OFFERING CIRCULAR

US$500,000,000

(incorporated with limited liability under the laws of the Republic of Korea)

6.0% Senior Notes due 2012
Issue Price: 99.835% Shinhan Bank (the “Bank”) will issue an aggregate principal amount of US$500,000,000 of 6.0% Senior Notes due 2012 (the “Notes”). The Notes will bear interest semi-annually in arrears on June 29 and December 29 of each year, commencing June 29, 2009 until redemption or maturity. The Notes will mature on June 29, 2012. The Bank may not redeem the Notes in whole or in part prior to maturity except upon the occurrence of certain events related to Korean tax law as described herein. The Notes will be issued in registered form in denominations of US$100,000 and integral multiples of US$1,000 in excess thereof. The Notes will be the Bank’s direct, unconditional and unsecured senior obligations and will rank pari passu with all of its other unsecured senior indebtedness, except as may be required by mandatory provisions of law. There is currently no market for the Notes. Application has been made to list the Notes on the Singapore Exchange Securities Trading Limited (the “Singapore Stock Exchange”). The Singapore Stock Exchange assumes no responsibility for the correctness of any statements made, opinions expressed or reports contained herein. The approval in-principle from, and the admission of the Notes to the Official List of, the Singapore Stock Exchange are not to be taken as an indication of the merits of the Issuer or the Notes. The Notes are expected to be rated A2 by Moody’s Investors Service, Inc. (“Moody’s”) and A- by Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc. (“S&P”). Such ratings do not constitute a recommendation to buy, sell or hold the Notes and may be subject to revision or withdrawal at any time by such rating organizations. Investing in the Notes involves risks. See “Risk Factors” beginning on page 11 for a discussion of certain factors to be considered in connection with investing in the Notes. The Notes have not been and will not be registered under the United States Securities Act of 1933 (the “Securities Act”) or any state securities laws and may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Notes may be offered for sale only (i) in the United States, to qualified institutional buyers (“QIBs”) within the meaning of, and in reliance on, Rule 144A under the Securities Act; or (ii) outside the United States in reliance on, and in accordance with, Regulation S, in each case, in compliance with applicable laws, regulations and directives. See “Plan of Distribution — Selling Restrictions” and “Notice to Investors”. Delivery of the Notes in book-entry form will be made on or about June 29, 2009. The Global Notes will be deposited with a custodian for and registered in the name of a nominee of The Depository Trust Company (“DTC”). Except as described herein, interests in the Global Notes will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its participants, including Euroclear Bank S.A./N.V. (“Euroclear”) and Clearstream Banking, société anonyme (“Clearstream”) and their accountholders. Definitive certificates in respect of beneficial interests in the Notes will not be issued except as described herein.

Joint Bookrunners and Joint Lead Managers

BNP PARIBAS Deutsche Bank HSBC Merrill Lynch & Co. The Royal Bank of Scotland
Joint Lead Manager

Goodmorning Shinhan Securities
The date of this offering circular is June 22, 2009.

TABLE OF CONTENTS Page CERTAIN DEFINED TERMS AND CONVENTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PRESENTATION OF FINANCIAL AND OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . ENFORCEABILITY OF CIVIL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EXCHANGE RATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CAPITALIZATION AND INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SELECTED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . UNAUDITED NON-CONSOLIDATED PRO FORMA INCOME STATEMENT . . . . . . . . . . . . . . . . MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . THE KOREAN BANKING INDUSTRY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DESCRIPTION OF ASSETS AND LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RISK MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . MANAGEMENT AND EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS . . . . . . . . . . . . . . . . . . . . SHINHAN FINANCIAL GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SUPERVISION AND REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DESCRIPTION OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NOTICE TO INVESTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CERTAIN ERISA CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SUMMARY OF CERTAIN DIFFERENCES BETWEEN KOREAN GAAP AND U.S. GAAP . . . INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv iv v v vi 1 11 25 26 27 28 30 32 69 70 87 110 128 135 136 141 154 165 170 174 177 179 179 180 F-1

i

You should rely only on the information contained in this offering circular or to which the Bank has referred you. We have not authorized anyone to provide you with information that is different. This offering circular may only be used where it is legal to sell the Notes. You should not assume that the information in this offering circular is accurate as of any date other than the date at the front of this offering circular. This offering circular is confidential. You are authorized to use this offering circular solely for the purpose of considering the purchase of the Notes described in this offering circular. You may not reproduce or distribute this offering circular in whole or in part, and you may not disclose any of the contents of this offering circular or use any information herein for any purpose other than considering a purchase of the Notes. You agree to the foregoing by accepting delivery of this offering circular.

IN CONNECTION WITH THIS OFFERING, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED OR ANY PERSON ACTING FOR OR ON ITS BEHALF, TO THE EXTENT PERMITTED BY APPLICABLE LAWS AND REGULATIONS, MAY OVERALLOT OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE NOTES AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL FOR A LIMITED PERIOD OF TIME AFTER THE ISSUE DATE. HOWEVER, THERE IS NO ASSURANCE THAT MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED OR ITS AGENT WILL UNDERTAKE SUCH STABILIZATION. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME AND MUST BE BROUGHT TO AN END AFTER A LIMITED PERIOD. SEE “PLAN OF DISTRIBUTION”. The Bank, having made all reasonable inquiries, confirms that this offering circular contains all information with respect to it and the Notes which is material in the context of the issue and offering of the Notes, that the information contained in this offering circular is true and accurate in all material respects and is not misleading in any material respect, that the opinions and intentions expressed in this offering circular are honestly held and have been reached after considering all relevant circumstances and are based on reasonable assumptions, and that there are no other facts, the omission of which would, in the context of the issue and offering of the Notes, make this offering circular as a whole or any information or the expression of any opinions or intentions expressed in this offering circular misleading in any material respect. The Bank accepts responsibility accordingly. Information provided in this offering circular with respect to Korea, its political status and economy, has been derived from information published by the Government and other public sources, and the Bank accepts responsibility only for the accurate extraction of information from such sources. In making an investment decision, prospective investors must rely on their own examination of us and the terms of the offering of Notes, including the merits and risks involved. We are not making any representation to any purchaser of the Notes regarding the legality of an investment in the Notes by such purchaser under any legal investment or similar laws or regulations. The contents of this offering circular should not be construed as providing legal, business, accounting or tax advice. An investor should bear the economic risk of an investment in the Notes. This offering circular is based on the information provided by the Bank. Accordingly, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the Initial Purchasers as to the accuracy or completeness of the information contained in this offering circular or any other information provided by us in connection with the offering of the Notes. No person is authorized in connection with any offering of the Notes to give any information or make any representation other than as contained in this offering circular and, if given or made, that information or representation must not be relied upon as having been authorized by us or by the Initial Purchasers (as defined in “Plan of Distribution”). This offering circular does not constitute an offer to sell or a solicitation of an offer to buy any Notes by any person except in compliance with all applicable laws and regulations. Neither the delivery of this offering circular nor any sale made in connection with this offering circular shall under any circumstances imply that the information in this offering circular is correct as of any date subsequent to the date of this offering circular or constitute a representation that there has been no change or development reasonably likely to involve a material adverse change in our affairs since the date of this offering circular.

ii

The distribution of this offering circular and the offering of the Notes in certain jurisdictions may be restricted by law. It may not be used for or in connection with any offer to, or solicitation by, anyone in any jurisdiction in which it is unlawful to make such an offer or solicitation. Persons into whose possession this offering circular may come are required by us and the Initial Purchasers to inform themselves about and to observe the relevant restrictions. No action is being taken in any jurisdiction to permit an offering to the general public of Notes or the distribution of this offering circular in any jurisdiction where action would be required for those purposes. A REGISTRATION STATEMENT FOR THE OFFERING AND SALE OF THE NOTES HAS NOT BEEN FILED WITH THE FINANCIAL SERVICES COMMISSION OF KOREA. ACCORDINGLY, THE NOTES MAY NOT BE OFFERED, SOLD OR DELIVERED, DIRECTLY OR INDIRECTLY, IN KOREA OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY RESIDENT OF KOREA (AS SUCH TERM IS DEFINED UNDER THE FOREIGN EXCHANGE TRANSACTION LAW AND REGULATION OF KOREA AND ITS ENFORCEMENT DECREE), FOR A PERIOD OF ONE YEAR FROM THE DATE OF ISSUANCE OF THE NOTES, EXCEPT AS OTHERWISE PERMITTED BY APPLICABLE KOREAN LAWS AND REGULATIONS. FURTHERMORE, A HOLDER OF THE NOTES SHALL BE PROHIBITED FROM OFFERING, DELIVERING OR SELLING ANY NOTES, DIRECTLY OR INDIRECTLY, IN KOREA OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY RESIDENT OF KOREA OTHER THAN CERTAIN QUALIFIED PROFESSIONAL INVESTORS AS SET FORTH IN ARTICLE 11, PARAGRAPH 1, ITEM 1, SUB-ITEMS KA AND NA OF THE PRESIDENTIAL DECREE OF THE FINANCIAL INVESTMENT SERVICES AND CAPITAL MARKETS ACT FOR A PERIOD OF ONE YEAR FROM THE DATE OF ISSUANCE OF THE NOTES, EXCEPT AS OTHERWISE PERMITTED BY APPLICABLE KOREAN LAWS AND REGULATIONS.

NOTICE TO PROSPECTIVE INVESTORS IN THE UNITED STATES NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE “SEC”) NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE NOTES OR DETERMINED IF THIS OFFERING CIRCULAR IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE NOTES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. AS A PROSPECTIVE PURCHASER, YOU SHOULD BE AWARE THAT YOU MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. PLEASE REFER TO THE SECTIONS IN THIS OFFERING CIRCULAR ENTITLED “PLAN OF DISTRIBUTION” AND “NOTICE TO INVESTORS”.

NOTICE TO NEW HAMPSHIRE RESIDENTS NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER RSA 421-B WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER CHAPTER 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

iii

CERTAIN DEFINED TERMS AND CONVENTIONS Unless otherwise specified or the context otherwise requires, in this offering circular: Š all references to “we”, “us”, “our”, “Shinhan Bank” and the “Bank” shall mean the surviving entity following the merger of former Shinhan Bank into Chohung Bank, effective April 3, 2006; all references to “former Shinhan Bank” shall mean Shinhan Bank as in existence prior to its merger with Chohung Bank, effective April 3, 2006; all references to “Chohung Bank” shall mean Chohung Bank as in existence prior to its merger with former Shinhan Bank, effective April 3, 2006; and all references to “Shinhan Financial Group Co., Ltd.,” “Shinhan Financial Group” and “our holding company” shall mean Shinhan Financial Group Co., Ltd., of which the Bank is a wholly-owned subsidiary.

Š

Š

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All references to “Korea” and the “Republic” contained in this offering circular shall mean The Republic of Korea. All references to the “Government” shall mean the government of The Republic of Korea. The “Financial Supervisory Service” is the executive body of the Financial Services Commission, which was renamed as such as of February 29, 2008, from the Financial Supervisory Commission. All references to “Won” or “W” in this offering circular are to the lawful currency of Korea; all references to “Dollars”, “$” or “US$” are to the lawful currency of the United States of America; and all references to “Yen” or “¥” are to the lawful currency of Japan. For convenience only, certain Won amounts have been translated into U.S. dollars. Unless otherwise specified, all such conversions were made at the market average exchange rate announced by Seoul Money Brokerage Services, Ltd. in Seoul for U.S. dollars against Won (the “Market Average Exchange Rate”). Unless otherwise stated, the translations of Won into U.S. dollars as of March 31, 2009 were made at the Market Average Exchange Rate in effect on such date, which was W1,377.1 = U.S.$1.00. The Market Average Exchange Rate has been highly volatile recently and the U.S. dollar amounts referred to in this offering circular should not be relied upon as an accurate reflection of our results of operations. We expect this volatility to continue in the near future. No representation is made that the Won or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or Won, as the case may be, at any particular rate or at all. The Market Average Exchange Rate on June 19, 2009 was W1,263.2 = U.S.$1.00. Any discrepancies in any table between totals and the sums of the amounts listed are due to rounding. References to billions are to thousands of millions. PRESENTATION OF FINANCIAL AND OTHER INFORMATION We prepare our financial statements in Won in accordance with generally accepted accounting principles in Korea (“Korean GAAP”), together with, where applicable, accounting and reporting guidelines under Korean accounting standards applicable to the banking industry, which differ in certain important respects from generally accepted accounting principles in certain other countries, including the United States. For a discussion of certain differences between Korean GAAP and generally accepted accounting principles in the United States (“U.S. GAAP”) as they relate to the Issuer, see “Summary of Certain Differences between Korean GAAP and U.S. GAAP”. We have made no attempt to identify or quantify the impact of these differences. All financial information contained in this offering circular is presented on a non-consolidated basis, unless stated otherwise. Financial and other information contained in this offering circular regarding individual borrowers, groups or categories of borrowers or classifications by industry, geography, size or other factors, including information as to loans, credits, total exposures, allowances, collateral values, non-performing loans and other items, is derived solely from our internal management information systems.

iv

Under the Korean Banking Act of 1950, as amended (the “Banking Act”), assets accepted in trust by a bank in Korea must be segregated from its other assets in the accounts of that bank. Accordingly, banks, including the Bank, engaged in the banking and trust businesses must maintain two separate accounts, the bank account and the trust account, and two separate sets of records, which provide details of their respective banking and trust businesses. All financial information contained in this offering circular relating to the Bank is presented with respect to the Bank’s bank account only, unless stated otherwise. On August 19, 2003, Shinhan Financial Group acquired 80.04% of Chohung Bank’s common shares. Subsequently, Shinhan Financial Group acquired additional common shares of Chohung Bank, and in June 2004, acquired all remaining common shares of Chohung Bank. As of April 3, 2006, Shinhan Financial Group merged former Shinhan Bank into Chohung Bank, with the latter being the surviving legal entity, and split-merged the credit card business of Chohung Bank into Shinhan Card Co., Ltd. (“Shinhan Card”), a subsidiary of Shinhan Financial Group. On the same date, the surviving entity from the merger of former Shinhan Bank and Chohung Bank changed its name to Shinhan Bank. Accordingly, unless otherwise stated, the financial and statistical information of the Bank for the year ended December 31, 2006 contained in this offering circular does not include information for former Shinhan Bank prior to the merger on April 3, 2006. See also “Unaudited Non-consolidated Pro Forma Income Statement”. ENFORCEABILITY OF CIVIL LIABILITIES The Bank is a corporation organized under the laws of Korea. All of the Bank’s directors and officers and certain other persons named in this offering circular reside in Korea, and all or a significant portion of the assets of the directors and officers and certain other persons named in this offering circular and substantially all of the Bank’s assets are located in Korea. As a result, it may not be possible for you to effect service of process within the United States upon such persons or to enforce against them or against us in U.S. courts judgments predicated upon the civil liability provisions of the federal securities laws of the United States. There is doubt as to the enforceability in Korea, either in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated on the U.S. federal securities laws. AVAILABLE INFORMATION To permit compliance with Rule 144A under the Securities Act in connection with sales of the Notes, the Bank will be required under the Fiscal Agency Agreement to be entered into as of the closing date of this offering (the “Fiscal Agency Agreement”) between the Bank and The Bank of New York Mellon, as the fiscal agent (the “Fiscal Agent”), to furnish, upon request, to a Holder (as defined in “Description of the Notes — General”) of a Note and a prospective investor designated by such Holder, the information required to be delivered under Rule 144A(d)(4) under the Securities Act unless at the time of the request we are a reporting company under Section 13 or Section 15(d) of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”), or the Bank is exempt from the registration requirements of Section 12(g) of the Exchange Act (and therefore are required to publish on its Web site, in English, certain information pursuant to Rule 12g3-2(b) under the Exchange Act). In accordance with the Fiscal Agency Agreement, the Fiscal Agent also will make available for inspection by Holders of the Notes or, in certain cases, arrange for the mailing to such Holders, certain reports or communications received from us. See “Description of the Notes — Notices”. Copies of the Bank’s articles of incorporation and the Fiscal Agency Agreement are available free of charge from the specified offices of the Fiscal Agent. We prepare audited annual financial statements and unaudited interim financial statements in accordance with generally accepted accounting principles in Korea (“Korean GAAP”), which will be available at the office of the Fiscal Agent.

v

FORWARD-LOOKING STATEMENTS This offering circular contains certain “forward-looking statements” that are based on the Bank’s current expectations, assumptions, estimates and projections about it and its industry. The forward-looking statements are subject to various risks and uncertainties. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “anticipate”, “believe”, “estimate”, “expect”, “intend”, “target”, “seek”, “aim”, “contemplate”, “project”, “plan”, “goal”, “should” and similar expressions or the negatives thereof. Those statements include, among other things, the discussions of the Bank’s business strategy and expectations concerning its market position, future operations, cash flows, margins, profitability, liquidity and capital resources. The Bank cautions you that reliance on any forwardlooking statement involves risks and uncertainties, and that although the Bank believes that the assumptions on which its forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and, as a result, the forward-looking statements based on those assumptions could be incorrect. The uncertainties in this regard include, but are not limited to, those identified in the risk factors discussed elsewhere in this offering circular. See the section entitled “Risk Factors” beginning on page 11. In light of these and other uncertainties, you should not conclude that the Bank will necessarily achieve any plans and objectives or projected financial results referred to in any of the forward-looking statements. The Bank does not undertake to release the results of any revisions of these forward-looking statements to reflect future events or circumstances, except as required by law.

vi

SUMMARY You should read the following summary as an introduction to and in conjunction with the more detailed information about the Bank and its financial statements contained elsewhere in this offering circular. The Bank Introduction The Bank is the third largest commercial bank in Korea in terms of total assets as of March 31, 2009. The Bank provides a wide range of banking products and services to small- and medium-sized enterprises, large corporations and individuals in Korea. As of March 31, 2009, the Bank served approximately 5.2 million active customers (meaning customers who maintain a monthly average deposit balance of W300,000 or more or who have a positive monthly average loan balance with the Bank), through a nationwide network of 944 branches and 7,147 automated banking terminals, as well as fixed line, mobile telephone and Internet banking. As of March 31, 2009, the Bank’s non-consolidated total assets, net loans (after deducting allowance for loan losses) and bank account deposits, which do not include the assets and liabilities of trust accounts, were W216,249 billion, W140,634 billion and W126,849 billion, respectively. Lending to small- and medium-sized enterprises in Korea has been a principal focus of the Bank’s operations and the Bank remains one of the largest lenders in Korea to these customers. As of March 31, 2009 and December 31, 2008, the Bank’s loans to small- and medium-sized enterprises totaled W62,144 billion and W61,813 billion, respectively, which accounted for 43.4 % and 41.8% of the Bank’s total loans. This customer segment represents a broad spectrum of corporations in Korea, both by type of lending and type of customer. The Bank believes that its extensive branch network facilitates its customer-oriented approach to service this diversified group of customers. Since its inception, prudent risk management has been one of the highest priorities of the Bank’s operations. As of March 31, 2009, the Bank’s capital adequacy ratio, as reported to the Korean Financial Supervisory Service, was 14.46%, which was highest among Korean commercial banks. The Bank is the largest subsidiary of Shinhan Financial Group, which is the first privately established financial holding company in Korea. Shinhan Financial Group is one of the three largest financial services providers in Korea as measured by total assets as of March 31, 2009 and, through its subsidiaries, provides a wide range of financial products and services, including banking, credit card services, brokerage, insurance and asset management services, including the largest credit card operation in Korea. The Bank believes that its business has benefited from the cross-selling and other synergy opportunities with other member companies of Shinhan Financial Group. For more information on the financial holding company structure, see “Shinhan Financial Group”. Former Shinhan Bank was established in 1982 as the first privately funded commercial bank in Korea. Chohung Bank was established in 1897 and was the oldest financial institution in Korea. Former Shinhan Bank and Chohung Bank were merged on April 3, 2006 and the new bank was named “Shinhan Bank”. The Bank’s headquarters is located at 120, 2-Ka, Taepyung-ro, Chung-Ku, Seoul, Korea. As of March 31, 2009, the Bank had nine consolidated subsidiaries, located in Seoul, Hong Kong, New York, Los Angeles, Toronto, Frankfurt, Phnom Penh, Beijing and Almaty. Strategy Prior to the onset of the current turmoil in the financial services industry and macro-economy in Korea as well as globally, the Bank’s primary strategic focus has been on enhancing its market position in the Korean banking industry, achieving economy of scale in each major business segment, and integrating the business units of former Shinhan Bank and Chohung Bank.

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The Bank believes that the level of uncertainty and volatility presented by the ongoing market and economic conditions presents a unique set of challenges and opportunities that requires it to realign its strategic priorities in order to ensure that it positions itself to best weather the current market crisis as well as to capture the opportunities that emerge from it. Accordingly, the Bank plans to take a more “back to basics” approach in protecting and strengthening the fundamentals of, and synergy among, its core business lines, which will serve as the platform for pursuing sustainable growth group-wide and further solidifying its competitive leadership, notwithstanding the difficult prospects in the global and domestic market and economic conditions. More specifically, the Bank’s “back to basics” approach in light of the current crisis will focus on the following fundamentals of its core businesses: Further strengthen risk management. The Bank plans to make its risk management system more comprehensive and pre-emptive in detecting and assessing any known and potential risks through early alerts and multiple contingency management plans. The Bank will also seek to improve its overall asset quality and minimize any reputational risk by reassessing the risk profile of its core businesses and realigning their respective asset portfolios by reducing exposure to high-risk assets. Strengthen the profit structure. In order to improve the Bank’s profitability, it plans, among others, to adopt greater differentiation in risk-profiling its products to price them more accurately, aggressively restructure low-profit and overlapping product lines and loss-leaders, conservatively diversify its revenue streams by taking advantage of market openings allowed by regulatory changes, deepen its banking customer relationships by capturing a greater market share of auto payroll deposit accounts and further expand cross-selling opportunities across the group-wide business units. Capture maximum synergy. The Bank plans to continue to assist in building out, in conjunction with Shinhan Financial Group’s group-wide efforts, informational networks and shared databases in order to maximize opportunities for target marketing, up-selling and cross-selling as well as deepening customer loyalty and relationships at the group level. The Bank plans to use its strong business fundamentals as described above to become a world-class bank that ranks among the leaders of the banking industry in Asia and globally. The Bank aims to achieve such objective by implementing the following strategies and focusing on the following objectives and initiatives: Pursue new customer-oriented marketing to enhance customer loyalty. To further develop and enhance the loyalty of the Bank’s customers across all business segments, the Bank will (i) develop comprehensive banking services for each customer segment, (ii) formulate customized marketing and business strategies for each customer segment, (iii) strengthen its direct marketing efforts, (iv) explore new businesses to meet changes in customers’ needs, (v) seek to develop innovative products and services, such as ubiquitous banking and foreign financial product investment services, and (vi) offer diversified investment products to customers. In particular, the Bank is focusing on the development of its mass-market customer basis. In addition, the Bank plans to combine its commercial banking channels with its investment banking products to create a unique commercial investment banking model in Korea and simultaneously seek investment banking opportunities in the overseas markets. Establish an optimal earnings structure for corporate sustainability. The Bank aims to strengthen its foundation of income sources, with particular efforts to increase its non-interest income. Furthermore, the Bank aims to secure a sound management structure to improve risk management, achieve an optimal balance of funding and funds operations and strengthen its infrastructure and systems to maximize earnings from cross-selling products and services of its affiliates. Establish a sound foundation to compete globally. To enable the Bank to compete in the global financial markets, it aims to (i) improve its brand value, (ii) continue to create customer-oriented operating systems and processes, (iii) establish a system to create, accumulate, utilize and share intellectual property among the Bank and its affiliates, (iv) create a flexible organizational culture that

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embraces changes in market conditions and customers’ demands and (v) establish a platform to enable the Bank to strengthen its strategic co-operation with foreign financial institutions and create a global network to exchange information and ideas. Creating synergies within the holding company structure of Shinhan Financial Group. Since the establishment of a financial holding company, Shinhan Financial Group, in 2001, the Bank has focused on achieving synergy through cross-selling of products and services of the other subsidiaries of Shinhan Financial Group. The Bank and its affiliates, Goodmorning Shinhan Securities and Shinhan Life Insurance, together serve as the primary distribution channel for Shinhan Financial Group while the other non-bank members of the Shinhan Financial Group are focusing on developing competitive products and services. Examples of the principal products for cross-selling in the retail segment include bancassurance, credit cards, beneficiary certificates and “Financial Network Accounts”, which are integrated accounts for banking, brokerage and insurance services. In particular, the Bank intends to capitalize on the synergistic benefits of the acquisition by Shinhan Financial Group of LG Card and its substantial customer base. See “Shinhan Financial Group”. Establishing and Consolidating the One Portal Network. In order to provide total financial solutions to the customers of the Bank and other members of the Shinhan Financial Group on a real-time basis, the Bank, together with other members of the Shinhan Financial Group, is continuing to develop a one-portal network for the Shinhan Financial Group. The one-portal network refers to the ability of a corporate or retail customer to have access to a total financial solution through any single point of contact with any member of Shinhan Financial Group.

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Summary Financial Data The following tables set forth summary non-consolidated income statement and balance sheet data with respect to the Bank as of and for the years ended December 31, 2006, 2007 and 2008, which have been derived from the Bank’s audited non-consolidated financial statements as of such dates and for such periods, and as of March 31, 2009 and for the three months ended March 31, 2008 and 2009, which have been derived from the Bank’s unaudited non-consolidated interim financial statements as of such date and for such periods. The non-consolidated financial statements exclude the accounts of all of the Bank’s subsidiaries (except that the value of the Bank’s equity investments in their respective consolidated subsidiaries is included) and their respective trust account management business. The non-consolidated financial statements have been prepared in accordance with Korean GAAP and, where applicable, the Korean Bank Accounting Guidelines, which differ in certain material respects from U.S. GAAP, and have not been intended to present the financial position, results of operations, cash flows and changes in equity in accordance with generally accepted accounting policies and practices in countries and jurisdictions other than Korea. For a discussion of certain differences between Korean GAAP and U.S. GAAP, see “Summary of Certain Differences between Korean GAAP and U.S. GAAP” in this offering circular. Certain financial information contained in “Business” and “Description of Assets and Liabilities of the Bank” was not derived directly from the Bank’s unaudited non-consolidated interim financial statements as of March 31, 2009 and for the three months ended March 31, 2008 and 2009 or from the Bank’s audited non-consolidated financial statements as of and for the years ended December 31, 2006, 2007 and 2008 but was derived from certain accounting records, which were unaudited but were subject to the Bank’s internal control over financial reporting. On August 19, 2003, Shinhan Financial Group acquired 80.04% of Chohung Bank’s common shares. Subsequently, Shinhan Financial Group acquired additional common shares of Chohung Bank, and in June 2004, acquired all remaining common shares of Chohung Bank. As of April 3, 2006, Shinhan Financial Group merged former Shinhan Bank into Chohung Bank, with the latter being the surviving legal entity, and split-merged the credit card business of Chohung Bank into Shinhan Card, a subsidiary of Shinhan Financial Group. On the same date, the surviving entity from the merger of former Shinhan Bank and Chohung Bank changed its name to Shinhan Bank. Accordingly, unless otherwise stated, the financial and statistical information of the Bank for the year ended December 31, 2006 contained in this offering circular does not include information for former Shinhan Bank prior to the merger on April 3, 2006.

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Non-Consolidated Financial Information The non-consolidated financial information set forth below presents only the bank account of the Bank and excludes the trust accounts of the Bank. The non-consolidated financial information of the Bank represented 97.4% of the consolidated total assets and 97.3% of the total consolidated liabilities of the Bank as of December 31, 2008 and 98.8% of the consolidated operating income of the Bank for the year ended December 31, 2008.
For the year ended December 31, 2006 2007 (audited) (audited) (in billions of Won) Non-Consolidated Income Statement Information Interest and dividend income . . . . . Interest expense . . . . . . . . . . . . . . . . Net interest income . . . . . . . . . . . . . Provision for loan losses . . . . . . . . . Net interest income after provision for loan losses . . . . . . . Non-interest income . . . . . . . . . . . . . Non-interest expense . . . . . . . . . . . . Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . Income tax expense . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . 2008 (audited) (in millions of U.S. dollars) For the three months ended March 31, 2008 (unaudited) 2009 (unaudited) (in millions of U.S. dollars)

(in billions of Won)

W6,811 3,765 3,046 426 2,620 7,065 7,729 1,956 525 W1,431

W9,491 W11,672 5,749 7,328 3,742 4,344 459 929 3,283 8,464 8,892 2,855 804 3,415 38,071 39,583 1,903 456

US$ 8,476 5,321 3,155 675 2,480 27,646 28,744 1,382 331 US$ 1,051

W2,740 W 2,641 1,695 1,733 1,045 908 109 332 936 6,049 6,460 525 144 W 381 W 576 17,236 17,708 104 30 74

US$ 1,918 1,258 659 241 418 12,516 12,859 76 22 US$ 54

W2,051 W 1,447

As of December 31, 2006 2007 (audited) (audited) (in billions of Won) 2008 (audited)

As of March 31, 2009 (unaudited)

(in millions of (in billions (in millions of U.S. dollars) of Won) U.S. dollars)

Non-Consolidated Balance Sheet Information Assets Cash and due from banks . . . . . . . . . . . . . . . . . W 9,013 W 6,313 W 8,579 US$ 6,230 W 13,900 US$ 10,094 Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,660 32,329 36,592 26,572 40,547 29,444 Loans, net of allowance for loan losses . . . . . 112,715 125,405 145,342 105,542 140,634 102,123 Property and equipment, net of accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,199 2,313 2,292 1,664 2,265 1,645 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,610 8,746 20,764 15,078 18,903 13,726 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W154,197 W175,106 W213,569 US$ 155,086 W216,249 US$ 157,032 Liabilities and Stockholder’s Equity Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W 93,006 W103,818 W119,238 US$ 86,586 W126,849 US$ 92,113 Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,579 17,226 20,410 14,822 17,476 12,690 Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,213 28,171 32,418 23,541 28,139 20,433 Retirement and severance benefits . . . . . . . . . 108 102 133 96 126 92 Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 12,624 14,470 29,422 21,365 31,692 23,014 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . Total stockholder’s equity . . . . . . . . . . . . . . . . 144,530 9,667 163,787 11,319 201,621 11,948 146,410 8,676 204,282 11,967 148,342 8,690

Total liabilities and stockholder’s equity . . . W154,197 W175,106 W213,569 US$ 155,086 W216,249 US$ 157,032

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Selected Non-consolidated Ratios Except as otherwise indicated, the following ratios are calculated using the non-consolidated financial statements of the Bank. Profitability Ratios For the year ended For the three months ended December 31, March 31,(8) 2006 2007 2008 2008 2009 (in percentages) Net income as a percentage of: Average total assets(1) . . . . . . . . . . . . . . . . . . . . . . . . . . Average stockholders’ equity(1) . . . . . . . . . . . . . . . . . . Net interest spread(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net interest margin(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost-to-income ratio(4) . . . . . . . . . . . . . . . . . . . . . . . . . . Efficiency ratio(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost-to-average-assets ratio(6) . . . . . . . . . . . . . . . . . . . Equity-to-average-asset ratio(7) . . . . . . . . . . . . . . . . . .

1.08% 1.16% 0.71% 17.79 15.61 9.76 2.52 2.24 2.11 2.71 2.46 2.44 45.24 41.52 42.78 75.90 72.85 93.32 5.67 5.04 19.55 6.05 7.44 7.32

0.78% 11.03 2.15 2.47 50.27 91.06 13.25 7.08

0.13% 2.02 1.48 1.88 56.05 97.60 29.98 6.20

Notes: (1) (2) Represents the daily average balance of total assets or stockholders’ equity. Total assets refer to total assets in the bank accounts. Net interest spread represents the difference between the yield on average interest-earning assets and cost of average interestbearing liabilities. Net interest margin represents the ratio of net interest income to average interest-earning assets. Calculated as the ratio of general and administrative expenses to the sum of net interest income and net non-interest income (excluding general and administrative expenses). Efficiency ratio represents the ratio of non-interest expense to the sum of net interest income and non-interest income, a measure of efficiency for banks. Cost-to-average-assets ratio, a measure of cost of funding used by banks, represents the ratio of non-interest expense to average total assets. Equity-to-average-asset ratio represents the ratio of average stockholders’ equity to average total assets. Information for the three months ended March 31, 2008 and 2009 is presented on an annualized basis.

(3) (4)

(5)

(6)

(7) (8)

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Capital Ratios As of December 31, As of March 31, 2006 2007 2008 2009 (in percentages) Total capital adequacy (BIS) ratio(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . Tier I capital adequacy ratio(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tier II capital adequacy ratio(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.01 7.81 4.20 12.09 7.64 4.45 13.44 9.31 4.13 14.46 10.13 4.33

Note: (1) Computed on a consolidated basis pursuant to the guidelines of the Financial Supervisory Service. See “Supervision and Regulation — Principal Regulations Applicable to Banks — Capital Adequacy”.

Asset Quality Ratios As of December 31, As of March 31, 2006 2007 2008 2009 (in billions of Won, except percentages) Substandard and below loans(1) . . . . . . . . . . . . . . . . . . . . . . Substandard and below loans as a percentage of total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Substandard and below loans as a percentage of total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Precautionary loans as a percentage of total loans(2) . . . Precautionary and below loans as a percentage of total loans(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Precautionary and below loans as a percentage of total assets(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allowance for loan losses as a percentage of substandard and below loans . . . . . . . . . . . . . . . . . . . . . . Allowance for loan losses as a percentage of precautionary and below loans(2) . . . . . . . . . . . . . . . . . . Allowance for loan losses as a percentage of total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Substandard and below credits as a percentage of total credits(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loans in Korean Won as a percentage of deposits in Korean Won(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W 879 0.78% 0.57% 1.11% 1.89% 1.39% 180.54% 74.19% 1.40% 0.75% 123.38% W 975 0.77% 0.56% 0.84% 1.61% 1.17% 187.39% 89.29% 1.44% 0.73% 136.13% W 1,480 1.02% 0.69% 1.06% 2.08% 1.41% 163.98% 80.39% 1.68% 1.00% 129.84% W 2,074 1.45% 0.96% 1.28% 2.73% 1.80% 128.22% 68.38% 1.87% 1.51% 119.31%

Notes: (1) Substandard and below loans (other than loans provided from the Bank’s trust accounts and confirmed guarantees and acceptances) are defined in accordance with the regulatory guidance in Korea. See “Supervision and Regulation — Principal Regulations Applicable to Banks”. As defined by the Financial Services Commission. Credits include loans provided from the Bank’s trust accounts and confirmed guarantees and acceptances, as well as the total loan portfolio of the Bank’s bank accounts. Loans in Korean Won do not include bills bought in Won, advances for customers, bonds purchased under resale agreements, call loans, private placement corporate bonds and loans in restructurings that have been swapped for equity in the restructured borrower.

(2) (3) (4)

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The Offering Terms used in this summary and not otherwise defined shall have the meanings given to them in “Description of the Notes”. Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes offered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issue Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan Bank US$500,000,000 6.0% Notes due 2012. June 29, 2012. 99.835% June 29 and December 29 of commencing December 29, 2009. each year,

Ranking of the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Notes will be unsecured and will be the direct, unconditional and unsubordinated general obligations of the Bank and will rank pari passu among themselves without any preference of one over the other by reason of priority of date of issue or otherwise and at least equally with all other outstanding unsecured and unsubordinated general obligations of the Bank (subject to certain statutory exceptions under the laws of Korea). The Notes will be denominated in principal amounts of US$100,000 and integral multiples of US$1,000 in excess thereof. Notes sold to QIBs pursuant to Rule 144A and to non-U.S. persons pursuant to Regulation S will be evidenced by separate Global Notes, in fully registered form without coupons, and deposited with a custodian for and registered in the name of a nominee of DTC. The Notes will be issued in book-entry form. The Notes contain certain limitations on the creation, incurrence, issuance or assumption or the guarantee by the Bank of certain debt secured by any mortgage, charge, pledge, or other security interest on certain properties or assets of the Bank. See “Description of the Notes”. The Bank may, at its option, redeem the Notes, in whole but not in part, at their principal amount plus accrued interest to the date fixed for redemption, if the Bank has or would become obligated to pay Additional Amounts in respect of certain Korean taxes imposed in respect of payments of principal of or interest on the Notes. See “Description of the Notes — Optional Tax Redemption”.

Denomination; Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Optional Tax Redemption . . . . . . . . . . . . . . . . . . . . . . . . . .

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Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The aggregate net proceeds from the offering of the Notes are expected to be approximately US$496 million, after deducting underwriting commissions and certain out-of-pocket expenses relating to the offering. The net proceeds from the offering will be used for repayment of existing debt and other general corporate purposes. The Notes are expected to be rated A2 by Moody’s and A- by S&P. Such ratings do not constitute a recommendation to buy, sell or hold the Notes and may be subject to revision or withdrawal at any time by such rating organizations. Each such rating should be evaluated independently of any other rating of the Notes. Application has been made to list the Notes on the Singapore Stock Exchange. The Notes will be traded on the Singapore Stock Exchange in a minimum board lot size of US$200,000 for so long as the Notes are listed on the Singapore Stock Exchange. The Bank may from time to time, without the consent of the existing holders of the Notes, create and issue additional notes under the Fiscal Agency Agreement having the same terms and conditions as the Notes in all respects except for issue date and issue price. Additional notes issued in this manner may be consolidated with and form a single series with the Notes outstanding at the time of such further issuance, provided that such additional notes must be issued with no more than a de minimis amount of original issue discount or be part of a “qualified reopening” for U.S. federal income tax purposes. There are certain restrictions on the offer, sale and transfer of the Notes in the United States, United Kingdom, Korea, Hong Kong, Singapore and Japan. See “Plan of Distribution — Selling Restrictions”. The Notes have not been and will not be registered under the Securities Act or any state securities laws and may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Notes may be offered for sale only (i) in the United States, to QIBs within the meaning of, and in reliance on, Rule 144A; or (ii) outside the United States in reliance on, and in accordance with, Regulation S, in each case, in compliance with applicable laws, regulations and directives. See “Plan of Distribution — Selling Restrictions” and “Notice to Investors”.

Rating of the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Listing and Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Further Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Selling Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notice to Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Governing Law . . . . . . . . . .

The Notes and the Fiscal Agency Agreement will be governed by New York law. See “Risk Factors” and the other information in this offering circular for a discussion of factors that you should carefully consider before deciding to invest in the Notes. The Bank of New York Mellon.

Risk Factors . . . . . . . . . . . . .

Fiscal Agent . . . . . . . . . . . . . Paying and Transfer Agent . . . . . . . . . . . . . . . . .

The Bank of New York Mellon. For so long as the Notes are listed on the Singapore Stock Exchange and the rules of the Singapore Stock Exchange so require, the Bank will appoint and maintain a paying agent in Singapore, where the Notes may be presented or surrendered for payment or redemption, in the event that the Bank issues definitive Notes. In addition, in the event that any of the Global Notes is exchanged for definitive Notes, an announcement of such exchange will be made by or on behalf of the Bank through the Singapore Stock Exchange and such announcement will include all material information with respect to the delivery of the definitive Notes, including details of the paying agent in Singapore. Rule 144A Notes CUSIP ISIN 824589 AC9 US824589AC99 Regulation S Notes Y77488 AA5 USY77488AA51

Security Codes . . . . . . . . . . .

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RISK FACTORS In addition to other information contained in this offering circular, you should consider carefully the risks described below. These risks are not the only ones that the Bank faces. Additional risks not currently known to the Bank or those which the Bank currently believes are immaterial may also impair its business operations. The Bank’s business, financial condition or results of operations could be materially adversely affected by any of these risks. Risks Relating to the Current Economic and Market Crisis The recent difficulties in the global financial markets and their contagion effect on the overall economy could adversely affect the Bank’s asset quality and results of operations. Since July 2007, significant adverse developments in the U.S. sub-prime mortgage sector have created significant disruption and volatility in financial markets globally. The ensuing contraction of liquidity and credit and deteriorations in asset values have had contagion effects on the overall economy. Starting in the second half of 2008, the world’s largest economies, including the United States, Europe and Japan, are widely considered to be in the midst of significant economic recessions, and export-driven emerging economies such as China and Korea have also suffered substantial weakness in their economies. For example, the Korean economy experienced a contraction in real gross domestic product by 3.4% in the fourth quarter of 2008 compared to the fourth quarter of 2007. The weakening economies in Korea and globally may create further shocks to the global financial markets, which in turn could cause a further downward spiral in global economic and financial conditions. In Korea, where most of the Bank’s assets are located and where it generates most of its income, there are signs that, due to the recent significant difficulties in global economic and financial conditions, key macroand microeconomic indicators such as exports, personal expenditures and consumption, unemployment rates, demand for business products and services, debt service burden of households and businesses, the general availability of credit and the asset value of real estate and securities may further deteriorate. Any or a combination of the foregoing factors may result in an increase in non-performing loans and worsen the asset quality of the Bank’s loans. The Bank’s substandard or below credits, as classified according to the Financial Services Commission guidelines, increased to W2,294 billion as of March 31, 2009 and W1,531 billion as of December 31, 2008, from W981 billion as of December 31, 2007, while the ratio of the Bank’s substandard or below credits to total credits increased to 1.51% and 1.00% from 0.73% as of the same dates. The Bank’s delinquent loans as reported to the Financial Services Commission, which represent loans whose principals are past due for one day or more, increased to W1,608 billion as of March 31, 2009 and W1,172 billion as of December 31, 2008, from W790 billion as of December 31, 2007, while its delinquency ratio increased to 1.12% and 0.79% from 0.62% as of the same dates, respectively. Such increases were largely due to the deteriorating asset quality of the Bank’s loans to small- and medium-sized enterprises, which amounted to W62,144 billion as of March 31, 2009 and W61,813 billion as of December 31, 2008, compared to W53,512 billion as of December 31, 2007. The delinquency ratio for such loans increased to 1.98% and 1.33% from 0.85% as of the same dates. The asset quality of the Bank’s loans, particularly the loans to small- and mediumsized enterprises, may further deteriorate, especially if the current economic and financial conditions in global and Korean markets continue to worsen, which would have a material adverse effect on its business, financial condition and results of operation. The disruptions and volatility in the global and Korean financial markets and economies may also adversely affect the Bank’s business and results of operation in other ways. Specifically, the availability of credit may become limited, causing some of its counterparties to default. Moreover, negative developments in the global credit markets may cause significant fluctuations in stock markets globally and foreign currency exchange rates, which in turn may affect the Bank results of operation. If credit market conditions continue to deteriorate, the Bank’s capital funding structure may need to be adjusted, its funding costs may increase, its credit rating may be further downgraded, or its loan and other credit losses may increase, all of which could have a material adverse effect on its business, financial condition and results of operation.

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Systemic risk resulting from failures in the financial services industry could adversely affect the Bank. Within the financial services industry, the default of any institution could lead to defaults by other institutions. Concerns about, or a default by, one institution could lead to significant liquidity problems, losses or defaults by other institutions because the commercial soundness of many financial institutions may be closely related as a result of their credit, trading, clearing or other relationships. This risk is sometimes referred to as “systemic risk” and may adversely affect financial intermediaries, such as clearing agencies, clearinghouses, banks, securities firms and exchanges with which the Bank interacts on a daily basis, which could have an adverse effect on the Bank’s ability to raise new funding, and in turn, its business, financial condition and results of operation. Furthermore, the Bank could be perceived to be facing the same issues as other financial institutions that hold assets with limited market liquidity or with significantly depressed values due to significantly negative views about the financial services sector in general as a result of recent economic and market developments, including the recent failures of major global financial institutions. Such perceptions of the Bank, even if false, could adversely affect its business, financial condition and results of operation. Risks Relating to the Bank’s Business Competition in the Korean financial services industry is intense, and may further intensify as a result of recent deregulation. Competition in the Korean financial services industry is, and is likely to remain, intense. The Bank competes principally with other major Korean commercial banks and major global banks operating in Korea, as well as government-run banks, specialized banks and regional banks. Some of the Bank’s competitors, particularly the major global financial institutions, have greater experience and resources than it does. As the Korean economy further develops, more competitors may enter the industry. In addition, potential consolidation among the Bank’s rival institutions may make the competitive landscape more adverse to the Bank. The Korean financial industry continues to be deregulated, which has lowered the barriers to entry. In February 2009, the Financial Investment Services and Capital Markets Act became effective, which, by removing regulatory barriers between securities brokerage, asset management, derivative financial services and trust services, has enabled financial investment companies (which have replaced the pre-existing securities companies and asset management companies) to engage in a broader sphere of financial activities than the securities companies were previously allowed to, as well as offer a wider range of depositary services. Accordingly, the new law enables the creation of large financial institutions that can offer both commercial and investment banking services modeled after the major global financial institutions based in the United States and Europe. If the Bank is unable to compete effectively in this more competitive and deregulated business environment, its profit margin and market share may erode and its further growth opportunities may become limited, which could adversely affect its business, results of operation and financial condition. The Bank is required to maintain its capital ratios above a minimum required level, and the failure to do so could result in the suspension of some or all of its operations. The Bank, like other commercial banks in Korea, is required to maintain a minimum Tier I capital adequacy ratio of 4.0% and a BIS ratio of 8.0%, each on a consolidated basis. These ratios measure the respective regulatory capital as a percentage of risk-weighted assets on a consolidated basis and are determined based on guidelines of the Financial Services Commission. As of December 31, 2008, the Tier I capital adequacy ratio and the BIS ratio of the Bank on a consolidated basis were 9.3% and 13.4%, respectively, and as of March 31, 2009, the Tier I capital adequacy ratio and the BIS ratio of the Bank on a consolidated basis were 10.13% and 14.46%, respectively. The Bank may not be able to continue to satisfy its capital adequacy requirements for a number of reasons, including an increase in risky assets and provisioning expenses; substitution costs related to the disposal of problem loans; declines in the value of its securities portfolio; adverse changes in foreign currency

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exchange rates; changes in the capital ratio requirements, the guidelines regarding the computation of capital ratios, or the framework set by the Basel Committee on Banking Supervision upon which the guidelines of the Financial Services Commission are based; or other adverse developments affecting the Bank’s asset quality or equity capital as discussed in this section or due to other reasons. If the Bank’s capital adequacy ratios fall below the required levels, the Financial Services Commission may impose penalties ranging from a warning to suspension or revocation of its business licenses. In order to maintain the capital adequacy ratios above the required levels, the Bank may be required to raise additional capital through equity financing or capital injections from Shinhan Financial Group, but there is no assurance that it will be able to do so on commercially favorable terms or at all, or that Shinhan Financial Group may provide a capital injection in a sufficient amount or at all. Liquidity, funding management and credit ratings are critical to the Bank’s ongoing performance. Liquidity is essential to the Bank’s business as a financial intermediary, and the Bank may seek additional funding in the near future to satisfy liquidity needs, meet regulatory requirements, enhance its capital levels or fund the growth of its operations as opportunities arise. A substantial part of the liquidity and funding requirements for the Bank is met using short-term customer deposits. While the volume of the Bank’s customer deposits has generally been stable, there have been times when customer deposits declined substantially due to the popularity of other, higher-yielding investment opportunities, namely stocks and mutual funds. During those times, the Bank was required to obtain alternative funding at higher costs. In addition, following the deregulation of depositary and settlement services as a result of the Financial Investment Services and Capital Markets Act, the Bank may experience a decrease in customer deposits due to intensified competition for such deposits. The Bank also raises funds in the capital markets and borrows from other financial institutions, the cost of which depends on the market rates and the general availability of credit, the terms of which may limit its ability to make acquisitions or subject itself to other restrictive covenants. In addition, during times of sudden and significant devaluations of Korean Won against the U.S. dollar as was the case recently amid the global liquidity crisis, Korean commercial banks, including the Bank, had difficulties from time to time in refinancing or obtaining optimal amounts of foreign currencydenominated funding on terms commercially acceptable to the Bank. While the Bank currently is not facing liquidity difficulties in any material respect, if the Bank is unable to obtain the funding that it needs on terms commercially acceptable to it for an extended period of time for reasons of Won devaluation or otherwise, it may not be able to ensure its financial viability, meet regulatory requirements, implement its strategies or compete effectively. Credit ratings affect the cost and other terms upon which the Bank is able to obtain funding. Domestic and international rating agencies regularly evaluate the Bank, and their ratings of the Bank’s long-term debt are based on a number of factors, including its financial strength as well as conditions affecting the financial services industry generally and in Korea. In light of the ongoing difficulties in the financial services industry and the financial markets, there can be no assurance that the rating agencies will maintain the Bank’s current ratings or outlooks. For example, in February 2009, Moody’s Investors Service, Inc. (“Moody’s”) downgraded credit ratings on eight banks in Korea, including the Bank, as a result of which the Bank’s foreign currency-denominated long-term unsecured senior debt credit rating was downgraded from A1 to A2, which is the corresponding credit rating currently assigned to the Government. Other rating agencies may decide to follow suit or place the Bank in a lower credit rating category. Additional downgrades in the credit ratings and outlooks of the Bank will likely increase the cost of its funding, limit its access to capital markets and borrowings, or require it to post additional collateral in financial transactions, any of which could adversely affect its liquidity, net interest margins and profitability, and in turn, its business, financial condition and results of operation. Changes in interest rates, foreign exchange rates, bond and equity prices, and other market factors have affected and will continue to affect the Bank’s business. The most significant market risks that the Bank faces are interest rate, foreign exchange and bond and equity price risks. Changes in interest rate levels, yield curves and spreads may affect the interest rate margin realized between lending and borrowing costs. Changes in currency rates, particularly in the Korean Won-U.S. dollar exchange rates, affect the value of the Bank’s assets and liabilities denominated in foreign

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currencies, the reported earnings of the Bank’s non-Korean subsidiaries and income from foreign exchange dealings. The performance of financial markets may affect bond and equity prices and, therefore, cause changes in the value of the Bank’s investment and trading portfolios. While the Bank has implemented risk management methods to mitigate and control these and other market risks to which it is exposed, it is difficult to predict with accuracy changes in economic or market conditions and to anticipate the effects that such changes could have on the Bank’s business, financial condition and results of operation. The Bank may incur losses associated with its counterparty exposures. The Bank faces the risk that counterparties will be unable to honor contractual obligations. These parties may default on their obligations to the Bank due to bankruptcy, lack of liquidity, operational failure or other reasons. This risk may arise, for example, from entering into swaps or other derivative contracts under which counterparties have obligations to make payments to the Bank or in executing currency or other trades that fail to settle at the required time due to non-delivery by the counterparty or systems failure by clearing agents, exchanges, clearinghouses or other financial intermediaries. Counterparty risk has increased especially in light of the recent credit crisis and global economic downturn. The Bank has significant exposure to small- and medium-sized enterprises, and financial difficulties experienced by such enterprises may result in a deterioration of its asset quality. One of the Bank’s core banking businesses has historically been and continues to be lending to small- and medium-sized enterprises (as defined in “Business — Business Overview — The Bank’s Principal Activities — Corporate Banking Services — Small- and Medium-sized Enterprises Banking”). The Bank’s loans to such enterprises increased from W44,330 billion as of December 31, 2006, to W53,512 billion as of December 31, 2007, W61,813 billion as of December 31, 2008 and W62,144 billion as of March 31, 2009, representing 38.8%, 42.0%, 41.8% and 43.4%, respectively, of its total loan portfolio as of such dates. Compared to loans to large corporations, which tend to be better capitalized and able to weather business downturns with greater ease, or loans to individuals and households, which tend to be secured with homes and with respect to which the borrowers are therefore less willing to default, loans to small- and mediumsized enterprises have historically had a relatively higher delinquency ratio. Prior to the onset of the global financial crisis, loans to such enterprises were the targets of aggressive lending by Korean banks, including the Bank, as part of their campaigns to increase their respective market shares. As of December 31, 2006, 2007 and 2008 and March 31, 2009, the Bank’s delinquent loans to small- and medium-sized enterprises were W318 billion, W453 billion, W820 billion and W1,231 billion, respectively, representing delinquency ratios (net of charge-offs and loan sales) of 0.72%, 0.85%, 1.33% and 1.98%, respectively. If the current business downturn further deepens in terms of length and severity, the delinquency ratio for the Bank’s loans to small- and medium-sized enterprises is likely to rise significantly at least in the near future. Of particular concern is the significant exposure that the Bank has to small- and medium-sized enterprises in the real estate and leasing industry and the construction industry. As of March 31, 2009, the Bank’s loans to the real estate and leasing industry and the construction industry was W12,444 billion and W4,349 billion, representing 8.68% and 3.04%, respectively, of its total loan portfolio as of such dates with a delinquency ratio (net of charge-offs and loan sales) of 1.50% and 3.88%, respectively. In comparison, as of December 31, 2008, the Bank’s loans to the real estate and leasing industry and the construction industry was W13,619 billion and W4,266 billion, representing 9.21% and 2.89%, respectively, of its total loan portfolio as of such dates with a delinquency ratio (net of charge-offs and loan sales) of 1.08% and 2.51%, respectively. The small- and medium-sized enterprises in the real estate development and construction industries are concentrated in the housing market, which has been particularly affected by declining asset prices as a result of the global credit crisis as well as sustained efforts by the Government to stem speculation in the housing market. The Bank also has significant exposure to construction companies that have built residential units in provinces outside the metropolitan Seoul area, which have experienced a relatively low rate of pre-sales, the proceeds from which the construction companies primarily rely on as a source for their liquidity and cash flow. In addition, the Bank also has significant exposure to the shipbuilding industry, which has also been disproportionately hurt by the recent economic downturn following a particularly robust period, largely due to the rapid slowdown in world trade, which has substantially diminished shipbuilding orders.

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The delinquency ratio for small- and medium-sized enterprises in the construction and shipbuilding industries is also likely to increase significantly if a restructuring program for troubled companies in these industries is implemented as currently planned by the government. Specifically, in December 2008, the Government announced that it would promote swift restructuring of troubled companies in certain industries that have been disproportionately affected by the ongoing economic difficulties, such as construction and shipbuilding industries. These restructurings will be supervised primarily by the major commercial banks that are creditor financial institutions of such companies, with the Government having an oversight role. In February 2009, 12 construction companies and four shipbuilding companies became subject to workout following review by their creditor financial institutions and the Government, and the Bank was one of the creditor financial institutions for 11 construction companies and four shipbuilding companies. The Bank has established an allowance for the loans and off-balance sheet credit instruments for such companies amounting to W129 billion and W28 billion, respectively, as of December 31, 2008 and W204 billion and W123 billion, respectively, as of March 31, 2009. However, there is no assurance that the Bank’s allowances for such companies will be sufficient to cover all future losses arising from its exposure to such companies. The Bank is taking active steps to curtail delinquency among its small- and medium-sized enterprise customers, including by way of strengthening loan application review processes and closely monitoring borrowers in troubled sectors. Despite such efforts, there is no assurance that the delinquency ratio for the Bank’s loans to small- and medium-sized enterprises will not rise in the future. The current adverse economic developments, which may deepen in terms of length and severity, are likely to cause deterioration in the liquidity and cash flow of these enterprises and result in higher delinquency and impairment of loans. Furthermore, adverse structural changes or macroeconomic trends in the Korean economy may further hurt the ability of such enterprises to generate revenues or service debt. A significant rise in the delinquency ratios among these borrowers would have a material adverse effect on the Bank’s business, financial condition and results of operation. A decline in the value of the collateral securing the Bank’s loans or the Bank’s inability to fully realize the collateral value may adversely affect the Bank’s credit portfolio. Most of the Bank’s home and mortgage loans are secured by borrowers’ homes, other real estate, other securities and guarantees (which are principally provided by the Government and other financial institutions), and a substantial portion of the Bank’s corporate loans are also secured, including by real estate. The secured portion of the Bank’s loans amounted to W71,955 billion, or 60.1% of its total loans, as of December 31, 2008, and W72,484 billion, or 60.4% of its total loans, as of March 31, 2009. The Bank cannot assure that the collateral value may not materially decline in the future. The Bank’s general policy for home and mortgage loans is to lend up to 50% to 70% of the appraised value of collateral (except in “highly speculated” areas designated by the government where the Bank is required to limit the Bank lending to 40% of the appraised value of collateral) and to periodically re-appraise the collateral value. However, in light of the current downturn in the real estate market in Korea, the value of the collateral may fall below the outstanding principal balance of the underlying loans. Declines in real estate prices reduce the value of the collateral securing the Bank’s mortgage and home equity loans, and such reduction in the value of collateral may result in the Bank’s inability to cover the uncollectible portion of its secured loans. A decline in the value of the real estate or other collateral securing the Bank’s loans, or its inability to obtain additional collateral in the event of such declines, may result in the deterioration of its asset quality and require the Bank to take additional loan loss provisions. In Korea, foreclosure on collateral generally requires a written petition to a Korean court. Foreclosure procedures in Korea typically take from seven months to one year from initiation to collection depending on the nature of the collateral, and foreclosure applications may be subject to delays and administrative requirements, which may result in a decrease in the recovery value of such collateral. There can be no assurance that the Bank will be able to realize the full value of collateral as a result of, among others, delays in foreclosure proceedings, defects in the perfection of collateral and general declines in collateral value. The Bank’s failure to recover the expected value of collateral could expose it to significant losses. Payment guarantees received in connection with the Bank’s real estate financing may not provide sufficient coverage. The Bank, alone or together with other financial institutions, provides financing to real estate development projects, which are concentrated in the construction of residential and, to a lesser extent, commercial

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complexes. Developers in Korea commonly use project financings to acquire land and related project development costs. It is the market practice for general contractors to guarantee the loan raised by a special purpose financing vehicle established by the developers in order to procure the construction orders as the developers tend to be small and highly leveraged. While the general contractors tend to be large and wellestablished construction companies, given the severe downturn in the real estate market and the construction industry in general, there is no guarantee that even such companies will have sufficient liquidity to back up their payment guarantees if the real estate development projects do not generate sufficient cash flow from pre-sales of the residential or commercial units. This is particularly the case for development projects outside the Seoul metropolitan area, where pre-sales have been disproportionately low. If defaults arise under the Bank loans to real estate development projects and payment guarantees are not paid in sufficient amounts to cover the amount of the Bank financings, this may have a material adverse effect on the Bank’s business, financial condition and results of operation. A significant portion of the Bank’s credit exposure is concentrated in a relatively small number of large corporate borrowers, and future financial difficulties experienced by them may have an adverse impact on the Bank. Of the Bank’s 10 largest corporate exposures as of March 31, 2009, four were companies that are or were members of the main debtor groups identified by the Governor of the Financial Supervisory Service, which are largely comprised of chaebols. As of such date, the total amount of the Bank’s exposures to the main debtor groups was W20,805 billion, or 10.52%, of the Bank’s total exposure. As of that date, the Bank’s single largest corporate credit exposure was to the Hyundai Heavy Industry group, to which it had outstanding credit exposure of W4,868 billion, or 2.46% of the Bank’s total exposures. See “Description of Assets and Liabilities — Loan Portfolio — Exposure to Main Debtor Groups”. If the credit quality of the Bank’s exposures to the main debtor groups declines, the Bank may be required to record additional loan loss provisions in respect of loans and impairment losses in respect of securities, which would adversely affect its financial condition, results of operations and capital adequacy. The Bank cannot assure you that the allowances which it has established against these exposures will be sufficient to cover all future losses arising from such exposures, especially in light of the current economic downturn. Specifically, starting in April 2009, the major creditor financial institutions to large corporations with outstanding unsecured debt of W50 billion conducted credit review on 433 such corporations under the supervision of the Government as part of a campaign to promote swift restructuring in the Korean corporate sector, and on June 11, 2009, the Financial Supervisory Service reportedly announced that, after the credit review, 22 and 11 of such corporations will become subject to workouts and liquidation, respectively. In addition, the creditor financial institutions also entered into agreements with nine main debtor groups, largely comprised of chaebols, under which such groups will undertake plans to improve their financial conditions, including through sale of subsidiaries. Detailed information regarding the exposure to the foregoing corporations and main debtor groups is not publicly available. The Bank is one of the creditor financial institutions and has exposure to a limited number of such corporations and main debtor groups. With respect to those companies that are in or in the future may enter into workout, restructuring or liquidation processes, the Bank may not be able to make full recoveries against such companies. Bankruptcies or financial difficulties of large corporations, including chaebol groups, may have the adverse ripple effect of triggering delinquencies and impairment of the Bank’s loans to small- and medium-sized enterprises that supply parts or labor to such corporations. If the Bank experiences future losses from its exposures to large corporations, including chaebol groups, it may have a material adverse impact on the Bank’s business, financial condition and results of operation. See “Description of Assets and Liabilities — Loan Portfolio — Exposure to Main Debtor Groups”. Any deterioration in the asset quality of the Bank’s guarantees and acceptances will likely have a material adverse effect on its financial condition and results of operations. In the normal course of the Bank’s banking activities, it makes various commitments and incurs certain contingent liabilities in the form of guarantees and acceptances. Certain guarantees issued or modified after December 31, 2002, that are not derivative contracts have been recorded on the Bank’s non-consolidated balance sheet at their fair value at inception. Other guarantees are recorded as off-balance sheet items in the footnotes to the Bank’s financial statements, and those guarantees on which it has confirmed to make payments become acceptances, which are recorded on the balance sheet. As of December 31, 2008 and March 31, 2009, the Bank had aggregate guarantees and acceptances of W16,244 billion and W16,664 billion, respectively, for which it provided allowances for losses of W114 billion and W212 billion, respectively.

