others		6,219,285		4,593,406

		8,930,389		7,748,766
Unconfirmed acceptances and guarantees:
Letter of credit		1,940,855		1,979,841
Others		5,836,016		4,224,656

		7,776,871		6,204,497
Commitments:
Commitments on loans		47,205,974		46,591,132
Others		2,020,595		2,020,595

		49,226,569		48,611,727

	W	65,933,829		62,564,990

41. Trust Accounts

(1)	Trust accounts as of December 31, 2022 and 2021 are as follows:


	December 31, 2022		December 31, 2021
Accrued trust fee	W	10,052		8,585
Borrowings from trust accounts		583,034		965,733
Accrued interest on deposits		511		686

120

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

41. Trust Accounts, Continued

(2)	Transactions with trust accounts for the years ended December 31, 2022 and 2021 are as follows:


	2022		2021
Trust management fee	W	31,223		31,729
Interest expenses of borrowings from trust accounts		17,585		7,167

(3)	The carrying amounts of principals guaranteed money trust and principals and interest guaranteed money trust as of December 31, 2022 and 2021 are as follows:


	December 31, 2022		December 31, 2021
Principals guaranteed money trust	W	224,876		236,858
Principals and interest guaranteed money trust		229,324		234,697

	W	454,200		471,555

Principal of money and property trust	W	421,623		436,299
Accrued trust profit		32,577		35,256

42. Related Party Transactions

(1)	The Bank’s related parties as of December 31, 2022 are as follows:


Classification		Corporate name
Subsidiaries		KDB Capital Corporation, Daewoo Shipbuilding & Marine Engineering Co., Ltd., KDB Infrastructure Investment Asset Management Co., Ltd., KDB Asia Ltd., KDB Ireland Ltd., KDB Bank Europe Ltd., Banco KDB Do Brazil S.A., KDB Bank Uzbekistan, PT KDB Tifa Finance Tbk and 7 others, KDB Investment PEF No. 2, KDB Consus Value PEF, KDB Small Medium Mezzanine PEF and 7 others, Principals guaranteed trust accounts of KDB, Principals and interests guaranteed interest trust accounts of KDB, KDB ESG 1ST INC. and 12 others, KIAMCO Road Investment Private Fund Special Asset Trust 2 and 17 others
Associates		Korea Electric Power Co., Ltd., Korea Tourism Organization, Korea Real Estate Board, GM Korea Company, HMM Co., Ltd., HANJIN KAL, Korean Air Lines Co., Ltd., Korea Ocean Business Corporation and 14 others, Keistone Value Investment 2nd Private Equity Fund and 99 others, Hana K-New Deal Unicorn Fund and 112 others
Others		Key management personnel

121

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

42. Related Party Transactions, Continued

(2)	Significant balances with related parties as of December 31, 2022 and 2021 are as follows:


	Account	December 31, 2022			December 31, 2021
Subsidiaries:
KDB Capital Corporation	Loans	W	1,924			74,158
	Allowance for loan losses		(1	)		(36	)
	Derivative financial assets		1,305			1,463
	Other assets		2			4
	Deposits		100,255			447
	Other liabilities		35,408			35,539
KDB Infrastructure Investment Asset Management Co., Ltd.	Deposits		606			9,028
	Other liabilities		1			34
KDB Ireland Ltd.	Loans		753,188			543,636
	Allowance for loan losses		(241	)		(158	)
	Derivative financial assets		18			5,141
	Other assets		3,138			114
	Derivative financial liabilities		19,778			1,510
KDB Bank Europe Ltd.	Cash and due from banks		365,513			353,575
	Loans		40,536			—
	Allowance for loan losses		(13	)		—
	Derivative financial assets		—			2,202
	Other assets		2,854			—
	Derivative financial liabilities		501			—
	Other liabilities		—			1,872
Banco KDB Do Brazil S.A.	Cash and due from banks		87,444			59,275
	Loans		234,451			210,426
	Allowance for loan losses		(75	)		(78	)
	Other assets		2,802			317
	Allowance of other assets		(1	)		—
PT KDB Tifa Finance Tbk	Loans		25,346			23,710
	Allowance for loan losses		(8	)		(7	)
	Other assets		92			12
KDB Silicon Valley LLC	Deposits		107,721			86,542
	Other liabilities		321			20
KDB Asia Ltd.	Cash and due from banks		1,346,583			1,344,965
	Loans		228,114			450,474
	Allowance for loan losses		(73	)		(130	)
	Derivative financial assets		25			26
	Other assets		8,872			1,237
	Allowance of other assets		(1	)		—
	Deposits		2			2
	Borrowings		32,967			43,707
	Derivative financial liabilities		14,551			2,408
	Other liabilities		146			167

122

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

42. Related Party Transactions, Continued


	Account	December 31, 2022			December 31, 2021
KDB Investment PEF No.1	Loans	W	—			600,000
	Allowance for loan losses		—			(2,554	)
	Derivative financial assets		—			800
	Other assets		—			8,758
	Allowance of other assets		—			(32	)
	Deposits		—			215,203
	Derivative financial liabilities		—			3,550
	Other liabilities		—			140
	Other provisions		—			1,630
KDB Consus Value PEF	Securities		18,494			40,101
	Derivative financial assets		13,564			8,633
	Other assets		149			345
	Deposits		139			62
	Derivative financial liabilities		8,302			1,083
	Other liabilities		708			702
Daewoo Shipbuilding & Marine Engineering Co., Ltd.	Loans		1,549,024			1,432,973
	Allowance for loan losses		(821,394	)		(599,475	)
	Derivative financial assets		460,879			194,696
	Other assets		10,650			1,488
	Deposits		169,965			473,357
	Derivative financial liabilities		18			2,731
	Other liabilities		13,144			30,802
	Other provisions		786,164			781,272
Corporate Liquidity Assistance Agency Co., Ltd.	Loans		440,000			440,000
	Allowance for loan losses		(152	)		(142	)
	Other assets		44,544			24,331
	Allowance of other assets		(15	)		(8	)
	Deposits		444,924			610,416
	Other liabilities		507			190
	Other provisions		144			135
Others	Loans		1,336,253			1,015,470
	Allowance for loan losses		(141,003	)		(432,829	)
	Derivative financial assets		5,473			10,697
	Other assets		3,105			11,853
	Allowance of other assets		(344	)		(5,384	)
	Deposits		136,609			93,295
	Borrowings		44,553			95,565
	Derivative financial liabilities		850			205
	Other liabilities		6,078			16,927
	Other provisions		3,728			246,239

123

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

42. Related Party Transactions, Continued


	Account	December 31, 2022			December 31, 2021
Associates:
Korea Electric Power Co., Ltd.	Securities	W	177,317			10,759
	Loans		227,477			236,223
	Allowances for loan losses		(1,151	)		(1,428	)
	Derivative financial assets		92,381			2,409
	Other assets		4,409			2,074
	Deposits		23,196			400,963
	Borrowings		2,253			2,649
	Derivative financial liabilities		223,611			149,969
	Other liabilities		57,487			3,434
	Other provisions		59			12
KG Dongbu Steel Co., Ltd.	Loans		—			783,695
	Allowances for loan losses		—			(4,093	)
	Other assets		—			375
	Deposits		—			12,294
	Other liabilities		—			76
	Other provisions		—			682
HMM Co., Ltd.	Securities		5,233,622			7,315,547
	Loans		164,292			202,509
	Allowances for loan losses		(2,243	)		(30,614	)
	Other assets		7,123			7,236
	Deposits		509,920			1,876,483
	Other liabilities		10,468			9,145
HANJIN KAL	Loans		373,445			449,252
	Other assets		481			518
	Deposits		70,000			—
	Other liabilities		1,050			—
Korean Air Lines Co., Ltd.	Loans		1,189,100			—
	Allowances for loan losses		(8,798	)		—
	Other assets		11,989			—
	Deposits		1,716,833			—
	Other liabilities		23,075			—
	Derivative financial liabilities		73,131			—
Korea Ocean Business Corporation	Loans		—			15,237
	Allowances for loan losses		—			(2	)
	Other assets		—			16
	Deposits		25,000			40,000
	Other liabilities		386			237
Others	Securities		—			1,454
	Loans		209,978			445,904
	Allowances for loan losses		(480	)		(8,250	)

124

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

42. Related Party Transactions, Continued


Account	December 31, 2022		December 31, 2021
Other assets	W	6,472		6,900
Deposits		323,333		470,808
Other liabilities		2,215		2,307
Other provisions		46		76,500

(*1)	Daewoo Engineering & Construction Co., Ltd. that was the subsidiary of KDB Investment PEF No.1 is disposed and is excluded from the Bank’s related parties for the year ended December 31, 2022.

(*2)	KG Dongbu Steel Co., Ltd. is excluded from the Bank’s related parties due to the disposal of shares for the year ended December 31, 2022.

(3)	Significant profit or loss with related parties for the years ended December 31, 2022 and 2021 are as follows:


	Account	2022			2021
Subsidiaries:
KDB Capital Corporation	Interest income	W	305			92
	Dividend income		69,766			27,956
	Reversal of allowance for loan losses		35			—
	Fees and commission income, other income		5,418			6,018
	Interest expenses		(1,058	)		(417	)
	Provision for loan losses		—			(33	)
	Other operating expenses		(119	)		(513	)
KDB Infrastructure Investments Asset Management Co., Ltd.	Dividend income		13,499			9,089
	Interest expenses		(106	)		(121	)
KDB Ireland Ltd.	Interest income		12,111			1,186
	Fees and commission income, other income		4,626			5,176
	Interest expenses		(1	)		(1	)
	Provision for loan losses		(74	)		(57	)
	Other operating expenses		(26,771	)		(8,028	)
KDB Bank Europe Ltd.	Interest income		5,846			712
	Fees and commission income, other income		183			2,760
	Interest expenses		(4	)		(1	)
	Provision for loan losses		(13	)		—
	Other operating expenses		(6,900	)		(596	)

125

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

42. Related Party Transactions, Continued


	Account	2022			2021
Banco KDB Do Brazil S.A.	Interest income	W	5,133			1,016
	Reversal of allowance for loan losses		8			—
	Provision for loan losses		—			(45	)
	Other operating expenses		(1	)		—
PT KDB Tifa Finance Tbk	Interest income		576			160
	Provision for loan losses		(1	)		(1	)
KDB Silicon Valley LLC	Fees and commission income, other income		384			—
	Interest expenses		(2,648	)		(22	)
KDB Asia Ltd.	Interest income		36,144			8,258
	Reversal of allowance for loan losses		63			—
	Fees and commission income, other income		830			2,386
	Interest expenses		(821	)		(426	)
	Provision for loan losses		—			(57	)
	Other operating expenses		(14,167	)		(6,412	)
KDB Investment PEF No.1	Interest income		2,926			22,780
	Fees and commission income, other income		2,949			2,567
	Interest expenses		(230	)		(230	)
	Other operating expenses		—			(4,805	)
KDB Consus Value PEF	Interest income		1,404			1,600
	Fees and commission income, other income		34,354			21,087
	Interest expenses		(7	)		(6	)
	Other operating expenses		(11,114	)		(1,094	)
Daewoo Shipbuilding & Marine Engineering Co., Ltd.	Interest income		55,968			21,470
	Fees and commission income, other income		1,101,411			696,230
	Interest expenses		(4,732	)		(4,988	)
	Provision for loan losses		(195,154	)		(117,849	)
	Other operating expenses		(527,175	)		(247,919	)
Corporate Liquidity Assistance Agency Co., Ltd.	Interest income		20,212			19,880
	Fees and commission income, other income		—			33
	Interest expenses		(7,752	)		(7,226	)
	Provision for loan losses		(10	)		(78	)
	Other operating expenses		(16	)		(7	)
Others	Interest income		40,171			44,048
	Dividend income		58,996			74,548
	Reversal of allowance for loan losses		253,724			72,674

126

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

42. Related Party Transactions, Continued


	Account	2022			2021
	Fees and commission income, other income	W	222,300			195,228
	Interest expenses		(2,631	)		(639	)
	Provision for loan losses		(382,807	)		(118,800	)
	Other operating expenses		(184,219	)		(216,888	)
Associates:
Korea Electric Power Co., Ltd.	Interest income		12,096			2,994
	Dividend income		—			256,862
	Reversal of allowance for loan losses		379			351
	Fees and commission income, other income		136,288			19,298
	Interest expenses		(3,357	)		(1,006	)
	Other operating expenses		(208,915	)		(254,043	)
KG Dongbu Steel Co., Ltd.	Interest income		—			11,889
	Dividend income		—			1,101
	Reversal of allowance for loan losses		—			51,228
	Fees and commission income, other income		—			27,840
	Interest expenses		—			(13	)
	Other operating expenses		—			(10,866	)
HMM Co., Ltd.	Interest income		42,406			43,330
	Dividend income		60,720			—
	Reversal of allowance for loan losses		28,372			62,402
	Fees and commission income, other income		19,561			1,830,596
	Interest expenses		(7,724	)		(3,377	)
	Other operating expenses		(192,015	)		(85,660	)
Hanjin Heavy Industries & Construction Co., Ltd. (*)	Interest income		—			2,962
	Fees and commission income, other income		—			133,190
	Interest expenses		—			(177	)
	Provision for loan losses		—			(3,514	)
	Other operating expenses		—			(2,930	)
HANJIN KAL	Interest income		6,713			7,012
	Fees and commission income, other income		15			58,399
	Interest expenses		(1,184	)		—
	Other operating expenses		(75,807	)		—
Korean Air Lines Co., Ltd.	Interest income		44,609			—
	Reversal of allowance for loan losses		13,348			—
	Fees and commission income, other income		62,228			—

127

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

42. Related Party Transactions, Continued


	Account	2022			2021
	Interest expenses	W	(41,878	)		—
	Other operating expenses		(144,436	)		—
Korea Ocean Business Corporation	Interest income		343			213
	Reversal of allowance for loan losses		2			—
	Fees and commission income, other income		2,907			1,338
	Interest expenses		(266	)		(237	)
Others	Interest income		6,738			20,066
	Dividend income		218,852			606,017
	Reversal of allowance for loan losses		4			348,053
	Fees and commission income, other income		5,639			23,393
	Interest expenses		(6,422	)		(2,332	)
	Provision for loan losses		(129	)		(641	)
	Other operating expenses		(329	)		(31,566	)

(*)	The amounts are profit or loss recognized until the Hanjin Heavy Industries & Construction Co., Ltd. was excluded from the related parties due to the Bank’s sale of shares for the year ended December 31, 2021.

128

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

42. Related Party Transactions, Continued

(4)	Details of guarantees and commitments to the related parties as of December 31, 2022 and 2021 are as follows:


	Account	December 31, 2022		December 31, 2021
Subsidiaries:
KDB Capital Corporation	Commitments	W	500,000		250,000
KDB Investment PEF No.1	Unconfirmed acceptances and guarantees		—		4,386
	Commitments		—		413,874
Daewoo Shipbuilding & Marine Engineering Co., Ltd.	Confirmed acceptances and guarantees		2,560,260		1,457,948
	Unconfirmed acceptances and guarantees		2,781,317		1,818,741
	Commitments		2,337,089		4,047,436
Corporate Liquidity Assistance Agency Co., Ltd.	Commitments		560,000		560,000
Others	Confirmed acceptances and guarantees		—		464,349
	Unconfirmed acceptances and guarantees		5,885		192,627
	Commitments		85,625		501,800
Associates:
KG Dongbu Steel Co., Ltd. (*)	Unconfirmed acceptances and guarantees		—		32,487
	Commitments		—		186,021
Korean Air Lines Co., Ltd.	Confirmed acceptances and guarantees		177,367		—
Others	Commitments		426,085		221,182

		W	9,433,628		10,150,851

(*)	KG Dongbu Steel Co., Ltd. is excluded from the Bank’s related parties due to the disposal of shares for the year ended December 31, 2021.

(5)	Details of compensation to key management personnel for the years ended December 31, 2022 and 2021 are as follows:


	2022		2021
Short-term employee benefits	W	1,166		1,213
Post-employment benefits		30		33

	W	1,196		1,246

(6)	The Bank are not pledged any assets as collaterals to the related parties and from the related parties as of December 31, 2022 and 2021.

129

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

43. Statements of Cash Flows

(1)	Cash and cash equivalents in the statements of cash flows as of December 31, 2022 and 2021 are as follows:


	December 31, 2022			December 31, 2021
Cash and due from banks:
Cash and foreign currencies	W	70,525			55,083
Due from banks in Korean won		3,931,203			6,007,684
Due from banks in foreign currencies / off-shores		7,537,078			5,913,000

		11,538,806			11,975,767
Less: Restricted due from banks, others		(4,450,242	)		(3,409,429	)
Add: Financial instruments reaching maturity within three months from date of acquisition
Securities measured at FVTPL
Government and public bonds		39,903			—
Loans measured at amortized cost:
Call-loans		2,249,447			653,340
Inter-bank loans		2,494,555			233,898

		4,744,002			887,238

	W	11,872,469			9,453,576

(2)	Significant transactions not involving cash flows for the years ended December 31, 2022 and 2021 are as follows:


	2022			2021
Decrease in loans due to write-offs	W	85,067			33,671
Increase in securities measured at FVOCI due to debt-to-equity swap, etc		13,505			146,183
Increase in investments in subsidiaries and associates due to debt-to-equity swap, etc.		—			2,658,000
Increase (decrease) in accumulated other comprehensive income due to securities valuation		(3,005,858	)		3,616,681
Deferred income tax effect due to securities valuation		861,407			(994,587	)
Reclassification of investments in subsidiaries and associates to assets held for sale		(1,371,052	)		—
Reclassification from investments in subsidiaries and associates to securities measured at FVOCI		19,125			—
Transfer from property and equipment to investment property		937			4,004
Recognition of right-of-use assets and lease liabilities		62,099			115,586
In-kind equity		565,000			—

130

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

44. Transfers of Financial Instruments

Details of financial assets and liabilities related to repurchase agreements and loaned securities sold and loaned debt securities that do not qualify for derecognition as of December 31, 2022 and 2021 are as follows:


	December 31, 2022				December 31, 2021
Characteristics of transactions	Carrying amounts for transferred assets		Carrying amounts for related liabilities		Carrying amounts for transferred assets		Carrying amounts for related liabilities
Repurchase agreements	W	2,373,401		57,619		3,349,080		1,307,268
Loaned securities		—		—		417,640		—

	W	2,373,401		57,619		3,766,720		1,307,268

45. Fair Value of Financial Assets and Liabilities

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

•

Level 1: Financial instruments measured at quoted prices from active markets are classified as level 1.

•

Level 2: Financial instruments measured using valuation techniques where all significant inputs are observable market data are classified as level 2.

•

Level 3: Financial instruments measured using valuation techniques where one or more significant inputs are not based on observable market data are classified as level 3.

(1) Fair value hierarchy of financial instruments measured at fair value

(i)

The fair value hierarchy of financial instruments measured at fair value as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Financial assets:
Securities measured at FVTPL	W	623,264		718,103		10,610,539		11,951,906
Securities measured at FVOCI		2,929,043		18,531,804		16,224,072		37,684,919
Loans measured at FVTPL		—		—		541,811		541,811
Derivative financial assets		—		9,781,693		12,762		9,794,455

	W	3,552,307		29,031,600		27,389,184		59,973,091

Financial liabilities:
Financial liabilities measured at FVTPL	W	—		1,469,724		—		1,469,724
Derivative financial liabilities		34		11,276,609		40,359		11,317,002

	W	34		12,746,333		40,359		12,786,726

131

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

45. Fair Value of Financial Assets and Liabilities, Continued


	December 31, 2021
	Level 1		Level 2		Level 3		Total
Financial assets:
Securities measured at FVTPL	W	606,008		1,348,367		7,864,436		9,818,811
Securities measured at FVOCI		1,819,791		17,419,641		18,635,704		37,875,136
Loans measured at FVTPL		—		—		644,412		644,412
Derivative financial assets		1		5,295,504		10,067		5,305,572

	W	2,425,800		24,063,512		27,154,619		53,643,931

Financial liabilities:
Financial liabilities measured at FVTPL	W	—		2,067,144		—		2,067,144
Derivative financial liabilities		2		4,746,616		11,223		4,757,841

	W	2		6,813,760		11,223		6,824,985

(ii)

Changes in the fair value of level 3 financial instruments for the years ended December 31, 2022 and 2021 are as follows:


	2022
	Financial assets															Financial liabilities
	Securities measured at FVTPL			Securities measured at FVOCI			Loans measured at FVTPL			Derivative financial assets			Total			Derivative financial liabilities
January 1, 2022	W	7,864,436			18,635,704			644,412			10,067			27,154,619			11,223
Profit or loss		118,898			—			(78,954	)		5,295			45,239			29,136
Other comprehensive income		—			(2,321,954	)		—			—			(2,321,954	)		—
Acquisition / Issue		2,981,856			1,364,206			50,950			—			4,397,012			—
Sale / Settlement		(360,003	)		(853,910	)		(74,597	)		(2,600	)		(1,291,110	)		—
Transfer out(*)		—			(599,974	)		—			—			(599,974	)		—
Transfer in(*)		5,352			—			—			—			5,352			—

December 31, 2022	W	10,610,539			16,224,072			541,811			12,762			27,389,184			40,359

132

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

45. Fair Value of Financial Assets and Liabilities, Continued


	2021
	Financial assets															Financial liabilities
	Securities measured at FVTPL			Securities measured at FVOCI			Loans measured at FVTPL			Derivative financial assets			Total			Derivative financial liabilities
January 1, 2021	W	6,232,064			14,634,541			1,434,514			8,214			22,309,333			6,451
Profit or loss		172,327			—			79,411			8,547			260,285			4,772
Other comprehensive income		—			3,691,901			—			—			3,691,901			—
Acquisition / Issue		1,857,647			494,015			52,450			—			2,404,112			—
Sale / Settlement		(397,602	)		(157,861	)		(921,963	)		(6,694	)		(1,484,120	)		—
Transfer out(*)		—			(26,892	)		—			—			(26,892	)		—
Transfer in(*)		—			—			—			—			—			—

December 31, 2021	W	7,864,436			18,635,704			644,412			10,067			27,154,619			11,223

(*)	When significant inputs become observable market data, the financial instruments are transferred to (from) other levels.

(iii)

Changes in deferred day one profit or loss for the years ended December 31, 2022 and 2021 are as follows:


	2022			2021
Beginning balance	W	3,989			4,375
Amortization		(385	)		(386	)

Ending balance	W	3,604			3,989

(iv)	Details of valuation technique and inputs used in the fair value measurement categorized within level 2 of the fair value hierarchy of financial instruments measured at fair value as of December 31, 2022 and 2021 are as follows:


	Valuation technique	Input
Securities measured at FVTPL
Equity securities	Net asset value approach	Underlying asset price
Debt securities	Discounted cash flow method	Discount rate
Securities measured at FVOCI
Equity securities	Net asset value approach	Underlying asset price
Debt securities	Discounted cash flow method	Discount rate
Derivatives financial assets:
Interest rate swaps	Discounted cash flow method, Black-Scholes model, Modified Black model, Formula model	Discount rate, exchange rate, volatility, commodity index, etc.
Currency forwards and swaps
Currency options
Commodities options
Financial liabilities measured at FVTPL:
Debentures	Discounted cash flow method	Discount rate

133

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

45. Fair Value of Financial Assets and Liabilities, Continued

(v)	Details of valuation technique and quantitative information about unobservable inputs used in the fair value measurement categorized within level 3 of the fair value hierarchy of financial instruments measured at fair value as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Valuation technique	Unobservable input	Range (%)
Securities measured at FVTPL
Equity securities	Discounted cash flow	Discount rate	6.35 ~ 41.31
	method, Relative value	Rate of increase in	—
	approach, Net asset	property disposal price
	value approach, etc.	Rate of increase in	—
		liquidation value
		Volatility	16.89 ~ 44.54
Securities measured at FVOCI
Equity securities	Discounted cash flow	Growth rate	—
	method, Relative value	Discount rate	9.08 ~ 18.51
	approach, Net asset	Volatility	16.52 ~ 46.53
	value approach, etc.
Loans measured at FVTPL
Convertible bonds, etc.	LSMC, Binomial model	Volatility	16.89 ~ 44.54
Derivatives financial assets
Interest rate swaps	Discounted cash flow	Volatility	80.87 ~ 102.80
		Correlation coefficient	0.87 ~ 0.95
Interest rate options	Modified Black model	Volatility	80.87 ~ 102.80
Stock index options	Black-Scholes model	Volatility	8.70 ~ 72.20

134

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

45. Fair Value of Financial Assets and Liabilities, Continued


	December 31, 2021
	Valuation technique	Unobservable input	Range (%)
Securities measured at FVTPL
Equity securities	Discounted cash flow	Discount rate	6.52 ~ 13.22
	method, Relative value	Rate of increase in	—
	approach, Net asset	property disposal price
	value approach, etc.	Rate of increase in	—
		liquidation value
		Volatility	17.89 ~ 41.50
Securities measured at FVOCI
Equity securities	Discounted cash flow	Growth rate	—
	method, Relative value	Discount rate	7.70 ~17.56
	approach, Net asset	Volatility	19.48 ~ 33.20
	value approach
Loans measured at FVTPL
Convertible bonds, etc.	LSMC, Binomial model	Volatility	17.89 ~ 34.16
Derivatives financial assets
Interest rate swaps	Discounted cash flow	Volatility	38.23 ~ 49.07
		Correlation coefficient	0.43 ~ 0.87
Interest rate options	Modified Black model	Volatility	38.23 ~ 49.07
Stock index options	Black-Scholes model	Volatility	5.40 ~ 71.40
Equity options	Discounted cash flow	Volatility	18.87 ~ 25.49
	method and others

(vi)	The sensitivity analysis on changes in unobservable inputs for financial instruments categorized within level 3 of the fair value hierarchy of financial instruments measured at fair value as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Profit(loss) for the year					Other comprehensive income(loss)
	Favorable change		Unfavorable change			Favorable change		Unfavorable change
Securities measured at FVTPL (*1)	W	50,112		(47,080	)		—		—
Securities measured at FVOCI (*1)		—		—			36,873		(29,480	)
Loans measured at FVTPL (*2)		10,372		(9,957	)		—		—
Derivative financial assets (*2)		218		(217	)		—		—

	W	60,702		(57,254	)		36,873		(29,480	)

135

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

45. Fair Value of Financial Assets and Liabilities, Continued


	December 31, 2021
	Profit(loss) for the year					Other comprehensive income(loss)
	Favorable change		Unfavorable change			Favorable change		Unfavorable change
Securities measured at FVTPL (*1)	W	8,690		(6,723	)		—		—
Securities measured at FVOCI (*1)		—		—			43,861		(31,587	)
Loans measured at FVTPL (*2)		9,041		(8,029	)		—		—
Derivative financial assets (*2)		3,745		(3,728	)		—		—

	W	21,476		(18,480	)		43,861		(31,587	)

(*1)

Sensitivity amounts of equity securities are calculated by increasing and decreasing the correlations between the discount rates and the growth rates (0~1%) or the rate of increase in liquidation value (-1~1%) which are significant unobservable inputs. Sensitivity amounts for beneficiary certificates are calculated by increasing and decreasing the correlations between the discount rate of rent cash flow (-1~1%) and the rate of increase in property disposal price (-1~1%), only when they consist of real properties. Other than that, it is difficult to measure the sensitivity amounts of beneficiary certificates for practical reasons. Also, for financial instruments categorized within level 3 in 2022 and 2021,W18,704,023 million andW17,718,595 million, respectively, are excluded from the sensitivity disclosure because it is impossible to calculate the sensitivity due to changes in unobservable variables for practical reasons.

(*2)	Sensitivity amounts of loans measured at FVTPL and derivatives financial instruments are calculated by increasing and decreasing the correlation coefficient and volatility (-10~10%) which are significant unobservable inputs.

(2)	Fair value hierarchy of financial instruments measured at amortized cost

(i)	The Bank’s policies for measuring fair value of financial instruments at amortized costs are as follows:

Securities measured at amortized cost: The fair value of securities measured at amortized cost is computed by widely-accepted appraisal agencies upon request.

136

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

45. Fair Value of Financial Assets and Liabilities, Continued

Debentures: The fair value of industrial financial debentures is computed using the discounted cash flow method by the Bank’s Fair Value Evaluation System.

(ii)	The fair value hierarchy of financial instruments measured at amortized cost as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks (*)	W	7,088,563		4,450,243		—		11,538,806
Securities measured at amortized cost		2,964,285		3,391,599		—		6,355,884
Loans measured at amortized cost (*)		—		2,249,447		194,990,235		197,239,682
Other financial assets (*)		—		6,344,790		1,329,534		7,674,324

	W	10,052,848		16,436,079		196,319,769		222,808,696

Financial liabilities:
Deposits (*)	W	—		2,271,579		65,998,390		68,269,969
Borrowings (*)		—		1,395,037		23,872,311		25,267,348
Debentures		—		158,228,192		—		158,228,192
Other financial liabilities (*)		—		2,836,258		3,868,478		6,704,736

	W	—		164,731,066		93,739,179		258,470,245


	December 31, 2021
	Level 1		Level 2		Level 3		Total
Financial assets:
Cash and due from banks (*)	W	8,566,338		3,409,429		—		11,975,767
Securities measured at amortized cost		1,437,496		1,531,381		—		2,968,877
Loans measured at amortized cost (*)		—		653,340		170,486,002		171,139,342
Other financial assets (*)		—		5,097,270		738,178		5,835,448

	W	10,003,834		10,691,420		171,224,180		191,919,434

Financial liabilities:
Deposits (*)	W	—		2,294,155		50,441,274		52,735,429
Borrowings (*)		—		861,402		21,183,763		22,045,165
Debentures		—		146,446,618		—		146,446,618
Other financial liabilities (*)		—		3,920,770		2,886,692		6,807,462

	W	—		153,522,945		74,511,729		228,034,674

(*)	For financial instruments categorized as level 2, the carrying amount is considered as a reasonable approximation of the fair value and is thus, disclosed by fair value.

137

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

45. Fair Value of Financial Assets and Liabilities, Continued

(iii)


	Valuation technique	Input
Level 2
Financial assets:
Securities measured at amortized cost	Discounted cash flow method	Discount rate
Financial liabilities:
Debentures	Discounted cash flow method	Discount rate
Level 3
Financial assets:
Loans measured at amortized cost	Discounted cash flow method	Credit spread, Other spread, Prepayment rate
Other financial assets	Discounted cash flow method	Other spread
Financial liabilities:
Deposits	Discounted cash flow method	Other spread
Borrowings	Discounted cash flow method	Other spread
Other financial liabilities	Discounted cash flow method	Other spread

138

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

46. Categories of Financial Assets and Liabilities

Categories of financial assets and liabilities as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Cash and cash equivalents		Financial instruments measured at FVTPL		Financial instruments designated at FVTPL		Financial instruments measured at FVOCI		Financial instruments designated at FVOCI		Financial instruments measured at amortized cost		Hedging purpose derivative instruments		Total
Financial assets:
Cash and due from banks	W	7,088,563		—		—		—		—		4,450,243		—		11,538,806
Securities measured at FVTPL		39,903		11,912,003		—		—		—		—		—		11,951,906
Securities measured at FVOCI		—		—		—		20,814,864		16,870,055		—		—		37,684,919
Securities measured at amortized cost		—		—		—		—		—		6,355,884		—		6,355,884
Loans measured at FVTPL		—		541,811		—		—		—		—		—		541,811
Loans measured at amortized cost		4,744,002		—		—		—		—		193,301,601		—		198,045,603
Derivative financial assets		—		9,609,026		—		—		—		—		185,429		9,794,455
Other financial assets		—		—		—		—		—		7,676,612		—		7,676,612

	W	11,872,468		22,062,840		—		20,814,864		16,870,055		211,784,340		185,429		283,589,996

Financial liabilities:
Financial liabilities measured at FVTPL	W	—		—		1,469,724		—		—		—		—		1,469,724
Deposits		—		—		—		—		—		68,326,656		—		68,326,656
Borrowings		—		—		—		—		—		25,429,244		—		25,429,244
Debentures		—		—		—		—		—		158,711,896		—		158,711,896
Derivative financial liabilities		—		10,118,348		—		—		—		—		1,198,654		11,317,002
Other financial liabilities		—		—		—		—		—		6,717,731		—		6,717,731

	W	—		10,118,348		1,469,724		—		—		259,185,527		1,198,654		271,972,253

139

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

46. Categories of Financial Assets and Liabilities, Continued


	December 31, 2021
	Cash and cash equivalents		Financial instruments measured at FVTPL		Financial instruments designated at FVTPL		Financial instruments measured at FVOCI		Financial instruments designated at FVOCI		Financial instruments measured at amortized cost		Hedging purpose derivative instruments		Total
Financial assets:
Cash and due from banks	W	8,566,338		—		—		—		—		3,409,429		—		11,975,767
Securities measured at FVTPL		—		9,818,811		—		—		—		—		—		9,818,811
Securities measured at FVOCI		—		—		—		18,994,503		18,880,633		—		—		37,875,136
Securities measured at amortized cost		—		—		—		—		—		2,968,877		—		2,968,877
Loans measured at FVTPL		—		644,412		—		—		—		—		—		644,412
Loans measured at amortized cost		887,238		—		—		—		—		169,876,156		—		170,763,394
Derivative financial assets		—		4,776,872		—		—		—		—		528,700		5,305,572
Other financial assets		—		—		—		—		—		5,836,048		—		5,836,048

	W	9,453,576		15,240,095		—		18,994,503		18,880,633		182,090,510		528,700		245,188,017

Financial liabilities:
Financial liabilities measured at FVTPL	W	—		—		2,067,144		—		—		—		—		2,067,144
Deposits		—		—		—		—		—		52,792,121		—		52,792,121
Borrowings		—		—		—		—		—		22,063,777		—		22,063,777
Debentures		—		—		—		—		—		145,365,330		—		145,365,330
Derivative financial liabilities		—		4,501,378		—		—		—		—		256,463		4,757,841
Other financial liabilities		—		—		—		—		—		6,817,630		—		6,817,630

	W	—		4,501,378		2,067,144		—		—		227,038,858		256,463		233,863,843

140

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

47. Offsetting of Financial Assets and Liabilities

Details of financial instruments subject to offsetting, enforceable master netting agreements or similar agreements as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Gross amounts of recognized financial asset		Gross amounts of recognized financial liabilities set off in the statement of financial position		Net amounts of financial assets presented in the statement of financial position		Related amounts not set off in the statement of financial position				Net amounts
	Gross amounts of recognized financial asset						Financial instruments		Cash collateral received		Net amounts
Derivative financial assets (*)	W	9,794,455		—		9,794,455		5,814,449		71,536		3,908,470
Unsettled spot exchange receivables (*)		2,597,457		—		2,597,457		2,593,577		—		3,880
Unsettled domestic exchange receivables		6,008,639		2,261,306		3,747,333		—		—		3,747,333
Security pledged as collateral for repurchase agreements		2,373,401		—		2,373,401		57,619		—		2,315,782
Reverse repurchase agreements		2,240,000		—		2,240,000		2,240,000		—		—
Loaned securities		—		—		—		—		—		—
Receivables from securities transaction		11,940		—		11,940		11,940		—		—

	W	23,025,892		2,261,306		20,764,586		10,717,585		71,536		9,975,465


	December 31, 2022
	Gross amounts of recognized financial liabilities		Gross amounts of recognized financial assets set off in the statement of financial position		Net amounts of financial liabilities presented in the statement of financial position		Related amounts not set off in the statement of financial position				Net amounts
							Financial instruments		Cash collateral pledged		Net amounts
Derivative financial liabilities (*)	W	11,317,002		—		11,317,002		5,552,654		501		5,763,847
Unsettled spot exchange payables (*)		2,593,992		—		2,593,992		2,593,577		—		415
Unsettled domestic exchange payables		2,503,572		2,261,306		242,266		—		—		242,266
Repurchase agreements		57,619		—		57,619		57,619		—		—
Payables from securities transaction		18,305		—		18,305		18,305		—		—

	W	16,490,490		2,261,306		14,229,184		8,222,155		501		6,006,528

141

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

47. Offsetting of Financial Assets and Liabilities, Continued


	December 31, 2021
	Gross amounts of recognized financial asset		Gross amounts of recognized financial liabilities set off in the statement of financial position		Net amounts of financial assets presented in the statement of financial position		Related amounts not set off in the statement of financial position				Net amounts
	Gross amounts of recognized financial asset						Financial instruments		Cash collateral received		Net amounts
Derivative financial assets (*)	W	5,305,572		—		5,305,572		3,485,084		19,412		1,801,076
Unsettled spot exchange receivables (*)		3,302,464		—		3,302,464		3,300,991		—		1,473
Unsettled domestic exchange receivables		3,502,263		1,707,457		1,794,806		—		—		1,794,806
Security pledged as collateral for repurchase agreements		3,349,080		—		3,349,080		1,307,268		—		2,041,812
Reverse repurchase agreements		790,000		—		790,000		790,000		—		—
Loaned securities		417,640		—		417,640		417,640		—		—
Receivables from securities transaction		12,553		—		12,553		12,553		—		—

	W	16,679,572		1,707,457		14,972,115		9,313,536		19,412		5,639,167


	December 31, 2021
	Gross amounts of recognized financial liabilities		Gross amounts of recognized financial assets set off in the statement of financial position		Net amounts of financial liabilities presented in the statement of financial position		Related amounts not set off in the statement of financial position				Net amounts
							Financial instruments		Cash collateral pledged		Net amounts
Derivative financial liabilities (*)	W	4,757,841		—		4,757,841		2,988,272		105,989		1,663,580
Unsettled spot exchange payables (*)		3,303,324		—		3,303,324		3,300,991		—		2,333
Unsettled domestic exchange payables		2,324,903		1,707,457		617,446		—		—		617,446
Repurchase agreements		1,307,268		—		1,307,268		1,307,268		—		—
Payables from securities transaction		10,036		—		10,036		10,036		—		—

	W	11,703,372		1,707,457		9,995,915		7,606,567		105,989		2,283,359

(*)	For the derivatives covered by the ISDA derivative contracts, all contracts are settled and the net amount of derivative contracts is measured and paid based on the liquidation value if the counterparty files for bankruptcy or has any credit issues.