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Such guarantees and acceptances include refund guarantees provided by the Bank to shipbuilding companies, which involve guaranteeing payment of the initial cash payment (typically 25% of the contract amount for ship orders) received by shipbuilders in the event that such shipbuilders are unable to deliver the ships in time or otherwise default under the shipbuilding contracts. Recently, small- and medium-sized shipbuilding companies have faced increasing financial difficulties due to the global economic downturn and the slowdown in shipbuilding orders, which increases the risk that they may default on their shipbuilding contracts and the Bank may have to make payments under the refund guarantees. The refund guarantees provided to small- and medium-sized shipbuilding companies by the Bank amounted to approximately W1 trillion and W1.6 trillion as of December 31, 2008 and March 31, 2009, respectively. If the Bank experiences significant asset quality deterioration with respect to its guarantees and acceptances, there is no assurance that its allowances will be sufficient to cover actual losses resulting in respect of these liabilities, or that the losses that it incurs on guarantees and acceptances will not be larger than the outstanding principal amount of the relevant loans. The Bank may incur significant losses from its investments and, to a lesser extent, trading activities due to market fluctuations. The Bank enters into and maintains large investment positions in the fixed income markets, primarily through its treasury and investment business, as described in “Business — Business Overview — The Bank’s Principal Activities — Treasury and Securities Investment”. The Bank also maintains smaller trading positions, including securities and derivative financial instruments, as part of its banking operations. Taking these positions entails making assessments about financial market conditions and trends. The revenues and profits that the Bank derives from many of these positions and related transactions are dependent on market prices, which are beyond the Bank’s control. When the Bank owns assets such as debt securities, a decline in market prices, as a result of fluctuating market interest rates, can expose it to losses. If market prices move in a way that the Bank has not anticipated, it may experience losses. Also, when markets are volatile and subject to rapid changes in the price directions, the actual market prices may be contrary to the Bank’s assessments and lead to lower than anticipated revenues or profits, or even result in losses, with respect to the related transactions and positions. The Bank may incur losses from commission- and fee-based business. The Bank provides trust account management services for its customers. Downturns in stock markets are likely to lead to a decline in the volume of transactions that the Bank executes for its customers and, therefore, to a decline in its non-interest revenues. In addition, because the fees that the Bank charges for managing its clients’ portfolios are in many cases based on the size of the assets under management, a market downturn which has the effect of reducing the value of its clients’ portfolios or increasing the amount of withdrawals would reduce the revenues that the Bank receives from its trust account management. Even in the absence of a market downturn, below-market performance by the Bank’s trust account services may result in increased withdrawals and reduced inflows, which would reduce the revenue that it receives from these businesses. In addition, protracted market movements resulting in declines of asset prices can reduce liquidity for assets held by the Bank and lead to material losses if it cannot close out or otherwise dispose of deteriorating positions in a timely way or at commercially reasonable prices. Damage to the Bank’s reputation could harm the Bank’s business. The Bank is one of the largest and most influential commercial banks in Korea by virtue of its financial track records, market share and the size of its operations and customer base. The Bank’s reputation is critical in maintaining its relationships with clients, investors, regulators and the general public. The Bank’s reputation can be damaged in numerous ways, including, among others, employee misconduct (including embezzlement), litigation, compliance failures, failure to properly address potential conflicts of interest, the activities of customers and counterparties over which the Bank has limited or no control, prolonged or exacting scrutiny from regulatory authorities and customers regarding its trade practices, or uncertainty about its financial soundness and reliability. If the Bank is unable to prevent or properly address these concerns, it could lose its existing or prospective customers and investors, which could adversely affect its business, financial condition and results of operation.

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The Bank’s risk management policies and procedures may not be fully effective at all times. In the course of the Bank’s operations, it must manage a number of risks, such as credit risks, market risks and operational risks. Although the Bank devotes significant resources to developing and improving its risk management policies and procedures and expects to continue to do so in the future, its risk management techniques may not be fully effective at all times in mitigating risk exposures in all market environments or against all types of risk, including risks that are unidentified or unanticipated. For example, in January 2009, the Bank reported to the Financial Supervisory Service that an employee at a regional branch of the Bank had embezzled approximately W22 billion of the Bank’s funds. The Bank expects to recover approximately W5.7 billion of the embezzled funds. To date, the Bank is waiting for the Financial Supervisory Service to issue a request for remedial measures. Management of credit, market and operational risk requires, among others, policies and procedures to record properly and verify a large number of transactions and events, and the Bank cannot assure you that these policies and procedures will prove to be fully effective at all times against all the risks that the Bank faces. Legal claims and regulatory risks arise in the conduct of the Bank’s business. In the ordinary course of the Bank’s business, it is subject to regulatory oversight and liability risk. The Bank is also involved in a variety of other claims, disputes, legal proceedings and government investigations in jurisdictions where it is active, including Korea. These types of proceedings expose the Bank to substantial monetary damages and legal defense costs, injunctive relief, criminal and civil penalties and the potential for regulatory restrictions on its businesses. The outcome of these matters cannot be predicted and they could adversely affect the Bank’s future business. Recently, the Bank has become party to individual and collective lawsuits in connection with the sale of foreign currency derivatives products known as “KIKO”, which stands for “knock-in knock-out”, to certain of its customers comprised mostly of small- and medium-sized enterprises. The KIKOs, which are intended to be hedging instruments, operate so that if the value of Korean Won increases to a certain level, then the Bank is required to pay the purchasers a certain amount, and if the value of Korean Won falls below a certain level, then the purchasers of KIKOs are required to pay the Bank a certain amount. As the Korean Won significantly depreciated against the U.S. dollar in the second half of 2008, purchasers of KIKOs were required under the relevant contracts to make large payments to the Bank, and some of such purchasers have filed lawsuits to nullify their obligations. The aggregate amount of such claims as of March 31, 2009 was W11.8 billion, and this amount may become larger as the lawsuits progress. The amount of damages for which the Bank may be liable if it loses these lawsuits may increase if the Korean Won further depreciates against the U.S. dollar. While the Bank has won a limited number of preliminary injunction cases at the lower court level, other cases are pending and additional cases may be filed against the Bank. Other commercial banks facing similar claims have lost some of their cases. If the Bank loses, the court may nullify the contracts under which KIKO products were sold and order the Bank to return payments received from the customers. While the final outcome of such litigation is uncertain and the Bank plans to rigorously defend its position, the lawsuits, especially if the courts rule against the Bank, may have a material adverse effect on its business, financial condition and results of operation. In addition, due to the global economic slowdown and a deteriorating Korean stock market since the second half of 2008, investment funds whose performance is tied to domestic and foreign stock markets have experienced a sharp fall in their rates of return. Consequently, investors in these funds have increasingly brought lawsuits against commercial banks in Korea that have sold such investment fund products based on the allegation that such banks used defective sales practices in selling such funds, such as failing to comply with disclosure requirements or unfairly inducing them to invest in the funds. There have been cases in which the courts required the banks to compensate their customers for inadequate disclosure and unfair inducement. The Bank cannot assure you that, despite due training, all of its employees in charge of such sales have not breached disclosure requirements, engaged in unfair inducement or committed similar acts. As of March 31, 2009, there were 12 cases filed against the Bank, which claims amounted to W6.3 billion in the aggregate. The amount claimed may increase in the course of litigation and there may be other lawsuits that may be brought against the Bank based on similar allegations. While it is difficult to predict the outcome of each lawsuit against the Bank, as it will ultimately depend on the specific facts and circumstances underlying such lawsuit, if the courts rule against the Bank, the lawsuits may have a material adverse effect on its business, financial condition and results of operation.

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Labor unrest may adversely affect the Bank’s operations. Following the merger of Chohung Bank and former Shinhan Bank on April 3, 2006, the labor union of the Chohung Bank and the labor union of former Shinhan Bank were integrated in January 2008. As of March 31, 2009, 8,074 employees were members of the integrated union, and, to date, the Bank has not experienced any significant difficulties in its relationships with the integrated union in connection with the merger. Any significant labor unrest in the Korean financial industry or other sectors of the Korean economy could adversely affect the Bank’s operations, as well as the operations of many of the Bank’s customers and their ability to repay their loans, and could affect the financial conditions of Korean companies in general, and depress the prices of securities on the Korea Exchange, the value of unlisted securities and the value of the Won relative to other currencies. Such developments would likely have an adverse effect on the Bank’s business, financial condition, results of operations and capital adequacy. The Act Concerning Protection of Fixed Term or Part Time Employees may have an adverse effect on the Bank’s operations. The Act Concerning Protection of Fixed Term or Part Time Employees (the “Non-regular Employee Act”) became effective on July 1, 2007. Under the Non-regular Employee Act, fixed-term employees hired under fixed-term employment contracts must not be discriminated against by employers, compared to regular employees performing the same or similar duties as those of the fixed-term employees in wages and other labor conditions, without justifiable grounds. The Non-regular Employee Act also provides that, if a fixedterm employee remains employed under a fixed-term employment contract for a period exceeding two years, the fixed-term employee will be deemed to be a regular employee and the employer will not be able to terminate the employment of such fixed-term employee without justifiable grounds, even after the expiration of the fixed-term employment contract, provided that this provision shall apply only to fixedterm employees to be hired under fixed-term employment contracts to be newly entered into or renewed or extended after the effective date of the Non-regular Employee Act. As of March 31, 2009, the Bank had 15,996 employees, of which 4,964 were fixed-term employees. To the extent that the Bank must treat any of the temporary employees as permanent employees with respect to wages and other benefits, the Bank’s results of operations could be negatively affected. The Bank may incur significant costs in preparing for and complying with the new IFRS accounting standards, and may not be able to fully comply with such standards within the prescribed timeline. In March 2007, the Government announced that all companies listed on the Korea Exchange will be required to comply with International Financial Reporting Standards (“IFRS”) by 2011. IFRS is the financial reporting standard adopted in more than 110 countries and has requirements that are substantially different from those under Korean GAAP or U.S. GAAP. A task force team has been established by the Bank to assist preparation for IFRS compliance by Shinhan Financial Group. Such preparation, as well as actual compliance with IFRS, may result in significant costs for the Bank and may have a material adverse effect on its results of operations. In addition, the Bank may not be able to comply with the IFRS requirements within the prescribed timeline, and such non-compliance may result in regulatory sanctions as well as harm to its reputation. The Bank may experience disruptions, delays and other difficulties relating to its information technology systems. The Bank relies on its information technology systems for its daily operations including billing, effecting online and offline financial transactions and record keeping. The Bank also upgrades from time to time its group-wide customer data sharing and other customer relations management systems. The Bank may experience disruptions, delays or other difficulties relating to its information technology systems, and may not integrate or upgrade its systems as currently planned. Any of these developments may have an adverse effect on its business and adversely impact its customers’ confidence in it.

19

Risks Relating to Law, Regulation and Government Policy The Bank is a heavily regulated entity and operates in a legal and regulatory environment that is subject to change, and violations could result in penalties and other regulatory actions. As a financial services provider, the Bank is subject to a number of regulations designed to maintain the safety and soundness of Korea’s financial system, ensure the Bank’s compliance with economic and other obligations and limit its risk exposure. These regulations may limit the Bank’s activities, and changes in these regulations may increase its costs of doing business. Regulatory agencies frequently review regulations relating to the Bank’s business. The Bank expects the regulatory environment in which it operates to continue to change. Changes to regulations applicable to the Bank and the Bank’s business or changes in their implementation or interpretation could affect it in unpredictable ways and could adversely affect its business, results of operations and financial conditions. In addition, a breach of regulations could expose the Bank to potential liabilities and sanctions. For example, if the Financial Services Commission deems the Bank’s financial condition to be unsound, or if the Bank fails to meet the applicable requisite capital ratio or the capital adequacy ratio set forth under Korean law, the Financial Services Commission may order, among others, capital increases or reductions, stock cancellations or consolidations, transfers of business, sales of assets, closures of branch offices, mergers with other financial institutions, or suspensions of a part or all of the Bank’s business operations. If any of such measures is imposed on the Bank by the Financial Services Commission as a result of unsound financial condition or failure to comply with minimum capital adequacy requirements or for other reasons, such measures may have a material adverse effect on its business, financial condition and results of operation. For further details on the principal laws and regulations applicable to the Bank, see “Supervision and Regulation”. Increased government intervention in the economy and tighter regulation of the financial services industry in Korea as a result of the ongoing global economic downturn could increase the Bank’s costs and result in lower profits. In response to the ongoing turbulence in the financial markets and the impact on the overall economy, many governments worldwide, including the Government, have intervened on a massive scale, including by way of fiscal stimulus, lowered interest rates and direct investment in troubled financial institutions and corporations. The anticipated severity of the current economic crisis may lead the Government to take other interventionist measures, as a result of which the Bank may be requested to participate in providing assistance to support distressed companies that are not its subsidiaries. In addition, the Bank may voluntarily enter into arrangements with the government under which it accepts greater government intervention in its affairs in exchange for government assistance. For example, in November 2008, the Bank entered into a memorandum of understanding with the Government, under which the Bank may become subject to increased government monitoring of its operations and may be required to make certain adjustments to its operations if it receives government guarantees for a certain amount of its foreign currency-denominated borrowings. In April 2009, the term during which the Bank is entitled to government guarantees for its foreign currency-denominated debt was extended until December 2009. While the Bank does not currently anticipate that it will need such government guarantees, increased government involvement in its operations could adversely affect its business, financial condition and results of operation. In addition, in February 2009, in order to provide additional liquidity and capital support for commercial banks in Korea, the Government announced a plan to establish a bank capital improvement fund in the amount of W20 trillion. The fund will be funded with loans from government-owned banks as well as from outside investors. The commercial banks may draw down from the fund up to a limit specified for each bank, in exchange for subordinated debt, preferred shares and/or hybrid securities to be issued to the fund, which may have the effect of improving the drawing bank’s liquidity and capital adequacy. The Bank’s drawdown limit is expected to be W2 trillion, and on February 26, 2009, the Bank’s board of directors decided to apply for the credit line with the fund. If the Bank draws down from the fund, it may become subject to increased government monitoring and certain conditions on the use of proceeds from the

20

drawdown, including increased lending to small- and medium-sized enterprises, which generally are facing increasing difficulties due to the economic downturn. This may have a material adverse effect on the Bank’s business, results of operation and financial condition. The Government may encourage targeted lending to and investment in certain sectors in furtherance of policy initiatives, and the Bank may take this factor into account. The Government has encouraged and may in the future encourage lending to or investment in the securities of certain types of borrowers and other financial institutions in furtherance of government initiatives. The Government, through its regulatory bodies such as the Financial Services Commission, has in the past announced lending policies to encourage Korean banks and financial institutions to lend to or invest in particular industries or customer segments, and, in certain cases, has provided lower cost funding through loans made by the Bank of Korea for further lending to specific customer segments. Recently, the Government’s emphasis has been to provide assistance to the small- and medium-sized enterprises, which have been disproportionately affected by the recent developments in the Korean and global economy. While all of the Bank’s loans or securities investments are reviewed in accordance with its credit review policies or internal investment guidelines and regulations, the Bank, on a voluntary basis, may factor the existence of such policies and encouragements into consideration in making loans or securities investments. In addition, while the ultimate decision whether to make loans or securities investments remains with the Bank and is made based on its credit approval procedures and its risk management system independently of government policies, the Government may in the future request financial institutions in Korea, including the Bank, to make investments in or provide other forms of financial support to particular sectors of the Korean economy as a matter of policy, which financial institutions, including the Bank, may decide to accept. For example, the Government has recently undertaken various initiatives to support small- and medium-sized enterprises through the ongoing economic downturn. As part of such initiatives, the Bank, like other commercial banks in Korea, has entered into a memorandum of understanding in April 2009 with the Government under which the Bank will make efforts, among others, to provide greater liquidity into the general economy by extending a greater volume of loans to small- and medium-sized enterprises. The Bank may incur costs or losses as a result of providing such financial support. The level and scope of government oversight of the Bank’s lending business, particularly regarding home equity and mortgage loans, may change depending on the economic or political climate. Curtailing excessive speculation in the real estate market has historically been a key policy initiative for the Government, and it has in the past adopted several regulatory measures, including in relation to retail banking, to effect such policy. Some of the measures undertaken in the past include requiring financial institutions to impose stricter debt-to-income ratio and loan-to-value ratio requirements for mortgage loans for real property located in areas deemed to have engaged in high speculation, raising property taxes on real estate transactions for owners of multiple residential units, adopting a ceiling on the sale price of newly constructed housing units and recommending that commercial banks refrain from making further mortgage and home equity lending, among others. In light of the deepening slump in the housing market, the Government has recently announced or started implementing various policies to support the economy, such as deregulating the real estate sector and lowering tax rates. However, if the housing market shows signs of recovery, the Government may from time to time take measures to regulate such market in order to preempt undue speculation, including by way of imposing restrictions on retail lending, including mortgage and home equity lending. Any such measures may be premature, result in unintended consequences or contribute to substantial future declines in real estate prices in Korea, which will reduce the value of the collateral securing the Bank’s mortgage and home equity loans. See “— Risks Relating to the Bank’s Business — A decline in the value of the collateral securing the Bank’s loans and the Bank’s inability to fully realize the collateral value may adversely affect the Bank’s credit portfolio”. Such measures may also have the effect of limiting the growth and profitability of the Bank’s retail banking business, especially in the area of mortgage and home equity lending.

21

The Bank is generally subject to Korean accounting and disclosure standards, which differ from those applicable to banks in other countries. Banks in Korea, including the Bank, are subject to Korean accounting standards and disclosure requirements, which differ in significant respects from those applicable to banks in certain other countries, including the United States. In addition, the Bank’s financial statements are prepared in accordance with Korean GAAP, which differ in certain respects from U.S. GAAP and generally accepted accounting principles of other countries as applied to banks. The audited financial statements of the Bank set forth in this offering circular were audited in accordance with auditing standards generally accepted in Korea, which may differ from procedures and practices generally utilized in the United States and other jurisdictions, which procedures and practices could produce different results. See “Summary of Certain Differences between Korean GAAP and U.S. GAAP”. You may not be able to enforce a judgment of a foreign court against the Bank. The Bank is a corporation with limited liability organized under the laws of Korea. Substantially all of the Bank’s directors and officers and other persons named in this offering circular reside in Korea, and all or a significant portion of the assets of the Bank directors and officers and other persons named in this offering circular and substantially all of its assets are located in Korea. As a result, it may not be possible for investors to effect service of process within the United States, or to enforce against them or the Bank in the United States judgments obtained in United States courts based on the civil liability provisions of the federal securities laws of the United States. There is doubt as to the enforceability in Korea, either in original actions or in actions for enforcement of judgments of United States courts, of civil liabilities predicated on the United States federal securities laws. Risks Relating to Korea Unfavorable financial and economic conditions in Korea and globally may have a material adverse impact on the Bank’s asset quality, liquidity and financial performance. The Bank is incorporated in Korea, where most of its assets are located and most of its income is generated. As a result, the Bank is subject to political, economic, legal and regulatory risks specific to Korea, and its business, results of operation and financial condition are substantially dependent on developments relating to the Korean economy. As Korea’s economy is highly dependent on the health and direction of the global economy, and investors’ reactions to developments in one country can have adverse effects on the securities prices of companies in other countries, the Bank is also subject to global economic conditions. Factors that determine economic and business cycles of the Korean or global economy are for the most part beyond the Bank’s control and inherently uncertain. In addition to discussions of recent developments regarding the global economic and market uncertainties and the risks relating to the Bank as provided elsewhere in this section, factors that could hurt Korea’s economy in the future include, among others: Š Š the length and severity of the current global and economic downturn; volatility in foreign currency reserve levels, commodity prices (including oil prices), exchange rates (particularly against the U.S. dollar), interest rates and stock markets; increased reliance on exports to service foreign currency debts, which could cause friction with Korea’s trading partners; adverse developments in the economies of countries to which Korea exports goods and services (such as the United States, China and Japan), or in emerging market economies in Asia or elsewhere that could result in a loss of confidence in the Korean economy; the continued emergence of China, to the extent that its benefits (such as increased exports to China) are outweighed by its costs (such as competition in export markets or for foreign investment and relocation of the manufacturing base from Korea to China);

Š

Š

Š

22

Š Š Š

social and labor unrest or declining consumer confidence or spending resulting from layoffs, increasing unemployment and lower levels of income; uncertainty and volatility in real estate prices arising, in part, from the Government’s policy-driven tax and other regulatory measures; a decrease in tax revenues and a substantial increase in the Government’s expenditures for unemployment compensation and other social programs that together could lead to an increased government budget deficit; political uncertainty or increasing strife among or within political parties in Korea, including as a result of the increasing polarization of the positions of the ruling conservative party and the progressive opposition; and a deterioration in economic or diplomatic relations between Korea and its trading partners or allies, including such deterioration resulting from trade disputes or disagreements in foreign policy.

Š

Š

Any future deterioration of the Korean economy could have an adverse effect on the Bank’s business, financial condition and results of operation. Tensions with North Korea could have an adverse effect on the Bank. Relations between Korea and North Korea have been tense throughout Korea’s modern history. The level of tension between the two Koreas has fluctuated and may increase abruptly as a result of current and future events. In recent years, there have been heightened security concerns stemming from North Korea’s nuclear weapons and long-range missile programs and uncertainty regarding North Korea’s actions and possible responses from the international community. In April 2009, after launching a long-range rocket over the Pacific Ocean, which led to protests from the international community, North Korea announced that it would permanently withdraw from the six-party talks that began in 2003 to discuss Pyongyang’s path to denuclearization. On May 25, 2009, North Korea conducted its second nuclear testing by launching several short-range missiles. In response to such actions, the Republic decided to join the Proliferation Security Initiative, an international campaign aimed at stopping the trafficking of weapons of mass destruction, over Pyongyang’s harsh rebuke and threat of war. After the United Nations Security Council passed on June 12, 2009, a resolution to condemn North Korea’s second nuclear test and impose tougher sanctions such as a mandatory ban on arms exports, North Korea announced that it would produce nuclear weapons and take “resolute military actions” against the international community. There recently has been increased uncertainty about the future of North Korea’s political leadership and its implications for the economic and political stability of the region. In June 2009, American and South Korean officials announced that Kim Jong-il, the North Korean ruler who reportedly suffered a stroke in August 2008, designated his third son, who is reportedly in his twenties, to become his successor. The succession plan, however, remains uncertain. In addition, North Korea’s economy faces severe challenges. There can be no assurance that the level of tension and instability in the Korean peninsula will not escalate in the future, or that the political regime in North Korea may not suddenly collapse. The Bank currently is not engaged in any business activities in North Korea. However, any further increase in tension or uncertainty relating to the military or economic stability in the Korean peninsula, including a breakdown of diplomatic negotiations over the North Korean nuclear program, the occurrence of military hostilities or heightened concerns about the stability of North Korea’s political leadership, could have a material adverse effect on the Bank’s business, financial condition and results of operation. Risks Relating to the Notes The Notes are unsecured obligations. Because the Notes are unsecured obligations, their repayment may be compromised if: Š the Bank enters into bankruptcy, liquidation, rehabilitation or other winding-up proceedings;

23

Š

there is a default in payment under the Bank’s future secured indebtedness or other unsecured indebtedness; or there is an acceleration of any of the Bank’s indebtedness.

Š

If any of these events occurs, the Bank’s assets may not be sufficient to pay amounts due on any of the Notes. The Notes are not protected by restrictive covenants. The Notes and the Fiscal Agency Agreement do not contain various restrictive financial, operating or other covenants or restrictions, including those on change of control, the payment of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by the Bank, except as provided in the Fiscal Agency Agreement. See “Description of the Notes”. The Notes are subject to transfer restrictions. The Notes will not be registered under the Securities Act or any state securities laws and may not be offered or sold within the United States, except to QIBs in reliance on the exemption provided by Rule 144A, to certain persons in offshore transactions in reliance on Regulation S, or pursuant to another exemption from, or in another transaction not subject to, the registration requirements of the Securities Act and in accordance with applicable state securities laws. In addition, subject to the conditions set forth herein and the Fiscal Agency Agreement, Notes may be transferred only if the principal amount of Notes transferred is at least US$100,000. For a further discussion of the transfer restrictions applicable to the Notes, see “Notice to Investors”. The Notes may have limited liquidity. The Notes constitute a new issue of securities for which there is no existing market. Application has been made to list the Notes on the Singapore Stock Exchange. The offer and sale of the Notes is not conditioned on obtaining a listing of the Notes on the Singapore Stock Exchange or any other exchange. Although the Initial Purchasers have advised the Bank that they currently intend to make a market in the Notes, they are not obligated to do so, and any market-making activity with respect to the Notes, if commenced, may be discontinued at any time without notice in their sole discretion. For a further discussion of the Initial Purchasers’ planned market-making activities, see “Plan of Distribution”. No assurance can be given as to the liquidity of, or the development and continuation of an active trading market for, the Notes. If an active trading market for the Notes does not develop or is not maintained, the market price and liquidity of the Notes may be adversely affected. If such a market were to develop, the Notes could trade at prices that may be higher or lower than the price at which the Notes are issued depending on many factors, including: Š Š Š Š Š prevailing interest rates; the Bank’s results of operations and financial condition; political and economic developments in and affecting Korea; the market conditions for similar securities; and the financial condition and stability of the Korean financial sector.

24

USE OF PROCEEDS The aggregate net proceeds from the offering of the Notes are expected to be approximately US$496 million, after deducting underwriting commissions and certain out-of-pocket expenses relating to the offering. The net proceeds from the offering will be used for repayment of existing debt and other general corporate purposes.

25

EXCHANGE RATES The following table sets forth, for the periods and dates indicated, certain information concerning the Market Average Exchange Rate in Won per US$1.00. The Market Average Exchange Rate has been highly volatile recently and the U.S. dollar amounts referred to in this offering circular should not be relied upon as an accurate reflection of our results of operations. We expect this volatility to continue in the near future. At End of Period Average(1) High (Won per US$1.00) W1,043.8 1,013.0 929.6 938.2 1,257.5 1,263.2 1,368.5 1,496.6 1,377.1 1,348.0 1,272.9 1,263.2 W1,145.3 1,024.2 956.1 929.2 1,102.6 1,355.2 1,346.1 1,414.9 1,462.0 1,341.9 1,258.7 1,355.2 W1,195.5 1,060.3 1,013.0 950.0 1,509.0 1,573.6 1,391.0 1,500.5 1,573.6 1,398.2 1,307.3 1,573.6

Year Ended December 31,

Low

2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2009 (through June 19) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . February . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . April . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June (through June 19) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W1,038.3 998.2 918.0 902.2 934.5 1,236.1 1,257.5 1,376.2 1,328.9 1,316.2 1,236.1 1,236.1

Source: Seoul Money Brokerage Services, Ltd. Note: (1) Represents the average of the Market Average Exchange Rate on the last trading day of each month during the relevant period.

26

CAPITALIZATION AND INDEBTEDNESS The following table shows the Bank’s non-consolidated indebtedness and capitalization as of March 31, 2009, (i) as derived from the Bank’s unaudited non-consolidated financial statements as of and for the three months ended March 31, 2009 and (ii) as adjusted to give effect to the issuance of the Notes but before the application of the proceeds therefrom. As of March 31, 2009 Actual As Adjusted(1) (in millions (in millions (in billions of U.S. (in billions of U.S. of Won) dollars) of Won) dollars) Liabilities (including current portion): Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Borrowings(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retirement and severance benefits . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . Stockholder’s equity: Capital stock, par value W5,000 Authorized: 2,000,000,000 shares issued and outstanding: 1,585,615,506 fully paid common shares . . . . . . . . . . . . . . . . . . Capital Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive income . . . . Total stockholder’s equity . . . . . . . . . . . . . . . . . . . Total capitalization(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W126,849 US$ 92,113 17,476 12,690 28,139 20,433 126 92 31,692 23,014 W204,282 US$148,342

W126,849 US$ 92,113 17,476 12,690 28,822 20,929 126 92 31,692 23,014 W204,965 US$148,838

W

7,928 US$ 398 3,318 323 11,967

5,757 289 2,410 234 8,690

W

7,928 US$ 398 3,318 323 11,967

5,757 289 2,410 234 8,690

W216,249

US$157,032

W216,932

US$157,528

Notes: (1) (2) The U.S. dollar amount of the Notes offered hereby has been translated into Won at W1,377.1 to U.S.$1.00, the Market Exchange Rate as announced by Seoul Money Brokerage Services, Ltd. on March 31, 2009. As of March 31, 2009, certain of the Bank’s borrowings are secured by securities amounting to W6,685 billion (U.S.$ 4,854 million). Other than as aforesaid no collateral given as security was outstanding in respect of any of these borrowings as of March 31, 2009. Represents the sum of total liabilities and stockholder’s equity.

(3)

Except as set forth herein, there has been no material change in contingent liabilities (including guarantees), liabilities, stockholder’s equity and the Bank’s non-consolidated capitalization since March 31, 2009.

27

SELECTED FINANCIAL INFORMATION The following tables set forth selected non-consolidated income statement and balance sheet data with respect to the Bank as of and for the years ended December 31, 2006, 2007 and 2008, which have been derived from the Bank’s audited non-consolidated financial statements as of such dates and for such periods, and as of March 31, 2009 and for the three months ended March 31, 2008 and 2009, which have been derived from the Bank’s unaudited non-consolidated interim financial statements as of such date and for such periods. The non-consolidated financial statements exclude the accounts of all of the Bank’s subsidiaries (except that the value of the Bank’s equity investments in their respective consolidated subsidiaries is included) and their respective trust account management business. The non-consolidated financial statements have been prepared in accordance with Korean GAAP and, where applicable, the Korean Bank Accounting Guidelines, which differ in certain material respects from U.S. GAAP, and have not been intended to present the financial position, results of operations, cash flows and changes in equity in accordance with generally accepted accounting policies and practices in countries and jurisdictions other than Korea. For a discussion of certain differences between Korean GAAP and U.S. GAAP, see “Summary of Certain Differences between Korean GAAP and U.S. GAAP” in this offering circular. Certain financial information contained in “Business” and “Description of Assets and Liabilities of the Bank” was not derived directly from the Bank’s unaudited non-consolidated interim financial statements as of March 31, 2009 and for the three months ended March 31, 2008 and 2009 or from the Bank’s audited non-consolidated financial statements as of and for the years ended December 31, 2006, 2007 and 2008 but was derived from certain accounting records that are subject to the internal control over financial reporting of the Bank. On August 19, 2003, Shinhan Financial Group acquired 80.04% of Chohung Bank’s common shares. Subsequently, Shinhan Financial Group acquired additional common shares of Chohung Bank, and as of June 2004, acquired all remaining common shares of Chohung Bank. As of April 3, 2006, Shinhan Financial Group merged former Shinhan Bank into Chohung Bank, with the latter being the surviving legal entity, and split-merged the credit card business of Chohung Bank into Shinhan Card, a subsidiary of Shinhan Financial Group. On the same date, the surviving entity from the merger of former Shinhan Bank and Chohung Bank changed its name to Shinhan Bank. Accordingly, unless otherwise stated, the financial and statistical information of the Bank for the year ended December 31, 2006 contained in this offering circular does not include information for former Shinhan Bank prior to the merger on April 3, 2006.

28

Non-Consolidated Financial Information The non-consolidated financial information set forth below presents only the bank account of the Bank and excludes the trust accounts of the Bank. The non-consolidated financial information of the Bank represented 97.4% of the consolidated total assets and 97.3% of the total consolidated liabilities of the Bank as of December 31, 2008 and 98.8% of the consolidated operating income of the Bank for the year ended December 31, 2008.
For the year ended December 31, 2006 2007 (audited) (audited) (in billions of Won) Non-Consolidated Income Statement Information Interest and dividend income . . . . . Interest expense . . . . . . . . . . . . . . . . Net interest income . . . . . . . . . . . . . Provision for loan losses . . . . . . . . . Net interest income after provision for loan losses . . . . . . . Non-interest income . . . . . . . . . . . . . Non-interest expense . . . . . . . . . . . . Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . Income tax expense . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . For the three months ended March 31,

2008 2008 2009 (audited) (unaudited) (unaudited) (in millions of (in millions of U.S. dollars) (in billions of Won) U.S. dollars)

W6,811 3,765 3,046 426 2,620 7,065 7,729 1,956 525 W1,431

W9,491 W11,672 5,749 7,328 3,742 4,344 459 929 3,283 8,464 8,892 2,855 804 3,415 38,071 39,583 1,903 456

US$ 8,476 5,321 3,155 675 2,480 27,646 28,744 1,382 331 US$ 1,051

W2,740 W 2,641 1,695 1,733 1,045 908 109 332 936 6,049 6,460 525 144 W 381 W 576 17,236 17,708 104 30 74

US$ 1,918 1,258 659 241 418 12,516 12,859 76 22 US$ 54

W2,051 W 1,447

As of December 31, 2006 2007 (audited) (audited) (in billions of Won)

As of March 31,

2008 2009 (audited) (unaudited) (in millions of (in billions (in millions of U.S. dollars) of Won) U.S. dollars)

Non-Consolidated Balance Sheet Information Assets Cash and due from banks . . . . . . . . . . . . . . . . . W 9,013 W 6,313 W 8,579 US$ 6,230 W 13,900 US$ 10,094 Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,660 32,329 36,592 26,572 40,547 29,444 Loans, net of allowance for loan losses . . . . . 112,715 125,405 145,342 105,542 140,634 102,123 Property and equipment, net of accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,199 2,313 2,292 1,664 2,265 1,645 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,610 8,746 20,764 15,078 18,903 13,726 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W154,197 W175,106 W213,569 US$ 155,086 W216,249 US$ 157,032 Liabilities and Stockholder’s Equity Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W 93,006 W103,818 W119,238 US$ 86,586 W126,849 US$ 92,113 Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,579 17,226 20,410 14,822 17,476 12,690 Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,213 28,171 32,418 23,541 28,139 20,433 Retirement and severance benefits . . . . . . . . . 108 102 133 96 126 92 Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 12,624 14,470 29,422 21,365 31,692 23,014 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . Total stockholder’s equity . . . . . . . . . . . . . . . . 144,530 9,667 163,787 11,319 201,621 11,948 146,410 8,676 204,282 11,967 148,342 8,690

Total liabilities and stockholder’s equity . . . W154,197 W175,106 W213,569 US$ 155,086 W216,249 US$ 157,032

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UNAUDITED NON-CONSOLIDATED PRO FORMA INCOME STATEMENT On August 19, 2003, Shinhan Financial Group acquired 80.04% of Chohung Bank’s common shares. Subsequently, Shinhan Financial Group acquired additional common shares of Chohung Bank, and in June 2004 acquired all remaining common shares of Chohung Bank. Effective April 3, 2006, former Shinhan Bank merged into Chohung Bank, with the latter being the surviving legal entity, and split-merged the credit card business of Chohung Bank into Shinhan Card, a subsidiary of Shinhan Financial Group. On the same date, the surviving entity from the merger of former Shinhan Bank and Chohung Bank changed its name to Shinhan Bank. Accordingly, unless otherwise stated, the financial and statistical information of the Bank for the year ended December 31, 2006 contained in this offering circular does not include information for former Shinhan Bank prior to the merger on April 3, 2006. The following unaudited and unreviewed non-consolidated pro forma statement of income for the year ended December 31, 2006 has been derived from the audited non-consolidated statement of income of the Bank for such year and the unaudited non-consolidated statement of income of former Shinhan Bank for the three months ended March 31, 2006. The basis of preparation of and the assumptions applied in calculating the adjustments to the unaudited and unreviewed non-consolidated pro forma financial information are described below in the notes thereto. Investors are cautioned that the unaudited and unreviewed non-consolidated pro forma statement of income for the year ended December 31, 2006 represents a summation (subject to certain adjustments as noted below) of the audited non-consolidated statement of income of the Bank for such year and the unaudited but reviewed non-consolidated statement of income of former Shinhan Bank for the three months ended March 31, 2006. The unaudited and unreviewed non-consolidated pro forma statement of income has been prepared to illustrate what non-consolidated results of the operation of the Bank might have been if the merger described above had occurred on January 1, 2006. However, the unaudited and unreviewed non-consolidated pro forma financial information is for illustrative purposes only and not necessarily indicative of the non-consolidated results of operation that would have been attained if the transactions had actually occurred on that date, or of any future operating results. In addition, the audited non-consolidated statement of income of the Bank for the year ended December 31, 2006 includes the credit card operations of Chohung Bank (which operations were split off on April 3, 2006 concurrently with the merger of former Shinhan Bank into Chohung Bank). Accordingly, exclusion of the operating results of the credit card operations of Chohung Bank for the three months ended March 31, 2006 from the Bank’s audited non-consolidated statement of income for the year ended December 31, 2006 could affect the analysis of the operating results of the Bank that would have been attained if the merger of former Shinhan Bank into Chohung Bank had actually occurred on January 1, 2006. The summation of the aforementioned statements of income should not be relied upon for the purpose of making any decision to invest in the Notes.

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Pro forma statement of income for the year ended December 31, 2006 Pro forma adjustments(2) Former Shinhan The Bank Bank (audited) (unaudited) (Debit) (Credit) (in billions of Won) W6,811 W1,086 W0.2 W 3,765 585 0.2 3,046 501 426 39 2,620 7,065 7,729 1,956 525 W1,431 462 902 997 367 139 W 228 Pro forma(1) (unaudited and unreviewed) W7,896 4,349 3,547 465 3,082 7,964 8,723 2,323 664 W1,659

Interest and dividend income . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . Net interest income . . . . . . . . . . . . . . . . Provision for loan losses . . . . . . . . . . . Net interest income after provision for loan losses . . . . . . . . . . . . . . . . . . Non-interest income . . . . . . . . . . . . . . . Non-interest expense . . . . . . . . . . . . . . Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . Income tax expense . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . .

3.0 3.0

Notes: (1) Basis of presentation: The unaudited and unreviewed non-consolidated pro forma statement of income for the year ended December 31, 2006 is a summation of the audited non-consolidated statement of income of the Bank for such year and the unaudited but reviewed non-consolidated statement of income of former Shinhan Bank for the three months ended March 31, 2006, as adjusted by the items stated in notes 2.a. – 2.b. below. (2) Adjustments: a. For illustrative purposes, all material intercompany transactions between former Shinhan Bank and Chohung Bank during the three months ended March 31, 2006 were eliminated in the preparation of the unaudited and unreviewed non-consolidated pro forma statement of income. Pursuant to the terms of the split-merger agreement, dated April 3, 2006, between Chohung Bank and Shinhan Card, a wholly-owned subsidiary of Shinhan Financial Group, Chohung Bank’s credit card business was split off and merged into Shinhan Card. Chohung Bank did not maintain accounting records that allow for the separate identification of each line item of income and expense and assets and liabilities in respect of its credit card business consistent with the presentation of the unaudited and unreviewed non-consolidated pro forma financial information presented herein. Accordingly, the unaudited and unreviewed non-consolidated pro forma statement of income shown above includes the results of operations of Chohung Bank’s credit card business for the three months ended March 31, 2006, as follows: Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (in billions of Won) W133 45 36

b.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by reference to, the Bank’s non-consolidated financial statements and the notes thereto included elsewhere in this offering circular. This financial information has been prepared in accordance with Korean GAAP, which differs in certain respects from U.S. GAAP. See “Summary of Certain Differences Between Korean GAAP and U.S. GAAP”. The discussion contains forward-looking statements and reflects the Bank’s current view with respect to future events and financial performance. Actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors such as those set forth under “Risk Factors” and elsewhere in this offering circular. Overview Since July 2007, adverse developments in the U.S. sub-prime mortgage sector have created significant disruption and volatility in the financial markets globally. The ensuing contraction of liquidity and credit and deteriorations in asset values have had contagion effects on the overall economy. Starting in the second half of 2008, the world’s largest economies, including the United States, Europe and Japan, are widely considered to be in the midst of economic recessions, and export-driven emerging economies such as China and Korea have also suffered a substantially slower rate of growth. The weakening economy may create further shocks to the global financial markets, which in turn could cause a further downward spiral in global economic and financial conditions. In Korea, where most of the Bank’s assets are located and where it generates most of its income, there are signs that due to the recent difficulties in the global economic and financial conditions, key macro- and microeconomic indicators such as exports, personal expenditures and consumption, demand for business products and services, debt service burden of households and businesses, the general availability of credit and the asset value of real estate and securities may further deteriorate. Any or a combination of the foregoing factors may result in an increase in non-performing loans and otherwise worsen the asset quality of the Bank’s loans, which would lead to increases in provisions for loan losses. For instance, an increase in bankruptcies, or a worsening cash flow situation, among the Bank’s corporate customers, particularly the small- and medium-sized enterprises, which represent a substantial number of the Bank’s customers, may lead to an increase in defaults under the Bank’s loans. In addition, as a significant portion of the Bank’s loan portfolio is secured by homes and other real estate, a downturn in the real estate market may cause a portion of its loans to exceed the value of the underlying collateral; and any decline in the value of the collateral securing its loans, and the inability to obtain additional collateral or inability to realize the value of the collateral may require the Bank to increase credit loss allowances. The disruptions and volatility in the global and Korean financial markets and economy may adversely affect the Bank’s business and results of operation in other ways. Specifically, the availability of credit may become limited, causing some of the Bank’s counterparties to default. Moreover, the negative developments in the global credit markets may cause significant fluctuations in stock markets globally and foreign currency exchange rates, which in turn may affect the Bank’s results of operation. If credit market conditions continue to deteriorate, the Bank’s capital funding structure may need to be adjusted, its funding costs may increase, its credit rating may be downgraded, or its credit-related losses may increase, all of which could have a material adverse effect on the Bank’s results of operation, financial condition, cash flows and capital adequacy. In particular, in recent years, commercial banks in Korea, including the Bank, have significantly expanded lending in the areas of home and mortgage loans to individuals and loans to small- and medium-enterprises. The global economic and financial crisis has significantly increased the credit risk of such loans, which have represented the Bank’s core lending activities, as well as the market risks of its new product offerings such as structured derivative products. The global crisis has also increased the funding costs of foreigndenominated as well as Won-denominated borrowings, and has significantly affected liquidity in general, notwithstanding the active liquidity support provided by the Bank of Korea. The Bank’s deposit products increased in volume in the second half of 2008 due to the downturn in the Korean stock market, but a reduction in market interest rates may negatively impact the popularity of its deposit products compared to

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other investment alternatives. The Bank’s results of operation is expected to, at least in the short term, depend primarily on the strength of risk management, improvement of funding and the net interest margin and cost reduction, rather than the pricing and volume competition among the commercial banks as was the case in the recent past. Overall, the Bank faces an increasingly difficult environment due to the ongoing difficulties in the global and Korean economy and financial markets, and it will continue to focus on risk management, synergy creation and cost cutting to withstand the related challenges. Outlook In light of the deepening economic downturn in Korea and globally, the Bank anticipates that the asset quality of its loans may significantly deteriorate in 2009 compared to 2008, accompanied by increases in delinquencies, non-performing loans and substandard or below credit relative to its total loans and credit and provision for loan losses. The Bank anticipates that its total loans and credits will not increase significantly and may even decrease in terms of volume in 2009 compared to 2008, if the economic slump severely worsens. In addition, the Bank anticipates that its net interest margin may significantly decrease in 2009 compared to 2008 largely due to a narrowing in the net interest spread as the base certificate of deposit rates, upon which a substantial portion of its lending is based, remains relatively low due to government policy reasons related to stimulating the economy while the interest rates applicable to its borrowings remain relatively high due to the continued liquidity difficulties in the global financial markets. Accordingly, the Bank anticipates that the level of its net income may be significantly lower in 2009 compared to 2008. The Bank’s anticipated financial condition and results of operation described above are forward-looking statements based upon the assumptions and beliefs of its management regarding economic conditions in Korea and globally, demand for its products and services, its market environment, its credit costs and reserves and other factors, and are subject to the qualifications described under “Forward-Looking Statements”. The Bank’s actual results of operations could vary significantly from the foregoing expectations and could be influenced by a number of factors, including those described in “— Operating Results” and “Risk Factors”. As a result, the Bank cannot and does not make any representations with respect to the accuracy of the foregoing expectations. Interest Rates Interest rate movements, in terms of magnitude and timing as well as the divergence of such movements with respect to the Bank’s assets and liabilities, have a significant impact on its net interest margins and its profitability, particularly with respect to its financial products that are sensitive to such movements. For example, if the interest rates applicable to the Bank’s loans (which are recorded as its assets) decrease or increase at a slower pace or by a thinner margin compared to the interest rates applicable to its deposits (which are recorded as its liabilities), its net interest margin will shrink and its profitability will be negatively affected. In addition, the relative size and composition of its variable rate loans and deposits (as compared to its fixed rate loans and deposits) may also impact its net interest margin. Furthermore, the difference in the average term of the Bank’s loans compared to its deposits may also impact the Bank’s net interest margin. For example, since the Bank’s deposits tend to have a longer term, on average, than that of its loans, the Bank’s deposits are less sensitive to movements in the base interest rates on which the Bank’s deposits and loans tend to be pegged, and, therefore, an increase in the base interest rates tend to increase the net margin of the Bank while a decrease in the base interest rates tend to have the opposite effect. While the Bank continually manages its assets and liabilities to minimize its exposure to interest rate volatilities, such efforts by the Bank may not mitigate the impact of interest rate volatility in a timely or effective manner.

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The following table shows certain benchmark Won-denominated borrowing interest rates as of the dates indicated. Corporate Treasury Certificate Bond Bond of Deposit Rates(1) Rates(2) Rates(3) December 31, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 30, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 30, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 30, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June 30, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Source: Korea Securities Dealers Association Notes: (1) (2) (3) Measured by the yield on three-year AA-rated corporate bonds. Measured by the yield on three-year treasury bonds. Measured by the yield on certificates of deposit (with a maturity of 91 days).

3.72 4.41 5.52 5.20 5.29 5.66 6.77 6.88 7.72 6.13

3.28 4.02 5.08 4.92 4.92 5.26 5.74 5.90 3.41 3.94

3.43 3.54 4.09 4.59 4.86 5.00 5.82 5.37 3.93 2.43

Critical Accounting Policies The Bank’s non-consolidated financial statements are prepared in accordance with Korean GAAP, and where applicable, Korean Bank Accounting Guidelines, which reflect prevailing accounting practices within the Korean banking industry. The preparation of the Bank’s financial statements requires management to make judgments, involving significant estimates and assumptions, in the application of certain accounting policies about the effects of matters that are inherently uncertain. These estimates and assumptions, which may materially affect the reported amounts of certain assets, liabilities, revenues and expenses, are based on information available to the Bank as of the date of the financial statements, and changes in this information over time could materially impact amounts reported in the financial statements as a result of the use of different estimates and assumptions. Certain accounting policies, by their nature, have a greater reliance on the use of estimates and assumptions, and could produce results materially different from those originally reported. Based on the sensitivity of financial statement amounts to the methods, estimates and assumptions underlying reported amounts, the Bank has identified the following significant accounting policies that involve critical accounting estimates. These policies require subjective or complex judgments, and as such could be subject to revision as new information becomes available. The Bank’s significant accounting policies are described in more detail in Note 2 in the notes to its non-consolidated financial statements included in this offering circular. Allowance for Credit Losses The allowance for credit losses includes allowance for loan losses and allowance for off-balance sheet credit instruments. The allowance for loan losses is reported as a reduction of loans, and the allowance for off-balance sheet credit instruments is reported in other liabilities. The allowance for credit losses represents the amount available for estimated probable credit losses existing in the Bank’s lending portfolio. In estimating the allowance for corporate and household loan losses, the Bank records the greater amount resulting from the methods described below for each loan classification.

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(i) Expected Loss Method The Bank estimates the allowance for corporate and household loan losses by applying the expected loss method, which analyzes factors of estimated loss based on probability of default (“PD”) and loss given default (“LGD”). This provisioning method considers both financial and non-financial factors of borrowers to assess PD and LGD. PD is determined by considering the type of borrowers, the nature of loans and delinquent days and LGD is determined by considering the type of loan and collateral. The period of historical data used to calculate PD and LGD is updated annually; PD and LGD are calculated based on historical data for the past seven years and 70 months for corporate loans, and five years and 60 months for retail loans, respectively, as of December 31, 2008 and as of March 31, 2009. The allowance for loan losses is calculated by multiplying the outstanding loan balance by the PD and LGD. (ii) Financial Supervisory Service Guidelines The Bank applies the Financial Supervisory Service Guidelines for corporate and household loans in accordance with the Regulation for the Supervision of Banks revised on February 2, 2009. The prescribed minimum levels of provision per the Financial Supervisory Service Guidelines are as follows: Š for corporate loans, 0.85% for normal (0.9% for construction, real estate and rental services, retail and wholesale, lodging and restaurant; industries susceptible to market), 7% for precautionary, 20% for substandard, 50% for doubtful and 100% for estimated loss, respectively; and for household loans, 1% for normal, 10% for precautionary, 20% for substandard, 55% for doubtful and 100% for estimated loss, respectively.

Š

In addition, the Bank considers the borrower’s ability to repay and the recovery value of collateral in estimating expected loss on high-risk or large volume loan balances. In estimating the allowance for unused corporate and household credit commitments, to the extent that the Bank’s internal analysis and the Financial Supervisory Service guidelines yield different amounts of allowance, the Bank records the greater amount with respect to each loan classification. Allowance for Off-balance Sheet Credit Instruments The allowance for off-balance sheet credit instruments represents the amounts available for estimated probable credit loss existing in the Bank’s unfunded credit facilities such as commitments to extend credit, guarantees, acceptances, standby and commercial letters of credit and other financial instruments. As stated above, the Bank performs periodic systematic reviews of its credit portfolio including off-balance sheet credit instruments to identify inherent losses and assess the overall probability of collection. (i) Expected Loss Method The Bank estimates the allowance for unused loan commitments using the same method applied for allowance for loan losses. (ii) Financial Supervisory Service Guidelines The Bank estimates the allowance for unused loan commitments based on each classification in accordance with the Regulations for the Supervision of Banks established by the Financial Supervisory Service, as amended on February 2, 2009 as follows: Š for unused corporate loan commitments, a minimum of 0.85% for normal (0.9% for construction, real estate and rental services, retail and wholesale, lodging and restaurant; industries susceptible to market), 7% for precautionary, 20% for substandard, 50% for doubtful and 100% for estimated loss, respectively; and for unused household loan commitments, a minimum of 1% for normal, 10% for precautionary, 20% for substandard, 55% for doubtful and 100% for estimated loss, respectively.

Š

35

The Bank estimates allowance for losses on outstanding guarantees and acceptances, contingent guarantees and acceptances and endorsed bills in accordance with the same loan classification criteria applied in estimating allowance for loan losses. Such allowance of losses is recorded as other liabilities, and the changes in such allowance over the relevant period are recorded as non-interest expenses or non-interest income. Valuation of Securities and Financial Instruments The Bank classifies securities on its balance sheet as trading, available-for-sale, or held-to-maturity, based on their marketability, the intent of its acquisition and its ability to hold those securities. Specifically, the Bank classifies securities as trading securities when those securities are bought and held principally for sale in the near term to generate profits from short-term price differences and are traded frequently. Debt securities that have a fixed or determinable payment amount and a fixed maturity are classified as held-to-maturity, only if the Bank has both the positive intent and ability to hold such securities to maturity. All other securities are classified as available-for-sale. Trading securities. If the fair value of trading securities differs from the book value, they are recorded at their fair value on the Bank’s balance sheet and unrealized holding gains and losses are included in its current earnings. Available-for-sale securities. The Bank records available-for-sale securities at their fair value on its balance sheet. Unrealized holding gains and losses for available-for-sale securities are accounted for as separate components of stockholders’ equity until realized; that is, at the time when such securities are disposed of or written down to recognize impairment loss, the lump-sum cumulative amount of such components of stockholders’ equity related to those securities is reflected in current earnings. As an exception, however, available-for-sale equity securities that are not traded in an active trading market are accounted for at their acquisition costs, only if their fair values cannot be reliably estimated. When the recoverable values of available-for-sale equity securities are less than their acquisition cost (for debt securities, their amortized acquisition cost), and there is any objective evidence that their fair values are impaired, book values are adjusted to the recoverable amounts and the amount of the acquisition cost (for debt securities, the amortized acquisition cost) in excess of the recoverable value less the amount of impairment loss already recognized in prior periods is reflected in current loss as impairment loss for available-for-sale securities. Subsequent recovery is recorded in current operations up to the amount of the previously recognized impairment loss as reversal of loss on impairment on available-for-sale securities and any excess is included in accumulated other comprehensive income as gain on valuation of available-for-sale securities. However, if the increases in the fair value of the impaired securities are not regarded as the recovery of the impairment, the increases in the fair value are recorded on gain or loss on valuation of available-for sale securities in accumulated other comprehensive income. For non-marketable equity securities, which were impaired based on the net asset fair value, the recovery is recorded up to the amount of acquisition cost. Held-to-maturity securities. The Bank records held-to-maturity securities at amortized acquisition cost. The difference between their acquisition cost and face value (commonly referred to as a “discount” or “premium” on debt securities) is (1) amortized into interest income over the remaining term of the securities using the effective interest method and (2) added to or subtracted from the acquisition cost. When the recoverable amount is less than the amortized acquisition cost of a debt security, and there is any objective evidence of impairment loss, the book value of the security is adjusted to the recoverable amount. The difference between the recoverable amount and book value is accounted for in current loss as impairment loss for held-to-maturity securities. Subsequent recovery is recorded in current operations up to the amount of the previously recognized impairment loss as reversal of loss on impairment of held-to-maturity securities. The Bank believes that the accounting estimates related to the fair value and recoverable value of its various securities are a “critical accounting policy” because: (1) they may be highly susceptible to change from period to period based on factors beyond the Bank’s control; and (2) any significant difference between the

36

estimated fair or recoverable value of these securities on any particular date and either their estimated fair or recoverable value on a different date or the actual proceeds that the Bank receives upon sale of these securities could result in valuation losses or losses on disposal, which may have a material impact on the Bank’s net income. The Bank’s assumptions about the fair or recoverable value of securities that it holds require significant judgment because actual valuations have fluctuated in the past and are expected to continue to do so, based on a variety of factors. Investments in Associates Associates are all entities over which the Bank has the ability to significantly influence the financial and operating policies and procedures, generally accompanying an equity interest of over 15% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognized at cost. The parent company’s investments in associates include goodwill identified on acquisition (net of any accumulated impairment loss). Goodwill is calculated as the excess of the acquisition cost of an investment in an associate over the parent company’s share of the fair value of the identifiable net assets acquired. Negative goodwill is the excess of fair value of the net identifiable assets acquired over the purchase price. The balance of negative goodwill is allocated to reduce proportionately the values assigned to depreciable non-monetary assets. If the allocation reduces the non-monetary assets to zero, any remainder is recognized as an extraordinary gain in the period of acquisition. However, negative goodwill related to future losses and expenses that have been specifically identified in the purchase agreement is recognized as income in the period that these are actually incurred. Goodwill is amortized using the straight-line method over its estimated useful life of five years. Amortization of (negative) goodwill is recorded together with equity income (losses). The parent company’s share of its post-acquisition profits or losses in investments in associates is recognized in the consolidated income statement, and its share of post-acquisition movements in equity is recognized in equity. The cumulative post-acquisition movements are adjusted against the carrying amount of each investment. Changes in the carrying amount of an investment resulting from dividends by an associate are recognized when the associate declares the dividend. When the parent company’s share of losses in an associate equals or exceeds its interest in the associate, including preferred stock, other long-term loans and receivables issued by the associate or guaranteed obligations of the associate, the parent company does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealized gains on transactions between the parent company and its associates are eliminated to the extent of the parent company’s interest in each associate. When events or circumstances indicate that the carrying value of goodwill may not be recoverable, the parent company reviews goodwill for impairment and records any impairment loss immediately in the consolidated statement of income. Contingent Liabilities The Bank is subject to contingent liabilities, including judicial, tax, regulatory and arbitration proceedings, commitments provided to its customers and other claims arising from the conduct of its business activities. The Bank establishes allowances against these contingencies in its financial statements based on its assessment of the probability of occurrence and its estimate of the obligation. The Bank involves internal and external advisors, such as attorneys, consultants and other professionals, in assessing probability and in estimating any amounts involved. Throughout the life of a contingency, the Bank or its advisors may learn of additional information that can affect its assessments about the probability of repayment or about the estimates of amounts involved. Changes in these assessments can lead to changes in allowances recorded on the Bank’s financial statements. In addition, the actual costs of resolving these claims may be substantially higher or lower than the amounts provided in the Bank’s financial statements for those claims.

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Recognition of Deferred Tax Assets Income tax expense is the amount currently payable for the period added to or deducted from the change in deferred income tax. However, the Bank recognizes deferred income tax assets only if it reasonably expects to realize the future tax benefits from accumulated temporary differences and tax loss carry-forwards. In forming a conclusion about whether a tax asset is recoverable in the foreseeable future, the Bank uses its judgment in assessing the potential events and circumstances affecting future recoverability while at the same time considering past experience. If the Bank’s interpretations or judgments differ from those of tax authorities with respect to the utilization of tax losses carried forward, the income tax provision may vary in future periods. The Bank accounts for the difference between the amount currently payable for the period and income tax expense as deferred income tax assets or liabilities and is offset against income tax assets or liabilities in future periods. The Bank believes that the estimates related to its establishment of deferred tax assets are a “critical accounting policy” because: (1) they may be highly susceptible to change from period to period based on its assumptions regarding its future profitability; and (2) any significant difference between the Bank’s estimates of future profits on any particular date and such estimates of future profits on a different date could result in income tax benefits, which may have a material impact on its net income from period to period. The Bank’s assumptions about future profitability require significant judgment and are inherently subjective.

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Average Balance and Volume and Rate Analysis Average Balance Sheet and Related Interest The following table shows on a non-consolidated basis the Bank’s average balances and interest rates, as well as the net interest spread, net interest margin and asset liability ratio, for the years ended December 31, 2006, 2007 and 2008 and for the three months ended March 31, 2008 and 2009.
For the year ended December 31, 2006(1) 2007 Interest Interest Average Income/ Yield/ Average Income/ Yield/ Average Balance(2) Expense Rate Balance(2) Expense Rate Balance(2) (in billions of Won, except percentages) Interest-earning Assets: Interest-bearing deposits in other banks . . . . . . . . . . . . . W 1,140 W 46 Trading assets . . . . . . . . . . . . . 1,468 70 Securities . . . . . . . . . . . . . . . . . 24,584 1,038 Loans(3): Corporate . . . . . . . . . . . . 59,589 3,806 Retail . . . . . . . . . . . . . . . . 44,113 2,866 Total loans . . . . . . . Other interest-earning assets . . . . . . . . . . . . . . . . . . 103,702 6,672 70

2008 Interest Income/ Yield/ Expense Rate

4.04% W 1,130 W 47 4.77 4,159 220 4.22 24,688 1,170 6.39 6.50 6.43% 72,590 49,519 122,109 4,669 3,320 7,989 65

4.16% W 4,896 W 119 5.29 4,744 277 4.74 29,155 1,652 6.43 6.70 6.54% 85,256 54,307 139,563 5,719 3,837 9,556 68

2.43% 5.84 5.67 6.71 7.07 6.85%

Total interest-earning assets . . . . . . . . . . . . . . . . . . W130,894 W7,896 Property and equipment . . . . 2,009 Derivative assets . . . . . . . . . . 1,244 Other assets . . . . . . . . . . 19,979 Total assets . . . . . . . . . . Interest-bearing liabilities: Interest-bearing deposits: Demand deposits . . . . . . Time and savings deposits . . . . . . . . . . . . Other deposits . . . . . . . . Total interest-bearing deposits . . . . . . . Debentures . . . . . . . . . . . . . . . . Borrowings . . . . . . . . . . . . . . . Other interest-bearing liabilities . . . . . . . . . . . . . . . Total interest-bearing liabilities . . . . . . . . . . . . . . . Non-interest-bearing sources Derivative liabilities . . . Other non-interest-bearing liabilities . . . . . . . . . . . Stockholders’ equity . . Total liabilities and stockholders’ equity . . . . . . . . . Net interest spread(4) . . . . . . . Net interest margin(5) . . . . . . Ratio of average interest-earning assets to interest-bearing liabilities(6) . . . . . . . . . . . . . W154,126 W7,896 W 11,533 W 125 60,599 13,151 85,283 22,037 16,483 1,857 595 2,577 1,134 576 62 W123,803 W4,349 1,223 19,772 9,328

6.03% W152,086 W9,491 2,401 1,348 20,627 W176,462 W9,491 1.08% W 10,382 W 144 3.06 4.52 3.02% 5.15 3.49 65,371 23,858 99,611 27,106 17,004 2,228 1,078 3,450 1,474 722 103 3.51% W143,721 W5,749 1,416 18,196 13,129

6.24% W178,358 W11,672 2,428 6,409 15,267 W202,462 W11,672 1.39% W 11,079 W 3.41 4.52 3.46% 5.44 4.25 77,630 24,368 113,077 31,832 20,188 158 3,199 1,238 4,595 1,822 785 126 4.00% W165,097 W 7,328 6,517 16,028 14,820

6.54%

1.43% 4.12 5.08 4.06% 5.72 3.89

4.43%

W154,126 W4,349 2.52% 2.71%

W176,462 W5,749 2.24% 2.46%

W202,462 W 7,328 2.11% 2.44%

105.73%

105.82%

108.03%

39

For the three months ended March 31, 2008 2009 Interest Interest Average Income/ Yield/ Average Income/ Balance(2) Expense Rate(7) Balance(2) Expense (in billions of Won, except percentages) Interest-earning Assets: Interest-bearing deposits in other banks . . Trading assets . . . . . . . . . . . . . . . . . . . . . . . . . . Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loans(3): Corporate . . . . . . . . . . . . . . . . . . . . . . . . . Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total loans . . . . . . . . . . . . . . . . . . . . Other interest-earning assets . . . . . . . . . . . . Total interest-earning assets . . . . . . . . . . . Property and equipment . . . . . . . . . . . . . . . . . Derivative assets . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . Interest-bearing liabilities: Interest-bearing deposits: Demand deposits . . . . . . . . . . . . . . . . . . . . . . . Time and savings deposits . . . . . . . . . . . . . . Other deposits . . . . . . . . . . . . . . . . . . . . . . . . . . Total interest-bearing deposits . . . . . . Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other interest-bearing liabilities . . . . . . . . . Total interest-bearing liabilities . . . . . . . . Non-interest-bearing sources Derivative liabilities . . . . . . . . . . . . . . . Other non-interest-bearing liabilities . . . . . . . . . . . . . . . . . . . . . . . . Stockholders’ equity . . . . . . . . . . . . . . . Total liabilities and stockholders’ equity . . . . . . . . Net interest spread ................... Net interest margin(5) . . . . . . . . . . . . . . . . . . . Ratio of average interest-earning assets to interest-bearing liabilities(6) . . . . . . . . . . .
(4)

Yield/ Rate(7)

W

4,869 5,157 28,024 78,786 52,523 131,309

W

18 77 390

1.48% W 8,231 5.97 3,152 5.57 33,938 6.68 7.03 6.82 92,348 56,197 148,545

W

14 33 416

0.68% 4.19 4.90 5.70 6.01 5.82%

1,316 923 2,239 16

1,315 845 2,160 18

W169,359 2,348 2,136 21,177 W195,020

W2,740

6.47% W193,866 2,306 13,726 26,386 W236,284

W2,641

5.45%

W 10,881 72,910 24,063 107,854 29,904 19,206

W

38 715 294

1.40% W 11,738 3.92 92,025 4.89 21,206 3.88% 5.66 4.21 124,969 30,391 18,994

W

33 869 231

1.12% 3.78 4.36 3.63% 5.30 3.18

1,047 423 202 23 W1,695

1,133 403 151 46 W1,733

W156,964 2,258 21,984 13,814 W195,020

4.32% W174,354 13,279 33,999 14,652 W236,284 2.15% 2.47% 107.90%

3.97%

1.48% 1.88% 111.19%

Notes: (1) Includes information for former Shinhan Bank for the three months ended March 31, 2006, which was merged into Chohung Bank to form the Bank in April 2006. See “Unaudited Non-consolidated Pro Forma Income Statement”.

40

(2) (3)

Based on average daily balances. Non-accruing loans are included in the respective average loan balances. Income on such non-accruing loans is no longer recognized from the date on which the loan is placed on non-accrual status. The Bank reclassifies loans as accruing when interest (including default interest) and principal payments are current. The difference between the average rate of interest earned on interest-earning assets and the average rate of interest paid on interest-bearing liabilities. The ratio of net interest income to average interest-earning assets. The ratio of average interest-earning assets to average interest-bearing liabilities. Information for the three months ended March 31, 2008 and 2009 is presented on an annualized basis.

(4)

(5) (6) (7)

Analysis of Changes in Net Interest Income — Volume and Rate Analysis The following tables provide an analysis of changes in interest income, interest expense and net interest income between changes in volume and changes in rates for (i) 2007 compared to 2006, (ii) 2008 compared to 2007 and (iii) the first quarter of 2009 compared to the first quarter of 2008. Volume and rate variances have been calculated on the movement in average balances and the change in the interest rates on average interest-earning assets and average interest-bearing liabilities in proportion to absolute volume and rate change. The variance caused by the change in both volume and rate has been allocated in proportion to the absolute volume and rate change. From 2006(1) to 2007 Interest Increase (Decrease) Due to Change in Volume Rate Change (in billions of Won) Increase in interest income Interest-bearing deposits in banks . . . . . . . . . . . . . . . . . . . . . . . Trading assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loans: Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other interest-earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) in interest expense Interest-bearing deposits: Demand deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time and savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . Other deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other interest-bearing liabilities . . . . . . . . . . . . . . . . . . . . . . . . . Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . Net increase (decrease) in net interest income . . . . . . . . . . W W W

— 142 5 836 363

1 8 127 27 91 118 — 254

1 150 132 863 454

1,199 (5) 1,341

1,317 (5) 1,595

(16) 163 484 631 276 22 41 970 W 371

35 208 (1) 242 64 124 — 430 W(176)

19 371 483 873 340 146 41 1,400 W 195

41

From 2007 to 2008 Interest Increase (Decrease) Due to Change in Volume Rate Change (in billions of Won) Increase in interest income Interest-bearing deposits in banks . . . . . . . . . . . . . . . . . . . . . . Trading assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loans: Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other interest-earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) in interest expense Interest-bearing deposits: Demand deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time and savings deposits . . . . . . . . . . . . . . . . . . . . . . . . Other deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total interest-bearing deposits . . . . . . . . . . . . . . . . Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other interest-bearing liabilities . . . . . . . . . . . . . . . . . . . . . . . . Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net increase (decrease) in net interest income . . . . . . . . . W 91 34 253 850 339 W1,189 3 1,570 W (19) 23 229 200 178 W378 — 611 W 72 57 482 1,050 517 W1,567 3 2,181

10 505 26 541 270 124 23 W 958 W 612

4 466 134 604 78 (61) — W621 W (10)

14 971 160 1,145 348 63 23 W1,579 W 602

From the first quarter of 2008 to the first quarter of 2009 Interest Increase (Decrease) Due to Change in Volume Rate Change (in billions of Won) Increase in interest income Interest-bearing deposits in banks . . . . . . . . . . . . . . . . . . . . . . . Trading assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loans: Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other interest-earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) in interest expense Interest-bearing deposits: Demand deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time and savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . Other deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other interest-bearing liabilities . . . . . . . . . . . . . . . . . . . . . . . . Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . Net increase (decrease) in net interest income . . . . . . . . . W 6 (21) 72 W (10) (23) (46) (194) (133) W(327) — (406) W (4) (44) 26 (1) (78) W (79) 2 (99)

193 55 W248 2 307

2 180 (31) 151 6 (2) 22 W177 W130

(7) (26) (32) (65) (26) (49) — W(140) W(266)

(5) 154 (63) 86 (20) (51) 23 W 38 W(137)

42

Note: (1) Includes information for former Shinhan Bank for the three months ended March 31, 2006, which was merged into Chohung Bank to form the Bank in April 2006. See “Unaudited Non-consolidated Pro Forma Income Statement”.

Operating Results The First Quarter of 2009 Compared to the First Quarter of 2008 Net Interest Income The following table shows, for the periods indicated, the principal components of the Bank’s net interest income. Three Months Ended March 31, 2008 2009 % Change (in billions of Won, except percentages) Interest and dividend income: Interest and fees on loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest and dividends on securities . . . . . . . . . . . . . . . . . . . . . . . Interests and dividends on trading assets . . . . . . . . . . . . . . . . . . . Other interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total interest and dividend income . . . . . . . . . . . . . . . . . . . Interest expense: Interest on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest on debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest on borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net interest margin
(1)

W2,239 390 77 34 W2,740 W1,047 423 202 23 1,695 W1,045 2.47%

W2,160 416 33 32 W2,641 W1,133 403 151 46 1,733 W 908 1.88%

(3.5)% 6.7 (57.1) (5.9) (3.6)% 8.2% (4.7) (25.2) 100.0 2.2 (13.1)%

.........................................

Note: (1) The ratio of net interest income to average interest-earning assets. See “— Average Balance and Volume and Rate Analysis — Average Balance Sheet and Related Interest”.

Interest and dividend income. The 3.6% decrease in interest and dividend income is due primarily to a 3.5% decrease in interest and fees on loans. The 3.5% decrease in interest and fees on loans was due primarily to a 8.5% decrease in interest and fees on retail loans from W923 billion in the first quarter of 2008 to W845 billion in the first quarter of 2009, which was due primarily to a decrease by 102 basis points in the average yield on such loans from 7.03% in the first quarter of 2008 to 6.01% in the first quarter of 2009, which was partially offset by a 7.0% increase in the average balance of retail loans from W52,523 billion in the first quarter of 2008 to W56,197 billion in the first quarter of 2009. Interest and fees on corporate loans remained stable at W1,316 billion in the first quarter of 2008 compared to W1,315 billion in the first quarter of 2009, as a decrease by 98 basis points in the average yield on such loans from 6.68% in the first quarter of 2008 to 5.70% in the first quarter of 2009 was partially offset by a 17.2% increase in the average balance of corporate loans from W78,786 billion in the first quarter of 2008 to W92,348 billion in the first quarter of 2009.

43

The decrease in lending rates for both corporate and retail loans was principally due to a decrease in the base rate set by the Bank of Korea in an effort to increase the supply of liquidity in the Korean financial markets in light of the global credit crisis. Overall, the average volume of the Bank’s loans increased by 13.1% from W131,309 billion in the first quarter of 2008 to W148,545 billion in the first quarter of 2009. The increase in the average volume of corporate loans was primarily due to an increase in lending to small- and medium-sized enterprises in the first quarter of 2009 pursuant to the Government initiative to support such enterprises in light of the difficult economic environment in Korea. The increase in the average volume of retail loans was primarily due to a steady increase in certain mortgage and home equity lending that was made pursuant to preset lending schedules in the first quarter of 2009. Interest expense. Interest expense increased by 2.2% from W1,695 billion in the first quarter of 2008 to W1,733 billion in the first quarter of 2009, due primarily to a 8.2% increase in interest on deposits from W1,047 billion in the first quarter of 2008 to W1,133 billion in the first quarter of 2009, which was partially offset by a 25.2% decrease in interest on borrowings from W202 billion in the first quarter of 2008 to W151 billion in the first quarter of 2009. The increase in interest expense on deposits in the first quarter of 2009 was primarily the result of a 15.9% increase in the average volume of interest-bearing deposits from W107,854 billion in the first quarter of 2008 to W124,969 billion in the first quarter of 2009, which was partially offset by a decrease of 25 basis points in the cost of interest-bearing deposits from 3.88% in the first quarter of 2008 to 3.63% in the first quarter of 2009. The increase in the average volume of interest-bearing deposits was due primarily to a 7.9% increase in the average volume of demand deposits from W10,881 billion in the first quarter of 2008 to W11,738 billion in the first quarter of 2009 and a 26.2% increase in the average volume of the Bank’s time and savings deposits from W72,910 billion in the first quarter of 2008 to W92,025 billion in the first quarter of 2009, which was partially offset by an 11.9% decrease in the average volume of other deposits from W24,063 billion in the first quarter of 2008 to W21,206 billion in the first quarter of 2009. The principal reason for the decrease in interest rates payable on the Bank’s interest-bearing deposits was the decrease in market interest rates payable on interest-bearing deposits in general as a result of a decrease in the base rate set by the Bank of Korea in an effort to increase the supply of liquidity in the Korean financial markets in light of the global credit crisis. The average interest rate paid on time and savings deposits, which accounted for 73.6% of its average interest-bearing deposits in the first quarter of 2009, decreased by 14 basis points from 3.92% in the first quarter of 2008 to 3.78% in the first quarter of 2009. In contrast, the average interest rate paid on the Bank’s demand deposits, which accounted for 9.4% of its average interest-bearing deposits in the first quarter of 2009, decreased by 28 basis points from 1.40% in the first quarter of 2008 to 1.12% in the first quarter of 2009, and the average interest rate paid on the Bank’s other deposits, which consist primarily of certificates of deposit and accounted for 17.0% of the Bank’s average interest-bearing deposits in the first quarter of 2009 decreased by 62 basis points from 4.98% in the first quarter of 2008 to 4.36% in the first quarter of 2009. The 4.7% decrease in interest expense on debentures was primarily due to a decrease in the average rate for debentures by 36 basis points, from 5.66% in the first quarter of 2008 to 5.30% in the first quarter of 2009, which was partially offset by an increase in the average volume of debentures by 1.6% from W29,904 billion in the first quarter of 2008 to W30,391 billion in the first quarter of 2009. The 25.2% decrease in interest expense on borrowings was primarily due to a decrease by 103 basis points in the average interest rates paid on the Bank’s borrowings from 4.21% in the first quarter of 2008 to 3.18% in the first quarter of 2009, and a 1.1% decrease in the average volume of the Bank’s borrowings from W19,206 billion in the first quarter of 2008 to W18,994 billion in the first quarter of 2009. Net interest margin. Net interest margin represents the ratio of net interest income to average interestearning assets. The Bank’s overall net interest margin decreased by 59 basis points from 2.47% in the first quarter of 2008 to 1.88% in the first quarter of 2009, primarily due to a decrease in net interest spread by

44

67 basis points from 2.15% in the first quarter of 2008 to 1.48% in the first quarter of 2009 and a 13.1% decrease in net interest income from W1,045 billion in the first quarter of 2008 to W908 billion in the first quarter of 2009 and a 14.5% increase in the average volume of its interest-earning assets from W169,359 billion in the first quarter of 2008 to W193,866 billion in the first quarter of 2009. The decrease in net interest spread was largely due to a steeper decrease in the interest rates for the Bank’s interest-earning assets by 102 basis points from 6.47% in the first quarter of 2008 to 5.45% in the first quarter of 2009 compared to a decrease by 35 basis points in the interest rates for the Bank’s interest-bearing liabilities from 4.32% as of March 31, 2008 to 3.97% as of March 31, 2009. The interest rate for the Bank’s interest-earning assets decreased more than the interest rate for the Bank’s interest-bearing liabilities as a result of the Government’s attempt to lower lending rates in light of the continued global liquidity crisis in the first quarter of 2009. Provision for Loan Losses For a discussion of the Bank’s loan loss provisioning policy, see “Description of Assets and Liabilities — Loan Portfolio — Provisioning Policy”. The Bank’s provision for loan losses significantly increased from W125 billion in the first quarter of 2008 to W314 billion in the first quarter of 2009, primarily reflecting the deterioration in the overall asset quality of its corporate loans due to the continued economic downturn in Korea in the first quarter of 2009, and particularly as a result of additional allowances made for construction and shipbuilding companies that are being restructured under the supervision of creditor commercial banks and the Government. Additional allowance for construction and shipbuilding companies’ loans totaled W89 billion as of March 31, 2009. The following table sets forth, for the periods indicated, the components of provision for loan and other credit losses by product type. Three Months Ended March 31, 2008 2009 % Change (in billions of Won, except percentages) Total provision for loan losses (A): Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subtotal (A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total (reversal of) provision for off-balance sheet credit instruments (B): Guarantees and acceptances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unused portions of corporate and retail credit line . . . . . . . . . . . . . . . Subtotal (B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total provision for credit losses (A+B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W104 21 125

W247 67 314

N/M N/M N/M

W

2 (59) (57)

W 98 (1) 97 W411

N/M N/M N/M N/M

W 68

N/M= Not meaningful

Provision for loan losses for corporate loans increased significantly from W104 billion in the first quarter of 2008 to W247 billion in the first quarter of 2009, primarily as a result of an increase in impaired loans and deterioration in the asset quality of the Bank’s corporate loan portfolio as discussed above. For similar reasons, loan loss allowance against the Bank’s corporate loans increased by 38.2% from W1,325 billion as of March 31, 2008 to W1,847 billion as of March 31, 2009. Net charge-offs of the Bank’s corporate loans increased significantly from W12 billion in the first quarter of 2008 to W91 billion in the first quarter of 2009, primarily as a result of deterioration in asset quality of corporate loans as a result of the continued economic downturn in the first quarter of 2009.

45

Specifically, in December 2008, the Government announced that it would promote swift restructuring of troubled companies in certain industries that have been disproportionately affected by the ongoing economic difficulties, such as the construction and shipbuilding industries. These restructurings will be supervised primarily by the major commercial banks that are creditor financial institutions of such companies, with the Government having an oversight role. In February 2009, 12 construction companies and four shipbuilding companies became subject to workout following review by their creditor financial institutions and the Government, and the Bank was one of the creditor financial institutions for 11 construction companies and four shipbuilding companies. The Bank established additional allowance for the loans and off-balance sheet credit instruments amounting to W83 billion and W31 billion, respectively, for such companies. Provision for loan losses for retail loans increased significantly from W21 billion in the first quarter of 2008 to W67 billion in the first quarter of 2009, and total allowance for losses for the Bank’s retail loans increased by 5.9% from W675 billion in the first quarter of 2008 to W715 billion in the first quarter of 2009, primarily as a result of the increase in the total volume of retail loans. Net charge-offs of the Bank’s retail loans increased significantly from W5 billion in the first quarter of 2008 to W29 billion in the first quarter of 2009. Provision for off-balance sheet credit instruments increased substantially from the first quarter of 2008 to the first quarter of 2009 due to the increase in provision for refund guarantees provided to shipbuilding companies in light of the financial difficulties that these companies faced in the first quarter of 2009. Reversal of provision for unused portions of credit lines significantly decreased from the first quarter of 2008 to the first quarter of 2009 due to a decrease in the amount of credit lines provided in the first quarter of 2009 mainly as a result of the Bank’s overall efforts to reduce credit exposure in light of the difficult economic environment in Korea. Non-interest Income (Expense), net The following table sets forth, for the periods indicated, the components of the Bank’s net non-interest income expense. Three Months Ended March 31, 2008 2009 % Change (in billions of Won, except percentages) Fees and commission income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized gain (loss) on trading securities . . . . . . . . . . . . . . . . . . . . . . . . Realized gain (loss) from sale of trading securities . . . . . . . . . . . . . . . . . Realized gain (loss) from sale of available-for-sale securities . . . . . . . (Reversal of) impairment loss on available-for-sale securities . . . . . . . Gain (loss) from equity method investment securities . . . . . . . . . . . . . . . Gain (loss) from disposition of equity method investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain (loss) from sale of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain (loss) on foreign currency transactions . . . . . . . . . . . . . . . . . . . . . . . Gain (loss) on derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General and administrative expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total net non-interest income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . W 235 W 145 1 (3) 2 3 28 68 (30) (25) (12) (15) (1) 1 28 (7) (641) (39) — 15 216 (169) (556) (151) (38.3)% N/M 50.0% N/M (16.7) N/M N/M N/M N/M N/M (13.3) N/M 14.8%

W(411) W(472)

N/M= Not meaningful

46

The 14.8% increase in net non-interest expense was mainly attributable to a 38.3% decrease in fees and commission income, a significant increase in loss on derivatives and a significant increase in other expenses, which was partially offset by a 13.3% decrease in general and administrative expenses and a significant increase in gain on foreign currency transactions. The decrease in fees and commission income was principally due to the decrease in the sales of fund products following the downturn in the Korean stock market. The increase in loss on derivatives and the increase in gain on foreign currency transactions were principally due to an increase in the volume of currency-related derivative transactions as a result of the heightened volatility in the exchange rates between Won and the U.S. dollar in the first quarter of 2009. The decrease in general and administrative expenses was principally due to aggressive cost-cutting measures including a reduction in fringe benefits. The increase in gain on foreign currency transactions was largely due to the increased volume of foreign currency transactions entered in light of the increased exchange rate volatility in the first quarter of 2009. The increase in other expenses was largely due to an increase in provision for guarantees and acceptances and a reversal of other provision. Income Tax Expense Income tax expense decreased by 79.2% from W144 billion in the first quarter of 2008 to W30 billion in the first quarter of 2009 due primarily to a decrease in taxable income from W494 billion in the first quarter of 2008 to W389 billion in the first quarter of 2009. The statutory tax rate was 27.5% in the first quarter of 2008 and 24.2% in the first quarter of 2009. The Bank’s effective rate of income tax increased from 27.4% in the first quarter of 2008 to 29.3% in the first quarter of 2009. Net Income As a result of the foregoing, the Bank’s net income decreased by 80.6% from W382 billion in the first quarter of 2008 to W74 billion in the first quarter of 2009. 2008 Compared to 2007 Net Interest Income The following table shows, for the periods indicated, the principal components of the Bank’s net interest income. Year Ended December 31, 2007 2008 % Change (in billions of Won, except percentages) Interest and dividend income: Interest and fees on loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest and dividends on securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest and dividends on trading assets . . . . . . . . . . . . . . . . . . . . . . . . . . . Other interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total interest and dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense: Interest on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest on debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest on borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net interest margin
(1)

W7,989 1,170 220 112 W9,491 W3,450 1,474 722 103 5,749 W3,742 2.46%

W 9,556 1,652 277 187 W11,672 W 4,595 1,822 785 126 7,328 W 4,344 2.44%

19.6% 41.2 25.9 67.0 23.0% 33.2% 23.6 8.7 22.3 27.5 16.1%

................................................

47

Note: (1) The ratio of net interest income to average interest-earning assets. See “— Average Balance and Volume and Rate Analysis— Average Balance Sheet and Related Interest”.

Interest and dividend income. The 23.0% increase in interest and dividend income is due primarily to a 19.6% increase in interest and fees on loans. The 19.6% increase in interest and fees on loans was due primarily to the following; Š a 22.5% increase in interest and fees on corporate loans from W4,669 billion in 2007 to W5,719 billion in 2008, which was due primarily to a 17.4% increase in the average balance of corporate loans from W72,590 billion in 2007 to W85,256 billion in 2008 and an increase by 28 basis points in the average yield on such loans from 6.43% in 2007 to 6.71% in 2008; and a 15.6% increase in interest and fees on retail loans from W3,320 billion in 2007 to W3,837 billion in 2008, which was due primarily to a 9.7% increase in the average balance of retail loans from W49,519 billion in 2007 to W54,307 billion in 2008 and an increase by 37 basis points in the average yield on such loans from 6.70% in 2007 to 7.07% in 2008.

Š

The increase in the average volume of corporate loans was primarily due to the continued increase in lending to small- and medium-sized enterprises in the first half of 2008 and increased lending to large corporations compared to small- and medium-sized enterprises in the second half of 2008, which resulted from the Bank’s efforts to improve the asset quality of the Bank’s corporate loans in light of the downturn in the Korean economy in the second half of 2008. The increase in the average volume of retail loans was primarily due to the steady increase in mortgage and home lending, and to a lesser extent, increased lending to professionals and other high income-earning individuals as part of a targeted marketing campaign in 2008. Overall, the average volume of the Bank’s loans increased by 14.3% from W122,109 billion in 2007 to W139,563 billion in 2008. The increases in the yields of corporate loans and retail loans were largely due to the general increase in market interest rates in Korea in the second half of 2008 as a result of the global liquidity crisis. The 41.2% increase in interest and dividends on securities was due primarily to an 18.1% increase in the average balance of securities from W24,688 billion in 2007 to W29,155 billion in 2008 and an increase by 93 basis points in the average yield on securities from 4.74% in 2007 to 5.67% in 2008. The average balance of securities increased as a result of an increased purchase of securities in proportion to the increase in total assets. The increase in the average yield of securities was largely due to the general increase in market interest rates in Korea in the second half of 2008. Interest expense. Interest expense increased by 27.5% from W5,749 billion in 2007 to W7,328 billion in 2008, due primarily to a 33.2% increase in interest on deposits from W3,450 billion in 2007 to W4,595 billion in 2008 and a 23.6% increase in interest on debentures from W1,474 billion in 2007 to W1,822 billion in 2008. The increase in interest expense on deposits in 2008 was primarily the result of an increase by 60 basis points in the cost of interest-bearing deposits from 3.46% in 2007 to 4.06% in 2008 and a 13.5% increase in the average volume of interest-bearing deposits from W99,611 billion in 2007 to W113,077 billion in 2008. The principal reason for the increase in interest rates payable on the Bank’s interest-bearing deposits was the increase in interest rates payable on time and savings deposits. The average interest rate paid on the Bank’s time and savings deposits, which accounted for 68.7% of its average interest-bearing deposits in

48

2008, increased by 71 basis points from 3.41% in 2007 to 4.12% in 2008. The average interest rate paid on other deposits, which accounted for 21.5% of the Bank’s average interest-bearing deposits in 2008, increased by 56 basis points from 4.52% in 2007 to 5.08% in 2008. The average interest rate paid on demand deposits, which accounted for 9.8% of the Bank’s average interest-bearing deposits in 2008, increased by 4 basis points from 1.39% in 2007 to 1.43% in 2008. The increase in the average volume of interest-bearing deposits was due primarily to an 18.8% increase in the average volume of time and savings deposits from W65,371 billion in 2007 to W77,630 billion in 2008, and to a lesser extent, a 2.1% increase in the average volume of other deposits from W23,858 billion in 2007 to W24,368 billion in 2008 and a 6.7% increase in the average volume of demand deposits from W10,382 billion in 2007 to W11,079 billion in 2008. The increase in the average volume of time and savings deposits and other deposits was largely due to the aggressive marketing of other deposits based on higher interest rates in the second half of 2008 as part of the Bank’s funding strategy to meet increased demand for corporate loans in light of the global liquidity crisis in the second half of 2008. The 23.6% increase in interest expense on debentures was primarily due to a 17.4% increase in the average volume of debentures from W27,106 billion in 2007 to W31,832 billion in 2008 and an increase by 28 basis points in the average rate for debentures from 5.44% in 2007 to 5.72% in 2008. The 8.7% increase in interest expense on borrowings was primarily due to a 18.7% increase in the average volume of borrowings from W17,004 billion in 2007 to W20,188 billion in 2008, which was partially offset by a decrease by 36 basis points in the average interest rates paid on the Bank’s borrowings from 4.25% in 2007 to 3.89% in 2008. Net interest margin. The Bank’s overall net interest margin decreased by 2 basis points from 2.46% in 2007 to 2.44% in 2008, primarily due to a 17.3% increase in the average volume of its interest-earning assets from W152,086 billion in 2007 to W178,358 billion in 2008 and a decrease in net interest spread by 13 basis points from 2.24% in 2007 to 2.11% in 2008, which was partially offset by a 16.1% increase in net interest income from W3,742 billion in 2007 to W4,344 billion in 2008. The decrease in net interest spread was largely due to a relatively steeper increase in the Bank’s borrowing rates compared to the Bank’s lending rates in 2008 as a result of the relatively longer average duration for the Bank’s interest-bearing liabilities compared to that for its interest-bearing assets. Provision for Loan Losses For a discussion of the Bank’s loan loss provisioning policy, see “Description of Assets and Liabilities — Loan Portfolio — Provisioning Policy”. The Bank’s provision for loan losses significantly increased to W753 billion in 2008 from W422 billion in 2007, primarily reflecting the deterioration in the overall asset quality of its corporate loans due to the economic downturn in Korea in 2008, and particularly as a result of additional allowances made for construction and shipbuilding companies that are being restructured under the supervision of creditor commercial banks and the Government. Additional allowance for construction and shipbuilding companies loans totaled W71 billion.

49

The following table sets forth, for the periods indicated, the components of provision for loan and other credit losses by product type. As of December 31, 2007 2008 % Change (in billions of Won, except percentages) Total provision for loan losses: Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subtotal (A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total (reversal of) provision for off-balance sheet credit instruments: Guarantees and acceptances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unused portions of corporate and retail credit line . . . . . . . . . . . . Subtotal (B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total provision for credit losses (A+B) . . . . . . . . . . . . . . . . . . . . . . . . . . .

W308 114 422

W663 90 753

115.3% (21.1) 78.4

W 8 128 136 W558

W 54 (92) (38) W715

551.4 N/M N/M 27.9%

N/M= Not meaningful

Provision for loan losses for corporate loans increased by 115.3% from W308 billion in 2007 to W663 billion in 2008, primarily as a result of an increase in impaired loans and deterioration in the asset quality of the Bank’s corporate loan portfolio as discussed above. For similar reasons, loan loss allowance against the Bank’s corporate loans increased by 38.1% from W1,217 billion as of December 31, 2007 to W1,679 billion as of December 31, 2008. Net charge-offs of the Bank’s corporate loans increased significantly from W25 billion in 2007 to W241 billion in 2008, the non-performing loan ratio for the Bank’s corporate loans increased from 0.58% in 2007 to 0.63% in 2008, and the delinquency ratio for the Bank’s corporate loans also increased from 0.78% in 2007 to 1.06% in 2008, primarily as a result of deterioration in asset quality of corporate loans as a result of the economic downturn in the second half of 2008. The non-performing loan ratio measures the ratio of loans that are past due more than 90 days to the total loans. The non-performing loans are generally “substandard or below” under asset classifications under Financial Supervisory Service Guidelines, but are not necessarily the same. See “Description of Assets and Liabilities — Loan Portfolio — Provisioning Policy — Loan and Credit Classifications”. Specifically, in December 2008, the Government announced that it would promote swift restructuring of troubled companies in certain industries that have been disproportionately affected by the ongoing economic difficulties, such as construction and shipbuilding industries. These restructurings will be supervised primarily by the major commercial banks that are creditor financial institutions of such companies, with the Government having an oversight role. Provision for loan losses for retail loans decreased by 21.1% from W114 billion in 2007 to W90 billion in 2008, and total allowance for losses for the Bank’s retail loans increased by 4.7% from W659 billion in 2007 to W690 billion in 2008, primarily as a result of the increase in the total volume of retail loans. Net charge-offs of the Bank’s retail loans decreased by 57.1% from W84 billion in 2007 to W36 billion in 2008, the non-performing loan ratio for the Bank’s retail loans decreased from 0.21% in 2007 to 0.17% in 2008, and the delinquency ratio for the Bank’s retail loans also decreased from 0.39% in 2007 to 0.35% in 2008, primarily as a result of improved asset quality in the home and mortgage loans, which comprise the substantial majority of the Bank retail loans, due to stricter lending policies involving more stringent loan-to-value and debt-to-income ratios applied in making such loans. Provision for off-balance sheet credit instruments decreased substantially from 2007 to 2008 due to the decrease in the amount of credit lines provided in 2008 mainly as a result of the Bank’s overall efforts to reduce credit exposure in light of the difficult economic environment in Korea.

50

Non-interest Income (Expense), net The following table sets forth, for the periods indicated, the components of the Bank’s net non-interest income and expense. As of December 31, 2007 2008 % Change (in billions of Won, except percentages) Fees and commission income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized gain (loss) on trading securities . . . . . . . . . . . . . . . . . . . . . Realized gain (loss) from sale of trading securities . . . . . . . . . . . . . . Realized gain from sale of available-for-sale securities . . . . . . . . . . (Reversal of) impairment loss on available-for-sale securities . . . . Gain (loss) from equity method investment securities . . . . . . . . . . . . Gain (loss) from disposition of equity method investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain from sale of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on foreign currency transactions . . . . . . . . . . . . . . . . . . . . . . . . . . Gain (loss) on derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General and administrative expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total net non-interest income (expenses) . . . . . . . . . . . . . . . . . . . . . . . W 889 (8) 5 1,035 122 94 W 776 9 (9) 117 (114) 56 96 4 482 (386) (2,117) (426) W(1,512) (12.7)% N/M N/M (88.7) N/M (40.4) N/M (89.4) N/M N/M (10.0) 6.8 N/M

(136) 38 163 122 (2,353) (399) W (428)

N/M = Not meaningful

The significant increase in net non-interest expense was mainly attributable to a significant decrease in realized gain from sale of available-for-sale securities and loss on derivatives in 2008 compared to gain on derivatives in 2007, which was partially offset by gain on foreign currency transactions. The decrease in realized gain from sale of available-for-sale securities was principally due to the sale of the Bank’s interest in LG Card to Shinhan Financial Group in March 2007. The change from gain on derivatives to loss on derivatives was mainly due to a significant increase in the trading volume of foreign currency-related derivatives related to significant fluctuations in exchange rates between the Won and the U.S. dollar in 2008. Income Tax Expense Income tax expense decreased by 43.3% from W804 billion in 2007 to W456 billion in 2008 due primarily to a decrease in taxable income from W2,653 billion in 2007 to W2,123 billion in 2008. The statutory tax rate was 27.5% in both 2007 and 2008. The Bank’s effective rate of income tax decreased to 24.0% in 2008 from 28.2% in 2007, due to the reduction in the future tax rate to be applied to deferred tax assets. Net Income As a result of the foregoing, the Bank’s net income decreased by 29.4% from W2,051 billion in 2007 to W1,447 billion in 2008.

51

2007 Compared to 2006 Net Interest Income The following table shows, for the periods indicated, the principal components of the Bank’s net interest income. Year Ended December 31, 2006(1) 2007 % Change (in billions of Won, except percentages) Interest and dividend income: Interest and fees on loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest and dividends on securities . . . . . . . . . . . . . . . . . . . . . . Interest and dividends on trading assets . . . . . . . . . . . . . . . . . . Other interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total interest and dividend income . . . . . . . . . . . . . . . . . . Interest expense: Interest on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest on debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest on borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net interest margin(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W6,672 1,038 70 116 W7,896 W2,577 1,134 576 62 4,349 W3,547 2.71%

W7,989 1,170 220 112 W9,491 W3,450 1,474 722 103 5,749 W3,742 2.46%

19.7% 12.7 N/M (3.4) 20.2% 33.9% 30.0 25.3 66.1 32.2 5.5%

Notes: (1) Includes information for former Shinhan Bank for the three months ended March 31, 2006, which was merged into Chohung Bank to form the Bank in April 2006. See “Unaudited Non-consolidated Pro Forma Income Statement”. The ratio of net interest income to average interest-earning assets. See “— Average Balance and Volume and Rate Analysis — Average Balance Sheet and Related Interest”.

(2)

Interest and dividend income. The 20.2% increase in interest and dividend income was due primarily to a 19.7% increase in interest and fees on loans. The increase in interest and fees on loans was due primarily to the following: Š a 22.7% increase in interest and fees on corporate loans from W3,806 billion in 2006 to W4,669 billion in 2007, which was due primarily to a 21.8% increase in average balance of corporate loans from W59,589 billion in 2006 to W72,590 billion in 2007, and an increase by 4 basis points in the average yield on such loans from 6.39% in 2006 to 6.43% in 2007; and a 15.8% increase in interest and fees on retail loans from W2,866 billion in 2006 to W3,320 billion in 2007, which was due primarily to a 12.3% increase in the average balance of retail loans from W44,113 billion in 2006 to W49,519 billion in 2007, and an increase by 20 basis points in the average yield on such loans from 6.50% in 2006 to 6.70% in 2007.

Š

The increase in the average balance of corporate loans was primarily as a result of increased lending to small- and medium-sized enterprises due to increased marketing efforts targeted at such customers. The increase in the average balance of retail loans was primarily as a result of continued demand for such loans in 2007 and an increase in the volume of loan extensions with respect to such loans.

52

Overall, the average balance of the Bank’s loans increased by 17.8% from W103,702 billion in 2006 to W122,109 billion in 2007. The increase in the average yields for corporate loans and retail loans was primarily due to the general rise in market interest rates in Korea from 2006 to 2007. Interest expense. Interest expense increased by 32.2% from W4,349 billion in 2006 to W5,749 billion in 2007, due primarily to a 33.9% increase in interest on deposits from W2,577 billion in 2006 to W3,450 billion in 2007 and a 30.0% increase in interest on debentures from W1,134 billion in 2006 to W1,474 billion in 2007. The increase in interest expense on deposits in 2007 was primarily the result of a 16.8% increase in the average volume of interest-bearing deposits from W85,283 billion in 2006 to W99,611 billion in 2007 and an increase by 44 basis points in the cost of interest-bearing deposits from 3.02% in 2006 to 3.46% in 2007. The 30.0% increase in interest expense on debentures was primarily due to a 23.0% increase in the average volume of debentures from W23,037 billion in 2006 to W27,106 billion in 2007, which mainly resulted from the increased issuance of foreign long-term debt by the Bank to take advantage of lower funding costs in the low exchange rate environment in 2007, and an increase by 29 basis points in the average interest rate paid on the Bank’s debentures from 5.15% in 2006 to 5.44% in 2007, primarily as a result of the general increase in the average market interest rate in 2007. The 25.3% increase in interest expense on borrowings was primarily due to a 3.2% increase in the average volume of borrowings from W16,483 billion in 2006 to W17,004 billion in 2007, which mainly resulted from an increase by 76 basis points in the average interest rate paid on the Bank’s borrowings from 3.49% in 2006 to 4.25% in 2007, primarily as a result of the general increase in the average market interest rate in 2007 and the increased issuance of foreign long-term debt by the Bank to take advantage of lower funding costs based on Won appreciation in 2007. Net interest margin. The Bank’s overall net interest margin decreased by 25 basis points from 2.71% in 2006 to 2.46% in 2007, primarily due to a 16.2% increase in the average volume of the Bank’s interest earning assets from W130,894 billion in 2006 to W152,086 billion in 2007, which was partially offset by a 5.5% increase in net interest income from W3,547 billion in 2006 to W3,742 billion in 2007. Provision For Loan Losses For a discussion of the Bank’s loan loss provisioning policy, see “Description of Assets and Liabilities — Loan Portfolio — Provisioning Policy”. The Bank’s provision for loan losses increased by 9.6% to W422 billion in 2007 from W385 billion in 2006, primarily as a result of the increase in provision for loan losses of corporate loans, which was partially offset by an improvement in the overall asset quality of the Bank’s loan resulting from the relative paucity of problem loans in the retail sector compared to prior years and the implementation of stricter loan review process.

53

The following table sets forth for the periods indicated the components of provision for loan and other credit losses by product type. As of December 31, 2006 2007 % Change (in billions of Won, except percentages)
(1)

Total (reversal of) provision for loan losses: Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subtotal (A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total (reversal of) provision for off-balance sheet credit instruments: Guarantees and acceptances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unused portions of corporate and retail credit line . . . . . . . . . . . Subtotal (B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total (reversal of) provision for credit losses (A+B) . . . . . . . . . . . . . .

W154 231 W385

W308 114 W422

100.0% (49.4)% 9.6%

W (12) 98 86 W471

W 8 128 136 W558

N/M 30.8 58.4 18.5%

N/M = not meaningful Note: (1) Includes information for former Shinhan Bank for the three months ended March 31, 2006, which was merged into Chohung Bank to form the Bank in April 2006. See “Unaudited Non-consolidated Pro Forma Income Statement”.

Provision for loan losses for corporate loans significantly increased by 100.0% from W154 billion in 2006 to W308 billion in 2007, primarily as a result of an increase in the total volume of the Bank’s corporate loans, which increased from W66,437 billion in 2006 to W75,120 billion in 2007, and a change in the Financial Supervisory Service guideline on the minimum provisions for corporate loans. In 2007, the Financial Supervisory Service increased the minimum level of provisions for corporate loans classified as “normal” from 0.70% in 2006 to 0.85% generally (and in the case of loans to construction, real estate and rental services, retail and wholesale, lodging and restaurant industries and other industries that are particularly susceptible to market conditions, 0.90%) in 2007. In addition, the ratio of non-performing corporate loans for the Bank increased from 0.45% in 2006 to 0.58% in 2007, and the delinquency ratio for corporate loans for the Bank increased from 0.67% in 2006 to 0.78% in 2007, primarily due to the deterioration of asset quality for the Bank’s corporate loans from 2006 to 2007 consistent with the downturn in the business cycle in 2007 compared to 2006. Provision for retail loans significantly decreased to W114 billion in 2007 from W231 billion in 2006, due primarily to the continued improvement in asset quality in home and mortgage loans as a result of the stricter lending policies involving more stringent loan-to-value and debt-to-income ratios applied in making such loans as well as the continued strength in the housing market in 2007, which more than offset the increase in the total volume of retail loans. The ratio of non-performing loans for the Bank’s retail loans decreased from 0.32% in 2006 to 0.21% in 2007, and the delinquency ratio for retail loans decreased from 0.49% in 2006 to 0.39% in 2007, primarily as a result of the improved asset quality. Net charge-offs of retail loans increased from W72 billion in 2006 to W84 billion in 2007. Provision for off-balance sheet credit instruments increased substantially from 2006 to 2007 primarily due to an increase in the volume of commitments related to real estate and other project financing.

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Non-interest Income (Expense), net The following table sets forth for the periods indicated the components of the Bank’s net noninterest income (expense). As of December 31, 2006 2007 % Change (in billions of Won, except percentages)
(1)

Fees and commission income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized gain (loss) on trading securities . . . . . . . . . . . . . . . . . . . . . . Realized gain (loss) from sale of trading securities . . . . . . . . . . . . . . . Realized gain (loss) from sale of available-for-sale securities . . . . . (Reversal of) impairment loss on available-for-sale securities . . . . . Gain (loss) from equity method investment securities . . . . . . . . . . . . Gain (loss) from disposition of equity method investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain (loss) from sale of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain (loss) on foreign currency transactions . . . . . . . . . . . . . . . . . . . . . Gain (loss) on derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General and administrative expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total net non-interest income (expense) . . . . . . . . . . . . . . . . . . . . . . . . .

W

659 2 6 402 207 91

W

889 (8) 5 1,035 122 94

34.9% N/M (16.7) N/M (41.1) 3.3 N/M 0.0 26.4 (37.4) 2.6 104.6 (43.6)%

— (136) 38 38 129 163 195 122 (2,293) (2,353) (195) (399) W (759) W (428)

N/M = Not meaningful Note: (1) Includes information for former Shinhan Bank for the three months ended March 31, 2006, which was merged into Chohung Bank to form the Bank in April 2006. See “Unaudited Non-consolidated Pro Forma Income Statement”.

The 43.6% decrease in net noninterest expense was mainly attributable to a significant increase in realized gain from sale of available-for-sale securities related to the LG Card acquisition. Income Tax Expense Income tax expense increased by 53.1% from W525 billion in 2006 to W804 billion in 2007 as a result of an increase in taxable income from W1,734 billion in 2006 to W2,653 billion in 2007. The statutory tax rate was 27.5% in 2006 and 2007. The Bank’s effective rate of income tax increased to 28.2% in 2007 from 26.8% in 2006. Net Income As a result of the foregoing, the Bank’s net income increased by 43.3% from W1,431 billion in 2006 to W2,051 billion in 2007. Results by Principal Business Segment In February 2009, the Bank underwent internal restructuring, as a result of which it became organized into the following five business segments: Š business development, which primarily focuses on making loans to or receiving deposits from individual customers, wealth management customers and institutions such as hospitals, airports and schools; corporate banking, which primarily focuses on making loans to or receiving deposits from corporations, including small- and medium-sized enterprises;

Š

55

Š

treasury and international banking, which primarily focuses on internal asset and liability management, trading of securities and derivatives, investment portfolio management and other related businesses, management of overseas subsidiaries and branch operations and other international business; investment banking, which primarily focuses on business related to investment banking; and other, which primarily focuses on administration of bank operations.

Š Š

See Note 26 to the notes to the unaudited non-consolidated financial statements as of and for the three months ended March 31, 2009 for the results of operation for such period by segment for the foregoing business segments. Due to the changes in segment reporting in February 2009, comparison of the results of operation by segment for the three months ended March 31, 2008 and 2009 is unavailable. For the years ended December 31, 2006, 2007 and 2008, the Bank was organized into the following four major business segments: Š Š Š Š retail banking; corporate banking; treasury and international banking; and other banking services.

The following table sets forth the results of operation by segment for the years ended December 31, 2006, 2007 and 2008.

Segment Results(1) Total Revenues(2) Year Ended December 31, (3) 2006 2007 2008 2006 2007 2008 (in billions of Won, except percentages) Retail banking . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate banking . . . . . . . . . . . . . . . . . . . . . . Treasury and international business . . . . . . . Other banking services . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W1,163 472 371 317 W2,323 W1,681 W1,124 W 2,871 525 2,058 1,056 (696) (556) 5,938 1,345 (723) 1,646 W2,855 W1,903 W11,511 W 3,296 1,130 5,199 2,581 W12,206 W 4,310 7,815 27,383 2,907 W42,415

Notes: (1) (2) (3) Represents income per segment before income taxes. Represents net interest income plus non-interest income. Includes information for former Shinhan Bank for the three months ended March 31, 2006, which was merged into Chohung Bank to form the Bank in April 2006. See “Unaudited Non-consolidated Pro Forma Income Statement”.

Retail Banking The retail banking segment consists of the products provided by the Bank’s retail banking branches to principally retail customers. Such products principally consist of mortgage and home equity loans and other

56

consumer loans, deposits and other savings products, as well as corporate loans provided to small businesses. The table below provides the income statement data for the retail banking segment for the periods indicated. Year Ended December 31, % Change (1) 2006 2007 2008 2006/2007 2007/2008 (in billions of Won, except percentages) Income statement data Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision (reversal) for loan losses . . . . . . . . . . . . . . . Noninterest expense including depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Segment results(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W2,274 597 2,871 291 1,417 W1,163

W2,328 968 3,296 222 1,393 W1,681

W2,311 1,999 4,310 362 2,824 W1,124

2.4% 62.1 14.8 (23.7) (1.7) 44.5%

(0.7)% 106.5 30.8 63.1 102.7 (33.1)%

Notes: (1) Includes information for former Shinhan Bank for the months ended March 31, 2006, which was merged into Chohung Bank to form the Bank in April 2006. See “Unaudited Non-consolidated Pro Forma Income Statement”. Net income per segment before income taxes.

(2)

Comparison of 2008 to 2007 The overall segment results for retail banking decreased by 33.1% from W1,681 billion in 2007 to W1,124 billion in 2008. Net interest income decreased by 0.7% due primarily to a decrease in net interest margin, while the average volume of lending to individuals and households remained relatively stable. The decrease in net interest margin in 2008 was due primarily to the relatively higher rise in the borrowing rates as a result of the global liquidity crisis in the second half of 2008 compared to the lending rates which are pegged to a base rate determined by the Government, which declined in the second half of 2008 as part of the government effort to increase liquidity in the market. Non-interest income increased by 106.5% due primarily to an increase in fees from an increased volume of derivatives transactions related to interest rate hedging undertaken for funding for retail loans, which more than offset an decrease in fees and commissions from the sales of investment fund products arising from the downturn in the Korean stock market in the second half of 2008. Provision for loan losses increased by 63.1% due primarily to the increase in corporate loans provided by the Bank’s retail banking branches to small businesses, the asset quality of which deteriorated. Non-interest expense including depreciation and amortization increased by 102.7% due primarily to the return of deposits held in accounts which have been dormant for more than five years pursuant to new regulatory requirements and mandatory contributions made to the court deposit management commission, as well as an increase in expenses related to the increased volume of derivatives transactions. Comparison of 2007 to 2006 The overall segment results for retail banking increased by 44.5% from W1,163 billion in 2006 to W1,681 billion in 2007. Net interest income increased by 2.4% due primarily to the increase in the Bank’s interest rate in line with the general rise of market interests in Korea and the increase in the average volume of lending to individuals and households as a result of greater consumer demand for retail loans.

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Non-interest income increased by 62.1% due primarily to the increase in the fees and commissions from the sales of investment fund products, which gained popularity among consumers in 2007 due to the bullish stock market in Korea. Provision for loan losses on retail loans decreased by 23.7% due primarily to the non-recurrence of additional provisioning the Bank was required to undertake in 2006 to meet the new minimum required provisioning levels established by the Financial Services Commission for retail loans, as well as the overall improvement in the asset quality of the Bank’s retail loan portfolio, which more than offset the effect from the increase in the total volume of retail lending. Noninterest expense including depreciation and amortization decreased by 1.7% due primarily to the non-occurrence of fees related to credit card services performed by Chohung Bank in 2006 prior to the split-off of Chohung Bank’s credit card division in April 2006. Corporate Banking The corporate banking segment consists of the products provided by the Bank’s corporate banking branches principally to corporate customers, most of which are small- and medium-sized enterprises, chaebols and public enterprises. Activities within the segment include providing loans, overdrafts and other credit facilities and procuring deposits. The table below provides the income statement data for the corporate banking segment for the periods indicated. Year Ended December 31, % Change (1) 2006 2007 2008 2006/2007 2007/2008 (in billions of Won, except percentages) Income statement data Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision (reversal) for loan losses . . . . . . . . . . . . . . . Non-interest expense including depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Segment results(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W 833 223 1,056 142 442 W 472

W 864 266 1,130 137 468 W 525

W2,476 5,339 7,815 326 5,431 W2,058

3.7% 19.3 7.0 (3.5) 5.9 11.2%

186.6% N/M N/M 138.0 N/M N/M

N/M = not meaningful Notes: (1) (2) Includes information for former Shinhan Bank for the three months ended March 31, 2006, which was merged into Chohung Bank to form the Bank in April 2006. See “Unaudited Non-consolidated Pro Forma Income Statement”. Net income per segment before income taxes.

Comparison of 2008 to 2007 The overall segment results for corporate banking improved significantly from W525 billion in 2007 to W2,058 billion in 2008. Net interest income increased significantly due primarily to an increase in the volume of corporate lending due principally to increased reliance by large corporations on loans from banks for funding in light of the tightened liquidity in the credit markets in the second half of 2008 and the Bank’s marketing campaigns to attract high-quality corporate borrowers.

58

Noninterest income increased significantly, due primarily to an increase in the sales volume of foreign currency-related derivatives as a result of an increase in volatility in exchange rates and an enlarged exposure to naked currency positions among the Bank’s customers. Provision for loan losses on corporate loans increased significantly, mainly as a result of additional allowance made for troubled construction and shipbuilding companies and the deterioration in asset quality for corporate loans. Non-interest expense including depreciation and amortization increased significantly, due primarily to an increase in the sales volume of foreign currency-related derivatives. Comparison of 2007 to 2006 The overall segment results for corporate banking increased by 11.2% from W472 billion in 2006 to W525 billion in 2007. Net interest income increased by 3.7% due primarily to the increase in the average volume of lending to corporate customers, particularly small- and medium-sized enterprises, following aggressive marketing to this segment, which more than offset the increase in funding costs related to the increasing flight of customer funds from depositary bank accounts to investment fund products. Non-interest income increased by 19.3% due primarily to valuation loss of currency forwards as a result of Won appreciation compared to other currencies. Provision for loan losses on corporate loans decreased by 3.5% due primarily to a decrease in charge-offs and an increase in recoveries of charged-off loans. Noninterest expense including depreciation and amortization increased by 5.9% due primarily to the increase in the number of employees related to new hiring, the increased depreciation and amortization expenses related to the integration of the information technology systems of former Shinhan Bank and Chohung Bank in 2006 and valuation gains of currency forwards as a result of Won appreciation compared to other currencies. Treasury and International Banking The treasury and international business segment consists primarily of the Bank’s business of trading of, and investment in, debt securities and, to a lesser extent, in equity securities for its own accounts, handling its treasury activities such as correspondence banking, and entering into derivatives transactions. The table below provides the income statement data for the treasury and international banking segment for the periods indicated. % Change Year Ended December 31, 2006(1) 2007 2008 2006/2007 2007/2008 (in billions of Won, except percentages) Income statement data Net interest income (expense) . . . . . . . . . . . . . . . . . . . Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision (reversal) for loan losses . . . . . . . . . . . . . . Non-interest expense including depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Segment results(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W (172) W (265) W (578) 6,110 5,464 27,961 5,938 (13) 5,580 W 371 5,199 38 5,857 27,383 (4) 27,943

54.1% (10.6) (12.4) N/M 5.0% N/M

118.1% N/M N/M (110.5) N/M (20.1)%

W (696) W (556)

N/M = not meaningful Notes: (1) (2) Includes information for former Shinhan Bank for the three months ended March 31, 2006, which was merged into Chohung Bank to form the Bank in April 2006. See “Unaudited Non-consolidated Pro Forma Income Statement”. Net income per segment before income taxes.

59

Comparison of 2008 to 2007 The net loss of treasury and international banking decreased by 20.1% from W696 billion in 2007 to W556 billion in 2008. Net interest expense increased by 118.1% due primarily to an increase in deposits (including special highinterest deposit products) and the increased funding costs for corporate debentures issued by the Bank as a result of the tightened credit market in the second half of 2008. Non-interest income and non-interest expense including depreciation and amortization increased significantly, in each case, due primarily to an increase in the sales volume of foreign currency-related derivatives as a result of an increase in volatility in exchange rates and an enlarged exposure to naked currency positions of the Bank’s counterparties. Comparison of 2007 to 2006 The overall segment results for treasury and international banking significantly deteriorated from net income before income taxes of W371 billion in 2006 to net loss of W696 billion in 2007. Net interest expense increased by 54.1% due primarily to an increase in foreign-currency denominated loans obtained by the Bank to reduce its long-term funding costs by taking advantage of the appreciation of Korean Won, as well as the increase in the issuance of Won-denominated corporate bonds. Non-interest income decreased by 10.6% due primarily to a decrease in gains from foreign currency transactions, largely due to the appreciation of Won against other currencies in 2007. Non-interest expense including depreciation and amortization increased by 5.0% due primarily to an increase in losses and other costs related to derivative products, which was mainly a result of the increased number of interest rate derivatives transactions undertaken in 2007 in light of the general increase in market interest rates. Other Banking Services This segment consists primarily of the Bank’s trust account management services, merchant banking business and non-performing loan collection services. The table below provides the income statement data for the other banking services segment for the periods indicated. % Change Year Ended December 31, (1) 2006 2007 2008 2006/2007 2007/2008 (in billions of Won, except percentages) Income statement data Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision (reversal) for loan losses . . . . . . . . . . . . . . . Non-interest expense including depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Segment results(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W 612 1,034 1,646 45 1,284 W 317

W 815 1,766 2,581 62 1,174 W1,345

W 135 2,772 2,907 245 3,385 W (723)

33.2% 70.8 56.8 37.8 (8.6) N/M

(83.4)% 57.0 12.6 N/M 188.3 (153.8)%

N/M = not meaningful Notes: (1) (2) Includes information for former Shinhan Bank for the three months ended March 31, 2006, which was merged into Chohung Bank to form the Bank in April 2006. See “Unaudited Non-consolidated Pro Forma Income Statement”. Net income per segment before income taxes.

60

For segment reporting purposes, each segment result reflects provision for loan losses that are allocated based on the ending balances of loans for each segment in order to show a meaningful comparison of performance within such segment and compared to other segments. In other banking segment, provision (reversal) for loan losses amounted to W45 billion, W62 billion and W245 billion in 2006, 2007 and 2008, respectively. The Bank frequently issues subordinated debt securities, which carry interest rates that are higher than market interest rates. As subordinated debt securities have the overall effect of improving the Bank’s capital adequacy and benefit the Bank in its entirety, the management believes it is inappropriate to allocate the higher costs associated with issuing subordinated debt to a particular business segment. Accordingly, the Bank allocates and reflects the difference between the higher costs associated with subordinated debt and market interest rates in this segment as interest expenses. Comparison of 2008 to 2007 The overall segment results for other banking deteriorated significantly from net income of W1,345 billion in 2007 to net loss of W723 billion in 2008. The Bank recorded net interest expense in 2008 compared to net interest income in 2007 due primarily to an aggressive marketing campaign to sell high interest-bearing deposit products to its corporate customers, which more than offset the increase in interest income from increased lending to large corporate borrowers. Non-interest income increased by 57.0% due primarily to an increase in gains from foreign currency derivative transactions, which largely resulted from the increased volume of such transactions due to the wide fluctuations in the exchange rates between Korean Won and the U.S. dollar. Non-interest expense including depreciation and amortization increased significantly due primarily to an increase in losses from foreign currency derivative transactions, which largely resulted from the increased volume of such transactions due to the wide fluctuations in the exchange rates between Korean Won and the U.S. dollar. Comparison of 2007 to 2006 The overall segment results for other banking increased significantly from W317 billion in 2006 to W1,345 billion in 2007. Net interest income increased by 33.2% due primarily to an increase in interest earned on commercial papers and debentures, which was partially offset by an increase in interests payable on certificates of deposit and other time deposits. Non-interest income increased by 70.8% due primarily to an increase in gains from the disposition of available-for-sale securities as a result of the change in the accounting method into an equity accounting method for the 7.15% equity interest previously held by the Bank prior to the acquisition of the controlling equity interest in LG Card in March 2007. Non-interest expense including depreciation and amortization decreased by 8.6% due primarily to the absence in 2007 in impairment in available-for-sale securities recorded in 2006.

61

Financial Condition Assets The following table sets forth, as of the dates indicated, the principal components of the Bank’s assets. As of As of March 31, % Change December 31, 2007 2008 2009 2006/2007 2007/2008 2008/2009 (in billions of Won, except percentages)

2006

Cash and due from banks . . . . Trading securities . . . . . . Investment securities . . . . . . Loans . . . . . . . . . . . Less allowance for loan losses . . . . . . . . . Loans, net . . . . . . . Property and equipment . . . . . Other assets . . . . . Total assets . . . . . .

W

9,013 657 23,003 114,342

W

6,313 5,165

W

8,579 1,913

W 13,900 3,869 36,678 143,196

(30.0)% N/M 18.1 11.3

35.9% (63.0) 27.7 16.1

62.0% 102.3 5.8 (3.1)

27,164 127,281

34,679 147,711

(1,627) 112,715 2,199 6,610 W154,197

(1,876) 125,405 2,313 8,746 W175,106

(2,369) 145,342 2,292 20,764 W213,569

(2,562) 140,634 2,265 18,903 W216,249

15.3 11.3 5.2 32.3 13.6%

26.3 15.9 (0.9) N/M 22.0%

8.2 (3.2) (1.2) (9.0) 1.3%

Comparison of March 31, 2009 to December 31, 2008 The Bank’s assets increased by 1.3% from W213,569 billion as of December 31, 2008 to W216,249 billion as of March 31, 2009 principally due to a 62.0% increase in cash and due from banks from W8,579 billion as of December 31, 2008 to W13,900 billion as of March 31, 2009, which was partially offset by a 3.2% decrease in loans, on a net basis, from W145,342 billion as of December 31, 2008 to W140,634 billion as of March 31, 2009. Cash and due from banks increased principally as a result of increased cash deposits made by the Bank with the Bank of Korea. Loans, on a net basis, decreased principally as a result of the tightened lending policy in the first quarter of 2009 in light of concerns about the continued economic downturn and a decrease in repurchase contracts with the Bank of Korea. For further information on the Bank’s assets, see “Description of Assets and Liabilities”. Comparison of December 31, 2008 to December 31, 2007 The Bank’s assets increased by 22.0% from W175,106 billion as of December 31, 2007 to W213,569 billion as of December 31, 2008 principally due to an increase in the amount of loans and other assets. Loans increased by 15.90%, on a net basis, from W125,405 billion as of December 31, 2007 to W145,342 billion as of December 31, 2008, principally due to an increase in corporate loans and other assets, which consist largely of foreign-currency related derivatives. The Bank’s corporate loans increased by 22.04% from W75,120 billion as of December 31, 2007 to W91,675 billion as of December 31, 2008, mainly due to an increase in lending to large corporations. Loans to large corporations increased largely as a result of increased demand from large corporations for bank loans due to the relative scarcity of alternative financing arising from the global liquidity crisis in the second half of 2008. Other assets, which principally consist of foreign-currency related derivatives, increased significantly from W8,746 billion as of December 31, 2007 to W20,764 billion as of December 31, 2008, largely due to the increased use of such derivatives for hedging against the wide fluctuations in foreign exchange rates in 2008, particularly the Won against the U.S. dollar.

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For further information on the Bank’s assets, see “Description of Assets and Liabilities”. Comparison of December 31, 2007 to December 31, 2006 The Bank’s assets increased by 13.56% from W154,197 billion as of December 31, 2006 to W175,106 billion as of December 31, 2007 principally due to the increase in the amount of loans. The amount of the Bank’s loans increased 11.26%, on a net basis, from W112,715 billion as of December 31, 2006 to W125,405 billion as of December 31, 2007. This increase was due largely to the increase in corporate loans. The Bank’s corporate loans increased 13.07% from W66,437 billion as of December 31, 2006 to W75,120 billion as of December 31, 2007, mainly due to increased lending to small- and medium-sized enterprises in line with the increased competition among commercial banks in this type of lending. For further information on the Bank’s assets, see “Description of Assets and Liabilities”. Liabilities and Stockholders’ Equity The following table sets forth, as of the dates indicated, the principal components of the Bank’s total liabilities and stockholders’ equity. As of As of December 31, March 31, % Change 2007 2008 2009 2006/2007 2007/2008 2008/2009 (in billions of Won, except percentages) W126,849 28,139 17,476 11.6% 16.4 18.2 14.9% 15.1 18.5 6.4% (13.2) (14.4)

2006

Deposits . . . . . . . . Debentures . . . . . . Borrowings . . . . . . Retirement and severance benefits, net . . . Other liabilities . . . . . . Total liabilities . . Stockholders’ equity . . . . . . . . . Total liabilities and stockholders’ equity . . . . . . . . .

W 93,006 W103,818 W119,238 24,213 28,171 32,418 14,579 17,226 20,410

108 12,624 144,530

102 14,470 163,787

133 29,422 201,621

126 31,692 204,282

(5.6) 14.6 13.3

30.4 103.3 23.1

(5.3) 7.7 1.3

9,667

11,319

11,948

11,967

17.1

5.6

0.2

W154,197

W175,106

W213,569

W216,249

13.6%

22.0%

1.3%

Comparison of March 31, 2009 to December 31, 2008 The Bank’s total liabilities increased by 1.3% from W201,621 billion as of December 31, 2008 to W204,282 billion as of March 31, 2009, primarily due to a 6.4% increase in deposits from W119,238 billion as of December 31, 2008 to W126,849 billion as of March 31, 2009, which was partially offset by a 13.2% decrease in debentures from W32,418 billion as of December 31, 2008 to W28,139 billion as of March 31, 2009 and a 14.4% decrease in borrowings from W20,410 billion as of December 31, 2008 to W17,476 billion as of March 31, 2009. Deposits increased largely as a result of an increased preference for safer financial products by the Bank’s customers following a downturn in the Korean stock market. Debentures and borrowings decreased largely as a result of increased difficulties in obtaining funding in light of the global credit crisis. The Bank’s stockholders’ equity remained stable from W11,948 billion as of December 31, 2008 to W11,967 billion as of March 31, 2009.