142

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

48. Operating Segments

(1)


Segments		General information
Corporate finance		Provides trade finance and loans to corporate customers
Investment finance		Provides consulting services to corporate such as capital finance, restructuring, etc.
Asset management		Provides asset management services to individual and corporate customers
Others		Any other segment not mentioned above

(2)	Operating income (loss) from external customers and among operating segments for the years ended December 31, 2022 and 2021 are as follows:


	2022
	Corporate finance			Investment finance			Asset management		Others			Total
Operating income (loss) from external customers	W	594,063			(2,363,552	)		32,111		3,495,076			1,757,698
Operating income (loss) from intersegment sales		(13,094	)		2,134,556			—		(2,121,462	)		—

	W	580,969			(228,996	)		32,111		1,373,614			1,757,698


	2021
	Corporate finance			Investment finance			Asset management		Others			Total
Operating income (loss) from external customers	W	(65,255	)		1,848,863			20,821		1,745,727			3,550,156
Operating income (loss) from intersegment sales		5,536			754,438			—		(759,974	)		—

	W	(59,719	)		2,603,301			20,821		985,753			3,550,156

143

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

48. Operating Segments, Continued

(3)	Details of segment results for the Bank’s reportable segments for the years ended December 31, 2022 and 2021 are as follows:


	2022
	Corporate finance			Investment finance			Asset management			Others			Total
Net interest income	W	871,204			(463,883	)		9,421			1,327,073			1,743,815
Non-interest income
Income related to securities (*1)		(17,602	)		(136,455	)		—			57,440			(96,617	)
Other non-interest income		512,907			778,927			36,350			2,377			1,330,561

		495,305			642,472			36,350			59,817			1,233,944
Provision for loan losses and others (*2)		(42,977	)		(297,286	)		—			(3,427	)		(343,690	)
General and administrative expenses		(742,563	)		(110,299	)		(13,660	)		(9,849	)		(876,371	)

Operating income	W	580,969			(228,996	)		32,111			1,373,614			1,757,698


	2021
	Corporate finance			Investment finance			Asset management			Others			Total
Net interest income	W	1,181,060			(158,369	)		2,328			633,590			1,658,609
Non-interest income
Income related to securities (*1)		63,729			17,194			—			26,604			107,527
Other non-interest income		602,798			2,807,533			36,448			(23,092	)		3,423,687

		666,527			2,824,727			36,448			3,512			3,531,214
Provision for loan losses and others (*2)		(924,878	)		95,316			—			5,641			(823,921	)
General and administrative expenses		(982,428	)		(158,373	)		(17,955	)		343,010			(815,746	)

Operating income	W	(59,719	)		2,603,301			20,821			985,753			3,550,156

(*1)	Income related to securities is composed of net gain (loss) on securities measured at FVTPL, securities measured at FVOCI and securities measured at amortized cost.

(*2)	Provision for loan losses and others comprises of provision for loan losses, provision for derivative credit risks, gains (losses) on sales of loans, and increase (reversal) of provision.

144

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

48. Operating Segments, Continued

(4)	Geographical revenue information about the Bank’s operating segments for the years ended December 31, 2022 and 2021 and the geographical non-current asset information as of December 31, 2022 and 2021 are as follows:


	*Revenues (1)**				*Non-current assets (2)**
	2022		2021		December 31, 2022		December 31, 2021
Domestic	W	47,753,159		31,511,510		28,918,343		29,704,702
Overseas		2,198,448		776,644		86,363		108,076

	W	49,951,607		32,288,154		29,004,706		29,812,778

(*1)	Revenues consist of interest income, fees and commission income, dividend income, income related to securities, gain on derivatives, foreign currency transaction gain, other operating income and provision for loan losses.

(*2)	Non-current assets consist of investments in subsidiaries and associates, property and equipment, investment property and intangible assets.

49. Risk Management

(1) Introduction

(i) Objectives and principles

•

managed comprehensively and independently,

•

recognized timely, evaluated exactly and managed effectively,

•

maintained to the extent that the risks balance with profit,

•

diversified appropriately to avoid concentration on specific segments,

•

managed to prevent excessive exposure by the setting up and managing of tolerance limits and guidelines.

(ii) Risk management strategy and process

Furthermore, the Bank focuses on consistent communication among different departments to establish a progressive consensus on risk management.

145

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued

(iii) Risk management governance

Risk Management Committee

The Bank’s Risk Management Committee (the “Committee”) is composed of the President of the committee (an outside director), and three other commissioners. The Committee functions to establish policies of risk management, evaluate the capital adequacy of the Bank, discuss material issues relating to risk management, and present preliminary decisions on such matters.

The CEO of the Bank and the head of Risk Management Segment

The CEO of the Bank, according to the policies of risk management, performs his or her role to manage and direct risk management to sustain efficiency and internal control. The head of the Risk Management Segment is responsible for supervising the overall administration of the Bank’s risk management business and providing risk-related information to members of the board of directors and the Bank’s management.

Risk Management Policy Committee

The Bank’s Risk Management Policy Committee is composed of the leaders of all business segments. and exercises its role to decide important matters relating to the Bank’s portfolio including allocating internal capital limits by segment and setting exposure limits by industry within the scope that Risk Management Committee regulated.

(iv) Performance of risk management committee

The Risk Management Committee performs comprehensive reviews of all the affairs related to risk management and deliberates the decisions of the board of directors. For the year ended December 31, 2022, the key activities of the Risk Management Committee are as follows:

•

Major decision

•

Risk management plan for 2022

•

Contingency funding plan for 2022

•

Setting and managing exposure limits by country for 2022

•

Increase of internal capital limit for interest rate risk of Korean won

•

Major reporting

•

Result of integrated crisis analysis for the second half of 2021

•

Resolution of Credit Committee for the fourth quarter of 2021

•

Result of ex-post validation of credit rating system and default rates, and verification of risk measurement factors for internal purposes

•

Setting management limit of credit portfolios of 2022

•

Allocation of internal capital limits of 2022

146

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued

•

Resolution of Credit Committee for the first quarter of 2022

•

Changes the period of the additional allowance for loan losses for COVID-19 forbearance companies

•

Increase of industry limits for feed manufacturing considering external factors

•

Result of operation of corporate credit rating system in 2022

•

Result of integrated crisis analysis for the first half of 2022

•

Resolution of Credit Committee for the second quarter of 2022

•

Verification of risk-weighted assets for BIS ratio as of December 31, 2021

•

Review of the outlook and management plan for the BIS ratio

•

Result of assessment of suitability for internal capital for 2022

•

Result of BCP training for 2022

•

Result of integrated crisis analysis for the second half of 2022

•

Resolution of Credit Committee for the third quarter of 2022

(v) Improvement of risk management system

For the continuous improvement of risk management, financial soundness and capital adequacy, the Bank performs the following:

•

Continuous improvement of Basel

•

Improvements in the internal capital adequacy assessment system, in line with the guidelines set by the Financial Supervisory Service (FSS) in 2008, to manage capital adequacy more effectively

•

Improvements in the credit assessment system on Low Default Portfolio (LDP)

•

Elaboration of risk measuring criteria including credit risk parameters and measurement logics

•

Development of the application system for timely calculation of LCR and NSFR

•

Rebuilding the Corporate Credit Rating System (approved by Financial Supervisory Services on October 26, 2017)

•

Establishment of the system to calculate Basel Interest Rate Risk in the Banking Book coming to domestic in September 2018

•

Establishment of the system to comply with the amended regulation relating to risk-weighted assets under Basel III in December 2020

•

Development of system related to Fundamental Review of the Trading Book (FRTB) under Basel III in August 2022

•

Development of system related to operational risk under Basel III in September 2022

147

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued

•

Expansion of risk management infrastructure

•

Establishment of the RAPM system to reflect risks to the Bank’s business and support decision-making upon management, and application of performance assessment at the branch level since 2010

•

Enforcement of risk management related to irregular compound derivatives and validation of the derivative pricing model developed by the Bank’s Front Office

•

Establishment of IFRS 9 accounting system to calculate a loan loss allowances under IFRS 9 in March 2017 and, since then, run of IFRS 9 accounting system in January 2018

(vi) Risk management reporting and measuring system


Application system	Approach	Completion date	Major function
Corporate Credit Rating System	Logit Model	Oct. 2017	Rebuilding the Corporate Credit Rating System
Market Risk Management System	Risk Watch	Jun. 2002 Feb. 2019	Summarize position, manage exposure limits and calculate Market VaR
	RS Model	Sep. 2012	Calculate regulatory capital by Standardized Approach
			Calculate regulatory capital by Standardized Approach
	Murex M/O	Apr. 2013	Supplement of RiskWatch to calculate VaR
			Supplement of RiskWatch to calculate VaR
Interest/Liquidity Risk Management System	In-house	May. 2019	Calculation of interest risk, liquidity risk, etc.
Operational Risk Management System	Standardized Approach	May. 2006	Manage process and calculate CSA, KRI and OP VaR, etc.
BIS Capital Ratio Calculation/Credit Risk Measurement System	Fermat RaY (*)	Sep. 2006 Dec. 2013	Calculate equity, credit risk-weighted assets and credit risk, etc.
Loan Loss Allowance	IFRS	Jan. 2011	Incurred loss model
Calculation System	IFRS 9	Mar. 2017	Expected loss model

(*)	To comply with the amended regulation relating to risk-weighted assets under Basel III, the upgrade of relevant systems was completed in March 2021.

148

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued

(vii) Response to Basel

The Bank has completed IT consulting and system development related to Market Risk Regulation (Fundamental Review of the Trading Book, FRTB) and Operational Risk Regulation under Basel III during the second half of 2022, and plans to respond to the regulatory changes smoothly starting from 2023.

(viii) Internal capital adequacy assessment process

•

Internal capital adequacy assessment

149

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued

•

Goal setting of internal capital management

•

Allocation of internal capital

•

Composition of internal capital

(2) Credit Risk

(i) Concept

150

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued

(ii) Approach to credit risk management

Summary of credit risk management

At the individual credit level, the relationship manager (RM), the credit officer (CO) and the Credit Review Committee manage each borrower’s credit risk.

Post management and insolvent borrower management

The Bank monitors the borrower’s credit rating from the date of the loan to the date of the final collection of debt consistently and inspects the borrower’s status frequently to prevent the generation of new bad debts and to stabilize the number of debt recoveries.

In addition, an early warning system is operated to spot borrowers that are highly likely to be insolvent. The early warning system provides financial information, financial transaction information, public information and market information of the borrower, and such information is used by the RM and the CO to monitor and manage changes in the borrower’s credit rating.

A borrower that is likely to be insolvent is classified as an early warning borrower, depending on the level of insolvency risk. The Bank sets up a specific and applicable stabilization plan for such a borrower considering the borrower’s characteristics. Furthermore, sub-standard borrowers are classified as insolvent borrowers, and are managed intensively by the Bank, which takes legal proceedings, disposals or corporate turnaround measures if necessary.

Classification of asset soundness and provision of allowance for loss

151

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued

Details of loans by credit rating as of December 31, 2022 and 2021 are as follows:


< Corporate >

	December 31, 2022
	Carrying amounts		12-month expected credit loss		Lifetime expected credit losses
	Carrying amounts		12-month expected credit loss		Non credit- impaired		Credit- impaired
AAA ~ BBB1	W	169,982,892		150,604,520		19,378,372		—
BBB2 ~ CCC		30,582,238		8,314,570		20,210,063		2,057,605
Below CC		1,283,425		—		52,693		1,230,732

	W	201,848,555		158,919,090		39,641,128		3,288,337


	December 31, 2021
	Carrying amounts		12-month expected credit loss		Lifetime expected credit losses
	Carrying amounts		12-month expected credit loss		Non credit- impaired		Credit- impaired
AAA ~ BBB1	W	138,451,664		123,087,995		15,363,669		—
BBB2 ~ CCC		34,125,651		11,317,394		21,134,914		1,673,343
Below CC		2,133,285		—		12,670		2,120,615

	W	174,710,600		134,405,389		36,511,253		3,793,958


< Retail >

	December 31, 2022
	Carrying amounts		12-month expected credit loss		Lifetime expected credit losses
	Carrying amounts		12-month expected credit loss		Non credit- impaired		Credit- impaired
Grade 1~ Grade 6	W	181,023		173,381		7,642		—
Grade 7~ Grade 8		2,116		—		2,084		32
Grade 9~ Grade 10		536		—		—		536

	W	183,675		173,381		9,726		568


	December 31, 2021
	Carrying amounts		12-month expected credit loss		Lifetime expected credit losses
	Carrying amounts		12-month expected credit loss		Non credit- impaired		Credit- impaired
Grade 1~ Grade 6	W	203,299		192,455		10,838		6
Grade 7~ Grade 8		2,709		—		2,701		8
Grade 9~ Grade 10		572		—		—		572

	W	206,580		192,455		13,539		586

152

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued

Details of payment guarantees (including financial guarantees) and unused commitments by credit rating as of December 31, 2022 and 2021 are as follows:

< Corporate >


	December 31, 2022
	Exposures		12-month expected credit loss		Lifetime expected credit losses
	Exposures		12-month expected credit loss		Non credit- impaired		Credit- impaired
Unused commitments:
AAA ~ BBB1	W	42,065,612		38,276,358		3,789,254		—
BBB2 ~ CCC		5,108,112		1,943,066		3,112,816		52,230
Below CC		—		—		—		—

	W	47,173,724		40,219,424		6,902,070		52,230

Payment guarantees (including financial guarantees):
AAA ~ BBB1	W	6,921,986		6,008,602		913,384		—
BBB2 ~ CCC		9,773,163		4,598,273		3,826,826		1,348,064
Below CC		12,110		—		154		11,956

	W	16,707,259		10,606,875		4,740,364		1,360,020


	December 31, 2021
	Exposures		12-month expected credit loss		Lifetime expected credit losses
	Exposures		12-month expected credit loss		Non credit- impaired		Credit- impaired
Unused commitments:
AAA ~ BBB1	W	37,276,730		34,822,879		2,453,851		—
BBB2 ~ CCC		9,237,945		5,814,835		3,369,595		53,515
Below CC		—		—		—		—

	W	46,514,675		40,637,714		5,823,446		53,515

Payment guarantees (including financial guarantees):
AAA ~ BBB1	W	6,396,425		5,700,522		695,903		—
BBB2 ~ CCC		6,890,993		3,303,869		3,064,270		522,854
Below CC		665,845		—		—		665,845

	W	13,953,263		9,004,391		3,760,173		1,188,699

153

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued


< Retail >

	December 31, 2022
	Exposures		12-month expected credit loss		Lifetime expected credit losses
	Exposures		12-month expected credit loss		Non credit- impaired		Credit- impaired
Unused commitments:
Grade 1~ Grade 6	W	32,230		31,779		451		—
Grade 7~ Grade 8		20		—		20		—
Grade 9~ Grade 10		—		—		—		—

	W	32,250		31,779		471		—


	December 31, 2021
	Exposures		12-month expected credit loss		Lifetime expected credit losses
	Exposures		12-month expected credit loss		Non credit- impaired		Credit- impaired
Unused commitments:
Grade 1~ Grade 6	W	76,448		75,950		498		—
Grade 7~ Grade 8		9		—		9		—
Grade 9~ Grade 10		—		—		—		—

	W	76,457		75,950		507		—

(iii) Measurement methodology of credit risk

Standardized Approach (“SA”)


Credit rating	Corporate	Country	Bank
AAA ~ AA-	20.0%	0.0%	20.0%
A+ ~ A-	50.0%	20.0%	30.0%
BBB+ ~ BBB-	75.0%	50.0%	50.0%
BB+ ~ BB-	100.0%	100.0%	100.0%
B+ ~ B-	150.0%	100.0%	100.0%
Below B-	150.0%	150.0%	150.0%
Unrated	100.0% (*)	100.0%	Rating based on due diligence

(*)	In case of small and medium-sized business, 85.0% is applied.

154

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued

The OECD is designated as foreign ECAI and Korea Investrors Service Co., Ltd., NICE Investors Services Co., Ltd. and the Korea Ratings Co., Ltd. are designated as domestic ECAI.

Internal Ratings-Based Approach (IRB)

To use the Internal Ratings-Based Approach, a bank must be approved by the FSS and should also meet the requirement pre-set by the FSS.

Measurement method of credit risk-weighted asset

The Bank calculates credit risk-weighted assets of corporate exposures and asset securitization exposures using the Foundation Internal Ratings-Based Approach as of December 31, 2022.


<Approved measurement method>
Measurement method		Exposure
Standardized Approach	Permanent SA	— Countries, public institutions, banks, equity
Standardized Approach	SA	— Overseas subsidiaries and branches, and other assets, retail, residential mortgage, commercial properties
Foundation Internal Ratings-Based Approach		— Corporate, small and medium enterprises, asset securitization (at each credit level)
Application of IRB by phase		— Special lending, non-residence and others

Credit rating model

155

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued

Credit rating process control structure

According to the Principle of Checks and Balances, the Bank has established the credit rating process control structure by which the credit rating system operates appropriately.

•

Independent assessment of credit rating: The Bank’s business segment (RM) and credit rating assessment segment (SRO) are independently operated.

•

Independent verification of credit rating system: Credit rating system is independently verified by RiskValidation Team of the Financial Planning Department.

•

Internal audit of credit rating process: Credit rating process is audited by the Bank’s internal audit department.

•

Role of the Board of Directors and the Bank’s management: Major issues relating to credit process are approved by the Board of Directors and are regularly monitored by the Bank’s top management.

The Bank reviews debt serviceability based on a credit analysis when handling loans. Depending on the results, credit loan preservation is adjusted as necessary using such methods as interest rate preservation due to credit risk.

156

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued

The quantification of the extent to which collateral and other credit enhancements mitigate credit risk of impaired financial assets as of December 31, 2022 and 2021 are as follows:


	December 31, 2022		December 31, 2021
Securities measured at FVOCI	W	72,739		71,668
Loans measured at amortized cost		3,345,216		3,849,967
Other assets		14,221		26,488

(iv) Credit exposure

Geographical information of credit exposure as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Korea		Hong Kong		Ireland		Uzbekistan		Brazil		Hungary		UK		USA		Ohers		Total
Due from banks (excluding due from BOK)	W	1,449,224		1,405,648		—		38,019		87,444		365,514		536,418		3,329,355		1,031,286		8,242,908
Securities measured at FVOCI:
Bonds (excluding government bonds)		13,531,541		241,512		12,533		—		—		—		297,115		4,953,262		2,807,821		21,843,784
Loans		164,692,863		1,913,983		1,534,814		687,498		339,476		929,402		1,471,985		5,616,327		44,228,252		221,414,600
Derivative financial assets		108,797		3,572		—		—		—		—		8,681		18,656		45,771		185,477
Other assets		1,559,148		—		—		—		—		—		—		—		6,233,425		7,792,573

		181,341,573		3,564,715		1,547,347		725,517		426,920		1,294,916		2,314,199		13,917,600		54,346,555		259,479,342
Guarantees (including financial guarantees)		16,226,813		—		—		—		—		48,285		—		241,660		190,503		16,707,261
Commitments		42,293,299		166,993		110,971		—		126,730		20,268		416,056		2,281,667		1,789,989		47,205,973

		58,520,112		166,993		110,971		—		126,730		68,553		416,056		2,523,327		1,980,492		63,913,234

	W	239,861,685		3,731,708		1,658,318		725,517		553,650		1,363,469		2,730,255		16,440,927		56,327,047		323,392,576

157

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued


	December 31, 2021
	Korea		Hong Kong		Ireland		Uzbekistan		Brazil		Hungary		UK		USA		Ohers		Total
Due from banks (excluding due from BOK)	W	749,525		1,402,014		—		—		59,275		353,577		82,528		2,898,169		640,657		6,185,745
Securities measured at FVOCI:
Bonds (excluding government bonds)		8,109,726		302,189		21,711		—		—		—		266,248		3,862,898		2,297,025		14,859,797
Loans		135,447,184		1,301,443		941,965		536,160		312,567		433,149		999,688		2,322,372		28,337,321		170,631,849
Derivative financial assets		174,859		45,847		—		—		—		—		3,922		80,543		223,656		528,827
Other assets		5,803,336		—		—		—		—		—		—		—		121,422		5,924,758

		150,284,630		3,051,493		963,676		536,160		371,842		786,726		1,352,386		9,163,982		31,620,081		198,130,976
Guarantees (including financial guarantees)		13,270,467		—		—		—		—		45,169		—		347,919		289,708		13,953,263
Commitments		39,836,375		85,880		148,185		—		—		11,902		774,783		979,541		4,754,466		46,591,132

		53,106,842		85,880		148,185		—		—		57,071		774,783		1,327,460		5,044,174		60,544,395

	W	203,391,472		3,137,373		1,111,861		536,160		371,842		843,797		2,127,169		10,491,442		36,664,255		258,675,371

Industry information of credit exposure as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Manufacturing		Service		Others		Total
Due from banks (excluding due from BOK)	W	—		7,636,352		606,556		8,242,908
Securities measured at FVOCI:
Bonds (excluding government bonds)		3,642,461		14,432,050		3,769,273		21,843,784
Loans		84,698,134		117,538,177		19,178,289		221,414,600
Derivative financial assets		—		185,477		—		185,477
Other assets		244,043		468,531		7,079,999		7,792,573

		88,584,638		140,260,587		30,634,117		259,479,342
Guarantees (including financial guarantees)		14,244,265		2,070,682		392,314		16,707,261
Commitments		22,153,544		23,477,561		1,574,868		47,205,973

		36,397,809		25,548,243		1,967,182		63,913,234

	W	124,982,447		165,808,830		32,601,299		323,392,576

158

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued


	December 31, 2021
	Manufacturing		Service		Others		Total
Due from banks (excluding due from BOK)	W	—		5,529,904		655,841		6,185,745
Securities measured at FVOCI:
Bonds (excluding government bonds)		2,597,917		9,614,360		2,647,520		14,859,797
Loans		73,076,518		82,852,716		14,702,615		170,631,849
Derivative financial assets		—		528,827		—		528,827
Other assets		121,251		227,172		5,576,335		5,924,758

	75,795,686		98,752,979		23,582,311		198,130,976
Guarantees (including financial guarantees)		10,588,505		3,012,831		351,927		13,953,263
Commitments		21,238,777		22,162,715		3,189,640		46,591,132

	31,827,282		25,175,546		3,541,567		60,544,395

	W 107,622,968		123,928,525		27,123,878		258,675,371

The detail of credit exposures by industry affected by the pandemic of COVID-19 as of December 31, 2022 and 2021 are as follows and the exposures by industries could be changed according to economic fluctuations.


	December 31, 2022
	Due from banks (excluding due from BOK)		Securities measured at FVOCI
	Due from banks (excluding due from BOK)		Bonds (excluding government bonds)		Loans		Derivative financial assets		Other assets		Subtotal		Guarantees (including financial guarantees)		Commit- ments		Subtotal		Total
Manufacturing:
Display	W	—		—		1,289,473		—		5,100		1,294,573		382		33,564		33,946		1,328,519
Semiconductor /Mobile phone		—		226,042		4,267,310		—		16,770		4,510,122		152,023		1,564,613		1,716,636		6,226,758
Automotive		—		325,472		12,191,177		—		29,695		12,546,344		580,123		1,716,017		2,296,140		14,842,484
Refinery/Chemical/Energy		—		1,077,431		18,430,754		—		60,552		19,568,737		201,296		6,409,868		6,611,164		26,179,901
Steel/Metal		—		182,739		10,022,074		—		22,002		10,226,815		650,497		2,873,421		3,523,918		13,750,733
Others		—		1,830,777		38,497,346		—		109,924		40,438,047		12,659,944		9,556,061		22,216,005		62,654,052

		—		3,642,461		84,698,134		—		244,043		88,584,638		14,244,265		22,153,544		36,397,809		124,982,447
Service:
Air transportation		—		5,624		3,085,579		—		13,785		3,104,988		221,159		3,000		224,159		3,329,147
Sea transportation		—		—		2,493,475		—		31,018		2,524,493		78,278		374,025		452,303		2,976,796
Other transportation		—		166,659		8,724,268		—		23,326		8,914,253		16,597		2,583,356		2,599,953		11,514,206
Leisure/Travel industry		—		—		12,277		—		59		12,336		—		1,700		1,700		14,036
Food/Accommodation		—		11,589		2,043,522		—		4,873		2,059,984		39,249		347,915		387,164		2,447,148
Automotive-related		—		—		563,657		—		1,672		565,329		7,127		112,440		119,567		684,896
Finance/Insurance and others		7,636,352		14,248,178		100,615,399		185,477		393,798		123,079,204		1,708,272		20,055,125		21,763,397		144,842,601

		7,636,352		14,432,050		117,538,177		185,477		468,531		140,260,587		2,070,682		23,477,561		25,548,243		165,808,830
Other:
Construction		—		285,970		4,067,049		—		8,889		4,361,908		348,557		1,561,312		1,909,869		6,271,777
Others		606,556		3,483,303		15,111,240		—		7,071,110		26,272,209		43,757		13,556		57,313		26,329,522

		606,556		3,769,273		19,178,289		—		7,079,999		30,634,117		392,314		1,574,868		1,967,182		32,601,299

	W	8,242,908		21,843,784		221,414,600		185,477		7,792,573		259,479,342		16,707,261		47,205,973		63,913,234		323,392,576

159

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued


	December 31, 2021
	Due from banks (excluding due from BOK)		Securities measured at FVOCI
	Due from banks (excluding due from BOK)		Bonds (excluding government bonds)		Loans		Derivative financial assets		Other assets		Subtotal		Guarantees (including financial guarantees)		Commit- ments		Subtotal		Total
Manufacturing:
Display	W	—		—		730,259		—		2,917		733,176		1,641		267,574		269,215		1,002,391
Semiconductor /Mobile phone		—		204,679		5,059,874		—		7,958		5,272,511		115,211		365,071		480,282		5,752,793
Automotive		—		231,343		10,721,833		—		15,286		10,968,462		435,597		1,685,997		2,121,594		13,090,056
Refinery/Chemical/Energy		—		620,186		13,875,360		—		27,904		14,523,450		150,371		5,520,913		5,671,284		20,194,734
Steel/Metal		—		146,239		9,985,811		—		13,814		10,145,864		617,066		2,343,478		2,960,544		13,106,408
Others		—		1,395,470		32,703,381		—		53,372		34,152,223		9,268,619		11,055,744		20,324,363		54,476,586

		—		2,597,917		73,076,518		—		121,251		75,795,686		10,588,505		21,238,777		31,827,282		107,622,968
Service:
Air transportation		—		5,844		3,200,683		—		9,284		3,215,811		291,880		21,000		312,880		3,528,691
Sea transportation		—		—		2,083,099		—		21,353		2,104,452		74,721		751,613		826,334		2,930,786
Other transportation		—		140,164		6,261,103		—		12,895		6,414,162		9,110		3,576,532		3,585,642		9,999,804
Leisure/Travel industry		—		—		59,072		—		66		59,138		—		1,700		1,700		60,838
Food/Accommodation		—		72,427		1,990,730		—		3,651		2,066,808		36,674		318,921		355,595		2,422,403
Automotive-related		—		—		513,522		—		876		514,398		12,322		84,891		97,213		611,611
Finance/Insurance and others		5,529,904		9,395,925		68,744,507		528,827		179,047		84,378,210		2,588,124		17,408,058		19,996,182		104,374,392

		5,529,904		9,614,360		82,852,716		528,827		227,172		98,752,979		3,012,831		22,162,715		25,175,546		123,928,525
Other:
Construction		—		236,235		2,640,398		—		3,628		2,880,261		195,956		1,640,764		1,836,720		4,716,981
Others		655,841		2,411,285		12,062,217		—		5,572,707		20,702,050		155,971		1,548,876		1,704,847		22,406,897

		655,841		2,647,520		14,702,615		—		5,576,335		23,582,311		351,927		3,189,640		3,541,567		27,123,878

	W	6,185,745		14,859,797		170,631,849		528,827		5,924,758		198,130,976		13,953,263		46,591,132		60,544,395		258,675,371

Responding to the COVID-19 pandemic, the Bank recalculates the forward-looking information and recognises additional allowance for loan losses and provisions amounting toW924,176 million for the year ended December 31, 2021.

160

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued

Credit exposures of debt securities by credit rating as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Carrying amounts		12-month expected credit loss		Lifetime expected credit losses
	Carrying amounts		12-month expected credit loss		Non credit- impaired		Credit- impaired
AAA ~ BBB1	W	27,133,598		26,789,221		344,377		—
BBB2 ~ CCC		37,359		14,927		22,432		—
Below CC		—		—		—		—

	W	27,170,957		26,804,148		366,809		—


	December 31, 2021
	Carrying amounts		12-month expected credit loss		Lifetime expected credit losses
	Carrying amounts		12-month expected credit loss		Non credit- impaired		Credit- impaired
AAA ~ BBB1	W	21,929,738		21,600,109		329,629		—
BBB2 ~ CCC		33,800		33,800		—		—
Below CC		—		—		—		—

	W	21,963,538		21,633,909		329,629		—

(3) Capital management activities

(i) Capital adequacy

Tier 1 capital

- Common Equity Tier 1

- Additional Tier 1 capital

161

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued

Tier 2 capital (Supplementary Tier 2 capital)

The BIS capital adequacy ratio and capital in accordance to Basel III standards as of December 31, 2022 and 2021 are as follows:

BIS capital adequacy ratio


	December 31, 2022			December 31, 2021
Equity capital based on BIS (A):
Tier 1 capital:
Common Equity Tier 1	W	35,125,348			41,131,484
Additional Tier 1 capital		—			—

		35,125,348			41,131,484
Tier 2 capital		3,197,936			3,454,548

	W	38,323,284			44,586,032

Risk-weighted assets (B):
Credit risk-weighted assets	W	277,265,026			291,238,386
Market risk-weighted assets		1,329,603			1,692,127
Operational risk-weighted assets		7,458,674			6,750,345

	W	286,053,303			299,680,858

BIS capital adequacy ratio (A/B):		13.40	%		14.88	%
Tier 1 capital ratio:		12.28	%		13.73	%
Common Equity Tier 1 ratio		12.28	%		13.73	%
Additional Tier 1 capital ratio		—			—
Tier 2 capital ratio		1.12	%		1.15	%

162

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued

Equity capital based on BIS


	December 31, 2022			December 31, 2021
Tier 1 capital (A):
Common Equity Tier 1
Capital stock	W	23,151,559			21,886,559
Capital surplus, etc.		748,121			738,802
Retained earnings		7,355,027			14,226,652
Accumulated other comprehensive income		4,185,537			5,289,110
Common stock deductibles		(314,896	)		(1,009,639	)

		35,125,348			41,131,484
Tier 2 capital (B):
Allowance for doubtful accounts, etc.		972,578			924,935
Qualified capital securities		2,244,000			2,312,000
Non-qualified capital securities		—			258,060
Additional stock deductibles		(18,642	)		(40,447	)

		3,197,936			3,454,548

Equity capital (A+B)	W	38,323,284			44,586,032

(4) Market risk

(i) Concept

(ii) Market risks of trading positions

Management method on market risks arising from trading positions

In estimating market risk, the Standardized Approach and the internal model are used. The Standardized Approach is used to calculate the required capital from market risk and the internal model is used to manage risks internally. Since July 2007, the Bank has measured one-day VaR through the historical simulation method using the time series data of past 250 days under a 99% confidence level. The calculated VaR is monitored daily.