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Comparison of December 31, 2008 to December 31, 2007 The Bank’s total liabilities increased by 23.1% from W163,787 billion as of December 31, 2007 to W201,621 billion as of December 31, 2008, primarily due to an increase in deposits at the Bank and an increase in other liabilities. The increase in deposits was largely due to an increase in high-interest time and savings deposits, which were marketed heavily to attract deposit in light of the global liquidity crisis in the second half of 2008. Other liabilities, which principally consist of foreign currency-related derivatives, increased significantly from W14,470 billion as of December 31, 2007 to W29,422 billion as of December 31, 2008, largely due to the increased use of such derivatives for hedging against the wide fluctuations in foreign exchange rates in 2008, particularly the Won against the U.S. dollar. The Bank’s stockholders’ equity increased by 5.6% from W11,319 billion as of December 31, 2007 to W11,948 billion as of December 31, 2008, primarily due to an increase in the unappropriated retained earnings, which was partially offset by the valuation loss on available-for-sale securities due to the downturn in the Korean stock market. Comparison of December 31, 2007 to December 31, 2006 The Bank’s total liabilities increased by 13.3% from W144,530 billion as of December 31, 2006 to W163,787 billion as of December 31, 2007, primarily due to an increase in deposits at the Bank largely to meeting the funding needs from the increase in the volume of loans made by the Bank. The Bank’s stockholders’ equity increased by 17.1% from W9,667 billion as of December 31, 2006 to W11,319 billion as of December 31, 2007, largely due to the issuance of preferred shares to fund the acquisition of LG Card. Liquidity and Capital Resources The Bank is exposed to liquidity risk arising from the funding of its lending, trading and investment activities and in the management of trading positions. The goal of liquidity management is for the Bank to be able, even under adverse conditions, to meet all of the Bank’s liability repayments on time and fund all investment opportunities. For an explanation of how the Bank manages its liquidity risk, see “Risk Management — Market Risk Management — Market Risk Management for Non trading Activities — Liquidity Risk Management”. In the Bank’s opinion, the working capital is sufficient for its present requirements. The following table sets forth the Bank’s capital resources as of December 31, 2008 and March 31, 2009. As of December 31, 2008 (in billions (in millions of of Won) US dollars) Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Call money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Borrowings from the Bank of Korea . . . . . . . . . . . . Other short-term borrowings . . . . . . . . . . . . . . . . . . . Stockholders’ equity(1) . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W119,238 25,428 4,584 1,004 21,812 7,928 W179,994 US$ 86,586 18,465 3,330 729 15,839 5,757 US$130,706 As of March 31, 2009 (in billions (in millions of of Won) US dollars) W126,849 22,357 3,141 909 19,208 7,928 W180,392 US$ 92,113 16,234 2,281 660 13,948 5,757 US$130,993

Note: (1) Includes only the shareholder’s paid-in capital.

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Due to the Bank’s history as a traditional commercial bank, its primary source of funding has historically been and continues to be customer deposits. Deposits amounted to W103,818 billion, W119,238 billion and W126,849 billion as of December 31, 2007 and 2008 and March 31, 2009, respectively, which represented approximately 66.2%, 66.3% and 70.3%, respectively, of the Bank’s total funding as of such dates. The Bank meets most of its funding requirements through short-term funding sources, which consist primarily of customer deposits. As of December 31, 2008, approximately 66.7% of the Bank’s total deposits had current maturities of one year or less. In the past, largely due to the lack of alternative investment opportunities for individuals and households in Korea, especially in light of the low interest rate environment and volatile stock market conditions, a substantial portion of such customer deposits were rolled over upon maturity and accordingly provided a stable source of funding for the Bank. However, at times of a bullish stock market as in 2007 and the first half of 2008, a significant portion of customer deposits maintained at banks shifted to money market funds and other brokerage accounts maintained at securities companies, which resulted in temporary difficulty in finding sufficient funding for Korean banks in general, including the Bank, in the first half of 2008. While customers have, in large part, reverted to bank deposits when the Korean stock market turned bearish, the Bank cannot assure you that there will not be significant outflows in bank deposits in the future resulting from upturns in the stock market or the availability of other attractive investment alternatives. In addition, during times of sudden and significant devaluations of Korean Won against the U.S. dollar as was the case recently amid the global liquidity crisis, Korean commercial banks, including the Bank, had difficulties in refinancing or obtaining optimal amounts of foreign currency-denominated funding on terms commercially acceptable to the Bank. While the Bank currently is not facing liquidity difficulties in any material respect, if the Bank is unable to obtain the funding it needs on terms commercially acceptable to it for an extended period of time for reasons of Won devaluation or otherwise, the Bank may not be able to ensure its financial viability, meet regulatory requirements, implement its strategies or compete effectively. The Bank may use secondary and other funding sources, such as debt and equity securities issuances and repurchase transactions, to complement, or, if necessary, replace funding through customer deposits. In addition, the Bank receives from time to time capital contributions from Shinhan Financial Group. For example, in December 2008, the Bank received a capital contribution of W800 billion from Shinhan Financial Group to improve the Bank’s capital adequacy in light of the concerns regarding the growing global credit crisis. The Bank depends on long-term debt as a significant source of funding, principally in the form of corporate debt securities. Since 1999, the Bank has actively issued and continues to issue long-term debt securities with maturities of over one year in the Korean fixed-income market. The Bank has maintained one of the highest credit ratings of AAA in the domestic fixed-income market since 1999. In addition, the Bank may also issue long-term debt securities denominated in foreign currency in the overseas market. As of December 31, 2007 and 2008 and March 31, 2009, the Bank’s long-term debt amounted to W20,973 billion, W25,428 billion and W22,357 billion, respectively. Given the Bank’s relatively high debt rating in the fixed-income market in Korea, the Bank believes that it will be able to obtain replacement funding through the issuance of long-term debt securities. The Bank’s interest rates on long-term debt securities are in general 20 to 40 basis points higher than the interest rates offered on its deposits. However, since long-term debt securities are not subject to premiums paid for deposit insurance and the Bank of Korea reserves, the Bank estimates that its funding costs on long-term debt securities are on a par with its funding costs on deposits. Credit ratings affect the cost and other terms upon which the Bank is able to obtain funding. Domestic and international rating agencies regularly evaluate the Bank and their ratings of the Bank’s long-term debt are based on a number of factors, including the Bank’s financial strength as well as conditions affecting the financial services industry generally. In light of the ongoing difficulties in the financial services industry and the financial markets, there can be no assurance that the rating agencies will maintain the current ratings or outlooks for the Bank. For example, in February 2009, Moody’s have put 10 commercial banks in Korea, including the Bank, on a negative outlook, as a result of which the Bank’s credit rating for foreign currency-denominated long-term unsecured senior debt was downgraded to A2 from A1. There is no assurance that other rating agencies will not follow suit or place in an even more negative credit rating

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category. The Bank’s failure to maintain current credit ratings and outlooks could increase the cost of its funding, limit its access to capital markets and borrowings, and require the Bank to post additional collateral in financial transactions, any of which could adversely affect its liquidity, net interest margins and profitability. As of June 15, 2009, the credit ratings by S&P, Moody’s and Fitch assigned to the Bank were as follows: As of June 15, 2009 S&P Moody’s AA2

Fitch A

Secondary funding sources also include call money, borrowings from the Bank of Korea and other shortterm borrowings which amounted to W24,424 billion, W27,400 billion and W23,258 billion, as of December 31, 2007 and 2008 and March 31, 2009, each representing 15.6%, 15.2% and 12.9%, respectively, of the Bank’s total funding as of such dates. In addition, pursuant to the Bank’s liquidity risk management policies designed to ensure compliance with required capital adequacy and liquidity ratios, Shinhan Financial Group has set limits to the amount of liquidity support by it to its subsidiaries to 70% of its total stockholders’ equity and the amount of liquidity support to a single subsidiary to 35% of its total stockholders’ equity. Contractual Obligations, Commitments and Guarantees In the ordinary course of the Bank’s business, it has certain contractual cash obligations and commitments which extend for several years. As the Bank is able to obtain liquidity and funding through various sources as described in “— Liquidity and Capital Resources” above, the Bank does not believe that these contractual cash obligations and commitments will have a material effect on its liquidity or capital resources. Contractual Cash Obligations The following table sets forth the Bank’s contractual cash obligations as of March 31, 2009. As of March 31, 2009 Payments Due by Period(3) Less than 3 months 3-6 months 7-12 months 1-3 years (in billions of Won) W 1,403 4,094 45,543 W51,040 W 1,420 7,012 8,544 W16,976 More than 3 years Total

Borrowings(1) . . . . . . . . . . . . . . . . . . . . . Debentures(2) . . . . . . . . . . . . . . . . . . . . . . Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W10,305 2,534 29,472 W42,311

W 2,911 2,011 9,335 W14,257

W 1,437 12,511 33,955 W47,903

W 17,476 28,162 126,849 W172,487

Notes: (1) (2) (3) Borrowings exclude Won-denominated or foreign currency denominated debentures. W23 billion of bond discounts and premiums on redemption of debentures is excluded. As of March 31, 2009, accrued severance indemnities amounted to W305 billion.

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Commitments and Guarantees In the normal course of the Bank’s banking activities, it makes various commitments and guarantees to meet the financing needs of its customers. Commitments and guarantees are usually in the form of, among others, commitments to extend credit, commercial letters of credit, standby letter of credit and performance guarantees. The contractual amount of these financial instruments represents the maximum possible loss amount if the counter party draws down the commitment or the Bank should fulfill its obligation under the guarantee and the counter party fails to perform under the contract. See “Description of Assets and Liabilities — Commitments and Guarantees”. The following table sets forth, on a consolidated basis, the Bank’s commitments and guarantees as of December 31, 2008 and March 31, 2009. These commitments, apart from certain guarantees and acceptances, are not included within the Bank’s unaudited non-consolidated balance sheet. As of December 31, 2008 Commitment Expiration by Period More Less than than 5 1 Year 1-5 Years Years Total (in billions of Won) Commitments to extend credit(1): Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liquidity facilities to SPEs(2) . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial letters of credit(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial standby letters of credit(4) . . . . . . . . . . . . . . . . . . . . . . . . Other financial guarantees(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Performance letters of credit and guarantees(6) . . . . . . . . . . . . . . Acceptances(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Credit derivatives(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W42,558 8,003 677 2,990 311 740 7,831 472 29 W63,611 W 3,951 292 2,688 3 95 31 3,653 — — W10,713 W3,044 W49,553 1 8,296 1,007 4,372 — 2,993 — 406 23 794 66 11,550 — 472 — 29 W4,141 W78,465

As of March 31, 2009 Commitment Expiration by Period More Less than than 5 1 Year 1-5 Years Years Total (in billions of Won) Commitments to extend credit(1): Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liquidity facilities to SPEs(2) . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial letters of credit(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial standby letters of credit(4) . . . . . . . . . . . . . . . . . . . . . . . . Other financial guarantees(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Performance letters of credit and guarantees(6) . . . . . . . . . . . . . . Acceptances(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Credit derivatives(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W46,833 8,336 813 2,771 332 863 8,836 548 29 W67,239 W 6,192 290 2,995 14 94 32 3,070 — — W12,687 W4,063 W57,088 1 8,627 884 4,692 — 2,785 — 426 23 918 52 11,958 — 548 — 29 W7,145 W87,071

Notes: (1) Commitments to extend credit represent unfunded portions of authorizations to extend credit in the form of loans. The commitments expire on fixed dates and a customer is required to comply with predetermined conditions to draw funds under the commitments.

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(2) (3)

Liquidity facilities to SPEs represent irrevocable commitments to provide contingent credit lines including commercial paper purchase agreements to special purpose entities for which the Bank serves as the administrator. Commercial letters of credit are undertakings on behalf of customers authorizing third parties to draw drafts on the Bank up to a stipulated amount under specific terms and conditions. These are generally short-term and collateralized by the underlying shipments of goods to which they relate. Commitments to extend credit, including credit lines, are in general subject to provisions that allow the Bank to withdraw such commitments in the event there are material adverse changes affecting an obligor. Financial standby letters of credit are irrevocable obligations to pay third-party beneficiaries when the Bank’s customers fail to repay loans or debt instruments, which are generally in foreign currencies. A substantial portion of these standby letters of credit are secured by underlying assets, including trade-related documents. Other financial guarantees are used in various transactions to enhance the credit standing of the Bank’s customers. They provide irrevocable assurance, subject to satisfaction of certain conditions, that the Bank will make payment in the event that its customers fail to fulfill their obligations to third parties. These financial obligations include a return of security deposits and the payment of service fees. Performance letters of credit and guarantees are issued to guarantee customers’ tender bids on construction or similar projects or to guarantee completion of such projects in accordance with contractual terms. They are also issued to support a customer’s obligation to supply products, commodities, maintenance or other services to third parties. Acceptances represent guarantees by the Bank to pay a bill of exchange drawn on a customer. The Bank expects most acceptances to be presented, but reimbursement by the customer is normally immediate. The Bank discloses written notional amounts of certain derivatives contracts that do not meet the characteristics of derivatives under the Interpretation of Korea Accounting Standard No. 53-70 as part of guarantee exposure.

(4)

(5)

(6)

(7) (8)

Off-Balance Sheet Arrangements The Bank has several types of off-balance sheet arrangements, including guarantees for loans, debentures, trade financing arrangements, guarantees for other financings, credit lines, letters of credit and credit commitments. Details of the Bank’s off-balance sheet arrangements are provided in Note 16 in the notes to the Bank’s non-consolidated financial statements included in this offering circular.

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THE KOREAN BANKING INDUSTRY Unless otherwise expressly stated, the information and statistics set out in this section are derived from publicly available information, including materials published by the Financial Services Commission. No further verification has been made by the Bank or any of its affiliates or advisers. The banking sector in Korea is composed of five specialized banks, seven nationwide commercial banks, six regional commercial banks and 39 branches of foreign banks as of March 31, 2009. The specialized banks are organized under, or chartered by, special laws and are designed to meet the needs of specific sectors of the Korean economy in accordance with Government policy, that cannot be met by commercial banks due to limited resources or lack of profitability. The Korea Development Bank, for example, offers long-term facility investment funds to major industries in Korea, while The Export-Import Bank of Korea offers export loans and trade finance. Industrial Bank of Korea focuses on the small- and medium-sized enterprises sector while National Agricultural Cooperative Federation and National Federation of Fisheries Cooperatives support their respective industries. All of these specialized banks also provide traditional deposit products, except for The Export-Import Bank of Korea. The commercial banks are designed to serve the general public and corporate sectors. The seven nationwide banks consist of the Bank, Kookmin Bank, Woori Bank, Hana Bank, Korea Exchange Bank, Citibank and Standard Chartered First Bank Korea. Amongst these, the Bank, Kookmin Bank, Woori Bank and Hana Bank are major banking flagships of their respective financial holding companies, established based on the Commercial Act of Korea and the Financial Holding Company Act to facilitate cross-selling opportunities between traditional banking and nonbanking operations and promoting improved resources allocation and capital efficiency. Providing similar services as nationwide banks, the regional banks were limited in principle to operating within the provinces where they are based. Such limitation, however, was abolished on November 27, 1998. Except for the customers of their branches in Seoul, the regional banks’ main business clients are small and medium-sized companies in their regions. The regional banks are Pusan Bank, Daegu Bank, Kwangju Bank, Jeonbuk Bank, Kyongnam Bank and Jeju Bank. Kwangju Bank, Jeonbuk Bank, and Kyongnam Bank are subsidiaries of Woori Financial Group while Jeju Bank is a subsidiary of Shinhan Financial Group. As in most countries, commercial banks in Korea may engage in a wide range of business. Their core activities include the taking of deposits, the extension of loans and discounts, remittances and collections, and foreign exchange. They also handle such business as guarantees and acceptances and own-account securities investment. Specific authorization is required for each area of nonbank business in which they engage such as the trust and credit card businesses. In addition, they are also expanding their businesses into noninterest but fee-based businesses such as bancassurance and fund sales.

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BUSINESS Introduction Former Shinhan Bank was established in 1982 as the first privately funded commercial bank in Korea. Chohung Bank was established in 1897 and was the oldest financial institution in Korea. Former Shinhan Bank and Chohung Bank were merged on April 3, 2006 and the new bank was named “Shinhan Bank”. The Bank provides a wide range of banking products and services to small- and medium-sized enterprises, large corporations and individuals in Korea through its nationwide network of branches. As of March 31, 2009, the Bank had 944 domestic branches and 10 overseas branches. The Bank’s extensive branch network and its retail customer base provide it with a stable and relatively low cost funding source. Won-currency deposits of the Bank amounted to W36,056 billion as of December 31, 2008, and W40,308 billion as of March 31, 2009. The Bank has eight consolidated subsidiaries, located in Seoul, Hong Kong, New York, California, Frankfurt, Phnom Penh, Beijing and Almaty. As of March 31, 2009, the total assets, net loans (after deducting allowance for loan losses) and deposits of the Bank, which do not include the assets and liabilities of trust accounts, were W216,249 billion, W140,634 billion and W126,849 billion, respectively. As of December 31, 2008, the total assets, net loans (after deducting allowance for loan losses) and deposits of the bank accounts of the Bank were W213,569 billion, W145,342 billion and W119,238 billion, respectively. As of December 31, 2007, the total assets, net loans (after deducting allowance for loan losses) and deposits of the bank accounts of the Bank were W175,106 billion, W125,405 billion and W103,818 billion, respectively. For 2007, 2008 and the first quarter of 2009, the Bank’s net income was W2,051 billion, W1,447 billion and W74 billion, respectively. The Bank is one of the largest lenders in Korea to small- and medium-sized enterprises. As of December 31, 2008 and March 31, 2009, loans to small- and medium-sized enterprises totaled W61,813 billion and W62,144 billion, respectively, representing, 41.8%, and 43.4% of the loans of the Bank, respectively. As of December 31, 2008 and March 31, 2009, the Bank’s capital adequacy ratio, determined in accordance with the Financial Service Commission requirements which have been formulated using the Foundation Internal Ratings Based (“FIRB”) method, was 13.44% and 14.46%, respectively. See “Supervision and Regulation — Principal Regulations Applicable to Banks — Capital Adequacy”. The Bank’s registration number with the Companies Registry in Korea is 110111-0012809. The Bank has its headquarters at 120, 2-Ka, Taepyung-ro, Chung-Ku, Seoul, Korea. Merger On August 19, 2003, Shinhan Financial Group acquired 543,570,144 shares of Chohung Bank’s common stock from KDIC, which shares represented 80.04 % of Chohung Bank’s outstanding shares. In December 2003, Shinhan Financial Group’s ownership increased to 81.15% following its additional capital injection of W200 billion into Chohung Bank. In June 2004, Shinhan Financial Group acquired the common shares of Chohung Bank that it previously did not own, which were 135,548,285 shares, or 18.85% of total common shares of former Chohung Bank outstanding, through a cash tender offer followed by a small-scale share swap under Korean law. Shinhan Financial Group delisted the common shares of Chohung Bank from the Korea Exchange on July 2, 2004. On April 3, 2006, former Shinhan Bank was merged into Chohung Bank with Chohung Bank being the surviving legal entity. In connection with the merger, Chohung Bank issued 828,505,540 shares of common stock of Chohung Bank in consideration for the assets and liabilities of former Shinhan Bank. Immediately following the merger, Chohung Bank changed its name to “Shinhan Bank”. On April 3, 2006, Chohung Bank’s credit card business was spun-off and merged into Shinhan Card. In connection with the split-merger, 41,207,856 shares of common stock of Shinhan Card were issued to Shinhan Financial Group in exchange for 42,008,463 shares of common stock of Chohung Bank, and

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Shinhan Card assumed assets amounting to W1,967 billion, together with certain liabilities and accumulated other comprehensive income amounting to W1,797 billion, relating to the credit card business of Chohung Bank. As a result of the split-merger, 42,008,463 shares of common stock of Chohung Bank were retired, resulting in a reduction in its stockholder’s equity of approximately W210 billion. Following the merger of the two banks on April 3, 2006, the labor union of the Chohung Bank and the labor union of former Shinhan Bank were integrated in January 2008. As of March 31, 2009, 8,074 employees were members of the integrated union. To date, the Bank has not experienced any significant difficulties in its relationships with the integrated union in connection with the merger. Financial Holding Company Structure In September 2001, former Shinhan Bank formed a financial holding company, Shinhan Financial Group pursuant to the Financial Holding Company Act of Korea. Former Shinhan Bank’s shares were exchanged for those of Shinhan Financial Group. As part of this share exchange, former Shinhan Bank also transferred its holding in Shinhan Capital Co., Ltd. to Shinhan Financial Group. Under the new structure, as of July 1, 2002, former Shinhan Bank was the wholly owned subsidiary of Shinhan Financial Group. For more information on the financial holding company structure, see “Shinhan Financial Group”. Competitive Strengths Strategy Prior to the onset of the current turmoil in the financial services industry and macro-economy in Korea as well as globally, the Bank’s primary strategic focus has been on enhancing its market position in the Korean financial industry, achieving an economy of scale in each major business segment, and seamlessly integrating the business units of the former Shinhan Bank and Chohung Bank. The Bank believes that the level of uncertainty and volatility presented by the ongoing market and economic conditions presents a unique set of challenges and opportunities that requires it to realign its strategic priorities in order to ensure that it positions itself to best weather the current market crisis as well as to capture the opportunities that emerge from it. Accordingly, the Bank plans to take a more “back to basics” approach in protecting and strengthening the fundamentals of, and synergy among, its core business lines, which will serve as the platform for pursing sustainable growth group-wide and further solidifying its competitive leadership, notwithstanding the difficult prospects in the global and domestic market and economic conditions. More specifically, the Bank’s “back to basics” approach in light of the current crisis will focus on the following fundamentals of its core businesses: Further strengthen risk management. The Bank plans to make its risk management system more comprehensive and preemptive in detecting and assessing any known and potential risks through early alerts and multiple contingency management plans. The Bank will also seek to improve its overall asset quality and minimize any reputational risk by reassessing the risk profile of its core businesses and realigning their respective asset portfolios by unburdening a substantial portion of the high-risk assets. Strengthen the profit structure. In order to improve the Bank’s profitability, it plans, among others, to adopt greater differentiation in risk-profiling its products to price them more accurately, aggressively restructure low-profit and overlapping product lines and loss-leaders, conservatively diversify its revenue streams by taking advantage of market openings allowed by regulatory changes, deepen its banking customer relationships by capturing a greater market share of auto payroll deposit accounts and further expand cross-selling opportunities across the group-wide business units. Capture maximum synergy. The Bank plans to continue to assist in building out, in conjunction with Shinhan Financial Group’s groupwide efforts, informational networks and shared databases in order to maximize opportunities for target marketing, up-selling and cross-selling as well as deepening customer loyalty and relationship at the group level.

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The Bank plans to use its strong business fundamentals as described above to become a world-class bank that ranks among the leaders of the banking industry in Asia and globally. The Bank aims to achieve such objective by implementing the following strategies and focusing on the following objectives and initiatives: Pursue new customer-oriented marketing to enhance customer loyalty. To further develop and enhance the loyalty of the Bank’s customers across all business segments, it will (i) develop comprehensive banking services for each customer segment, (ii) formulate customized marketing and business strategies for each customer segment, (iii) strengthen its direct marketing efforts, (iv) explore new businesses to meet changes in customers’ needs, (v) seek to develop innovative products and services, such as ubiquitous banking and foreign financial product investment services and (vi) offer diversified investment products to customers. In particular, the Bank is focusing on the development of its mass-market customer basis. In addition, the Bank plans to combine its commercial banking channels with its investment banking products to create a unique commercial investment banking model in Korea and simultaneously seek investment banking opportunities in the overseas markets. Establish an optimal earnings structure for corporate sustainability. The Bank aims to strengthen its foundation of income sources, with particular efforts to increase its noninterest income. Furthermore, the Bank aims to secure a sound management structure to improve risk management, achieve an optimal balance of funding and funds operations and strengthen its infrastructure and systems to maximize earnings from cross-selling products and services of its affiliates. Establish a sound foundation to compete globally. To enable the Bank to compete in the global financial markets, it aims to (i) improve its brand value, (ii) continue to create customer-oriented operating systems and processes, (iii) establish a system to create, accumulate, utilize and share intellectual property among the Bank and its affiliates, (iv) create a flexible organizational culture that embraces changes in market conditions and customers’ demands and (v) establish a platform to enable the Bank to strengthen its strategic cooperation with foreign financial institutions and create a global network to exchange information and ideas. Creating synergies within the holding company structure of Shinhan Financial Group. Since the establishment of a financial holding company, Shinhan Financial Group, in 2001, the Bank has focused on achieving synergy through cross-selling of products and services of the other subsidiaries of Shinhan Financial Group. The Bank and its affiliates, Goodmorning Shinhan Securities and Shinhan Life Insurance, together serve as the primary distribution channels for the Shinhan Financial Group while the other non bank members of the Shinhan Financial Group are focusing on developing competitive products and services. Examples of the principal products for cross-selling in the retail segment include bancassurance, credit cards, beneficiary certificates and “Financial Network Accounts”, which are integrated accounts for banking, brokerage and insurance services. In particular, the Bank intends to capitalize on the synergistic benefits of the acquisition by Shinhan Financial Group of LG Card and its substantial customer base. See “Shinhan Financial Group”. Establishing and Consolidating the One Portal Network. In order to provide total financial solutions to the customers of the Bank and other members of the Shinhan Financial Group on a real-time basis, the Bank, along with other members of the Shinhan Financial Group, are continuing to develop a one portal network for the Shinhan Financial Group. The one portal network refers to the ability of a corporate or retail customer to have access to a total financial solution through any single point of contact with any member of the Shinhan Financial Group.

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Business Overview The Bank’s Principal Activities The Bank’s principal group activities consist of deposit-taking activities from its retail and corporate customers, which provide the Bank with funding necessary to offer a variety of banking services. The comprehensive banking services that the Bank has traditionally provided are as follows: Š Š retail banking services; corporate banking services, primarily consisting of: Š Š Š Š small- and medium-sized enterprises banking; and large corporate banking;

treasury and securities investment; and trust account management services.

In February 2008, the Bank underwent internal restructuring, as a result of which it became organized into five business segments, consisting of business development, corporate banking, treasury and international banking, investment banking and other services. For more details, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results by Principal Business Segment.” The Bank’s principal activities are not subject to any material seasonal trends. While the Bank has a number of overseas branches and subsidiaries, substantially all of its revenues are generated in Korea. Deposit-Taking Activities The Bank offers many deposit products that target different customer segments with features tailored to each segment’s financial and other profiles. The deposit products offered by the Bank include principally the following: Š Demand deposits. These deposit products do not accrue interest or accrue interest at a lower rate than time or savings deposits and allow the customer to deposit and withdraw funds at any time. These interest-bearing, demand deposits accrue interest at a fixed or variable rate depending on the period and the amount of deposit. Demand deposits constituted approximately 37.9%, 32.2% and 33.7% of the Bank’s total deposits as of December 31, 2007 and 2008 and March 31, 2009, respectively, and paid interest at the average rate of 1.39%, 1.43% and 1.12% in 2007, 2008 and the first quarter of 2009, respectively. Time and savings deposits. Timing and savings deposits consist of time deposit products and savings deposit products. Time deposit products generally require the customer to maintain a deposit for a fixed term during which the deposit accrues interest at a fixed rate or variable rate based on certain financial indexes, including the Korea Composite Stock Price Index (“KOSPI”). If the deposit is withdrawn prior to the end of the fixed term, the customer will be paid a lower interest rate than that originally offered. The term typically ranges from one month to five years. Savings deposit products allow the customer to deposit and withdraw funds at any time and accrue interest at an adjustable interest rate, which is lower than time or installment deposits. Currently, interest on savings deposits ranges from zero to 3.04%. Time and savings deposits constituted approximately 41.3%, 50.8% and 51.9% of the Bank’s total deposits as of December 31, 2007 and 2008 and March 31, 2009, respectively, and paid interest at the average rate of 3.41%, 4.12% and 3.78% in 2007, 2008 and the first quarter of 2009, respectively.

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Š

Other deposits. Other deposits principally include certificate of deposits. Certificate of deposit products typically have maturities from 30 days to 5 years. Interest rates on certificates of deposits are determined based on the length of the deposit and the prevailing market interest rates. Certificates of deposits are sold on a discount to their face value, reflecting the interest payable on the certificates of deposit. Other deposits constituted approximately 20.9%, 17.0% and 14.3% of the Bank’s total deposits as of December 31, 2007 and 2008 and March 31, 2009, respectively, and paid interest at the average rate of 4.52%, 5.08% and 4.36% in 2007, 2008 and the first quarter of 2009, respectively.

The Bank also offers deposits which provide the customer with preferential rights to housing subscriptions under the Housing Construction Promotion Law, and eligibility for mortgage loans. These products include: Housing subscription time deposits, which are special purpose time deposits providing the customer with a preferential right to subscribe for new private apartment units under the Housing Construction Promotion Law. This law sets forth various measures supporting the purchase of houses and the supply of such houses by construction companies. If a potential home-buyer subscribes for these deposit products and holds them for a certain period of time as set forth in the Housing Construction Promotion Law, such deposit customers obtain the right to subscribe for new private apartment units on a priority basis. Such preferential rights are neither transferable nor marketable in the open market. These products accrue interest at a fixed rate for one year and at an adjustable rate after one year, which are consistent with other time deposits. Deposit amounts per account range from W2 million to W15 million depending on the size and location of the dwelling unit. These deposit products target high and middle income households. Housing subscription installment savings deposits, which are monthly installment savings programs providing the customer with a preferential subscription right for new private apartment units under the Housing Construction Promotion Law. Such preferential rights are neither transferable nor marketable in the open market. These deposits require monthly installments of W50,000 to W500,000, have maturities between three and five years and accrue interest at fixed rates depending on the terms, which are consistent with other installment savings deposits. These deposit products target low and middle income households. For information on the Bank’s deposits in Korean Won based on the principal types of deposit products the Bank offers, see “Description of Assets and Liabilities — Funding — Deposits”. The Bank offers varying interest rates on its deposit products depending on the rate of return on its interest earning assets, average funding costs and interest rates offered by other major commercial banks. The Monetary Policy Committee of the Bank of Korea imposes a reserve requirement on Won currency deposits of commercial banks which ranges from 0% to 7%, based generally on the term to maturity and the type of deposit instrument. See “Supervision and Regulation — Principal Regulations Applicable to Banks — Liquidity”. The Depositor Protection Act provides for a deposit insurance system where the Korea Deposit Insurance Corporation guarantees to depositors the repayment of their eligible bank deposits. The deposit insurance system insures up to a total of W50 million per depositor per bank. See “Supervision and Regulation — Principal Regulations Applicable to Banks — Deposit Insurance System”. Retail Banking Services Overview Retail banking services include mortgage and retail lending as well as demand, savings and fixed deposittaking, checking account services, electronic banking and ATM services, bill paying services, payroll and check-cashing services, currency exchange and wire fund transfer. Retail banking has been and will continue to remain one of its core businesses. The Bank’s strategy in retail banking is to provide prompt and comprehensive services to retail customers through increased automation and improved customer service, as well as a streamlined branch network focused on sales. The retail segment places an emphasis on targeting high net worth individuals. The retail loans of the Bank amounted to W56,131 billion and W56,034 billion as of December 31, 2008 and March 31, 2009, respectively.

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Retail Lending Activities The Bank offers various retail loan products, consisting principally of household loans, which target different segments of the population with features tailored to each segment’s financial profile and other characteristics, including each customer’s profession, age, loan purpose, collateral requirements and the duration of the customer’s relationship with the Bank. Household loans consist principally of the following: Š Š Mortgage and home equity loans, mostly consisting of mortgage loans which are loans to finance home purchases and are generally secured by the value of the home being purchased; and Other retail loans, which are loans made to customers for any purpose (other than mortgage and home equity loans), the terms of which vary based primarily upon the characteristics of the borrower and which are either unsecured or secured or guaranteed by deposits or a third party.

As of December 31, 2008, the Bank’s mortgage and home-equity loans and other retail loans accounted for 63.1% and 36.9%, respectively of the Bank’s total Won-denominated retail loans. For secured loans, including mortgage and home equity loans, the Bank’s policy is to lend up to 40% to 60% of the appraisal value of the collateral, by taking into account the value of any lien or other security interest that is prior to its security interest (other than petty claims). As of December 31, 2008, the loan-to-value ratio of mortgage and home equity loans of the Bank was approximately 45.58%. As of December 31, 2008, substantially all of its mortgage and home equity loans were secured by residential property. Due to the rapid increase in mortgage and home equity loans in Korea, in 2005 and 2006, the Financial Services Commission implemented stringent regulations and guidelines that are designed to suppress the increase of loans secured by housing. These regulations include restrictions on banks’ maximum loan-to-value ratios, guidelines with respect to appraisal of collateral, internal control and credit approval policy requirements with regard to housing loans, as well as provisions designed to discourage commercial banks or other financial institutions from instituting incentive-based marketing and promotion of housing loans. In addition to the existing regulations and guidelines, from the second half of 2005 to the first quarter of 2007, the Financial Services Commission implemented additional guidelines to reduce mortgage and home equity loans and stabilize the real estate market, including (i) permitting the term of the loan secured by the borrower’s apartment to be extended only once (ii) reducing the maximum loan-to-value ratio for loans secured by the borrower’s apartment in highly speculated areas, (iii) not allowing mortgage or home equity loans to minors and (iv) lowering the minimum loan-to-value ratio to 40% in respect of loans by banks and insurance companies for the purpose of assisting the purchase of apartments located in highly speculated areas with a purchase price of less than W600 million. Following the onset of the new administration of President Lee Myong Bak whose campaign platform included promises of market-oriented deregulation and, in response to the ongoing recession in the housing market, the Government has rolled back some of the restrictive regulatory initiatives, including raising the loan-to-value ratio to 60% except in three designated highly speculative areas. The Government is reportedly considering other measures in order to bolster the housing market. Despite such recent measures, the Bank believes the outlook for the Korean housing market remains uncertain in light of the ongoing uncertainties surrounding the Korean economy and its financial markets. The following table sets forth the portfolio of the Bank’s retail loans. As of March 31, As of December 31, 2006 2007 2008 2009 (in billions of Won, except percentages) Retail loans(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Percentage of retail loans to total gross loans . . . . . . . . . W47,943 41.9% W52,258 41.0% W56,131 38.0% W56,034 39.1%

Note: (1) Before allowance for loan losses.

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Pricing The interest rates on retail loans made by the Bank are either periodic floating rates (which are based on a base rate determined for three-month, six-month or twelve-month periods derived using an internal transfer price system, which reflects its cost of funding in the market, further adjusted to account for expenses related to lending and profit margin) or fixed rates that reflect its cost of funding, as well as its expenses related to lending and profit margin. Fixed-rate loans are currently limited to maturities of three years and are offered only on a limited basis. For unsecured loans, both types of rates also incorporate a margin based on, among other things, the borrower’s credit score as determined during the Bank’s loan approval process. For secured loans, credit limit is based on the type of collateral, priority with respect to the collateral and loan to value. The Bank can adjust the price to reflect the borrower’s current and/or expected future contribution to its profitability. The applicable interest rate is determined at the time a loan is extended. If a loan is terminated prior to its maturity, the borrower is obligated to pay the Bank an early termination fee of approximately 0.5% to 2.0% of the loan amount in addition to the accrued interest, depending on the timing, the nature of the credit and the amount. As of December 31, 2008, the Bank’s three-month, six-month and twelve-month base rates were approximately 3.93%, 4.67% and 4.96%, respectively. As of March 31, 2009, the Bank’s three-month, six-month and twelve-month base rates were approximately 2.43%, 2.74% and 3.36%, respectively. As of December 31, 2008 and March 31, 2009, the Bank’s fixed rates for home equity loans with a maturity of one year, two years and three years were 8.80%, 9.10% and 9.40%, respectively, and the Bank’s fixed rates for other retail loans with a maturity of one year were from 10.00% to 14.50%, depending on the credit scores of its customers. As of December 31, 2008, approximately 82.0% of the Bank’s total retail loans were priced based on a floating rate and approximately 18.0% were priced based on a fixed rate. As of March 31, 2009, approximately 75.8% of the Bank’s total retail loans were priced based on a floating rate and approximately 24.2% were priced based on a fixed rate. Private Banking Historically, the Bank has focused on customers with high net worth. The Bank’s retail banking services provide a private banking service to its high net worth customers who seek personal advice in complex financial matters. The Bank’s aim is to help enhance the private wealth and increase the financial sophistication of its clients by offering them portfolio/fund management services, tax consulting services and real estate management service. As of March 31, 2009, the Bank operated 16 private banking centers nationwide, including ten in Seoul, two in the suburbs of Seoul and four in other cities located in other regions in Korea. As of March 31, 2009, the Bank had approximately 3,700 private banking customers, who typically are required to have W500 million in deposit or W1 billion in assets under management with the Bank to qualify for its private banking services. Corporate Banking Services Overview The Bank provides corporate banking services to small- and medium-sized enterprises, including enterprises known as “small office, home office” (“SOHO”), which are small enterprises operated by individuals or households, and, to a lesser extent, to large corporations, including corporations that are affiliated with chaebols. The Bank also lends to government-controlled companies.

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The following table sets forth the balances and percentage of the Bank’s total lending attributable to each category of its corporate lending business as of the dates indicated. As of December 31, As of March 31, 2007 2008 2009 (in billions of Won, except percentages)

2006

Small- and medium-sized enterprises loans(1) . . . . . . . . W44,330 66.7% W53,512 71.2% W61,813 67.4% W62,144 71.2% Large corporate loans(2) . . . . . . 22,107 33.3 21,608 28.8 29,862 32.6 25,118 28.8 Total corporate loans . . . . . . . . W66,437 100.0% W75,120 100.0% W91,675 100.0% W87,262 100.0%

Notes: (1) Represents the principal amount of loans extended to corporations meeting the definition of small- and medium-sized enterprises under the Basic Act on Small- and Medium-sized Enterprises and its Presidential Decree. Includes loans to government-controlled companies.

(2)

Small- and Medium-sized Enterprises Banking Under the Basic Act on Small- and Medium-sized Enterprises and its Presidential Decree, small- and medium-sized enterprises are defined as companies which (i) do not have employees, sales, paid-in capital or assets exceeding the number or the amount, as the case may be, specified in accordance with their types of businesses in the Presidential Decree and (ii) do not belong to a conglomerate as defined in the Monopoly Regulations and Fair Trade Act. In order to qualify as a small- and medium-sized enterprise, none of its shareholders holding 30% or more of its total issued and outstanding voting shares can have (i) full-time employees of 1,000 or more and (ii) assets of W500 billion or more as of the end of the immediately preceding fiscal year. As of December 31, 2008 and March 31, 2009, the Bank provided loans in the amount W61,813 billion and W62,144 billion to the small- and medium-sized enterprises, which numbered approximately 200,000 as of both December 31, 2008 and March 31, 2009. The Bank’s small- and medium-sized enterprises banking business has traditionally been and will remain one of its core businesses. As a result of the adoption of restrictive regulatory measures in 2005 to 2007 designed to curb speculation in the housing market, lending to the small- and medium-sized enterprises was an area of intense competition among the commercial banks in Korea as opportunities to expand home and mortgage loans diminished. However, since the onset of the global financial crisis and economic downturns in Korea starting in the second half of 2008, the Bank has sharply reduced new lending to the small- and medium-sized enterprises and is currently focusing on maintaining the asset quality of existing loans to these enterprises. The Bank, which has traditionally focused on small- and medium-sized enterprises lending, is wellpositioned to succeed in the small- and medium-sized enterprises market, in light of its marketing capabilities (which has provided the Bank with significant brand loyalty) and its conservative credit rating system for credit approval. To maintain or increase its market share of small- and medium-sized enterprises lending, the Bank has: Š positioned itself based on accumulated expertise. The Bank believes that it has a good understanding of the credit risks embedded in this market segment and to develop loan and other products specifically tailored to the needs of this market segment; operated a relationship management system to provide targeted and tailored customer service to small-and medium-sized enterprises. The Bank currently has 144 corporate banking branches with relationship management teams. These relationship management teams market products and review and approve smaller loans that pose less credit risks; and continued to focus on cross-selling loan products with other products. For example, when the Bank lends to small- and medium-sized enterprises, it also explores opportunities to cross-sell retail loans or deposit products to the employees of those companies or to provide financial advisory services.

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Large Corporate Banking Large corporate customers consist primarily of member companies of chaebols and financial institutions. Large corporate loans of the Bank amounted to W29,862 billion and W25,118 billion as of December 31, 2008 and March 31, 2009, respectively. The Bank aims to be a one-stop financial solution provider and a partner in corporate expansion and growth to its corporate clients. To this end and in order to take advantage of the recent deregulation in the Korean financial industry as a result of the adoption of the Financial Investment Services and Capital Markets Act, the Bank provides investment banking services, including real estate financing, overseas real estate project financing, large development project financing, infrastructure financing, structured financing, equity investments/venture investments, mergers and acquisitions consulting, securitization and derivatives services, including securities and derivative products and foreign exchange trading. The Bank, through its subsidiary, Shinhan Asia Limited, opened its investment banking center in Hong Kong in October 2006 to arrange financing for and offer consulting services to Korean companies expanding their business overseas. Due to the liquidity shortage as a result of the ongoing turbulence in the global financial markets, the Bank believes that opportunities for large corporate banking, particularly loans involving large sums of principal, will generally be limited at least in the near future. In light of this outlook, the Bank aims to focus on minimizing its credit risks in the area of large corporate banking, developing a diversified set of financial solutions to its corporate customers and bolstering human capital and other platforms to take advantage of future business opportunities in corporate banking. Electronic Corporate Banking The Bank offers to corporate customers a Web-based total cash management service through “Shinhan Bizbank”. Shinhan Bizbank supports all types of banking transactions from basic transaction history inquiries and fund transfers to opening letters of credit, trade finance, payment management, collection management, sales settlement service, acquisition settlement service, B2B settlement service, sweeping and pooling. Corporate Lending Activities The Bank’s principal loan products for corporate customers are working capital loans and facilities loans. Working capital loans, which include discounted notes and trade financing, are generally loans used for general working capital purposes. Facilities loans are provided to finance the purchase of equipment and construction of manufacturing plants. As of December 31, 2008, working capital loans and facilities loans amounted to W47,820 billion and W13,490 billion, respectively, representing 78.0% and 22.0% of the Bank’s total Won-denominated corporate loans. As of March 31, 2009, working capital loans and facilities loans amounted to W48,213 billion and W13,713 billion, respectively, representing 77.9% and 22.1% of the Bank’s total Won-denominated corporate loans. Working capital loans generally have a maturity of one year, but may be extended on an annual basis for an aggregate term of three years in the case of unsecured loans and five years in the case of secured loans. Facilities loans, which are generally secured, have a maximum maturity of ten years. Loans to corporations may be unsecured or secured by real estate, deposits or guaranty certificates. When evaluating the extension of loans to corporate customers, the Bank reviews the corporate customer’s creditworthiness, credit score, value of any collateral or third-party guarantee. The value of any collateral is defined using a formula that takes into account the appraised value of the property, any prior liens or other claims against the property and an adjustment factor based on a number of considerations including, with respect to property, the average value of any nearby property sold in a court-supervised auction during the previous year. The Bank revalues any collateral when a secured loan is renewed or if a trigger event occurs with respect to the loan in question.

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Pricing The Bank establishes the price for its corporate loan products based principally on their respective cost of funding and the expected loss rate based on the borrower’s credit risk. As of December 31, 2008, 0.37% of the Bank’s corporate loans with outstanding maturities of one year or more had interest rates that were not fixed but were variable by reference to its market rate. The Bank generally determines the pricing for its corporate loans as follows: Interest rate = (The Bank’s periodic market floating rate or reference rate) plus transaction cost plus a credit spread plus risk premium plus or minus a discretionary adjustment rate.

Depending on the situation and the Bank’s agreement with the borrower, the Bank may use either its periodic market floating rate or the reference rate as the base rate in calculating its pricing. As of December 31, 2008, the Bank’s periodic market floating rates (which are based on a base rate determined for three-month, six-month, one-year, two-year, three-year or five-year periods derived using the Bank’s market rate system) were 3.93% for three months, 4.73% for six months, 5.06% for one year, 5.513% for two years, 5.70% for three years and 6.11% for five years. As of the same date, the Bank’s reference rate was 8.75%. The reference rate refers to the base lending rate used by the Bank. The reference rate is determined annually by the Bank’s Asset & Liability Management Committee based on, among others, the Bank’s funding costs, cost efficiency ratio and discretionary margins. Transaction cost is added to reflect the standardized transaction cost assigned to each loan product and other miscellaneous costs, including contributions to the Credit Guarantee Fund and education taxes. The credit spread is added to the periodic floating rate to reflect the expected loss from a borrower’s credit rating and the value of any collateral or payment guarantee. In addition, the Bank adds a risk premium that is measured by the unexpected loss that exceeds the expected loss from the credit rating assigned to a particular borrower. A discretionary adjustment rate is added or subtracted to reflect the borrower’s current and/or future contribution to the Bank’ profitability. In the event of additional credit provided by way of a guarantee of another, the adjustment rate is subtracted to reflect such change in the credit spread. In addition, depending on the price and other terms set by competing banks for similar borrowers, the Bank may reduce the interest rate to compete more effectively with other banks. Treasury and Securities Investment The Bank engages in treasury and securities investment business, which involves, among other things, the following activities: Š Š Š Š treasury; securities investment and trading; derivatives trading; and international business.

Treasury The Bank’s treasury division provides funds to all of the Bank’s business operations and ensures the liquidity of its operation. To secure long-term stable funds, the Bank uses fixed and floating rate notes, debentures, structured financing and other advanced funding sources. As for overseas funding, the Bank closely monitors the feasibility of raising funds in currencies other than the U.S. dollar, such as Japanese Yen and the Euro. In addition, the Bank makes call loans and borrows call money in the short-term money market. Call loans are short-term lending among banks and financial institutions in either Korean Won or foreign currencies, in amounts exceeding W100 million, with maturities of typically one day.

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Securities Investment and Trading The Bank invests in and trades securities for its own accounts in order to maintain adequate sources of liquidity and to generate interest, dividend income and capital gains. The Bank’s trading and investment portfolios consist primarily of Korean treasury securities and debt securities issued by Government agencies, local governments or certain government-invested enterprises and debt securities issued by financial institutions. Equity securities held by the Bank consist of equities listed on the KRX KOSPI Market and KRX KOSDAQ Market of the Korea Exchange. For a detailed description of the Bank’s securities investment portfolio, see “Description of Assets and Liabilities — Investment Portfolio”. Derivatives Trading The Bank provides and trades a range of derivatives products. The derivatives products offered by the Bank include: Š Š Š Š Š Š Š interest rate swaps, options, and futures relating to Korean Won interest rate risks and LIBOR risks, respectively; cross-currency swaps, largely for Korean Won against U.S. dollars, Japanese Yen and Euros; equity and equity-linked options; foreign currency forwards, swaps and options; commodity forwards, swaps and options; credit derivatives; and KOSPI 200 indexed equity options.

The Bank’s trading volume in terms of notional amount was W329,643 billion, W395,015 billion and W100,538 billion, in 2007, 2008 and the first quarter of 2009, respectively. Such derivative operations generally focus on addressing the needs of corporate clients to hedge their risk exposure, and back-to-back derivatives entered into to hedge the Bank’s risk exposure that results from such client contracts. The Bank also enters into derivative trading contracts to hedge the interest rate and foreign currency risk exposures that arise from the Bank’s own assets and liabilities. In addition, on a limited basis, the Bank engages in proprietary trading of derivatives within its regulated open position limits. See “Description of Assets and Liabilities — Derivatives”. International Business The Bank also engages in treasury and investment activities in international capital markets, principally including foreign currency-denominated securities trading, foreign exchange trading and services, traderelated financial services, international factoring services and foreign retail banking operations through the Bank’s overseas branches and subsidiaries. The Bank aims to become a leading bank in Asia and expand its international business by focusing on further bolstering its overseas network, localizing its overseas operations and diversifying its product offerings, particularly in terms of asset management, in order to meet the varied financial needs of its current and potential customers overseas. Trust Account Management Services Overview The Bank’s trust account management services involve management of trust accounts, primarily in the form of money trusts. Trust account customers are typically individuals seeking higher rates of return than those offered by bank account deposits. Because deposit reserve requirements do not apply to deposits held in trust accounts as opposed to deposits held in bank accounts, and regulations governing trust accounts tend

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to be less strict, the Bank is generally able to offer higher rates of return on trust account products than on bank account deposits. However, due to the ongoing low interest environment, in recent years the Bank has not been able to offer highly attractive rates of return on its trust account products. Trust account products generally require higher minimum deposit amounts than comparable bank account deposit products do. Compared to comparable bank account products, deposits in trust accounts are invested primarily in securities and, to a lesser extent, in loans, as the relative shortage of funding sources require that trust accounts be invested in a higher percentage of liquid assets. Under the Banking Act of 1950, as amended, assets accepted in trust accounts are required to be segregated from other assets of the trustee bank and are not available to satisfy the claims of the depositors or other creditors of such bank. Accordingly, trust accounts are accounted for and reported separately from bank accounts. See “Supervision and Regulation”. Trust accounts are regulated by the Trust Act and the Financial Investment Services and Capital Markets Act, and most national commercial banks offer similar trust account products. The Bank earns income from trust account management services, which is recorded as net trust management fees. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Operating Results — 2008 Compared to 2007 — Non-interest Income (Expense), net”. As of December 31, 2007 and 2008 and March 31, 2009, the Bank had total trust assets of W34,259 billion, W37,123 billion and W32,623 billion, respectively, comprised principally of real property investments of W8,403 billion, W9,942 billion and W10,023 billion, respectively; securities investments of W11,903 billion, W10,628 billion and W8,985 billion, respectively; and loans in the principal amount of W677 billion, W744 billion and W693 billion, respectively. Securities investments consisted of corporate bonds, government-related bonds and other securities, primarily commercial paper. As of December 31, 2007 and 2008 and March 31, 2009, equity securities constituted 3.4%, 3.0% and 3.3%, respectively, of the Bank’s total trust assets. Loans made by trust accounts are similar in type to those made by the Bank’s bank accounts, except that they are made only in Korean Won. As of December 31, 2007 and 2008 and March 31, 2009, approximately 60.4%, 64.4% and 62.9%, respectively, of the amount of loans from the trust accounts were collateralized or guaranteed. In making investments from funds received for each trust account, each trust product maintains investment guidelines applicable to each such product which set forth, among other things, company, industry and security type limitations. Money trusts managed by the Bank’s trust account business were W13,574 billion, W12,822 billion and W10,458 billion as of December 31, 2007 and 2008 and March 31, 2009, respectively. Trust Products The Bank offers primarily two types of money trust accounts through its retail branch network: guaranteed fixed rate trusts and variable rate trusts. Š variable rate trust accounts. Variable rate trust accounts are not entitled to a guaranteed return on the deposits, except in the limited cases of principal guaranteed variable rate trust accounts, for which the payment of the principal amount is guaranteed. As of December 31, 2007 and 2008 and March 31, 2009, the Bank’s variable rate trust accounts amounted to W10,019 billion, W9,311 billion and W6,990 billion, respectively, and its principal guaranteed variable rate trust accounts amounted to W3,546 billion, W3,510 billion and W3,467 billion, respectively. The Bank charges a lump sum or a fixed percentage of the assets held in such trusts as a management fee, and, depending on the trust products, is also entitled to an additional fee in cases of early termination of trusts by the customer. Korean banks are currently allowed to guarantee the principal of the following types of variable rate trust account products: (i) existing individual pension trusts, (ii) new individual pension trusts, (iii) existing retirement pension trusts, (iv) new retirement pension trusts, (v) pension trusts and (vi) employee retirement benefit trusts. guaranteed fixed rate trust accounts. Guaranteed fixed rate trust accounts are entitled to a guaranteed return of the principal as well as a fixed rate of return. Upon termination of these trusts, the Bank is entitled to investment returns from the management of these trusts, net of the guaranteed

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returns paid to customers and any related expenses. In the past, Korean commercial banks, including the Bank, offered two types of guaranteed fixed rate trust products: general unspecified money trusts and development money trusts. However, since January 1999, the banks have been prohibited from offering new guaranteed fixed rate trust products, and the guaranteed fixed rate trust products currently serviced by the banks are carryovers from the past and have been dwindling in volume as the products mature. As of December 31, 2007 and 2008 and March 31, 2009, the guaranteed fixed rate trust products maintained by the Bank amounted to W9.7 billion, W1.0 billion and W1.0 billion, respectively. If income from a guaranteed fixed rate trust account is insufficient to pay the guaranteed amount, such deficiency must be satisfied from (i) first, special reserves maintained in such trust accounts, (ii) secondly, trust fees and (iii) lastly, funds transferred from the bank accounts of the Bank. Distribution Network The Bank offers a wide range of financial services to retail and corporate customers through a variety of distribution networks and channels. The following table presents the geographical distribution of the Bank’s distribution network based on the branch offices and other distribution channels, as of March 31, 2009. Distribution Channels in Korea Shinhan Bank Corporate Total 25 5 7 2 1 1 1 1 1 37 1 38 419 198 178 59 42 14 27 13 23 795 149 944

Retail Seoul metropolitan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Kyunggi Province . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Six major cities: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Incheon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Busan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Kwangju . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taegu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ulsan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taejon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sub-total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Banking Service Channels 394 193 171 57 41 13 26 12 22 758 148 906

The Bank’s services are primarily dispensed through an extensive branch network, complemented by selfservice terminals and electronic banking. As of March 31, 2009, the Bank had 944 branches in Korea, including 906 retail banking branches (including banking offices) and 38 corporate banking branches. The Bank’s branch network is designed to focus on providing one-stop banking services tailored to one of three customer categories: retail customers, small- and medium-sized enterprise customers and large corporate customers. Retail Banking Channels In Korea, many retail transactions are conducted in cash or with credit cards, and conventional checking accounts are generally not offered or used as widely as in other countries. As a result, an extensive retail branch network plays an important role for Korean banks as customers generally handle most transactions through bank branches. Recently, one of the key initiatives at the Bank has been to target high net worth individuals through private banking. The Bank’s private banking services are provided principally through private banking relationship managers who, within target customer groups, assist clients in developing individual investment strategies. The Bank believes that its relationship managers help foster lasting relationships with the Bank’s clients. Private banking customers also have access to the Bank’s retail branch network and other general banking products the Bank offers through its retail banking operations.

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Corporate Banking Channels In order to service corporate customers and attract high-quality corporate borrowers, in particular within the small-and medium-sized enterprises sector, the Bank has developed a corporate relationship management system within its domestic branch network and strengthened its marketing capability. The Bank’s corporate relationship managers help foster enduring relationships with the Bank’s corporate customers, particularly the small- and medium-sized enterprises. Self-Service Terminals In order to complement the Bank’s banking branch network, it maintains an extensive network of automated banking machines, which are located in branches and in unmanned outlets. These automated banking machines consist of ATMs, cash dispensers and passbook printers. As of March 31, 2009, the Bank had 1,022 cash dispensers and 6,125 ATMs. The Bank has actively promoted the use of these distribution outlets in order to provide convenient service to customers, as well as to maximize the marketing and sales functions at the branch level, reduce employee costs and improve profitability. The Bank believes that the use of its automated banking machines has increased in recent years. In 2008, automated banking machine transactions accounted for approximately 28.7% and 50.3% of total deposit and withdrawal transactions of the Bank in terms of the number of transactions and fee revenue generated, respectively. Electronic Banking The Bank’s internet banking services are more comprehensive than those available at the counter, including such services as 24-hour account balance posting, real-time account transfer, overseas remittance and loan requests. The Bank also provides the Mobile Banking service, which enables customers to make speedy, convenient and secure banking transactions using mobile phones. As the purpose of e-banking is primarily cost-saving rather than profit generation, the substantial majority of the Bank’s electronic banking transactions do not generate fee income. Overseas Branch Network The table below sets forth the Bank’s overseas banking subsidiaries and branches as of March 31, 2009. Business Unit Subsidiaries Shinhan Asia Ltd. Shinhan Bank Europe GmbH Shinhan Bank America Shinhan Vina Bank Shinhan Bank (China) Limited Shinhan Khmer Bank Limited Shinhan Bank Kazakhstan Limited Shinhan Bank Canada Branches Tokyo Osaka Fukuoka New York Singapore London Ho Chi Minh City Mumbai Hong Kong New Delhi Representative Office Shinhan Mexico Representative Office Location Year Established or Acquired

Hong Kong SAR, China Germany New York, U.S.A. Vietnam Beijing, China Cambodia Kazakhstan Toronto, Canada

1982 1994 2003 2000 2008 2007 2008 2008

Japan Japan Japan U.S.A. Singapore United Kingdom Vietnam India China India

1988 1986 1997 1989 1990 1991 1995 1996 2006 2006

Mexico City, Mexico

2008

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The principal activities of these overseas branches and subsidiaries are trade financing and local currency funding for Korean companies and Korean nationals in the overseas markets, and providing foreign exchange services in conjunction with the Bank’s headquarters. On a limited basis, these overseas branches and subsidiaries also engage in investment and trading of securities of foreign issuers. Subsidiaries As of March 31, 2009, the Bank had eight consolidated subsidiaries, details of which are provided in the table below. Subsidiary Location Equity ownership Business (Percentage) Shinhan Asia Limited Hong Kong 100.0 Investment banking services, arranging financing and consulting services for Korean companies, and engaging in investment banking business in China and Southeast Asian countries. General banking services, mostly for Korean customers living in the United States. Overseas lending, mostly to Korean corporations and/or their affiliates. General banking services, local investment banking and related services and arranging financing and consulting services for Korean companies. Financial services to both local and Korean communities and companies. Management of trust assets and related funds. Also provides consulting services and management of indirect investment securities. Established in February 2008 but has not launched its operations to date. General banking services, mostly for Korean customers living in Canada.

Shinhan Bank America Shinhan Bank Europe Gmbh Shinhan Khmer Bank

New York and California Frankfurt Phnom Penh

100.0 100.0 80.1

Shinhan Bank (China) Limited Shinhan Aitas Co., Ltd.

Beijing Seoul

100.0 89.6

Shinhan Bank Kazakhstan Shinhan Bank Canada Competition

Almaty Toronto

100.0 100.0

The Bank competes principally with other national commercial banks in Korea, but also faces competition from a number of additional entities, including branches and subsidiaries of foreign banks operating in Korea, regional banks, government-owned development banks and Korea’s specialized banks, such as Korea Development Bank and the National Association of Agriculture and Fisheries, as well as various other types of financial service institutions, including savings institutions (such as mutual savings and finance companies and credit unions and credit cooperatives), investment institutions (such as securities brokerage firms, merchant banking corporations and asset management companies) and life insurance companies. As of March 31, 2009, Korea had seven major domestic commercial banks in Korea (including Citibank and Standard Chartered First Bank, both of which acquired domestic commercial banks), six regional banks and branches and subsidiaries of 39 foreign banks. The Bank believes that foreign financial institutions, many of which have greater experiences and resources than the Bank does, will continue to enter the Korean market and compete with the Bank in providing financial products and services either by themselves or in partnership with existing Korean financial institutions. Furthermore, the Korean banking industry may undergo further consolidation either voluntarily or as part of government-led initiatives. Some of the financial institutions resulting from these developments may, by virtue of their increased size, expanded business scope and more efficient operations, provide greater competition for the Bank. Over the past several years, competition has been particularly fierce in the Bank’s core banking business of small- and medium-sized enterprise lending, as most Korean banks have focused their business in this area after reducing their exposure to large corporations, which has contributed to, and may further intensify,

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lower profitability and asset quality problems in small- and medium-enterprise loans. In addition, the newly enacted Financial Investment Services and Capital Markets Act took effect in February 2009, with the aim of promoting integration and rationalization of the Korean capital markets and financial investment products industry, and this will likely further intensify competition among financial institutions in Korea, including banks. See “Risk Factors — Risks Relating to the Bank’s Business — Competition in the Korean financial services industry is intense, and may further intensify as a result of recent deregulation”, “Supervision and Regulation — Financial Investment Services and Capital Markets Act”. There can be no assurance that the Bank will be able to compete successfully with other domestic and foreign financial institutions, and increased competition and market saturation from any or all of the foregoing developments may result in a loss of market share and declining margins for the Bank, which would have a material adverse effect on the Bank’s financial condition and results of operation. See “Risk Factors — Risks Relating to the Bank’s Business — Competition in the Korean financial services industry is intense, and may further intensify as a result of recent deregulation”. Information Technology The Bank dedicates substantial resources to maintaining a sophisticated information technology system to support its operations management and provide high quality customer service. In order to maximize synergy among the Bank’s subsidiaries, the Bank is currently continuing to build and implement a single groupwide enterprise information technology system known as “enterprise data warehouse”. In addition, the Bank is currently continuing to upgrade the information technology systems for each of its subsidiaries to enhance the quality of its customer service specific to such subsidiary. The Bank’s current information technology initiatives also include installing a financial reporting system meeting the IFRS standards starting fiscal year 2011 and building a group-wide security management system to further ensure secure financial transactions for its customers. The Bank’s information technology system is currently backed up on a real-time basis. The Bank has established a completely duplicative back-up IT system in different locations in Korea to provide a back-up system in the event of any system failure. The Bank’s information technology system is currently able to fully resume operation within an hour even in the case of a complete disruption of the information technology system at the headquarters of Shinhan Financial Group. Properties The Bank’s registered office and corporate headquarters are located at 120, 2-Ga, Taepyung-Ro, Jung-Gu, Seoul 100-102, Korea. Information regarding certain of the Bank’s properties in Korea is presented in the following table.
Type of Facility Location Area (in square meters) Building Registered office and corporate headquarters Shinhan Centennial Building Shinhan Bank Gwanggyo Branch Shinhan Myongdong Branch Shinhan Youngdungpo Branch Shinhan Back Office Support Center Shinhan Bank Back Office and Call Center Shinhan Bank Back Office and Storage Center 120, 2-Ga, Taepyung-Ro, Jung-Gu, Seoul 100-102, Korea 117, Samgak-Dong, Jung-Gu, Seoul, Korea 14, 1-Ga, Namdaemun-Ro, Jung-Gu, Seoul, Korea 53-1, 1-Ga, Myong-Dong, Jung-Gu, Seoul, Korea 57, 4-Ga, Youngdungpo-Dong, YoungdungpoGu, Seoul, Korea 781, Janghang-Dong, Ilsan-Gu, Goyang-Si, Kyunggi Province, Korea 731, Yoksam-Dong, Kangnam-Gu, Seoul, Korea 1704-Ga, Yongam-Dong, Sangdang-Gu, Cheongju-Si, Chungcheongbuk-Do, Korea 42,710 19,697 16,727 8,936 6,171 24,496 23,374 5,756 Site (if Different) 5,418 1,389 6,783 1,014 1,983 5,856 7,964 6,398

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The Bank’s principal establishment is the former Shinhan Bank headquarters building located in Seoul, Korea which has a total floor area of approximately 42,710 square meters. The Bank owns, directly or indirectly, a majority interest in its headquarters building. In addition, the Bank owns or leases various sites and buildings for its branches. The Bank houses its central mainframe computer system at its information technology centre in the Seoul metropolitan area. The Bank also owns the Chohung Bank headquarters building located in Seoul, Korea which has a total floor area of approximately 40,777 square meters. As of March 31, 2009, the Bank had a countrywide network of 944 branches. Approximately 27.1% of these facilities were housed in buildings owned by the Bank, while the remaining branches are leased properties. The net book value of all properties owned by the Bank as of March 31, 2009 was W1,920 billion. The Bank does not own any material properties outside of Korea. Legal Proceedings and Other Matters Legal Proceedings As of March 31, 2009, the Bank was the defendant in pending lawsuits in the aggregate claim amount of W175 billion, for which it recorded a provision of W33 billion. The Bank’s management believes that these lawsuits will not have a material adverse effect on its financial condition or results of operation. Tax Assessment Beginning in 2002, commercial banks in Korea, including the Bank, offered their customers products that combined certain deposit and swap elements. Under the terms of these products, the customer made deposits in Korean Won, which were immediately converted into Japanese Yen and were repaid in Korean Won at maturity after conversion from Japanese Yen. While these products carried a low interest rate, the majority of the benefit to the customers was from the foreign exchange gains. These products were marketed to customers under the notion that the exchange gains from these products would be exempt from income tax or tax withholding. However, in 2005, the Korean National Tax Service announced that such exchange gains would be subject to tax and tax withholding, and that the banks selling these products should have made a withholding and that the customers of these products should have reported income on such gains, and further that the banks and customers should pay substantial fines for having failed to do so. Following the announcement, the Bank ceased to offer these products. In November 2006, the Korean National Tax Service imposed on the Bank additional taxes in the amount of W13 billion with respect to the Bank’s tax liabilities and additional taxes in the amount of W21 billion with respect to its customers’ tax liabilities, in each case, in respect of the products described above. While the Bank has paid the additional taxes in order to avoid any further interest and penalty on unpaid taxes, it is currently challenging such tax imposition in court. In February 2009, the lower court ruled against the Bank, and the Bank is currently considering its legal options. For the purpose of fostering customer goodwill, the Bank has voluntarily and preemptively indemnified its customers for their increased tax liability to the extent they resulted from the investment in these deposit products, including any additional tax liability that its customers may have to the Korean National Tax Service. In 2006, based on the assumption that the Bank may be subject to maximum additional tax-related liability, including the liability from the indemnity to its customers, the Bank recorded a total charge to the Bank’s income of W52 billion in the year ended December 31, 2006, consisting of additional tax expenses of W13 billion and provision for other losses of W39 billion. In addition, the Bank also recorded W11 billion as deferred tax assets on its balance sheet as of December 31, 2006. In 2008, the Korean National Tax Service returned W4 billion of the additional tax payment made by the Bank. Mainly as a result of the foregoing, the Bank had W32 billion of provision for other losses and W7 billion of related deferred tax assets as of December 31, 2008 related to the Japanese Yen swap deposit products.