The Bank sets total limit of market risk based on annual business plan, risk appetite and others and monitors VaR limit of each department on a daily basis.

163

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued

Capital Requirements for Market risk

The Bank’s Capital Requirements for Market risk as of December 31, 2022 and 2021 are as follows:


	December 31, 2022		December 31, 2021
Interest rate risk	W	62,386		87,830
Equity risk		93		3
Foreign exchange (FX) risk		17,235		21,964
Option risk		11,249		20,262

Total	W	90,963		130,059

(iii) Market risks of non-trading positions

Management method on market risks arising from non-trading positions

The Bank’s Risk Management Committee sets and manages interest rate risk limits on a yearly basis and interest rate risk is monthly measured and monitored.

ΔEVE and ΔNII of the Bank’s non-trading positions as of December 31, 2022 and 2021 are as follows:

164

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued

(iv) Foreign currency risk

Outstanding balances by currency with significant exposure as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	KRW		USD		EUR		JPY		GBP		Others			Total
Financial assets:
Cash and due from banks	W	3,980,664		7,358,901		24,870		52,023		14,083		108,265			11,538,806
Securities measured at FVTPL		11,206,799		691,367		—		2,218		—		51,522			11,951,906
Securities measured at FVOCI		28,590,211		8,016,390		25		376,526		—		701,767			37,684,919
Securities measured at amortized cost		6,355,884		—		—		—		—		—			6,355,884
Loans measured at FVTPL		541,811		—		—		—		—		—			541,811
Loans measured at amortized cost		138,177,034		51,883,126		3,573,847		1,682,518		1,051,281		1,677,797			198,045,603
Derivative financial assets		6,804,262		2,674,562		64,348		22,321		175,820		53,142			9,794,455
Other financial assets		5,194,841		2,330,511		45,396		51,070		16,868		37,926			7,676,612

		200,851,506		72,954,857		3,708,486		2,186,676		1,258,052		2,630,419			283,589,996
Financial liabilities:
Financial liabilities measured at FVTPL		1,289,717		180,007		—		—		—		—			1,469,724
Deposits		55,270,353		12,572,982		34,059		448,083		78		1,101			68,326,656
Borrowings		4,609,133		18,257,698		62,662		1,101,058		—		1,398,693			25,429,244
Debentures		120,509,021		27,774,042		2,752,363		181,000		97,197		7,398,273			158,711,896
Derivative financial liabilities		7,858,410		3,056,382		114,369		8,662		218,257		60,922			11,317,002
Other financial liabilities		4,197,192		2,264,017		34,930		31,419		16,893		173,280			6,717,731

		193,733,826		64,105,128		2,998,383		1,770,222		332,425		9,032,269			271,972,253

Net financial position	W	7,117,680		8,849,729		710,103		416,454		925,627		(6,401,850	)		11,617,743

165

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued


	December 31, 2021
	KRW		USD		EUR		JPY		GBP		Others			Total
Financial assets:
Cash and due from banks	W	6,046,893		5,652,467		30,847		52,579		17,370		175,611			11,975,767
Securities measured at FVTPL		9,030,109		693,919		—		1,101		—		93,682			9,818,811
Securities measured at FVOCI		30,609,818		6,639,366		25		311,838		—		314,089			37,875,136
Securities measured at amortized cost		2,968,877		—		—		—		—		—			2,968,877
Loans measured at FVTPL		644,412		—		—		—		—		—			644,412
Loans measured at amortized cost		123,311,272		40,714,606		3,103,077		1,457,553		789,280		1,387,606			170,763,394
Derivative financial assets		4,092,050		1,117,750		44,940		2,464		30,077		18,291			5,305,572
Other financial assets		3,589,931		1,880,512		290,095		25,864		8,011		41,635			5,836,048

		180,293,362		56,698,620		3,468,984		1,851,399		844,738		2,030,914			245,188,017
Financial liabilities:
Financial liabilities measured at FVTPL		1,811,241		255,903		—		—		—		—			2,067,144
Deposits		41,469,942		10,949,203		44,634		327,145		91		1,106			52,792,121
Borrowings		5,637,556		14,709,344		20,683		1,037,799		—		658,395			22,063,777
Debentures		109,615,309		26,463,222		1,704,147		259,501		791,815		6,531,336			145,365,330
Derivative financial liabilities		3,988,813		728,275		4,569		4,296		16,166		15,722			4,757,841
Other financial liabilities		4,458,827		2,214,186		13,293		18,398		1,119		111,807			6,817,630

		166,981,688		55,320,133		1,787,326		1,647,139		809,191		7,318,366			233,863,843

Net financial position	W	13,311,674		1,378,487		1,681,658		204,260		35,547		(5,287,452	)		11,324,174

(v) Interest rate risk management

The Bank is closely monitoring the outputs prepared by the industrial working groups which is managing the transition to alternative benchmark rates and the markets related the rates. The outputs include the information published by regulatory authorities related to IBORs. The authorities have made it clear that after the end of 2021, they will no longer persuade or force banks to submit IBORs. Responding the transition, the Bank organized a task force led by the head of the risk management division and the task force has established the LIBOR transition plan that consists of workflows such as alternative interest rate determination, application development, customer communication management, risk management, taxation, finance, legal, and accounting system establishment. The important progress of the plan is reported to the management and may also be reported to the board of directors if necessary. The purpose of the task force is to review where exposure to IBOR occurs within the Bank’s business, and to develop and implement the plan to transit to the alternative benchmark rates. As of December 31, 2021, the Bank has completed the transition and the application of the alternative benchmark rates and plans to complete the transition to the alternative benchmark rates before June 2023 for existing contracts contracted in USD with a contract maturity after June 2023.

166

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued

The financial instruments that have yet to transition to alternative benchmark rates as of December 31, 2022 are as follows. The amounts of the non-derivative financial instruments are the carrying amounts and the amounts of the derivatives, the commitments and the guarantees are the nominal amounts.


	USD
Non-derivative financial assets:
Financial assets measured at FVOCI	W	6,342
Financial assets measured at amortized cost		10,932,787
Privately placed corporate bonds		19,010

		10,958,139
Non-derivative financial liabilities:
Financial liabilities measured at amortized cost		781,924
Derivative:
Trading purpose:
Interest rate		76,158,628
Currency		42,669,517

Hedging purpose:
Interest rate		16,209,017
Currency		5,025,604

		140,062,766
Commitments and guarantees	W	75,022

(5) Liquidity risk management

(i) Concept

(ii) Approach to liquidity risk management

The Bank manages its liquidity risks as follows:

Allowable limit for liquidity risk

•

The allowable limit for liquidity risk sets LCR, NSFR and Mid- to long-term foreign currency fund management ratio

•

The management standards with regards to the allowable limit for liquidity risk should be set using separate and stringent set ratios in accordance with the FSS guidelines.

•

LCR: (High quality liquid assets / Total net cash outflows over the next 30 calendar days) X 100

•

NSFR: Available Stable Funding / Required Stable Funding X 100

167

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued

•

Mid- to long-term foreign currency fund management ratio: Foreign currency funding being repaid after 1 year / Foreign currency lending being collected after 1 year X 100

Early warning indicator

Stress-Test analysis and contingency plan

•

The Bank established detailed contingency plan to manage the liquidity risks at every risk situations.

(iii) Analysis on remaining contractual maturity of financial instruments

Remaining contractual maturity analysis of non-derivative financial instruments including interest payment as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Financial assets:
Cash and due from banks	W	9,025,666		430,095		1,031,942		930,574		—		11,418,277
Securities measured at FVTPL		117,102		99,673		184,468		412,498		11,157,484		11,971,225
Securities measured at FVOCI		188,333		1,164,031		4,422,058		12,510,195		15,487,979		33,772,596
Securities measured at amortized cost		249,997		500,011		1,777,966		3,828,118		—		6,356,092
Loans		15,068,406		21,683,856		68,144,918		77,451,592		15,820,283		198,169,055
Other financial assets		6,344,790		—		—		—		1,447,354		7,792,144

	W	30,994,294		23,877,666		75,561,352		95,132,977		43,913,100		269,479,389

Financial liabilities:
Financial liabilities measured at FVTPL	W	60,946		123,271		388,312		290,403		88,371		951,303
Deposits		30,564,386		12,664,843		20,632,157		4,364,976		126,939		68,353,301
Borrowings		3,632,166		5,829,318		11,367,549		3,528,097		967,068		25,324,198
Debentures		4,841,503		11,647,424		54,655,589		83,734,150		4,151,709		159,030,375
Other financial liabilities		3,837,948		2,057,141		—		—		946,270		6,841,359

	W	42,936,949		32,321,997		87,043,607		91,917,626		6,280,357		260,500,536

168

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued


	December 31, 2021
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Financial assets:
Cash and due from banks	W	9,612,371		515,608		550,680		1,029,287		—		11,707,946
Securities measured at FVTPL		46,621		25,023		1,050,540		1,149,972		7,506,684		9,778,840
Securities measured at FVOCI		361,611		1,207,439		4,133,965		10,816,960		15,093,228		31,613,203
Securities measured at amortized cost		10,000		340,486		1,113,529		1,505,020		—		2,969,035
Loans		10,042,137		14,241,774		61,880,066		67,500,212		15,813,164		169,477,353
Other financial assets		5,097,270		—		—		—		803,773		5,901,043

	W	25,170,010		16,330,330		68,728,780		82,001,451		39,216,849		231,447,420

Financial liabilities:
Financial liabilities measured at FVTPL	W	8,854		125,618		682,882		348,104		214,802		1,380,260
Deposits		25,608,016		8,124,580		16,519,769		2,418,409		118,943		52,789,717
Borrowings		3,140,265		4,398,427		10,504,484		2,932,717		1,025,321		22,001,214
Debentures		4,648,419		11,697,892		47,013,584		76,093,647		6,148,738		145,602,280
Other financial liabilities		5,008,883		1,572,656		—		—		359,118		6,940,657

	W	38,414,437		25,919,173		74,720,719		81,792,877		7,866,922		228,714,128

Remaining contractual maturity analysis of derivative financial instruments as of December 31, 2022 and 2021 are as follows:

Net settlement of derivative financial instruments


	December 31, 2022
	Within 1 month			1~3 months			3~12 months		1~5 years			Over 5 years		Total
Trading purpose derivatives:
Currency	W	14,310			56,466			123,397		(231,289	)		329,021		291,905
Interest rate		1			—			—		—			—		1
Hedging purpose derivatives:
Interest rate		(43,682	)		(20,611	)		265,185		907,552			912,990		2,021,434

	W	(29,371	)		35,855			388,582		676,263			1,242,011		2,313,340

169

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued


	December 31, 2021
	Within 1 month			1~3 months			3~12 months		1~5 years			Over 5 years		Total
Trading purpose derivatives:
Currency	W	201			—			—		—			—		201
Interest rate		(11,805	)		(23,802	)		8,326		(158,553	)		535,474		349,640
Hedging purpose derivatives:
Interest rate		33,896			115,454			180,557		631,338			687,222		1,648,467

	W	22,292			91,652			188,883		472,785			1,222,696		1,998,308

Gross settlement of derivative financial instruments


	December 31, 2022
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Trading purpose derivatives:
Currency
Inflow	W	52,226,487		31,340,410		63,562,432		77,160,037		7,031,148		231,320,514
Outflow		52,120,608		31,419,674		63,702,102		76,526,053		6,968,341		230,736,778

Hedging purpose derivatives:
Currency
Inflow		382,466		331,653		8,692,048		15,738,325		3,653,029		28,797,521
Outflow		727,331		518,563		8,825,328		16,632,521		3,577,128		30,280,871

Total inflow	W	52,608,953		31,672,063		72,254,480		92,898,362		10,684,177		260,118,035

Total outflow	W	52,847,939		31,938,237		72,527,430		93,158,574		10,545,469		261,017,649


	December 31, 2021
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Trading purpose derivatives:
Currency
Inflow	W	56,066,208		34,469,849		99,529,773		89,932,702		8,452,901		288,451,433
Outflow		56,009,986		34,338,644		99,195,857		90,326,262		8,476,594		288,347,343

Hedging purpose derivatives:
Currency
Inflow		16,920		76,028		4,791,344		14,245,183		4,727,452		23,856,927
Outflow		16,786		79,183		6,083,666		14,902,210		4,624,965		25,706,810

Total inflow	W	56,083,128		34,545,877		104,321,117		104,177,885		13,180,353		312,308,360

Total outflow	W	56,026,772		34,417,827		105,279,523		105,228,472		13,101,559		314,054,153

170

Korea Development Bank

Notes to the Separate Financial Statements

December 31, 2022 and 2021

(In millions of won)

49. Risk Management, Continued

Remaining contractual maturity analysis of guarantees and commitments as of December 31, 2022 and 2021 are as follows:


	December 31, 2022
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Guarantees	W	1,004,990		1,588,345		3,883,351		9,810,539		420,035		16,707,260
Commitments		100,641		51,336		761,191		1,500,964		46,812,437		49,226,569

	W	1,105,631		1,639,681		4,644,542		11,311,503		47,232,472		65,933,829


	December 31, 2021
	Within 1 month		1~3 months		3~12 months		1~5 years		Over 5 years		Total
Guarantees	W	1,431,023		1,358,214		3,660,638		6,720,569		782,819		13,953,263
Commitments		227,768		21,982		715,958		2,765,040		44,880,979		48,611,727

	W	1,658,791		1,380,196		4,376,596		9,485,609		45,663,798		62,564,990

171

THE REPUBLIC OF KOREA

Land and History

Territory and Population

Located generally south of the 38th parallel on the Korean peninsula, The Republic of Korea covers about 38,000 square miles, approximately one-fourth of which is arable. The Republic has a population of approximately 51 million people. The country’s largest city and capital, Seoul, has a population of about 10 million people.

Map of the Republic of Korea

LOGO

Political History

Dr. Rhee Seungman, who was elected President in each of 1948, 1952, 1956 and 1960, dominated the years after the Republic’s founding in 1948. Shortly after President Rhee’s resignation in 1960 in response to student-led demonstrations, a group of military leaders headed by Park Chung Hee assumed power by coup. The military leaders established a civilian government, and the country elected Mr. Park as President in October 1963. President Park served as President until his assassination in 1979 following a period of increasing strife between the Government and its critics. The Government declared martial law and formed an interim

172

government under Prime Minister Choi Kyu Hah, who became the next President. After clashes between the Government and its critics, President Choi resigned, and General Chun Doo Hwan, who took control of the Korean army, became President in 1980.

In late 1980, the country approved, by national referendum, a new Constitution, providing for indirect election of the President by an electoral college and for certain democratic reforms, and shortly thereafter, in early 1981, re-elected President Chun.

Responding to public demonstrations in 1987, the legislature revised the Constitution to provide for direct election of the President. In December 1987, Roh Tae Woo won the presidency by a narrow plurality, after opposition parties led by Kim Young Sam and Kim Dae Jung failed to unite behind a single candidate. In February 1990, two opposition political parties, including the one led by Kim Young Sam, merged into President Roh’s ruling Democratic Liberal Party.

In December 1992, the country elected Kim Young Sam as President. The election of a civilian and former opposition party leader considerably lessened the controversy concerning the legitimacy of the political regime. President Kim’s administration reformed the political sector and deregulated and internationalized the Korean economy.

In December 1997, the country elected Kim Dae Jung as President. President Kim’s party, the Millennium Democratic Party (formerly known as the National Congress for New Politics), formed a coalition with the United Liberal Democrats led by Kim Jong Pil, with Kim Jong Pil becoming the first prime minister in President Kim’s administration. The coalition, which temporarily ended before the election held in April 2000, continued with the appointment of Lee Han Dong of the United Liberal Democrats as the Prime Minister in June 2000. The coalition again ended in September 2001.

In December 2002, the country elected Roh Moo Hyun as President. President Roh and his supporters left the Millennium Democratic Party in 2003 and formed a new party, the Uri Party, in November 2003. On August 15, 2007, 85 members of the National Assembly, previously belonging to the Uri Party, or the Democratic Party, formed the United New Democratic Party, or the UNDP. The Uri Party merged into the UNDP on August 20, 2007. In February 2008, the UNDP merged back into the Democratic Party. In December 2011, the Democratic Party merged with the Citizens Unity Party to form the Democratic United Party, which changed its name to the Democratic Party in May 2013.

In December 2007, the country elected Lee Myung-Bak as President. He commenced his term on February 25, 2008. In April 2018, the Korean prosecutor’s office indicted former President Lee on 16 counts of corruption, including bribery, abuse of power, embezzlement and other irregularities. In October 2018, a Seoul district court sentenced him to 15 years of prison term, which decision he subsequently appealed. In October 2020, the Supreme Court ruled against such appeal and sentenced him to 17 years of prison term. Subsequently, he was granted a special pardon by President Yoon, the current president of the Republic, and was released from prison in December 2022.

In December 2012, the country elected Park Geun-hye as President. She commenced her term on February 25, 2013. In March 2017, the Constitutional Court unanimously upheld a parliamentary vote to impeach President Park, triggering her immediate dismissal, for a number of constitutional and criminal violations, including violation of the Constitution and abuse of power by allowing her confidant to exert influence on state affairs and allowing senior presidential aides to aid in her extortion from companies. After a series of trials, former President Park was sentenced to a combined 22 years of prison term and a fine ofW21.5 billion. In light of her deteriorating health, however, former President Park was granted a special pardon by President Moon, her successor, and was released from prison on December 31, 2021.

A special election to elect a successor to former President Park was held on May 9, 2017 and the country elected Moon Jae-in as President. His term, which commenced on May 10, 2017, ended on May 9, 2022.

173

In March 2022, the country elected Yoon Suk-yeol as President. His term commenced on May 10, 2022. The Yoon administration’s key policy objectives include, among others, the following:

•

mitigating the adverse effects of the COVID-19 pandemic on the Korean economy, including through the provision of relief packages in support of small businesses and the self-employed;

•

stabilizing the housing market by increasing the supply of new homes and reforming property-related tax regulations;

•

pursuing economic prosperity by promoting private sector growth and supporting the semiconductor, artificial intelligence, battery and other strategic industries;

•

pursuing the denuclearization of the Korean Peninsula, enhancing Korea’s core military capabilities and improving foreign relations and national security;

•

pursuing enhanced environmental, social and corporate governance management, including through efforts to achieve carbon neutrality by reversing the previous administration’s nuclear-phase out policy and combining renewable energy with nuclear power generation; and

•

pursuing efficient management of the government through various measures, including the establishment of a digital platform and the relocation of presidential offices.

Government and Politics

Government and Administrative Structure

Governmental authority in the Republic is centralized and concentrated in a strong presidency. The President is elected by popular vote and can only serve one term of five years. The President chairs the State Council, which consists of the President, the prime minister, the deputy prime ministers, the respective heads of Government ministries and the ministers of state. The President can select the members of the State Council and appoint or remove all other Government officials, except for elected local officials.

The President can veto new legislation and take emergency measures in cases of natural disaster, serious fiscal or economic crisis, state of war or other similar circumstances. The President must promptly seek the concurrence of the National Assembly for any emergency measures taken and failing to do so automatically invalidates the emergency measures. In the case of martial law, the President may declare martial law without the consent of the National Assembly; provided, however, that the National Assembly may request the President to rescind such martial law.

The National Assembly exercises the country’s legislative power. The Constitution and the Public Official Election Act provide for the direct election of about 84% of the members of the National Assembly and the distribution of the remaining seats proportionately among parties winning more than five seats in the direct election or receiving over 3% of the popular vote. National Assembly members serve four-year terms. The National Assembly enacts laws, ratifies treaties and approves the national budget. The executive branch drafts most legislation and submits it to the National Assembly for approval.

The country’s judicial branch comprises the Supreme Court, the Constitutional Court and lower courts of various levels. The President appoints the Chief Justice of the Supreme Court and appoints the other Justices of the Supreme Court upon the recommendation of the Chief Justice. All appointments to the Supreme Court require the consent of the National Assembly. The Chief Justice, with the consent of the conference of Supreme Court Justices, appoints all the other judges in Korea. Supreme Court Justices serve for six years and all other judges serve for ten years. Other than the Chief Justice, justices and judges may be reappointed to successive terms.

The President formally appoints all nine judges of the Constitutional Court, but three judges must be designated by the National Assembly and three by the Chief Justice of the Supreme Court. Constitutional Court judges serve for six years and may be reappointed to successive terms.

174

Administratively, the Republic comprises eight provinces, two special autonomous provinces (Jeju and Gangwon), one special city (Seoul), six metropolitan cities (Busan, Daegu, Incheon, Gwangju, Daejeon and Ulsan) and one special autonomous city (Sejong). From 1961 to 1995, the national government controlled the provinces and the President appointed provincial officials. Local autonomy, including the election of provincial officials, was reintroduced in June 1995.

Political Parties

The 21st legislative general election was held on April 15, 2020 and the term of the National Assembly members elected in the 21st legislative general election commenced on May 30, 2020. Currently, there are three major political parties: The Democratic Party of Korea, or the DPK, the People Power Party, or the PPP, and the Justice Party, or the JP.

As of May 31, 2023, the parties control the following number of seats in the National Assembly:


	DPK		PPP		JP		Others		Total
Number of seats		167		113		6		13		299

Relations with North Korea

Relations between the Republic and North Korea have been tense over most of the Republic’s history. The Korean War began with the invasion of the Republic by communist forces from the north in 1950, which was repelled by the Republic and the United Nations forces led by the United States. Following a military stalemate, an armistice was reached establishing a demilitarized zone monitored by the United Nations in the vicinity of the 38th parallel in 1953.

North Korea maintains a military force estimated at more than a million regular troops, mostly concentrated near the northern side of the demilitarized zone, and approximately 7.6 million reserves. The Republic’s military forces, composed of approximately 555,000 regular troops and 3.1 million reserves, maintain a state of military preparedness along the southern side of the demilitarized zone. In addition, the United States has maintained its military presence in the Republic since the signing of the armistice and currently has approximately 25,300 troops stationed in the Republic. The Republic and the United States share a joint command structure over their military forces in Korea. In October 2014, the United States and the Republic agreed to implement a conditions-based approach to the dissolution of their joint command structure at an appropriate future date, which would allow the Republic to assume the command of its own armed forces in the event of war on the Korean peninsula. Over the years, the Republic and the United States have entered into a series of Special Measures Agreements, or SMAs, which cover the Republic’s contribution to the cost of maintaining the U.S. military presence in the Republic. In March 2021, the Republic and the United States reached an agreement to enter into a new six-year SMA, under which the Republic would increase its share of the cost of the American military presence in the Republic, which became effective in September 2021 upon ratification by the National Assembly.

The level of tension between the two Koreas has fluctuated and may increase abruptly as a result of current and future events. In particular, since the death of Kim Jong-il in December 2011, there has been increased uncertainty with respect to the future of North Korea’s political leadership and concern regarding its implications for political and economic stability in the region. Kim Jong-il’s third son, Kim Jong-un, has assumed power as his father’s designated successor.

In addition, there have been heightened security concerns in recent years stemming from North Korea’s nuclear weapons and ballistic missile programs as well as its hostile military and other actions against Korea. Some of the significant incidents in recent years include the following:

•

From time to time, North Korea has conducted ballistic missile tests. In February 2016, North Korea launched a long-range rocket in violation of its agreement with the United States as well as United Nations sanctions barring it from conducting launches that use ballistic missile technology. Despite

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international condemnation, North Korea released a statement that it intends to continue its rocket launch program and it conducted a series of ballistic missile tests in 2016 and 2017. In response, the United Nations Security Council issued unanimous statements condemning North Korea and agreeing to continue to closely monitor the situation and to take further significant measures, and in December 2017, unanimously passed a resolution extending existing sanctions that were imposed on North Korea. Despite such actions, North Korea increased the frequency of its missile tests in 2022, firing over 60 ballistic missiles, including multiple intercontinental ballistic missiles.

•

North Korea renounced its obligations under the Nuclear Non-Proliferation Treaty in January 2003 and conducted three rounds of nuclear tests between October 2006 and February 2013. In January 2016, North Korea conducted a fourth nuclear test, claiming that the test involved its first hydrogen bomb. In September 2016, North Korea conducted a fifth nuclear test, claiming to have successfully detonated a nuclear warhead that could be mounted on ballistic missiles. In September 2017, North Korea announced that it successfully conducted its sixth nuclear test by detonating a hydrogen bomb designed to be mounted on an intercontinental ballistic missile, which resulted in increased tensions in the region and elicited strong objections worldwide. In response to such tests (as well as North Korea’s long-range ballistic missile program), the United Nations Security Council unanimously passed several rounds of resolutions condemning North Korea’s actions and significantly expanding the scope of the sanctions applicable to North Korea, while the United States and the European Union also imposed additional sanctions on North Korea.

•

In August 2015, two Korean soldiers were injured in a landmine explosion near the Korean demilitarized zone. Claiming the landmines were set by North Koreans, the Korean army re-initiated its propaganda program toward North Korea utilizing loudspeakers near the demilitarized zone. In retaliation, the North Korean army fired artillery rounds on the loudspeakers, resulting in the highest level of military readiness for both Koreas.

•

In March 2010, a Korean naval vessel was destroyed by an underwater explosion, killing many of the crewmen on board. The Government formally accused North Korea of causing the sinking, while North Korea denied responsibility. Moreover, in November 2010, North Korea fired more than one hundred artillery shells that hit Korea’s Yeonpyeong Island near the Northern Limit Line, which acts as the de facto maritime boundary between Korea and North Korea on the west coast of the Korean peninsula, causing casualties and significant property damage. The Government condemned North Korea for the attack and vowed stern retaliation should there be further provocation.

North Korea’s economy also faces severe challenges, which may further aggravate social and political pressures within North Korea. Although bilateral summit meetings were held between Korea and North Korea in April and May 2018 and between the United States and North Korea in June 2018, February 2019 and June 2019, there can be no assurance that the level of tension on the Korean peninsula will not escalate in the future or that such escalation will not have a material adverse impact on the Republic’s economy and us. Any further increase in tension, which may occur, for example, if North Korea experiences a leadership crisis, high-level contacts between the Republic and North Korea break down or further military hostilities occur, could have a material adverse effect on the Republic’s economy and us. Over the longer term, reunification of the two Koreas could occur. Reunification may entail a significant economic commitment by the Republic.

Foreign Relations and International Organizations

The Republic maintains diplomatic relations with most nations of the world, most importantly with the United States with which it entered into a mutual defense treaty and several economic agreements. The Republic also has important relationships with Japan and China, its largest trading partners together with the United States.

The Republic belongs to a number of supranational organizations, including:

•

United Nations;

•

the International Monetary Fund, or the IMF;

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•

the World Bank;

•

the Asian Development Bank, or the ADB;

•

the Multilateral Investment Guarantee Agency;

•

the International Finance Corporation;

•

the International Development Association;

•

the African Development Bank;

•

the International Bank for Reconstruction and Development;

•

the European Bank for Reconstruction and Development;

•

the Bank for International Settlements;

•

the World Health Organization, or the WHO;

•

the World Trade Organization, or the WTO;

•

the International Atomic Energy Agency, or the IAEA;

•

the Inter-American Development Bank, or the IDB;

•

the Organization for Economic Cooperation and Development, or the OECD; and

•

the Asian Infrastructure Investment Bank.

The Economy

The following table sets forth information regarding certain of the Republic’s key economic indicators for the periods indicated.


	As of or for the year ended December 31,
	2018			2019			2020			2021			2022
	(billions of dollars and trillions of Won, except percentages)
GDP Growth (at current prices)		3.1	%		1.3	%		0.7	%		7.2	%⁽⁷⁾		3.8	%⁽⁷⁾
GDP Growth (at chained 2015 year prices)		2.7	%		2.3	%		(0.7	)%		4.3	%⁽⁷⁾		2.6	%⁽⁷⁾
Inflation⁽¹⁾		1.5	%		0.4	%		0.5	%		2.5	%		5.1	%⁽⁷⁾
Unemployment⁽²⁾		3.8	%		3.8	%		4.0	%		3.7	%		2.9	%⁽⁷⁾
Trade Surplus (Deficit)⁽³⁾	$	69.7		$	38.9		$	44.9		$	29.4		$	(47.8	)⁽⁷⁾
Foreign Currency Reserves	$	403.7		$	408.8		$	443.1		$	463.1		$	423.2
External Liabilities⁽⁴⁾	$	441.2		$	470.7		$	550.6		$	632.4		$	664.5	⁽⁷⁾
Fiscal Balance	W	31.2		W	(12.0	)	W	(71.2	)	W	(30.5	)	W	(64.6	)⁽⁷⁾
Direct Internal Debt of the Government⁽⁵⁾(as % of GDP⁽⁶⁾⁾		35.6	%		37.4	%		44.2	%		49.2	%		N/A	⁽⁸⁾
Direct External Debt of the Government⁽⁵⁾(as % of GDP⁽⁶⁾⁾		0.4	%		0.4	%		0.5	%		0.6	%		N/A	⁽⁸⁾

(1)	Measured by the year-on-year change in the consumer price index with base year 2020, as announced by The Bank of Korea.

(2)	Average for year.

(3)	Derived from customs clearance statistics on a C.I.F. basis, meaning that the price of goods includes insurance and freight cost.

(4)	Calculated under the criteria based on the sixth edition of the Balance of Payment Manual published by the International Monetary Fund in December 2010.

(5)	Does not include guarantees by the Government. See “—Debt—External and Internal Debt of the Government—Guarantees by the Government” for information on outstanding guarantees by the Government.

(6)	At chained 2015 year prices.

(7)	Preliminary.

(8)	Not available.

Source: The Bank of Korea

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Worldwide Economic and Financial Difficulties

In recent years, the global financial markets have experienced significant volatility as a result of, among other things:

•

the COVID-19 pandemic, as further described below;

•

hostilities, political or social tensions involving Russia (including the invasion of Ukraine by Russia and ensuing actions that the United States and other countries have taken or may take in the future, such as the imposition of sanctions against Russia) and the resulting adverse effects on the global supply of oil and other natural resources and the global financial markets;

•

rising inflationary pressures leading to increases in the costs of goods and services and a decrease in purchasing power;

•

interest rate fluctuations as well as perceived or actual changes in policy rates by, or other monetary and fiscal policies set forth by, the U.S. Federal Reserve and other central banks;

•

disruptions in the global supply chain for raw materials, natural resources, consumer goods, rare earth minerals, component parts and other supplies, including as a result of the COVID-19 pandemic, government policies and labor shortages;

•

adverse developments in the global financial markets and industry, including difficulties faced by several banks in the United States and Europe;

•

a deterioration in economic and trade relations between the United States and its major trading partners, including China;

•

financial and social difficulties affecting many governments worldwide, in particular in Latin America and Europe;

•

escalations in trade protectionism globally and geopolitical tensions in East Asia and the Middle East;

•

the slowdown of economic growth in China and other major emerging market economies;

•

political and social instability in various countries in the Middle East, including Iran, Iraq, Syria and Yemen; and

•

fluctuations in oil and commodity prices.

COVID-19, an infectious disease caused by severe acute respiratory syndrome coronavirus 2, has spread globally and was declared a “pandemic” by the WHO in March 2020. The COVID-19 pandemic has led to significant global economic and financial disruptions, including an adverse impact on international trade and business activities. Although there have been signs of recovery in the global economy resulting from the availability of COVID-19 vaccinations and gradual normalization of business activities, the extent to which the COVID-19 pandemic may continue to impact the global economy will depend on future developments, including the scope and duration of the COVID-19 pandemic as well as the timeliness and effectiveness of actions taken by governmental authorities, central banks, healthcare providers and other third parties around the world in order to contain and mitigate the effects of COVID-19. The possibility of a global recession in major markets due to the impact of COVID-19, including discrepancies in vaccine rollout rates, continued decline in consumer confidence and weakened demand for face-to-face services, could cause significant volatility in the global economic and financial systems.

There has been significant volatility in global financial markets resulting from, among others, the COVID-19 pandemic, Russia’s invasion of Ukraine and ensuing sanctions against Russia, and more recently, difficulties faced by several banks in the United States and Europe, which has also led to significant volatility in the Korea Composite Stock Price Index in recent years. See “—The Financial System—Securities Markets”. Declines in the index and large amounts of sales of Korean securities by foreign investors and subsequent

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repatriation of the proceeds of such sales may adversely affect the value of the Won, the foreign currency reserves held by financial institutions in Korea, and the ability of Korean companies and banks to raise capital. Moreover, the value of the Won relative to major foreign currencies in general and the U.S. dollar in particular has fluctuated widely. A depreciation of the Won generally increases the cost of imported goods and services and the required amount of the Won revenue for Korean companies to service foreign currency-denominated debt.

In light of the high level of interdependence of the global economy, any of the foregoing developments could have a material adverse effect on the Korean economy and financial markets. In addition, in the event of difficult conditions in the global credit markets or a deterioration of the global economy in the future, the Korean economy could be adversely affected and Korean banks may be forced to fund their operations at a higher cost or may be unable to raise as much funding as they need to support their lending and other activities.

In addition to the global developments, domestic developments that could lead to or contribute to a material adverse effect on the Korean economy include, among other things, the following:

•

a slowdown in consumer spending and depressed consumer sentiment due to the outbreak of infectious diseases, such as the COVID-19 pandemic discussed above;

•

increasing delinquencies and credit defaults by consumer and small- and medium-sized enterprise borrowers, which may occur due to, among others, the impact of the COVID-19 pandemic and the rise in interest rates;

•

steadily rising household debt consisting of housing loans and merchandise credit, which increased to approximately Won 1,867.0 trillion as of December 31, 2022 from Won 843.2 trillion as of December 31, 2010, primarily due to increases in mortgage loans and purchases with credit cards;

•

deterioration in economic or diplomatic relations between Korea and other countries resulting from territorial or trade disputes or disagreements in foreign policy;

•

a substantial increase in the Government’s expenditures for (i) fiscal stimulus measures to provide emergency relief payments to households and emergency loans to corporations in need of funding due to the COVID-19 pandemic and (ii) pension and social welfare programs, due in part to an aging population (defined as the population of people aged 65 years or older) that accounted for approximately 17.5% of the Republic’s total population as of December 31, 2022, an increase from 7.2% as of December 31, 2000, and is expected to surpass 20.6% in 2025;

•

decreases in the market prices of Korean real estate; and

•

the occurrence of severe health epidemics that affect the livestock industry.

The first confirmed case of COVID-19 in Korea was announced in January 2020 and the subsequent spread of the virus has since resulted in more than 31 million confirmed cases and more than 34,000 fatalities related to COVID-19 reported in Korea as of May 31, 2023. During the course of the pandemic, the Government implemented a number of measures in order to contain the spread of the COVID-19 disease, including, among others, a nationwide order for social distancing and a mask mandate, implementation of strict self-isolation and quarantine measures for the infected, and the closure of public facilities. In addition, the Government implemented the following measures, among others, in order to alleviate the adverse impact of the COVID-19 pandemic on the Korean economy and stabilize the financial markets: (i) lowering of The Bank of Korea’s policy rate from 1.25% to 0.75% in March 2020 and subsequently to 0.5% in May 2020, before gradually raising the policy rate back to pre-pandemic levels starting in August 2021 (see “—Monetary Policy—Interest Rates”), (ii) execution of a bilateral currency swap agreement with the U.S. Federal Reserve for the provision of US$60 billion in exchange for the Republic’s Won-denominated treasury bonds in March 2020, which agreement expired in December 2021 after three renewals throughout 2020 and 2021, and (iii) execution of a number of supplementary budgets for spending on various measures to mitigate the adverse effects of the COVID-19

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pandemic on the Korean economy, including in the form of loans, guarantees and maturity extensions for various entities facing liquidity crises, as well as emergency relief payments and expansion of social security contribution reliefs for those most impacted by the COVID-19 pandemic (see “—Government Finance”).

In February 2021, the Government began its COVID-19 vaccination campaign, and as of May 31, 2023, more than 86% of the Korean population was fully vaccinated. With the gradual decline in the number of confirmed cases and the reduced severity of symptoms related to COVID-19, the Government began to lift most of its pandemic-related restrictions, including limits on private gatherings and restaurant hours. Most recently, as a major step toward the return to pre-pandemic normalcy, the Government removed the mask mandate for most indoor spaces as well as public transportation from January to March 2023, although the mask mandate currently still remains in place for certain places designated as high-risk. Given the intermittent resurgence in the number of confirmed cases, the Government currently plans to continue to carefully monitor the situation before reinstating any pandemic-related restrictions again, if at all.

Despite signs of recovery from the COVID-19 pandemic generally, the outlook for the Republic’s economy and its financial services sector in 2023 and for the foreseeable future remains uncertain due to the impact of the COVID-19 pandemic on the Korean and global economies and financial markets, as well as factors such as fluctuations in oil and commodity prices, interest rates and exchange rates, rising inflationary pressures, higher unemployment, lower consumer confidence, stock market volatility, changes in fiscal and monetary policies, the ongoing military conflict involving Russia and Ukraine, difficulties faced by several banks in the United States and Europe, and continued tensions with North Korea.

Gross Domestic Product

GDP measures the market value of all final goods and services produced within a country for a given period and reveals whether a country’s productive output rises or falls over time. Economists present GDP in both current market prices and “real” or “inflation-adjusted” terms. In March 2009, the Republic adopted a method known as the “chain-linked” measure of GDP, replacing the previous fixed-base, or “constant” measure of GDP, to show the real growth of the aggregate economic activity, as recommended by the System of National Accounts 1993. GDP at current market prices values a country’s output using the actual prices of each year, whereas the “chain-linked” measure of GDP is compiled by using “chained indices” linking volume growth between consecutive time periods. In March 2014, the Republic published a revised GDP calculation method by implementing the System of National Accounts 2008 and updating the reference year from 2005 to 2010 to align Korean national accounts statistics with the recommendations of the new international standards for compiling national economic accounts and to maintain comparability with other nations’ accounts. The main components of these revisions include, among other things, (i) recognizing expenditures for research and development and creative activity for the products of entertainment, literary and artistic originals as fixed investment, (ii) incorporating a wide array of new and revised source data such as the economic census, the population and housing census and 2010 benchmark input-output tables, which provide thorough and detailed information on the structure of the Korean economy, (iii) developing supply-use tables, which provide a statistical tool for ensuring consistency among the production, expenditure and income approaches to measuring GDP and (iv) recording merchandise trade transactions based on ownership changes rather than movements of goods across the national border. The Republic has updated the reference year from 2010 to 2015 in July 2019 to better align Korean national accounts statistics with the recommendations of the previously implemented System of National Accounts 2008 and to maintain comparability with other countries’ accounts.

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The following table sets out the composition of the Republic’s GDP at current market and chained 2015 year prices and the annual average increase in the Republic’s GDP.

Gross Domestic Product


	2018			2019			2020			2021⁽¹⁾			2022⁽¹⁾			As % of GDP 2022⁽¹⁾
	(billions of Won)
Gross Domestic Product at Current Market Prices:
Private		908,273.7			931,669.5			897,449.2			955,779.6			1,040,363.7			48.4
Government		305,513.0			329,295.5			349,122.5			376,218.8			402,837.3			18.7
Gross Capital Formation		592,858.4			601,581.4			615,921.9			664,794.7			713,024.3			33.2
Exports of Goods and Services		788,279.0			766,602.0			704,554.0			870,831.7			1,037,793.1			48.3
Less Imports of Goods and Services		(701,150.7	)		(710,990.2	)		(633,487.5	)		(796,694.3	)		(1,043,600.0	)		(48.5	)
Statistical Discrepancy		(276.4	)		881.5			(407.7	)		727.5			157.3			0.0
Expenditures on Gross Domestic Product		1,893,497.0			1,919,039.9			1,933,152.4			2,071,658.0			2,150,575.8			100.0
Net Factor Income from the Rest of the World		4,955.7			16,675.3			14,868.3			23,063.3			28,299.9			1.3
Gross National Income⁽²⁾		1,898,452.7			1,935,715.2			1,948,020.7			2,094,721.3			2,178,875.7			101.3
Gross Domestic Product at Chained 2015 Year Prices:
Private		872,304.4			890,167.7			849,072.1			882,459.9			920,719.5			46.9
Government		286,644.8			304,760.3			319,321.3			337,684.6			351,624.6			17.9
Gross Capital Formation		566,376.1			555,494.6			561,440.4			576,617.3			574,457.6			29.2
Exports of Goods and Services		773,752.6			790,874.0			765,015.6			849,146.7			876,338.7			44.6
Less Imports of Goods and Services		(691,374.1	)		(693,412.8	)		(661,725.2	)		(729,824.9	)		(756,773.8	)		(38.5	)
Statistical Discrepancy		(2,511.7	)		(1,429.8	)		199.6			(993.1	)		(945.0	)		0.0
Expenditures on Gross Domestic Product⁽³⁾		1,807,735.9			1,848,958.5			1,836,881.1			1,915,777.5			1,964,831.7			100.0
Net Factor Income from the Rest of the World in the Terms of Trade		4,519.5			15,335.4			13,772.4			20,784.9			24,023.4			1.2
Trading Gains and Losses from Changes in the Terms of Trade		3,272.8			(40,224.9	)		(26,407.1	)		(44,730.4	)		(115,648.1	)		(5.9	)
Gross National Income⁽⁴⁾		1,815,558.4			1,824,136.5			1,824,242.5			1,891,893.2			1,873,275.2			95.3
Percentage Increase (Decrease) of GDP over Previous Year:
At Current Prices		3.1			1.3			0.7			7.2			3.8
At Chained 2015 Year Prices		2.7			2.3			(0.7	)		4.3			2.6

(1)	Preliminary.

(2)	GDP plus net factor income from the rest of the world is equal to the Republic’s gross national income.

(3)	Under the “chain-linked” measure of GDP, the components of GDP will not necessarily add up to the total GDP.

(4)	Under the “chain-linked” measure of Gross National Income, the components of Gross National Income will not necessarily add up to the total Gross National Income.

Source: The Bank of Korea

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The following table sets out the Republic’s GDP by economic sector at current market prices:

Gross Domestic Product by Economic Sector

(at current market prices)


		2018		2019		2020		2021⁽¹⁾		2022⁽¹⁾		As % of GDP 2022⁽¹⁾
	��	(billions of Won)
Industrial Sectors:			680,553.1		661,196.9		665,292.9		709,244.0		717,086.0		33.3
Agriculture, Forestry and Fishing			34,528.9		31,134.9		35,421.0		37,075.4		34,116.5		1.6
Manufacturing, Mining and Quarrying			506,854.7		487,889.2		481,573.6		529,346.9		553,026.6		25.7
Mining and Quarrying			2,247.7		1,943.6		1,945.1		1,862.8		1,872.8		0.1
Manufacturing			504,607.0		485,945.6		479,628.5		527,484.1		551,153.8		25.6
Electricity, Gas and Water Supply			36,813.2		36,580.7		43,118.7		36,090.3		18,781.2		0.9
Construction			102,356.3		105,592.1		105,179.6		106,731.4		111,161.7		5.2
Services:			1,049,864.7		1,095,424.2		1,104,240.8		1,180,337.3		1,252,558.6		58.2
Wholesale and Retail Trade, Accommodation and Food Services			180,661.0		180,358.0		172,245.3		180,652.2		194,505.1		9.0
Transportation and Storage			57,088.1		59,949.6		56,077.8		66,481.7		75,432.1		3.5
Finance and Insurance			104,336.2		104,718.6		110,441.3		124,125.5		135,635.0		6.3
Real Estate			135,890.3		142,735.8		145,464.2		147,903.4		146,437.2		6.8
Information and Communication			79,242.9		82,602.9		87,500.1		97,570.2		100,466.8		4.7
Business Activities			161,832.1		175,225.1		179,476.6		191,980.6		204,665.5		9.5
Public Administration, Defense and Social Security			115,086.1		122,162.4		128,647.1		135,111.1		142,999.3		6.6
Education			90,933.2		93,717.9		92,681.0		97,719.1		101,548.4		4.7
Human Health and Social Work			80,937.0		88,588.1		93,245.6		98,091.9		104,090.2		4.8
Cultural and Other Services			43,857.8		45,365.8		38,461.8		40,701.6		46,779.0		2.2
Taxes Less Subsidies on Products			163,079.3		162,418.6		163,618.9		182,076.8		180,931.1		8.4
Gross Domestic Product at Current Market Prices			1,893,497.0		1,919,039.9		1,933,152.4		2,071,658.0		2,150,575.8		100.0
Net Factor Income from the Rest of the World			4,955.7		16,675.3		14,868.3		23,063.3		28,299.9		1.3
Gross National Income at Current Market Price			1,898,452.7		1,935,715.1		1,948,020.7		2,094,721.3		2,178,875.7		101.3

(1)	Preliminary.

Source: The Bank of Korea

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The following table sets out the Republic’s GDP per capita:

Gross Domestic Product per capita

(at current market prices)


	2018		2019		2020		2021⁽¹⁾		2022⁽¹⁾
GDP per capita (thousands of Won)		36,782		37,218		37,334		40,036		41,655
GDP per capita (U.S. dollar)		33,429		31,929		31,637		34,984		32,237
Average Exchange Rate (in Won per U.S. dollar)		1,100.3		1,165.7		1,180.1		1,144.4		1,292.1

(1)	Preliminary.

Source: The Bank of Korea

The following table sets out the Republic’s Gross National Income, or GNI, per capita:

Gross National Income per capita

(at current market prices)


	2018		2019		2020		2021⁽¹⁾		2022⁽¹⁾
GNI per capita (thousands of Won)		36,930		37,539		37,621		40,482		42,203
GNI per capita (U.S. dollar)		33,564		32,204		31,881		35,373		32,661
Average Exchange Rate (in Won per U.S. dollar)		1,100.3		1,165.7		1,180.1		1,144.4		1,292.1

(1)	Preliminary.

Source: The Bank of Korea

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The following table sets out the Republic’s GDP by economic sector:

Gross Domestic Product by Economic Sector

(at chained 2015 year prices)


	2018		2019		2020		2021⁽¹⁾		2022⁽¹⁾		As % of GDP 2022⁽¹⁾
	(billions of Won)
Industrial Sectors:		654,072.8		658,741.5		653,510.5		686,043.1		693,728.9		35.3
Agriculture, Forestry and Fishing		32,540.4		32,859.2		32,054.3		32,634.3		32,222.4		1.6
Manufacturing, Mining and Quarrying		485,854.0		491,476.4		486,556.9		518,896.7		525,857.6		26.8
Mining and Quarrying		2,030.9		1,863.6		1,908.1		1,871.9		1,771.3		0.1
Manufacturing		483,823.1		489,612.8		484,648.8		517,024.8		524,086.3		26.7
Electricity, Gas and Water Supply		45,116.2		44,921.8		46,810.9		48,610.4		49,529.6		2.5
Construction		90,562.2		89,484.1		88,088.4		85,901.7		86,119.3		4.4
Services:		1,003,834.7		1,039,879.8		1,033,780.7		1,075,172.3		1,119,900.7		57.0
Wholesale and Retail Trade, Accommodation and Food Services		171,599.5		174,419.9		168,483.3		174,342.0		186,202.1		9.5
Transportation and Storage		61,888.5		62,746.9		53,954.4		55,309.9		60,388.1		3.1
Finance and Insurance		98,999.7		103,386.2		111,653.9		119,643.6		122,560.5		6.2
Real Estate		132,057.6		136,593.8		137,650.2		139,493.7		139,489.8		7.1
Information and Communication		78,941.7		82,473.3		85,520.8		91,317.4		95,332.2		4.9
Business Activities		150,522.3		157,790.8		156,898.3		162,133.3		166,150.2		8.5
Public Administration, Defense and Social Security		104,100.3		108,219.5		112,395.7		115,622.7		119,270.8		6.1
Education		86,440.9		87,493.6		85,465.3		89,488.1		92,660.1		4.7
Human Health and Social Work		78,160.0		85,046.7		87,053.5		91,405.7		97,117.1		4.9
Cultural and Other Services		41,218.1		41,709.1		34,705.3		36,415.9		40,729.8		2.1
Taxes Less Subsidies on Products		149,966.5		150,812.7		150,084.3		156,836.6		153,667.3		7.8
Gross Domestic Product⁽²⁾		1,807,735.9		1,848,958.5		1,836,881.1		1,915,777.5		1,964,831.7		100.0

(1)	Preliminary.

(2)	Under the “chain-linked” measure of GDP, the components of GDP will not necessarily add up to the total GDP.

Source: The Bank of Korea

GDP growth in 2018 was 2.7% at chained 2015 year prices, as aggregate private and general government consumption expenditures increased by 3.5% and exports of goods and services increased by 3.5%, which more than offset a decrease in gross domestic fixed capital formation by 2.4% and an increase in imports of goods and services by 0.8%, each compared with 2017.

GDP growth in 2019 was 2.3% at chained 2015 year prices, as aggregate private and general government consumption expenditures increased by 3.1%, exports of goods and services increased by 2.2% and imports of goods and services decreased by 0.3%, which more than offset a decrease in gross domestic fixed capital formation by 2.9%, each compared with 2018.

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GDP in 2020 contracted by 0.7% at chained 2015 year prices, primarily due to a 4.6% decrease in private consumption expenditures and a 3.3% decrease in exports of goods and services, which were offset in part by a 4.8% increase in general government consumption expenditures, a 2.6% increase in gross domestic fixed capital formation and a 3.3% decrease in imports of goods and services, each compared with 2019. The contraction of the Republic’s GDP in 2020 was primarily due to the COVID-19 pandemic.

Based on preliminary data, GDP growth in 2021 was 4.3% at chained 2015 year prices, as exports of goods and services increased by 11.0%, aggregate private and general government consumption expenditures increased by 4.4% and gross domestic fixed capital formation increased by 3.7%, which more than offset an increase in imports of goods and services by 10.3%, each compared with 2020.

Based on preliminary data, GDP growth in 2022 was 2.6% at chained 2015 year prices, as aggregate private and general government consumption expenditures increased by 4.3% and exports of goods and services increased by 3.2%, which more than offset an increase in imports of goods and services by 3.7% and a decrease in gross fixed capital formation by 0.8%, each compared with 2021.

Based on preliminary data, GDP growth in the first quarter of 2023 was 0.8% at chained 2015 year prices, primarily due to an increase in aggregate private and general government consumption expenditures by 4.4% and an increase in gross fixed capital formation by 3.2%, the effects of which were offset in large part by an increase in imports of goods and services by 4.4% and a decrease in exports of goods and services by 3.0%, each compared with the corresponding period of 2022.

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Principal Sectors of the Economy

Industrial Sectors

The following table sets out production indices for the principal industrial products of the Republic and their relative contribution to total industrial production:

Industrial Production

(2020 = 100)


	Index Weight⁽¹⁾		2018		2019		2020		2021		2022⁽²⁾
Industries		10,000.0		99.4		100.3		100.0		107.7		108.2
Mining and Manufacturing		9,593.5		99.4		100.3		100.0		107.7		108.2
Mining		24.0		69.8		70.2		100.0		93.6		96.2
Manufacturing		9,569.5		99.4		100.4		100.0		107.7		108.2
Food Products		451.8		90.9		96.3		100.0		111.0		110.2
Beverage Products		88.5		110.5		112.5		100.0		93.0		91.4
Tobacco Products		42.4		86.4		92.9		100.0		88.4		93.2
Textiles		113.4		133.3		121.2		100.0		104.2		100.4
Wearing Apparel, Clothing Accessories and Fur Articles		69.8		243.1		158.9		100.0		133.3		109.1
Tanning and Dressing of Leather, Luggage and Footwear		16.4		184.8		180.7		100.0		92.0		78.7
Wood and Products of Wood and Cork (Except Furniture)		32.5		145.1		94.0		100.0		80.8		87.2
Pulp, Paper and Paper Products		135.0		109.4		106.4		100.0		97.6		95.6
Printing and Reproduction of Recorded Media		41.8		110.9		119.4		100.0		109.4		129.0
Coke, hard-coal and lignite fuel briquettes and Refined Petroleum Products		192.4		110.4		107.0		100.0		98.3		101.9
Chemicals and Chemical Products		854.2		97.7		100.8		100.0		105.9		93.5
Pharmaceuticals, Medicinal Chemicals and Botanical Products		295.8		87.9		77.6		100.0		96.5		113.4
Rubber and Plastic Products		411.4		107.0		111.3		100.0		104.9		111.5
Non-metallic Minerals		214.5		107.4		110.9		100.0		119.7		102.0
Basic Metals		662.2		108.0		106.1		100.0		100.9		95.6
Fabricated Metal Products		459.3		108.4		114.3		100.0		82.0		80.1
Electronic Components, Computer, Radio, Television and Communication Equipment and Apparatuses		2,657.7		334.7		303.0		100.0		340.8		313.6
Medical, Precision and Optical Instruments, Watches and Clocks		408.1		376.1		336.9		100.0		298.0		362.8
Electrical Equipment		445.8		96.6		105.4		100.0		111.8		138.2
Other Machinery and Equipment		737.3		109.6		104.0		100.0		116.6		113.9
Motor Vehicles, Trailers and Semitrailers		987.5		125.7		122.8		100.0		109.6		121.2
Other Transport Equipment		127.3		83.8		98.4		100.0		93.6		108.4
Furniture		51.6		107.9		90.2		100.0		72.4		62.9
Other Products		39.1		107.7		107.0		100.0		233.5		330.3
Electricity, Gas		406.5		105.8		103.0		100.0		104.9		107.5
Total Index		10,000.0		99.4		100.3		100.0		107.7		108.2

(1)	Index weights were established on the basis of an industrial census in 2020 and reflect the average annual value added by production in each of the classifications shown, expressed as a percentage of total value added in the mining, manufacturing and electricity and gas industries in that year.

(2)	Preliminary.

Source: The Bank of Korea; Korea National Statistical Office

Industrial production increased by 1.2% in 2018, primarily due to increased domestic consumption and exports. Industrial production increased by 0.9% in 2019, primarily due to increased domestic consumption.

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Industrial production decreased by 0.3% in 2020, primarily due to decreased domestic consumption and exports resulting from the COVID-19 pandemic. Industrial production increased by 7.7% in 2021, primarily due to increased exports and domestic consumption. Based on preliminary data, industrial production increased by 0.5% in 2022, primarily due to increased exports and domestic consumption.

Manufacturing

The manufacturing sector increased production by 1.2% in 2018, primarily due to increased demand for consumer electronics products and electronic components (including semiconductors). The manufacturing sector increased production by 0.9% in 2019, primarily due to increased demand for consumer electronics products and electronic components (including semiconductors). The manufacturing sector decreased production by 0.4% in 2020, primarily due to decreased demand for automobiles. The manufacturing sector increased production by 7.7% in 2021, primarily due to increased demand for consumer electronics products, electronic components (including semiconductors) and machinery. Based on preliminary data, the manufacturing sector increased production by 0.5% in 2022, primarily due to increased demand for electronic components (including semiconductors) and automobiles.

Automobiles. In 2018, automobile production decreased by 2.1%, domestic sales volume recorded a decrease of 0.5% and exports sales volume recorded a decrease of 3.2%, compared with 2017, primarily due to decreased domestic production of automobiles resulting mainly from partial strikes by unionized workers of automobile manufacturers and the restructuring of GM Korea’s production units and decreased exports to countries in South America and the Middle East. In 2019, automobile production decreased by 1.9%, domestic sales volume recorded a decrease of 1.8% and export sales volume recorded a decrease of 2.0%, compared with 2018, primarily due to decreased domestic production of automobiles resulting mainly from partial strikes by unionized workers of automobile manufacturers, increased overseas production, decreased domestic demand for automobiles and decreased demand for automobiles in China. In 2020, automobile production decreased by 11.2% and export sales volume recorded a decrease of 21.4%, compared with 2019, primarily due to a general decline in global demand for automobiles caused by the COVID-19 pandemic, which outpaced a 4.7% increase in domestic sales volume from 2019 to 2020, primarily due to increased domestic demand for automobiles. In 2021, automobile production decreased by 1.3% and domestic sales volume recorded a decrease of 8.5%, compared with 2020, primarily due to the global shortage of semiconductors amid the COVID-19 pandemic, but exports sales volume recorded an increase of 8.6% compared with 2020, primarily due to an increase in the market share of domestic automobile manufacturers in the global automotive market. Based on preliminary data, in 2022, automobile production increased by 8.5% and exports sales volume recorded an increase of 12.7%, compared with 2021, primarily due to an increase in demand for Korean automobiles in the global automotive market as well as the gradual easing of the global shortage of automotive semiconductors in the second half of 2022, but domestic sales volume recorded a decrease of 3.2% compared with 2021, primarily due to the global shortage of automotive semiconductors during the first half of 2022.

Electronics. In 2018, electronics production amounted toW365,548 billion, an increase of 6.6% from the previous year, and exports amounted to US$220.3 billion, an increase of 11.5% from the previous year, primarily due to increases in demand for semiconductors and lithium-ion batteries. In 2018, export sales of semiconductor memory chips constituted approximately 21.2% of the Republic’s total exports. In 2019, electronics production amounted toW322,729 billion, a decrease of 11.7% from the previous year, and exports amounted to US$176.9 billion, a decrease of 19.7% from the previous year, primarily due to a significant decrease in semiconductor prices. In 2019, export sales of semiconductor memory chips constituted approximately 17.6% of the Republic’s total exports. In 2020, electronics production amounted toW332,084 billion, an increase of 2.9% from the previous year, and exports of electronics amounted to US$183.5 billion, an increase of 3.7% from the previous year, primarily due to an increase in demand for semiconductors, computers and other electronic apparatuses. In 2020, export sales of semiconductor memory chips constituted approximately 19.5% of the Republic’s total exports. In 2021, electronics production amounted toW368,407 billion, an increase of 10.9% from the previous year, and exports amounted to US$227.6 billion, an increase of 24.0% from the previous year,

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primarily due to an increase in demand for semiconductors, display panels, mobile devices, solid state drives and secondary cell batteries. In 2021, export sales of semiconductor memory chips constituted approximately 20.0% of the Republic’s total exports. Based on preliminary data, in 2022, electronics production amounted toW369,552 billion, an increase of 0.3% from the previous year, and exports amounted to US$233.3 billion, an increase of 2.5% from the previous year, primarily due to an increase in demand for semiconductors, display panels and secondary cell batteries. In 2022, export sales of semiconductor memory chips constituted approximately 19.1% of the Republic’s total exports.

Iron and Steel. In 2018, crude steel production totaled 72.5 million tons, an increase of 1.9% from 2017, primarily due to the recovery of the domestic shipbuilding industry, but export sales volume of iron and steel products decreased by 3.9%, primarily due to restrictions on imports of steel products imposed by the United States, Canada and the European Union. In 2019, crude steel production totaled 71.4 million tons, a decrease of 1.5% from 2018, primarily due to adverse conditions in the construction and shipbuilding industries, and export sales volume of iron and steel products decreased by 0.2%, primarily due to continued restrictions on imports of steel products imposed by the United States, Canada and the European Union. In 2020, crude steel production totaled 67.1 million tons, a decrease of 6.0% from 2019, primarily due to adverse conditions in the construction and shipbuilding industries in light of the COVID-19 pandemic, and export sales volume of iron and steel products decreased by 4.9%, primarily due to a decrease in global demand for crude steel products resulting from the COVID-19 pandemic. In 2021, crude steel production totaled 70.4 million tons, an increase of 4.9% from 2020, primarily due to an increase in domestic demand for crude steel products following a gradual economic recovery from the COVID-19 pandemic, but export sales volume of iron and steel products decreased by 6.1%, primarily due to an increase in the price of steel products coupled with a decrease in global demand for crude steel products resulting from the COVID-19 pandemic. Based on preliminary data, in 2022, crude steel production totaled 65.9 million tons, a decrease of 6.4% from 2021, primarily due to disruptions in supply chain resulting from the invasion of Ukraine by Russia and the temporary closure of steel production plants in Korea due to typhoons during the course of 2022, and export sales volume of iron and steel products decreased by 5.3%, primarily due to a decrease in global demand for crude steel products resulting from the lingering effects of the COVID-19 pandemic and a general slowdown of the global economy.

Shipbuilding. In 2018, the Republic’s shipbuilding orders amounted to approximately 13 million compensated gross tons, an increase of 62.5% compared to 2017, primarily due to increased demand for LNG carriers, oil tankers and container carriers. In 2019, the Republic’s shipbuilding orders amounted to approximately 10 million compensated gross tons, a decrease of 23.1% compared to 2018, primarily due to decreased demand for container carriers and bulk carriers, which more than offset increased demand for LNG carriers. In 2020, the Republic’s shipbuilding orders amounted to approximately 8 million compensated gross tons, a decrease of 20.0% compared to 2019, primarily due to the adverse conditions in the domestic and global shipbuilding industry resulting from the COVID-19 pandemic. In 2021, the Republic’s shipbuilding orders amounted to approximately 17 million compensated gross tons, an increase of 112.5% compared to 2020, primarily due to increased demand for container carriers and LNG carriers. Based on preliminary data, in 2022, the Republic’s shipbuilding orders amounted to approximately 16 million compensated gross tons, a decrease of 5.9% compared to 2021, primarily due to a decrease in demand for oil tankers and container carriers.

Agriculture, Forestry and Fisheries

The Government’s agricultural policy has traditionally focused on:

•

grain production;

•

development of irrigation systems;

•

land consolidation and reclamation;

•

seed improvement;

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•

mechanization measures to combat drought and flood damage; and

•

increasing agricultural incomes.

Recently, however, the Government has increased emphasis on cultivating profitable crops and strengthening international competitiveness as a result of the continued opening of the domestic agricultural market.

In 2018, rice production decreased 2.5% from 2017 to 3.9 million tons. In 2019, rice production decreased 5.1% from 2018 to 3.7 million tons. In 2020, rice production decreased 5.4% from 2019 to 3.5 million tons. In 2021, rice production increased 11.4% from 2020 to 3.9 million tons. In 2022, rice production decreased 2.6% from 2021 to 3.8 million tons. Due to limited crop yields resulting from geographical and physical constraints, the Republic depends on imports for certain basic foodstuffs.

The Government is seeking to develop the fishing industry by encouraging the building of large fishing vessels and modernizing fishing equipment, marketing techniques and distribution outlets.

In 2018, the agriculture, forestry and fisheries industry increased by 0.2% compared to 2017, primarily due to an increase in livestock production. In 2019, the agriculture, forestry and fisheries industry increased by 3.9% compared to 2018, primarily due to an increase in farming and livestock production. In 2020, the agriculture, forestry and fisheries industry decreased by 5.8% compared to 2019, primarily due to a decrease in farming and livestock production. In 2021, the agriculture, forestry and fisheries industry increased by 3.8% compared to 2020, primarily due to an increase in farming and fisheries production. Based on preliminary data, in 2022, the agriculture, forestry and fisheries industry decreased by 1.3% compared to 2021, primarily due to a decrease in farming and fisheries production.

Construction

In 2018, the construction industry decreased by 2.8% compared to 2017, primarily due to a decrease in the construction of residential and commercial buildings. In 2019, the construction industry decreased by 2.6% compared to 2018, primarily due to a continued decrease in the construction of residential buildings. In 2020, the construction industry decreased by 1.4% compared to 2019, primarily due to a decrease in the construction of residential buildings. In 2021, the construction industry decreased by 2.1% compared to 2020, primarily due to a decrease in the construction of residential buildings. Based on preliminary data, in 2022, the construction industry increased by 2.7% compared to 2021, primarily due to an increase in the construction of commercial buildings.

Electricity and Gas

The following table sets out the Republic’s dependence on imports for energy consumption:

Dependence on Imports for Energy Consumption


	Total Primary Energy Supply		Imports		Imports Dependence Ratio
	(millions of tons of oil equivalents⁽¹⁾, except ratios)
2018		300.7		288.1		95.8
2019		297.6		284.8		95.7
2020		285.5		271.2		95.0
2021		300.4		284.8		94.8
2022⁽²⁾		300.2		284.6		94.8

(1)	Conversion to tons of oil equivalents was calculated based on energy conversion factors under the Energy Act Enforcement Decree as amended in July 2017.

(2)	Preliminary.

Source: Korea Energy Economics Institute; Korea National Statistical Office

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Korea has almost no domestic oil or gas production and depends on imported oil and gas to meet its energy requirements. Accordingly, the international prices of oil and gas significantly affect the Korean economy. Any significant long-term increase in the prices of oil and gas will increase inflationary pressures in Korea and adversely affect the Republic’s balance of trade.

To reduce its dependence on oil and gas imports, the Government has encouraged energy conservation and energy source diversification emphasizing nuclear energy. The following table sets out the principal primary sources of energy supplied in the Republic, expressed in oil equivalents and as a percentage of total energy consumption.

Primary Energy Supply by Source


	Coal				Gas				Oil				Nuclear				Others⁽¹⁾				Total
	Quantity		%		Quantity		%		Quantity		%		Quantity		%		Quantity		%		Quantity		%
	(millions of tons of oil equivalents⁽²⁾, except percentages)
2018		90,965		30.2		55,090		18.3		114,450		38.1		28,437		9.5		11,796		3.9		300,738		100.0
2019		85,048		28.6		53,875		18.1		115,408		38.8		31,079		10.4		12,201		4.1		297,612		100.0
2020		75,983		26.6		53,947		18.9		107,970		37.8		34,119		11.9		13,524		4.7		285,543		100.0
2021		76,968		25.6		59,622		19.8		115,107		38.3		33,657		11.2		15,091		5.0		300,447		100.0
2022⁽³⁾		76,010		25.3		59,165		19.7		112,222		37.4		37,500		12.5		15,290		5.1		300,186		100.0

(1)	Includes hydro-electric power, biofuels and waste-based energy, geothermal and solar power and heat.

(2)	Conversion to tons of oil equivalents was calculated based on energy conversion factors under the Energy Act Enforcement Decree as amended in July 2017.

(3)	Preliminary.

Source: Korea Energy Economics Institute; The Bank of Korea

The Republic’s first nuclear power plant went into full operation in 1978 with a rated generating capacity of 587 megawatts. As of December 31, 2022, the Republic had 25 nuclear plants with a total estimated nuclear power installed generating capacity of 24,650 megawatts and four nuclear plants under construction.

In January 2023, the Government announced the Tenth Basic Plan of Long-Term Electricity Supply and Demand for the period from 2022 to 2036, which focuses on, among other things, (i) establishing a stable and safe source of energy supply for the long term, (ii) setting attainable goals for energy transition through a balanced mix of nuclear power and renewable energy, (iii) reducing greenhouse gas by cutting back on coal-fired generation, and (iv) diversifying the electricity market system and promoting fair competition in the renewable energy market. Furthermore, the Tenth Basic Plan includes the following implementation measures: (i) the previously suspended construction of two nuclear power units will be resumed, (ii) existing nuclear power plants will continue their operation, (iii) 28 coal-fired generation plants will be retired and converted to LNG fuel use by 2036, (iv) ammonia-coal and hydrogen-LNG co-firing will be introduced to reduce greenhouse gas, and (v) domestic renewable energy generation capacity will be expanded to 108.3 gigawatts by 2036.

Services Sector

In 2018, the service industry increased by 3.8% compared to 2017 as the health and social work sector increased by 8.2%, the finance and insurance sector increased by 5.6% and the public administration and defense sector increased by 3.4%, each compared with 2017. In 2019, the service industry increased by 3.4% compared to 2018 as the health and social work sector increased by 8.7%, the public administration and defense sector increased by 4.0% and the finance and insurance sector increased by 4.4%, each compared with 2018. In 2020, the service industry decreased by 1.0% compared to 2019 as the wholesale and retail trade, accommodation and food services sector decreased by 5.7%, the transportation and storage sector decreased by 15.1% and the cultural and other services sector decreased by 18.7%, each compared with 2019. In 2021, the service industry increased

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by 3.7% compared to 2020 as the finance and insurance sector increased by 6.1%, the wholesale and retail trade, accommodation and food services sector increased by 3.3% and the information and communication sector increased by 6.0%, each compared with 2020. Based on preliminary data, in 2022, the service industry increased by 11.5% compared to 2021 as the arts, sports and recreation-related services sector increased by 49.5%, the transportation and storage sector increased by 29.7% and the accommodation and food services sector increased by 25.7%, each compared with 2021.