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DESCRIPTION OF ASSETS AND LIABILITIES The following discussion describes the assets and liabilities of the bank accounts of the Bank on a non-consolidated basis. Unless otherwise indicated, the assets and liabilities of the trust accounts of the Bank are discussed under the heading “Trust Accounts”. Loan Portfolio The Bank extends loans from both its bank and trust accounts. Guarantees are not categorized as loans unless and until the Bank has made a payment on behalf of a customer in relation to the guarantee. As of December 31, As of March 31, 2006 2007 2008 2009 (in billions of Won) Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W 66,437 47,943 W114,380 W 75,120 52,258 W127,378 W 91,675 56,131 W147,806 W 87,262 56,034 W143,296

Note: (1) As of December 31, 2006, 2007 and 2008 and March 31, 2009, approximately 89.0%, 88.5%, 88.5% and 89.3% of the Bank’s total gross loans, respectively, were Won-denominated.

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Ten Largest Exposures by Borrower As of December 31, 2008 and March 31, 2009, the Bank’s ten largest exposures, consisting of loans, securities and guarantees and acceptances, totaled W27,358 billion and W28,736 billion, respectively, and accounted for 13.80% and 14.52%, respectively, of its total exposures. The following table sets forth the Bank’s total exposures to these top ten borrowers as of the dates indicated. Loans in Guarantees Loans in Foreign Equity Debt and Won Currency Securities Securities Acceptances (in billions of Won) As of December 31, 2008 The Bank of Korea . . . . . . . . . . . Ministry of Strategy and Finance . . . . . . . . . . . . . . . . . . . Korea Development Bank . . . . Hyundai Samho Heavy Industries Co., Ltd. . . . . . . . . Industrial Bank of Korea . . . . . Korea Deposit Insurance Corporation . . . . . . . . . . . . . . . Hyundai Heavy Industries Co., Ltd. . . . . . . . . . . . . . . . . . . Hyundai Mipo Dockyard Co., Ltd. . . . . . . . . . . . . . . . . . . Kookmin Bank . . . . . . . . . . . . . . . I-Clover Co., Ltd. . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . As of March 31, 2009 The Bank of Korea . . . . . . . . . . . Ministry of Strategy and Finance . . . . . . . . . . . . . . . . . . . I-Clover Co., Ltd. . . . . . . . . . . . . Hyundai Samho Heavy Industries Co., Ltd. . . . . . . . . Korea Deposit Insurance Corporation . . . . . . . . . . . . . . . Korea Development Bank . . . . Hyundai Heavy Industries Co., Ltd. . . . . . . . . . . . . . . . . . . Hyundai Mipo Dockyard Co., Ltd. . . . . . . . . . . . . . . . . . . STX Offshore & Shipbuilding Co., Ltd. . . . . . . . . . . . . . . . . . . Industrial Bank of Korea . . . . . Total . . . . . . . . . . . . . . . . . . .

Total Exposure

W2,190 — — — — — 3 — — 1,161 W3,354

— — — — — — — — — — —

— — — — — — 1 2 — — W 3

W 7,536 5,269 1,967 — 1,663 1,548 — — 1,328 90 W19,401

— — — 1,794 — — 1,442 1,364 — — W4,600

W 9,726 5,269 1,967 1,794 1,663 1,548 1,446 1,366 1,328 1,251 W27,358

W 170 — 1,155 — — 3 3 — — 137 W1,468

— — — — — — — — — — —

— — — — — — 1 2 — — W 3

W 8,722 6,972 939 — 1,828 1,490 — — — 1,123 W21,074

— 29 — 1,923 — — 1,483 1,456 1,300 — W6,191

W 8,892 7,001 2,094 1,923 1,828 1,493 1,487 1,458 1,300 1,260 W28,736

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Exposure to Main Debtor Groups As of December 31, 2008 and March 31, 2009, 11.90% and 10.52%, respectively, of the Bank’s total exposure was to the main debtor groups as designated by the Financial Supervisory Service, which consist mostly of chaebols. The following table shows, as of the dates indicated, the Bank’s total exposure to the ten chaebol groups to which the Bank has the largest exposure. Loans in Loans in Won Foreign Equity Debt Currency Currency Securities Securities (in billions of Won) Guarantees and Acceptances

Main Debtor Groups

Total Exposure

As of December 31, 2008 Hyundai Heavy Industries . . . Samsung . . . . . . . . . . . . . . . . . . . Hyundai Motors . . . . . . . . . . . . STX . . . . . . . . . . . . . . . . . . . . . . . SK . . . . . . . . . . . . . . . . . . . . . . . . . POSCO . . . . . . . . . . . . . . . . . . . . Lotte . . . . . . . . . . . . . . . . . . . . . . . Kumho Asiana . . . . . . . . . . . . . . LG . . . . . . . . . . . . . . . . . . . . . . . . . Hynix . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . As of March 31, 2009 Hyundai Heavy Industries . . . Samsung . . . . . . . . . . . . . . . . . . . STX . . . . . . . . . . . . . . . . . . . . . . . Hyundai Motors . . . . . . . . . . . . POSCO . . . . . . . . . . . . . . . . . . . . SK . . . . . . . . . . . . . . . . . . . . . . . . . LG . . . . . . . . . . . . . . . . . . . . . . . . . Kumho Asiana . . . . . . . . . . . . . . Doosan . . . . . . . . . . . . . . . . . . . . . Hyundai Engineering & Construction Co., Ltd. . . . . . Total . . . . . . . . . . . . . . . . . .

W

8 943 516 179 738 79 360 549 165 10

— 290 689 87 271 5 69 39 350 410 2,210

W

3 294 25 31 225 770 6 29 2 173

W — 158 197 — 143 85 132 18 47 — W780

W4,600 1,461 86 1,260 89 328 83 26 101 18 W8,052

W 4,611 3,146 1,513 1,557 1,466 1,267 650 661 665 611 W16,147

W3,547

W1,558

W

3 407 105 461 17 424 182 502 13 65

— 469 72 782 — 246 319 22 282 — 2,192

W

3 290 39 — 737 220 3 21 1 243

W — 550 — 109 82 56 52 — 33 20 W902

W4,862 1,465 1,348 146 275 114 49 3 213 195 W8,670

W 4,868 3,181 1,564 1,498 1,111 1,060 605 548 542 523 W15,500

W2,179

W1,557

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Loan Concentration by Industry The following table shows the aggregate balance of the Bank’s corporate loans by industry concentration as of the dates indicated. As of December 31, 2008 As of March 31, 2009 Percentage of Total Percentage of Total Aggregate Loan Corporate Loan Aggregate Loan Corporate Loan Balance Balance Balance Balance (in billions of Won) (Percentages) (in billions of Won) (Percentages) W29,520 32.20% W30,200 34.61%

Industry

Manufacturing . . . Real estate leasing and service . . . . . . . . Retail and wholesale . . . . . Finance and insurance . . . . . . Construction . . . . . Hotel and leisure(1) . . . . . . . Other . . . . . . . . . . . . Total . . . . . . .

18,684 13,169 9,705 6,329 3,486 10,782 W91,675

20.38 14.36 10.59 6.90 3.80 11.76 100.00%

18,549 13,263 6,421 6,341 3,493 8,995 W87,262

21.26 15.20 7.36 7.27 4.00 10.31 100.00%

Note: (1) Consists principally of hotels, motels and restaurants.

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Loan Concentration by Size of Loans The following table shows the aggregate balances of the Bank’s loans by outstanding loan amount as of December 31, 2008. Aggregate Loan Percentage of Total Balance Loan Balance (in billions of Won) (Percentages) Corporate Up to W10 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Over W10 million to W50 million . . . . . . . . . . . . . . . . . . . . . . . Over W50 million to W100 million . . . . . . . . . . . . . . . . . . . . . Over W100 million to W500 million . . . . . . . . . . . . . . . . . . . . Over W500 million to W1 billion . . . . . . . . . . . . . . . . . . . . . . . Over W1 billion to W5 billion . . . . . . . . . . . . . . . . . . . . . . . . . . Over W5 billion to W10 billion . . . . . . . . . . . . . . . . . . . . . . . . . Over W10 billion to W50 billion . . . . . . . . . . . . . . . . . . . . . . . . Over W50 billion to W100 billion . . . . . . . . . . . . . . . . . . . . . . . Over W100 billion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sub-total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retail Up to W10 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Over W10 million to W50 million . . . . . . . . . . . . . . . . . . . . . . . Over W50 million to W100 million . . . . . . . . . . . . . . . . . . . . . Over W100 million to W500 million . . . . . . . . . . . . . . . . . . . . Over W500 million to W1 billion . . . . . . . . . . . . . . . . . . . . . . . Over W1 billion to W5 billion . . . . . . . . . . . . . . . . . . . . . . . . . . Over W5 billion to W10 billion . . . . . . . . . . . . . . . . . . . . . . . . . Over W10 billion to W50 billion . . . . . . . . . . . . . . . . . . . . . . . . Over W50 billion to W100 billion . . . . . . . . . . . . . . . . . . . . . . . Over W100 billion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sub-total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Maturity Analysis The following table sets out the scheduled maturities (time remaining until maturity) of the Bank’s loan portfolio as of March 31, 2009. The amounts disclosed are before deduction of attributable loan loss reserves. As of March 31, 2009 Over 1 Year but Not More Than 5 Years Over 5 Years (in billions of Won) W 7,036 19,845 W26,881 W12,661 13,006 W25,667 W 118 2,201 3,094 15,455 8,515 20,192 8,598 18,628 5,836 9,037 0.08% 1.49 2.09 10.46 5.76 13.66 5.82 12.60 3.95 6.11 62.02% 2.10% 8.74 7.82 17.29 1.43 0.54 0.03 0.03 — — 37.98% 100.00%

W 91,675 W 3,099 12,918 11,551 25,553 2,115 796 49 50 — —

W 56,131 W147,806

1 Year or Less Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total gross loans . . . . . . . . . . . . . . . . . . W67,565 23,183 W90,748

Total W 87,262 56,034 W143,296

The Bank may roll over its working capital loans and retail loans (which are not payable in installments) after it conducts its normal loan review in accordance with its loan review procedures. Working capital loans of the Bank may be extended on an annual basis for an aggregate term of three years for unsecured loans and five years for secured loans and retail loans may be extended for additional terms of up to 12 months for a maximum aggregate of 10 years for both unsecured loans and secured loans.

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Interest Rate Sensitivity The following table shows the Bank’s loans by interest rate sensitivity as of the dates indicated. As of December 31, 2008 As of March 31, 2009 (in billions of Won) Fixed rate loans(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Variable rate loans(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total gross loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W 35,581 112,225 W147,806 W 30,146 113,150 W143,296

Notes: (1) (2) Fixed rate loans are loans for which the interest rate is fixed for the entire term. Variable or adjustable rate loans are for which the interest rate is not fixed for the entire term.

For additional information regarding the Bank’s management of interest rate risk, see “Risk Management — Market Risk Management — Market Risk Exposure from Trading Activities — Interest rate risk”. Provisioning Policy The Financial Services Commission generally requires Korean financial institutions to analyze and classify their assets by quality into one of five categories for Korean GAAP reporting purposes. In making these classifications, the Bank takes into account a number of factors, including the financial position, profitability and transaction history of the borrower, the value of any collateral or guarantee taken as security for the extension of credit, probability of default, loss amount in the event default. This classification method, and the Bank’s related provisioning policy, is intended to reflect the borrower’s capacity to repay. The Bank also conducts periodic and systematic detailed reviews of its loan portfolios to identify credit risks and to evaluate the adequacy of the overall allowance for loan losses. To the extent there is any conflict between the Financial Supervisory Commission guidelines and the Bank’s internal analysis in such classifications, the Bank adopts whichever is more conservative. The Bank’s management believes the allowance for loan losses reflects the best estimate of the expected loan losses as of each balance sheet date. Loan and Credit Classifications For Korean GAAP and regulatory reporting purposes, the Bank bases its provisioning on the following loan classifications that classify corporate and retail loans as required by the Financial Services Commission. Loan Classification Normal Loan Characteristics Loans made to customers whose financial position, future cash flows and nature of business are deemed financially sound. No problems in recoverability are expected. Loans made to customers whose financial position, future cash flows and nature of business show potential weakness, although there is no immediate risk of nonrepayment. Loans made to customers whose adverse financial position, future cash flows and nature of business have a direct effect on the repayment of the loan. Loans made to customers whose financial position, future cash flows and nature of business are so weak that significant risk exists in the recoverability of the loan, to the extent the outstanding amount exceeds any collateral pledged. Loans where write-off is unavoidable.

Precautionary

Substandard Doubtful

Estimated loss

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The Bank also uses the same classifications with respect to its credits reported to the Financial Services Commission. Corporate Loans The Bank reviews corporate loans periodically for potential impairment through a formal credit review; however, the Bank’s loan officers also consider the credits for impairment throughout the year if information that may indicate an impairment event has occurred is presented. The credit rating of the corporate borrower is determined based on exposure type. The Bank makes provisions for loan losses based on the higher of (i) provision for loan losses required under the Financial Supervisory Service guidelines and (ii) provision for loan losses as determined by the Bank based on an expected loss ratio applicable to each credit rating. The Bank’s credit rating system is derived from the Basel Accord. The following table sets out, at the dates indicated, the Bank’s loan loss allowances as a percentage of outstanding corporate loans based on their loan classification. As of December 31, As of March 31, 2006 2007 2008 2009 (Percentages) Normal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Precautionary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Doubtful . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Estimated loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retail Loans The credit rating of retail borrower is determined based on a behavior scoring system or application scoring system developed by the Bank. The Bank makes provisions for loan losses based on the higher of (i) provision for loan losses required under the Financial Supervisory Service guidelines and (ii) provision for loan losses as determined by the Bank based on expected loss computed using the Bank’s scoring system. The Bank’s scoring system is derived from the Basel Accord. Loan Aging Schedule The following table shows the Bank’s loan aging schedule (excluding accrued interest) for all loans as of the dates indicated. Past Due Past Due up Past Due More than to 3 Months 3-6 Months 6 Months Amount % Amount % Amount % (in billions of Won, except percentages) 0.80% 0.95% 0.99% 10.05 9.75 13.07 32.54 25.54 26.31 52.18 77.21 69.57 100.00% 100.00% 100.00% 0.94% 11.94 26.89 56.61 100.00%

Current Amount %

Total Amount

As of December 31, 2006 . . . . . . . . . . . . December 31, 2007 . . . . . . . . . . . . December 31, 2008 . . . . . . . . . . . . March 31, 2009 . . . . Delinquent Loans

W113,240 126,278 146,358 141,452

99.00% 99.14% 99.02% 98.71%

W685 549 778 924

0.60% 0.43% 0.53% 0.65%

W116 139 212 362

0.10% 0.11% 0.14% 0.25%

W339 412 458 558

0.30% W114,380 0.32% 0.31% 0.39% 127,378 147,806 143,296

Delinquent loans are defined as loans whose outstanding balance in respect of which either principal payments are overdue by one day or more or interest payments are overdue by 14 days or more (if

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prior interest payments on a loan were made late on more than three occasions, in which case the loan is considered delinquent if interest payments are overdue by one day or more). The delinquency ratio is defined as the ratio of the outstanding balance of a loan that is delinquent to the aggregate outstanding balance of such loan. The following table shows, as of the dates indicated, certain details of the total delinquent loan portfolio. As of December 31, As of March 31, 2006 2007 2008 2009 (in billions of Won, except percentages) Total delinquent loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . As a percentage of total loans . . . . . . . . . . . . . . . . . . . . . . . . . Analysis of Delinquent Loans The following table sets forth, for the dates indicated, the total delinquent loans by type of borrower. As of December 31, 2008 As of March 31, 2009 Ratio of Ratio of Delinquent Delinquent Delinquent Delinquent Loans Loans Loans Total Loans Total Loans Loans (in billions of Won, except percentages) Corporate . . . . . . . . . . . Retail . . . . . . . . . . . . . . . Total . . . . . . . . . . . W 91,675 56,131 W147,806 W 975 197 W1,172 1.06% 0.35 0.79 W 87,262 56,034 W143,296 W1,352 256 W1,608 1.55% 0.46 1.12 W 681 W 790 W1,172 0.59% 0.62% 0.79% W1,608 1.12%

Credit Exposures to Companies in Workout and Court Receivership The Bank’s exposures in restructuring are managed and collected by its Corporate Credit Collection Department. As of December 31, 2008 and March 31, 2009, 0.36% and 0.33% of the Bank’s total exposure, or W691 billion and W649 billion, respectively, was under restructuring. The legal form of restructurings in Korea is principally either workout or court receivership. Non-Performing Loans Non-performing loans are defined as loans past due by more than 90 days. These loans are generally rated “substandard” or below under the Financial Service Commission guidelines. The following table shows, as of the dates indicated, certain details of the total non-performing loan portfolio. As of December 31, As of March 31, 2006 2007 2008 2009 (in billions of Won, except percentages) Total non-performing loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . As a percentage of total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . W 456 W 550 W 670 0.40% 0.43% 0.45% W 920 0.64%

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The following table sets forth, for the dates indicated, the total non-performing loans by type of borrower.
As of December 31, 2006 Ratio of NonNonPerforming Performing Loans Loans 2007 Ratio of NonNonTotal Performing Performing Loans Loans Loans (in billions of Won, except percentages) W438 112 W550 2008 Ratio of NonNonPerforming Performing Loans Loans

Total Loans

Total Loans

Corporate . . . . . W 66,437 Retail . . . . . . . . 47,943 Total . . . . . W114,380

W301 155 W456

0.45% W 75,120 0.32 52,258 0.40% W127,378

0.58% W 91,675 0.21 56,131 0.43% W147,806

W577 93 W670

0.63% 0.17 0.45%

As of March 31, 2009 Ratio of Non-Performing Non-Performing Total Loans Loans Loans (in billions of Won, except percentages) Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Non-Performing Loans As of December 31, 2008 and March 31, 2009, the Bank’s 20 largest non-performing loans accounted for 32.69% and 25.64%, respectively, of its total non-performing loan portfolio. The following table shows, at the dates indicated, certain information regarding the Bank’s 20 largest non-performing loans. As of December 31, 2008 Gross Principal Allowance for Outstanding Loan Losses (in billions of Won) W 27 19 16 15 13 12 11 11 10 9 9 9 9 8 8 7 7 7 6 6 W219 W 21 19 9 13 5 10 6 2 3 5 7 3 2 5 5 2 4 1 5 6 W129 W 87,262 56,034 W143,296 W759 161 W920 0.87% 0.29 0.64%

Borrower

Industry

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real estate, leasing and service . . . . . . . . . . . . . . . . . . . . . . . . . . Retail and wholesale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real estate, leasing and service . . . . . . . . . . . . . . . . . . . . . . . . . . Retail and wholesale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real estate, leasing and service . . . . . . . . . . . . . . . . . . . . . . . . . . Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retail and wholesale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real estate, leasing and service . . . . . . . . . . . . . . . . . . . . . . . . . . Other service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real estate, leasing and service . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Borrower Industry

As of March 31, 2009 Gross Principal Allowance for Outstanding Loan Losses (in billions of Won) W 27 18 16 15 14 13 12 11 11 10 10 10 10 10 9 9 8 8 8 7 W236 W 21 4 9 8 4 8 10 5 2 6 2 4 3 2 3 2 4 4 5 2 W108

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real estate, leasing and service . . . . . . . . . . . . . . . . . . . . . . . . . . Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retail and wholesale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real estate, leasing and service . . . . . . . . . . . . . . . . . . . . . . . . . . Retail and wholesale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real estate, leasing and service . . . . . . . . . . . . . . . . . . . . . . . . . . Retail and wholesale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Real estate, leasing and service . . . . . . . . . . . . . . . . . . . . . . . . . . Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sales of Non-Performing Loans The Bank has also issued securities backed by non-performing loans and other assets through special purpose companies. Some of these transactions involved transfers of loans in connection with asset securitizations. The assets are not included in the Bank’s balance sheet as these transactions are classified as sold under Korean GAAP. The Bank sells non-performing loans to Korea Asset Management Corporation, a state-owned public enterprise, and special purpose vehicles. The aggregate principal amounts of non-performing loans sold to Korea Asset Management Corporation in connection with asset securitization transactions were W103 billion, W112 billion and W99 billion for 2006, 2007 and 2008, respectively, and W135 billion for the first quarter of 2009. The aggregate principal amounts of non-performing loans sold to special purpose companies in connection with asset securitization transactions were W210 billion, W0 billion and W31 billion for 2006, 2007 and 2008, respectively, and W1 billion for the first quarter of 2009. Non-Performing Loan Strategy One of the Bank’s primary objectives is to prevent its loans from becoming non-performing. Through the Bank’s corporate credit rating system, the Bank has reduced its credit risk relating to future non-performing loans. The Bank’s credit rating system is designed to prevent its loan officers from extending new loans to borrowers with high credit risks based on the borrower’s credit rating. The Bank’s early warning system is designed to bring any sudden increase in a borrower’s credit risk to the attention of its loan officers, who then closely monitor such loans. Notwithstanding the above, if a loan becomes non-performing, an officer at the branch level responsible for monitoring non-performing loans will commence due diligence of the borrower’s assets, send a notice demanding payment or a notice that the Bank will take legal action or prepare for legal action.

96

At the same time, the Bank also initiates its non-performing loan management process, which begins with: Š Š Š identifying loans subject to a proposed sale by assessing the estimated losses from such sale based on the estimated recovery value of collateral, if any, for such non-performing loans; identifying loans subject to charge-off based on the estimated recovery value of collateral, if any, for such non-performing loans and the estimated rate of recovery of unsecured loans; and on a limited basis, identifying commercial loans subject to normalization efforts based on the cashflow situation of the borrower.

Once the details of a non-performing loan are identified, the Bank pursues early solutions for recovery. Actual recovery efforts on non-performing loans are handled by several of the Bank’s departments or units, depending on the nature of such loans and of the borrower. The officers or agents of the responsible departments and units use a variety of methods to resolve non-performing loans, including: Š Š Š making phone calls and paying visits to the borrower requesting payment; continuing to assess and evaluate assets of the Bank’s borrowers; and if necessary, initiating legal action such as foreclosures, attachments and litigation.

In order to promote speedy recovery on loans subject to foreclosures and litigation, the Bank’s policy is to permit the branch responsible for handling these loans to transfer them to the relevant unit at headquarters or regional headquarters. The Bank’s policy is to commence legal action within one month after default on promissory note and four months after delinquency of payment on loans. For loans to insolvent or bankrupt borrowers, the Bank takes legal action immediately. In addition to making efforts to collect on these non-performing loans, the Bank also undertakes measures to reduce the level of its non-performing loans, which include: Š Š Š Š selling non-performing loans to third parties including the Korea Asset Management Corporation; entering into asset-backed securitization transactions with respect to non-performing loans; managing retail loans that are three months or more past due through Shinhan Credit Information under an agency agreement; and using third-party collection agencies including Solomon Credit Information.

Allocation of Allowance for Loan Losses The following table presents the allocation of the Bank’s loan loss allowance by loan type. As of December 31, 2007 As of March 31, 2009 Loans as % of Total Amt. Loans 60.90% 39.10 100.00%

2006 Loans as % of Total Amt. Loans Corporate . . . . . . . . . . . . . . . . . . . W 964 Retail . . . . . . . . . . . . . . . . . . . . . . 663 Total allowance for loan losses . . . . . . . . . . . . . . . . W1,627

2008

Loans Loans as % of as % of Total Total Amt. Loans Amt. Loans (in billions of Won, except percentages) 58.97% W1,679 41.03 690 100.00% W2,369

58.09% W1,217 41.91 659 100.00% W1,876

62.02% W1,847 37.98 715 100.00% W2,562

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The allowance for corporate loan losses increased by 26.2% from W964 billion as of December 31, 2006 to W1,217 billion as of December 31, 2007, primarily due to an increase in the corporate loan balance. The allowance for corporate loan losses increased from W1,217 billion as of December 31, 2007 to W1,679 billion as of December 31, 2008 and W1,847 billion as of March 31, 2009, primarily due to additional allowances made with respect to loans to troubled construction and shipbuilding companies and, to a lesser extent, an increase in the corporate loan balance. In the retail sector, the allowance for loan losses remained relatively stable from W663 billion as of December 31, 2006 to W659 billion as of December 31, 2007. The allowance for retail loan losses increased by 4.7% from W659 billion as of December 31, 2007 to W690 billion as of December 31, 2008, primarily due to an increase in the volume of retail loans. The allowance for retail loan losses increased by 3.6% from W690 billion as of December 31, 2008 to W715 billion as of March 31, 2009, primarily due to deteriorating asset quality of retail loans. Analysis of Allowance for Loan Losses The following table presents an analysis of the Bank’s loan loss experience for each of the periods indicated. For the year ended For the three months ended December 31, March 31, 2006 2007 2008 2008 2009 (in billions of Won, except percentages) Balance at the beginning of the period . . . . . . . . . . . . . . . . . . . . . . . . . . Amounts charged against income . . . Gross charge-offs: . . . . . . . . . . . . . . . . . Corporate . . . . . . . . . . . . . . . . . . . . . Retail . . . . . . . . . . . . . . . . . . . . . . . . Total gross charge-offs . . . . Recoveries: Corporate . . . . . . . . . . . . . . . . . . . . . Retail . . . . . . . . . . . . . . . . . . . . . . . . Total recoveries . . . . . . . . . . Net charge-offs . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at the end of the period . . . . . Ratio of net charge-offs during the period to average loans outstanding during the period(1) . . . . . . . . . . . . . . . . . . . . W 889 384 (84) (104) (188) W1,627 422 (69) (117) (186) W1,876 752 (266) (75) (341) W1,876 125 (18) (14) (32) W2,369 314 (100) (31) (131)

95 32 127 (61) 415 W1,627

44 33 77 (109) (64) W1,876

25 39 64 (277) 18 W2,369

6 9 15 (17) 17 W2,001

9 2 11 (120) (1) W2,562

0.06%

0.09%

0.20%

0.04%

0.32%

Note: (1) Information for the three months ended March 31, 2008 and 2009 is presented on an annualized basis.

Loan Charge-Offs The Bank’s level of gross charge-offs remained relatively stable from W188 billion in 2006 to W186 billion in 2007. The Bank’s level of gross charge-offs increased from W186 billion in 2007 to W341 billion in 2008 primarily due to an increase in charge-offs for corporate loans. The Bank’s level of gross charge-offs increased from W32 billion in the first quarter of 2008 to W131 billion in the first quarter of 2009 primarily due to an increase in charge-offs for corporate loans.

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Basic Principles The Bank attempts to minimize loans to be charged off, by practicing a sound credit approval process based on credit risk analysis prior to extending loans and a systematic management of outstanding loans. Loans To Be Charged-Off Loans are charged-off if they are deemed to be uncollectible by falling under any of the following categories: Š loans for which collection is not foreseeable due to insolvency, bankruptcy, dissolution or the shutting down of the business of the debtor; loans for which collection is not foreseeable due to the death or disappearance of the debtor; loans for which expenses of collection exceed the collectable amount; loans on which collection is not possible through legal or any other means; or the portion of loans classified as “estimated loss”, net of any recovery from collateral, which is deemed to be uncollectible.

Š Š Š Š

Procedure for Charge-off Approval An application for the Bank’s loans to be charged-off is submitted by a branch to the Corporate Credit Collection Department in the case of corporate loans and foreign branches, and to the Consumer Credit Collection Department in the case of individual loans. An application for charge-off is generally submitted immediately after the relevant loan becomes 180 days past due. The General Manager in charge of review evaluates the application. The General Manager of the Audit Department conducts a review of compliance with the Bank’s internal procedures for charge-offs. The General Manager in charge of review gets approval from the President of the Bank. Treatment of Loans Charged-Off Once loans are charged-off, they are derecognized from the Bank’s balance sheet. The Bank still continues its collection efforts in respect of these loans through third-party collection agencies including Korea Asset Management Corporation and Shinhan Credit Information. Treatment of Collateral When the Bank determines that a loan collateralized by real estate cannot be recovered through normal collection channels, the Bank will petition a court to foreclose and sell the collateral through a courtsupervised auction within one month after default and insolvency and within four months after delinquency. However, this treatment does not apply to companies under restructuring, workout or other court proceedings subjecting them to restrictions on such auction procedures. In the Bank’s experience, the filing of this petition with the court generally encourages the debtor to repay the overdue loan. If a debtor ultimately fails to repay and the court grants its approval for foreclosure, the Bank will sell the collateral and recover the full principal amount and accrued interest up to the sales price, net of expenses incurred from the auction. Foreclosure proceedings under laws and regulations in Korea typically take from seven months to one year from initiation to collection depending on the nature of the collateral.

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Credit portfolio as reported to the Financial Supervisory Service Credit Types The Bank’s credit portfolio as reported to the Financial Supervisory Service pursuant to Financial Supervisory Service consists principally of the following: Š loans net of present value discounts and excluding certain items, principally interbank loans, call loans and securities purchased under resale agreements; confirmed guarantees and acceptances, which are off-balance sheet items, and loans from the Bank’s trust accounts whose principal and/or interest are guaranteed by the Bank; and certain other items, principally merchant bank credits and suspense receivables. As of December 31, As of March 31, 2006 2007 2008 2009 (in billions of Won) Loans in Won . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loans in foreign currencies . . . . . . . . . . . . . . . . . . . . . . Bills bought in foreign currencies . . . . . . . . . . . . . . . . Privately placed bonds . . . . . . . . . . . . . . . . . . . . . . . . . . Merchant banking loans . . . . . . . . . . . . . . . . . . . . . . . . . Trust account loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Factoring receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . Advances under guarantees and acceptances . . . . . . Total loans(1) . . . . . . . . . . . . . . . . . . . . . . . . . . Other credits: Guarantees and acceptances outstanding . . . . . Suspense receivables as credit . . . . . . . . . . . . . . . Total credits . . . . . . . . . . . . . . . . . . . . . . . . . . . W 89,570 W105,823 W119,616 9,290 10,459 12,062 5,969 5,407 4,964 4,687 3,669 3,082 3,521 1,283 4,623 465 701 740 139 52 210 15 7 76 W113,656 W127,401 W145,373 W119,942 11,627 4,990 2,653 2,724 700 208 127 W142,971

Š

Š

W

3,888 8

W

6,828 W 12

8,273 205

W

8,822 298

W117,552

W134,241

W153,851

W152,091

Note: (1) For purposes of calculating total credits as reported to the Financial Services Commission, total loans are stated net of present value discounts, and certain loan items (consisting of interbank loans, call loans and securities purchased under resale agreements) are excluded from total loans.

Substandard or Below Credits Substandard or below credits are defined as those credits that are classified as substandard or below based on the Financial Services Commission’s asset classification criteria. See “— Loan Portfolio — Provisioning Policy — Loan and Credit Classifications” above.

100

The following table shows as of the dates indicated, certain details regarding the asset quality of the Bank’s credits, net of present value discounts, including its substandard or below credits, as reported to the Financial Services Commission. As of December 31, As of March 31, 2006 2007 2008 2009 (in billions of Won, except percentages) Credits(1): Normal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Precautionary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Doubtful . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Estimated loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total credits: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total substandard or below credits . . . . . . . . . . . . . . . Precautionary and substandard or below credits . . . Allowance for credit losses(2) . . . . . . . . . . . . . . . . . . . . Substandard or below credits as a percentage of total credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Precautionary and substandard or below credits as a percentage of total credits . . . . . . . . . . . . . . . . . . . Allowance for credit losses as a percentage of substandard or below credits . . . . . . . . . . . . . . . . . . Allowance for credit losses as a percentage of total credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W115,254 1,416 471 126 285 W117,552 W

W132,180 1,080 503 124 354 W134,241 981 2,061 1,869 0.73% 1.54% 190.59% 1.39%

W150,627 1,693 743 302 486 W153,851 W 1,531 3,224 2,509 1.00% 2.10% 163.88% 1.63%

W147,854 1,944 1,176 445 674 W152,093 W 2,294 4,237 2,820 1.51% 2.79% 122.94% 1.85%

882 W 2,298 1,626 0.75% 1.96% 184.24% 1.38%

Notes: (1) (2) Net of present value discounts of W17 billion, W13 billion, W15 billion and W18 billion as of December 31, 2006, 2007 and 2008 and March 31, 2009, respectively. Allowance for credit losses consists of allowance for loan losses, allowance for suspense receivables, allowance for acceptances and guarantees.

Trust Accounts Under Korean law, assets accepted in trust accounts by the Bank are segregated from other assets of the Bank and are not available to satisfy the claims of the depositors or other creditors of the Bank. Accordingly, the Bank’s trust assets and liabilities are accounted for and reported separately from the bank accounts.

101

The following table sets forth the assets and liabilities of the Bank’s trust accounts as of the dates indicated.
As of December 31, 2006 2007 2008 As of March 31, 2009

(in billions of Won) Assets: Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Call loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loans to bank accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allowance for valuation of receivables . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities: Money trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Special reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W

391 W 677 W 744 2,070 650 200 10,130 11,903 10,628 983 1,052 1,182 10,191 19,987 24,377 (15) (10) (8) W34,259 W37,123

W

693 — 8,985 1,238 21,715 (8)

W23,750

W32,623

W12,192 11,210 — 61 287 W23,750

W13,574 20,325 — 65 295 W34,259

W12,822 23,909 — 71 321 W37,123

W10,458 21,777 — 72 316 W32,623

Note: (1) Includes principally real estate assets received under property trusts.

The Bank provides guarantee as to principal and/or interest for a limited amount of the assets and liabilities of its trust accounts. As of each of December 31, 2008 and March 31, 2009, guaranteed fixed rate trust accounts, for which the Bank guarantees a fixed rate of interest, accounted for less than 0.01% of the total money trusts in the Bank’s trust accounts. As of December 31, 2008 and March 31, 2009, the aggregate amount of money trusts guaranteed as to principal or as to principal and interest was W3,511 billion and W3,468 billion, or 27.38% and 33.16%, respectively, of total money trusts for the Bank. Investment Portfolio The Bank invests in and trades Won-denominated and, to a lesser extent, foreign currency-denominated securities for its own account to: Š Š Š maintain the stability and diversification of the Bank assets; maintain adequate sources of back-up liquidity to match the Bank funding requirements; and supplement income from the Bank core lending activities.

In making securities investments, the Bank takes into account a number of factors, including macroeconomic trends, industry analysis and credit evaluation in determining whether to make investments in particular securities. The Bank’s investments in securities are also subject to a number of guidelines, including limitations prescribed under the Banking Act. Under these regulations, the Bank must limit its investments in shares and securities with a maturity in excess of three years (other than monetary stabilization bonds issued by the Bank of Korea and national government bonds) to 60.0% of the Bank total Tier I and Tier II capital. Generally, the Bank is also prohibited from acquiring more than 15.0% of the shares with voting rights issued by any other corporation (other than for the purpose of establishing or acquiring a subsidiary). Further information on the regulatory environment governing the Bank’s investment activities is set out in “Supervision and Regulation — Principal Regulations Applicable to Banks — Restrictions on Investments in Property”, “— Principal Regulations Applicable to Banks — Restrictions on Shareholdings in Other Companies”.

102

Securities Classifications The classification guidelines and methods of valuation for securities are as follows: Classification Trading securities (securities acquired for the purpose of short-term capital gains): Valuation Method Marked-to-market and any gains or losses from such valuation are included in the Bank’s income statement. Trading securities held by overseas branches of the Bank are stated at market value unless otherwise required by regulatory authorities in countries where the overseas branches are located.

Investment securities (securities other than trading securities): — Equity investment securities with readily determinable fair value and available-for- sale debt investment securities Marked-to-market and any valuation gains or losses are reflected on the balance sheet as accumulated other comprehensive income in stockholders’ equity under unrealized gain (losses) on valuation of investment securities. However, if the fair value of such securities depreciates significantly compared to the purchase value of such securities and there is little likelihood that such difference will be recovered, then such differences in value will be reflected on the income statement after eliminating any previously recorded accumulated other comprehensive income for temporary changes. Valued at acquisition cost. However, if the net asset value of such securities depreciates significantly compared to the purchase value of such securities and there is little likelihood that such difference will be recovered, then such differences in value will be reflected on the income statement. Valued at amortized cost. However, (i) if the market value of such securities depreciates significantly compared to the purchase value of such securities and there is little likelihood that such difference will be recovered, or (ii) if the difference between the face value and the purchase value of such securities are amortized until maturity, then such differences in value will be reflected on the income statement. Valued pursuant to the equity method (based on net asset value). The Bank’s share in net income or net loss of such investees is reflected in its income statements. Changes in retained earnings, capital surplus or other capital accounts of such investees are accounted for as adjustments to retained earnings or to accumulated other comprehensive income of the Bank consistent with the manner reflected in such investees’ financial statements.

Equity investment securities that do not have readily determinable fair value

Held-to maturity debt investment securities

Equity securities over which the Bank controls or exercises significant influence

103

Privately-placed commercial paper, privately-placed corporate bonds and guaranteed notes are not subject to the above valuation method. Instead, they are classified as loans and are subject to corresponding loan loss provisioning. Book Value and Market Value The following table sets out the book value and market value of securities in the Bank investment portfolio as of the dates indicated.
As of December 31, 2006 Book Value Market Value 2007 Book Value Market Value 2008 Book Value Market Value Book Value As of March 31, 2009 Market Value

(in billions of Won) Available for Sale: Equity securities . . . . . . . . . . . . . . . . . . W 4,110 W 4,110 W 4,814 W 4,814 W 3,163 W 3,163 W 3,289 Debt securities: Korean treasury and government agencies securities . . . . . . . . . . . . . . . . . . 1,236 1,236 1,339 1,339 2,902 2,902 4,128 Debt securities issued by financial institutions . . . . . . . . 3,907 3,907 6,947 6,947 12,782 12,782 12,193 Corporate securities . . . . . . . . . . 3,051 3,051 3,075 3,075 3,135 3,135 3,532 Beneficiary Certificates . . . . . . . . . . . 2,306 2,306 1,722 1,722 2,209 2,209 2,499 Securities in foreign currencies . . . . 947 947 1,216 1,216 1,622 1,622 1,653 Other . . . . . . . . . . . . . . . . . . . . . . . . 37 37 91 91 43 43 44 Total — Available for sale . . . . . . . . Held to Maturity: Debt securities: Korean treasury securities and government agencies . . . . . . . Debt securities issued by financial institutions . . . . . . . . Corporate securities . . . . . . . . . . Securities in foreign currencies . . . . Total — Held to Maturity . . . . . . . . . Trading: Equity securities . . . . . . . . . . . . . . . . . . Debt securities: Korean treasury securities and government agencies . . . . . . . Debt securities issued by financial institutions . . . . . . . . Corporate securities . . . . . . . . . . Beneficiary Certificates . . . . . . . . . . . Commercial Paper . . . . . . . . . . . . . . . . Securities in foreign currencies . . . . Total — Trading . . . . . . . . . . . . . 15,594 15,594 19,204 19,204 25,856 25,856 27,338

W 3,289

4,128 12,193 3,532 2,499 1,653 44 27,338

1,147 4,458 1,355 42 7,002

1,168 4,526 1,365 42 7,101

1,442 4,206 1,703 18 7,369

1,458 4,224 1,693 18 7,393

2,580 3,508 1,440 25 7,553

2,727 3,608 1,484 25 7,844

3,258 3,299 1,421 20 7,998

3,315 3,370 1,458 20 8,163

92

92

3

3

11

11

10

10

61 283 40 — 167 14 657

61 283 40 — 167 14 657

25 506 — — 4,631 — 5,165

25 506 — — 4,631 — 5,165

17 239 — 116 1,531 — 1,914

17 239 — 116 1,531 — 1,914

209 51 238 112 3,249 — 3,869

209 51 238 112 3,249 — 3,869 W39,370

Total Securities . . . . . . . . . . . . . . . . . . W23,253 W23,352 W31,738 W31,762 W35,323 W35,614 W39,205

104

Maturity Analysis The following table categorizes the Bank securities by maturity as of March 31, 2009. As of March 31, 2009 Over 3 Months but within 6 Months Over 6 Over 1 Months but Year but within within 1 Year 3 Years (in billions of Won)

3 Months or Less

Over 3 Years

Total

Securities available for sale: Korean treasury securities and government agencies . . . . . . . . . . . . . . . . Debt securities issued by financial institutions . . . . . Corporate debt securities . . . Debt securities in foreign currencies . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . Held-to-maturity securities: Korean treasury securities and government agencies . . . . . . . . . . . . . . . . Debt securities issued by financial institutions . . . . . Corporate debt securities . . . Debt securities in foreign currencies . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . Trading securities: Korean Treasury securities and government agencies . . . . . . . . . . . . . . . . Debt securities issued by financial institutions . . . . . Corporate debt securities . . . Total . . . . . . . . . . . . . . . . . Total Debt Securities . . . . . . . . . . .

W 241 5,371 123 44 5,779

W

— 939 93 22

W 201 2,147 521 101 2,970

W 1,194 3,126 1,448 563 6,331

W2,492 610 1,347 774 5,224

W 4,128 12,193 3,532 1,504 21,358

1,054

300 255 100 3 658

30 419 50 — 499

50 551 205 — 806

1,105 1,679 419 3 3,206

1,773 395 647 14 2,829

3,258 3,299 1,421 20 7,998

1 — — 1 W6,438

— — — — W1,553

— 10 — 10 W3,786

207 41 238 486 W10,023

1 — — 1 W8,054

209 51 238 498 W29,854

105

Concentrations of Risk The Bank’s stockholders’ equity was W11,948 billion and W11,967 billion as of December 31, 2008 and March 31, 2009, respectively. As of December 31, 2008 and March 31, 2009, the Bank held the following securities of individual issuers where the aggregate book value of those securities exceeded 10.0% of the Bank’s stockholders’ equity at such date. As of March 31, 2009 As of December 31, 2008 Book Value Market Value Book Value Market Value (in billions of Won) Name of issuer: Bank of Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . Korean Government . . . . . . . . . . . . . . . . . . . . . . . Korea Deposit Insurance Corporation . . . . . . . Korea Development Bank . . . . . . . . . . . . . . . . . Industrial Bank of Korea . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W 7,536 5,269 1,548 1,967 1,663 W17,983

W 7,576 5,354 1,567 1,973 1,665 W18,135

W 8,722 6,972 1,828 1,396 N/A W18,918

W 8,758 7,025 1,845 1,404 N/A W19,032

All of the above entities (other than the Government) are controlled and owned by the Government. Commitments and Guarantees In the normal course of its operations, the Bank makes various commitments and guarantees to meet the financing and other business needs of its customers. Commitments and guarantees are usually in the form of, among others, commitments to extend credit, commercial letters of credit, standby letters of credit and performance guarantees. The contractual amount of these financial instruments represents the maximum possible loss amount if the counterparty draws down the commitment or the Bank should fulfill its obligation under the guarantee and the counterparty fails to perform under the contract. The following table sets forth the Bank credit-related commitments and guarantees as of the dates indicated. As of March 31, As of December 31, 2006 2007 2008 2009 (in billions of Won) Commitments to extend credit: Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liquidity facilities to SPEs . . . . . . . . . . . . . . . . . . . . . Commercial letters of credit(1) . . . . . . . . . . . . . . . . . . . . . . . Standby letters of credit, other financial and performance guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W55,316 W65,587 6,081 6,914 3,876 6,638 2,953 3,503 3,899 W72,125 10,376 W93,018

W49,553 8,296 4,372 2,993 13,251 W78,465

W57,088 8,627 4,692 2,785 13,879 W87,071

Note: (1) These are generally short-term and collateralized by the underlying shipments of goods to which they relate.

The Bank has credit-related commitments that are not reflected on the balance sheet, which primarily consist of commitments to extend credit and letters of credit. Commitments to extend credit, including credit lines, represent unfunded portions of authorizations to extend credit in the form of loans. These commitments expire on fixed dates and a customer is required to comply with predetermined conditions to draw funds under the commitments.

106

Commercial letters of credit are undertakings on behalf of customers authorizing third parties to draw drafts on the Bank up to a stipulated amount under specific terms and conditions. They are generally short-term and collateralized by the underlying shipments of goods which they relate to and therefore have less risk. Standby letters of credit are irrevocable obligations to pay third party beneficiaries when the Bank customers fail to repay loans or debt instruments, which are generally in foreign currencies. A substantial portion of these standby letters of credit are secured by underlying assets, including trade-related documents. Other financial and performance guarantees are irrevocable assurance that the Bank makes payments to beneficiaries in the event that its customers fail to fulfill their obligations or to perform under certain contracts. Liquidity facilities to special purpose entities (“SPEs”) represent irrevocable commitments to provide contingent liquidity credit lines to SPEs established by the Bank’s customers in the event that a triggering event such as shortage of cash occurs. The commitments and guarantees do not necessarily represent the Bank’s exposure since they often expire unused. Derivatives As discussed under “Business — Business Overview — The Bank’s Principal Activities — Treasury and Securities Investment” above, the Bank engages in derivatives trading activities primarily on behalf of its customers so that they may hedge their risks and also enter into back-to-back derivatives with other financial institutions to cover exposures arising from such transactions. In addition, the Bank enters into derivatives transactions to hedge against risk exposures arising from its own assets and liabilities.

107

The following shows, as of the dates indicated, the gross notional or contractual amounts of derivatives held or issued. As of December 31, 2008 As of March 31, 2009 Underlying Estimated Estimated Underlying Estimated Estimated Notional Fair Value Fair Value Notional Fair Value Fair Value Amount(1) Assets Liabilities Amount(1) Assets Liabilities (in billions of Won) Foreign exchange contracts: Forward contracts . . . . Options purchased . . . Options written . . . . . . Swaps . . . . . . . . . . . . . . . Sub-total . . . . . . . . . . Interest rate contracts: Futures bought . . . . . . . Futures sold . . . . . . . . . Options purchased . . . Options written . . . . . . Swaps . . . . . . . . . . . . . . . Sub-total . . . . . . . . . . Stock Price index contracts: Futures bought . . . . . . . Futures sold . . . . . . . . . Stock index options purchased . . . . . . . . . Stock index options written . . . . . . . . . . . . Exchange-traded options purchased . . . . . . . . . Exchange-traded options written . . . . Stock swap . . . . . . . . . . Sub-total . . . . . . . . . . Other derivatives: Credit-linked derivatives . . . . . . . . Commodity forwards . . . . . . . . . . Commodity options purchased . . . . . . . . . Commodity options written . . . . . . . . . . . . Gold swaps . . . . . . . . . . Sub-total . . . . . . . . . . Total . . . . . . . . . . . . .

W 62,788 14,517 8,339 32,406 118,050 1,132 23 5,231 7,869 117,465 131,720

W 5,578 1,811 25 2,044 9,458 — — 92 — 1,990 2,082

W 3,532 67 908 4,436 8,943 — — — 100 2,105 2,205

W 55,090 11,013 4,328 32,841 103,272 551 105 5,361 7,070 121,841 134,928

W 5,123 1,691 5 2,380 9,199 — — 82 — 1,828 1,910

W 2,577 21 654 5,429 8,681 — — — 96 2,059 2,155

80 4 403 653

— — 75 —

— — — 86

112 — 429 463

— — 96 —

— — — 49

37 158 2,167 3,502

2 — 406 483

— — 298 384

34 28 2,027 3,093

1 — 303 400

— 1 222 272

88 13 264 264 85 714 W253,986

— 2 35 — 11 48 W12,071

39 2 — 35 — 76 W11,608

96 13 202 202 69 582 W241,875

0 2 19 — — 21 W11,530

42 2 — 19 — 63 W11,171

Note: (1) Notional amounts in foreign currencies were converted into Won at prevailing exchange rates as of March 31, 2009.

108

Funding For the Bank’s banking activities, it obtains funding from a variety of sources, both domestic and foreign. The Bank’s principal source of funding is customer deposits obtained from its banking operations. In addition, the Bank acquires funding through call money, borrowings from the Bank of Korea, other shortterm borrowings and other long-term debt, including debt and equity securities issuances, asset-backed securitizations and repurchase transactions, to complement, or, if necessary, replace funding through customer deposits. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Liquidity and Capital Resources”. Deposits Although the majority of the Bank’s bank deposits are short-term, it has been the Bank’s experience that the majority of its depositors generally roll over their deposits at maturity, providing its banking operations with a stable source of funding. The following table shows the average balances of the Bank’s deposits and the average rates paid on the Bank’s deposits for the periods indicated.
For the year ended December 31, 2006 Average Balance(1) 2007 2008 Interest Income/ Yield/ Expense Rate Interest Interest Income/ Yield/ Average Income/ Yield/ Average Expense Rate Balance(1) Expense Rate Balance(1) (in billions of Won, except percentages)

Interest-bearing deposits: Demand deposits . . . Time and savings deposits . . . . . . . . . Other deposits . . . . . Total interestbearing deposits . . . . . . .

W11,533 60,599 13,151

W 125 1,857 595

1.08% W10,382 3.06 4.52 65,371 23,858

W 144 2,228 1,078

1.39% W 11,079 3.41 4.52 77,630 24,368

W 158 3,199 1,238

1.43% 4.12 5.08

W85,283

W2,577

3.02% W99,611

W3,450

3.46% W113,077

W4,595

4.06%

For the three months ended March 31, 2008 2009 Interest Interest Average Income/ Average Income/ Balance(1) Expense Yield/Rate(2) Balance(1) Expense Yield/Rate(2) (in billions of Won, except percentages) Interest-bearing deposits: Demand deposits . . . . . . . . . . . . . . . . . . . . W 10,881 Time and savings deposits . . . . . . . . . . . 72,910 Other deposits . . . . . . . . . . . . . . . . . . . . . . 24,063 Total interest-bearing deposits . . . W107,854

W

38 715 294

1.40%W 11,738 3.92 92,025 4.89 21,206 3.88%W124,969

W

33 869 231

1.12% 3.78 4.36 3.63%

W1,047

W1,133

Notes: (1) (2) Based on average daily balances. Information for the three months ended March 31, 2008 and 2009 is presented on an annualized basis.

For a breakdown of retail deposit products, see “Business — Business Overview — The Bank’s Principal Activities — Deposit-Taking Activities”.

109

RISK MANAGEMENT Overview The Bank has a comprehensive system of risk management in order to manage the risks of the Bank within acceptable limits and ensure the soundness of its assets. The Bank strives to stabilize its long-term profitability through effective risk management. The Board of Directors (“Board”) sets basic guidelines with respect to the Bank’s risk management and controls, such as total risk limits for the Bank. Under the supervision of the Board, the Risk Management Committee determines asset allocation and risk limits for each business group, and assists the management in formulating basic management guidelines for all banking operations. In accordance with these basic policies and guidelines, the Asset & Liability Management Committee (“ALM Committee”) and the Credit Policy Committee, both consisting of senior executives and group heads, oversee credit, market and operational risks. The Risk Management Department, which is independent from all business units, identifies, evaluates and controls all risks of the Bank and supports the Risk Management Committee. Credit Risk Management Credit risk, which is the risk of loss from default by an obligor or counter-party, is the greatest risk the Bank faces. The Bank’s credit risk management is guided by the following principles: Š Š Š Š Š Š Š achieve profit level corresponding to the level of risks involved; improve asset quality and achieve optimal industrial and rating loan portfolio; focus on small- and medium-sized enterprises and markets; establish appropriate limits for investment securities; avoid excessive loan concentration in a particular borrower or sector; focus on borrower’s ability to repay the debt; and financially support the Bank’s select customers’ growth.

Major policies for the Bank’s credit risk management are determined by the Credit Policy Committee, the executive decision-making body for management of credit risk. The Credit Policy Committee is led by the Deputy President and head of the Risk Management Group. The Credit Policy Committee further consists of chief officers from other subsidiaries of Shinhan Financial Group. Apart from the Credit Policy Committee, the Bank has a Credit Review Committee in place to perform credit review evaluation, thereby separating credit policy decision-making and loan approvals. Both committees make decisions by 2/3 or more votes of the attending members, which must constitute at least two-thirds of the committee members to satisfy the quorum. The Bank performs credit risk management procedures pursuant to internal guidelines and regulations and continually monitors and improves these guidelines and regulations. Its credit risk management procedures include: Š Š Š credit evaluation and approval; credit review and monitoring; and credit risk assessment and control.

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Credit Evaluation and Approval All loan applicants and guarantors are subject to credit review evaluation before approval of any loans. Credit evaluation of loan applicants is carried out on a separate level by a Credit Officer and Senior Credit Officer and (senior) credit officer committees consisting of loan evaluation specialists from different areas. Loan evaluation is carried out by a group rather than on an individual level through objective and deliberate process. The Bank uses a credit scoring system for retail loans and a credit-risk rating system for commercial loans. Retail loans Loan applications for retail loans are reviewed in accordance with the Bank’s credit scoring system and the objective statistics methodology regarding secured and unsecured loans maintained and operated by the Bank’s Retail Banking Division. The credit scoring system is an automated credit approval system used to evaluate loan applications and determine the appropriate pricing for the loan. The Bank’s credit scoring system takes into account factors such as a borrower’s personal information, transaction history with the Bank and other financial institutions and other relevant credit information. The applicant is given a score which is used to decide whether to approve loans as well as determine loan amounts. The score determines whether the applicant is approved for credit, conditionally approved, subject to further assessment, or denied. If the applicant becomes subject to further assessment, the appropriate discretionary body, either at the branch level or at the headquarters level, makes a reassessment, which considers qualitative factors as well as quantitative factors, such as credit history, occupation and past relationship with the Bank. For mortgage loans and loans secured by real estate, the Bank evaluates the value of the real estate offered as collateral for a loan using a database the Bank has developed, which contains information about real estate values throughout Korea. In addition, the Bank uses information from a third party provider of information about the real estate market in Korea, which gives the Bank up-to-date market value information for Korean real estate values. Staff from the processing centers appraises the real estate. In addition, for loans of W5 billion or more, the Bank hires certified appraisers to review the appraisal value of real estate collateral that have an appraisal value exceeding W10 billion, as initially determined by the processing centers. The Bank reevaluates internally, on a summary basis, the appraisal value of collateral at least every year. For loans secured by securities, deposits or other assets other than real estate, the Bank requires borrowers to observe specified collateral ratios in respect of secured obligations. Corporate loans The Bank rates all of its corporate borrowers using a rating system. The Bank uses internally developed credit evaluation models to rate potential borrowers. The credit risk-rating systems take into account a variety of evaluation criteria in order to standardize credit decisions, by focusing on the quality of borrowers rather than the volume of loans. The systems include both quantitative factors based on the borrower’s financial and other data, and qualitative factors based on the judgment of the Bank’s credit officers. Financial evaluation factors the Bank considers include financial variables and ratios based on its customer’s financial statements, such as return on assets and cash flow to total debt ratios. Non-financial evaluation factors include, among others, the industry in which the borrower operates, its competitive position in its industry, its operating and funding capabilities, the quality of its management and controlling stockholders (based in part on interviews with its officers and employees), technological capabilities and labor relations. The Bank consults reports prepared by external credit rating services, such as Korea Information Service, National Information & Credit Evaluation Inc. and Korea Management Consulting & Credit Rating Corporation. The Bank uses these services to provide it with support for the accuracy of the credit review it conducts. The Bank monitors and improves the effectiveness of the credit risk-rating systems using a database that it updates continually with actual default records.

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Based on the scores calculated under the credit rating system, which takes into account the evaluation criteria described above and the probability of default, the Bank assigns the borrower one of twenty grades (AAA to D). Grades AA through B are further broken down into “+”, “0” or “-”. Grades AAA through Bare classified as normal, grade CCC precautionary, and grades CC through D non-performing. The credit risk-rating model is further differentiated by the size of the corporate borrower and the type of credit facilities. Loan approval process Evaluations of general loans are approved after combined evaluation and approval by the relationship manager of each branch and the committee of the applicable business unit at the Bank. Depending on the size and the importance of the loan, the approval process passes through review of the Credit Officer Committee or Senior Credit Officer Committee. In a case where the loan is considered significant or the amount exceeds the discretion limit of the Senior Credit Officer Committee, the credit evaluation is carried out by the highest decision-making credit approval body, the Credit Review Committee. The Credit Review Committee evaluates and approves large credits in excess of W10 billion for unsecured and W15 billion for secured lending. Meetings to approve these large credits are held twice a week. The Credit Review Committee makes decisions by two-thirds or more votes of the attending members, which must constitute at least two-thirds of the committee members to satisfy the quorum. The chart below summarizes the credit approval process of the Bank’s banking operation. The Senior Credit Officer and the Head of Business Division do not make individual decisions on loan approval, but are part of the decision-making process at the group level.
Credit Review Committee

Senior Credit Officer Committees (Corporate / Retail)

Credit Officer Committee

Branch Underwriter / Credit Officer

The reviewer at each level of the review process may approve loans up to a maximum amount per loan assigned to such level. The loan amount approval limit for each level of the loan approval process takes into account the credit level of the applicant based on credit review, the existence and value of collateral and the level of credit risk established by the credit rating system. The loan amount approval limit ranges from W100 million for unsecured B- grade retail loans, which applies to approvals by the retail branch manager, to W80 billion for secured AAA grade loans, which applies to approvals by the top-level credit review committee. Credit Review and Monitoring The Bank continually reviews and monitors existing credit risks primarily with respect to borrowers. In particular, the Bank’s automated early warning system conducts daily examination of borrowers using over 163 financial and non-financial factors, and the relationship manager and the credit officer must conduct periodic loan review and report to an independent loan review team which analyzes in detail the results and adjusts the credit rating accordingly. Based on these reviews, the Bank adjusts a borrower’s credit rating, credit limit, applied interest rates and credit policies. In addition, the group credit rating of the borrower’s group, if applicable, may be adjusted following a periodic review of the main debtor groups, mostly comprised of chaebols, as identified by the Governor of the Financial Supervisory Service based on their

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outstanding credit exposures, of which 43 and 45 were identified as such as of December 31, 2008 and March 31, 2009, respectively. The Bank also continually reviews other factors, such as industry conditions in which borrowers operate and their domestic and overseas asset base and operations, to ensure that ratings are appropriate. The Credit Review Department provides credit review reports, independent of underwriting, to the Chief Risk Officer on a monthly basis. The early warning system conducts an automatic daily check on borrowers with whom the Bank has more than W2 billion of exposure. The relationship manager and the Credit Officer in the Credit Review Department monitor those borrowers, and then the Credit Review Department further reviews the results of the monitoring. In addition, the Bank carries out a planned review of each borrower in accordance with changing credit risk factors based on changing economic environment. The results of such planned review are continually reported to the Chief Risk Officer of the Bank. Depending on the nature of the items detected by the early warning system, a borrower may be classified as a “deteriorating credit” and undergo evaluation for a possible downgrade in its customer rating, or may be initially classified as a “borrower showing early warning signs” or re-attain “normal borrower” status. For borrowers classified as “showing early warning signs”, the relevant relationship manager gathers information and conducts a review of the borrower to determine whether it should be classified as a deteriorating credit or whether to impose management improvement warnings or implement joint creditors’ management. If the borrower becomes non-performing, the Bank’s collection department directly manages such borrower’s account in order to maximize recovery rate, and conducts auctions, court proceedings, sale of assets or corporate restructuring as needed. Credit Risk Assessment and Control To assess credit risk in a systematic manner, the Bank has developed and upgraded systems designed to quantify credit risks based on selection and monitoring of various statistics, including delinquency rate, non-performing loan ratio, expected loan loss and weighted average risk rating. The Bank controls loan concentration by monitoring and managing loans at two levels: portfolio level and individual loan account level. In order to prevent concentration of loans, the Bank has established a credit limit per country, industry, affiliates, corporation and financial institution, and has encouraged extension of credit to customers with good credit and reduction of credit to customers with less than good credit. In addition, the Bank utilizes the results of credit portfolio analysis in allocating asset quality based on forward looking criteria, increasing discretion and adjusting loan to value ratio. The Bank measures credit risk using internally accumulated data. The Bank measures expected and unexpected losses with respect to total assets monthly, which the Bank refers to when setting risk limits for, and allocating capital to, its business groups. Expected loss is calculated based on the probability of default, the loss given default, the exposure at default and the past bankruptcy rate and recovery rate, and the Bank provides allowance for loan losses under Korean GAAP accordingly. The Bank selects the higher of the two provisioning levels, as determined by the Financial Supervisory Service requirement or the Bank’s internal calculation. Unexpected loss is predicted based on value at risk (“VaR”), which is used to determine compliance with the credit risk limits set for the entire Bank as well as for each department thereof. Beginning on January 1, 2008, the Bank uses the “Monte Carlo” simulation method to compute the VaR, compared to the “historical” simulation method used previously, as the “Monte Carlo” method provides a more systematic method for reflecting concentration risks and correlation effects. Market Risk Management Market risk is the risk of loss generated by fluctuations in market prices such as interest rates, foreign exchange rates and equity prices. The principal market risks to which the Bank is exposed are interest rate risk and, to a lesser extent, equity price risk, foreign exchange risk and commodity risk. These risks stem from the Bank’s trading and non-trading activities relating to financial instruments such as loans, deposits, securities and financial derivatives. The Bank divides market risk into risks arising from trading activities and risks arising from non-trading activities.