Prices, Wages and Employment

The following table shows selected price and wage indices and unemployment rates:


	Producer Price Index⁽¹⁾		Increase (Decrease) Over Previous Year			Consumer Price Index⁽¹⁾		Increase (Decrease) Over Previous Year		Wage Index⁽¹⁾⁽²⁾		Increase (Decrease) Over Previous Year			Unemployment Rate⁽¹⁾⁽³⁾
	(2015=100)		(%)			(2020=100)		(%)		(2015=100)		(%)			(%)
2018		103.5		1.9			99.1		1.5		113.6		6.8			3.8
2019		103.5		0.0			99.5		0.4		116.2		2.3			3.8
2020		103.0		(0.5	)		100.0		0.5		115.5		(0.6	)		4.0
2021		109.6		6.4			102.5		2.5		123.5		6.9			3.7
2022		118.7		8.3			107.7		5.1		130.7		5.8			2.9

(1)	Average for year.

(2)	Nominal wage index of average earnings in the manufacturing industry.

(3)	Expressed as a percentage of the economically active population.

Source: The Bank of Korea; Korea National Statistical Office

In 2018, the inflation rate decreased to 1.5%, primarily due to a slowdown in the growth rate of agricultural goods and oil prices. In 2019, the inflation rate decreased to 0.4%, primarily due to decreases in the prices of agricultural and livestock products and oil. In 2020, the inflation rate increased to 0.5%, primarily due to increases in agricultural and livestock product prices. In 2021, the inflation rate increased to 2.5%, primarily due to increases in agricultural and livestock product prices and oil prices. Based on preliminary data, in 2022, the inflation rate increased to 5.1%, primarily due to increases in agricultural and livestock product prices and oil prices. Based on preliminary data, the inflation rate was 4.7% in the first quarter of 2023.

In 2018, the unemployment rate increased to 3.8%, primarily due to the continued sluggishness of the domestic economy. In 2019, the unemployment rate remained constant at 3.8%. In 2020, the unemployment rate increased to 4.0%, primarily due to the COVID-19 pandemic. In 2021, the unemployment rate decreased to 3.7%, reflecting a gradual recovery of the Korean economy from the COVID-19 pandemic. Based on preliminary data, in 2022, the unemployment rate decreased to 2.9%, reflecting a gradual recovery of the Korean economy from the COVID-19 pandemic. Based on preliminary data, the unemployment rate was 3.2% in the first quarter of 2023.

From 1992 to 2009, the economically active population of the Republic increased by approximately 24.8% to 24.3 million, while the number of employees increased by approximately 23.7% to 23.5 million. The economically active population over 15 years old as a percentage of the total over-15 population has remained between 61% and 64% over the past decade. Literacy among workers under 50 is almost universal. As of December 31, 2022, the economically active population of the Republic was 28.9 million and the number of employees was 28.1 million.

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The following table shows selected employment information by industry and by gender:


	2018		2019		2020		2021		2022
	(all figures in percentages, except as indicated)
Labor force (in thousands of persons)		26,822		27,123		26,904		27,273		28,089
Employment by Industry:
Agriculture, Forestry and Fishing		5.0		5.1		5.4		5.3		5.4
Mining and Manufacturing		16.9		16.4		16.3		16.1		16.1
S.O.C & Services		78.1		78.5		78.3		78.6		78.5
Electricity, Transport, Communication and Finance		11.8		11.7		11.8		12.3		12.4
Business, Private & Public Service and Other Services		36.5		37.4		38.0		38.6		39.0
Construction		7.6		7.4		7.5		7.7		7.6
Wholesale & Retail Trade, Hotels and Restaurants		22.2		22.0		21.0		20.0		19.6

Total Employed		100.0		100.0		100.0		100.0		100.0

Employment by Gender:
Male		57.3		57.0		57.2		57.0		56.7
Female		42.7		43.0		42.8		43.0		43.3

Total Employed		100.0		100.0		100.0		100.0		100.0

Source: The Bank of Korea

Pursuant to certain amendments to the Labor Standards Act that became effective on July 1, 2018, the maximum working hours of employees have been reduced from 68 hours per week to 52 hours per week, and the number of special industries that are exempt from restrictions on maximum working hours will be significantly reduced. This new maximum working hours restriction under the amended Labor Standards Act is in effect for workplaces with 300 or more workers from July 1, 2018, and has been extended to workplaces with 50 or more but fewer than 300 workers from January 1, 2020, and has been further extended to workplaces with five or more but fewer than 50 workers from July 1, 2021.

Labor unrest in connection with demands by unionized workers for better wages and working conditions and greater job security occurs from time to time in the Republic. Some of the significant incidents in recent years include the following:

•

In July 2018, unionized workers at Hyundai Heavy Industries went on full strike demanding higher wages.

•

In May 2019, unionized bus drivers launched a nationwide strike seeking higher wages and increased manpower in time for the 52-hour work week that was implemented in July 2019.

•

In September 2019, unionized workers at GM Korea went on full strike, the first in more than 20 years, demanding higher wages and protesting against GM Korea’s restructuring plans.

•

In October and November 2019, several thousand members of the National Railroad Workers’ Union went on full strike demanding a normalization of wages and requesting the hiring of additional personnel.

•

In October, November and December 2020, unionized workers at GM Korea went on partial strikes during wage and collective agreement negotiations.

•

In November and December 2020, unionized workers at Kia went on partial strikes demanding higher wages, performance-based incentives and other benefits.

•

In November and December 2021, unionized workers at Hankook Tire & Technology, one of Korea’s largest tire makers, went on a full strike demanding higher wages and performance-based incentive payments.

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•

In 2021, unionized workers at CJ Logistics, one of Korea’s largest freight transportation companies, went on a series of partial strikes and demonstrations, demanding higher wages commensurate with increases in parcel delivery fees.

•

In June and November 2022, unionized truck drivers across various industries went on nationwide strikes demanding that a minimum pay system based on freight rates be made permanent and expanded in scope.

•

In 2022, subcontracted workers of Daewoo Shipping and Marine Engineering went on a full strike demanding higher wages.

Actions such as these by labor unions may hinder implementation of the labor reform measures and disrupt the Government’s plans to create a more flexible labor market. Although much effort is being expended to resolve labor disputes in a peaceful manner, there can be no assurance that further labor unrest will not occur in the future. Continued labor unrest in key industries of the Republic may have an adverse effect on the economy.

In 1997, the Korean Confederation of Trade Unions organized a political alliance, which led to the formation of the Democratic Labor Party in January 2000. The Democratic Labor Party merged with The New People’s Participation Party and changed its name to The Unified Progressive Party, or the UPP, in December 2011. In October 2012, the UPP split and seven UPP members of the National Assembly and their supporters formed a new party, the Progressive Justice Party, which changed its name to the Justice Party in July 2013. In December 2014, the Constitutional Court ordered the dissolution of the UPP and the removal of the party’s five lawmakers from the National Assembly for violating the Republic’s Constitution after certain of its members were convicted of trying to instigate an armed rebellion and supporting North Korea. In the legislative general election held on April 13, 2016, the Justice Party won six seats in the National Assembly, and the members-elect began their four-year terms on May 30, 2016. As of December 31, 2022, the Justice Party held six seats in the National Assembly.

The Financial System

Structure of the Financial Sector

The Republic’s financial sector includes the following categories of financial institutions:

•

The Bank of Korea;

•

banking institutions;

•

non-bank financial institutions; and

•

other financial entities, including:

•

financial investment companies;

•

credit guarantee institutions;

•

venture capital companies; and

•

miscellaneous others.

To increase transparency in financial transactions and enhance the integrity and efficiency of the financial markets, Korean law requires that financial institutions confirm that their clients use their real names when transacting business. The Government also strengthened confidentiality protection for private financial transactions.

In July 2007, the Korean National Assembly passed the Financial Investment Services and Capital Markets Act, or the FSCMA, under which various industry-based capital markets regulatory systems were consolidated

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into a single regulatory system. The FSCMA, which became effective in February 2009, expands the scope of permitted investment-related financial products and activities through expansive definitions of financial instruments and function-based regulations that allow financial investment companies to offer a wider range of financial services, as well as strengthening investor protection and disclosure requirements.

Prior to the effective date of the FSCMA, separate laws regulated various types of financial institutions depending on the type of the financial institution (for example, securities companies, futures companies, trust business companies and asset management companies) and subjected financial institutions to different licensing and ongoing regulatory requirements (for example, under the Securities and Exchange Act, the Futures Trading Act and the Indirect Investment Asset Management Business Act). By applying one uniform set of rules to financial businesses having the same economic function, the FSCMA attempts to improve and address issues caused by the previous regulatory system under which the same economic function relating to capital markets-related business were governed by multiple regulations. To this end, the FSCMA categorizes capital markets-related businesses into six different functions as follows:

•

investment dealing (trading and underwriting of financial investment products);

•

investment brokerage (brokerage of financial investment products);

•

collective investment (establishment of collective investment schemes and the management thereof);

•

investment advice;

•

discretionary investment management; and

•

trusts (together with the five businesses set forth above, the Financial Investment Businesses).

Accordingly, all financial businesses relating to financial investment products are classified as one or more of the Financial Investment Businesses described above, and financial institutions are subject to the regulations applicable to their relevant Financial Investment Businesses, irrespective of what type of financial institution it is. For example, under the FSCMA, derivative businesses conducted by securities companies and future companies are subject to the same regulations, at least in principle.

The banking business and the insurance business are not subject to the FSCMA and will continue to be regulated under separate laws; provided, however, that they are subject to the FSCMA if their activities involve any Financial Investment Businesses requiring a license based on the FSCMA.

Banking Industry

The banking industry comprises commercial banks and specialized banks. Commercial banks serve the general public and corporate sectors. They include nationwide banks, regional banks and branches of foreign banks. Regional banks provide services similar to nationwide banks, but operate in a geographically restricted region. Branches of foreign banks have operated in the Republic since 1967 but provide a relatively small proportion of the country’s banking services. As of December 31, 2022, there were six nationwide banks, six regional banks, three internet-only banks and 35 foreign banks with branches operating in the Republic.

Specialized banks meet the needs of specific sectors of the economy in accordance with Government policy; they are organized under, or chartered by, special laws. Specialized banks include (i) The Korea Development Bank, (ii) The Export-Import Bank of Korea, (iii) Industrial Bank of Korea, (iv) SuHyup Bank and (v) NongHyup Bank. The Government has made capital contributions to three of these specialized banks as follows:

•

The Korea Development Bank: the Government owns directly all of its paid-in capital and has made capital contributions since its establishment in 1954. Recent examples include the Government’s contributions to its capital ofW170 billion in 2018,W555 billion in 2019,W2,103 billion in 2020,W1,121 billion in 2021 andW1,265 billion in 2022. Taking into account these capital contributions, its total paid-in capital wasW23,152 billion as of December 31, 2022.

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•

The Export-Import Bank of Korea: the Government owns, directly and indirectly, all of its paid-in capital and has made capital contributions since its establishment in 1976. Recent examples include the Government’s contributions to its capital ofW56 billion in 2019,W578 billion in 2020,W299 billion in 2021 andW25 billion in 2022. Taking into account these capital contributions, its total paid-in capital wasW12,773 billion as of December 31, 2022.

•

Industrial Bank of Korea: the Government directly owned 59.5% of its total shares (including common and preferred shares) as of December 31, 2022. The Government had owned all of the issued share capital of Industrial Bank of Korea until 1994, but the Government’s minimum share ownership requirement was repealed in 1997, and the Government has since periodically adjusted its ownership percentage in Industrial Bank of Korea through transactions involving the purchase and sale of its common shares. In 2019, Industrial Bank of Korea issued an aggregate of 17,178,164 new common shares to the Government for a total ofW225 billion in cash. In 2020, Industrial Bank of Korea issued an aggregate of 161,507,381 new common shares to the Government for a total ofW1,266 billion in cash. In November 2020, Industrial Bank of Korea acquired from the Government and cancelled an aggregate of 44,847,038 perpetual preferred shares that it had previously issued to the Government. In May 2021, Industrial Bank of Korea issued and sold 5,636,227 new ordinary shares to the Government for an aggregate consideration ofW49 billion in cash. Taking into account such transactions, its total paid-in capital wasW4,211 billion as of December 31, 2022.

The economic difficulties in 1997 and 1998 caused an increase in Korean banks’ non-performing assets and a decline in capital adequacy ratios of Korean banks. From 1998 through 2002, the Financial Services Commission amended banking regulations several times to adopt more stringent criteria for non-performing assets that more closely followed international standards.

The following table sets out the total loans (including loans in Won and loans in foreign currencies) and non-performing assets of Korean banks as of the dates indicated.


	Total Loans		Non-Performing Assets⁽¹⁾		Percentage of Total
	(trillions of won)				(percentage)
December 31, 2018		1,872.6		18.2		1.0
December 31, 2019		1,980.6		15.3		0.8
December 31, 2020		2,171.7		13.9		0.6
December 31, 2021		2,371.9		11.8		0.5
December 31, 2022⁽²⁾		2,532.4		10.1		0.4

(1)	Assets classified as substandard or below.

(2)	Preliminary.

Source: Financial Supervisory Service

In 2018, these banks posted an aggregate net profit ofW15.6 trillion, compared to an aggregate net profit ofW11.2 trillion in 2017, primarily due to increased net interest income and decreased loan loss provisions, which more than offset a decrease in net non-interest income. In 2019, these banks posted an aggregate net profit ofW13.9 trillion, compared to an aggregate net profit ofW15.6 trillion in 2018, primarily due to losses on investments in subsidiaries and associates in 2019 compared to gains on investments in subsidiaries and associates in 2018, which more than offset decreased loan loss provisions. In 2020, these banks posted an aggregate net profit ofW12.1 trillion, compared to an aggregate net profit ofW13.9 trillion in 2019, primarily due to increased loan loss provisions. In 2021, these banks posted an aggregate net profit ofW16.9 trillion, compared to an aggregate net profit ofW12.1 trillion in 2020, primarily due to the significant amount of gains recognized by The Korea Development Bank in connection with the exercise of its right to convert its convertible bonds issued by HMM Company Limited into common shares, which took place in June 2021, and to a lesser extent, increased net interest income and decreased loan loss provisions. Based on preliminary data, in 2022,

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these banks posted an aggregate net profit ofW18.5 trillion, compared to an aggregate net profit ofW16.9 trillion in 2021, primarily due to increased net interest income reflecting the rise in interest rates during 2022.

Non-Bank Financial Institutions

Non-bank financial institutions include:

•

savings institutions, including trust accounts of banks, mutual savings banks, credit unions, mutual credit facilities, community credit cooperatives and postal savings;

•

life insurance institutions; and

•

credit card companies.

As of December 31, 2022, 79 mutual savings banks, 23 life insurance institutions, which include joint venture life insurance institutions and wholly-owned subsidiaries of foreign life insurance companies, and eight credit card companies operated in the Republic.

Money Markets

In the Republic, the money markets consist of the call market and markets for a wide range of other short-term financial instruments, including treasury bills, monetary stabilization bonds, negotiable certificates of deposits, repurchase agreements and commercial paper.

Securities Markets

On January 27, 2005, the Korea Exchange was established pursuant to the now repealed Korea Securities and Futures Trading Act by consolidating the Korea Stock Exchange, the Korea Futures Exchange, the KOSDAQ Stock Market, Inc., or the KOSDAQ, and the KOSDAQ Committee of the Korea Securities Dealers Association, which had formerly managed the KOSDAQ. There are three major markets operated by the Korea Exchange: the KRX KOSPI Market, the KRX KOSDAQ Market, and the KRX Derivatives Market. The Korea Exchange has two trading floors located in Seoul, one for the KRX KOSPI Market and one for the KRX KOSDAQ Market, and one trading floor in Busan for the KRX Derivatives Market. The Korea Exchange is a joint stock company with limited liability, the shares of which are held by (i) financial investment companies that were formerly members of the Korea Futures Exchange or the Korea Stock Exchange and (ii) the stockholders of the KOSDAQ. Currently, the Korea Exchange is the only stock exchange in Korea and is operated by membership, having as its members Korean financial investment companies and some Korean branches of foreign financial investment companies.

The Korea Exchange publishes the Korea Composite Stock Price Index every ten seconds, which is an index of all equity securities listed on the Korea Exchange. The Korea Composite Stock Price Index is computed using the aggregate value method, whereby the market capitalizations of all listed companies are aggregated, subject to certain adjustments, and this aggregate is expressed as a percentage of the aggregate market capitalization of all listed companies as of the base date, January 4, 1980.

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The following table shows the value of the Korea Composite Stock Price Index as of the dates indicated:


December 28, 2018			2,041.0
January 31, 2019			2,204.9
February 28, 2019			2,195.4
March 29, 2019			2,140.7
April 30, 2019			2,203.6
May 31, 2019			2,041.7
June 28, 2019			2,130.6
July 31, 2019			2,024.6
August 30, 2019			1,967.8
September 30, 2019			2,063.1
October 31, 2019			2,083.5
November 29, 2019			2,088.0
December 30, 2019			2,197.7
January 31, 2020			2,119.0
February 28, 2020			1,987.0
March 31, 2020			1,754.6
April 29, 2020			1,947.6
May 29, 2020			2,029.6
June 30, 2020			2,108.3
July 31, 2020			2,249.4
August 31, 2020			2,326.2
September 29, 2020			2,327.9
October 30, 2020			2,267.2
November 30, 2020			2,591.3
December 30, 2020			2,873.5
January 29, 2021			2,976.2
February 26, 2021			3,013.0
March 31, 2021			3,061.4
April 30, 2021			3,147.9
May 31, 2021			3,203.9
June 30, 2021			3,296.7
July 30, 2021			3,202.3
August 31, 2021			3,199.3
September 30, 2021			3,068.8
October 29, 2021			2,970.7
November 30, 2021			2,839.0
December 30, 2021			2,977.7
January 28, 2022			2,663.3
February 28, 2022			2,699.2
March 31, 2022			2,757.7
April 29, 2022			2,695.1
May 31, 2022			2,685.9
June 30, 2022			2,332.6
July 29, 2022			2,451.5
August 31, 2022			2,472.1
September 30, 2022			2,155.5
October 31, 2022			2,293.6
November 30, 2022			2,472.5
December 29, 2022			2,236.4
January 31, 2023			2,425.1
February 28, 2023			2,412.9
March 31, 2023			2,476.9
April 28, 2023			2,501.5
May 31, 2023			2,577.1

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Over the years, liquidity and credit concerns and volatility in the global financial markets have led to fluctuations in the stock prices of Korean companies. In recent years, there was significant volatility in the stock prices of Korean companies due to deteriorating market conditions domestically and abroad. The index was 2,564.2 on June 28, 2023.

Supervision System

The Office of Bank Supervision, the Securities Supervisory Board, the Insurance Supervisory Board and all other financial sector regulatory bodies merged in January 1999 to form the Financial Supervisory Service. The Financial Services Commission acts as the executive body over the Financial Supervisory Service. The Financial Services Commission reports to, but operates independently of, the Prime Minister’s office.

The Ministry of Economy and Finance focuses on financial policy and foreign currency regulations. The Bank of Korea manages monetary policy focusing on price stabilization.

Deposit Insurance System

The Republic’s deposit insurance system insures amounts on deposit with banks, non-bank financial institutions, securities companies and life insurance companies.

Since January 2001, deposits at any single financial institution are insured only up toW50 million per person regardless of the amount deposited.

The Government excluded certain deposits, such as repurchase agreements, from the insurance scheme, expanded the definition of unsound financial institutions to which the insurance scheme would apply and gradually increased the insurance premiums payable by insured financial institutions.

Monetary Policy

The Bank of Korea

The Bank of Korea was established in 1950 as Korea’s central bank and the country’s sole currency issuing bank. A seven-member Monetary Policy Committee, chaired by the Governor of The Bank of Korea, formulates and controls monetary and credit policies.

Inflation targeting is the basic system of operation for Korean monetary policy. The consumer price index is used as The Bank of Korea’s target indicator. To achieve its established inflation target, the Monetary Policy Committee of The Bank of Korea determines and announces the “Bank of Korea Base Rate”, the reference rate applied in transactions such as repurchase agreements between The Bank of Korea and its financial institution counterparts. The Bank of Korea uses open market operations as its primary instrument to keep the call rate in line with the Monetary Policy Committee’s target rate. In addition, The Bank of Korea is able to establish policies regarding its lending to banks in Korea and their reserve requirements.

Interest Rates

On November 30, 2017, The Bank of Korea raised its policy rate to 1.5% from 1.25%, which was further raised to 1.75% on November 30, 2018, in response to signs of inflationary pressures and the continued growth of the global and domestic economy. The Bank of Korea lowered its policy rate to 1.5% from 1.75% on July 18, 2019 and to 1.25% from 1.5% on October 16, 2019 to address the sluggishness of the global and domestic economy. On March 16, 2020, The Bank of Korea further lowered its policy rate to 0.75% from 1.25%, which was further lowered to 0.5% on May 28, 2020, in response to deteriorating economic conditions resulting from the COVID-19 pandemic. However, as the economy began to show signs of recovery from the COVID-19

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pandemic starting from the second half of 2021, The Bank of Korea raised its policy rate from 0.50% to 0.75% on August 26, 2021, 1.00% on November 25, 2021, 1.25% on January 14, 2022, 1.50% on April 14, 2022, 1.75% on May 26, 2022, 2.25% on July 13, 2022, 2.50% on August 25, 2022, 3.00% on October 12, 2022, 3.25% on November 24, 2022 and 3.50% on January 13, 2023 in response to rising levels of household debt and inflationary pressures.

With the deregulation of interest rates on banks’ demand deposits on February 2, 2004, The Bank of Korea completed the interest rate deregulation based upon the “Four-Stage Interest Rate Liberalization Plan” announced in 1991. The prohibition on the payment of interest on ordinary checking accounts was, however, maintained.

Money Supply

The following table shows the volume of the Republic’s money supply:


	December 31,
	2018			2019			2020			2021			2022
	(billions of Won)
Money Supply (M1)⁽¹⁾		865,851.8			952,922.8			1,197,828.9			1,372,336.6			1,236,983.3
Quasi-money⁽²⁾		1,834,510.6			1,960,686.8			2,002,006.8			2,241,351.0			2,521,252.2
Money Supply (M2)⁽³⁾		2,700,362.4			2,913,609.6			3,199,835.7			3,613,687.6			3,758,235.5
Percentage Increase Over Previous Year		6.7	%		7.9	%		9.8	%		12.9	%		4.0	%

(1)	Consists of currency in circulation and demand and instant access savings deposits at financial institutions.

(2)	Includes time and installment savings deposits, marketable instruments, yield-based dividend instruments and financial debentures, excluding financial instruments with a maturity of more than two years.

(3)	Money Supply (M2) is the sum of Money Supply (M1) and quasi-money.

Source: The Bank of Korea

Exchange Controls

Authorized foreign exchange banks, as registered with the Ministry of Economy and Finance, handle foreign exchange transactions. The ministry has designated other types of financial institutions to handle foreign exchange transactions on a limited basis.

Korean laws and regulations generally require a report to either the Ministry of Economy and Finance, The Bank of Korea or authorized foreign exchange banks, as applicable, for issuances of international bonds and other instruments, overseas investments and certain other transactions involving foreign exchange payments.

In 1994 and 1995, the Government relaxed regulations of foreign exchange position ceilings and foreign exchange transaction documentation and created free Won accounts which may be opened by non-residents at Korean foreign exchange banks. The Won funds deposited into the free Won accounts may be converted into foreign currencies and remitted outside Korea without any governmental approval. In December 1996, after joining the OECD, the Republic freed the repatriation of investment funds, dividends and profits, as well as loan repayments and interest payments. The Government continues to reduce exchange controls in response to changes in the world economy, including the new trade regime under the WTO, anticipating that such foreign exchange reform will improve the Republic’s competitiveness and encourage strategic alliances between domestic and foreign entities.

In September 1998, the National Assembly passed the Foreign Exchange Transactions Act, which became effective in April 1999 and has subsequently been amended numerous times. In principle, most currency and capital transactions, including, among others, the following transactions, have been liberalized:

•

the investment in real property located overseas by Korean companies and financial institutions;

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•

the establishment of overseas branches and subsidiaries by Korean companies and financial institutions;

•

the investment by non-residents in deposits and trust products having more than one year maturities; and

•

the issuance of debentures by non-residents in the Korean market.

To minimize the adverse effects from further opening of the Korean capital markets, the Ministry of Economy and Finance is authorized to introduce a variable deposit requirement system to restrict the influx of short-term speculative funds.

The Government has also embarked on a second set of liberalization initiatives starting in January 2001, under which ceilings on international payments for Korean residents have been eliminated, including overseas travel expenses, overseas inheritance remittances and emigration expenses. Overseas deposits, trusts, acquisitions of foreign securities and other foreign capital transactions made by residents and the making of deposits in Korean currency by non-residents have also been liberalized. In line with the foregoing liberalization, measures will also be adopted to curb illegal foreign exchange transactions and to stabilize the foreign exchange market.

Effective as of January 1, 2006, the Government liberalized the regulations governing “capital transactions”. The regulations provide that no regulatory approvals are required for any capital transactions. The capital transactions previously subject to approval requirements are now subject only to reporting requirements.

In January 2010, the Financial Supervisory Services released FX Derivative Transactions Risk Management Guideline to prevent over-hedging of foreign exchange risk by corporate investors. According to the guideline as amended in December 2014, if a corporate investor, other than a financial institution or a public enterprise, wishes to enter into a currency forward, currency option, foreign exchange swap or currency swap agreement with a bank, the bank is required to verify whether the corporate investor’s assets, liabilities or contracts face foreign exchange risks that could be mitigated by a currency forward, currency option, foreign exchange swap or currency swap agreement. In addition, the bank is required to ensure that the corporate investor’s risk hedge ratio, which is the ratio of the aggregate notional amount to the aggregate amount of risk, does not exceed 100%.

Foreign Exchange

The following table shows the exchange rate between the Won and the U.S. Dollar (in Won per U.S. Dollar) as announced by the Seoul Money Brokerage Services, Ltd. as of the dates indicated:


	Won/U.S. Dollar Exchange Rate
December 31, 2018		1,118.1
January 31, 2019		1,117.2
February 28, 2019		1,117.8
March 29, 2019		1,137.8
April 30, 2019		1,158.2
May 31, 2019		1,190.0
June 28, 2019		1,156.8
July 31, 2019		1,182.0
August 30, 2019		1,215.2
September 30, 2019		1,201.3
October 31, 2019		1,168.4
November 29, 2019		1,179.3

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	Won/U.S. Dollar Exchange Rate
December 31, 2019		1,157.8
January 31, 2020		1,183.5
February 28, 2020		1,215.9
March 31, 2020		1,222.6
April 29, 2020		1,225.2
May 29, 2020		1,239.4
June 30, 2020		1,200.7
July 31, 2020		1,191.4
August 31, 2020		1,185.1
September 29, 2020		1,173.5
October 30, 2020		1,133.4
November 30, 2020		1,104.4
December 31, 2020		1,088.0
January 29, 2021		1,114.6
February 26, 2021		1,108.4
March 31, 2021		1,133.5
April 30, 2021		1,119.4
May 31, 2021		1,116.0
June 30, 2021		1,130.0
July 30, 2021		1,147.4
August 31, 2021		1,164.4
September 30, 2021		1,184.9
October 29, 2021		1,171.7
November 30, 2021		1,193.4
December 31, 2021		1,185.5
January 28, 2022		1,202.4
February 28, 2022		1,202.7
March 31, 2022		1,210.8
April 29, 2022		1,269.4
May 31, 2022		1,245.8
June 30, 2022		1,299.4
July 29, 2022		1,304.0
August 31, 2022		1,347.5
September 30, 2022		1,434.8
October 31, 2022		1,419.3
November 30, 2022		1,331.5
December 30, 2022		1,267.3
January 31, 2023		1,228.7
February 28, 2023		1,317.4
March 31, 2023		1,303.8
April 28, 2023		1,339.9
May 31, 2023		1,322.2

During the period from January 2, 2008 through April 16, 2009, the value of the Won relative to the U.S. dollar declined by approximately 29.9%, due primarily to adverse economic conditions resulting from liquidity and credit concerns and volatility in the global credit and financial markets and repatriations by foreign investors of their investments in the Korean stock market. The exchange rate between the Won and the U.S. Dollar has fluctuated since then. In 2021, 2022 and in recent months, the value of the Won relative to the U.S. dollar fluctuated significantly, due primarily to the impact of the COVID-19 pandemic, the invasion of

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Ukraine by Russia and the ensuing sanctions against Russia and, more recently, the widening difference in policy rates between the United States and the Republic, among others. The market average exchange rate was Won 1,308.3 to US$1.00 on June 28, 2023.

Balance of Payments and Foreign Trade

Balance of Payments

Balance of payments figures measure the relative flow of goods, services and capital into and out of the country as represented in the current balance and the capital balance. The current balance tracks a country’s trade in goods and services and transfer payments and measures whether a country is living within its income from trading and investments. The capital balance covers all transactions involving the transfer of capital into and out of the country, including loans and investments. The overall balance represents the sum of the current and capital balances. An overall balance surplus indicates a net inflow of foreign currencies, thereby increasing demand for and strengthening the local currency. An overall balance deficit indicates a net outflow of foreign currencies, thereby decreasing demand for and weakening the local currency. The financial account mirrors the overall balance. If the overall balance is positive, the surplus, which represents the nation’s savings, finances the overall deficit of the country’s trading partners. Accordingly, the financial account will indicate cash outflows equal to the overall surplus. If, however, the overall balance is negative, the nation has an international deficit which must be financed. Accordingly, the financial account will indicate cash inflows equal to the overall deficit.

The following table sets out certain information with respect to the Republic’s balance of payments:

Balance of Payments⁽¹⁾


Classification	2018			2019			2020			2021			2022⁽⁴⁾
	(millions of dollars)
Current Account		77,466.5			59,676.1			75,902.2			85,228.2			29,830.9
Goods		110,086.8			79,812.1			80,604.8			75,730.9			15,060.9
Exports⁽²⁾		626,266.5			556,667.9			517,909.3			649,475.2			690,461.8
Imports⁽²⁾		516,179.7			476,855.8			437,304.5			573,744.3			675,400.9
Services		(29,369.4	)		(26,845.3	)		(14,670.1	)		(5,286.7	)		(5,547.5	)
Income		4,901.9			12,856.0			13,486.9			19,444.9			22,884.2
Current Transfers		(8,152.8	)		(6,146.7	)		(3,519.4	)		(4,660.9	)		(2,566.7	)
Capital and Financial Account		76,790.1			58,857.6			80,996.4			78,335.3			38,834.7
Capital Account		316.7			(169.3	)		(386.3	)		(155.3	)		1.3
Financial Account⁽³⁾		76,473.4			59,026.9			81,382.7			78,490.6			38,833.4
Net Errors and Omissions		(1,309.8	)		(479.9	)		5,866.8			(6,582.3	)		9,001.2

(1)

Figures are prepared based on the sixth edition of the Balance of Payment Manual published by International Monetary Fund in December 2010 and implemented by the Government in December 2013. In December 2018, The Bank of Korea revised the Republic’s balance of payments information to capture new economic activities and reflect the changes in raw data.

(2)	These entries are derived from trade statistics and are valued on a free on board basis, meaning that the insurance and freight costs are not included.

(3)	Includes borrowings from the IMF, syndicated bank loans and short-term borrowings.

(4)	Preliminary.

Source: The Bank of Korea

The current account surplus in 2021 increased to US$85.2 billion from the current account surplus of US$75.9 billion in 2020, primarily due to a decrease in deficit from the services account and an increase in surplus from the income account, the effect of which was offset in part by a decrease in surplus from the goods account. Based on preliminary data, the current account surplus in 2022 decreased to US$29.8 billion from the current account surplus of US$85.2 billion in 2021, primarily due to a decrease in surplus from the goods

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account, the effect of which was offset in part by an increase in surplus from the income account and a decrease in deficit from the current transfers account. Based on preliminary data, the Republic recorded a current account deficit of US$4.5 billion in the first quarter of 2023, which represented a change from the current account surplus of US$14.9 billion in the corresponding period of 2022, primarily due to a change from a surplus to a deficit from the goods account, as well as an increase in deficit from the services account, the effects of which were offset in part by an increase in surplus from the income account.

Foreign Direct Investment

Since 1960, the Government has adopted a broad range of related laws, administrative rules and regulations that provide a framework for the conduct and regulation of foreign investment activities. In September 1998, the Government promulgated the Foreign Investment Promotion Act, or the FIPA, which replaced previous foreign direct investment related laws, rules and regulations, to promote inbound foreign investments by providing incentives to, and facilitating investment activities in the Republic by, foreign nationals. The FIPA prescribes, among others, procedural requirements for inbound foreign investments, incentives for foreign investments such as tax reductions, and requirements relating to designation and development of foreign investment target regions. The Government believes that providing a stable and receptive environment for foreign direct investment will accelerate the inflow of foreign capital, technology and management techniques.

The following table sets forth information regarding annual foreign direct investment in the Republic for the periods indicated.

Foreign Direct Investment


	2018		2019		2020		2021		2022⁽²⁾
	(billions of dollars)
Contracted and Reported Investment
Greenfield Investment⁽¹⁾		20.0		15.9		14.5		18.1		22.3
Merger & Acquisition		6.9		7.4		6.2		11.4		8.1

Total		26.9		23.3		20.7		29.5		30.5

Actual Investment		17.3		13.4		11.4		18.6		18.0

(1)	Includes building new factories and operational facilities.

(2)	Preliminary.

Source: Ministry of Trade, Industry and Energy

In 2021, the contracted and reported amount of foreign direct investment in the Republic increased to US$29.5 billion from US$20.7 billion in 2020, primarily due to an increase in foreign investment in the services sector to US$23.6 billion in 2021 from US$14.4 billion in 2020.

Based on preliminary data, in 2022, the contracted and reported amount of foreign direct investment in the Republic increased to US$30.5 billion from US$29.5 billion in 2021, primarily due to an increase in foreign investment in the manufacturing sector to US$12.5 billion in 2022 from US$5.0 billion in 2021.

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The following table sets forth information regarding the source of foreign direct investment by region and country for the periods indicated:

Foreign Direct Investment by Region and Country


	2018		2019		2020		2021		2022
	(billions of dollars)
North America
U.S.A.		5.9		6.8		5.3		5.3		8.7
Others		1.9		1.7		3.5		1.6		5.8

		7.8		8.6		8.8		6.9		14.5
Asia
Japan		1.3		1.4		0.8		1.2		1.5
Hong Kong		1.5		1.9		1.1		0.6		0.4
Singapore		1.5		1.3		2.3		4.2		3.2
China		2.7		1.0		2.0		1.9		1.5
Others		2.4		1.0		0.4		1.2		0.5

		9.4		6.6		6.6		9.1		7.1
Europe
Netherlands		1.4		1.7		0.6		1.0		4.9
England		1.2		2.1		0.7		0.8		0.6
Germany		0.5		0.4		0.5		2.8		0.5
France		0.7		0.1		0.2		0.2		0.2
Others		5.2		3.1		2.8		8.0		1.9

		9.0		7.4		4.8		12.8		8.1
Other regions and countries		0.6		0.7		0.5		0.7		0.8

Total		26.9		23.3		20.7		29.5		30.5

Source: Ministry of Trade, Industry and Energy

Trade Balance

Trade balance figures measure the difference between a country’s exports and imports. If exports exceed imports the country has a trade balance surplus while if imports exceed exports the country has a deficit. A deficit, indicating that a country’s receipts from abroad fall short of its payments to foreigners, must be financed, rendering the country a debtor nation. A surplus, indicating that a country’s receipts exceed its payments to foreigners, allows the country to finance its trading partners’ net deficit to the extent of the surplus, rendering the country a creditor nation.

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The following table summarizes the Republic’s trade balance for the periods indicated:

Trade Balance


	Exports⁽¹⁾		As % of GDP⁽²⁾			Imports⁽¹⁾		As % of GDP⁽²⁾			Balance of Trade			Exports as % of Imports
	(billions of dollars, except percentages)
2018		604.9		35.2	%		535.2		31.1	%		69.7			113.0
2019		542.2		33.0	%		503.3		30.7	%		38.9			107.7
2020		512.5		31.3	%		467.6		28.5	%		44.9			109.6
2021		644.4		35.8	%		615.1		34.2	%		29.3			104.8
2022⁽³⁾		683.6		41.1	%		731.4		43.9	%		(47.8	)		93.5

(1)	These entries are derived from customs clearance statistics on a C.I.F. basis, meaning that the price of goods includes insurance and freight cost.

(2)	At current market prices.

(3)	Preliminary.

Source: The Bank of Korea; Korea Customs Service

The Republic, due to its lack of natural resources, relies on extensive trading activity for growth. The country meets virtually all domestic requirements for petroleum, wood and rubber with imports, as well as much of its coal and iron needs. Exports consistently represent a high percentage of GDP and, accordingly, the international economic environment is of crucial importance to the Republic’s economy. See “—The Economy—Worldwide Economic and Financial Difficulties”.

The following tables give information regarding the Republic’s exports and imports by major commodity groups:

Exports by Major Commodity Groups (C.I.F.)⁽¹⁾


	2018		As % of 2018 Total		2019		As % of 2019 Total		2020		As % of 2020 Total		2021		As % of 2021 Total		2022⁽²⁾		As % of 2022 Total⁽²⁾
	(billions of dollars, except percentages)
Foods & Consumer Goods		7.9		1.3		8.2		1.5		8.6		1.7		9.8		1.5		10.4		1.5
Raw Materials and Fuels		55.1		9.1		48.8		9.0		32.1		6.3		51.4		8.0		75.2		11.0
Petroleum & Derivatives		47.0		7.8		41.3		7.6		24.7		4.8		38.8		6.0		63.4		9.3
Others		8.1		1.3		7.5		1.4		7.4		1.4		12.6		2.0		11.8		1.7
Light Industrial Products		35.8		5.9		34.2		6.3		32.4		6.3		35.3		5.5		35.2		5.1
Heavy & Chemical Industrial Products		506.1		83.7		451.0		83.2		439.3		85.7		547.9		85.0		563.0		82.4
Electronic & Electronic Products		214.8		35.5		171.4		31.6		178.5		34.8		221.8		34.4		224.3		32.8
Chemicals & Chemical Products		74.0		12.2		67.4		12.4		66.6		13.0		91.9		14.3		98.0		14.3
Metal Goods		48.1		8.0		44.1		8.1		39.6		7.7		52.6		8.2		55.3		8.1
Machinery & Precision Equipment		69.4		11.5		67.6		12.5		63.4		12.4		70.9		11.0		70.9		10.4
Transport Equipment		87.4		14.4		87.7		16.2		77.6		15.1		94.2		14.6		98.5		14.4
Passenger Cars		38.2		6.3		40.5		7.5		35.6		6.9		44.3		6.9		51.7		7.6
Ship & Boat		20.7		3.4		19.5		3.6		19.2		3.7		22.4		3.5		17.6		2.6
Others		28.4		4.7		27.7		5.1		22.8		4.4		27.5		4.3		29.2		4.3
Others		12.5		2.1		12.7		2.3		13.6		2.7		16.6		2.6		16.0		2.3

Total		604.9		100.0		542.2		100.0		512.5		100.0		644.4		100.0		683.6		100.0

(1)	These entries are derived from customs clearance statistics. C.I.F. means that the price of goods includes insurance and freight costs.

(2)	Preliminary.

Source: The Bank of Korea; Korea Customs Service

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Imports by Major Commodity Groups (C.I.F.)⁽¹⁾


	2018		As % of 2018 Total		2019		As % of 2019 Total		2020		As % of 2020 Total		2021		As % of 2021 Total		2022⁽²⁾		As % of 2022 Total⁽²⁾
	(billions of dollars, except percentages)
Industrial Materials and Fuels		279.0		52.1		254.0		50.5		206.3		44.1		302.6		49.2		393.6		53.8
Crude Petroleum		80.4		15.0		70.3		14.0		44.5		9.5		67.0		10.9		105.8		14.5
Mineral		22.0		4.1		21.7		4.3		21.4		4.6		33.3		5.4		31.3		4.3
Chemicals		50.0		9.3		47.0		9.3		46.4		9.9		60.4		9.8		70.2		9.6
Iron & Steel Products		19.7		3.7		19.8		3.9		15.2		3.3		22.2		3.6		22.7		3.1
Non-ferrous Metal		12.8		2.4		12.0		2.4		11.7		2.5		18.4		3.0		19.5		2.7
Others		94.1		17.6		83.2		16.5		67.1		14.3		101.3		16.5		144.1		19.7
Capital Goods		174.6		32.6		164.9		32.8		177.1		37.9		212.8		34.6		228.9		31.3
Machinery & Precision Equipment		60.5		11.3		50.7		10.1		57.9		12.4		70.0		11.4		68.7		9.4
Electric & Electronic Machines		100.4		18.8		100.4		20.0		105.1		22.5		127.6		20.7		144.7		19.8
Transport Equipment		11.5		2.1		11.6		2.3		11.9		2.5		13.0		2.1		13.2		1.8
Others		2.2		0.4		2.1		0.4		2.3		0.5		2.2		0.4		2.3		0.3
Consumer Goods		81.6		15.2		84.5		16.8		84.2		18.0		99.6		16.2		108.7		14.9
Cereals		6.8		1.3		6.9		1.4		7.1		1.5		8.9		1.4		11.3		1.5
Goods for Direct Consumption		22.3		4.2		22.2		4.4		22.3		4.8		25.7		4.2		29.0		4.0
Consumer Durable Goods		32.2		6.0		34.5		6.9		34.9		7.5		42.2		6.9		42.8		5.9
Consumer Nondurable Goods		20.3		3.8		20.9		4.2		20.0		4.3		22.8		3.7		25.6		3.5

Total		535.2		100.0		503.3		100.0		467.6		100.0		615.1		100.0		731.4		100.0

(1)	These entries are derived from customs clearance statistics. C.I.F. means that the price of goods includes insurance and freight costs.

(2)	Preliminary.

Source: The Bank of Korea; Korea Customs Service

In 2018, the Republic recorded a trade surplus of US$69.7 billion. Exports increased by 5.4% to US$604.9 billion in 2018 from US$573.7 billion in 2017, primarily due to increased demand for semiconductors and petroleum products. Imports increased by 11.8% to US$535.2 billion in 2018 from US$478.5 billion in 2017, primarily due to an increase in oil prices, which also led to increased unit prices of other major raw materials.

In 2019, the Republic recorded a trade surplus of US$38.9 billion. Exports decreased by 10.4% to US$542.2 billion in 2019 from US$604.9 billion in 2018, primarily due to a significant decrease in semiconductor prices. Imports decreased by 6.0% to US$503.3 billion in 2019 from US$535.2 billion in 2018, primarily due to a decrease in oil prices, which also led to decreased unit prices of other major raw materials.

In 2020, the Republic recorded a trade surplus of US$44.9 billion. Exports decreased by 5.5% to US$512.5 billion in 2020 from US$542.2 billion in 2019, primarily due to a slowdown of the global economy resulting from the COVID-19 pandemic. Imports decreased by 7.1% to US$467.6 billion in 2020 from US$503.3 billion in 2019, primarily due to a decrease in oil prices, which also led to decreased unit prices of other major raw materials, as well as decreased domestic consumption, which were mainly attributed to the COVID-19 pandemic.

In 2021, the Republic recorded a trade surplus of US$29.3 billion. Exports increased by 25.7% to US$644.4 billion in 2021 from US$512.5 billion in 2020, primarily due to a recovery of the global economy from the COVID-19 pandemic. Imports increased by 31.5% to US$615.1 billion in 2021 from US$467.6 billion in 2020, primarily due to an increase in domestic consumption as well as an increase in oil prices, which also led to increased unit prices of other major raw materials.

Based on preliminary data, in 2022, the Republic recorded a trade deficit of US$47.8 billion. Exports increased by 6.1% to US$683.6 billion in 2022 from US$644.4 billion in 2021, primarily due to an improvement

206

in the domestic economic conditions of the Republic’s major trading partners. Imports increased by 18.9% to US$731.4 billion in 2022 from US$615.1 billion in 2021, primarily due to an increase in energy and commodity prices, which also led to increased unit prices of other major raw materials.

Based on preliminary data, the Republic recorded a trade deficit of US$22.6 billion in the first quarter of 2023. Exports decreased by 12.6% to US$151.5 billion in the first quarter of 2023 from US$173.4 billion in the corresponding period of 2022, primarily due to a deterioration in the domestic economic conditions of the Republic’s major trading partners. Imports decreased by 2.2% to US$174.0 billion in the first quarter of 2023 from US$177.9 billion in the corresponding period of 2022, primarily due to a decrease in oil prices, which also led to decreased unit prices of other major raw materials.

The following table sets forth the Republic’s exports trading partners:

Exports


	2018		As % of 2018 Total		2019		As % of 2019 Total		2020		As % of 2020 Total		2021		As % of 2021 Total		2022⁽¹⁾		As % of 2022 Total⁽¹⁾
	(millions of dollars, except percentages)
China		162,125.1		26.8		136,202.5		25.1		132,565.4		25.9		162,913.0		25.3		155,789.4		22.8
United States		72,719.9		12.0		73,343.9		13.5		74,115.8		14.5		95,902.0		14.9		109,765.7		16.1
Japan		30,528.6		5.0		28,420.2		5.2		25,097.7		4.9		30,061.8		4.7		30,606.3		4.5
Hong Kong		45,996.4		7.6		31,912.9		5.9		30,653.8		6.0		37,467.1		5.8		27,651.2		4.0
Singapore		11,782.2		1.9		12,768.0		2.4		9,828.4		1.9		14,148.5		2.2		20,205.4		3.0
Vietnam		48,622.1		8.0		48,177.7		8.9		48,510.6		9.5		56,728.5		8.8		60,972.0		8.9
Taiwan		20,783.5		3.4		15,666.3		2.9		16,465.4		3.2		24,285.3		3.8		26,198.2		3.8
India		15,606.2		2.6		15,096.3		2.8		11,937.3		2.3		15,603.3		2.4		18,870.1		2.8
Indonesia		8,833.2		1.5		7,650.1		1.4		6,312.9		1.2		8,550.3		1.3		10,215.9		1.5
Mexico		11,458.2		1.9		10,927.0		2.0		8,241.0		1.6		11,290.2		1.8		12,654.2		1.9
Australia		9,610.4		1.6		7,890.6		1.5		6,188.5		1.2		9,750.5		1.5		18,753.0		2.7
Germany		9,372.7		1.5		8,685.7		1.6		9,576.1		1.9		11,109.9		1.7		10,067.7		1.5
Others⁽²⁾		157,421.2		26.0		145,491.4		26.8		133,005.1		26.0		166,590.0		25.9		181,835.7		26.6

Total		604,859.7		100.0		542,232.6		100.0		512,498.0		100.0		644,400.4		100.0		683,584.8		100.0

(1)	Preliminary.

(2)	Includes more than 200 countries and regions.

Source: The Bank of Korea; Korea Customs Service

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The following table sets forth the Republic’s imports trading partners:

Imports


	2018		As % of 2018 Total		2019		As % of 2019 Total		2020		As % of 2020 Total		2021		As % of 2021 Total		2022⁽¹⁾		As % of 2022 Total⁽¹⁾
	(millions of dollars, except percentages)
China		106,488.6		19.9		107,228.7		21.3		108,884.6		23.3		138,628.1		22.5		154,576.3		21.1
Japan		54,603.7		10.2		47,580.9		9.5		46,023.0		9.8		54,642.2		8.9		54,711.8		7.5
United States		58,868.3		11.0		61,878.6		12.3		57,492.2		12.3		73,213.4		11.9		81,784.7		11.2
Saudi Arabia		26,335.8		4.9		21,840.6		4.3		15,979.6		3.4		24,271.3		3.9		41,640.3		5.7
Qatar		16,293.6		3.0		13,036.6		2.6		7,562.1		1.6		11,611.1		1.9		16,567.2		2.3
Australia		20,718.6		3.9		20,608.2		4.1		18,707.1		4.0		32,918.0		5.4		44,929.4		6.1
Germany		20,854.0		3.9		19,936.9		4.0		20,680.9		4.4		21,996.3		3.6		23,614.9		3.2
Kuwait		12,794.3		2.4		10,771.1		2.1		5,827.9		1.2		8,253.9		1.3		12,401.9		1.7
Taiwan		16,738.4		3.1		15,717.7		3.1		17,837.0		3.8		23,485.8		3.8		28,274.6		3.9
United Arab Emirates		9,287.4		1.7		8,991.1		1.8		5,692.7		1.2		7,318.7		1.2		15,492.8		2.1
Indonesia		11,161.2		2.1		8,819.8		1.8		7,594.7		1.6		10,725.1		1.7		15,734.9		2.2
Malaysia		10,205.7		1.9		9,279.9		1.8		8,892.6		1.9		10,456.2		1.7		15,249.1		2.1
Others⁽²⁾		170,852.9		31.9		157,652.8		31.3		146,458.4		31.3		197,573.3		32.1		226,391.8		31.0

Total		535,202.4		100.0		503,342.9		100.0		467,632.8		100.0		615,093.4		100.0		731,369.7		100.0

(1)	Preliminary.

(2)	Includes more than 200 countries and regions.

Source: The Bank of Korea; Korea Customs Service

The outbreak of severe health epidemics in Korea and various parts of the world, including the COVID-19 pandemic, raises significant uncertainty about prospects for international trade and economic growth for affected countries, as well as world economic prospects in general. Although the domestic and global economy has recovered generally from the COVID-19 pandemic in recent months, global economic uncertainties in relation to COVID-19, in particular the extent to which the COVID-19 pandemic affects international trade, are expected to continue in 2023. In order to contain further spread of such epidemics and to prevent the outbreak of similar epidemics in the future, the Government continues to cooperate actively with regional and international efforts to develop and implement various measures to combat such outbreaks. See “—The Economy—Worldwide Economic and Financial Difficulties”.

In 2020, 2021, 2022 and in recent months, the value of the Won relative to the U.S. dollar and Japanese Yen has fluctuated widely, in particular due to the impact of the COVID-19 pandemic, the invasion of Ukraine by Russia and the ensuing sanctions against Russia and, more recently, the widening difference in policy rates between the United States and the Republic, among others. See “—The Economy—Worldwide Economic and Financial Difficulties”. An appreciation of the Won against the U.S. dollar and Japanese Yen increases the Won value of the Republic’s export sales and diminishes the price-competitiveness of export goods in foreign markets in U.S. dollar and Japanese Yen terms, respectively. However, it also decreases the cost of imported raw materials in Won terms and the cost in Won of servicing the Republic’s U.S. dollar and Japanese Yen denominated debt. In general, when the Won appreciates, export dependent sectors of the Korean economy, including automobiles, electronics and shipbuilding, suffer from the resulting pressure on the price-competitiveness of export goods, which may lead to reduced profit margins and loss in market share, more than offsetting a decrease in the cost of imported raw materials. If the export dependent sectors of the Korean economy suffer reduced profit margins or a net loss, it could result in a material adverse effect on the Korean economy.

208

Since the Government announced its plans to pursue free trade agreements, or FTAs, in 2003, the Republic has entered into FTAs with key trading partners. The Republic has had bilateral FTAs in effect with Chile since 2004, Singapore since 2006, India since 2010, Peru since 2011, the United States since 2012, Turkey since 2013, Australia since 2014, Canada, China, New Zealand and Vietnam since 2015, Colombia since July 2016, the United Kingdom since January 2021, Israel and Cambodia since December 2022 and Indonesia since January 2023. The Republic is currently in negotiations with a number of other key trading partners. In addition, the Republic has had regional FTAs in effect with the European Free Trade Association since 2006, the Association of Southeast Asian Nations since 2009, the European Union since 2011, with each of Panama, Costa Rica, Guatemala, Honduras, El Salvador and Nicaragua since 2021 and with the Regional Comprehensive Economic Partnership since 2022, and is currently negotiating additional regional FTAs. The Republic and Turkey have completed revisions to their bilateral FTA, which became effective in August 2018. The Republic and the United States have also completed revisions to their bilateral FTA, which became effective in January 2019.

Non-Commodities Trade Balance

The Republic had non-commodities trade deficits of US$32.6 billion in 2018, US$20.1 billion in 2019, US$4.7 billion in 2020 and US$12.1 billion in 2021. Based on preliminary data, the Republic had a non-commodities trade surplus of US$9.5 billion in 2022.

Foreign Currency Reserves

The foreign currency reserves are external assets that are readily available to and controlled by monetary authorities for meeting balance of payments financing needs and for other related purposes. The following table shows the Republic’s total official foreign currency reserves:

Total Official Reserves


	December 31,
	2018		2019		2020		2021		2022
	(millions of dollars)
Gold	$	4,794.8	$	4,794.8	$	4,794.8	$	4,794.8	$	4,794.8
Foreign Exchange⁽¹⁾		393,332.5		397,876.1		430,117.2		438,319.2		399,043.1

Total Gold and Foreign Exchange		398,127.2		402,670.9		434,912.0		443,114.0		403,837.9

Reserve Position at IMF		2,140.4		2,792.9		4,815.3		4,634.9		4,489.5
Special Drawing Rights		3,426.6		3,352.4		3,370.8		15,369.5		14,836.3

Total Official Reserves	$	403,694.3	$	408,816.1	$	443,098.1	$	463,118.4	$	423,163.7

(1)	More than 95% of the Republic’s foreign currency reserves are comprised of convertible foreign currencies.

Source: The Bank of Korea; International Monetary Fund

The Government’s foreign currency reserves increased to US$262.2 billion as of December 31, 2007 from US$8.9 billion as of December 31, 1997, primarily due to continued balance of trade surpluses and capital inflows. In 2008, the Government’s foreign currency reserves decreased, falling to US$201.2 billion as of December 31, 2008, partially as a result of the Government’s use of the foreign currency reserve to provide foreign currency liquidity to Korean financial institutions. The Government’s foreign currency reserves increased to US$403.7 billion as of December 31, 2018, US$408.8 billion as of December 31, 2019, US$443.1 billion as of December 31, 2020 and US$463.1 billion as of December 31, 2021, primarily due to continued trade surpluses and capital inflows. The Government’s foreign currency reserves decreased to US$423.2 billion as of December 31, 2022, however, primarily in relation to the depreciation of the Won against the U.S. dollar. The amount of the Government’s foreign currency reserve was US$421.0 billion as of May 31, 2023.

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Government Finance

The Ministry of Economy and Finance prepares the Government budget and administers the Government’s finances.

The Government’s fiscal year commences on January 1. The Government must submit the budget, which is drafted by the Minister of Economy and Finance and approved by the President of the Republic, to the National Assembly not later than 90 days prior to the start of the fiscal year and may submit supplementary budgets revising the original budget at any time during the fiscal year.

2021 budgeted revenues remained relatively stable atW450.9 trillion from 2020. 2021 budgeted expenditures and net lending increased by 9.3% toW526.3 trillion fromW481.4 trillion in 2020, led by increases in budgeted expenditures on recovery from the COVID-19 pandemic (including support for individuals and businesses adversely impacted by the COVID-19 pandemic, procurement of COVID-19 vaccines and enhancement of medical facilities and other infrastructure, among others) and revitalization of the economy (public housing, job creation, research and development, social security and welfare services, among others). The 2021 budget anticipated aW75.4 trillion budget deficit.

2022 budgeted revenues increased by 14.8% toW517.7 trillion fromW450.9 trillion in 2021, led by an increase in budgeted tax revenues (including taxes on income, profits and capital gains as well as taxes on goods and services). 2022 budgeted expenditures and net lending increased by 8.6% toW571.8 trillion fromW526.3 trillion in 2021, led by increases in budgeted expenditures on recovery from the COVID-19 pandemic (including support for small businesses) and revitalization of the economy. The 2022 budget anticipated aW54.1 trillion budget deficit.

2023 budgeted revenues increased by 13.7% toW588.6 trillion fromW517.7 trillion in 2022, led by an increase in budgeted tax revenues (including taxes on income, profits and capital gains). 2023 budgeted expenditures and net lending increased by 5.2% toW601.6 trillion fromW571.8 trillion in 2022, led by increases in budgeted expenditures on revitalization of the economy. The 2023 budget anticipated aW13.1 trillion budget deficit.

Beginning in March 2020, the National Assembly approved a series of supplementary budgets as part of the Government’s efforts to mitigate adverse effects on the Korean economy resulting from the COVID-19 pandemic. See “—The Economy—Worldwide Economic and Financial Difficulties”. These supplementary budgets, which amounted toW66.8 trillion in 2020,W49.8 trillion in 2021 andW78.9 trillion in 2022, have been some of the largest of their kind drawn up in response to an outbreak of an infectious disease in Korea, and have been used for the following purposes: (i) provision of loans and guarantees for small businesses, (ii) relief packages and household support, including daycare vouchers and emergency livelihood support, (iii) disease prevention (including purchases and administration of vaccines), testing and treatment, (iv) various forms of financial support for local communities most affected by the COVID-19 pandemic and (v) measures to revitalize the economy from the impact of the COVID-19 pandemic. The supplementary budgets have been funded through the issuance of treasury bonds by the Government, The Bank of Korea’s unappropriated surplus and other surplus funds available to the Government, among others.

Any significant increase in additional spending measures as stipulated by the supplementary budgets (including relief packages) may lead to a budget deficit for 2023, which could result in a deterioration in the Government’s fiscal position and an increase in borrowings.

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The following table shows consolidated Government revenues and expenditures:

Consolidated Central Government Revenues and Expenditures


	Actual										Budget
	2018		2019		2020		2021		2022⁽¹⁾		2021		2022		2023⁽¹⁾
	(billions of Won)
Total Revenues		438,262		443,853		446,628		537,619		588,332		450,905		517,701		588,577
Current Revenues		435,558		441,148		443,694		534,999		585,325		447,865		514,696		584,672
Total Tax Revenues		358,424		363,005		360,129		422,182		479,384		359,775		424,050		486,573
Taxes on income, profits and capital gains		155,399		155,736		148,622		184,509		232,319		143,121		180,740		236,860
Social security contributions		64,854		69,550		74,583		78,104		83,444		77,032		80,666		86,116
Tax on property		15,473		15,474		22,735		31,392		27,696		19,300		28,047		27,815
Taxes on goods and services		99,056		98,614		91,047		99,840		105,828		95,658		106,738		107,760
Taxes on international trade and transaction		8,815		7,882		7,059		8,227		10,324		8,347		8,735		10,724
Other tax		14,828		15,748		16,084		20,110		19,773		16,316		19,124		17,299
Non-Tax Revenues		77,134		78,143		83,565		112,818		105,941		88,091		90,646		98,099
Operating surpluses of departmental enterprise sales and property income		28,616		29,345		33,571		56,664		47,459		32,791		34,628		36,492
Administration fees & charges and non-industrial sales		9,004		10,181		9,929		10,865		11,434		10,724		11,402		12,470
Fines and forfeits		24,455		22,554		23,583		26,993		28,276		26,950		25,501		27,816
Contributions to government employee pension fund		13,206		13,523		13,876		14,918		16,348		15,385		16,633		18,480
Current revenue of non-financial public enterprises		1,853		2,540		2,606		3,378		2,425		2,241		2,483		2,842
Capital Revenues		2,703		2,705		2,934		2,620		3,007		3,040		3,006		3,905
Total Expenditures and Net Lending		407,099		455,850		517,781		568,113		652,902		526,292		571,814		601,629
Total Expenditures		389,610		436,698		489,966		538,034		622,997		496,661		546,446		584,587
Current Expenditures		360,176		387,100		455,098		502,191		585,593		459,333		506,262		545,493
Expenditure on goods and service		71,459		60,196		79,460		88,144		89,759		94,636		94,814		94,966
Interest payment		14,287		13,837		14,452		15,431		18,481		17,254		17,928		21,726
Subsidies and other current transfers		272,080		309,575		357,295		395,826		473,661		343,636		389,599		424,353
Current expenditure of non-financial public enterprises		2,350		3,492		3,891		2,790		3,692		3,807		3,922		4,449
Capital Expenditures		29,434		49,598		34,868		35,842		37,404		37,328		40,184		39,094
Net Lending		17,489		19,152		27,815		30,079		29,905		29,631		25,369		17,042

(1)	Preliminary.

Source: Ministry of Economy and Finance; The Bank of Korea; Korea National Statistical Office

The consolidated Government account consists of a General Account, Special Accounts (including a non-financial public enterprise special account) and Public Funds. The Government segregates the accounts of certain functions of the Government into Special Accounts and Public Funds for more effective administration and fiscal control. The Special Accounts and Public Funds relate to business type activities, such as economic development, road and railway construction and maintenance, monopolies, and communications developments and the administration of loans received from official international financial organizations and foreign governments.

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Revenues derive mainly from national taxes and non-tax revenues. Taxes in Korea can be roughly classified into the following types:

•

income tax and capital gains tax,

•

property tax,

•

value-added tax,

•

customs duty tax, and

•

other taxes.

Income tax and capital gains tax are imposed on income derived from labor, business operation and ownership of assets and profits derived from capital appreciation. Income tax and capital gains tax, depending on the type of taxpayer, can be further classified into corporate income tax and individual income tax. Property tax is imposed on exchange or ownership of property and includes inheritance tax and gift tax. Value-added tax is imposed on value added to goods and services. Customs duty tax is imposed on imported goods. Other taxes include tax on certain securities transactions and a stamp tax for certain documents.

Expenditures include general administration, national defense, community service, education, health, social security, certain annuities and pensions and local finance, which involves the transfer of tax revenues to local governments.

For 2018, the Republic recorded total revenues ofW438.3 trillion and total expenditures and net lending ofW407.1 trillion. The Republic had a fiscal surplus ofW31.2 trillion in 2018.

For 2019, the Republic recorded total revenues ofW443.9 trillion and total expenditures and net lending ofW455.9 trillion. The Republic had a fiscal deficit ofW12.0 trillion in 2019.

For 2020, the Republic recorded total revenues ofW446.6 trillion and total expenditures and net lending ofW517.8 trillion. The Republic had a fiscal deficit ofW71.2 trillion in 2020.

For 2021, the Republic recorded total revenues ofW537.6 trillion and total expenditures and net lending ofW568.1 trillion. The Republic had a fiscal deficit ofW30.5 trillion in 2021.

Based on preliminary data, the Republic recorded total revenues ofW588.3 trillion and total expenditures and net lending ofW652.9 trillion in 2022. The Republic had a fiscal deficit ofW64.6 trillion in 2022.

Debt

The Government estimates that the total outstanding debt of the Government (including guarantees by the Government) as of December 31, 2021 amounted to approximatelyW950.0 trillion, an increase of 14.2% over the previous year.

The Government estimates that the total outstanding debt of the Government (including guarantees by the Government) as of December 31, 2022 amounted to approximatelyW1,044.0 trillion, an increase of 9.9% over the previous year.

The Government expects that the amount of the Government’s debt will further increase in 2023 as it continues to support the Republic’s economic recovery and prepare for the transition to a post-pandemic economy. The Ministry of Economy and Finance administers the national debt of the Republic.

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External and Internal Debt of the Government

The following table sets out, by currency and the equivalent amount in U.S. dollars, the estimated outstanding direct external debt of the Government as of December 31, 2022:

Direct External Debt of the Government


	Amount in Original Currency		Equivalent Amount in U.S. Dollars⁽¹⁾
	(millions)
US$		US$7,025.0	US$	7,025.0
Euro (EUR)		EUR2,150.0		2,290.0

Total			US$	9,315.0

(1)	Amounts expressed in currencies other than US$ are converted to US$ at the arbitrage rate announced by the Seoul Money Brokerage Services, Ltd. in effect on December 30, 2022.

The following table summarizes, as of December 31 of the years indicated, the outstanding direct internal debt of the Republic:

Direct Internal Debt of the Government


	(billions of Won)
2018		643,550.9
2019		690,524.1
2020		808,941.0
2021		927,865.2
2022		1,021,574.4

The following table sets out all guarantees by the Government of indebtedness of others:

Guarantees by the Government


	December 31,
	2018		2019		2020		2021		2022
	(billions of Won)
Domestic		17,016.3		14,760.0		12,490.0		10,930.0		10,620.0
External⁽¹⁾		—		—		—		—		—

Total		17,016.3		14,760.0		12,490.0		10,930.0		10,620.0

(1)	Converted to Won at foreign exchange banks’ telegraphed transfer selling rates to customers or the market average exchange rates in effect on December 31 of each year.

For further information on the outstanding indebtedness, including guarantees, of the Republic, see “—Tables and Supplementary Information”.

External Liabilities

The following tables set out certain information regarding the Republic’s external liabilities calculated under the criteria based on the sixth edition of the Balance of Payment Manual published by the International Monetary

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Fund in December 2010 and implemented by the Government in December 2013. Under BPM6, in particular, prepayments received in connection with the construction of ships are excluded from the external liabilities.


	December 31,
	2018		2019		2020		2021		2022⁽¹⁾
	(billions of dollars)
Long-term Liabilities		315.6		335.3		390.6		467.7		497.8
General Government		83.5		91.2		119.4		142.8		153.1
Monetary Authorities		15.2		14.4		15.0		35.9		25.1
Banks		100.1		104.4		112.2		128.1		146.8
Other Sectors		116.8		125.2		144.0		160.9		172.8
Short-term Liabilities		125.6		135.5		160.1		164.7		166.7
General Government		1.0		1.6		2.1		1.6		1.2
Monetary Authorities		12.8		10.9		10.8		9.6		4.8
Banks		90.3		102.0		122.0		123.6		128.7
Other Sectors		21.5		21.0		25.2		29.9		32.0

Total External Liabilities		441.2		470.7		550.6		632.4		664.5

(1)	Preliminary.

Commitments to Assume Treasury Obligations

The Government may, if deemed necessary for recovery from disasters and calamities, make commitments to assume treasury obligations to the extent resolved by the National Assembly each fiscal year. In such cases, such commitments shall be executed in accordance with the procedures for spending reserve funds within general accounts. As of January 4, 2023, such commitments assumed by the Government amounted toW0.1 trillion.

Debt Record

The Government has always paid when due the full amount of principal of, interest on, and amortization of sinking fund requirements of, all of its indebtedness.

Tables and Supplementary Information

A. External Debt of the Government

(1) External Bonds of the Government


Series	Issue Date		Maturity Date		Interest Rate (%)		Currency		Original Principal Amount		Principal Amount Outstanding as of December 31, 2022
2005-001		November 2, 2005		November 3, 2025		5.625		USD		400,000,000		400,000,000
2013-001		September 11, 2013		September 11, 2023		3.875		USD		1,000,000,000		1,000,000,000
2014-001		June 10, 2014		June 10, 2044		4.125		USD		1,000,000,000		1,000,000,000
2014-002		June 10, 2014		June 10, 2024		2.125		EUR		750,000,000		750,000,000
2017-001		January 19, 2017		January 19, 2027		2.750		USD		1,000,000,000		1,000,000,000
2018-001		September 20, 2018		September 20, 2028		3.500		USD		500,000,000		500,000,000
2018-002		September 20, 2018		September 20, 2048		3.875		USD		500,000,000		500,000,000
2019-001		June 19, 2019		June 19, 2029		2.500		USD		1,000,000,000		1,000,000,000
2019-002		June 19, 2019		June 19, 2024		2.000		USD		500,000,000		500,000,000
2020-001		September 16, 2020		September 16, 2030		1.000		USD		625,000,000		625,000,000
2020-002		September 16, 2020		September 16, 2025		0.000		EUR		700,000,000		700,000,000
2021-001		October 15, 2021		October 15, 2026		0.000		EUR		700,000,000		700,000,000
2021-002		October 15, 2021		October 15, 2031		1.750		USD		500,000,000		500,000,000

Total External Bonds in Original Currencies											USD	7,025,000,000
											EUR	2,150,000,000

Total External Bonds in Equivalent Amount of Won⁽¹⁾											W	11,807,862,500,000

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(1)

U.S. dollar amounts are converted to Won amounts at the rate of US$1.00 toW1,267.3, the market average exchange rate in effect on December 30, 2022, as announced by Seoul Money Brokerage Services, Ltd. Euro amounts are converted to Won amounts at the rate of EUR 1.00 toW1,351.2, the market average exchange rate in effect on December 30, 2022, as announced by Seoul Money Brokerage Services, Ltd.

(2) External Borrowings of the Government

None.

B. External Guaranteed Debt of the Government

None.