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For the Bank’s market risk management, the Bank’s Risk Management Committee establishes overall market risk management principles for both the trading and nontrading activities of the Bank. Based on these principles, the Bank’s Asset & Liability Management Committee, or the ALM Committee, assesses and controls market risks arising from trading and non-trading activities. The ALM Committee, which consists of eight executive vice presidents and the head of the Treasury Department, is the executive decision-making body for the Bank’s risk management and asset and liability management operations. At least on a monthly basis, the ALM Committee reviews and approves reports, which include the position and VaR with respect to the Bank’s trading activities and the position, VaR, duration gap and market value analysis and net interest income simulation with respect to its non-trading activities. The Bank measures market risk with respect to all assets and liabilities in bank accounts and trust accounts in accordance with the regulations promulgated by the Financial Services Commission. Market Risk Exposure from Trading Activities The Bank’s trading activities principally consist of: Š trading activities to realize short-term trading profits in debt and stock markets and foreign exchange markets based on the Bank’s short-term forecast of changes in market situation and customer demand, on its own account as well as for the trust accounts of the Bank’s customers; and trading activities primarily to realize profits from arbitrage transactions in derivatives such as swap, forward, futures and option transactions, and, to a lesser extent, to sell derivative products to the Bank’s customers and to cover market risk incurred from those trading activities.

Š

As a result of these trading activities, the Bank is exposed principally to interest rate risk, foreign exchange risk and equity risk. Interest rate risk The Bank’s exposure to interest rate risk arises primarily from Won-denominated debt securities, directly held or indirectly held through beneficiary certificates, and, to a lesser extent, from interest rate derivatives. The Bank’s exposure to interest rate risk arising from foreign currency-denominated trading debt securities is minimal since its net position in those securities is not significant. As the Bank’s trading accounts are marked-to-market daily, it manages the interest rate risk related to its trading accounts using VaR, a market value-based tool. Foreign exchange risk Foreign exchange risk arises because of the Bank’s assets and liabilities, including derivatives such as foreign exchange forwards and futures and currency swaps, which are denominated in currencies other than the Won. The Bank manages foreign exchange risk on an overall position basis, including its overseas branches, by covering all of its foreign exchange spot and forward positions in both trading and non-trading accounts. The Bank’s net foreign currency open position, which is the difference between its foreign currency assets and liabilities as offset against forward foreign exchange positions, is the Bank’s foreign exchange risk. The ALM Committee oversees the Bank’s foreign exchange exposure for both trading and non-trading activities by establishing limits for the net foreign currency open position, loss limits and VaR limits. The management of the Bank’s foreign exchange position is centralized at the FX & Derivatives Department. Dealers in the FX & Derivatives Department manage the Bank’s overall position within the set limits through spot trading, forward contracts, currency options, futures and swaps and foreign exchange swaps. The Bank sets the limit for net open position by currency and the limits for currencies other than the U.S. dollar and Japanese Yen are restrictive to minimize other foreign exchange trading.

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The following table shows the Bank’s net foreign currency open positions as of December 31, 2006, 2007 and 2008 and March 31, 2009. Positive amounts represent long exposures and negative amounts represent short exposures. As of December 31, As of March 31, 2006 2007 2008 2009 (In millions of US$) US$301.1 US$ 20.4 US$(41.6) (27.2) (21.0) (43.7) 25.5 18.9 (10.8) 70.3 66.1 59.3 US$369.7 US$ 84.4 US$(36.8) US$ (2.6) (0.1) (0.4) 47.5 US$(44.4)

Currency

U.S. dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Japanese Yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity risk

Equity risk for the Bank’s trading activities results from the trading of equity portfolio of Korean companies and Korea Stock Price Index futures and options. The trading equity portfolio consists of stocks listed on the KRX KOSPI Market Division or the KRX KOSDAQ Market Division of the Korea Exchange and nearest-month or second nearest-month futures contracts under strict limits on diversification as well as limits on positions. This has been an area of particular focus due to the level of volatility in the stock market. In addition, the Bank pays close attention to loss limits. Although the Bank holds a substantially smaller amount of equity securities than debt securities in its trading accounts, the VaR of trading account equity risk is generally higher than that of trading account interest rate risk due to high volatility in the value of equity securities. As of December 31, 2006, 2007 and 2008 and March 31, 2009, the Bank held W109.4 billion, W33.6 billion, W13.4 billion and W13.1 billion, respectively, of equity securities in its trading accounts (including the trust accounts). Management of Market Risk from Trading Activities The following tables present an overview of market risk, measured by VaR, from trading activities of the Bank for the year ended and as of December 31, 2008 and for the three months ended and as of March 31, 2009. For market risk management purposes, the Bank includes its trading portfolio in bank accounts and assets in trust accounts for which it guarantees principal or fixed return in accordance with the Financial Services Commission regulations. Trading Portfolio VaR(1) for the year ended December 31, 2008
Average Minimum Maximum As of December 31, 2008

(in billions of Won) Interest rate . . . . . . . . . . . . . . . . . . . . . . . . . Foreign exchange(2) . . . . . . . . . . . . . . . . . . Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Option volatility(3) . . . . . . . . . . . . . . . . . . . Less: portfolio diversification(4) . . . . . . . Total VaR(5) . . . . . . . . . . . . . . . . . . . . . . . . . W 43.3 12.2 15.8 9.5 (26.1) W 54.7 W28.6 0.6 6.1 1.2 1.7 W38.2 W 58.7 55.7 27.5 72.7 (91.1) W123.5 W 30.1 53.2 15.9 1.8 (54.2) W 46.8

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Trading Portfolio VaR(1) for the three months ended March 31, 2009
Average Minimum Maximum As of March 31, 2009

(in billions of Won) Interest rate . . . . . . . . . . . . . . . . . . . . Foreign exchange(2) . . . . . . . . . . . . . Equities . . . . . . . . . . . . . . . . . . . . . . . Option volatility(3) . . . . . . . . . . . . . . Less: portfolio diversification(4) . . . . . . . . . . . . . Total VaR(5) . . . . . . . . . . . . . . . . . . . W 32.8 28.3 12.2 2.9 (36.9) W 39.3 W 24.5 16.0 7.2 1.4 (21.0) W 28.0 W 49.1 70.2 18.9 4.2 (82.6) W 59.8 W 49.1 19.6 13.7 1.8 (34.8) W 49.4

Notes: (1) (2) (3) (4) Ten-day VaR results with a 99.9% confidence level. Includes both trading and non-trading accounts as the Bank manages foreign exchange risk on a total position basis. Volatility implied by or inferred from the option price using the Black-Scholes or a similar model. Calculation of portfolio diversification effects may occur on different days for different risk components. The total VaRs are less than the simple sum of the risk component VaRs due to offsets resulting from portfolio diversification. Includes trading portfolio in the Bank’s bank accounts and assets in trust accounts for which it guarantees principal or fixed return.

(5)

The Bank generally manages its market risk from trading activities throughout the entire portfolio level. To control its trading portfolio market risk, the Bank uses position limits, VaR limits, and stop loss limits. The Bank prepared its risk control and management guidelines for derivative trading based on the regulations and guidelines promulgated by the Financial Services Commission. The Bank measures market risk from trading activities to monitor and control the risk of its operating divisions and teams that perform trading activities. Value-at-risk analysis. The Bank uses ten-day VaRs to measure its market risk. The Bank calculates VaRs on a daily basis based on data for the previous 12 months for holding periods of ten days. A ten-day VaR is a statistically estimated maximum amount of loss that can occur for ten days under normal market conditions. The Bank uses a 99.9% confidence level to measure the VaRs, which means the actual amount of loss may exceed the VaR, on average, once out of 1,000 business days. Value-at-risk is a commonly used market risk management technique. However, VaR models have the following shortcomings: Š By its nature as a statistical approach, VaR estimates possible losses over a certain period at a particular confidence level using past market movement data. Past market movement, however, is not necessarily a good indicator of future events, particularly potential future events that are extreme in nature. This model may underestimate the probability of extreme market movements. The time periods used for the model, generally one or ten days, are assumed to be a sufficient holding period before liquidating the relevant underlying positions. If these holding periods are not sufficient, or too long, the VaR results may understate the potential loss. The use of a 99% confidence level does not take account of or make any statement about, any losses that might occur beyond this confidence level. VaR does not capture all complex effects of various risk factors on the value of positions and portfolios and could underestimate potential losses.

Š Š

Š Š

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Currently, the Bank conducts back-testing of VaR results against actual outcomes on a daily basis. The Bank operates an integrated market risk management system which manages The Bank’s Won-denominated and foreign-denominated accounts. This system uses historical simulation to measure both linear risks arising from such products as equity and debt securities and nonlinear risks arising from other products including options. The Bank believes that this system enables it to generate elaborate and consistent VaR numbers and perform sensitivity analysis and back testing to check the validity of the models on a daily basis. Stress test. In addition to VaR, the Bank performs stress tests to measure market risk. As VaR assumes normal market situations, the Bank assesses its market risk exposure to unlikely abnormal market fluctuations through stress tests. Stress test is an important way to supplement VaR since VaR does not cover potential loss if the market moves in a manner which is outside the Bank’s normal expectations. Stress test projects the anticipated change in value of holding positions under certain scenarios assuming that no action is taken during a stress event to change the risk profile of a portfolio. The Bank uses seven relatively simple but fundamental scenarios for stress tests taking into account four market risk components such as foreign exchange rates, stock prices and Won-denominated and foreign currency-denominated interest rates. For the worst case scenario, the Bank assumed instantaneous and simultaneous movements in the four market risk components — depreciation of Won by 20%, decrease in Korea Exchange Composite Index by 30%, and increases in Won-denominated and U.S. dollar-denominated interest rates by 200 basis point and 200 basis points, respectively. In the case of this worst-case scenario, the change in market value of the Bank’s trading portfolio was a decline of W315.9 billion and W129.7 billion as of December 31, 2008 and March 31, 2009, respectively. The Bank performs stress test at least monthly and reports the results to the ALM Committee and the Risk Management Committee. The Bank sets limits on stress testing for its overall operations. If the impact of market turmoil or other abnormalities is large, their respective chief risk officer may request a portfolio restructuring or other proper action. Hedging and Derivative Market Risk The principal objective of the Bank’s groupwide hedging strategy is to manage its market risk within established limits. The Bank uses derivative instruments to hedge its market risk as well as to make profits by trading derivative products within pre-approved risk limits. The Bank’s derivative trading includes interest rate and cross-currency swaps, foreign currency forwards and futures, stock index and interest rate futures, and stock index and currency options. While the Bank uses derivatives for hedging purposes, derivative transactions themselves incur market risk as the Bank takes trading positions and trades them for the purpose of making profits. These activities consist primarily of the following: Š arbitrage transactions to make profits from short-term discrepancies between the spot and derivative markets or within the derivative markets; sales of tailor-made derivative products that meet various needs of the Bank’s corporate customers, and related transactions to reduce its exposure resulting from those sales; taking positions in limited cases when the Bank expects short-swing profits based on its market forecasts; and trading to hedge the Bank’s interest rate and foreign currency risk exposure as described above.

Š

Š

Š

Market risk from derivatives is not significant since derivative trading activities of the Bank are primarily driven by arbitrage and customer deals with very limited open trading positions.

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Market Risk Management for Non-trading Activities Interest Rate Risk Principal market risk from non-trading activities of the Bank is interest rate risk. Interest rate risk is the risk of loss resulting from interest rate fluctuations that adversely affect the financial condition and results of operations of the Bank. The Bank’s interest rate risk arises primarily due to differences between the timing of rate changes for interest-earning assets and interest-bearing liabilities. Interest rate risk affects the Bank’s earnings and the economic value of the Bank’s net assets: Š Earnings: interest rate fluctuations have an effect on the Bank’s net interest income by affecting its interest-sensitive operating income and expenses. Economic value of net assets: interest rate fluctuations influence the Bank’s net worth by affecting the present value of cash flows from the assets, liabilities and other transactions of the Bank.

Š

Accordingly, the Bank measures and manages interest rate risk for non-trading activities by taking into account effects of interest rate changes on both its income and net asset value. The Bank measures and manages interest rate risk on a daily/monthly basis with respect to all interest-earning assets and interestbearing liabilities in the Bank’s bank accounts (including derivatives denominated in Won which are interest rate swaps for the purpose of hedging) and in the trust accounts, except that it measures VaRs on a monthly basis. Most of the Bank’s interest-earning assets and interest-bearing liabilities are denominated in Won. Interest Rate Risk Management The principal objectives of the Bank’s interest rate risk management are to generate stable net interest income and to protect the Bank’s net asset value against interest rate fluctuations. To this end, the ALM Committee sets out the Bank’s interest rate risk limits at least annually and the Risk Management Department monitors the Bank’s compliance with these limits and reports the monitoring results to the ALM Committee on a monthly basis. The Bank uses interest rate swaps to control its interest rate exposure limits. On a daily/monthly basis, the Bank uses various analytical methodologies to measure and manage its interest rate risk for nontrading activities, including the following: Š Interest Rate Gap Analysis. Interest rate gap analysis measures the difference in the amounts of interest-earning assets and interest-bearing liabilities at each maturity and repricing date for a specific time frame. Duration Gap Analysis. Duration gap analysis measures durations of the Bank’s interest-earning assets and interest-bearing liabilities, which are weighted average maturities of these assets and liabilities calculated based on discounted cash flows from these assets and liabilities using yield curves. Market Value Analysis. Market value analysis measures changes in the market value of the Bank’s interest-earning assets and interest-bearing liabilities based on the assumption of parallel shifts in interest rates. Net Interest Income Simulation Analysis. Net interest income simulation analysis uses deterministic analysis methodology to measure changes in the Bank’s annual net interest income (interest income less interest expenses) under the current maturity structure, using different scenarios for interest rates (assuming parallel shifts) and funding requirements.

Š

Š

Š

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Interest Rate Gap Analysis Interest rate gap analysis measures the difference in the amounts of interest-earning assets and interestbearing liabilities at each maturity and repricing date by preparing interest rate gap tables in which the Bank’s interest-earning assets and interest-bearing liabilities are allocated to the applicable time buckets based on the expected cash flows and repricing dates. On a daily basis, the Bank performs interest rate gap analysis for Won and foreign currency denominated assets and liabilities in its bank and trust accounts. The Bank’s gap analysis includes Won-denominated derivatives (which are interest rate swaps for the purpose of hedging) and foreign currency-denominated derivatives (which are currency swaps for the purpose of hedging) whose management is centralized at the FX & Derivatives Department. Through the interest rate gap analysis that measures interest rate sensitivity gaps, cumulative gaps and gap ratios, the Bank assesses its exposure to future interest risk fluctuations. For interest rate gap analysis, the Bank assumes and uses the following maturities for different assets and liabilities: Š With respect to the maturities and re-pricing dates of the Bank’s assets, the Bank assumes that the maturity of its prime rate-linked loans is the same as that of its fixed-rate loans. The Bank also assumes that the debt securities in the Bank’s trading accounts have maturities of three months. The Bank excludes equity securities from interest-earning assets. With respect to the maturities and re-pricing of the Bank’s liabilities, the Bank assumes that money market deposit accounts and “non-core” demand deposits under the Financial Services Commission guidelines have a maturity of three months or less. With respect to “core” demand deposits under the Financial Services Commission guidelines, the Bank assumes that they have maturities of eight different intervals ranging from one month to five years.

Š

The following tables show the Bank’s interest rate gaps as of the dates indicated for (1) Won-denominated non-trading bank accounts, including derivatives for the purpose of hedging and (2) foreign currencydenominated non-trading bank accounts, including derivatives for the purpose of hedging. Won-denominated non-trading bank accounts(1) As of December 31, 2008 0-3 Months 3-6 6-12 1-2 2-3 Over Months Months Years Years 3 Years (in billions of Won, except percentages) Total

Interest-earning assets . . . . . W115,845 W13,238 W 11,909 W11,618 W 4,920 W11,603 W169,133 Fixed rates . . . . . . . . . . . 28,173 8,000 9,354 10,134 3,263 6,976 65,900 Floating rates . . . . . . . . . 85,312 4,528 1,050 1,005 355 653 92,903 Interest rate swaps . . . . 2,360 710 1,505 480 1,302 3,973 10,330 Interest-bearing liabilities . . . . . . . . . . . . . . . W 79,629 W22,148 W 28,256 W12,126 W 8,125 W12,902 W163,186 Fixed liabilities . . . . . . . 37,341 14,555 26,793 11,758 7,991 12,731 111,169 Floating liabilities . . . . . 31,957 7,593 1,463 367 134 172 41,686 Interest rate swaps . . . . 10,330 — — — — — 10,330 Sensitivity gap . . . . . . . . . . . . 36,216 (8,910) (16,347) (507) (3,205) (1,300) 5,947 Cumulative gap . . . . . . . . . . . 36,216 27,306 10,959 10,452 7,247 5,947 % of total assets . . . . . . . . . . . 21.4% 16.1% 6.5% 6.2% 4.3% 3.5%

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As of March 31, 2009 0-3 Months 3-6 6-12 1-2 2-3 Over Months Months Years Years 3 Years (in billions of Won, except percentages) Total

Interest-earning assets . . . . W115,443 W12,425 W 11,461 W 9,251 W 5,212 W 13,537 W167,330 Fixed rates . . . . . . . . . . . 28,353 6,110 9,209 7,617 3,864 9,048 64,202 Floating rates . . . . . . . . 85,610 5,601 1,362 754 356.295 555.022 94,238 Interest rate swaps . . . 1,480 715 890 880 992 3,933 8,890 Interest-bearing liabilities . . . . . . . . . . . . . . W 85,831 W18,197 W 28,060 W11,216 W 7,059 W 13,087 W163,448 Fixed liabilities . . . . . . 32,235 13,799 26,481 10,856 6,975 12,877 103,222 Floating liabilities . . . . 44,706 4,398 1,579 360 84 210 51,336 Interest rate swaps . . . 8,890 — — — — — 8,890 Sensitivity gap . . . . . . . . . . . 29,613 (5,771) (16,598) (1,964) (1,847) 450 3,882 Cumulative gap . . . . . . . . . . . 29,613 23,841 7,243 5,279 3,432 3,882 % of total assets . . . . . . . . . . 17.70% 14.25% 4.33% 3.15% 2.05% 2.32% Foreign currency-denominated non-trading bank accounts(1) As of December 31, 2008 0-3 Months 3-6 6-12 1-3 Over Months Months Years 3 Years (In millions of US$, except percentages) Total

Interest-earning assets . . . . . . . . . . . . . . . Interest-bearing Liabilities . . . . . . . . . . . Sensitivity gap . . . . . . . . . . . . . . . . . . . . . . Cumulative gap . . . . . . . . . . . . . . . . . . . . . % of total assets . . . . . . . . . . . . . . . . . . . . .

$13,055 $ 2,580 $ 1,094 $ 1,153 $ 1,696 $19,578 14,035 2,446 1,489 2,002 1,498 21,470 (981) 134 (396) (849) 198 (1,893) (981) (846) (1,242) (2,091) (1,893) (5.0)% (4.3)% (6.3)% (10.7)% (9.7)% As of March 31, 2009 0-3 Months 3-6 6-12 1-3 Over Months Months Years 3 Years (In millions of US$, except percentages) Total

Interest-earning assets . . . . . . . . . . . . . . . Interest-bearing Liabilities . . . . . . . . . . . Sensitivity gap . . . . . . . . . . . . . . . . . . . . . . Cumulative gap . . . . . . . . . . . . . . . . . . . . . % of total assets . . . . . . . . . . . . . . . . . . . . .

$11,946 $ 1,563 $ 1,040 $ 1,179 $ 1,679 $17,407 13,611 2,414 1,525 1,981 1,459 20,990 (1,664) (851) (485) (802) 219 (3,583) (1,664) (2,516) (3,001) (3,803) (3,583) (9.56)% (14.45)% (17.24)% (21.85)% (20.59)%

Note: (1) Includes merchant banking accounts.

Duration Gap and Market Value Analysis The Bank performs a duration gap analysis to measure effects of interest rate risk on the market value of its assets and liabilities. The Bank measures, on a daily basis and for each operating department, account, product and currency, durations of interest-earning assets and interest-bearing liabilities. The Bank also measures, on a daily basis, changes in the market value of the Bank’s interest-earning assets and interestbearing liabilities.

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The following tables show duration gaps and market values of the Bank’s Won-denominated interestearning assets and interest-bearing liabilities in its non-trading accounts as of the dates indicated and changes in these market values when interest rate increases by one percentage point. Duration for non-trading Won-denominated bank accounts(1) As of December 31, 2008(1) As of March 31, 2009(1) (In months) Interest-earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest-bearing liabilities . . . . . . . . . . . . . . . . . . . . . . . Gap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.4 9.8 (1.4) 9.0 8.8 0.3

Market Value for non-trading Won-denominated bank accounts(1) As of December 31, 2008(1) As of March 31, 2009(1) 1% Point 1% Point Actual Increase Changes Actual Increase Changes (in billions of Won) Interest-earning assets . . . . . . . . . . . Interest-bearing liabilities . . . . . . . . Gap . . . . . . . . . . . . . . . . . . . . . . . . . . . . W173,319 W172,164 168,332 167,043 4,987 5,121 W(1,155) W172,421 W171,137 (1,289) 166,965 165,801 134 5,457 5,336 W(1,284) (1,164) (120)

Note: (1) Includes merchant banking accounts and derivatives for the purpose of hedging.

Net Interest Income Simulation The Bank performs net interest income simulation to measure the effects of the change in interest rate on its results of operations. Such simulation measures the estimated changes in the Bank’s annual net interest income (interest income less interest expenses) under the current maturity structure, using different scenarios for interest rates and funding requirements. For such simulation, the Bank applies three scenarios of parallel shifts in interest rate: (1) no change, (2) a 1% point increase in interest rates and (3) a 1% point decrease in interest rates. For funding requirement changes, the Bank uses two scenarios: (1) no change in funding requirement and (2) a 10% increase in funding requirement. The following tables illustrate by way of an example the simulated changes in the Bank’s annual net interest income for 2009 with respect to Won-denominated interest-earning assets and interest-bearing liabilities, using the Bank’s net interest income simulation model, when it assumes (a) the maturity structure and funding requirement of the Bank as of March 31, 2009 and (b) the same interest rates as of March 31, 2009 and a 1% point increase or decrease in the interest rates. Simulated Net Interest Income for April 2009 — March 2010 (For Non-trading Won-denominated Bank Accounts)(1) Change in Net Change in Net Assumed Interest Rates Interest Income Interest Income % % Amount Amount Change Change No 1% Point 1% Point (1% Point (1% Point (1% Point (1% Point Change Increase Decrease Increase) Increase) Decrease) Decrease) (in billions of Won, except percentages) Simulated interest income . . . . . . . . . . . . W83,079 Simulated interest expense . . . . . . . . . . . 58,222 Net interest income . . . 24,857

W94,088 66,832 27,256

W72,067 49,612 22,455

W11,009 8,610 2,399

13.25% W(11,011) 14.79% 9.65% (8,609) (2,402)

(13.25)% (14.79)% (9.66)%

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Note: (1) Excludes merchant banking account and derivatives for the purpose of hedging.

The Bank’s Won-denominated interest earning assets and interest-bearing liabilities in non-trading accounts have a maturity structure that benefits from an increase in interest rates, because the re-pricing periods of the interest-earning assets in the Bank’s non-trading accounts are shorter than those of the interest-bearing liabilities in these accounts. This is primarily due to a continuous decrease in interest rates in recent years in Korea, which resulted in a significant increase in floating rate loans, resulting in the maturities or repricing periods of the Bank’s loans being shorter. As a result, the Bank’s net interest income increases when the interest rates rise. Interest Rate VaRs for Non-trading Assets and Liabilities The Bank measures VaRs for interest rate risk from non-trading activities on a monthly basis. The following table shows, as of and for the year ended December 31, 2008 and as of for the three months ended March 31, 2009, the VaRs of interest rate mismatch risk for other assets and liabilities, which arises from mismatches in the re-pricing dates of the Bank’s non-trading interest-earning assets and interest-bearing liabilities, including available-for-sale investment securities. Under the Financial Services Commission regulations, the Bank includes in calculation of these VaRs interest-earning assets and interest-bearing liabilities in its bank accounts and its merchant banking accounts. VaR for the year ended December 31, 2008(1) Average Minimum Maximum As of December 31 (in billions of Won) Interest rate mismatch — nontrading assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W296

W152

W402

W234

VaR for the three months ended March 31, 2009(1) Average Minimum Maximum As of March 31 (in billions of Won) Interest rate mismatch — nontrading assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W249

W311

W272

W257

Note: (1) One-year VaR results with a 99% confidence level.

Equity Risk Substantially all of the Bank’s equity risk results from its equity portfolio of Korean companies. As of December 31, 2008 and March 31, 2009, the Bank held an aggregate amount of W26 billion and W29 billion, respectively, of equity shares in unlisted foreign companies. The equity securities in Won held in the Bank’s investment portfolio consist of stocks listed on the KRX KOSPI Market or the KRX KOSDAQ Market of the Korea Exchange and certain unlisted stocks. The Bank measures VaRs for all of these equity securities but does not manage most of the related risk using VaR limits, as most of these securities are held for reasons other than normal investment purposes. As of December 31, 2008 and March 31, 2009, the Bank held equity securities in an aggregate amount of W4,158 billion and W4,326 billion, respectively, in its non-trading accounts, including equity securities in the amount of W2,063 billion and W2,288 billion, respectively, that it held, among other reasons, for management control purposes and as a result of debt-to-equity conversion as a part of reorganization proceedings of the companies to which it had extended loans.

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As of December 31, 2008 and March 31, 2009, the Bank held Won-denominated convertible bonds in the amount of W2 billion and W2 billion, respectively, and foreign currency exchangeable bonds in the amount of W22 billion and W25 billion, respectively, in its non-trading accounts. The Bank does not measure equity risk with respect to convertible and exchangeable bonds and the interest rate risk of these bonds are measured together with the other debt securities. As such, the Bank measures interest rate risk VaRs but not equity risk VaRs for these equity-linked securities. The following table shows the VaRs of the Bank’s equity risk for listed equity as of the dates indicated. As of December 31, 2008 As of March 31, 2009 (in billions of Won) Listed equities(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W880 W966

Note: (1) Ten-day VaR results with a 99.9% confidence level.

Liquidity Risk Management Liquidity risk is the risk of insolvency, default or loss due to disparity between inflow and outflow of funds, including having to obtain funds at a high price or to dispose of securities at an unfavorable price due to lack of available funds or losing attractive investment opportunities. The Bank applies the following basic principles for liquidity risk management: Š maintain an appropriate level of liquidity risk through liquidity risk management based on liquidity gap or debt-to-equity ratio at each maturity date; assess and monitor net cash flows by currency and by maturity and continuously evaluate available sources of funds and possibility of disposal of any liquid assets; diversify sources and uses of funds by product and by maturity to prevent excessive concentration in certain periods or products; and prepare contingency plans to cope with liquidity crisis.

Š

Š

Š

The Bank manages its liquidity risk within the limits set on Won and foreign currency accounts in accordance with the regulations of the Financial Services Commission. The Financial Services Commission requires Korean banks to maintain a Won liquidity ratio of at least 100.0% and a foreign currency liquidity ratio of at least 85.0%. The Financial Services Commission defines foreign currency liquidity ratio as foreign currency-denominated liquid assets (including marketable securities) due within three months divided by foreign currency-denominated liabilities due within three months. As for the Won liquidity ratio, prior to October 2008 the Financial Services Commission defined it as Won-denominated liquid assets (including marketable securities) due within three months divided by Won-denominated liabilities due within three months, but since October 2008 defines it as Won-denominated liquid assets (including marketable securities) due within one month divided by Won-denominated liabilities due within one month. The Treasury Department is in charge of liquidity risk management with respect to the Bank’s Won and foreign currency funds. The Treasury Department submits the Bank’s monthly funding and asset management plans to the ALM Committee for its approval, based on the analysis of various factors, including macroeconomic indices, interest rate and foreign exchange movements and maturity structures of the Bank’s assets and liabilities. The Risk Management Department measures the Bank’s liquidity ratio and liquidity gap ratio on a daily basis and reports whether they are in compliance with the limits to the ALM Committee on a monthly basis.

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The following tables show the Bank’s liquidity status and limits for Won and foreign currency accounts (including derivatives) as of the dates indicated in accordance with the regulations of the Financial Services Commission. Won-denominated accounts (including derivatives and merchant banking accounts)
As of December 31, 2008 3-6 6-12 1-3 Over Sub-standard Months Months Years 3 years or below (in billions of Won, except percentages) W28,282 18,023 W39,541 W29,080 W58,082 49,185 25,692 56,622

Won-Denominated Accounts

0-1 Month

1-3 Months

Total

Assets: . . . . . . . . . . . . . . . . W53,056 W25,379 Liabilities: . . . . . . . . . . . . . 49,398 19,251 For one month or less: Liquidity gap . . . . . . 3,658 Liquidity ratio(1) . . . 107.40% Limit . . . . . . . . . . . . . . 100.00%

W1,261 W234,683 — 218,171

Won-Denominated Accounts

0-1 Month

1-3 Months

As of March 31, 2009 3-6 6-12 1-3 Over Sub-standard Months Months Years 3 years or below (in billions of Won, except percentages) W24,193 17,654 W38,134 W26,738 W57,986 51,023 22,500 56,117

Total

Assets: . . . . . . . . . . . . . . . . W60,014 W22,247 Liabilities: . . . . . . . . . . . . . 51,936 15,025 For one month or less: Liquidity gap . . . . . . 8,079 Liquidity ratio(1) . . . 115.55% Limit . . . . . . . . . . . . . . 100.00%

W1,878 W231,191 — 214,256

Foreign currencies-denominated accounts (including derivatives and merchant banking accounts(1))
As of December 31, 2008 7 Days-1 3-6 6-12 Over Sub-Standard Month 3 Months Months Months 1 Year or Below (In millions of US$, except percentages) $ 7,463 8,390 $ 10,331 10,661 26,729 27,025 98.90% 85.00% As of March 31, 2009 7 Days-1 3-6 6-12 Over Sub-Standard Month 3 Months Months Months 1 Year or Below (In millions of US$, except percentages) $ 7,868 9,171 $ 8,059 8,633 24,452 24,027 101.77% 85.00% $ 6,656 $ 5,148 $ 15,198 7,448 5,813 15,672 $ $ 7,202 $ 6,819 $ 17,050 6,032 6,789 18,234 $

Foreign Currencies Denominated Accounts:

7 Days or Less

Total

Assets: . . . . . . . . . . . . . . . . $ 8,935 Liabilities . . . . . . . . . . . . . . 7,974 For three months or less: Assets . . . . . . . . . . . . . Liabilities . . . . . . . . . Liquidity ratio . . . . . Limit . . . . . . . . . . . . . .

87 $ 57,888 — 58,080

Foreign Currencies Denominated Accounts:

7 Days or Less

Total

Assets: . . . . . . . . . . . . . . . . $ 8,526 Liabilities . . . . . . . . . . . . . . 6,223 For three months or less: Assets . . . . . . . . . . . . . Liabilities . . . . . . . . . Liquidity ratio . . . . . Limit . . . . . . . . . . . . . .

167 $ 51,622 — 52,961

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Note: (1) In October 2008, the criteria for Won currency liquidity ratio were changed from three months of residual maturity to one month of residual maturity.

The Bank maintains diverse sources of liquidity to facilitate flexibility in meeting its funding requirements. The Bank funds its operations principally by accepting deposits from retail and corporate depositors, accessing the call loan market (a short-term market for loans with maturities of less than one month), issuing debentures and borrowing from the Bank of Korea. The Bank uses the funds primarily to extend loans or purchase securities. Generally, deposits are of shorter average maturity than loans or investments. In addition to liquidity risk management under the normal market situations, the Bank has contingency plans to effectively cope with possible liquidity crisis. Liquidity crisis arises when the Bank would not be able to effectively manage the situations with its normal liquidity management measures due to, among other reasons, inability to access the Bank’s normal sources of funds or epidemic withdrawals of deposits as a result of various external or internal factors, including a collapse in the financial markets or abrupt deterioration of the Bank’s credit. The Bank has contingency plans corresponding to different stages of liquidity crisis: “cautionary stage”, “near-crisis stage” and “crisis stage”, based on the following liquidity indices: Š Š Š indices that reflect the market movements such as interest rates and stock prices; indices that reflect financial market psychology such as the size of money market funds; and indices that reflect the Bank’s internal financial condition.

Operational Risk Management Operational risk is difficult to quantify and subject to different definitions. The Basel Committee defines operational risk as the risk of loss resulting from inadequate or failed internal processes, people and systems or from other external events. Similarly, the Bank defines operational risk as the risks related to its overall management other than credit risk, market risk, interest rate risk and liquidity risk. These include risks arising from system failure, human error or non-adherence to policy and procedures, from fraud or inadequate internal controls and procedures, and from environmental changes, resulting in financial and non-financial loss, including reputational loss. The Bank monitors and assesses operational risks related to its business operations, including administrative risk, information technology risk, managerial risk, legal risk and reputation risk, with a view to minimizing such losses. To monitor and manage operational risks, the Bank maintains, a system of comprehensive policies and has in place a control framework designed to provide a stable and well-managed operational environment throughout the organization. Currently, the primary responsibility for ensuring compliance with the Bank’s banking operational risk procedures remains with each of the business units and operational teams. In addition, the Audit Department, the Risk Management Department and the Compliance Department of the Bank also play important roles in reviewing and maintaining the integrity of the Bank’s internal control environment. The operational risk management system of the Bank is managed by the operational risk team under the Risk Management Department. The current system principally consists of risk control self-assessment, risk quantification using key risk indicators, loss data collection, scenario management and operational risk capital measurement. The Bank operates several educational and awareness programs with a view to familiarizing all of its employees to this new system. In addition, the Bank has a designated operational risk manager at each of its departments and branch offices, serving the role of a coordinator between the operational risk team at the headquarters and the employees in the field and seeking to provide centralized feedback to further improve the operational risk management system.

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As of December 31, 2008 and March 31, 2009, the Bank has conducted risk control self-assessments on its departments as well as domestic and overseas branch offices, from which it collects systematized data on all of its branch offices, and uses the findings from such self-assessments to improve the procedures and processes for the relevant departments or branch offices. In addition, the Bank has accumulated risk-related data since 2003, improved the procedures for monitoring operational losses and is developing risk simulation models. In addition, the Bank selects and monitors, at the department level, approximately 200 key risk indicators. The audit committee of the Bank, which consists of three board members, including two outside directors, is an independent inspection authority that supervises the Bank’s internal controls and compliance with established ethical and legal principles. The audit committee performs internal audits of, among other matters, the Bank’s overall management and accounting, and supervises its Audit Department, which assists the Bank’s audit committee. The Bank’s audit committee also reviews and evaluates the Bank’s accounting policies and their changes, financial and accounting matters and fairness of financial reporting. The Bank’s Audit Committee and the Audit Department supervise and perform the following audits: Š general audits, including full-scale audits performed annually for the overall operations, sectional audits of selected operations performed when necessary, and periodic and irregular spot audits; special audits, performed when the Audit Committee or a standing director who is an audit committee member deems it necessary or pursuant to requests by the chief executive officer or supervisory authorities such as the Financial Supervisory Service; day-to-day audits, performed by the standing director who is an audit committee member for material transactions or operations that are subject to approval by the heads of the Bank’s operational departments or senior executives; real-time monitoring audits, performed by the computerized audit system to identify any irregular transactions and take any necessary actions; and self-audits as a self-check by each operational department to ensure its compliance with the Bank’s business regulations and policies, which include daily audits, monthly audits and special audits.

Š

Š

Š

Š

In addition to these audits and compliance activities, the Bank’s Audit Department designates operational risk management examiners to monitor the appropriateness of operational risk management frameworks and the functions and activities of the board of directors, relevant departments and business units, and conducts periodic checks on the operational risk and reports such findings. The Bank’s Audit Department also reviews in advance proposed banking products or other business or service plans with a view to minimizing operational risk. General audits, special audits, day-to-day audits and real-time monitoring audits are performed by the Bank’s examiners, and self-audits are performed by the self-auditors of the relevant operational departments. In addition to internal audits and inspections, the Financial Supervisory Service conducts general annual audits of the Bank’s operations. The Financial Supervisory Service also performs special audits as the need arises on particular aspects of the Bank’s operations such as risk management, credit monitoring and liquidity. In the ordinary course of these audits, the Financial Supervisory Service routinely issues warning notices where it determines that a regulated financial institution or such institution’s employees have failed to comply with the applicable laws or rules, regulations and guidelines of the Financial Supervisory Service. The Bank has in the past received, and expects in the future to receive, such notices and it has taken and will continue to take appropriate actions in response to such notices. For example, in January 2009, the Bank reported to the Financial Supervisory Service that an employee at a regional branch of the Bank had embezzled approximately W22 billion of the Bank’s funds. The Bank expects to recover approximately W5.7 billion of the embezzled fund. To date, the Bank is waiting for the Financial Supervisory Service to issue a request for remedial measures.

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The Bank considers legal risk as a part of operational risk. The uncertainty of the enforceability of obligations of the Bank’s customers and counterparties, including foreclosure on collateral, creates legal risk. Changes in laws and regulations could also adversely affect the Bank. Legal risk is higher in new areas of business where the law is often untested in the courts although legal risk can also increase in the Bank’s traditional business to the extent that the legal and regulatory landscape in Korea is changing and many new laws and regulations governing the banking industry remain untested. The Bank seeks to minimize legal risk by using stringent legal documentation, employing procedures designed to ensure that transactions are properly authorized and consulting legal advisers. The Compliance Department operates the Bank’s compliance inspection system. This system is designed to ensure that all of the Bank’s employees comply with the law. The compliance inspection system’s main function is to monitor the degree of improvement in compliance with the law, maintain internal controls (including ensuring that each department has established proper internal policies and that it complies with those policies) and educate employees about observance of the law. The Compliance Department also supervises the management, execution and performance of the self-audits. Upgrades and Integration of Risk Management In December 2007, the Bank obtained approval from the Financial Supervisory Service to use an internal market risk evaluation model, and in April 2008, the Bank became the first commercial bank in Korea to obtain approval from the Financial Supervisory Service to use the foundation internal rating-based (“F-IRB”) method with respect to the Basel II credit risks related to loan portfolios of large companies, small- and medium-sized enterprises and retail outlets. In December 2008, the Bank applied for approval from the Financial Supervisory Service to use the advanced internal rating-based (“A-IRB”) method with respect to operational risks and is currently undergoing the review process. The approval to use the internal market risk evaluation model enables the Bank to gain a pricing advantage compared to other banks, as such model makes it easier for the Bank to manage its capital and meet the BIS equity ratio through a differentiated risk assessment based on the borrower’s credit rating. Since 2003, in anticipation of the Basel II requirements, the Bank has taken measures to improve its risk management system, including the design and operation of its credit evaluation model, quantitative modeling of risk factors and testing the adequacy of such factors, and management and monitoring of credit risks, to a level consistent with international practice. Consistent with this approach, since 2005, the Bank has been reflecting the cost of credit based on expected loss in the computation of its pre-tax profits and also adopted the Risk Adjusted Return on Capital (“RAROC”) system to evaluate risk adjustments, and in 2008, the Bank expects to give further weight to the use of the RAROC evaluation system in determining the lending rates and the risk-adjusted profitability of such loans. The Bank aims to apply the Basel II standards and principles more systematically in its systems governing the lending process, price determination, portfolio and risk management, allocation of capital, performance evaluations and incentive determinations. In particular, the Bank aims to further develop portfolio management techniques to optimize the investment of its own capital in light of the differentiated determination of regulatory capital based on the level of risk under Basel II.

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MANAGEMENT AND EMPLOYEES Management Board of Directors Management of the Bank is the responsibility of the Board of Directors of the Bank (the “Board”), which is responsible for policy and strategic matters, has the ultimate responsibility for the administration of the affairs of the Bank and oversees the day-to-day operations through several governing bodies. The address for each of the Directors of the Board is: c/o Shinhan Bank, 120, 2-Ka, Taepyung-ro, Chung-Ku, Seoul, Korea. The Board is comprised of two Standing Directors (one of whom is an Executive Director) and seven Non-Standing (Outside) Directors. The Standing (Executive) Director is elected for a renewable term of up to three years as determined at the general meeting of the Bank’s shareholders. Non-Standing (Outside) Directors are elected for a renewable term of two-years. The Standing Director who is a member of the audit committee (as described below) is elected for a renewable term of three years. The Board meets at least once every quarter and additional extraordinary meetings can be convened at the request of the chairman of the Board. In addition, the Board has established four committees to carry out duties for the purpose of supporting the administration of various Board responsibilities: an audit committee, a risk management committee, an audit committee member nomination committee and an outside director nomination committee. The purpose of the audit committee is to (i) establish internal audit plans, carry out such plans, evaluate the results, take appropriate follow-up measures and propose appropriate reforms, (ii) evaluate and propose appropriate reforms regarding the comprehensive system of internal controls, (iii) approve the appointment(s) of external auditor(s), and (iv) perform various other functions similar to the foregoing. The purpose of the risk management committee is to (i) review risk, evaluation and limit policies of the Bank, (ii) review asset liability management and credit and market risk measures, and (iii) regulate asset quality, risk exposure and problem assets. The purpose of the audit committee nomination committee is to nominate, and recommend to the Board for appointment candidates for members of the audit committee. The purpose of the outside director nomination committee is to nominate, and recommend at the relevant general shareholders meeting for appointment candidates for outside directors. Standing (Executive) Director As of the date of this offering circular, the Bank had one Standing (Executive) Director, who is a full-time employee of the Bank and holds executive positions as listed below. Name Baek Soon Lee Age 57 Position President and Chief Executive Officer CEO Since March 17, 2009 Date Term Ends March 16, 2012

Baek Soon Lee has been the Bank’s president, chief executive officer and executive director since March 17, 2009. Mr. Lee previously served as Shinhan Financial Group’s Deputy President. Mr. Lee graduated from Deok Su commercial high school. The above Executive Director does not hold external positions outside of the Bank.

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Standing Director (Audit Committee Member) Statutory Auditor Since March 21, 2008

Name Woo-Jong Won

Age 56

Position Standing Director

Date Term Ends March 20, 2011

Woo-Jong Won has been a Standing Director and a member of the Audit Committee since March 21, 2008. Mr. Won previously worked as the Director of the Non-Bank Service Department in the Financial Supervisory Service. Mr. Won received his B.A. in economics from Sogang University. Non-Standing (Outside) Directors As of the date of this offering circular, the Bank had seven Non-Standing (Outside) Directors, as listed below. Name Sang Hoon Shin Chul Soon Park Kyung-Suh Park Sung Ho Wee Sang Rok Seo Jae Ha Park Hirakawa Yuki Age 61 52 51 52 69 52 49 Position Director, President and CEO of Shinhan Financial Group Director, Professor of Seoul National University Director, Professor of Korea University Director, Vice President of Shinhan Financial Group Director, Ex-Dean of University of Incheon Director, Deputy Director of Korea Institute of Finance Director, CEO of Pyung Chun Industries Corporation Director Since March 17, 2009 March 17, 2009 Date Term Ends March 16, 2010 March 16, 2011

April 1, 2006 March 17, 2010 March 17, 2009 March 16, 2010 April 1, 2006 March 19, 2007 March 17, 2009 March 17, 2010 March 16, 2011 March 16, 2010

Sang Hoon Shin has been a Non-Standing Director since March 17, 2009. Mr. Shin has worked at Shinhan Bank since 1982 and previously served as Shinhan Financial Group’s Senior Executive Vice President and President and Chief Executive Officer of Shinhan Bank. Mr. Shin received a B.A. in business administration from Sungkyunkwan University and a M.B.A. from Yonsei University. Chul Soon Park has been a Non-Standing Director since March 17, 2009. Mr. Park worked as the Vice Dean of College of Economics at Seoul National University and is currently a professor in the College of Business Administration at Seoul National University. Mr. Park received his B.A. in economics from Seoul National University and his Ph. D. in business administration from Columbia University. Kyung-Suh Park has been a Non-Standing Director since April 1, 2006. Mr. Park is currently a professor of business administration at Korea University. Mr. Park received his B.A. in business administration from Korea University and received his Ph.D in business administration from Northwestern University. Sung Ho Wee has been a Non-Standing Director since March 17, 2009. Mr. Wee previously worked as the general manager of Shinhan Bank Gua Cheon branch and private banking department, and is currently a Deputy President of Shinhan Financial Group. Mr. Wee received his B.A. in economics from Korea University. Sang-Rok Seo has been a Non-Standing Director since April 1, 2006. Mr. Seo previously worked as the Dean of Incheon University and is currently a joint professor at Kyungbook University. Mr. Seo received his B.A. in economics from Seoul National University and his Ph.D in economics from the University of Illinois.

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Jae Ha Park has been a Non-Standing Director since March 19, 2007. Mr. Park is currently the deputy director of Korea Institute of Finance. Mr. Park received his B.A. in economics from Seoul National University and his Ph.D from Pennsylvania State University. Hirakawa Yuki has been a Non-Standing Director since March 17, 2009. Mr. Yuki is currently Chief Executive Officer of Pyung Chun Industries Corporation. Mr. Yuki received his B.A. in Spanish from the National Osaka University. Substantially all of the Non-Standing (Outside) Directors hold positions with companies or organizations other than the Bank (the principal such positions are specified above). Management As of the date of this offering circular, the management of the Bank consists of 11 Non-Director Executive Officers. Non-Director Executive Officers Jeum Joo Gweon Age 54 Position Deputy President — Retail Business Development Group Deputy President — Risk Management Group Deputy President — Management Support Group Deputy President — Credit Analysis & Assessment Group Deputy President — Management Planning Group Deputy President — Corporate Banking Group Deputy President — Institutional Banking Group Executive Vice President — Investment Banking Group Executive Vice President — IT Group Executive Vice President — Treasury & Global Banking Group Executive Vice President — Wealth Management Group Executive Officer Since December 19, 2006 Date Term Ends December 18, 2010

Joo Won Park Chan Park Jung Won Lee

55 52 53

December 21, 2007 August 29, 2007 August 29, 2007

December 20, 2009 August 28, 2009 August 28, 2009

Hyung Jin Kim

51

December 21, 2007

December 20, 2009

Young Hoon Lee Sung Rack Lee Dong Dae Lee Se Il Oh Yong Byung Cho

53 51 52 52 52

December 21, 2007 August 29, 2008 February 12, 2009 February 12, 2009 February 12, 2009

December 20, 2009 August 28, 2010 February 11, 2011 February 11, 2011 February 11, 2011

Jong Bok Moon

52

February 12, 2009

February 11, 2011

Jeum Joo Gwon has been our Deputy President and Non-Director Executive Officer since December 19, 2006. Mr. Gwon previously served as the Deputy General Manager of the Financial Planning Department in Shinhan Financial Group. Mr. Gwon received his B.A. in business administration from Hongik University. Joo Won Park has been our Deputy President and Non-Director Executive Officer since December 21, 2007. Mr. Park previously served as the General Manager of the Human Resources Department at Chohung Bank. Mr. Park received his B.A. in agricultural education at Seoul National University. Chan Park has been our Deputy President and Non-Director Executive Officer since August 29, 2007. Mr. Park previously served as the General Manager of Chohung Bank’s New Bank Promotion Department and Vice President of Shinhan Bank’s Value Innovation Department. Mr. Park received his B.A. in agricultural economics from Jun Book University.

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Jung Won Lee has been our Deputy President and Non-Director Executive Officer since August 29, 2007. Mr. Lee previously served as General Manager of Shinhan Bank’s Credit Planning Department and Credit Analysis & Assessment Department. Mr. Lee received his B.A. in trade from Sung Kyun Kwan University. Hyung Jin Kim has been our Deputy President and Non-Director Executive Officer since December 21, 2007. Mr. Kim previously served as Branch Manager of Shinhan Bank’s East Seocho Branch, General Manager of Human Resources Department, and Head of the Value Innovation Department. Mr. Kim received his B.A. in economics from Yeungnam University. Young Hoon Lee has been our Deputy President and Non-Director Executive Officer since December 21, 2007. Mr. Lee previously served as Branch Manager of Shinhan Bank’s Ansan Corporate Finance Branch and General Manager of Corporate Banking Department. Mr. Lee received his B.A. in economics from Jeonam University. Sung Rack Lee has been our Deputy President and Non-Director Executive Officer since August 29, 2008. Mr. Lee previously served as Branch Manager of Shinhan Bank’s Garak Branch and Incheon International Airport Branch, and General Manager of the General Affairs Department and the Human Resources Department. Mr. Lee received his B.A. in economics from Konkook University. Dong Dae Lee has been our Executive Vice President and Non-Director Executive Officer since February 12, 2009. Mr. Lee previously served as Branch Manager of Shinhan Bank’s Samsung Central Conglomerate Finance Branch and Head of the Conglomerate Sales Department. Mr. Lee received his B.A. in trade from Myungji University. Se Il Oh has been our Executive Vice President and Non-Director Executive Officer since February 12, 2009. Mr. Oh previously served as General Manager of Shinhan Bank’s Information System Department and Comprehensive Financial Support Department and Head of Corporate Sales Department. Mr. Oh received his B.A. in economics from Yeonsei University. Yong Byung Cho has been our Executive Vice President and Non-Director Executive Officer since February 12, 2009. Mr. Cho previously served as Branch Manager of Shinhan Bank’s Sejongro Branch and New York office, and General Manager of Human Resources and Financial Planning Department. Mr. Cho received his B.A. in law from Korea University. Jong Bok Moon has been our Executive Vice President and Non-Director Executive Officer since February 12, 2009. Mr. Moon previously served as Branch Manager of Chohung Bank’s Daegu Corporate Finance Branch and Shinhan Bank’s Euljiro Corporate Finance Branch. Audit Committee The Bank has an Audit Committee under the Board. The rights and responsibilities of the Audit Committee include the following: (i) conduct the audit of accounting and business of the Bank, (ii) investigate the agenda and documents to be submitted at general shareholders meetings and state at general shareholders meetings its opinion on whether there exists any violation of laws, regulations or articles of incorporation or remarkable illegality, (iii) demand the convening of extraordinary shareholders meetings, (iv) request reports on business of subsidiaries and if necessary, investigate business or status of properties of subsidiaries, (v) approve the appointment of external auditors and (vi) handle other matters delegated by the Board.

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As of the date of this offering circular, the audit committee of the Bank consists of the following members. Name Sang-Rok Seo Age 69 Position Head of the audit committee; non-standing (outside) director Member of the audit committee; non-standing (outside) director Standing member of the audit committee Audit Committee Member Since Date Term Ends April 1, 2006 March 17, 2010

Jae-Ha Park

52

March 19, 2007

March 16, 2011

Woo-Jong Won

56

March 21, 2008

March 20, 2001

Sang-Rok Seo has been the Head of the Audit Committee and a non-standing outside director since April 1, 2006. Mr. Seo previously worked as director and statutory auditor of Samsung Life Insurance Co., Ltd. and received his Ph.D from University of Illinois. Jae-Ha Park has been a member of the Audit Committee and a non-standing outside director since March 19, 2007. Mr. Park has previously as advisor of the Ministry of Finance and Economy and received his Ph.D from Pennsylvania State University. Woo-Jong Won has been the standing member of the Audit Committee since March 21, 2008. Mr. Won previously worked as professor at the Human Resources Development Office in the Financial Supervisory Service. Mr. Won received his B.A. in economics from Sogang University. Risk Management Committee The Risk Management Committee currently consists of three outside directors, namely Chul Soon Park, Kyung-Suh Park and Sung Ho Wee. The committee oversees and makes determinations on all issues relating to the Bank’s comprehensive risk management function. In order to ensure the Bank’s stable financial condition and to maximize its profits, the committee monitors the Bank’s overall risk exposure and reviews the Bank’s compliance with risk policies and risk limits. In addition, the committee reviews risk and control strategies and policies, evaluates whether each risk is at an adequate level, establishes or abolishes risk management divisions, reviews risk-based capital allocations, and reviews the plans and evaluation of internal control. The committee holds regular meetings every quarter. Audit Committee Nomination Committee Members of this committee will be appointed by the Bank’s Board if and only to the extent necessary to recommend and nominate candidates for the Bank’s audit committee member positions and related matters. This committee recommends candidates for the members of the Audit Committee and is required to act on the basis of a two-thirds vote of the members present. Outside Director Recommendation Committee Members of this committee will be appointed by the Bank’s Board if and only to the extent necessary to recommend and nominate candidates for the Bank’s outside director positions and related matters. The committee meetings are called by the chairman of this committee, who must be an outside director. Remuneration The aggregate remuneration and benefits in kind granted by the Bank to its directors and executive officers as of December 31, 2008 was approximately W3,013 million. Employees As of March 31, 2009, the Bank had 13,079 employees, including 2,013 contract-based employees, who were employed on a fixed term basis. The Bank believes that it has a good relationship with its employees.

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As of March 31, 2009, 8,150 employees were members of the Bank’s labor union. Following the merger of Chohung Bank and former Shinhan Bank, the employees of the two banks maintained separate unions until October 1, 2008, when the two unions merged together. The Bank has not experienced a work stoppage of a serious nature since the acquisition of Chohung Bank in 2003. Every year the union and management negotiate and enter into a new collective bargaining agreement that has a one-year term. Share Ownership All of the Bank’s share capital is owned by Shinhan Financial Group. Stock Options Shinhan Financial Group has granted stock options to certain of the directors and officers of the Bank. For options granted prior to March 21, 2006, Shinhan Financial Group is required to pay in cash the difference between the exercise and the market price at the date of exercise. For options issued on or after March 21, 2006, Shinhan Financial Group may either issue common stock or pay in cash the difference between the exercise and the market price at the date of exercise. The following table is the breakdown of outstanding stock options exercisable into shares of Shinhan Financial Group’s common stock that it has granted to the Bank’s directors and officers, describing the grant dates, positions held by such directors and officers, exercise period, price and the number of options as of March 31, 2009. Exercise Period Grant Date The Bank Baek Soon Lee . . . . . . . . . . . . (President & CEO) From To Exercise Price (In Won) Number of Granted Options Number of options Outstanding

Jeom Ju Gweon . . . . . . . . . . . (Deputy President)

Joo Won Park . . . . . . . . . . . . (Deputy President)

Chan Park . . . . . . . . . . . . . . . (Deputy President)

Jung Won Lee . . . . . . . . . . . . (Deputy President)

5/22/2002 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 3/19/2008 5/22/2002 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 3/19/2008 3/30/2005 3/21/2006 3/20/2007 3/19/2008 3/30/2005 3/21/2006 3/20/2007 3/19/2008 5/22/2002 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 3/19/2008

5/23/2004 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 3/19/2011 5/23/2004 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 3/19/2011 3/30/2008 3/21/2009 3/20/2010 3/19/2011 3/30/2008 3/21/2009 3/20/2010 3/19/2011 5/23/2004 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 3/19/2011

5/22/2008 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 3/18/2015 5/22/2008 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 3/18/2015 3/29/2012 3/20/2013 3/19/2014 3/18/2015 3/29/2012 3/20/2013 3/19/2014 3/18/2015 5/22/2008 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 3/18/2015

18,910 11,800 21,595 28,006 38,829 54,560 49,053 18,910 11,800 21,595 28,006 38,829 54,560 49,053 28,006 38,829 54,560 49,053 28,006 38,829 54,560 49,053 18,910 11,800 21,595 28,006 38,829 54,560 49,053

1,500 2,200 20,000 19,889 22,683 11,000 11,000 1,500 1,700 1,800 2,500 6,616 7,500 11,000 2,000 2,100 7,000 10,000 1,800 6,616 7,000 8,250 2,500 1,700 2,000 2,500 2,500 3,000 8,250

— 2,200 — 19,889 22,683 11,000 9,900 — — — 2,500 6,616 7,500 9,900 2,000 2,100 7,000 9,000 1,800 6,616 7,000 7,425 — 1,700 — 2,500 2,500 3,000 7,425

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Exercise Period Grant Date Hyung Jin Kim . . . . . . . . . . . . . . . . . (Deputy President) 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 3/19/2008 5/22/2002 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 3/19/2008 5/22/2002 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 5/22/2002 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 3/19/2008 5/22/2002 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/19/2008 5/22/2002 5/15/2003 3/25/2004 3/30/2005 3/21/2006 3/20/2007 From 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 3/19/2011 5/23/2004 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 3/19/2011 5/23/2004 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 5/23/2004 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 3/19/2011 5/23/2004 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/19/2011 5/23/2004 5/16/2005 3/25/2006 3/30/2008 3/21/2009 3/20/2010 To 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 3/18/2015 5/22/2008 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 3/18/2015 5/22/2008 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 5/22/2008 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 3/18/2015 5/22/2008 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/18/2015 5/22/2008 5/15/2009 3/25/2009 3/29/2012 3/20/2013 3/19/2014 Exercise Number of Number of Price Granted options (In Won) Options Outstanding 11,800 21,595 28,006 38,829 54,560 49,053 18,910 11,800 21,595 28,006 38,829 54,560 49,053 18,910 11,800 21,595 28,006 38,829 54,560 18,910 11,800 21,595 28,006 38,829 54,560 49,053 18,910 11,800 21,595 28,006 38,829 49,053 18,910 11,800 21,595 28,006 38,829 54,560 28,006 38,829 54,560 1,200 2,000 1,800 2,500 3,000 7,500 1,500 1,200 2,000 2,500 6,616 3,000 7,500 1,000 1,200 2,000 2,500 2,500 3,000 1,500 1,700 2,500 2,500 2,500 3,000 3,500 1,500 2,200 1,800 1,800 2,100 3,500 2,500 1,700 1,800 1,800 2,500 3,000 1,500 1,800 3,000 292,320 — — 1,800 2,500 3,000 6,750 — — — 2,500 6,616 3,000 6,750 — 1,200 — 2,500 2,500 3,000 — — — 2,500 2,500 3,000 3,500 — — — 1,800 2,100 3,500 — — — 1,800 2,500 3,000 1,500 1,800 3,000 226,870

Young Hoon Lee . . . . . . . . . . . . . . . (Deputy President)

Sung Rack Lee . . . . . . . . . . . . . . . . . (Deputy President)

Dong Dae Lee . . . . . . . . . . . . . . . . . (Executive Vice President)

Se Il Oh . . . . . . . . . . . . . . . . . . . . . . . (Executive Vice President)

Yong Byung Cho . . . . . . . . . . . . . . . (Executive Vice President)

Jong Bok Moon . . . . . . . . . . . . . . . . (Executive Vice President)

3/30/2005 3/30/2008 3/29/2012 3/21/2006 3/21/2009 3/20/2013 3/20/2007 3/20/2010 3/19/2014

Total . . . . . . . . . . . . . . . . . . . . .

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS As of March 31, 2009, there were no loans outstanding made by the Bank to the members of the Bank’s board of directors or the Bank’s executive officers. There are no guarantees provided by the Bank and its consolidated subsidiaries for the benefit of any of the Bank’s directors or executive officers. None of the directors or executive officers has or has had any interest in any transactions effected by the Bank which are or were unusual in their nature or conditional or significant to the business of the Bank and which were effected during the current or immediately preceding year or were effected during an earlier year and remain in any respect outstanding or unperformed. Following the merger of Chohung Bank and former Shinhan Bank in April 2006, the Bank granted to its employees 1,708,050 out of 2,420,955 treasury shares of Shinhan Financial Group’s common stock held by the Bank in accordance with the Financial Holding Company Act of Korea, which requires that the treasury shares must be disposed of within six months of acquisition. The remaining 712,905 ungranted treasury shares of Shinhan Financial Group’s common stock held by the Bank were sold in the market in June 2006. Directors, executive officers and certain employees of the Bank, as is the case with certain other subsidiaries of Shinhan Financial Group, receive from time to time shares of Shinhan Financial Group’s common stock and/or stock options exercisable into such shares, as part of their compensation. See “Management and Employees — Share Ownership” and “Management and Employees — Stock Options”. As a subsidiary of Shinhan Financial Group, the Bank engages from time to time in ordinary course of business activities with other subsidiaries of Shinhan Financial Group, including cross-selling activities. See Note 23 of the notes to the Bank’s unaudited non-consolidated financial statements included in this offering circular.