C. Internal Debt of the Government


Title	Range of Interest Rates		Range of Years of Issue		Range of Years of Original Maturity		Principal Amounts Outstanding as of December 31, 2022
	(%)						(billions of Won)
1. Bonds
Interest-Bearing Treasury Bond for Treasury Bond Management Fund		0.750-5.750		2006-2022		2023-2072		937,507.4
Interest-Bearing Treasury Bond for National Housing I		1.00-2.00		2014-2022		2019-2027		82,150.1
Interest-Bearing Treasury Bond for National Housing II		0.0-3.0		1997-2017		2017-2027		2.5
Interest-Bearing Treasury Bond for National Housing III		—		—		—		0
Non-interest-Bearing Treasury Bond for Contribution to International Organizations⁽¹⁾		0		1968-1985		—		9.4

Total Bonds								1,019,669.4

2. Borrowings
Borrowings from The Bank of Korea		—		—		—		0
Borrowings from the Sports Promotion Fund		1.325-3.585		2021-2022		2023-2024		880.0
Borrowings from The Korea Foundation Fund		—		—		—		0
Borrowings from the Labor Welfare Promotion Fund		—		—		—		0
Borrowings from Korea Technology Finance Corporation		3.135-3.585		2022		2024		195.0
Borrowings from the Credit Guarantee Fund for Agriculture, Forestry and Fisheries Suppliers		—		—		—		0
Borrowings from the Government Employees’ Pension Fund		—		—		—		0
Borrowings from the Film Industry Development Fund		—		—		—		0
Borrowings from the Korea Credit Guarantee Fund		0.81		2020		2023		250.0
Borrowings from the Housing Finance Credit Guarantee Fund		0.815-1.285		2020		2023		530.0
Borrowings from the Korea Infrastructure Credit Guarantee Fund		0.81		2020		2023		50.0

Total Borrowings								1,905.0

Total Internal Funded Debt								1,021,574.4

(1)	Interest Rates and Years of Original Maturity not applicable.

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D. Internal Guaranteed Debt of the Government


Title	Range of Interest Rates		Range of Years of Issue		Range of Years of Original Maturity		Principal Amounts Outstanding as of December 31, 2022
	(%)						(billions of Won)
1. Bonds of Government-Affiliated Corporations
Korea Deposit Insurance Corporation		—		—		—		0
Korea Student Aid Foundation		0.00-5.48		2011-2022		2023-2042		9,920.0
Key Industry Stabilization Fund		0.94-2.19		2020-2022		2023-2025		700.0

Total Internal Guaranteed Debt								10,620.0

E. Others

Commitments to Assume Treasury Obligations

216

DESCRIPTION OF THE SECURITIES

Description of Debt Securities

We will issue debt securities under a fiscal agency agreement or agreements. The description below summarizes the material provisions of the debt securities and the fiscal agency agreement. Since it is only a summary, the description may not contain all of the information that may be important to you as a potential investor in the debt securities. Therefore, we urge you to read the form of fiscal agency agreement and the form of global debt security before deciding whether to invest in the debt securities. We have filed a copy of these documents with the Securities and Exchange Commission as exhibits to the registration statement of which this prospectus is a part. You should refer to such exhibits for more complete information.

The financial terms and other specific terms of your debt securities will be described in the prospectus supplement relating to your debt securities. The description in the prospectus supplement will supplement this description or, to the extent inconsistent with this description, replace it.

We will appoint a fiscal agent or agents in connection with debt securities whose duties will be governed by the fiscal agency agreement. We may replace the fiscal agent or appoint different fiscal agents for different series of debt securities.

General Terms of the Debt Securities

We may issue debt securities in separate series at various times. The Republic may irrevocably guarantee the payment of principal of, and interest on, one or more series of debt securities. The prospectus supplement that relates to your debt securities will specify some or all of the following terms:

•

the aggregate principal amount;

•

the currency of denomination and payment;

•

any limitation on principal amount and authorized denominations;

•

the percentage of their principal amount at which the debt securities will be issued;

•

the maturity date or dates;

•

the interest rate for the debt securities and, if variable, the method by which the interest rate will be calculated;

•

whether any amount payable in respect of the debt securities will be determined based on an index or formula, and how any such amount will be determined;

•

the dates from which interest, if any, will accrue for payment of interest and the record dates for any such interest payments;

•

where and how we will pay principal and interest;

•

whether and in what circumstances the debt securities may be redeemed before maturity;

•

any sinking fund or similar provision;

•

whether any part or all of the debt securities will be in the form of a global security and the circumstances in which a global security is exchangeable for certificated securities;

•

if issued in certificated form, whether the debt securities will be in bearer form with interest coupons, if any, or in registered form without interest coupons, or both forms, and any restrictions on exchanges from one form to the other;

•

whether any of the terms set out herein will differ for the debt securities;

217

•

whether the Republic will irrevocably guarantee the payment of principal of, and interest on, the debt securities; and

•

other specific provisions.

Depending on the terms of the debt securities we issue, the prospectus supplement relating to the debt securities may also describe applicable U.S. federal income tax and other considerations additional to the disclosure in this prospectus.

Unless otherwise specified in the applicable prospectus supplement, we will maintain at an office in the Borough of Manhattan, The City of New York, a register for the registration of transfers of debt securities issued in registered form.

Payments of Principal, Premium and Interest

On every payment date specified in the relevant prospectus supplement, we will pay the principal, premium and/or interest due on that date to the registered holder of the relevant debt security at the close of business on the related record date. We will make all payments at the place and in the currency set out in the prospectus supplement. Unless otherwise specified in the relevant prospectus supplement or the debt securities, we will make payments in U.S. dollars at the New York office of the fiscal agent or, outside the United States, at the office of any paying agent. Unless otherwise specified in the applicable prospectus supplement or debt securities, we will pay interest by check, payable to the registered holder.

We will make any payments on debt securities in bearer form at the offices and agencies of the fiscal agent or any other paying agent outside the United States as we may designate. At the option of the holder of the bearer debt securities, we will make such payments by check or by transfer to an account maintained by the holder with a bank located outside of the United States. We will not make payments on bearer debt securities at the corporate trust office of the fiscal agent in the United States or at any other paying agency in the United States. In addition, we will not make any payment by mail to an address in the United States or by transfer to an account maintained by a holder of bearer debt securities with a bank in the United States. Nevertheless, we will make payments on a bearer debt security denominated and payable in U.S. dollars at an office or agency in the United States if:

•

payment outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions; and

•

the payment is then permitted under United States law, without material adverse consequences to us.

If we issue bearer debt securities, we will designate the offices of at least one paying agent outside the United States as the location for payment.

Repayment of Funds; Prescription

If no one claims money paid by us to the fiscal agent for the payment of principal or interest in respect of any series of debt securities for two years after the payment was due and payable, the fiscal agent or paying agent will repay the money to us. After such repayment, the fiscal agent or paying agent will not be liable with respect to the amounts so repaid, and you may look only to us for any payment under the debt securities.

Under Korean law, you will not be permitted to file a claim against us for payment of principal or interest on any series of debt securities unless you do so within five years, in the case of principal, and two years, in the case of interest, from the date on which payment was due.

218

Global Securities

The prospectus supplement relating to a series of debt securities will indicate whether any of that series of debt securities will be represented by a global security. The prospectus supplement will also describe any unique specific terms of the depositary arrangement with respect to that series. Unless otherwise specified in the prospectus supplement, we anticipate that the following provisions will apply to depositary arrangements.

Registered Ownership of the Global Security

The global security will be registered in the name of a depositary identified in the prospectus supplement, or its nominee, and will be deposited with the depositary, its nominee or a custodian. The depositary, or its nominee, will therefore be considered the sole owner or holder of debt securities represented by the global security for all purposes under the fiscal agency agreement. Except as specified below or in the applicable prospectus supplement, beneficial owners:

��

will not be entitled to have any of the debt securities represented by the global security registered in their names;

•

will not receive physical delivery of any debt securities in definitive form;

•

will not be considered the owners or holders of the debt securities;

•

must rely on the procedures of the depositary and, if applicable, any participants (institutions that have accounts with the depositary or a nominee of the depositary, such as securities brokers and dealers) to exercise any rights of a holder; and

•

will receive payments of principal and interest from the depositary or its participants rather than directly from us.

We understand that, under existing industry practice, the depositary and participants will allow beneficial owners to take all actions required of, and exercise all rights granted to, the registered holders of the debt securities.

We will register debt securities in the name of a person other than the depositary or its nominee only if:

•

the depositary for a series of debt securities is unwilling or unable to continue as depositary; or

•

we determine, in our sole discretion, not to have a series of debt securities represented by a global security.

In either such instance, an owner of a beneficial interest in a global security will be entitled to registration of a principal amount of debt securities equal to its beneficial interest in its name and to physical delivery of the debt securities in definitive form.

Beneficial Interests in and Payments on a Global Security

Only participants, and persons that may hold beneficial interests through participants, can own a beneficial interest in the global security. The depositary keeps records of the ownership and transfer of beneficial interests in the global security by its participants. In turn, participants keep records of the ownership and transfer of beneficial interests in the global security by other persons (such as their customers). No other records of the ownership and transfer of beneficial interests in the global security will be kept.

All payments on a global security will be made to the depositary or its nominee. When the depositary receives payment of principal or interest on the global security, we expect the depositary to credit its participants’ accounts with amounts that correspond to their respective beneficial interests in the global security. We also expect that, after the participants’ accounts are credited, the participants will credit the accounts of the owners of beneficial interests in the global security with amounts that correspond to the owners’ respective beneficial interests in the global security.

219

The depositary and its participants establish policies and procedures governing payments, transfers, exchanges and other important matters that affect owners of beneficial interests in a global security. The depositary and its participants may change these policies and procedures from time to time. We have no responsibility or liability for the records of ownership of beneficial interests in the global security, or for payments made or not made to owners of such beneficial interests. We also have no responsibility or liability for any aspect of the relationship between the depositary and its participants or for any aspect of the relationship between participants and owners of beneficial interests in the global security.

Bearer Securities

We may issue debt securities in a series in the form of one or more bearer global debt securities deposited with a common depositary for the Euroclear and Clearstream, or with a nominee identified in the applicable prospectus supplement. The specific terms and procedures, including the specific terms of the depositary arrangement, with respect to any portion of a series of debt securities to be represented by a global security will be described in the applicable prospectus supplement.

Additional Amounts

We will make all payments of principal of, and premium and interest, if any, on the debt securities without withholding or deducting any present or future taxes imposed by the Republic or any of its political subdivisions, unless required by law. If Korean law requires us to deduct or withhold taxes, we will pay additional amounts as necessary to ensure that you receive the same amount as you would have received without such withholding or deduction.

We will not pay, however, any additional amounts if you are liable for Korean tax because:

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you are connected with the Republic other than by merely owning the debt security or receiving income or payments on the debt security;

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you failed to complete and submit a declaration of your status as a non-resident of the Republic after we or the relevant tax authority requested you to do so; or

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you failed to present your debt security for payment within 30 days of when the payment is due or, if the fiscal agent did not receive the money prior to the due date, the date notice is given to holders that the fiscal agent has received the full amount due to holders. Nevertheless, we will pay additional amounts to the extent you would have been entitled to such amounts had you presented your debt security for payment on the last day of the 30-day period.

We will not pay any additional amounts for taxes on the debt securities except for taxes payable through deduction or withholding from payments of principal, premium or interest. Examples of the types of taxes for which we will not pay additional amounts include the following: estate or inheritance taxes, gift taxes, sales or transfer taxes, personal property or related taxes, assessments or other governmental charges. We will also not pay any additional amounts for taxes imposed pursuant to Sections 1471 through 1474 of the U.S. Internal Revenue Code of 1986, as amended, U.S. Treasury regulations or administrative guidance promulgated thereunder or any law implementing an intergovernmental approach thereto, or FATCA. We will pay stamp or other similar taxes that may be imposed by the Republic, the United States or any political subdivision or taxing authority in one of those two countries on the fiscal agency agreement or be payable in connection with the issuance of the debt securities.

Status of Debt Securities

The debt securities will:

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constitute our direct, unconditional, unsecured and unsubordinated obligations; and

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•

rank without any preference among themselves and equally with all of our other unsecured and unsubordinated obligations. It is understood that this provision shall not be construed so as to require us to make payments under the debt securities ratably with payments being made under any of our other debt securities.

Negative Pledge Covenant

If any debt securities are outstanding, we will not create or permit any security interests on our assets as security for any of our indebtedness or guarantees issued by us, unless the security interest also secures our obligations under the debt securities.

We may, however, create or permit a security interest:

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on any promissory debt securities or commercial paper discounted or otherwise provided as security to or issued or held by us created in favor of The Bank of Korea in the normal operation of The Bank of Korea’s discount facilities or facilities for the funding of loans by us to our customers; or

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on any asset (or documents of title to such asset) incurred when the asset was purchased or improved to secure payment of the cost of the activity; or

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of a statutory nature arising in the ordinary course of our business but unrelated to our activities of borrowing or raising money; or

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on any real estate owned by us imposed by a tenant of such real estate as security for repayment of any key money paid by the tenant; or

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arising by operation of Korean law or given preference by law following our failure to meet an obligation, although we will not permit such a security interest to exist for more than 30 days.

Events of Default

Unless otherwise specified in the applicable prospectus supplement in connection with a particular offering of debt securities, each of the following constitutes an event of default with respect to any series of debt securities:

Non-Payment: we do not pay principal or interest or premium or deposit any sinking fund payment on any debt securities of the series when due and such failure to pay continues for 30 days.

Breach of Other Obligations: we fail to observe or perform any of the covenants in the series of debt securities (other than non-payment) for 60 days after written notice of the default is delivered to us at the corporate trust office of the fiscal agent in New York City by holders representing at least 10% of the aggregate principal amount of the debt securities of the series.

Cross Default and Cross Acceleration:

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we default on any External Indebtedness, and, as a result, becomes obligated to pay an amount equal to or greater than US$10,000,000 in aggregate principal amount prior to its due date; or

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we fail to pay when due, including any grace period, any of our External Indebtedness in aggregate principal amount equal to or greater than US$10,000,000 or we fail to pay when requested and required by the terms thereof any guarantee for External Indebtedness of another person equal to or greater than US$10,000,000 in aggregate principal amount.

Moratorium/Default:

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the Republic declares a general moratorium on the payment of its External Indebtedness, including obligations under guarantees;

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•

the Republic becomes liable to repay prior to maturity any amount of External Indebtedness, including obligations under guarantees, as a result of a default under such External Indebtedness or obligations; or

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the international monetary reserves of the Republic become subject to a security interest or segregation or other preferential arrangement for the benefit of any creditors.

Bankruptcy:

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we are declared bankrupt or insolvent by any court or administrative agency with jurisdiction over us;

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we pass a resolution to apply for bankruptcy or to request the appointment of a receiver or trustee or similar official in insolvency;

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a substantial part of our assets are liquidated; or

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we cease to conduct the banking business.

Cessation of Government Control or Failure of Support: the Republic ceases to (directly or indirectly) control us or fails to provide financial support for us as required under Article 32 of the KDB Act as of the issue date of the debt securities of such series.

For purposes of the foregoing, “External Indebtedness” means any obligation for the payment or repayment of money borrowed that is denominated in a currency other than the currency of the Republic.

As used in paragraph 6 above, “control” means the acquisition or control of a majority of our voting share capital or the right to appoint and/or remove all or the majority of the members of our board of directors or other governing body, whether obtained directly or indirectly, and whether obtained by ownership of share capital, the possession of voting rights, contract or otherwise.

If an event of default occurs, any holder may declare the principal amount of debt securities that it holds to be immediately due and payable by written notice to us and the fiscal agent.

You should note that:

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despite the procedure described above, no debt securities may be declared due and payable if we cure the applicable event of default before we receive the written notice from the debt security holder;

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we are not required to provide periodic evidence of the absence of defaults; and

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the fiscal agency agreement does not require us to notify holders of the debt securities of an event of default or grant any debt security holder a right to examine the security register.

Modifications and Amendments; Debt Securityholders’ Meetings

Each holder of a series of debt securities must consent to any amendment or modification of the terms of that series of debt securities or the fiscal agency agreement that would, among other things:

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change the stated maturity of the principal of the debt securities or any installment of interest;

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reduce the principal amount of such series of debt securities or the portion of the principal amount payable upon acceleration of such debt securities;

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change the debt security’s interest rate or premium payable;

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change the currency of payment of principal, interest or premium;

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amend either the procedures provided for a redemption event or the definition of a redemption event;

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shorten the period during which we are not allowed to redeem the debt securities or grant us a right to redeem the debt securities which we previously did not have; or

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reduce the percentage of the outstanding principal amount needed to modify or amend the fiscal agency agreement or the terms of such series of debt securities.

We may, with the exception of the above changes, with the consent of the holders of at least 66²/₃% in principal amount of the debt securities of a series that are outstanding, modify and amend other terms of that series of debt securities.

We may at any time call a meeting of the holders of a series of debt securities to seek the holders of the debt securities’ approval of the modification, or amendment, or obtain a waiver, of any provision of that series of debt securities. The meeting will be held at the time and place in the Borough of Manhattan in New York City as determined by the fiscal agent. The notice calling the meeting must be given at least 30 days and not more than 60 days prior to the meeting.

While an event of default with respect to a series of debt securities is continuing, holders of at least 10% of the aggregate principal amount of that series of debt securities may compel the fiscal agent to call a meeting of all holders of debt securities of that series.

Holders of debt securities who hold, in the aggregate, a majority in principal amount of the debt securities of the series that are outstanding at the time will constitute a quorum at a meeting. At the reconvening of any meeting adjourned for a lack of a quorum, the persons entitled to vote 25% in principal amount of the debt securities of the series that are outstanding at the time will constitute a quorum for taking any action set out in the original notice. To vote at a meeting, a person must either hold outstanding debt securities of the relevant series or be duly appointed as a proxy for a debt securityholder. The fiscal agent will make all rules governing the conduct of any meeting.

The fiscal agency agreement and a series of debt securities may be modified or amended, without the consent of the holders of the debt securities, to:

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add covenants made by us that benefit holders of the debt securities;

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surrender any right or power given to us;

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secure the debt securities;

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permit registered securities to be exchanged for bearer securities or relax or eliminate restrictions on the payment of principal, premium or interest on bearer securities to the extent permitted under United States Department of Treasury regulations, provided that holders of the debt securities do not suffer any adverse tax consequences as a result; and

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cure any ambiguity or correct or supplement any defective provision in the fiscal agency agreement or the debt securities, without materially and adversely affecting the interests of the holders of the debt securities.

Fiscal Agent

The fiscal agency agreement governs the duties of each fiscal agent. We may maintain bank accounts and a banking relationship with each fiscal agent. The fiscal agent is our agent and does not act as a trustee for the holders of the debt securities.

Further Issues of Debt Securities

We may, without the consent of the holders of the debt securities, create and issue additional debt securities with the same terms and conditions as any series of debt securities (or that are the same except for the amount of

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the first interest payment and for the interest paid on the series of debt securities prior to the issuance of the additional debt securities). We may consolidate such additional debt securities with the outstanding debt securities to form a single series.

Description of Warrants

The description below summarizes some of the provisions of warrants for the purchase of debt securities that we may issue from time to time and of the warrant agreement. Copies of the forms of warrants and the warrant agreement are or will be filed as exhibits to the registration statement of which this prospectus is a part. Since it is only a summary, the description may not contain all of the information that is important to you as a potential investor in the warrants.

The description of the warrants that will be contained in the prospectus supplement will supplement this description and, to the extent inconsistent with this description, replace it.

General Terms of the Warrants

Each series of warrants will be issued under a warrant agreement to be entered into between us and a bank or trust company, as warrant agent. The prospectus supplement relating to the series of warrants will describe:

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the terms of the debt securities purchasable upon exercise of the warrants, as described above under “—Description of Debt Securities—General Terms of the Debt Securities”;

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the principal amount of debt securities purchasable upon exercise of one warrant and the exercise price;

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the procedures and conditions for the exercise of the warrants;

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the dates on which the right to exercise the warrants begins and expires;

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whether and under what conditions the warrants may be terminated or canceled by us;

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whether and under what conditions the warrants and any debt securities issued with the warrants will be separately transferable;

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whether the warrants will be issued in bearer or registered form;

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whether the warrants will be exchangeable between registered and bearer form, and, if issued in registered form, where they may be transferred and registered; and

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other specific provisions.

Terms Applicable to Debt Securities and Warrants

Governing Law

The fiscal agency agreement, any warrant agreement and the debt securities and any warrants will be governed by the laws of the State of New York without regard to any principles of New York law requiring the application of the laws of another jurisdiction. Nevertheless, all matters governing our authorization, execution and delivery of the debt securities and the fiscal agency agreement and any warrants and warrant agreement by us will be governed by the laws of the Republic.

Jurisdiction and Consent to Service

We are owned by a foreign sovereign government and all of our directors and executive officers and some of the experts named in this prospectus are residents of Korea. In addition, all or most of our assets and the assets of the people named in the preceding sentence are located outside of the United States. For that reason, you may have difficultly serving process on us or the individuals described above in the United States or enforcing in a

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U.S. court a U.S.-court judgment based on the U.S. federal securities laws. Our Korean counsel has informed us that there would be certain conditions to be met under Korean law regarding the enforceability in Korea, either in original actions or in actions for the enforcement of U.S.-court judgments, of civil liabilities based on the U.S. federal securities laws. The enforcement of U.S.-court judgments against KDB may be affected or limited by the general principle of good morals and other social order and the general principle of good faith and fairness provided in the Civil Code of Korea. The courts of Korea will recognize as a valid judgment and enforce any judgment obtained in a U.S. court without re-examination of the merits; provided, that (a) such judgment was finally and conclusively given by a court having valid jurisdiction in accordance with the international jurisdiction principles under Korean law and applicable treaties, (b) KDB was duly served with service of process (otherwise than by publication or similar means) in sufficient time to enable KDB to prepare our defense in conformity with applicable laws or responded to the action without being served with process, (c) in light of the substance of such judgment and the procedures of litigation, recognition of such judgment is not contrary to the public policy of Korea, and (d) judgments of the courts of Korea are accorded reciprocal treatment in the jurisdiction of the court which had issued such judgment or the requirements for the recognition of a foreign judgment in the jurisdiction of the court which had issued such judgment are neither manifestly inequitable nor substantially different in material respects from the requirements for recognition of a foreign judgment in Korea.

We have appointed the General Manager of our New York Branch, Mr. Tae Jeong Yun, and the Deputy General Manager of our New York Branch, Mr. Ki Cheon Chang, and each of their successors in the future, as our authorized agents to receive service of process in any suit which a holder of any series of debt securities or warrants may bring in any state or federal court in New York City and we have accepted the jurisdiction of those courts for those actions. Our New York Branch is located at 320 Park Avenue, 32nd Floor, New York, New York 10022. These appointments are irrevocable as long as any amounts of principal, premium or interest remain payable by us to the Fiscal Agent under any series of debt securities or any warrants have not expired or otherwise terminated under their terms. If for any reason either of these two men ceases to act as our authorized agent or ceases to have an address in Manhattan, we shall appoint a replacement. The appointment of agents for receipt of service of process and the acceptance of jurisdiction of state or federal courts in New York City do not, however, apply to actions brought under the United States federal securities laws. We may also be sued in courts having jurisdiction over us located in the Republic.

We will irrevocably consent to any relief and process in connection with a suit against us in relation to the debt securities or warrants, including the enforcement or execution of any order or judgment of the court. To the extent permitted by law, we will waive irrevocably any immunity from jurisdiction to which we might otherwise be entitled in any suit based on any series of debt securities or warrants.

Foreign Exchange Controls

Before we may issue debt securities outside the Republic, the Minister of Economy and Finance of Korea must receive a report with respect to the issuance by us of debt securities in accordance with the Foreign Exchange Transaction Act and the Foreign Exchange Transaction Regulation of Korea. After issuance of debt securities outside the Republic, we are required to notify the Minister of Economy and Finance of such issuance. No further approval or authorization is required for us to pay principal of or interest on the debt securities.

Description of Guarantees to be Issued by Us

The description below summarizes some of the provisions of the guarantees that we may issue from time to time. Copies of the forms of guarantees are or will be filed as exhibits to the registration statement of which this prospectus is a part. Since it is only a summary, the description may not contain all of the information that is important to you as a potential beneficiary of a guarantee.

The description of a guarantee that will be contained in the prospectus supplement will supplement this description and, to the extent inconsistent with this description, replace it.

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General Terms of the Guarantees

Each guarantee will be issued by us as guarantor. The prospectus supplement relating to a guarantee will specify:

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the relevant obligor and the obligations guaranteed under the guarantee;

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the nature and scope of the guarantee, including whether or not it is irrevocable and unconditional;

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the status of the guarantee in relation to our other obligations;

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the governing law of the guarantee; and

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other relevant provisions of the guarantee.

Description of Guarantees to be Issued by The Republic of Korea

The description below summarizes some of the provisions of the guarantees that the Republic may issue from time to time to guarantee our debt securities. Since it is only a summary, the description may not contain all of the information that is important to you as a potential beneficiary of a guarantee.

The prospectus supplement relating to a guarantee to be issued by the Republic will specify other specific provisions. The description of a guarantee to be issued by the Republic that will be contained in the prospectus supplement will supplement this description and, to the extent inconsistent with this description, replace it.

General Terms of the Guarantees

Each guarantee will be issued by the Republic as guarantor. The prospectus supplement relating to a guarantee will specify:

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the relevant obligor and the obligations guaranteed under the guarantee;

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the nature and scope of the guarantee, including whether or not it is irrevocable and unconditional;

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the status of the guarantee in relation to the Republic’s other obligations;

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the governing law of the guarantee; and

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other relevant provisions of the guarantee.

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LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES AND BEARER WARRANTS

Bearer securities will not be offered, sold or delivered in the United States or its possessions or to a United States person; except in certain circumstances permitted by United States tax regulations. Bearer securities will initially be represented by temporary global securities, without interest coupons, deposited with a common depositary in London for Euroclear and Clearstream for credit to designated accounts. Unless otherwise indicated in the prospectus supplement:

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each temporary global security will be exchangeable for definitive bearer securities on or after the date that is 40 days after issuance only upon receipt of certification of non-United States beneficial ownership of the temporary global security as provided for in United States tax regulations, provided that no bearer security will be mailed or otherwise delivered to any location in the United States in connection with the exchange; and

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any interest payable on any portion of a temporary global security with respect to any interest payment date occurring prior to the issuance of definitive bearer securities will be paid only upon receipt of certification of non-United States beneficial ownership of the temporary global security as provided for in United States tax regulations.

Bearer securities, other than temporary global debt securities, and any related coupons will bear the following legend: “Any United States person who holds this obligation will be subject to limitations under the United States federal income tax laws, including the limitations provided in Section 165(j) and 1287(a) of the Internal Revenue Code.” The sections referred to in the legend provide that, with certain exceptions, a United States person who holds a bearer security or coupon will not be allowed to deduct any loss realized on the disposition of the bearer security, and any gain, which might otherwise be characterized as capital gain, recognized on the disposition will be treated as ordinary income.

For purposes of this section, “United States person” means:

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a citizen or resident of the United States;

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a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof; or

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an estate or trust the income of which is subject to United States federal income taxation regardless of its source.

For purposes of this section, “United States” means the United States of America, including each state and the District of Columbia, its territories, possessions and other areas subject to its jurisdiction.

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TAXATION

The following discussion summarizes certain Korean tax and U.S. federal income tax considerations that may be relevant to you if you invest in debt securities. This summary is based on laws, regulations, rulings and decisions in effect as of the date of this Prospectus. These laws, regulations, rulings and/or decisions may change; any such change could apply retroactively and could affect the continued validity of this summary.

This summary does not describe all of the tax considerations that may be relevant to you or your situation, particularly if you are subject to special tax rules. You should consult your tax adviser about the tax consequences of holding the debt securities, including the relevance to your particular situation of the considerations discussed below, as well as of state, local or other tax laws.

Korean Taxation

The following summary of Korean tax considerations applies to you so long as you are not:

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a resident of Korea;

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a corporation with registered head office or main office located in Korea;

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a corporation of which the place of effective management is located in Korea; or

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engaged in a trade or business in Korea through a permanent establishment or a fixed base to which the relevant income is attributable or with which the relevant income is effectively connected.

Tax on Interest Payments

Under current Korean tax laws, when we make payments of interest to you (excluding payments to your permanent establishment in Korea) on the debt securities denominated in a foreign currency, no amount will be withheld from such payments for, or on account of, taxes of any kind imposed, levied, withheld or assessed by Korea or any political subdivision or taxing authority thereof or therein, provided that the offering of the debt securities is deemed to be an overseas issuance under Korean tax law.

If the tax exemption under Korean tax law referred to above were to cease to be in effect, the payments of interest to you (excluding payments to your permanent establishment in Korea) on the debt securities will be taxable at Korean withholding tax rates of 15.4% (including local income tax) unless a reduced rate is available under an applicable income tax treaty. For more information regarding tax treaties, please refer to the heading “—Tax Treaties” below.

Tax on Capital Gains

You will not be subject to any Korean income or withholding taxes in connection with the sale, exchange or other disposition of the debt securities, if (i) such sale, exchange or disposition is made to other non-residents or non-Korean corporations (other than their permanent establishments in Korea) or (ii) such sale, exchange or disposition takes place outside Korea, provided that the issuance of the debt securities is deemed to be an overseas issuance under Korean tax law. If you sell, exchange or otherwise dispose of the debt securities to a Korean resident or a Korean corporation (or the Korean permanent establishment of a non-resident or a non-Korean corporation) and such sale, exchange or disposition is made within Korea, any gain realized on the transaction will be taxable at ordinary Korean withholding tax rates (the lower of (subject to the production of satisfactory evidence of the acquisition costs and certain direct transaction costs) 22% (including local income tax) of net gain or 11% (including local income tax) of the gross sale proceeds with respect to such transaction), unless an exemption is available under an applicable income tax treaty. For example, if you are a resident of the United States for the purposes of the income tax treaty currently in force between Korea and the United States, you are generally entitled to an exemption from Korean taxation in respect of any gain realized on a disposition of the debt securities, regardless of whether the disposition is to a Korean resident. For more information regarding tax treaties, please refer to the heading “—Tax Treaties” below.

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Inheritance Tax and Gift Tax

If you die while you are the holder of the debt security, the subsequent transfer of the debt security by way of succession will be subject to Korean inheritance tax. Similarly, if you transfer the debt security as a gift, the donee will be subject to Korean gift tax and you may be required to pay the gift tax if the donee fails to do so or the donee is a non-resident.

Stamp Duty

You will not be subject to any Korean securities transaction tax, stamp duty, registration tax or similar documentary tax in respect of or in connection with a transfer of any debt securities or in connection with the exercise of exchange rights or conversion rights that may be acquired with the debt securities except for a nominal amount of stamp duty on certain documents executed in Korea which will be paid by us.

Guarantees

Although there are no Korean tax laws, regulations, rulings or decisions specific to the payment under the guarantee herein, with regard to payment of any interest on the debt securities under the guarantee herein, the Korean tax authority issued a ruling in April 2019 to the effect that the interest on the foreign currency denominated bonds paid by the guarantor on behalf of the issuer due to the insolvency of the issuer is exempt from income tax and corporation tax provided that the offering of the debt securities is deemed to be an overseas issuance under Korean tax law. In this regard, even though it is not clear under Korean tax laws, regulations or decisions, we believe any payments of interest on and principal amount of the debt securities (or the issue price if the debt securities were originally issued at a discount) by the Republic under the Republic’s guarantee on the debt securities denominated in a foreign currency (provided that the offering of the debt securities is deemed to be an overseas issuance under Korean tax law) and issued by us or any payments of interest on and principal amount of the debt securities (or the issue price if the debt securities were originally issued at a discount) by us under our guarantee on the debt securities denominated in a foreign currency (provided that the offering of the debt securities is deemed to be an overseas issuance under Korean tax law) and issued by a third-party Korean issuer are not subject to withholding tax. Further details of the tax consequences of the holders of our debt securities guaranteed by the Republic or third-party debt securities guaranteed by us may be provided in the relevant prospectus supplement.

Tax Treaties

At the date of this prospectus, Korea has tax treaties with, among others, Australia, Austria, Bangladesh, Belgium, Brazil, Bulgaria, Canada, China, Czech Republic, Denmark, Egypt, Finland, France, Germany, Hungary, India, Indonesia, Ireland, Italy, Japan, Luxembourg, Malaysia, Mexico, Mongolia, the Netherlands, New Zealand, Norway, Pakistan, Philippines, Poland, Republic of Fiji, Romania, Singapore, Spain, Sri Lanka, Sweden, Switzerland, Thailand, Tunisia, Turkey, the United Kingdom, the United States of America and Vietnam under which the rate of withholding tax on interest and dividends is reduced, generally to between 5% and 16.5% (including local income tax), and the tax on capital gains is often eliminated.

With respect to any gains subject to Korean withholding tax, as described under “—Tax on Capital Gains” above, you should inquire for yourself whether you are entitled to the benefit of a tax treaty with Korea. It will be your responsibility to claim the benefits of any tax treaty that may exist between your country and Korea in respect of capital gains, and to provide to the purchaser of the debt securities, or the relevant securities company handling the debt securities, as applicable, a certificate as to your country of tax residence. In the absence of sufficient proof, the purchaser, or the relevant securities company, as the case may be, must withhold tax at the normal rates.

Furthermore, in order to claim the benefit of a tax rate reduction or tax exemption available under the applicable tax treaties, you should submit to the payer of such Korean source income an application (for reduced

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withholding tax rate, “application for entitlement to reduced tax rate” and in the case of exemption from withholding tax, “application for exemption” under a tax treaty along with the documents proving the beneficial owner of such Korean source income, including a certificate of the non-resident holder’s tax residence issued by a competent authority of the non-resident holder’s residence country) as the beneficial owner, or a BO Application. Such application should be submitted to the withholding agent prior to the payment date of the relevant income. Subject to certain exceptions, where the relevant income is paid to an overseas investment vehicle (which is not the beneficial owner of such income), or an OIV, a beneficial owner claiming the benefit of an applicable tax treaty with respect to such income must submit its BO Application to such OIV, which must submit an OIV report and a schedule of beneficial owners to the withholding agent prior to the payment date of such income. Starting from January 1, 2022, an OIV is deemed to be a beneficial owner of the Korean source income if (i) under the applicable tax treaty, the OIV bears tax liabilities in the country in which it is established or the OIV is deemed to be the beneficial owner of the Korean source income, and (ii) the Korean source income is eligible for the treaty benefits under the tax treaty. The benefits under a tax treaty between Korea and the country of such OIV’s residence will apply with respect to the relevant income paid to such OIV, subject to certain application requirements as prescribed by Korean tax law. In the case of a tax exemption application, the withholding agent is required to submit such application (together with the applicable OIV report in the case of income paid to an OIV) to the relevant district tax office by the ninth day of the month following the date of the payment of such income.

At present, Korea has not entered into tax treaties regarding inheritance or gift tax.

Warrants

A description of the tax consequences of an investment in warrants will be provided in the applicable prospectus supplement.

U.S. Federal Income Tax Considerations

The following discussion summarizes certain U.S. federal income tax considerations that may be relevant to you if you invest in debt securities and are a U.S. holder, and, to a limited extent, if you are a non-U.S. holder. You will be a U.S. holder if you are a beneficial owner of the debt securities and are an individual who is a citizen or resident of the United States, a U.S. domestic corporation, or any other person that is subject to U.S. federal income tax on a net income basis in respect of its investment in a debt security. This summary deals only with U.S. holders that hold debt securities as capital assets for tax purposes. This summary does not apply to you if you are an investor that is subject to special tax rules, such as:

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a bank or thrift;

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a real estate investment trust;

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a regulated investment company;

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an insurance company;

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a dealer in securities or currencies;

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a trader in securities or commodities that elects mark-to-market treatment;

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a person that will hold debt securities as a hedge against currency risk or as a position in a straddle or conversion transaction for tax purposes, or as part of a “synthetic security” or other integrated financial transaction;

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nonresident alien individuals present in the United States for more than 182 days in a taxable year;

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U.S. expatriates;

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an entity taxed as a partnership or a partner therein;

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•

a tax exempt organization; or

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a person whose functional currency for tax purposes is not the U.S. dollar.

A non-U.S. holder is a beneficial owner of a debt security that is not a U.S. holder.

This summary is based on the Internal Revenue Code of 1986, as amended, or the Code, its legislative history, existing and proposed regulations promulgated thereunder, and published rulings and court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive basis. This summary addresses only U.S. federal income tax consequences, and does not address state, local, or non-U.S. tax laws, any alternative minimum tax, or the Medicare tax on net investment income or under special timing rules prescribed under section 451(b) of the Code. This summary does not discuss tax considerations relevant to the ownership and disposal of bearer securities.

This summary deals only with debt securities that are properly treated as indebtedness for U.S. federal income tax purposes. Any special U.S. federal income tax considerations relevant to a particular issuance of debt securities will be discussed in the applicable prospectus supplement. You should consult your tax adviser about the tax consequences of holding debt securities, including the relevance to your particular situation of the considerations discussed below, as well as of state, local or other tax laws.

Payments or Accruals of Interest

Payments or accruals of “qualified stated interest” (as defined below) on a debt security, but excluding any pre-issuance accrued interest, will be taxable to you as ordinary interest income at the time that you receive or accrue such amounts, in accordance with your regular method of tax accounting. If you use the cash method of tax accounting and you receive payments of interest pursuant to the terms of a debt security in a currency other than U.S. dollars, a “foreign currency”, the amount of interest income you will realize will be the U.S. dollar value of the foreign currency payment based on the exchange rate in effect on the date you receive the payment regardless of whether you convert the payment into U.S. dollars. If you are an accrual-basis U.S. holder, the amount of interest income you will realize will be based on the average exchange rate in effect during the interest accrual period or, with respect to an interest accrual period that spans two taxable years, at the average exchange rate for the partial period within the taxable year. Alternatively, as an accrual-basis U.S. holder you may elect to translate all interest income on foreign currency-denominated debt securities at the spot rate on the last day of the accrual period (or the last day of the taxable year, in the case of an accrual period that spans more than one taxable year), or on the date that you receive the interest payment if that date is within five business days of the end of the accrual period. If you make this election you must apply it consistently to all debt instruments from year to year and you cannot change the election without the consent of the U.S. Internal Revenue Service, or the IRS. If you use the accrual method of accounting for tax purposes you will recognize foreign currency gain or loss on the receipt of a foreign currency interest payment if the exchange rate in effect on the date the payment is received differs from the rate applicable to a previous accrual of that interest income. Amounts attributable to pre-issuance accrued interest will generally not be includable in income, except to the extent of foreign currency gain or loss attributable to any changes in exchange rates during the period between the date the U.S. Holder acquired the debt security and the first interest payment date. This foreign currency gain or loss will be treated as ordinary income or loss, but generally will not be treated as an adjustment to interest income received on the debt security.

Purchase, Sale and Retirement of Debt Securities

Initially, your tax basis in a debt security generally will equal the cost of the debt security to you. Your basis will increase by any amounts that you are required to include in income under the rules governing original issue discount and market discount, and will decrease by the amount of any amortized premium and any payments other than qualified stated interest made on the debt security. The rules for determining these amounts are

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discussed below. If you purchase a debt security that is denominated in a foreign currency, the cost to you, and therefore generally your initial tax basis, will be the U.S. dollar value of the foreign currency purchase price on the date of purchase calculated at the exchange rate in effect on that date. If the foreign currency-denominated debt security is traded on an established securities market and you are a cash-basis taxpayer, or if you are an accrual-basis taxpayer that makes a special election, then you will determine the U.S. dollar value of the cost of the debt security by translating the amount of the foreign currency that you paid for the debt security at the spot rate of exchange on the settlement date of your purchase. The amount of any subsequent adjustments to your tax basis in a foreign currency-denominated debt security in respect of original issue discount, market discount and premium will be determined in the manner described below. If you convert U.S. dollars into a foreign currency and then immediately use that foreign currency to purchase a debt security, you generally will not have any taxable gain or loss as a result of the purchase.

When you sell or exchange a debt security, or if a debt security is retired, you generally will recognize gain or loss equal to the difference between the amount you realize on the transaction, less any accrued qualified stated interest, which will be subject to tax in the manner described above, and your tax basis in the debt security. If you sell or exchange a debt security for a foreign currency, or receive foreign currency on the retirement of a debt security, the amount you will realize for U.S. federal income tax purposes generally will be the U.S. dollar value of the foreign currency that you receive calculated at the exchange rate in effect on the date the foreign currency debt security is disposed of or retired. If you dispose of a foreign currency debt security that is traded on an established securities market and you are a cash-basis U.S. holder, or if you are an accrual-basis holder that makes a special election, then you will determine the U.S. dollar value of the amount realized by translating the amount received at the spot rate of exchange on the settlement date of the sale, exchange or retirement.

The special election available to you if you are an accrual-basis taxpayer in respect of the purchase and sale of foreign currency debt securities traded on an established securities market, which is discussed in the two preceding paragraphs, must be applied consistently to all debt instruments from year to year and cannot be changed without the consent of the IRS.

Except as discussed below with respect to market discount, short-term debt securities and foreign currency gain or loss, the gain or loss that you recognize on the sale, exchange or retirement of a debt security generally will be long-term capital gain or loss if you have held the debt security for more than one year. The Code provides preferential treatment under certain circumstances for net long-term capital gains recognized by individual investors. The ability of U.S. holders to offset capital losses against ordinary income is limited.

Despite the foregoing, the gain or loss that you recognize on the sale, exchange or retirement of a foreign currency debt security generally will be treated as ordinary income or loss to the extent that the gain or loss is attributable to changes in exchange rates during the period in which you held the debt security. However, any such foreign currency gain or loss (including any foreign currency gain or loss with respect to the receipt of accrued but unpaid interest) will be realized only to the extent of total gain or loss realized on the sale or retirement. This foreign currency gain or loss will not be treated as an adjustment to interest income that you receive on the debt security.

Under new foreign tax credit requirements recently adopted by the IRS, any Korean tax imposed on the sale or other disposition of the debt security generally will not be treated as a creditable tax for U.S. foreign tax credit purposes. If the Korean tax is not a creditable tax, the tax would reduce the amount realized on the sale or other disposition of the debt security even if the U.S. holder has elected to claim a foreign tax credit for other taxes in the same year. U.S. holders should consult their own tax advisors regarding the application of the foreign tax credit rules to a sale or other disposition of the debt security and any Korean tax imposed on such sale or disposition.

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Original Issue Discount

If we issue debt securities at a discount from their stated redemption price at maturity, and the discount is equal to or more than the product of one-fourth of one percent (0.25%) of the stated redemption price at maturity of the debt securities multiplied by the number of whole years to their maturity (the “de minimis threshold”), the debt securities will be “Original Issue Discount Debt Securities.” The difference between the issue price and their stated redemption price at maturity will be the “original issue discount.” The “issue price” of the debt securities will be the first price at which a substantial amount of the debt securities are sold to the public (i.e., excluding sales of debt securities to underwriters, placement agents, wholesalers, or similar persons). The “stated redemption price at maturity” will include all payments under the debt securities other than payments of qualified stated interest. The term “qualified stated interest” generally means stated interest that is unconditionally payable in cash or property, other than debt instruments issued by the Company, at least annually during the entire term of a debt security at a single fixed interest rate or, subject to certain conditions, based on one or more interest indices.

If you invest in Original Issue Discount Debt Securities you generally will be subject to the special tax accounting rules for original issue discount obligations provided by the Code and certain Treasury regulations, or the OID regulations. You should be aware that, as described in greater detail below, if you invest in an Original Issue Discount Debt Security you generally will be required to include original issue discount in ordinary gross income for U.S. federal income tax purposes as it accrues, before you receive the cash attributable to that income.

In general, and regardless of whether you use the cash or the accrual method of tax accounting, if you are the holder of an Original Issue Discount Debt Security with a maturity greater than one year, you will be required to include in ordinary gross income the sum of the “daily portions” of original issue discount on that debt security for all days during the taxable year that you own the debt security. The daily portions of original issue discount on an Original Issue Discount Debt Security are determined by allocating to each day in any accrual period a ratable portion of the original issue discount allocable to that accrual period. Accrual periods may be any length and may vary in length over the term of an Original Issue Discount Debt Security, so long as no accrual period is longer than one year and each scheduled payment of principal or interest occurs on the first or last day of an accrual period. If you are the initial holder of the debt security, the amount of original issue discount on an Original Issue Discount Debt Security allocable to each accrual period is determined by:

(i)

multiplying the “adjusted issue price” (as defined below) of the debt security at the beginning of the accrual period by a fraction, the numerator of which is the annual yield to maturity of the debt security and the denominator of which is the number of accrual periods in a year; and

(ii)

subtracting from that product the amount, if any, payable as qualified stated interest allocable to that accrual period.

In the case of an Original Issue Discount Debt Security that is a floating rate debt security, both the “annual yield to maturity” and the qualified stated interest will be determined for these purposes as though the debt security had borne interest in all periods at a fixed rate generally equal to the rate that would be applicable to interest payments on the debt security on its date of issue or, in the case of some floating rate debt securities, the rate that reflects the yield that is reasonably expected for the debt security. Additional rules may apply if interest on a floating rate debt security is based on more than one interest index. The “adjusted issue price” of an Original Issue Discount Debt Security at the beginning of any accrual period will generally be the sum of its issue price, including any accrued interest, and the amount of original issue discount allocable to all prior accrual periods, reduced by the amount of all payments other than any qualified stated interest payments on the debt security in all prior accrual periods. All payments on an Original Issue Discount Debt Security, other than qualified stated interest, will generally be viewed first as payments of previously accrued original issue discount, to the extent of the previously accrued discount, with payments considered made from the earliest accrual periods first, and then as a payment of principal. The “annual yield to maturity” of a debt security is the discount rate, appropriately adjusted to reflect the length of accrual periods, that causes the present value on the issue date of all payments on

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the debt security to equal the issue price. As a result of this “constant yield” method of including original issue discount income, the amounts you will be required to include in your gross income if you invest in an Original Issue Discount Debt Security denominated in U.S. dollars will generally be less in the early years and greater in the later years than amounts that would be includible on a straight-line basis.

You generally may make an irrevocable election to include in income your entire return on a debt security (i.e., the excess of all remaining payments to be received on the debt security, including payments of qualified stated interest, over the amount you paid for the debt security) under the constant yield method described above. For debt securities purchased at a premium or bearing market discount in your hands, if you make this election you will also be deemed to have made the election (discussed below under “Premium and Market Discount”) to amortize premium or to accrue market discount in income currently on a constant yield basis.

In the case of an Original Issue Discount Debt Security that is also a foreign currency-denominated debt security, you should determine the U.S. dollar amount includible as original issue discount for each accrual period by (i) calculating the amount of original issue discount allocable to each accrual period in the foreign currency using the constant yield method, and (ii) translating the foreign currency amount so determined at the average exchange rate in effect during that accrual period (or, with respect to an interest accrual period that spans two taxable years, at the average exchange rate for each partial period). Alternatively, you may translate the foreign currency amount so determined at the spot rate of exchange on the last day of the accrual period (or the last day of the taxable year, for an accrual period that spans two taxable years), or at the spot rate of exchange on the date of receipt, if that date is within five business days of the last day of the accrual period, provided that you have made the election described under “—Payments or Accruals of Interest” above. Because exchange rates may fluctuate, if you are the holder of an Original Issue Discount Debt Security that is also a foreign currency debt security you may recognize a different amount of original issue discount income in each accrual period than would be the case if you were the holder of an otherwise similar Original Issue Discount Debt Security denominated in U.S. dollars. Upon the receipt of an amount attributable to original issue discount, whether in connection with a payment of an amount that is not qualified stated interest or the sale or retirement of the Original Issue Discount Debt Security, you will recognize ordinary income or loss measured by the difference between the amount received, translated into U.S. dollars at the exchange rate in effect on the date of receipt or on the date of disposition of the Original Issue Discount Debt Security, as the case may be, and the amount accrued, using the exchange rate applicable to such previous accrual.

If you purchase an Original Issue Discount Debt Security outside of the initial offering at a cost less than its “remaining redemption amount”, or if you purchase an Original Issue Discount Debt Security in the initial offering at a price other than the debt security’s issue price, you will also generally be required to include in gross income the daily portions of original issue discount, calculated as described above. However, if you acquire an Original Issue Discount Debt Security at a price greater than its adjusted issue price, you will be required to reduce your periodic inclusions of original issue discount to reflect the premium paid over the adjusted issue price. The remaining redemption amount for an Original Issue Discount Debt Security is the total of all future payments to be made on the debt security other than qualified stated interest.

Floating rate debt securities generally will be treated as “variable rate debt instruments” under the OID regulations. Accordingly, the stated interest on a floating rate debt security generally will be treated as qualified stated interest, and such a debt security will not have original issue discount solely as a result of the fact that it provides for interest at a variable rate. A floating rate debt security that does not qualify as a variable rate debt instrument will be subject to special rules (the “contingent payment regulations”) that govern the tax treatment of debt obligations that provide for contingent payments (“contingent debt obligations”). A detailed description of the tax considerations relevant to U.S. holders of any such debt securities will be provided in the applicable prospectus supplement.

Certain debt securities may be redeemed prior to maturity, either at our option or at the option of the holder, or may have special repayment or interest rate reset features as indicated in the prospectus supplement. Original

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Issue Discount Debt Securities containing these features may be subject to rules that differ from the general rules discussed above. If you purchase Original Issue Discount Debt Securities with these features, you should carefully examine the prospectus supplement and consult your tax adviser about their treatment since the tax consequences with respect to original issue discount will depend, in part, on the particular terms and features of the debt securities.

If a debt security provides for a scheduled accrual period that is longer than one year (for example, as a result of a long initial period on a debt security with interest that is generally paid on an annual basis), then stated interest on the debt security will not qualify as “qualified stated interest” under the OID Regulations. As a result, the debt security would be an Original Issue Discount Debt Security. In that event, among other things, if you are a cash-method U.S. holder you will be required to accrue stated interest on the debt security under the rules for original issue discount described above, and regardless of your method of accounting for U.S. federal income tax purposes, you will be required to accrue original issue discount that would otherwise fall under the de minimis threshold.

Short-Term Debt Securities

The rules described above will also generally apply to Original Issue Discount Debt Securities with maturities of one year or less (“short-term debt securities”), but with some modifications.

First, the original issue discount rules treat none of the interest on a short-term debt security as qualified stated interest, but treat a short-term debt security as having original issue discount. Thus, all short-term debt securities will be Original Issue Discount Debt Securities. Except as noted below, if you are a cash-basis holder of a short-term debt security and are not a bank, securities dealer, regulated investment company or common trust fund and you do not identify the short-term debt security as part of a hedging transaction you will generally not be required to accrue original issue discount currently, but you will be required to treat any gain realized on a sale, exchange or retirement of the debt security as ordinary income to the extent such gain does not exceed the original issue discount accrued with respect to the debt security during the period you held the debt security. You may not be allowed to deduct all of the interest paid or accrued on any indebtedness incurred or maintained to purchase or carry a short-term debt security until the maturity of the debt security or its earlier disposition in a taxable transaction. Notwithstanding the foregoing, if you are a cash-basis U.S. holder of a short-term debt security you may elect to accrue original issue discount on a current basis, in which case the limitation on the deductibility of interest described above will not apply. A U.S. holder using the accrual method of tax accounting and some cash method holders, including banks, securities dealers, regulated investment companies and common trust funds, generally will be required to include original issue discount on a short-term debt security in gross income on a current basis. Original issue discount will be treated as accruing for these purposes on a ratable basis or, at the election of the holder, on a constant yield basis based on daily compounding.

Second, regardless of whether you are a cash- or accrual-basis holder, if you are the holder of a short-term debt security you can elect to accrue any “acquisition discount” with respect to the debt security on a current basis. Acquisition discount is the excess of the debt security’s stated redemption price at maturity (i.e., all amounts payable on the short-term debt security) over the purchase price. Acquisition discount will be treated as accruing ratably or, at the election of the holder, under a constant yield method based on daily compounding. If you elect to accrue acquisition discount, the original issue discount rules will not apply.

Finally, the market discount rules described below will not apply to short-term debt securities.

As described above, certain of the debt securities may be subject to special redemption features. These features may affect the determination of whether a debt security has a maturity of one year or less and thus is a short-term debt security. If you purchase debt securities with these features, you should carefully examine the prospectus supplement and consult your tax adviser about these features.

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Premium and Market Discount

If you purchase a debt security at a cost greater than the debt security’s remaining redemption amount, you will be considered to have purchased the debt security at a premium, and you may elect to amortize the premium as an offset to interest income, using a constant yield method, over the remaining term of the debt security. If you make this election, it generally will apply to all debt instruments that you hold at the time of the election, as well as any debt instruments that you subsequently acquire. In addition, you may not revoke the election without the consent of the IRS. If you elect to amortize the premium you will be required to reduce your tax basis in the debt security by the amount of the premium amortized during your holding period. Original Issue Discount Debt Securities purchased at a premium will not be subject to the original issue discount rules described above. In the case of premium on a foreign currency debt security, you should calculate the amortization of the premium in the foreign currency. Amortization deductions attributable to a period reduce interest payments in respect of that period, and therefore are translated into U.S. dollars at the rate that you use for those interest payments. Exchange gain or loss will be realized with respect to amortized premium on a foreign currency debt security based on the difference between the exchange rate computed on the date or dates the premium is amortized against interest payments on the debt security and the exchange rate on the date when the holder acquired the debt security. For a U.S. holder that does not elect to amortize premium, the amount of premium will be included in your tax basis when the debt security matures or is disposed of. Therefore, if you do not elect to amortize premium and you hold the debt security to maturity, you generally will be required to treat the premium as capital loss when the debt security matures.

If you purchase a debt security at a price that is lower than the debt security’s remaining redemption amount, or in the case of an Original Issue Discount Debt Security, the debt security’s adjusted issue price, by 0.25% or more of the remaining redemption amount, or adjusted issue price, multiplied by the number of remaining whole years to maturity, the debt security will be considered to bear “market discount” in your hands. In this case, any gain that you realize on the disposition of the debt security generally will be treated as ordinary interest income to the extent of the market discount that accrued on the debt security during your holding period. In addition, you could be required to defer the deduction of a portion of the interest paid on any indebtedness that you incurred or continued to purchase or carry the debt security. In general, market discount will be treated as accruing ratably over the term of the debt security, or, at your election, under a constant yield method. You must accrue market discount on a foreign currency debt security in the specified currency. The amount that you will be required to include in income in respect of accrued market discount will be the U.S. dollar value of the accrued amount, generally calculated at the exchange rate in effect on the date that you dispose of the debt security.

You may elect to include market discount in gross income currently as it accrues (on either a ratable or constant yield basis), in lieu of treating a portion of any gain realized on a sale of the debt security as ordinary income. If you elect to include market discount on a current basis, the interest deduction deferral rule described above will not apply. If you do make such an election, it will apply to all market discount debt instruments that you acquire on or after the first day of the first taxable year to which the election applies. The election may not be revoked without the consent of the IRS. Any accrued market discount on a foreign currency debt security that is currently includible in income will be translated into U.S. dollars at the average exchange rate for the accrual period (or portion thereof within your taxable year).

Indexed Debt Securities and Other Debt Securities Providing for Contingent Payments

The contingent payment regulations generally require accrual of interest income on a constant yield basis in respect of contingent debt obligations at a yield determined at the time of issuance of the obligation, and may require adjustments to these accruals when any contingent payments are made. In addition, special rules may apply to floating rate debt securities if the interest payable on the debt securities is based on more than one interest index. We will provide a detailed description of the tax considerations relevant to U.S. holders of any debt securities that are subject to the special rules discussed in this paragraph in the relevant prospectus supplement.

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Foreign Currency-Denominated Debt Securities and Reportable Transactions

A U.S. holder that participates in a “reportable transaction” will be required to disclose its participation to the IRS. The scope and application of these rules is not entirely clear. A U.S. holder may be required to treat a foreign currency exchange loss relating to a foreign currency-denominated debt security as a reportable transaction if the loss exceeds $50,000 in a single taxable year if the U.S. holder is an individual or trust, or higher amounts for other U.S. holders. In the event the acquisition, ownership or disposition of a foreign currency-denominated debt security constitutes participation in a “reportable transaction” for purposes of these rules, a U.S. holder will be required to disclose its investment to the Internal Revenue Service, currently on IRS Form 8886. Prospective purchasers should consult their tax advisors regarding the application of these rules to the acquisition, ownership or disposition of foreign currency-denominated debt securities.

Specified Foreign Financial Assets

Individual U.S. holders that own “specified foreign financial assets” with an aggregate value in excess of $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year are generally required to file an information statement along with their tax returns, currently on IRS Form 8938, with respect to such assets. “Specified foreign financial assets” include any financial accounts held at a non-U.S. financial institution, as well as securities issued by a non-U.S. issuer (which may include debt securities issued in certificated form) that are not held in accounts maintained by financial institutions. Higher reporting thresholds apply to certain individuals living abroad and to certain married individuals. Regulations extend this reporting requirement to certain entities that are treated as formed or availed of to hold direct or indirect interests in specified foreign financial assets based on certain objective criteria. U.S. holders who fail to report the required information could be subject to substantial penalties. In addition, the statute of limitations for assessment of tax would be suspended, in whole or part. Prospective investors should consult their own tax advisors concerning the application of these rules to their investment in the debt securities, including the application of the rules to their particular circumstances.

Information Reporting and Backup Withholding

The paying agent must file information returns with the IRS in connection with debt security payments made to certain United States persons. If you are a United States person, you generally will not be subject to U.S. backup withholding tax on such payments if you provide your taxpayer identification number to the paying agent. You may also be subject to information reporting and backup withholding tax requirements with respect to the proceeds from a sale of the debt securities. If you are not a United States person, in order to avoid information reporting and backup withholding tax requirements you may have to comply with certification procedures to establish that you are not a United States person. The amount of any backup withholding from a payment to a United States or non-United States person will be allowed as a credit against the holder’s U.S. federal income tax liability and may entitle the holder to a refund, provided that the required information is timely furnished to the IRS.

Foreign Account Tax Compliance Act

We or a non-U.S. financial institution through which payments are made may be required pursuant to FATCA to collect and provide to the IRS or another tax authority substantial information regarding investors in debt securities. As such, holders may be required to provide information and tax documentation regarding their tax identities as well as that of their direct and indirect owners. Moreover, we, any paying agents, and other financial institutions through which payments are made, may be required to withhold U.S. tax at a 30% rate on “foreign passthru payments” (a term not yet defined) paid to an investor who does not provide information sufficient for the institution to determine whether the investor is a United States person or should otherwise be treated as holding a “United States account” of the institution, or to an investor that is, or holds the debt securities directly or indirectly through, a non-U.S. financial institution that is not in compliance with FATCA. Under a

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grandfathering rule, this withholding tax will not apply unless the debt securities are issued or materially modified after the date that is six months after the date on which final U.S. Treasury Regulations defining the term “foreign passthru payment” are filed with the U.S. Federal Register.

By purchasing the debt securities, U.S. holders agree to provide an IRS form W-9, and whatever other information may be necessary for us to comply with these reporting obligations. If an amount of, or in respect of, U.S. withholding tax were to be deducted or withheld from payments on the debt securities as a result of an investor’s failure to comply with these rules, neither we nor any paying agent nor any other person would be required to pay additional amounts with respect to any debt securities as a result of the deduction or withholding of such tax. You should consult your tax advisors on how FATCA may apply to payments you receive under the debt securities.

Warrants

A description of the tax consequences of an investment in warrants will be provided in the applicable prospectus supplement.

Guarantees

A description of the tax consequences of an investment in guarantees will be provided in the applicable prospectus supplement.

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PLAN OF DISTRIBUTION

We and the Republic, if a guarantee by the Republic is furnished, may sell or issue the debt securities, warrants or guarantees in any of three ways:

•

through underwriters or dealers;

•

directly to one or more purchasers; or

•

through agents.

The prospectus supplement relating to a particular series of debt securities, warrants or guarantees will state:

•

the names of any underwriters;

•

the purchase price of the securities;

•

the proceeds to us from the sale;

•

any underwriting discounts and other compensation;

•

the initial public offering price;

•

any discounts or concessions allowed or paid to dealers; and

•

any securities exchanges on which the securities will be listed.

Any underwriter involved in the sale of securities will acquire the securities for its own account. The underwriters may resell the securities from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices to be determined at the time of sale. The securities may be offered to the public either by underwriting syndicates represented by managing underwriters or by underwriters without a syndicate. Unless the prospectus supplement states otherwise, certain conditions must be satisfied before the underwriters become obligated to purchase securities from us and the Republic, if applicable, and they will be obligated to purchase all of the securities if any are purchased. The underwriters may change any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers.

If we and the Republic, if a guarantee by the Republic is furnished, sell any securities through agents, the prospectus supplement will identify the agent and indicate any commissions payable by us and the Republic, if applicable. Unless the prospectus supplement states otherwise, all agents will act on a best efforts basis and will not acquire the securities for their own account.

We and the Republic, if a guarantee by the Republic is furnished, may authorize agents, underwriters or dealers to solicit offers by certain specified entities to purchase the securities from us and the Republic, if applicable, at the public offering price set forth in a prospectus supplement pursuant to delayed delivery contracts. The prospectus supplement will set out the conditions of the delayed delivery contracts and the commission receivable by the agents, underwriters or dealers for soliciting the contracts.

We and the Republic, if a guarantee by the Republic is furnished, may offer debt securities as consideration for the purchase of other of our debt securities, either in connection with a publicly announced tender offer or in privately negotiated transactions. The offer may be in addition to or in lieu of sales of debt securities directly or through underwriters or agents. We may offer guarantees as consideration for transactions involving securities of other issuers.

Agents and underwriters may be entitled to indemnification by us against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribution from us with respect to certain payments which the agents or underwriters may be required to make. Agents and underwriters may be customers of, engage in transactions with, or perform services (including commercial and investment banking services) for us and the Republic in the ordinary course of business.

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LEGAL MATTERS

The validity of any particular series of debt securities or warrants issued with debt securities or any guarantees will be passed upon for us and any underwriters or agents by United States and Korean counsel identified in the related prospectus supplement.

AUTHORIZED REPRESENTATIVES IN THE UNITED STATES

Our authorized agents in the United States are Mr. Tae Jeong Yun, General Manager of our New York Branch, or Mr. Ki Cheon Chang, Deputy General Manager of our New York Branch. The address of our New York Branch is 320 Park Avenue, 32nd Floor, New York, New York 10022. The authorized representative of the Republic in the United States is Mr. Munkyu Park, Financial Attaché, Korean Consulate General in New York, located at 460 Park Avenue, 9th Floor, New York, New York 10022.

OFFICIAL STATEMENTS AND DOCUMENTS

Our President and Chairman of the Board of Directors, in his official capacity, has supplied the information set forth under “The Korea Development Bank” (except for the information set out under “The Korea Development Bank—Business—Government Support and Supervision”). Such information is stated on his authority.

The Minister of Economy and Finance of The Republic of Korea, in his official capacity, has supplied the information set out under “The Korea Development Bank—Business—Government Support and Supervision” and “The Republic of Korea.” Such information is stated on his authority. The documents identified in the portion of this prospectus captioned “The Republic of Korea” as the sources of financial or statistical data are official public documents of the Republic or its agencies and instrumentalities.

EXPERTS

Our separate financial statements as of and for the years ended December 31, 2022 and 2021 have been included in this prospectus in reliance upon the report of Nexia Samduk, independent auditors, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

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FORWARD-LOOKING STATEMENTS

This prospectus includes future expectations, projections or “forward-looking statements”, as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words “believe”, “expect”, “anticipate”, “estimate”, “project” and similar words identify forward-looking statements. In addition, all statements other than statements of historical facts included in this prospectus are forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we can give no assurance that such expectations will prove correct. This prospectus discloses important factors that could cause actual results to differ materially from our expectations, or Cautionary Statements. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Cautionary Statements.

Factors that could adversely affect the future performance of the Korean economy include:

•

the occurrence of severe health epidemics in Korea or other parts of the world, including the COVID-19 pandemic, swine or avian flu, Ebola or Middle East respiratory syndrome;

•

hostilities, political or social tensions involving Russia (including the invasion of Ukraine by Russia and ensuing actions that the United States and other countries have taken or may take in the future) and the resulting adverse effects on the global supply of oil and other natural resources and the global financial markets;

•

adverse conditions or developments in the economies of countries and regions that are important export markets for Korea, such as the United States, Europe, Japan and China, or in emerging market economies in Asia or elsewhere, including as a result of the COVID-19 pandemic, deteriorating economic and trade relations between the United States and China and increased uncertainties in the global financial markets and industry;

•

disruptions in the global supply chain for raw materials, natural resources, consumer goods, rare earth minerals, component parts and other supplies, including semiconductors, as a result of the COVID-19 pandemic, the invasion of Ukraine by Russia and ensuing sanctions against Russia, government policies and labor shortages, among others;

•

interest rate fluctuations as well as perceived or actual changes in policy rates, or other monetary and fiscal policies set forth, by the U.S. Federal Reserve, Korea and other central banks;

•

rising inflationary pressures leading to increases in the costs of goods and services and a decrease in purchasing power;

•

adverse developments in the global financial markets and industry, including difficulties faced by several banks in the United States and Europe;

•

adverse changes or volatility in foreign currency reserve levels, commodity prices (including oil prices), exchange rates (including fluctuation of the U.S. dollar, the euro or Japanese yen exchange rates or revaluation of the Chinese yuan and the depreciation of the Won against such currencies), interest rates, inflation rates or stock markets;

•

difficulties in the financial sectors and increased sovereign default risks in select countries and the resulting adverse effects on the global financial markets;

•

a substantial decrease in tax revenues and a substantial increase in the Government’s expenditures for fiscal stimulus measures, unemployment compensation and other economic and social programs, in particular in light of the Government’s ongoing efforts to provide emergency relief payments relating to COVID-19 to households and corporations in need of funding, which, together, would lead to an increased Government budget deficit as well as an increase in the Government’s debt;

•

declines in consumer confidence and a slowdown in consumer spending in the Korean or global economy, in particular due to the COVID-19 pandemic;

241

•

increasing levels of household debt;

•

increasing delinquencies and credit defaults by consumer and small- and medium-sized enterprise borrowers;

•

substantial changes in the market prices of Korean real estate;

•

the continued growth of the Chinese economy, to the extent its benefits (such as increased exports to China) are outweighed by its costs (such as competition in export markets or for foreign investment and the relocation of the manufacturing base from Korea to China), as well as a slowdown in the growth of China’s economy, which is Korea’s most important export market;

•

investigations of large Korean business groups and their senior management for possible misconduct;

•

the economic impact of any pending or future free trade agreements or of any changes to existing free trade agreements;

•

social and labor unrest;

•

financial problems or lack of progress in the restructuring of Korean conglomerates, other large troubled companies, their suppliers or the financial sector;

•

loss of investor confidence arising from corporate accounting irregularities or corporate governance issues at certain Korean companies;

•

increases in social expenditures to support an aging population in Korea or decreases in economic productivity due to the declining population size in Korea;

•

geo-political uncertainty and risk of further attacks by terrorist groups around the world;

•

deterioration in economic or diplomatic relations between Korea and its trading partners or allies, including deterioration resulting from territorial or trade disputes or disagreements in foreign policy;

•

political uncertainty or increasing strife among or within political parties in Korea;

•

natural or man-made disasters that have a significant adverse economic or other impact on Korea or its major trading partners;

•

hostilities or political or social tensions involving oil-producing countries in the Middle East (including a potential escalation of hostilities between the United States and Iran) and Northern Africa and any material disruption in the supply of oil or sudden changes in the price of oil; and

•

an increase in the level of tensions or an outbreak of hostilities between North Korea and Korea or the United States.

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FURTHER INFORMATION

We filed a registration statement with respect to the securities with the Securities and Exchange Commission under the Securities Act of 1933, as amended, and its related rules and regulations. You can find additional information concerning ourselves and the securities in the registration statement and any pre- or post-effective amendment, including its various exhibits, which may be inspected at the public reference facilities maintained by the Securities and Exchange Commission at 100 F Street, N.E., Washington, D.C. 20549. These filings are also available to the public from the Securities and Exchange Commission’s website at http://www.sec.gov. Our Internet address is https://www.kdb.co.kr.

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HEAD OFFICE OF THE BANK

14, Eunhaeng-ro

Yeongdeungpo-gu, Seoul 07242

The Republic of Korea

FISCAL AGENT AND PRINCIPAL PAYING AGENT

The Bank of New York Mellon

240 Greenwich Street

New York, NY 10286

United States of America

LEGAL ADVISORS TO THE BANK


as to Korean law		as to U.S. law

Shin & Kim LLC 23F, D-Tower (D2) 17 Jongno 3-gil, Jongno-gu Seoul 03155 The Republic of Korea		Cleary Gottlieb Steen & Hamilton LLP c/o 19th Floor, Ferrum Tower 19 Eulji-ro 5-gil, Jung-gu Seoul 04539 The Republic of Korea

LEGAL ADVISOR TO THE UNDERWRITERS

as to U.S. law

Linklaters LLP

22nd Floor, Center One Building

26, Eulji-ro 5-gil, Jung-gu

Seoul 04539

The Republic of Korea

AUDITOR OF THE BANK

Nexia Samduk

12F, S&S Building

48 Ujeongguk-ro, Jongno-gu

Seoul 03145

The Republic of Korea

SINGAPORE LISTING AGENT

Shook Lin & Bok LLP

1 Robinson Road

#18-00 AIA Tower

Singapore 048542

LOGO

December 31, 2022

December 31, 2021

W1,484,769