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SHINHAN FINANCIAL GROUP Introduction Incorporated on September 1, 2001, Shinhan Financial Group is the first private financial holding company to be established in Korea. Since inception, Shinhan Financial Group has developed and introduced a wide range of financial products and services in Korea and aimed to deliver comprehensive financial solutions to clients through a convenient one-portal network. According to reports by the Financial Supervisory Service, Shinhan Financial Group is one of the three largest financial services providers in Korea as measured by total assets as of December 31, 2008 and operates the third largest banking business (as measured by total assets as of December 31, 2008) and the largest credit card business (as measured by the total credit purchase volume as of December 31, 2008) in Korea. Shinhan Financial Group has experienced substantial growth through several mergers and acquisitions. Most notably, Shinhan Financial Group’s acquisition of Chohung Bank in 2003 has enabled Shinhan Financial Group to have one of the three largest banking operations in Korea and enhanced its banking client base by adding Chohung Bank’s large corporate clients to its traditional client base of small- and medium-sized enterprises. In addition, Shinhan Financial Group’s acquisition in March 2007 of LG Card, the then and now largest credit card company in Korea, has significantly expanded its non-banking business capacity and helped it to achieve a balanced business portfolio. Shinhan Financial Group currently has 11 direct subsidiaries and 17 indirect subsidiaries (not including any special purpose entities) offering a wide range of financial products and services, including commercial banking, corporate banking, private banking, credit card, asset management, brokerage and insurance services. Shinhan Financial Group believes that such breadth of services will help it to meet the diversified needs of the Bank’s present and potential clients. Shinhan Financial Group currently serves approximately 14.8 million active customers, which Shinhan Financial Group believes is the largest customer base in Korea for financial institutions, through approximately 17,200 employees at more than 1,430 network branches group-wide. While substantially all of Shinhan Financial Group’s revenues have been historically derived from Korea, it aims to serve the needs of its clients through a global network of its 42 offices in the United States, Canada, the United Kingdom, Japan, the People’s Republic of China, Germany, India, Hong Kong, Vietnam, Cambodia, Kazakhstan and Singapore. History and Organization On September 1, 2001, Shinhan Financial Group was formed as a financial holding company under the Financial Holding Companies Act, as a result of acquiring all of the issued shares of the following four entities from their former shareholders in exchange for shares of Shinhan Financial Group’s common stock: (i) the Bank, a nationwide commercial bank listed on the Korea Stock Exchange, (ii) Shinhan Securities Co., Ltd., a securities brokerage company listed on the Korea Stock Exchange, (iii) Shinhan Capital Co., Ltd., a leasing company listed on the Korea Exchange Korean Securities Dealers Automated Quotations (“KRX KOSDAQ”), and (iv) Shinhan Investment Trust Management Co., Ltd., a privately held investment trust management company. On September 10, 2001, the common stock of Shinhan Financial Group’s holding company was listed on what is currently the KRX KOSPI Market.

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Since its inception, Shinhan Financial Group has expanded its operations, in large part, through strategic acquisitions or formation of joint ventures. Shinhan Financial Group’s key acquisitions and joint venture formations are described as below: Date of Acquisition April 2002 Entity Jeju Bank Principal Activities Regional banking Method of Establishment Acquisition from Korea Deposit Insurance Corporation Acquisition from the SsangYong Group 50:50 joint venture with BNP Paribas Acquisition from creditors Acquisition from shareholders Acquisition from creditors

July 2002 August 2002

Goodmorning Shinhan Securities Co., Ltd. Shinhan BNP Paribas Investment Trust Management Co., Ltd.(1) Chohung Bank(2) Shinhan Life Insurance LG Card(3)

Securities and investment Investment advisory

August 2003 December 2005 March 2007

Commercial banking Life insurance services Credit card services

Notes: (1) In August 2002, Shinhan Financial Group signed a joint venture agreement with BNP Paribas Asset Management, the asset management arm of BNP Paribas, in respect of Shinhan Investment Trust Management. In October 2002, Shinhan Financial Group sold to BNP Paribas Asset Management 3,999,999 shares of Shinhan Investment Trust Management, representing 50% less one share, which was subsequently renamed Shinhan BNP Paribas Investment Trust Management Co., Ltd. (“Shinhan BNP Paribas Investment Trust Management”). In January 2009, SH Asset Management Co., Ltd. (“SH Asset Management”) and Shinhan BNP Paribas Investment Trust Management merged to form Shinhan BNP Paribas Asset Management Co., Ltd. (“Shinhan BNP Paribas Asset Management”). In August 2003, Shinhan Financial Group acquired 80.04% of common shares of Chohung Bank, a nationwide commercial bank in Korea. Shinhan Financial Group subsequently acquired the remaining interest in Chohung Bank through a series of transactions and delisted Chohung Bank from the Korea Exchange in July 2004. Shinhan Financial Group merged Shinhan Bank and Chohung Bank in April 2006, with Chohung Bank becoming the legal surviving entity. The newly merged bank then changed its name to “Shinhan Bank”. In June 2002, the credit card division of the Bank was split off and established as Shinhan Financial Group’s wholly-owned subsidiary, Shinhan Card Co., Ltd. In April 2006, concurrently with the merger of Shinhan Bank and Chohung Bank, Shinhan Financial Group also split off Chohung Bank’s credit card business and merged it into the former Shinhan Card. In March 2007, Shinhan Financial Group acquired from the creditor committee and other shareholders of LG Card the controlling equity interest in LG Card following a public tender offer. After Shinhan Financial Group’s further acquisition of shares in July 2007 following a second public tender offer and a share swap with the Shinhan Financial Group’s shares in September 2007, LG Card became Shinhan Financial Group’s wholly-owned subsidiary. On October 1, 2007, LG Card assumed all of the assets and liabilities of former Shinhan Card, and changed its name to Shinhan Card. On the same date, former Shinhan Card changed its name to SHC Management Co., Ltd. and currently survives under that name with no significant assets and liabilities.

(2)

(3)

Below are some of the recent developments relating to Shinhan Financial Group’s organizational structure. Š On June 2, 2008, Shinhan Card established Shinhan KTF Mobile Card Co., Ltd. as a joint venture with KTF, a mobile telephone company in Korea, to promote joint marketing between its credit card operations and KTF’s mobile telephone services. The joint venture’s capital stock as of December 31, 2008 amounted to W2 billion, of which Shinhan Card owned 50%. On May 29, 2008, the Bank acquired a 55.9% equity interest in AITAS Co., Ltd. for W36 billion. This entity provides administration services to mutual funds and other trust investment companies. Other commercial banks and employees of AITAS own the remaining equity. The Bank currently owns 89.58% equity interest in AITAS.

Š

137

Š

In January 2009, SH Asset Management and Shinhan BNP Paribas Investment Trust Management merged to form Shinhan BNP Paribas Asset Management. In June 2009, Shinhan Financial Group sold 3,290,002 common shares, or approximately 35%, of SH&C Life Insurance Co., Ltd., a 50:50 joint venture with BNP Paribas Assurance (formerly known as Cardif S.A.), to BNP Paribas Assurance. Following this transaction, BNP Paribas Assurance owns approximately 85% equity interest in SH&C Life Insurance Co., Ltd. In consideration of Shinhan Financial Group’s extensive business partnership with BNP Paribas and the Bank’s role in selling the bancassurance products, Shinhan Financial Group transferred 15% equity interest in SH&C Life Insurance to the Bank. Following this transaction, SH&C is no longer Shinhan Financial Group’s subsidiary.

Š

All of Shinhan Financial Group’s subsidiaries are incorporated in Korea, except for the following: Š Š Š Š Š Š Š Š Š Š Š Š Shinhan Asia Limited (incorporated in Hong Kong); Shinhan Bank America (incorporated in the United States); Shinhan Bank Canada (incorporated in the Canada); Shinhan Bank (China) Limited (incorporated in the People’s Republic of China); Shinhan Bank Europe GmbH (incorporated in Germany); Shinhan Bank Kazakhstan Limited (incorporated in Kazakhstan); Shinhan Khmer Bank Limited (incorporated in Cambodia); Shinhan Vina Bank (incorporated in Vietnam); Shinhan Finance Ltd., Hong Kong (incorporated in Hong Kong); Goodmorning Shinhan Securities Europe Ltd. (incorporated in United Kingdom); Goodmorning Shinhan Securities USA, Inc. (incorporated in the United States); and Goodmorning Shinhan Securities Asia Limited (incorporated in Hong Kong).

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As of the date hereof, Shinhan Financial Group has 11 direct and 17 indirect subsidiaries (not including any special purpose entities). The following diagram shows Shinhan Financial Group’s organization structure as of the date hereof:
Shinhan Data System 100%

Shinhan Financial Group

Shinhan Bank

100% Shinhan Asia Ltd., Hong Kong 100%

Shinhan Card

100% Shinhan Bank America 100%

Goodmorning Shinhan Securities 100%

Shinhan Bank Europe GmbH

100%

Shinhan Vina Bank Shinhan Life Insurance 100%

50%

Shinhan Khmer Bank Limited 100% Shinhan Capital 100% Shinhan Bank Kazakhstan 100%

Jeju Bank

68.9%

Shinhan Bank China Limited

100%

Shinhan AITAS Shinhan Credit Information 100% Shinhan Bank Canada Shinhan Private Equity 100%

89.6%

100%

Shinhan Finance Ltd., Hong Kong (2) 100%

Shinhan BNP Paribas Asset Management

Shinhan-KTF Mobile Card 65%

50%

Shinhan Macquarie Financial Advisory

Goodmorning Shinhan Securities Asia Ltd. 100% 51% Goodmorning Shinhan Securities Europe Ltd. 100% Goodmorning Shinhan Securities USA 100%

SHC Management (1)

100%

Shinhan NPS Private Equity Fund (3) 5% Shinhan Private Equity Fund II (4) 2.2%

Notes: (1) (2) Currently in liquidation proceedings. On November 1, 2006, Shinhan Finance Limited, Shinhan Financial Group’s indirect subsidiary, was transferred to a branch of the Bank. The liquidation process is currently in process. Shinhan Financial Group and its subsidiaries currently own an additional 31.7%. Shinhan Financial Group and its subsidiaries currently own an additional 30.4%.

(3) (4)

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The following table sets forth certain information relating to the beneficial ownership of Shinhan Financial Group’s common shares as of December 31, 2008. Number of Common Shares Held Ownership % 33,682,104 26,181,238 18,740,162 10,776,145 6,453,801 6,103,884 5,955,000 5,039,397 4,178,065 279,089,791 396,199,587 8.50% 6.61% 4.73% 2.72% 1.63% 1.54% 1.50% 1.27% 1.06% 70.45% 100.00%

Name of Shareholder BNP Paribas(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Korea National Pension Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Citibank, N.A. (ADR Department) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mirae Asset Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan Financial Group Employee Stock Ownership Association . . . . . NTC-GOV SPORE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mizuho . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DaeGyoo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Norges Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note: (1) Includes 26,288,081 common shares held by BNP Paribas S.A. and 7,394,023 common shares held by BNP Paribas Luxembourg. Following a rights offering by Shinhan Financial Group in March 2009, the BNP Paribas Group held 38,574,239 shares, or 8.13% of our total common stock. Does not include 14,721,000 Series 11 non-voting redeemable convertible preferred shares issued on January 25, 2007, which may be converted at the option of the holders thereof at any time from the day after the first anniversary of the issuance date until the fifth anniversary of the issuance date at a conversion rate of one-to-one at the conversion price W57,806 per share. Following the rights offering in March 2009, the total number of common shares outstanding is 474,199,587.

(2)

(3)

Other than those listed above, no other shareholders own more than 1% of Shinhan Financial Group’s issued and outstanding voting securities. None of Shinhan Financial Group’s shareholders have different voting rights.

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SUPERVISION AND REGULATION Principal Regulations Applicable to Banks General The banking system in Korea is governed by the Banking Act of 1950, as amended (the “Banking Act”) and the Bank of Korea Act of 1950, as amended (the “Bank of Korea Act”). In addition, Korean banks are subject to the regulations and supervision of the Bank of Korea, the Bank of Korea’s Monetary Policy Committee, the Financial Services Commission and its executive body, the Financial Supervisory Service. The Bank of Korea, established in June 1950 under the Bank of Korea Act, performs the customary functions of a central bank. It seeks to contribute to the sound development of the national economy by price stabilization through establishing and implementing efficient monetary and credit policies. The Bank of Korea acts under instructions of the Monetary Policy Committee, the supreme policy-making body of the Bank of Korea. Under the Bank of Korea Act, the Monetary Policy Committee’s primary responsibilities are to formulate monetary and credit policies and to determine the operations, management and administration of the Bank of Korea. The Financial Services Commission, established on April 1, 1998, exerts direct control over commercial banks pursuant to the Banking Act, including establishing guidelines on capital adequacy of commercial banks, and prepares regulations relating to supervision of banks. Furthermore, pursuant to the Amendment to the Government Organization Act and the Banking Act on May 24, 1999, the Financial Services Commission, instead of the Ministry of Strategy and Finance, now regulates market entry into the banking business. The Financial Supervisory Service is subject to the instructions and directives of the Financial Services Commission and carries out supervision and examination of commercial banks. In particular, the Financial Supervisory Service sets requirements both for prudent control of liquidity and for capital adequacy and establishes reporting requirements within the authority delegated to it under the Financial Services Commission regulations, pursuant to which banks are required to submit annual reports on financial performance and shareholdings, regular reports on management strategy and non-performing loans, including write-offs, and management of problem companies and plans for the settlement of bad loans. Under the Banking Act, permission to commence a commercial banking business or a long-term financing business must be obtained from the Financial Services Commission. Commercial banking business is defined as the lending of funds acquired predominantly from the acceptance of deposits for a period not exceeding one year or subject to the limitation established by the Financial Services Commission, for a period between one year and three years. Long-term financing business is defined as the lending, for periods in excess of one year, of funds acquired predominantly from paid-in capital, reserves or other retained earnings, the acceptance of deposits with maturities of at least one year, or the issuance of bonds or other securities. A bank wishing to enter any business other than commercial banking and long-term financing businesses, such as the trust business, must obtain permission from the Financial Services Commission. Permission to merge with any other banking institution, to liquidate, to close a banking business or to transfer all or a part of a business must also be obtained from the Financial Services Commission. If the Government deems a bank’s financial condition to be unsound or if a bank fails to meet the applicable capital adequacy ratio set forth under Korean law, the government may order: Š Š Š Š capital increases or reductions; stock cancellations or consolidations; transfers of a part or all of business; sale of assets;

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closures of branch offices; mergers or becoming a subsidiary of a financial holding company under the Financial Holding Companies Act; acquisitions of a bank by a third party; suspensions of a part or all of business operations; or assignments of contractual rights and obligations relating to financial transactions.

Capital Adequacy The Banking Act requires nationwide banks to maintain a minimum paid-in capital of W100 billion and regional banks to maintain a minimum paid-in capital of W25 billion. In addition to minimum capital requirements, all banks including foreign bank branches in Korea are required to maintain a prescribed solvency position. A bank must also set aside as its legal reserve an amount equal to at least 10% of its net profits after tax each time it pays dividends on net profits earned until such time when the reserve equals the amount of its total paid-in capital. Under the Banking Act, the capital of a bank is divided into two categories: Tier I and Tier II capital. Tier I capital (core capital) consists of stockholders’ equity, capital surplus, retained earnings, unissued stock dividends and hybrid Tier I capital instruments. Tier II capital (supplementary capital) consists of revaluation reserves, gain on valuation of investment in securities, allowance for bad debts set aside for loans classified as “normal” or “precautionary” (up to certain limits), perpetual subordinated (up to certain limits) debt, cumulative preferred shares, redeemable preferred shares (with a right to redeem after the fifth anniversary of the date of issuance) and certain other subordinated debt. The regulation under the Banking Act currently allows 70% of the increased after-tax profit arising out of the revaluation of tangible assets to be included in Tier II capital (supplementary capital). All banks must meet standards regarding minimum ratios of Tier I and Tier II capital (less any capital deductions) to risk-weighted assets, determined in accordance with the Financial Services Commission requirements that have been formulated based on the Bank for International Settlement (“BIS”) Standards. These standards were adopted and became effective in 1996 and were amended effective January 1, 2008 upon the implementation by Financial Services Commission of Basel II. Under these regulations, all domestic banks and foreign bank branches were required to meet the minimum ratio of Tier I and Tier II capital (less any capital deductions) to risk-weighted assets of 8%. The Financial Services Commission amended the Regulation on the Supervision of the Banking Business in November 2002 to include a more conservative risk-weighting system on certain newly extended mortgage and home equity loans, requiring Korean banks to apply the risk-weighted ratio of 50%, 60%, or 70% in respect of home mortgage loans depending on the borrowers’ debt ratios and whether the home mortgage loans are overdue. On June 28, 2007, the Financial Supervisory Commission further amended the Enforcement Detailed Rules on the Supervision of the Banking Business, and, as a result, Korean banks have been applying the following risk-weight ratios in respect of their home mortgage loans starting from 1st January, 2008: (1) for those banks adopting a standardized approach for calculating credit risk capital requirements, the risk-weight ratio of 35%; and for those banks adopting an internal ratings-based approach for calculating credit risk capital requirements, a risk-weight ratio calculated with reference to the probability of default, loss given default and exposure at default, each as defined in the Enforcement Detailed Rules on the Supervision of the Banking Business.

(2)

In Korea, Basel II, the new convention entered into by the Basel committee in June 2004 for the purpose of improving risk management and increasing capital adequacy of banks, was implemented in January 2008.

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Pursuant to Basel II, operational risk, such as inadequate procedure, loss risk by employees, internal system, occurrence of unexpected event, as well as credit risk and market risk, should be taken into account in calculating the risk-weighted assets. However, as the current capital adequacy ratio of 8% for banks would be maintained, it would become more onerous for banks to satisfy the minimum capital requirements. Under Basel II, the capital requirements for credit risk can be calculated by the internal rating based (IRB) approach or the standardized approach. Under the standardized approach, home mortgage loans fully secured by the residential property that is or will be occupied by the borrower are risk-weighted at 35%. Under the Regulation on the Supervision of the Banking Business, banks generally must maintain allowances for credit losses in respect of their outstanding loans and other credits (including confirmed guarantees and acceptances and trust account loans) in an aggregate amount covering not less than: Š 0.85% of normal credits (or 0.9% in the case of normal credits comprising loans to certain industries including construction, retail and wholesale sales, accommodations, restaurant, real estate and lease, 1.0% in the case of normal credits comprising loans to individuals and households and 1.5% in the case of normal credits comprising outstanding credit card receivables and card loans); 7% of precautionary credits (or 10% in the case of precautionary credits comprising loans to individuals and households, and 15% in the case of precautionary credits comprising outstanding credit card receivables and card loans); 20% of substandard credits; 50% of doubtful credits (or 55% in the case of doubtful credits comprising loans to individuals and households, and 60% in the case of doubtful credits comprising outstanding credit card receivables and card loans); and 100% of estimated loss credits.

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Furthermore, under an amendment in 2006 to the Regulation on the Supervision of the Banking Business, banks must maintain allowances for credit losses in respect of their confirmed guarantees (including confirmed acceptances) and outstanding non-used credit lines as of the settlement date in an aggregate amount calculated at the same rates applicable to normal, precautionary, substandard and doubtful credits comprising their outstanding loans and other credits as set forth above. Liquidity All banks are required to match the maturities of their assets and liabilities in accordance with the Banking Act in order to ensure adequate liquidity. Banks may not invest in excess of an amount exceeding 60% of their Tier I and Tier II capital (less any capital deductions) in stocks and other securities with a remaining period to maturity of over three years. However, this restriction does not apply to government bonds or to Monetary Stabilization Bonds issued by the Bank of Korea. The Financial Services Commission requires each Korean bank to maintain a Won liquidity ratio (defined as Won assets due within one month, including marketable securities, divided by Won liabilities due within one month) of not less than 100% and to make monthly reports to the Financial Supervisory Service. The Financial Services Commission also requires each Korean bank to (1) maintain a foreign-currency liquidity ratio due within three months (defined as foreign-currency liquid assets due within three months divided by foreign-currency liabilities due within three months) of not less than 85%, (2) maintain a ratio of foreigncurrency liquid assets due within seven days (defined as foreign-currency liquid assets due within seven days less foreign-currency liabilities due within seven days, divided by total foreign-currency assets) of not less than 0% and (3) maintain a ratio of foreign-currency liquid assets due within a month (defined as foreign-currency liquid assets due within a month less foreign currency liabilities due within a month, divided by total foreign-currency assets) of not less than negative 10%. The Financial Services Commission also requires each Korean bank to submit monthly reports with respect to maintenance of these ratios.

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The Monetary Policy Committee is authorized to fix and alter minimum reserve requirements that banks must maintain against their deposit liabilities. The current minimum reserve ratio is 7.0% of average balances for Won currency demand deposits outstanding, 0.0% of average balances for Won currency employee asset establishment savings deposits, employee long-term savings deposits, employee house purchase savings deposits, long-term house purchase savings deposits, household long-term savings deposits and employee preferential savings deposits outstanding and 2.0% of average balances for Won currency time and savings deposits, mutual installments, housing installments and certificates of deposit outstanding. For foreign currency deposit liabilities, a 2.0% minimum reserve ratio is applied to savings deposits outstanding and a 7.0% minimum reserve ratio is applied to demand deposits, while a 1.0% minimum reserve ratio is applied for offshore accounts, immigrant accounts and resident accounts opened by foreign exchange banks. Financial Exposure to Any Single Customer and Major Shareholders Under the Banking Act, the sum of material credit exposures by a bank, that is, the total sum of its credits to single individuals, legal entities or business groups that exceed 10% of the sum of Tier I and Tier II capital (less any capital deductions), must not exceed five times the sum of Tier I and Tier II capital (less any capital deductions), subject to certain exceptions. Beginning on January 1, 2000, subject to certain exceptions, no bank is permitted to extend credit (including loans, guarantees, purchases of securities (only in the nature of a credit) and such other transactions which directly or indirectly create credit risk) in excess of 20% of the sum of Tier I and Tier II capital (less any capital deductions) to a single individual or legal entity, and no bank may grant credit in excess of 25% of the sum of Tier I and Tier II capital (less any capital deductions) to a single group of companies that belong to the same conglomerate as defined in the Monopoly Regulations and Fair Trade Act. Pursuant to an amendment to the Banking Act, which became effective on July 28, 2002, the restrictions on extending credits to a major shareholder have been amended. The definition of a “major shareholder” is as follows: Š a shareholder holding (together with persons who have a special relationship with such shareholder as defined in the Presidential Decree of the Banking Act) in excess of 10% (or in the case of regional banks, 15%) in the aggregate of the bank’s total issued and outstanding voting shares; or a shareholder holding (together with persons who have a special relationship with such shareholder as defined in the Presidential Decree of the Banking Act) more than 4% in the aggregate of the bank’s (excluding regional banks) total issued and outstanding voting shares, where such shareholder is the largest shareholder or is able to actually control the major business affairs of the bank, for example, through appointment and dismissal of the chief executive officer or of the majority of the executives.

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According to such amendment, banks are prohibited from extending credits in an amount greater than the lesser of (1) 25% of the sum of such bank’s Tier I and Tier II capital (less any capital deductions) or (2) the relevant major shareholder’s shareholding ratio multiplied by the sum of the bank’s Tier I and Tier II capital (less any capital deductions) to a major shareholder (together with persons who have special relationship with such major shareholder as defined in the Presidential Decree of the Banking Act). Also, no bank is allowed to grant credit to its major shareholders in the aggregate in excess of 25% of its Tier I and Tier II capital (less any capital deductions). However, the foregoing restrictions do not apply to the Korea Deposit Insurance Corporation if it becomes a major shareholder of a bank in the process of restructuring of such bank. Recently, there has been a rapid increase in the use of credit support agreements between banks and special purpose companies that have been established for asset-backed securitization. When managing the credit risk of banks, among the methods for providing credit support by banks, a loan agreement, a purchase agreement for asset-backed commercial papers, purchase of subordinate beneficiary certificates, and assumption of liability by providing warranty against default under asset-backed securitization are examples of creating financial exposure to banks.

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Interest Rates Korean banks remain dependent on the acceptance of deposits as their primary source of funds. Currently, there are no legal controls on interest rates on bank loans in Korea except for the cap of 49% on the interest rate with respect to loans extended to individuals and certain small-sized enterprises under the Act on Lending Business. Historically, interest rates on deposits and lending rates were regulated by the Monetary Board of the Bank of Korea. Under the government’s Financial Reform Plan issued in May 1993, controls on deposit interest rates in Korea have been gradually reduced. In February 2004, the Government removed restrictions on all interest rates, except for the prohibition on interest payments on current account deposits. Deregulation of interest rates on deposits has increased competition for deposits based on interest rates offered and therefore may increase the Bank’s banking operation’s interest expense. Lending to Small- and Medium-Sized Enterprises In order to obtain funding from the Bank of Korea at concessionary rates for their small- and medium-sized enterprise loans, banks are required to extend to small- and medium-sized enterprises a certain minimum percentage of any monthly increase in their Won currency lending. Currently, this minimum percentage is 45% in the case of national banks and 60% in the case of regional banks. If a bank does not comply with the foregoing, all or a portion of the Bank of Korea funds provided to such bank in support of loans to smalland medium-sized enterprises may have to be prepaid to the Bank of Korea or the credit limit from the Bank of Korea for such bank may be decreased. Disclosure of Management Performance For the purpose of enforcing mandatory disclosure of management performance so that the general public, especially depositors and stockholders, will be in a better position to monitor banks, the Financial Services Commission requires commercial banks to disclose certain matters as follows: Š loans bearing no profit made to a single business group in an amount exceeding 10% of the sum of the bank’s Tier I and Tier II capital (less any capital deductions) as of the end of the previous month (where the loan exposure to such borrower is calculated as the sum of substandard credits, doubtful credits and estimated loss credits) except where the loan exposure to a single business group is not more than W4 billion; occurrence of any financial event involving embezzlement, malfeasance or misappropriation of funds the amount of which exceeds 1% of the sum of the bank’s Tier I and Tier II capital (less any capital deductions), unless the bank has lost or expects to lose not more than W1 billion as a result thereof, or the Governor of the Financial Supervisory Service has made a public announcement regarding such an occurrence; any loss due to court judgments or similar decisions in civil proceedings in an amount exceeding 1% of the sum of the bank’s Tier I and Tier II capital (less any capital deductions) as of the end of the previous month except where the loss is not more than W1 billion; any event which can cause a material change in financial status, such as resolutions for a capital increase or reduction, issuance of convertible bonds, bonds with warrants, exchangeable bonds, or depositary receipts or cancellation of shares with profit; any event which can cause a material change in a bank’s management, such as knowledge of a proposal or confirmation of a litigation that can have a material effect on the management of the bank such as litigation regarding the effectiveness of securities issuance or amendments of rights thereunder, appointment or dismissal of an officer, or a change in bank’s largest shareholder, major shareholder, affiliate company, or a resolution for change of business objective; any event which can cause a material change in the bank’s property, such as a natural disaster which causes damages in an amount exceeding 5% (or 2.5% in the case of a “Large Listed Company”, which refers to a company that has total assets as of the end of the most recent fiscal year of W2 trillion or more) or more of its total assets as of the end of the most recent fiscal year;

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any event which can cause a material change in the bank’s investment, such as investment in other companies in an amount exceeding 5% (or 2.5% in the case of a Large Listed Company) or more of the bank’s Tier I and Tier II capital; any event which can cause a material change in the bank’s profit or loss, such as special profit or special loss of 10% (or 5% in the case of a Large Listed Company) or more of the bank’s Tier I and Tier II capital; and any other events which can have material effects on the bank’s operation, including, among others, payment of cash dividends, acquisition or disposal of treasury shares, or distribution of stock options.

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Restrictions on Lending According to the Banking Act, commercial banks are prohibited from making any of the following categories of loans: Š Š loans made for the purpose of speculation in commodities or securities; loans made directly or indirectly on the pledge of a bank’s own shares, or on the pledge of shares in excess of 20% of the issued and outstanding shares of any other corporation (subject to certain exceptions with respect to financing for infrastructure projects); loans made directly or indirectly to enable a natural or legal person to buy the bank’s own shares; loans made directly or indirectly to finance political campaigns and other related activities; loans made to any of the bank’s officers or employees other than de minimis loans of up to (1) W20 million in the case of a general loan, (2) W50 million in the case of a general loan plus a housing loan, or (3) W60 million in the aggregate for general loans, housing loans and loans to pay damages arising from wrongful acts of employees in financial transactions; credit (including loans) secured by a pledge of shares of a subsidiary corporation of the bank or to enable a natural or juridical person to buy shares of a subsidiary corporation of the bank; and loans to any officers or employees of a subsidiary corporation of the bank other than general loans of up to W20 million or general and housing loans of up to W50 million in the aggregate.

Š Š Š

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Regulations Relating to Retail Household Loans The Financial Services Committee has in recent years implemented a number of changes to the mechanisms by which a bank evaluates and reports its retail household loan balances and has proposed implementing further changes. As a result of the rapid increase in retail household loans and related credit risks, the Financial Services Committee and the Financial Supervisory Service increased the minimum provisioning requirements for retail household loans. These requirements, set forth in the following table, became effective on December 31, 2006. Asset Quality Classification Provisioning Ratio on Retail Household Loans Before Current 0.75% or above 8.0% or above 20.0% or above 55.0% or above 100.0% 1.0% or above 10.0% or above 20.0% or above 55.0% or above 100.0%

Normal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Precautionary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Doubtful . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Estimated loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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In addition, due to a rapid increase in the number of loans secured by homes and other forms of housing, the Financial Services Committee and the Financial Supervisory Service have implemented regulations designed to curtail extension of new or refinanced loans secured by housing, including the following: Š as to loans secured by collateral of housing located nationwide, the loan-to-value ratio (the aggregate principal amount of loans secured by such collateral over the appraised value of the collateral) should not exceed 60%; as to loans secured by collateral of housing located in areas of excessive investment as designated by the Government, (i) the loan-to-value ratio for loans with a maturity of not more than three years should not exceed 50% and (ii) the loan-to-value ratio for loans with a maturity of more than three years should not exceed 60%; as to loans secured by apartments located in areas of high speculation as designated by the Government, (i) the loan-to-value ratio for loans with a maturity of not more than ten years should not exceed 40%; and (ii) the loan-to-value ratio for loans with a maturity of more than ten years should not exceed (a) 40%, if the price of such apartment is over W600 million, and (b) 60%, if the price of such apartment is W600 million or lower; as to loans secured by apartments with appraisal values of more than W600 million in areas of high speculation as designated by the Government or certain metropolitan areas designated as areas of excessive investment by the Government, the borrower’s debt-to-income ratio (calculated as (i) the aggregate annual total payment amount of (x) the principal of and interest on loans secured by such apartment(s) and (y) the interest on other debts of the borrower over (ii) the borrower’s annual income) should not exceed 40%; as to apartments located in areas of high speculation as designated by the Government, a borrower is permitted to have only one new loan secured by such apartment; where a borrower has two or more loans secured by apartments located in areas of high speculation as designated by the Government, the loan with the earliest maturity date must be repaid first and the number of loans must be eventually reduced to one; and in the case of a borrower (i) whose spouse already has a loan secured by housing or (ii) who is single and under 30 years old, the debt-to-income ratio of the borrower in respect of loans secured by apartment(s) located in areas of high speculation as designated by the Government should not exceed 40%.

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Restrictions on Investments in Property A bank may possess real estate property only to the extent necessary for the conduct of its business, provided that the aggregate value of such real estate property must not exceed 60% of the sum of its Tier I and Tier II capital (less any capital deductions). Any property acquired by a bank (1) through the exercise of its rights as a secured party or (2) the acquisition of which is prohibited by the Banking Act must be disposed of within one year, subject to certain exceptions. Restrictions on Shareholdings in Other Companies Under the Banking Act, a bank may not own more than 15% of outstanding shares with voting rights of another company, except where, among other reasons: Š the company issuing such shares is engaged in a category of financial business set forth by the Financial Services Commission (including private equity funds); or the acquisition of shares by the bank is necessary for corporate restructuring of such company and is approved by the Financial Services Commission.

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In the above cases, a bank must satisfy either of the following requirements: Š the total investment in companies in which the bank owns more than 15% of the outstanding shares with voting rights does not exceed 15% of the sum of Tier I and Tier II capital (less any capital deductions); or the acquisition satisfies the requirements determined by the Financial Services Commission.

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The Banking Act provides that a bank using its bank accounts and its trust accounts is not permitted to acquire the shares issued by the Major Shareholder of such bank in excess of an amount equal to 1% of the sum of Tier I and Tier II capital (less any capital deductions). Restrictions on Bank Ownership Under an amendment to the Banking Act, which became effective on July 28, 2002, subject to certain exceptions, a single shareholder and persons who stand in a special relationship with such shareholder (as described in the Presidential Decree to the Banking Act) may acquire beneficial ownership of up to 10% of a national bank’s total issued and outstanding shares with voting rights and up to 15% of a regional bank’s total issued and outstanding shares with voting rights. The government, the Korea Deposit Insurance Corporation and financial holding companies qualifying under the Financial Holding Companies Act are not subject to such ceilings. However, non-financial business group companies (i.e., (1) any same shareholder group with aggregate net assets of all non-financial companies belonging to such group of not less than 25% of the aggregate net assets of all corporations that are members of such group, (2) any group with aggregate assets of all non-financial companies belonging to such group of not less than W2 trillion or (3) any mutual fund in which a same shareholder group, as described in items (1) and (2) above, owns more than 4% of the total shares issued and outstanding) may not acquire beneficial ownership of shares of a national bank in excess of 4% of such bank’s outstanding voting shares, provided that such non-financial business group companies may acquire beneficial ownership of: Š up to 10% of a national bank’s outstanding voting shares with the approval of the Financial Services Commission under the condition that such non-financial group companies will not exercise voting rights in respect of such shares in excess of the 4% limit; and in the event that a foreigner, as defined in the Foreign Investment Promotion Act, owns in excess of 4% of a national bank’s outstanding voting shares, up to 10% of such bank’s outstanding voting shares without the approval of the Financial Services Commission, and in excess of 10%, 25% or 33% of such bank’s outstanding voting shares, with the approval of the Financial Services Commission, up to the number of shares owned by such foreigner.

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In addition, any person (whether a Korean national or a foreigner), with the exception of non-financial business group companies described above, may also acquire in excess of 10% of a national bank’s total voting shares issued and outstanding, provided that an approval from the Financial Services Commission is obtained in instances where the total holding exceeds 10% (or 15% in the case of regional banks), 25% or 33% of the bank’s total voting shares issued and outstanding, provided that in addition to the foregoing threshold shareholding ratios, the Financial Services Commission may, at its discretion, designate a separate and additional threshold shareholding ratio. Deposit Insurance System The Depositor Protection Act provides, through a deposit insurance system, insurance for certain deposits of banks in Korea. Under the Depositor Protection Act, all banks governed by the Banking Act, including the Bank, are required to pay to the Korea Deposit Insurance Corporation an insurance premium on a quarterly basis at such rate as determined by the Presidential Decree to the Depositor Protection Act, which shall not exceed 0.5% of the bank’s insurable deposits in any given year. The current insurance premium is 0.02% of insurable deposits for each quarter. If the Korea Deposit Insurance Corporation pays the insured amount, it will acquire the claims of the depositors within the payment amount. Under current rules, the Korea Deposit

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Insurance Corporation insures only up to a total of W50 million for deposits and interest, regardless of when the deposits were made and the size of the deposits. However, the maximum limit of W50 million is not applicable to interest-free settlement accounts (for example, a checking account), for any insurable event occurring during the period from January 1, 2001 to December 31, 2003. Restrictions on Foreign Exchange Position Under the Korean Foreign Exchange Transaction Regulations, a bank’s net overpurchased and oversold positions are each limited to 50% of the stockholders’ equity as of the end of the prior month. Trust Business A bank that intends to enter into the trust business must obtain the approval of the Financial Services Commission. Trust activities of banks are governed by the Trust Act and the Financial Investment Services and Capital Markets Act. Banks engaged in the banking business and trust business are subject to certain legal and accounting procedures requirements, including the following: Š under the Banking Act, assets accepted in trust by a bank in Korea must be segregated from its other assets in the accounts of such bank; accordingly, banks engaged in the banking and trust businesses must maintain two separate accounts, the “bank accounts” and the “trust accounts”, and two separate sets of records which provide details of their banking and trust businesses, respectively; and assets comprising the trust accounts are not available to depositors or other general creditors of such bank in the event the trustee is liquidated or is wound up.

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On January 17, 2005, in accordance with the amendment to the Trust Business Act, a comprehensive trust system was introduced to allow banks engaged in trust businesses to accept in trust two or more properties such as money, securities, or real estate with one trust deed. In addition, intellectual property rights can also be held as a trust asset. The Indirect Investment Asset Management Business Act, which applied to unspecified money trust account products under the Trust Business Act, securities investment trusts under the Securities Investment Trust Business Act, securities investment companies under the Securities Investment Company Act and variable insurance products under the Insurance Business Act, took effect on January 5, 2004. In accordance with the Indirect Investment Asset Management Business Act, the Bank ceased offering unspecified money trust account products from the Bank and instead began to offer products developed by its investment trust management business that fulfill the requirements as an asset management company. Since February 4, 2009, a trust business conducted by a bank is also governed by the Financial Investment Services and Capital Markets Act, which replaced and superseded the Trust Business Act, and the Indirect Investment Asset Management Business Act. Under the Financial Investment Services and Capital Markets Act, a bank with a trust business license (such as the Bank) is permitted to offer both specified money trust account products and unspecified money trust account products. In the event that a bank qualifies and operates as an asset management company, a trustee, a custodian or a general office administrator under the Financial Investment Services and Capital Markets Act, it is required to establish relevant operation and management systems to prevent potential conflicts of interest among the banking business, the asset management business, the trustee or custodian business and general office administration. These measures include: Š prohibitions against officers, directors and employees of one particular business operation from serving as an officer, director or employee in another business operation, except where an officer or a director (1) is serving in two or more business operations with no significant conflict of interest in accordance with the Presidential Decree on the Financial Investment Services and Capital Markets Act or (2) is serving in a trustee business or a custodian business and simultaneously serving in a general office administrator business in accordance with the Financial Investment Services and Capital Markets Act;

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prohibitions against the joint use or sharing of computer equipment or office equipment; and prohibitions against the sharing of information by and among officers, directors or employees engaged in the different business operations.

A bank which qualifies and operates as an asset management company may engage in the sale of beneficiary certificates of investment trusts which are managed by such bank. However, such bank is prohibited from engaging in the following activities: Š Š acting as trustee of an investment trust managed by such bank; purchasing with such bank’s own funds beneficiary certificates of an investment trust managed by such bank; using in its sales activities information relating to the trust property of an investment trust managed by such bank; selling through a financial institution established under the Banking Act beneficiary certificates of an investment trust managed by such bank; establishing a short-term financial indirect investment vehicle; and establishing a mutual fund.

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Laws and Regulations Governing Other Business Activities To enter the foreign exchange business, a bank must register with the Minister of the Ministry of Strategy and Finance. The foreign exchange business is governed by the Foreign Exchange Transaction Law. To enter the securities business, a bank must obtain the permission of the Financial Services Commission. The securities dealing and brokerage business is governed by regulations under the Financial Investment Services and Capital Markets Act. Pursuant to the above-mentioned laws, banks are permitted to engage in the foreign exchange business and the underwriting business for government and other public bonds. Financial Investment Services and Capital Markets Act General On July 3, 2007, the National Assembly of Korea passed the Financial Investment Services and Capital Markets Act, a new law consolidating six laws regulating capital markets. The Financial Investment Services and Capital Markets Act became effective as of February 4, 2009. Consolidation of Capital Markets-Related Laws Prior to the effective date of the Financial Investment Services and Capital Markets Act, 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 subject financial institutions to different licensing and ongoing regulatory requirements (for example, under the Securities and Exchange Act, the Futures Business Act and the Indirect Investment Asset Management Business Act). By applying one uniform set of rules to the same financial business having the same economic function, the Financial Investment Services and Capital Markets Act 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 Financial Investment Services and Capital Markets Act categorizes capital markets-related business into six different functions, as follows: Š dealing (trading and underwriting of “financial investment products” (as defined below));

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Š Š Š Š Š

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 business set forth above, the “Financial Investment Businesses”).

Accordingly, all financial business relating to financial investment products are reclassified 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 Business, irrespective of the type of the financial institution it is. For example, under the Financial Investment Services and Capital Markets Act, derivative businesses conducted by securities companies and future companies will be subject to the same regulations under the Financial Investment Services and Capital Markets Act, at least in principle. The banking business and insurance business are not subject to the Financial Investment Services and Capital Markets Act and will continue to be regulated under separate laws; provided, however, that they can still be subject to the Financial Investment Services and Capital Markets Act if their activities involve any financial investment businesses requiring a license based on the Financial Investment Services and Capital Markets Act. Comprehensive Definition of Financial Investment Products In an effort to encompass the various types of securities and derivative products available in the capital markets, the Financial Investment Services and Capital Markets Act sets forth the comprehensive term “financial investment products”, defined to mean all financial products with a risk of loss in the invested amount (in contrast to “deposits”, which are financial products for which the invested amount is protected or preserved). Financial investment products are classified into two major categories: (i) “securities” (relating to financial investment products where the risk of loss is limited to the invested amount) and (ii) “derivatives” (relating to financial investment products where the risk of loss may exceed the invested amount). As a result of the general and open-ended manner in which financial investment products are defined, any future financial product could potentially fall under the definition of financial investment products, which would enable Financial Investment Companies (as defined below) to handle a broader range of financial products. Under the Financial Investment Services and Capital Markets Act, securities companies, asset management companies, future companies and other entities engaging in any Financial Investment Business are classified as “Financial Investment Companies”. New License System and the Conversion of Existing Licenses Financial Investment Companies will be able to choose what Financial Investment Business to engage in (through the “check the box” method set forth in the relevant license application), by specifying the desired (i) Financial Investment Business, (ii) financial investment product and (iii) target customers to which financial investment products may be sold or dealt to (i.e., general investors or professional investors). Licenses will be issued under the specific business sub-categories described in the foregoing sentence. For example, it would be possible for a Financial Investment Company to obtain a license to engage in the Financial Investment Business of (i) dealing, (ii) over the counter derivatives products or (iii) only with professional investors. Financial institution currently engaging in business activities constituting a Financial Investment Business have had to take certain steps, such as renewal of their license or registration, in order to continue engaging in such business activities even after the Financial Investment Services and Capital Markets Act became effective. Financial institutions that are not licensed Financial Investment Companies are not be permitted to engage in any Financial Investment Business, subject to the following exceptions: (i) banks and insurance companies are permitted to engage in certain categories of Financial Investment Business for a period not

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exceeding six months commencing on the effective date of the Financial Investment Services and Capital Markets Act; and (ii) other financial institutions that engaged in any Financial Investment Business prior to the effective date of the Financial Investment Services and Capital Markets Act (whether in the form of a concurrent business or an incidental business) are permitted to continue such Financial Investment Business for a period not exceeding six months commencing on the effective date of the Financial Investment Services and Capital Markets Act. Expanded Business Scope of Financial Investment Companies Under the previous regulatory regime in Korea, it was difficult for a financial institution to explore a new line of business or expand upon its existing line of business. For example, a financial institution licensed as a securities company generally could not engage in the asset management business. In contrast, under the Financial Investment Services and Capital Markets Act, pursuant to the integration of its current business involving financial investment products into a single Financial Investment Business, a licensed Financial Investment Company is permitted to engage in all types of Financial Investment Businesses, subject to satisfying relevant regulations, for example, maintaining an adequate “Chinese Wall”, to the extent required. As to incidental businesses (i.e., a financial related business which is not a Financial Investment Business), the Financial Investment Services and Capital Markets Act generally allows a Financial Investment Company to freely engage in such incidental businesses by shifting away from the current positive-list system towards a more comprehensive system. In addition, a Financial Investment Company is permitted (i) to outsource marketing activities by contracting “introducing brokers” that are individuals but not employees of the Financial Investment Company, (ii) to engage in foreign exchange business related to their Financial Investment Business and (iii) to participate in the settlement network, pursuant to an agreement among the settlement network participants. Improvement in Investor Protection Mechanism While the Financial Investment Services and Capital Markets Act widens the scope of financial businesses in which financial institutions are permitted to engage, a more rigorous investor-protection mechanism will be imposed upon Financial Investment Companies dealing in financial investment products. The Financial Investment Services and Capital Markets Act distinguishes general investors from sophisticated investors and provides new or enhanced protections to general investors. For instance, the Financial Investment Services and Capital Markets Act expressly provides for strict know-your-customer rules for general investors and imposes an obligation that Financial Investment Companies should market financial investment products suitable to each general investor considering his/her investment objective, net worth, investment experience etc. Under the Financial Investment Services and Capital Markets Act, a Financial Investment Company can be held liable if a general investor proves (i) damage or losses relating to such general investor’s investment in financial investment products solicited by such Financial Investment Company and (ii) absence of explanation, false explanation, or omission of material fact (without having to prove fault or causation). In cases where there are any conflicts of interest between the Financial Investment Companies and investors, the Financial Investment Services and Capital Markets Act expressly requires (i) disclosure of any conflict of interest to investors and (ii) either mitigation of the conflicts of interest to a comfortable level or abstention from the relevant transaction. Other Regulatory Changes Related to Securities and Investments The Financial Investment Services and Capital Markets Act changed various securities regulations including those relating to public disclosure, insider trading and proxy contests, which were previously governed by the Securities and Exchange Act. For example, the 5% and 10% reporting obligations under the Securities and Exchange Act are more stringent under the Financial Investment Services and Capital Markets Act. For example, the number of events requiring an investor to update its 5% report are increased under the Financial Investment Services and Capital Markets Act. Previously, only a change in the shareholding of 1% or more or in the purpose of shareholding (such as an intention to influence management) could trigger the obligation to update the 5% report. The government has issued detailed regulations stipulating additional events requiring updates to 5% reports, such as the change in the type of holding and change in any major aspect of the relevant contract. As for the 10% report filing obligation, the initial filing is expected to be required to be made within five business days of the date of the event

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triggering the 10% reporting obligation, compared to 10 calendar days under the previous law. The due date for reporting a subsequent change after the initial 10% report filing is reduced from the 10th day of the first month immediately following the month in which such change took place to five business days of the date of such change. Under the previous law, there are limitation on the type of investment vehicles that could be used in a collective investment scheme (namely, to trusts and corporations), the type of funds that can be used for collective investment, and the types of assets and investment securities a fund can invest in. However, the Financial Investment Services and Capital Markets Act significantly liberalizes these restrictions, permitting all legal entities, including limited liability companies or partnerships, to be used for the purpose of collective investments, allowing the formation of fund complexes and permitting investment funds to invest in a wide variety of different assets and investment instruments.

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DESCRIPTION OF THE NOTES The Notes will be issued under a fiscal agency agreement (the “Fiscal Agency Agreement”) to be dated as of June 29, 2009 between the Bank and The Bank of New York Mellon, as fiscal agent (the “Fiscal Agent”). The following summaries of certain provisions of the Notes and the Fiscal Agency Agreement do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all the provisions of the Notes and the Fiscal Agency Agreement, including the definitions contained therein of certain terms. General The Notes will be issued in an initial aggregate principal amount of US$500,000,000 and will mature on June 29, 2012. The Notes will be the direct, unconditional, unsecured and unsubordinated general obligations of the Bank. The Notes will rank pari passu among themselves, without any preference of one over the other by reason of priority of date of issue or otherwise, and at least equally with all other outstanding unsecured and unsubordinated general obligations of the Bank. The Notes will bear interest at the rate per annum shown on the front cover of this Offering Circular from June 29, 2009, payable semi-annually in arrears on June 29 and December 29 of each year, commencing December 29, 2009, to the holders of record on June 14 or December 14 immediately preceding such interest payment date (each, a “Record Date”). Interest will be calculated on the basis of a 360-day year consisting of twelve 30-day months and in the case of an incomplete month, the number of days elapsed on the basis of a month of 30 days. The Notes will be issued in denominations of US$100,000 or integral multiples of US$1,000 in excess thereof. The Notes do not provide for any sinking fund. Temporary documents of title will not be issued. During the tenure of the Notes, the Notes will be traded on the Singapore Stock Exchange in a minimum board lot size of US$200,000. The term “Business Day” means any day other than a day on which commercial banks or foreign exchange markets are permitted or required to be closed in the City of New York or London or, in the case Certificated Notes (as defined below) are to be presented, in the place in which Certificated Notes are presented. If the date for payment of interest on or principal of the Notes is not a Business Day, then payment of interest or principal will be made on the next succeeding Business Day with the same force and effect as if made on such date, and no interest shall accrue for the period after such date. Payments on the Notes will be made in accordance with any laws, regulations or administrative practices applicable to the Bank and its agents in respect thereof, including the requirements under Korean tax law. Further issues The Notes will be issued in the initial aggregate principal amount set forth above. The Bank may, from time to time, without the consent of the holders of the Notes, create and issue, pursuant to the Fiscal Agency Agreement and in accordance with applicable laws and regulations, additional notes (“Additional Notes”) maturing on the same maturity date and having the same terms and conditions under the Fiscal Agency Agreement as the previously outstanding Notes in all respects (or in all respects except for the issue date and the amount and the date of the first payment of interest thereon) so that such Additional Notes shall be consolidated and form a single series with the previously outstanding Notes, provided that Additional Notes must (i) be issued with no more than a de minimis amount of original issue discount, or (ii) be part of a “qualified reopening” for U.S. federal income tax purposes. Redemption at maturity On June 29, 2012 (the “Maturity Date”), the Bank will redeem all outstanding Notes at a price equal to 100% of the unpaid principal amount thereof. The Notes cannot be redeemed prior to Maturity Date except as provided below under “— Optional tax redemption.” Optional tax redemption The Notes may be redeemed at any time, at the option of the Bank, in whole, but not in part, upon not less than 30 nor more than 60 days’ prior notice, at a redemption price equal to 100% of the principal amount of

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the Notes then outstanding plus accrued and unpaid interest on the principal amount being redeemed to (but excluding) the redemption date, if (i) as a result of any change in, or amendment to, the laws or regulations of Korea (or of any political subdivision or authority thereof or therein having the power to tax) or any change in the application or official interpretation of such laws or regulations (including the cessation of tax exemptions presently applicable), which change or amendment becomes effective on or after the date of this Offering Circular, the Bank is or would be obligated on the next succeeding due date for a payment with respect to the Notes to pay additional amounts with respect to the Notes, and (ii) such obligation cannot be avoided by the Bank taking reasonable measures available to it. Additional amounts are payable by the Bank under the circumstances described below under “— Additional amounts”. Prior to any such redemption of the Notes, the Fiscal Agency Agreement requires that the Bank deliver to the Fiscal Agent a certificate signed by an authorized officer of the Bank stating that the Bank is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Bank so to redeem have occurred, and an opinion of independent legal advisers of recognized standing to the effect that the Bank has or will become obliged to pay such additional amounts as a result of such change or amendment. No notice of redemption may be given earlier than 90 days prior to the earliest date on which the Bank would be obligated to pay additional amounts if a payment in respect of the Notes were then due. Purchases The Bank may at any time purchase Notes at any price in the open market or otherwise. Notes, if so purchased, may be held, reissued or resold or, at the option of the Bank, surrendered to the Fiscal Agent for cancellation. Cancellations All Notes which are redeemed will forthwith be cancelled. All Notes so cancelled and the Notes purchased and surrendered for cancellation as described above shall be forwarded to the Fiscal Agent and cannot be reissued or resold. Meetings of holders of the Notes; modifications The Bank may at any time, and the Fiscal Agent will at any time after the Notes become immediately due and payable due to a default upon a request in writing made by holders of the Notes holding not less than 10% of the aggregate outstanding principal amount of the Notes, convene a meeting of holders of the Notes. Further provisions concerning meetings of the holders are set forth in the Fiscal Agency Agreement. The Fiscal Agency Agreement permits the Bank and the Fiscal Agent, without the consent of the holders of the Notes, to execute supplemental agreements for certain enumerated purposes, and with the consent of the holders of not less than a majority in aggregate principal amount of the Notes then outstanding, evidenced as in the Fiscal Agency Agreement provided, to execute supplemental agreements adding any provisions to or changing in any manner or eliminating any of the provisions of the Fiscal Agency Agreement or of the Note or of any supplemental agreement or modifying in any manner the rights of the holders of the Notes; provided that no such supplemental agreement will (a) change the stated maturity of the principal of any Note, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of any installment of interest thereon, or change the place or currency of payment of principal of, or interest on, any Note, or change the Bank’s obligation to pay additional amounts, or impair or affect the right of any Noteholder to institute suit for the enforcement of any such payment on or after the due date therefor (or in the case of redemption, on or after the redemption date) without the consent of the holder of each Note so affected; or (b) reduce the aforesaid percentage of Notes, the consent of the holders of which is required for any such supplemental agreement, without the consent of the holders of all Notes then outstanding. At a meeting of the holders of the Notes called for obtaining the consent of the holders of the Notes, persons entitled to vote a majority in aggregate principal amount of the Notes at the time outstanding will constitute a quorum. In the absence of a quorum at any such meeting, the meeting may be adjourned for a period of not less than 10 days; in the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days; at the reconvening of any meeting further

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adjourned for lack of a quorum, the persons entitled to vote 25% in aggregate principal amount of the Notes at the time outstanding will constitute a quorum for the taking of any action set forth in the notice of the original meeting. At a meeting or an adjourned meeting duly convened and at which a quorum is present as aforesaid, any resolution to modify or amend, or to waive compliance with, any of the covenants or conditions referred to above (other than certain situations set forth in the Fiscal Agency Agreement) will be effectively passed if passed by the persons entitled to vote the lesser of (i) a majority in aggregate principal amount of Notes then outstanding or (ii) 75% in aggregate principal amount of the Notes represented and voting at the meeting. Any modifications, amendments or waivers so consented to or approved will be conclusive and binding on all holders of the Notes whether or not they have given such consent or were present at such meeting, and on all future holders of the Notes whether or not notation of such modifications, amendments or waivers is made upon the Notes. Any instrument given by or on behalf of any holder of a Note in connection with any consent to any such modification, amendment or waiver will be irrevocable once given and will be conclusive and binding on all subsequent holders of such Note. Limitation on liens So long as any of the Notes remains outstanding, the Bank will not create or permit to subsist any mortgage, charge, pledge or other security interest upon or over the whole or any part of its property, assets or revenues (whether present or future) to secure for the benefit of the holders of any International Investment Securities (as defined below): (i) (ii) payment of any sum due in respect of any such International Investment Securities; payment under any guarantee in respect of any such International Investment Securities; or

(iii) payment under any indemnity or other like obligations in respect of any such International Investment Securities, without, in any such case and at the same time, according to the holders of the Notes either the same security as is available for the benefit of the holders of such International Investment Securities or such other security or guarantee as shall be approved by the holders of a majority of the aggregate principal amount of the Notes then outstanding. For purposes of the foregoing, “International Investment Securities” means notes, bonds, debentures, certificates of deposit or investment securities of any person which: (i) by their terms either are payable, or confer a right to receive payment, in any currency other than Won or are denominated in Won and more than one-half of the aggregate principal amount of which is initially distributed outside Korea by or with the authorization of the Bank; and are for the time being, or are intended to be, quoted, listed, ordinarily dealt in or traded on any stock exchange or over-the-counter or other securities market outside Korea.

(ii)

For the avoidance of doubt, notwithstanding the foregoing, in the event that there is a change in law or regulation in Korea permitting or providing for the issue of covered bonds, any arrangement relating to the segregation of any part of the Bank’s property, assets or revenues for the purpose thereof shall be permitted, provided that, such arrangement is entered into in compliance with such law or regulation and that such property, assets or revenues qualify as collateral for issues of covered bonds under such law or regulation. Events of default The occurrence and continuance of one or more of the following events will constitute events of default (each an “Event of Default”) under the Notes: (a) Non-payment: default in the payment of principal of the Notes when the same becomes due and payable, whether at maturity, upon acceleration, redemption or otherwise; or default in the payment of any installment of interest upon any of the Notes as and when the same shall become due and payable, and continuance of such default in the payment of interest for a period of 14 days; or

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(b)

Breach of other obligations: the Bank defaults in the performance or observance of any of its other obligations under or in respect of the Notes or the Fiscal Agency Agreement and such default remains unremedied for 30 days after the Fiscal Agent or any Noteholder has given written notice thereof to the Bank; or Cross-acceleration: any Indebtedness (as defined below) by the Bank in aggregate exceeding US$10,000,000 (or its equivalent in one or more other currencies) of the Bank either (1) becoming due and payable prior to the due date for payment thereof by reason of acceleration following a default by the Bank or (2) not being repaid by the Bank at, and remaining unpaid after, maturity (as extended by the period of grace, if any) applicable thereto, or any guarantee given by the Bank in respect of Indebtedness of any other person not being honored and remaining dishonored after becoming due and called; provided that, in the case of (1) above, if any such default under any such Indebtedness shall be cured or waived, then the default under the Notes shall be deemed to have been cured and waived; or Enforcement proceedings: a distress, attachment, execution, seizure before judgment or other legal process is levied, enforced or sued out upon or against the whole or a material part of the assets or revenues of the Bank and is not discharged or stayed within 60 days; or Security enforced: a secured party takes possession, or a receiver, manager or other similar officer is appointed, of the whole or a material part of the undertaking, assets and revenues of the Bank; or Insolvency, etc.: (1) the Bank becomes insolvent or is unable to pay its debts as they fall due, (2) an administrator or liquidator of the Bank or the whole or any part of the undertaking, assets and revenues of the Bank is appointed (or application for any such appointment is made (or documents filed with a court for such appointment) and is not withdrawn within 60 days thereafter), (3) the Bank takes any action for a readjustment or deferment of any of its obligations or makes a general assignment or an arrangement or composition with or for the benefit of its creditors or declares a moratorium in respect of any of its Indebtedness or any Surety given by it, (4) the Bank ceases or threatens to cease to carry on all or any substantial part of its business or (5) the Bank ceases to be a foreign exchange bank with a general banking license in Korea; or Winding up, etc.: an order is made or an effective resolution is passed for the winding up, liquidation or dissolution of the Bank; or Analogous event: any event occurs which under the laws of Korea has an analogous effect to any of the events referred to in paragraphs (d) through (g) above; or Unlawfulness: it is or becomes unlawful for the Bank to perform or comply with any one or more of its obligations under or in respect of any of the Notes or the Fiscal Agency Agreement; or Government intervention: (1) all or any substantial part of the undertaking, assets and revenues of the Bank is condemned, seized or otherwise appropriated by any person acting or purporting to act under the authority of any national, regional or local government of Korea or (2) the Bank is prevented by any such person from exercising normal control over all or any substantial part of its undertaking, assets and revenues.

(c)

(d)

(e)

(f)

(g)

(h)

(i)

(j)

For the purposes of the foregoing: (i) “Indebtedness” means all obligations created, incurred or assumed by a Person for the payment or repayment of moneys relating to or in connection with (a) any indebtedness of the Person in respect of moneys borrowed by it; (b) any indebtedness of the Person under acceptance or documentary credit facilities; (c) any indebtedness of the Person under bills, bonds, debentures,

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notes or similar instruments on which the Person is liable; (d) any obligations of the Person under leases which in accordance with accounting principles generally accepted in Korea are required to be capitalized for financial reporting purposes; (e) any indebtedness of the Person (whether actual or contingent) for moneys owing under any instrument entered into by the Person in respect of the acquisition cost of assets payment of which is deferred for a period in excess of six months after acquisition thereof, and (f) indebtedness of the Person (actual or contingent) under guarantees, security, indemnities or other commitments designed to assure any creditors in respect of the payment of any indebtedness of any other person; (ii) “Person” means any individual, company, corporation, firm, partnership, joint venture, association, organization, state, agency of a state or other entity, whether or not having a separate legal personality; and

(iii) “Surety” means any obligation of any Person to pay an Indebtedness of another Person(s) including, without limitation, (1) any obligation to purchase such Indebtedness, (2) any obligation to lend or give money, to purchase or subscribe shares or other securities or to purchase assets or services in order to provide funds for the payment of such Indebtedness, (3) any indemnity against the consequences of a default in the payment of such Indebtedness and (4) any other agreement to be responsible for such Indebtedness. In each and every such case described in (a) through (j) above, unless the principal of all of the Notes shall already have become due and payable, the holders of not less than 25% in aggregate principal amount of the Notes then outstanding, by written notice as provided in the Fiscal Agency Agreement, may declare the entire principal of all the Notes, and the interest accrued thereon, to be due and payable immediately, provided however, that if any of the events specified in (d) through (h) shall have occurred, the aggregate principal amount of the Notes then outstanding shall automatically become due and payable without regard to the giving of any such notice. If, at any time after the principal of the Notes shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the Bank shall pay or deposit with the Fiscal Agent a sum sufficient to pay all matured installments of interest upon all the Notes and the principal of any and all Notes that shall have become due otherwise than by acceleration (with interest upon such principal and, to the extent that the payment of such interest is enforceable under applicable law, on overdue installments of interest) and reasonable compensation and expenses of the Fiscal Agent, and if any and all Events of Default under the Notes, other than the non-payment of the principal of Notes that shall have become due by acceleration, shall have been cured, waived or otherwise remedied, then and in every such case the holders of a majority in aggregate principal amount of the Notes then outstanding may, by written notice, waive all defaults and rescind and annul such declaration and its consequences. Consolidation, merger and sale of assets The Bank will not consolidate with, merge or amalgamate into, or transfer all or substantially all of its assets to any corporation or convey or transfer all or substantially all of its assets to any person, except as provided in the Notes or the Fiscal Agency Agreement. The Bank may, without the consent of the holders of any of the Notes, consolidate with, or merge into, or sell, transfer, lease or convey all or substantially all of its assets to any corporation organized under the laws of Korea, provided that: Š any successor corporation expressly assumes the Bank’s obligations under the Notes and the Fiscal Agency Agreement; after giving effect to the transaction, no Event of Default and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing; the Bank has delivered to the Fiscal Agent an officer’s certificate and an opinion of counsel, each stating that such consolidation, merger, sale, transfer, lease or conveyance and, if a supplemental agreement is required in connection with such transaction, such supplemental agreement comply with this provision and that all conditions precedent provided for in the Fiscal Agency Agreement relating to such transaction have been complied with; and

Š

Š

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Š

certain other conditions in the Fiscal Agency Agreement are satisfied.

Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve “substantially all” of the property or assets of a person. Discharge and defeasance Discharge of Notes The Fiscal Agency Agreement provides that the Bank will be discharged from any and all obligations in respect of the Notes (except for certain obligations to register the transfer of or exchange Notes, replace stolen, lost or mutilated Notes, make payments of principal and interest and maintain paying agencies) if: Š the Bank has paid or caused to be paid in full the principal of and interest on all Notes outstanding thereunder; the Bank shall have delivered to the Fiscal Agent for cancellation all Notes outstanding theretofore authenticated; or all Notes not theretofore delivered to the Fiscal Agent for cancellation (i) have become due and payable; (ii) will become due and payable in accordance with their terms within one year or (iii) are to be, or have been, called for redemption as described under “— Optional tax redemption” within one year under arrangements satisfactory to the Fiscal Agent for the giving of notice of redemption, and, in any such case, the Bank shall have irrevocably deposited with the Fiscal Agent, in trust for the benefit of the holders of such Notes, (a) cash in U.S. dollars in an amount, or (b) U.S. Government Obligations (as defined below) which through the payment of interest thereon and principal thereof in accordance with their terms will provide not later than the due date of any payment, cash in U.S. dollars in an amount, or (c) any combination of (a) and (b), sufficient to pay all the principal of, and interest on, the Notes on the dates such payments are due in accordance with the terms of the Notes.

Š

Š

“U.S. Government Obligations” means securities which are (i) direct obligations of the United States government or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States government, the payment of which is unconditionally guaranteed by the United States government, which, in either case, are full faith and credit obligations of the United States government payable in U.S. dollars and are not callable or redeemable at the option of the issuer thereof and shall also include a depositary receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depositary receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depositary receipt. Covenant defeasance The Fiscal Agency Agreement also provides that the Bank need not comply with certain covenants (“covenant defeasance”) of the Notes (including those described under “— Limitation on liens”), if: Š the Bank irrevocably deposits with the Fiscal Agent, in trust for the benefit of the holders of such Notes, (a) cash in U.S. dollars in an amount, or (b) U.S. Government Obligations which through the payment of interest thereon and principal thereof in accordance with their terms will provide not later than the due date of any payment cash in U.S. dollars in an amount, or (c) any combination of (a) and (b), sufficient to pay all the principal of, and interest on, the Notes on the dates such payments are due in accordance with the terms of the Notes;

159

Š Š

certain Events of Default or certain events which with notice or lapse of time or both would become Events of Default shall not have occurred and be continuing on the date of such deposit; the Bank delivers to the Fiscal Agent an opinion of tax counsel of recognized standing with respect to U.S. federal income tax matters to the effect that the beneficial owners of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the exercise of such covenant defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would be the case if such covenant defeasance had not occurred; the Bank delivers to the Fiscal Agent an opinion of tax counsel of recognized standing in Korea to the effect that such deposit and related covenant defeasance will not cause the holders of Notes, other than holders who are or who are deemed to be residents of Korea or use or hold or are deemed to use or hold their Notes in carrying on a business in Korea, to recognize income, gain or loss for Korean income tax purposes, and to the effect that payments out of the trust fund will be free and exempt from any and all withholding and other income taxes of whatever nature of Korea or any province or political subdivision thereof or therein having power to tax, except in the case of Notes beneficially owned (x) by a Person who is or is deemed to be a resident of Korea or (y) by a Person who uses or holds or is deemed to use or hold such Notes in carrying on a business in Korea; and the Bank delivers to the Fiscal Agent an Officers’ Certificate and an opinion of legal counsel of recognized standing, each stating that all conditions precedent provided for relating to such covenant defeasance have been complied with.

Š

Š

Additional amounts All payments of principal and interest in respect of the Notes by the Bank shall be made without withholding or deduction for, or on account of, any present or future taxes or duties of whatever nature imposed or levied by or on behalf of Korea, or any political subdivision of, or any authority thereof or therein having power to tax (“Taxes”), unless such withholding or deduction is required by law. In such event, the Bank will pay such additional amounts (“Additional Amounts”) as shall be necessary in order that the net amounts received by the holders of the Notes after such withholding or deduction shall equal the respective amounts of principal or interest which would otherwise have been receivable in respect of such Note in the absence of such withholding or deduction, except that no such Additional Amounts shall be payable in respect of the Notes: (i) to or on behalf of a holder of the Notes who is liable for such Taxes in respect of such Note by reason of such holder of the Notes (or fiduciary, settlor, beneficiary, member or shareholder of, or possessor of power over the relevant holder, if the relevant holder is an estate, nominee, trust or corporation) being or having been connected with Korea (or any political subdivision thereof) otherwise than merely by holding such Note; or to or on behalf of a holder of the Notes who presents a Note (where presentation is required) more than 30 days after the Relevant Date (as defined below), except to the extent that the holder of the Notes thereof would have been entitled to such Additional Amounts on presenting the same for payment on such thirtieth day; or

(ii)

(iii) where such withholding or deduction is imposed on a payment to or for the benefit of an individual and is required to be made pursuant to European Union Directive 2003/48/EC or any law implementing or complying with, or introduced in order to conform to, such Directive; or (iv) to or on behalf of a holder of the Notes who would have been able to avoid such withholding or deduction by presenting (where presentation is required) the Note elsewhere to the Fiscal Agent or a paying agent in a Member State of the European Union; or (v) to or on behalf of a holder of the Notes who is able to avoid such withholding or deduction by making a declaration of non-residence or other similar claim for exemption and does not make such declaration or claim; or

(vi) any combination of (i) through (v) above.

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As used herein, the “Relevant Date” means the date on which any payment in respect of a Note first becomes due, except that, if the full amount of the moneys payable has not been duly received by the Fiscal Agent on or prior to such due date, it means the date on which, the full amount of such moneys having been so received, notice to that effect is duly given to the holders of the Notes in accordance with the Fiscal Agency Agreement. The obligation of the Bank to pay such Additional Amounts shall not apply to (a) any estate, inheritance, gift, sales, transfer, personal property or any similar tax, assessment or other governmental charge or (b) any tax, assessment or other governmental charge which is payable otherwise than by deduction or withholding from payments of principal of or interest on the Notes; provided that, except as otherwise set forth in the Notes and in the Fiscal Agency Agreement, the Bank shall pay all stamp and other duties, if any, which may be imposed by Korea or any respective political subdivision thereof or any taxing authority of or in the foregoing, with respect to the Fiscal Agency Agreement or as a consequence of the initial issuance of the Notes. Furthermore, no Additional Amounts shall be payable with respect to any payment of the principal of, or any interest on, any Note to any holder who is a fiduciary; partnership; limited liability company or any person other than the sole beneficial owner of such payment to the extent such payment would be required by the laws of Korea (or any political subdivision or taxing authority thereof or therein) to be included in the income for tax purposes of a beneficiary or settlor with respect to such fiduciary, a member of such partnership or limited liability company, or a beneficial owner who would not have been entitled to such Additional Amounts had such beneficiary, settlor, member or beneficial owner been the holder of such Note. References to payments of principal or interest in respect of the Notes shall be deemed to include any additional amounts which may be payable as set forth in the Fiscal Agency Agreement. Indemnification of Judgment Currency To the fullest extent permitted by applicable law, the Bank will indemnify each holder of the Notes against any loss incurred by such holder as a result of any judgment or order being given or made for any amount due under any Note and such judgment or order being expressed and paid in a currency (the “Judgment Currency”) which is other than U.S. dollars and as a result of any variation as between (i) the rate of exchange at which the U.S. dollar is converted into the Judgment Currency for the purposes of such judgment or order and (ii) the spot rate of exchange in The City of New York at which the holder on the date of payment of such judgment is able to purchase U.S. dollars with the amount of the Judgment Currency actually received by such holder. This indemnification will constitute a separate and independent obligation of the Bank and will continue in full force and effect notwithstanding any such judgment or order as aforesaid. The term spot rate of exchange includes any premiums and costs of exchange payable in connection with the purchase of, or conversion into, U.S. dollars. Fiscal Agent The Fiscal Agent may resign at any time or may be removed by the Bank. If the Fiscal Agent resigns, is removed or becomes incapable of acting as Fiscal Agent or if a vacancy occurs in the office of the Fiscal Agent for any cause, the Bank shall appoint a successor Fiscal Agent in accordance with the provisions of the Fiscal Agency Agreement. The address of the relevant corporate trust office of the Fiscal Agent is 101 Barclay Street, New York, NY 10286, U.S.A. Book-entry; Delivery and Form Summary of provisions relating to Notes in Global form The certificates representing the Notes will be issued in fully registered form without interest coupons. Notes sold in offshore transactions in reliance on Regulation S under the Securities Act will initially be

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represented by one or more permanent global Notes in definitive, fully registered form without interest coupons (each a “Regulation S Global Note”) and will be deposited with the Fiscal Agent as custodian for, and registered in the name of, a nominee of DTC for the accounts of its participants, including Euroclear and Clearstream. Prior to the 40th day after the later of the commencement of the offering of the Notes and the date of the Fiscal Agency Agreement, any resale or other transfer of such interests to U.S. persons shall not be permitted unless such resale or transfer is made pursuant to Rule 144A or Regulation S and in accordance with the certification requirements described below. Notes sold in reliance on Rule 144A will be represented by one or more permanent global Notes in definitive, fully registered form without interest coupons (each, a “Rule 144A Global Note” and, together with the Regulation S Global Note, the “Global Notes”) and will be deposited with the Fiscal Agent as custodian for, and registered in the name of a nominee of, DTC. Beneficial interests in a Rule 144A Global Note may be transferred to a person who takes delivery in the form of an interest in a Regulation S Global Note only upon receipt by the Fiscal Agent of written certifications (in the form(s) provided in the Fiscal Agency Agreement) and pursuant to the transfer restrictions related to a Rule 144A Global Note as described in this Offering Circular. Each Global Note (and any Notes issued in exchange therefor) will be subject to certain restrictions on transfer set forth therein described under “Notice to Investors”. Except in the limited circumstances described below under “— Summary of provisions relating to Certificated Notes”, owners of beneficial interests in the Global Notes will not be entitled to receive physical delivery of Certificated Notes (as defined below). Ownership of beneficial interests in a Global Note will be limited to persons who have accounts with DTC (“participants”) or persons who hold interests through participants. Ownership of beneficial interests in a Global Note will be shown on, and the transfer of that ownership will be effected only through, records maintained by DTC or its nominee (with respect to interests of participants) and the records of participants (with respect to interests of persons other than participants). Qualified Institutional Buyers may hold their interests in a Rule 144A Global Note directly through DTC if they are participants in such system, or indirectly through organizations which are participants in such system. Investors may hold their interests in a Regulation S Global Note directly through Euroclear or Clearstream, if they are participants in such systems, or indirectly through organizations that are participants in such systems. Euroclear and Clearstream will hold interests in the Regulations S Global Notes on behalf of their participants through DTC. So long as DTC, or its nominee, is the holder of the Global Note, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by such Global Note for all purposes under the Fiscal Agency Agreement and the Notes. No beneficial owner of an interest in a Global Note will be able to transfer that interest except in accordance with DTC’s applicable procedures, in addition to these provided for under the Fiscal Agency Agreement and, if applicable, those of Euroclear and Clearstream. Payments of the principal of, and interest on, a Global Note will be made to DTC or its nominee, as the case may be, as the holder thereof. Neither the Bank nor the Fiscal Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. The Bank expects that DTC or its nominee, upon receipt of any payment in respect of a Global Note, will credit participants’ accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Note as shown on the records of DTC or its nominee. The Bank also expects that payments by participants to owners of beneficial interests in such Global Note held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payments will be the responsibility of such participants. Transfers between participants in DTC will be effected in the ordinary way in accordance with DTC rules and will be settled in same-day funds. Transfers between participants in Euroclear and Clearstream will be effected in the ordinary way in accordance with their respective rules and operating procedures.

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The Bank expects that DTC will take any action permitted to be taken by a Noteholder (including the presentation of Notes for exchange as described below) only at the direction of one or more participants to whose account the DTC interests in a Global Note is credited and only in respect of such portion of the aggregate principal amount of Notes as to which such participant or participants has or have given such direction. However, if there is an Event of Default under the Notes, DTC will exchange the applicable Global Note for Certificated Notes, which it will distribute to its participants and which may be legended as set forth under the heading “Notice to Investors”. Summary of provisions relating to Certificated Notes If (i) DTC notifies the Bank that it is unwilling or unable to continue as a depositary for the Global Notes, and a successor depositary is not appointed by the Bank within 90 days of such notice, (ii) either Euroclear or Clearstream or a successor clearing system is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so, or (iii) an Event of Default has occurred and is continuing, the Bank (at its cost) will issue certificates representing the Notes (“Certificated Notes”) in registered form in exchange for the affected Global Notes. Upon receipt of such notice from DTC, Euroclear, Clearstream or the Fiscal Agent, as the case may be, the Bank will use its best efforts to make arrangements for the exchange of interests in the relevant Global Note for Certificated Notes and cause the requested Certificated Notes to be registered in the names of beneficial holders and executed and delivered to the Paying and Transfer Agents in sufficient quantities for delivery to holders. A Certificated Note may be transferred in whole or in part (in a principal amount equal to the minimum authorized denomination or any integral multiple thereof) by surrendering such Certificated Note to be transferred, together with an executed instrument or assignment of transfer, at the corporate trust office of the Fiscal Agent or at the office of the Paying and Transfer Agent and (so long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require) the Paying and Transfer Agent in Singapore. In the case of a permitted transfer of only part of a Certificated Note, a new Certificated Note in respect of the balance not transferred will be issued to the transferor. Each new Certificated Note to be issued upon the transfer of a Certificated Note will, upon the effective receipt of a duly completed form of transfer by a Paying and Transfer Agent at its respective specified office, be available for delivery three business days after issuance at such specified office, or at the request of the holder requesting such transfer, will be mailed at the risk of the transferee entitled to the new Certificated Note to such address as may be specified in such duly completed form of transfer. The transfer of the Certificated Notes will be effected without charge by or on behalf of the Bank or any Paying and Transfer Agent but against such indemnity as the Bank or the Paying and Transfer Agent may require in respect of any tax or other duty of whatever nature which may be levied or imposed in connection with such transfer. If any Certificated Note is lost, stolen, mutilated, defaced or destroyed it may be replaced at the specified office of the Fiscal Agent upon payment by the claimant of the expenses incurred in connection with such replacement and on such terms as to evidence and indemnity as the Bank may reasonably require. Mutilated or defaced Certificated Notes must be surrendered before replacements will be issued. Certificated Notes delivered in exchange for beneficial interests in any Global Note will be registered in the names, and issued in denominations of $100,000 or integral multiples of $1,000 in excess thereof, requested by or on behalf of the DTC or successor depositary (in accordance with its customary procedures). Holders of an interest in the Global Notes may receive Certificated Notes, which may bear the legend referred to under “Notice to Investors”, in accordance with DTC’s rules and procedures in addition to those provided for under the Fiscal Agency Agreement. Subject to such transfer restrictions, the holder of a Certificated Note bearing such a legend may transfer or exchange such Notes in whole or in part by surrendering them to the Fiscal Agent. Prior to any proposed transfer of Notes in certificated form, the holder may be required to provide certifications and other documentation to the Fiscal Agent as described above. In the case of a transfer of only part of a Note, the original principal amount of both the part transferred and the balance not transferred must be in authorized denominations, and new Notes will be issued to the transferor and transferee, respectively, by the Fiscal Agent. Upon the transfer, exchange or replacement of Certificated Notes not bearing the legend described above, the Fiscal Agent will deliver Certificated Notes that do not bear such legend.

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Upon the transfer, exchange or replacement of Certificated Notes bearing the legend described above, or upon a specific request for removal of the legend from such Certificated Note, the Fiscal Agent will deliver only Certificated Notes bearing such legend or will refuse to remove such legend, as the case may be, unless there is delivered to the Bank such satisfactory evidence, which may include an opinion of legal counsel of recognized standing, as may be reasonably required by the Bank that neither the legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act. Payment of principal and interest in respect of the Certificated Notes shall be payable at the office of agency of the Bank in the City of New York which shall initially be the corporate trust office of the Fiscal Agent, at 101 Barclay Street, New York, NY 10286, U.S.A, provided that at the option of the Bank, payment may be made by wire transfer, direct deposit or check mailed to the address of the holder entitled thereto as such address appears in the Note Register (as defined in the Fiscal Agency Agreement). Except in the limited circumstances described above, owners of interests in the Global Notes will not be entitled to receive physical delivery of individual definitive certificates. The Notes are not issuable in bearer form. Notices Except as otherwise expressly provided herein or the Fiscal Agency Agreement, whenever the Fiscal Agency Agreement or the Note requires that the Bank or the Fiscal Agent give notice to the holder of the Notes, the Bank or the Fiscal Agent will cause such notice to be mailed to the holders of Notes at their respective addresses as they appear in the Note Register. For so long as all of the Notes are represented in registered form and held on behalf of a clearing systems, any notices or reports to holders of the Notes may alternatively be given by delivery thereof to the clearing systems in accordance with the applicable rules and procedures of the clearing systems. Governing Law, Jurisdiction and Other Matters The Fiscal Agency Agreement and the Notes will be governed by, and construed in accordance with, the laws of the State of New York. The Bank will agree that any legal action, suit, or proceeding arising out of or based upon the Fiscal Agency Agreement or the Notes may be instituted in any New York State or U.S. Federal court located in the Borough of Manhattan, The City of New York. The Bank will appoint Shinhan Bank, New York Branch as its authorized agent upon whom process may be served in connection with any such action and will irrevocably consent to the jurisdiction of any such court in respect of any such proceeding. The Bank will also waive, to the extent permissible under applicable law, any objection which the Bank may now or hereafter have to the laying of venue of any such proceeding and any claim that such proceeding brought in such court has been brought in an inconvenient forum. To the extent that the Bank has or hereafter may acquire any immunity (sovereign or otherwise) from any legal action, suit or proceeding, from jurisdiction of any court or from set-off or any legal process (whether service or notice, attachment in aid or otherwise) against the Bank or any of its assets which may arise in connection with the Notes or the Fiscal Agency Agreement, the Bank hereby irrevocably waives and agrees, to fullest extent allowed under applicable law, not to plead or claim such immunity. Paying and Transfer Agents The Fiscal Agent will serve as the initial principal paying agent and transfer agent (together with any additional paying agent and transfer agent, the “Paying and Transfer Agents”). The Paying and Transfer Agents may resign at any time or may be removed by the Bank. If the Paying and Transfer Agents are removed or become incapable of acting as Paying and Transfer Agents or if a vacancy occurs in the office of the Paying and Transfer Agents for any cause, a successor Paying and Transfer Agent as provided by the Fiscal Agency Agreement; provided that we will maintain a Paying and Transfer Agent having a specified office in Singapore so long as the Notes are listed on the SGX-ST and the rules of the SGX-ST so require.

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TAXATION Korean Taxation Republic of Korea The information provided below does not purport to be a complete summary of Korean tax law and practice currently applicable. Prospective investors who are in any doubt as to their tax position should consult with their own professional advisors. The taxation of non resident individuals and non Korean corporations (“Non-Residents”) depends on whether they have a “permanent establishment” (as defined under Korean law and applicable tax treaty) in Korea to which the relevant Korean source income is attributable or with which such income is effectively connected. Non-Residents without a permanent establishment in Korea are taxed in the manner described below. Non-Residents with permanent establishments in Korea are taxed in accordance with different rules. Tax on Interest Interest on the Notes paid to Non-Residents, being foreign currency denominated bonds, is exempt from income tax and corporation tax (whether payable by withholding or otherwise) pursuant to the Special Tax Treatment Control Law (the “STTCL”), so far as the Notes are “foreign currency denominated bonds” under the STTCL. The term “foreign currency denominated bonds” in this context is not defined under the STTCL. In this regard, the Korean tax authority issued a ruling on September 1, 1990 to the effect that “a notes issuance facility, commercial paper issued in U.S. dollars or euros or a banker’s acceptance” are not treated as the “foreign currency denominated bonds”. If the tax exemption under the STTCL referred to above were to cease to be in effect, the rate of income tax or corporation tax applicable to interest on the Notes, for a Non-Resident without a permanent establishment in Korea, would be 14% of income. In addition, a tax surcharge called a residents’ tax would be imposed at the rate of 10% of the income tax or corporation tax (raising the total tax rate to 15.4%). The tax is withheld by the payer or us. The tax rates may be reduced by an applicable tax treaty, convention or agreement between Korea and the country of the recipient of the income. The relevant tax treaties are discussed below. Tax on Capital Gains Korean tax laws currently exclude from Korean taxation gains made by a Non-Resident without a permanent establishment in Korea from the sale of the Notes to other Non-Residents (other than to their permanent establishments in Korea). In addition, capital gains earned by Non-Residents with or without permanent establishments in Korea from the transfer taking place outside Korea of the Notes are currently exempt from taxation by virtue of STTCL, provided that the issuance of the Notes is deemed to be an overseas issuance under the STTCL. If the exclusion or exemption from Korean taxation referred to above were to cease to be in effect, in the absence of an applicable tax treaty reducing or eliminating tax on capital gains, the applicable rate of tax would be the lower of 11% (including resident surtax) of the gross realization proceeds or (subject to the production of satisfactory evidence of the acquisition cost and certain direct transaction costs of the relevant Note) 22% (including resident surtax) of the realized gain (i.e., the excess of the gross realization proceeds over the acquisition cost and certain direct transaction costs) made. If such evidence shows that no gain (or a loss) was made on the sale, no Korean tax is payable. There is no provision under relevant Korean law to allow offsetting of gains and losses or otherwise aggregating transactions for the purpose of computing the net gain attributable to sales of the Notes issued by Korean companies. The purchaser or any other designated withholding agent of the Notes is obliged under Korean law to withhold the applicable amount of Korean tax and make payment thereof to the relevant Korean tax authority. Unless the seller can claim the benefit of an exemption from tax under an applicable tax treaty or on the failure of the seller to produce satisfactory evidence of his acquisition cost and certain direct transaction costs in relation to the instruments being sold, the purchaser or such withholding agent must withhold an amount equal to 11% of the gross realization proceeds. Any amounts withheld by the purchaser or such withholding agent must be paid to the

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competent Korean tax office. The purchaser or withholding agent must pay any withholding tax no later than the tenth day of the month following the month in which the payment for the purchase of the relevant instruments occurred. Failure to transmit the withheld tax to the Korean tax authorities in time subjects the purchaser or such withholding agent to penalties under Korean tax laws. The Korean tax authorities may attempt to collect such tax from a Non-Resident who is liable for payment of any Korean tax on gains, as a purchaser or withholding agent who is obliged to withhold such tax, through proceedings against payments due to the Non-Resident from its Korean investments and the assets or revenues of any of the Non-Resident’s branch or representative offices in Korea. Inheritance Tax and Gift Tax Korean inheritance tax is imposed upon (a) all assets (wherever located) of the deceased if at the time of his death he was domiciled in Korea and (b) all property located in Korea that passes on death (irrespective of the domicile of the deceased). Gift tax is imposed in similar circumstances to the above. The taxes are imposed if the value of the relevant property is above a certain limit and the rate varies from 10% to 50%. At present, Korea has not entered into any tax treaties regarding its inheritance or gift taxes. Under Korean inheritance and gift tax laws, bonds issued by Korean corporations are deemed located in Korea irrespective of where they are physically located or by whom they are owned, and, consequently, the Korean inheritance and gift taxes will be imposed on transfers of the Notes by inheritance or gift. Prospective purchasers should consult their personal tax advisors regarding the consequences of the imposition of the Korean inheritance or gift tax. Stamp Duty and Securities Transaction Tax No stamp, issue or registration duties will be payable in Korea by the Holders in connection with the issue of the Notes except for a nominal amount of stamp duty on certain documents executed in Korea which will be paid by us. No securities transaction tax will be imposed upon the transfer of the Notes. Tax Treaties At the date of this offering circular, Korea has tax treaties with, among others Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Luxembourg, The Netherlands, New Zealand, Norway, Singapore, Sweden, Switzerland, the United Kingdom and the United States of America, under which the rate of withholding tax on interest is reduced, generally to between 5% and 16.5% (including residents’ tax), and the tax on capital gains is often eliminated. Under the tax treaty with the United States, in general Korean withholding tax on interest (excluding residents’ tax) may not exceed a rate of 12% and the tax on capital gains is eliminated, provided that the Holders are beneficial owners of the relevant interest income and capital gain. Each Holder should inquire whether he is entitled to the benefit of a tax treaty with respect to any transaction involving the Notes. It is the responsibility of the party claiming the benefits of a tax treaty in respect of interest payments to file with the payer or us a certificate as to his residence. In the absence of sufficient proof, the payer or we must withhold taxes in accordance with the above discussion. Further, in order for a Non-Resident to obtain the benefit of a tax exemption on certain Korean source income (e.g., interest and capital gains) under an applicable tax treaty, Korean tax law requires such Non-Resident (or its agents) to submit to the payer of such Korean source income an application for tax exemption under a tax treaty along with a certificate of tax residency of such Non-Resident issued by a competent authority of the Non-Resident’s country of tax residence, subject to certain exceptions. The payer of such Korean source income, in turn, is required to submit such application to the relevant district tax office by the ninth day of the month following the date of the first payment of such income. Withholding and Gross Up As mentioned above, interest on the Notes is exempt from any withholding or deduction on account of income tax or corporation tax pursuant to STTCL. However, in the event that the payer or we are required by law to make any withholding or deduction for or on account of any Korean taxes (as more fully

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described in “Description of the Notes — Additional Amounts”) we have agreed to pay (subject to the customary exceptions as set out in “Description of the Notes — Additional Amounts”) such Additional Amounts as may be necessary in order that the net amounts received by the Holder of any Note after such withholding or deduction shall equal the respective amounts which would have been received by such Holder in the absence of such withholding or deduction. United States Taxation To ensure compliance with Internal Revenue Service Circular 230, you are hereby notified that any discussion of tax matters set forth in this offering circular was written in connection with the promotion or marketing of the transactions or matters addressed herein and was not intended or written to be used, and cannot be used by any prospective investor, for the purpose of avoiding tax-related penalties under federal, state or local tax law. Each prospective investor should seek advice based on its particular circumstances from an independent tax advisor. The following is a summary of certain United States federal income tax consequences of the purchase, ownership and disposition of Notes as of the date hereof. Except where noted, this summary deals only with Notes that are held as capital assets by a U.S. holder (as defined below) who acquired our Notes upon original issuance at their initial offering price. A “U.S. holder” means a person that is for United States federal income tax purposes any of the following: Š Š an individual citizen or resident of the United States; a corporation (or any other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; an estate the income of which is subject to United States federal income taxation regardless of its source; or a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person.

Š Š

With respect to U.S. holders, the discussion set forth below is applicable to U.S. holders (i) who are residents of the United States for purposes of the current income tax treaty between the United States and Korea (the “Treaty”), (ii) whose Notes are not, for purposes of the Treaty, attributable to a permanent establishment in Korea and (iii) who otherwise qualify for the full benefits of the Treaty. This summary is based upon provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and regulations, rulings and judicial decisions as of the date hereof. Those authorities may be changed, perhaps retroactively, so as to result in United States federal income tax consequences different from those summarized below. This summary does not address all aspects of United States federal income taxes and does not deal with foreign, state, or local or other tax considerations that may be relevant to U.S. holders in light of their personal circumstances. In addition, it does not represent a detailed description of the United States federal income tax consequences applicable to you if you are subject to special treatment under the United States federal income tax laws. For example, this summary does not address all of the United States federal income tax consequences applicable to: Š holders who may be subject to special tax treatment, such as dealers in securities or currencies, traders in securities that elect to use the mark-to-market method of accounting for their securities, financial institutions, regulated investment companies, real estate investment trusts, partnerships or other passthrough entities for United States federal income tax purposes, tax-exempt entities or insurance companies; persons holding the Notes as part of a hedging, integrated, constructive sale or conversion transaction or a straddle;

Š

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Š Š

holders of the Notes whose “functional currency” is not the United States dollar; or alternative minimum tax consequences, if any.

If a partnership holds our Notes, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our Notes, you should consult your tax advisors. If you are considering the purchase of Notes, you should consult your own tax advisors concerning the particular United States federal income tax consequences to you of the ownership of the Notes, as well as the consequences to you arising under the laws of any other taxing jurisdiction. Payments of Interest If the principal amount of the Notes exceeds their “issue price” (the first price at which a substantial amount of the Notes is sold to the public) by an amount equal to or greater than 0.25% of the principal amount of the Notes multiplied by the number of complete years to maturity, the Notes will be treated as having being issued with original issue discount (“OID”) in an amount equal to such difference. The Notes are not expected to be, and the following discussion assumes that the Notes will not be, issued with OID for United States federal income tax purposes. Accordingly, interest on a Note will generally be taxable to you as ordinary income at the time it is paid or accrued in accordance with your method of accounting for tax purposes. If, however, the Notes are issued with OID, you generally must accrue the OID in gross income over the term of the Notes on a constant yield basis, regardless of your regular method of tax accounting. As a result, you generally would recognize taxable income in respect of a Note in advance of the receipt of cash attributable to such income. Although interest payments are currently exempt from Korean taxation, if the Korean law providing for the exemption is repealed, then, in addition to interest payments on the Notes, you will be required to include in income any Additional Amounts and any Korean tax withheld from interest payments notwithstanding that you in fact did not receive such withheld tax. You may be entitled to deduct or credit this tax, subject to certain limitations (including that the election to deduct or credit foreign taxes applies to all of your foreign taxes for a particular tax year). Interest income (including any Additional Amounts and any Korean taxes withheld in respect thereof) on a Note generally will be considered foreign source income and, for purposes of the United States foreign tax credit, generally will be considered passive category income. As a U.S. holder that is entitled to the benefits of the Treaty, any United States foreign tax credit that you are entitled to generally will not exceed the rate of tax applicable under the Treaty. You will generally be denied a foreign tax credit for foreign taxes imposed with respect to the Notes where you do not meet a minimum holding period requirement during which you are not protected from risk of loss. The rules governing the foreign tax credit are complex. You are urged to consult your tax advisors regarding the availability of the foreign tax credit under your particular circumstances. Sale, Exchange and Retirement of Notes Your tax basis in a Note will, in general, be your cost for that Note. Upon the sale, exchange, retirement or other disposition of a Note, you will recognize gain or loss equal to the difference between the amount you realize upon the sale, exchange, retirement or other disposition (less an amount equal to any accrued but unpaid interest, which will be taxable as interest income to the extent not previously included in income) and the adjusted tax basis of the Note. Such gain or loss will be capital gain or loss and will generally be treated as United States source gain or loss. Consequently, you may not be able to claim a credit for any Korean tax imposed upon a disposition of a Note unless such credit can be applied (subject to applicable limitation) against tax due on other income treated as derived from foreign sources. Capital gains of individuals derived in respect of capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. Backup Withholding and Information Reporting Information reporting requirements may apply to payments the Bank makes to you and the proceeds from a sale of a Note paid to you, unless you are an exempt recipient such as a corporation. Additionally, if you

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fail to provide your taxpayer identification number, or in the case of interest payments, fail either to report in full dividend and interest income or to make certain certifications to establish an exemption from backup withholding, you may be subject to backup withholding. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your United States federal income tax liability provided the required information is furnished to the Internal Revenue Service. EU Savings Directive Under European Council Directive 2003/48/EC on the taxation of savings income, each Member State of the European Union is required to provide to the tax authorities of another Member State details of payments of interest or other similar income paid by a person within its jurisdiction to an individual beneficial owner resident in that other Member State; however, for a transitional period, Austria, Belgium and Luxembourg will instead apply a withholding system in relation to such payments, deducting tax at rates rising over time to 35%, unless during such period they elect otherwise. A number of non-EU countries, and certain dependent or associated territories of certain Member States, have agreed to adopt similar measures (either provision of information or transitional withholding) in relation to payments made by a person within its jurisdiction to an individual beneficial owner resident in a Member State. In addition, the Member States have entered into reciprocal provision of information or transitional withholding arrangements with certain of those dependent or associated territories in relation to payments made by a person in a Member State to an individual beneficial owner resident in one of those territories.

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PLAN OF DISTRIBUTION The Bank and the initial purchasers named below (the “Initial Purchasers”) have entered into a Purchase Agreement dated June 22, 2009 (the “Purchase Agreement”) with respect to the Notes. BNP Paribas Securities Corp., Deutsche Bank AG, Singapore Branch, The Hongkong and Shanghai Banking Corporation Limited, Merrill Lynch, Pierce, Fenner & Smith Incorporated and The Royal Bank of Scotland plc are acting as joint lead managers and bookrunners and Goodmorning Shinhan Securities Co., Ltd. is acting as a joint lead manager in this offering. Subject to the terms and conditions set forth in the Purchase Agreement, each of the Initial Purchasers has severally agreed to purchase the principal amount of the Notes set out opposite its name below. Initial Purchasers BNP Paribas Securities Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deutsche Bank AG, Singapore Branch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodmorning Shinhan Securities Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Hongkong and Shanghai Banking Corporation Limited . . . . . . . . . . . . . . . . . . . . . . . . . . Merrill Lynch, Pierce, Fenner & Smith Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Royal Bank of Scotland plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Principal Amount US$ 95,000,000 95,000,000 25,000,000 95,000,000 95,000,000 95,000,000 US$500,000,000

The Purchase Agreement provides that the obligation of the Initial Purchasers to pay for and accept delivery of the Notes is subject to, among other conditions, the delivery of certain legal opinions by counsel. The Initial Purchasers are obligated to take and pay for the entire principal amount of the Notes, if any such Notes are purchased. The purchase price for the Notes will be the initial offering price set forth on the cover page of this offering circular less an underwriting discount. If all the Notes are not sold at the initial offering price, the Initial Purchasers may change the offering price and the other selling terms. The Bank has agreed that from the date of this offering circular to the date of the issue of the Notes, the Bank will not, without the prior consent of the Initial Purchasers, issue or agree to issue any other listed notes, bonds or other debt securities of whatsoever nature (other than the Notes to be issued to the Initial Purchasers) where such notes, bonds or other debt securities would have the same maturity and currency as the Notes. The Purchase Agreement provides that the Bank will indemnify the Initial Purchasers against certain liabilities, including liabilities under the Securities Act, and will contribute to payments the Initial Purchasers may be required to make in respect thereof. New Issue of the Notes The Notes are a new issue of securities with no established trading market. Application has been made to list the Notes on the Singapore Stock Exchange. The Initial Purchasers have advised us that they intend to make a market in the Notes as permitted by applicable laws and regulations. The Initial Purchasers are not obligated, however, to make a market in the Notes and any such market-making may be discontinued at any time at the sole discretion of the Initial Purchasers. Accordingly, no assurance can be given as to the liquidity of, or trading market for, the Notes. Price Stabilization and Short Positions In connection with this offering, Merrill Lynch, Pierce, Fenner & Smith Incorporated as the Stabilizing Manager or any person acting for it, on behalf of the Initial Purchasers, is permitted to engage in transactions that stabilize or otherwise affect the market price of the Notes. These transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of the Notes. If the Stabilizing Manager or its agent creates a short position in the Notes in connection with this offering, (i.e., if an Initial

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Purchaser or its agent sells more Notes than are set forth on the cover page of this offering circular), the Stabilizing Manager or its agent may reduce that short position by purchasing the Notes in the open market. In general, purchases of a Note for the purpose of stabilization or to reduce a short position could cause the price of the Notes to be higher than it might be in the absence of such purchases. If the activities are commenced, they may be discontinued by the Stabilizing Manager or its agent at any time. These transactions may be effected in the over-the-counter market at any time. The Stabilizing Manager or its agent also may impose a penalty bid. This occurs when a particular Initial Purchaser repays to the Stabilizing Manager or its agent a portion of the underwriting discount received by it because the Stabilizing Manager or its agent has repurchased the Notes sold by or for the account of such Initial Purchaser in stabilizing or short covering transactions. Neither the Bank nor the Stabilizing Manager makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Notes. In addition, neither the Bank nor the Stabilizing Manager makes any representation that the Stabilizing Manager or its agent will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice. Other Relationships In the ordinary course of business, some of the Initial Purchasers and certain of their affiliates may engage from time to time in various financing and investment banking transactions with the Bank and its affiliates, for which they have received customary compensation. It is expected that the Initial Purchasers and their affiliates will continue to provide such services to, and enter into such transactions with the Bank and its affiliates in the future. Delivery of the Notes We expect that the Notes will be delivered against payment in same-day funds, on or about June 29, 2009, which we expect will be the fifth business day following the date of this offering circular. Under Rule 15c6-1 promulgated under the Exchange Act, investors are generally required to settle trades in the secondary market in three business days, unless investors and the other parties to any such trade expressly agree otherwise. Accordingly, if investors wish to trade the Notes on the date of this offering circular or on the next succeeding business day, because the Notes will initially settle in T+5, investors may be required to specify an alternate settlement cycle at the time of investor’s trade to prevent a failed settlement. Selling Restrictions General No action has been taken or will be taken in any jurisdiction by us or the Initial Purchaser that would permit a public offering of the Notes, or the possession, circulation or distribution of this offering circular or any other material relating to the Notes or this offering, in any jurisdiction where action for that purpose is required. Accordingly, the Notes may not be offered or sold, directly or indirectly, and neither this offering circular nor such other material may be distributed or published, in or from any country or jurisdiction except in compliance with any applicable rules and regulations of such country or jurisdiction. United States The Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States except in transactions exempt from, or not subject to, the registration requirements of the Securities Act and applicable state securities laws. In addition, an offer or sale of Notes within the United States by a dealer (whether or not participating in this offering) may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A. The Initial Purchasers, through their respective affiliates acting as selling agents, where applicable, propose to offer the Notes to certain persons in offshore transactions in reliance on Regulation S and in accordance with applicable law and propose to offer the Notes to qualified institutional buyers in the United States

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pursuant to Rule 144A. Each of the Initial Purchasers has severally represented and agreed that, except as permitted under the Purchase Agreement, it will not offer, sell or deliver the Notes within the United States. Any offer or sale of the Notes in the United States in reliance on Rule 144A will be made by broker-dealers who are registered as such under the Exchange Act. Terms used in this paragraph have the meanings given to them by Regulation S. Transfer of the Notes will be restricted as described under “Notice to Investors”. United Kingdom Each of the Initial Purchasers has severally represented and agreed that: (a) 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 the Notes in circumstances in which Section 21(1) of the FSMA does not apply to us; and it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.

(b)

Korea The Notes may not be offered, sold or delivered, directly or indirectly, in Korea or to, or for the account or benefit of, any Korean resident (as such term is defined in the Foreign Exchange Transaction Law and regulation of Korea and its enforcement decree) for a period of one year from the date of issuance of the Notes, except as otherwise permitted by applicable Korean laws and regulations. Each of the Initial Purchasers has severally represented and agreed that it will not, directly or indirectly, offer, sell or deliver any Notes in Korea or to, or for the account or benefit of, any resident of Korea, or to others for reoffering or resale, directly or indirectly, in Korea or to, or for the account or benefit of, any resident of Korea other than certain qualified professional investors as set forth in Article 11, Paragraph 1, Item 1, Sub-items Ka and Na of the presidential decree of the Financial Investment Services and Capital Markets Act for a period of one year from the date of issuance of the Notes, except as otherwise permitted by applicable Korean laws and regulations. Hong Kong Each of the Initial Purchasers has severally represented and agreed that: (i) 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 and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance; and (ii) 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 the 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 Securities and Futures Ordinance and any rules made under that Ordinance. Singapore Each of the Initial Purchasers has severally acknowledged that this offering circular has not been and will not be registered as a prospectus with the Monetary Authority of Singapore under the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”). Accordingly, each of the Initial Purchasers 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, nor will it offer or sell the 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

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circulate or distribute, this offering circular 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 persons in Singapore other than (i) to an institutional investor pursuant to Section 274 of the SFA, (ii) to a relevant person, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA or (iii) pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. Each of the following relevant persons specified in Section 275 of the SFA which has subscribed or purchased Notes, namely a person who is: (a) a corporation (which is not an accredited investor) 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 a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an individual who is an accredited investor,

(b)

should note that shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for six months after that corporation or that trust has acquired the Notes under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person, or to any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA; where no consideration is or will be given for the transfer; or by operation of law.

(2) (3) Japan

The Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Law No. 25 of 1948, as amended) (the “FIEA”). Each of the Initial Purchasers has severally represented and agreed that it has not offered or sold and will not offer or sell any Notes, directly or indirectly, 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 resale, directly or indirectly, in Japan or to, or for the benefit of, a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the FIEA and other applicable laws, regulations and ministerial guidelines of Japan.

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NOTICE TO INVESTORS Because of the following restrictions, investors are advised to consult legal counsel prior to making any offer, resale, pledge or other transfer of the Notes offered pursuant to this offering circular. Korea A registration statement for the offering and sale of the Notes has not been filed with the Financial Services Commission of Korea. Each purchaser of the Notes hereunder will be deemed to have represented and agreed as follows: (1) the Notes may not be offered, sold or delivered, directly or indirectly, in Korea or to, or for the account or benefit of, any resident of Korea (as such term is defined under the Foreign Exchange Transaction Law and Regulation of Korea and its Enforcement Decree), for a period of one year from the date of issuance of the Notes, except as otherwise permitted by applicable Korean laws and regulations. Furthermore, a holder of the Notes shall be prohibited from offering, delivering or selling any Notes, directly or indirectly, in Korea or to, or for the account or benefit of, any resident of Korea other than certain qualified professional investors as set forth in Article 11, Paragraph 1, Item 1, Sub-items Ka and Na of the presidential decree of the Financial Investment Services and Capital Markets Act of Korea for a period of one year from the date of issuance of the Notes, except as otherwise permitted by applicable Korean laws and regulations. it understands that the Notes will, unless otherwise agreed by us, bear a legend substantially to the following effect: A REGISTRATION STATEMENT FOR THE OFFERING AND SALE OF THE NOTES HAS NOT BEEN FILED WITH THE FINANCIAL SERVICES COMMISSION OF KOREA. ACCORDINGLY, THE NOTES MAY NOT BE OFFERED, SOLD OR DELIVERED, DIRECTLY OR INDIRECTLY, IN KOREA OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY RESIDENT OF KOREA (AS SUCH TERM IS DEFINED UNDER THE FOREIGN EXCHANGE TRANSACTION LAW AND REGULATION OF KOREA AND ITS ENFORCEMENT DECREE), FOR A PERIOD OF ONE YEAR FROM THE DATE OF ISSUANCE OF THE NOTES, EXCEPT AS OTHERWISE PERMITTED BY APPLICABLE KOREAN LAWS AND REGULATIONS. FURTHERMORE, A HOLDER OF THE NOTES SHALL BE PROHIBITED FROM OFFERING, DELIVERING OR SELLING ANY NOTES, DIRECTLY OR INDIRECTLY, IN KOREA OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY RESIDENT OF KOREA OTHER THAN CERTAIN QUALIFIED PROFESSIONAL INVESTORS AS SET FORTH IN ARTICLE 11, PARAGRAPH 1, ITEM 1, SUB-ITEMS KA AND NA OF THE PRESIDENTIAL DECREE OF THE FINANCIAL INVESTMENT SERVICES AND CAPITAL MARKETS ACT FOR A PERIOD OF ONE YEAR FROM THE DATE OF ISSUANCE OF THE NOTES, EXCEPT AS OTHERWISE PERMITTED BY APPLICABLE KOREAN LAWS AND REGULATIONS. United States The Notes have not been and will not be registered under the Securities Act or the securities laws of any state of the United States or the securities laws of any other jurisdiction. The Notes may not be offered or sold within the United States, except in reliance on Rule 144A to QIBs. The Notes may also be offered and sold in offshore transactions in reliance on Regulation S. Each purchaser of the Notes hereunder will be deemed to have represented and agreed as follows (terms used in this paragraph that are defined in Rule 144A or in Regulations S under the Securities Act are used in this offering circular as defined in the Securities Act): (1) it is purchasing the Notes for its own account or an account with respect to which it exercises sole investment discretion, and it and any such account (i) is a QIB, and is aware that the sale to it is being made in reliance on Rule 144A or (ii) is outside the United States;

(2)

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(2)

it acknowledges that the Notes have not been and will not be registered under the Securities Act or with any securities regulatory authority of any jurisdiction and may not be offered or sold within the United States except as set forth below; it understands and agrees that if in the future it decides to sell, pledge or otherwise transfer any Notes or any beneficial interest in any Notes, such Notes may be offered, resold, pledged or transferred only (A)(i) to us, (ii) to a person whom the seller reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A, (iii) in an offshore transaction meeting the requirements of Rule 903 or 904 of Regulation S under the Securities Act, (iv) pursuant to an exemption from registration under the Securities Act provided by Rule 144 under the Securities Act (if available) or (v) pursuant to another exemption from the Securities Act, provided that, as a condition to the registration of the transfer thereof, we or the Fiscal Agent may require the delivery of any documents, including an opinion of counsel that it, in its sole discretion, may deem necessary or appropriate to evidence compliance with such exemption, or (B) pursuant to an effective registration statement under the Securities Act, and, in each of such cases in accordance with any applicable securities laws of any state of the United States; it agrees to, and each subsequent holder is required to, notify any purchaser of the Notes from it of the resale restrictions referred to in clause (3)(A) above, if then applicable; it understands and agrees that Notes initially offered in the United States to QIBs will be represented by one or more Rule 144A Global Notes and that Notes initially offered outside the United States in reliance on Regulation S will be represented by one or more Regulation S Global Notes; it understands that the Rule 144A Global Notes will, unless otherwise agreed by us, bear a legend substantially to the following effect: “THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF SHINHAN BANK (THE “BANK”) THAT THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A)(i) TO THE BANK, (ii) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT, IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT, (iii) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT, (iv) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (v) PURSUANT TO ANOTHER EXEMPTION FROM THE SECURITIES ACT, PROVIDED THAT, AS A CONDITION TO THE REGISTRATION OF THE TRANSFER THEREOF, THE BANK OR THE FISCAL AGENT MAY REQUIRE THE DELIVERY OF ANY DOCUMENTS, INCLUDING AN OPINION OF COUNSEL THAT IT, IN ITS SOLE DISCRETION, MAY DEEM NECESSARY OR APPROPRIATE TO EVIDENCE COMPLIANCE WITH SUCH EXEMPTION, OR (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND, IN EACH OF SUCH CASES IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER AGREES TO, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE NOTES FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE, IF THEN APPLICABLE.”

(3)

(4)

(5)

(6)

(7)

it understands that the Regulation S Global Notes will bear a legend to the following effect unless otherwise agreed to by us: “THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES

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SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE TRANSFERRED IN THE UNITED STATES EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ALL APPLICABLE STATE SECURITIES LAWS. TERMS USED ABOVE HAVE THE MEANINGS GIVEN TO THEM IN REGULATIONS UNDER THE SECURITIES ACT.” (8) it acknowledges that prior to any proposed transfer of any Certificated Notes in certificated form or of beneficial interests in the Global Notes (other than pursuant to an effective registration statement), the holder of the Notes or the holder of beneficial interests in the Global Notes, as the case may be, may be required to provide certificates and other documentation relating to the manner of such transfer and submit such certifications and other documentation as provided in the Fiscal Agency Agreement; either (i) no portion of the assets used by such purchaser or transferee to acquire or hold the Note or any beneficial interest therein constitutes assets of any employee benefit plan subject to Title I of the U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”), plan, individual retirement account or other arrangement subject to Section 4975 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) or provisions under any other federal, state, local, non-U.S. or other laws or regulations that are similar to such provisions of ERISA or the Code (collectively, “Similar Laws”) or any entity whose underlying assets are considered to include “plan assets” of any such employee benefit plan, plan, account or arrangement or (ii) the purchase and holding of the Notes or any beneficial interest therein by such purchaser will not constitute a non exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or a similar violation of any applicable Similar Law; and

(9)

(10) it acknowledges that we, the Initial Purchasers, the Fiscal Agent and others will rely upon the truth and accuracy of the foregoing acknowledgments, representations and agreements and agrees that if any of such acknowledgments, representations or warranties deemed to have been made by virtue of its purchase of the Notes are no longer accurate, it shall promptly notify us; and if it is acquiring any Notes as a fiduciary or agent for one or more accounts, it represents that it has sole investment discretion with respect to each such account and that it has full power to make the foregoing acknowledgments, representations and agreements on behalf of each such account.

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CERTAIN ERISA CONSIDERATIONS The following is a summary of certain considerations associated with the purchase of the Notes by employee benefit plans that are subject to Title I of the U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”), plans, individual retirement accounts and other arrangements that are subject to Section 4975 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) or provisions under any other federal, state, local, non-U.S. or other laws or regulations that are similar to such provisions of ERISA or the Code (collectively, “Similar Laws”), and entities whose underlying assets are considered to include “plan assets” of any such plan, account or arrangement (each, a “Plan”). General Fiduciary Matters ERISA and the Code impose certain duties on persons who are fiduciaries of a Plan subject to Title I of ERISA or Section 4975 of the Code (an “ERISA Plan”) and prohibit certain transactions involving the assets of an ERISA Plan and its fiduciaries or other interested parties. Under ERISA and the Code, any person who exercises any discretionary authority or control over the administration of such an ERISA Plan or the management or disposition of the assets of such an ERISA Plan, or who renders investment advice for a fee or other compensation to such an ERISA Plan, is generally considered to be a fiduciary of the ERISA Plan. In considering an investment in the Notes of a portion of the assets of any Plan, a fiduciary should determine whether the investment is in accordance with the documents and instruments governing the Plan and the applicable provisions of ERISA, the Code or any Similar Law relating to a fiduciary’s duties to the Plan including, without limitation, the prudence, diversification, delegation of control and prohibited transaction provisions of ERISA, the Code and any other applicable Similar Laws. Prohibited Transaction Issues Section 406 of ERISA and Section 4975 of the Code prohibit ERISA Plans from engaging in specified transactions involving plan assets with persons or entities who are “parties in interest,” within the meaning of ERISA, or “disqualified persons,” within the meaning of Section 4975 of the Code, unless an exemption is available. A party in interest or disqualified person who engaged in a non-exempt prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Code. In addition, the fiduciary of the ERISA Plan that engaged in such a non-exempt prohibited transaction may be subject to penalties and liabilities under ERISA and the Code. The acquisition and/or holding of Notes by an ERISA Plan with respect to which the Issuer or the Initial Purchasers are considered a party in interest or a disqualified person may constitute or result in a direct or indirect prohibited transaction under Section 406 of ERISA and/or Section 4975 of the Code, unless the investment is acquired and is held in accordance with an applicable statutory, class or individual prohibited transaction exemption. In this regard, the U.S. Department of Labor (the “DOL”) has issued prohibited transaction class exemptions, or “PTCEs,” that may apply to the acquisition and holding of the Notes. These class exemptions include, without limitation, PTCE 84-14 respecting transactions determined by independent qualified professional asset managers, PTCE 90-1 respecting insurance company pooled separate accounts, PTCE 91-38 respecting bank collective investment funds, PTCE 95-60 respecting life insurance company general accounts and PTCE 96-23 respecting transactions determined by in-house asset managers. In addition, Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code provide limited relief from the prohibited transaction provisions of ERISA and Section 4975 of the Code for certain transactions, provided that neither the issuer of the securities nor any of its affiliates (directly or indirectly) have or exercise any discretionary authority or control or render any investment advice with respect to the assets of any ERISA Plan involved in the transaction and provided further that the ERISA Plan pays no more than adequate consideration in connection with the transaction. There can be no assurance that all of the conditions of any such exemptions will be satisfied. Because of the foregoing, the Notes should not be purchased or held by any person investing “plan assets” of any Plan, unless such purchase and holding will not constitute a non-exempt prohibited transaction under ERISA and the Code or similar violation of any applicable Similar Laws.

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Representation Accordingly, by acceptance of a Note or any beneficial interest therein, each purchaser and subsequent transferee of a Note or any beneficial interest therein will be deemed to have represented and warranted that either (i) no portion of the assets used by such purchaser or transferee to acquire or hold the Note or any beneficial interest therein constitutes assets of any Plan or (ii) the purchase and holding of the Notes or any beneficial interest therein by such purchaser or transferee will not constitute a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or a similar violation under any applicable Similar Laws. The foregoing discussion is general in nature and is not intended to be all inclusive. Due to the complexity of these rules and the penalties that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries, or other persons considering purchasing the Notes on behalf of, or with the assets of, any Plan, consult with their counsel regarding the potential applicability of ERISA, Section 4975 of the Code and any Similar Laws to such investment and whether an exemption would be applicable to the purchase and holding of the Notes.

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LEGAL MATTERS Certain legal matters with respect to the issue and sale of the Notes will be passed upon for the Bank by Simpson Thacher & Bartlett LLP as to matters of United States federal and New York law and Yulchon as to matters of Korean law. Certain legal matters relating to the issue and sale of the Notes will be passed upon for the Initial Purchasers by Davis Polk & Wardwell as to matters of United States federal and New York state law and Kim & Change as to matters of Korean law. Yulchon may rely on the opinions of Simpson Thacher & Bartlett LLP with respect to matters of United States federal and New York state law, and Simpson Thacher & Bartlett LLP may rely on the opinion of Yulchon with respect to matters of Korean law. INDEPENDENT ACCOUNTANTS The non-consolidated financial statements of the Bank as of and for the year ended December 31, 2006, 2007 and 2008 included in this offering circular have been audited by KPMG Samjong Accounting Corp., independent accountants, as stated in their report appearing herein, which include explanatory paragraphs regarding the basis of non-consolidated financial statements presentation under Korean GAAP, the procedures and practices utilized in the Republic of Korea to audit non-consolidated financial statements and the translation into United States dollars for the convenience of the reader. With respect to the non-consolidated interim financial statements as of March 31, 2009 and for the three months ended March 31, 2009 and 2008 included in this offering circular, the independent accountants have reported that they applied limited procedures in accordance with professional standards for a review of such information. However, their separate report included herein, states that they did not audit and they do not express an opinion on those non-consolidated interim financial statements. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. Their review report also includes explanatory paragraphs regarding the basis of non-consolidated financial statements presentation under Korean GAAP; the procedures and practices utilized in the Republic of Korea to review non-consolidated financial statements and the translation into United States dollars for the convenience of the reader. KPMG Samjong Accounting Corp. is a member of the Korean Institute of Certified Public Accountants.

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SUMMARY OF CERTAIN DIFFERENCES BETWEEN KOREAN GAAP AND U.S. GAAP The non-consolidated financial statements of the Bank appearing elsewhere in this offering circular are prepared and presented in accordance with Korean GAAP. Certain differences between Korean GAAP and U.S. GAAP, which would impact the Bank’s financial statements included in this offering circular, are summarized below. Such differences involve methods for recognizing and measuring the amounts shown in financial statements, as well as differing financial statement presentation and disclosure requirements. Such summary should not be construed to be exhaustive. Accordingly, no assurance is provided that the following summary of differences between Korean GAAP and U.S. GAAP is complete. Had any such quantification or reconciliation been undertaken, other potential accounting and disclosure differences may have come to our management’s attention that are not identified below. In addition, no attempt has been made to identify disclosure, presentation or classification differences that would affect the manner in which transactions and events are presented in our financial statements or notes thereto. Additionally, no attempt has been made to identify future differences between Korean GAAP and U.S. GAAP as the result of prescribed changes in accounting standards. Regulatory bodies that promulgate Korean GAAP and U.S. GAAP have significant projects ongoing that could affect future comparisons such as this one. Finally, no attempt has been made to identify all future differences between Korean GAAP and U.S. GAAP that may affect our financial statements as a result of transactions or events that may occur in the future. In making an investment decision, investors must rely upon their own examination of the Bank, the terms of this offering circular and the Bank’s financial statements included therein. Potential investors should consult their own professional advisors for an understanding of the differences between Korean GAAP and U.S. GAAP, and how these differences might effect the financial information herein. Financial Statements Presentation Changes in Equity Under Korean GAAP, shareholders’ equity consists of common stock, capital surplus, capital adjustment, accumulated other comprehensive income and retained earnings. Accumulated other comprehensive income consists of unrealized holding gains and losses on available-for-sale securities, foreign currency translation reserve and cash flow hedge reserve, etc. Income tax (current and deferred) is recognized directly in equity if the related gain or loss is recognized directly in equity, in the current or a previous period. Under U.S. GAAP, shareholders’ equity consists of common stock, additional-paid-in capital, retained earnings and accumulated other comprehensive income. Accumulated other comprehensive income consists of unrealized holding gains and losses on available-for-sale securities, foreign currency translation reserve, cash flow hedge reserve and deferred amounts from actuarial gains and losses, prior service cost and transition amounts related to defined benefit postretirement benefit plans. Income tax (current and deferred) is recognized directly in accumulated other comprehensive income if the related gain or loss is recognized as other comprehensive income for the period. However, subsequent changes in deferred tax related to changes in tax rates, tax status, or from the assessment of the recoverability of a deferred tax asset are recognized in profit or loss. Business Combination Under Korean GAAP, when the control over an entity is acquired through a series of transactions, such acquisition is accounted for under the lump-sum method. Under U.S. GAAP, such acquisition is accounted for under the step-acquisition method, and the minority interest in the entity prior to the acquisition of control is accounted retroactively under the equity method. Under Korean GAAP, the value of consideration paid for acquisition of subsidiaries was measured based on the Bank’s stock price on the consummation date of the merger, whereas under U.S. GAAP, the value of consideration was measured based on the Bank’s average closing stock price on the KRX KOSPI Market Division of the Korea Exchange two days before and after the date the merger was agreed to and announced.

180

Under Korean GAAP, goodwill is amortized over its useful life during which future economic benefits are expected to flow to the enterprise, not exceeding twenty years. Under U.S. GAAP, goodwill is not amortized, but rather it is tested for impairment at least annually. Under Korean GAAP, acquisition of the remaining interest in its consolidated subsidiary is accounted for under the book basis with no goodwill recognized, rather, any excess amount paid results in a reduction of capital surplus. Furthermore, consolidation is required when the investor owns more than 30% of the investee’s voting shares and is also the largest shareholder. Under U.S. GAAP, acquisition of the remaining interest in its equity investee is accounted for under the purchase method with the excess cost over the fair value of the net assets acquired recognized as goodwill. Generally, under U.S. GAAP, consolidation is required when the investor owns more than 50% of the investee’s voting shares, unless control does not rest with the majority owner. Consolidation of Variable Interest Entities Under Korean GAAP, there are no comprehensive standards or criteria for the consolidation of variable interest entities including special purpose companies. Special purpose companies established under the Korea Asset Securitization Act for the purpose of holding certain financial assets and which are limited to passive activities are normally not consolidated if they do not otherwise meet the consolidation criteria under Korean GAAP. Financial statements of the trust accounts of a bank, on which the bank guarantees a fixed rate of return and/or the repayment of principal, are accounted for as a controlled subsidiary. Under U.S. GAAP, FASB Interpretation No. 46(R) Consolidation of Variable Interest Entities an interpretation of ARB No. 51 clarifies application of the majority voting interest requirement in ARB 51 to certain types of entities in which identification of the party with a controlling financial interest may be achieved through arrangements that do not involve voting interests. Variable interest entities, as defined, including non-qualifying special purpose companies, are subject to consolidation pursuant to FIN 46(R) if the equity investors as a group lack the characteristics of a controlling financial interest in the entity or do not have sufficient equity at risk to finance its activities without additional subordinated financial support. The principle behind the Interpretation is that if an investor absorbs a majority of expected losses and/or receives a majority of expected residual returns in another entity, that investor should consolidate the entity. Financial statements of the trust accounts of a bank, on which the bank guarantees a fixed rate of return and the repayment of principal, are consolidated. Intangible Asset Under Korean GAAP, an intangible asset, except for goodwill from business combination, shall be recognized only if (1) it is probable that future economic benefits that are attributable to the asset will flow into the entity, (2) the cost of the asset can be measured reliably, and (3) it is an identifiable resource controlled by the entity. The depreciable amount of an intangible asset shall be allocated on a systematic basis over the best estimate of its useful life. The useful life of an intangible asset shall not exceed 20 years from the date when the asset is available for use, except in the case where, by contract or related laws, an entity has monopolistic and exclusive rights to control an intangible asset. Amortization shall commence when the asset is available for use. Under Korean GAAP, if the recoverable amount of an intangible asset becomes less than its carrying amount as a result of obsolescence or sharp decline in market value of the asset or because of some other causes of impairment, the carrying amount of the asset shall be reduced to its recoverable amount and the reduced amount shall be recognized as impairment loss. Recoveries after impairment loss recognition are permitted. If an intangible asset is not in use and held for disposal, the intangible asset shall be carried at its carrying amount as of the date when its use is suspended and tested for impairment at the end of each fiscal year to recognize possible impairment loss. Under U.S. GAAP, intangible assets except for goodwill are classified as two types: finite-lived intangible assets and indefinite-lived intangible assets. If an identifiable intangible asset has an indefinite useful economic life that is supported by clearly identifiable cash flows, then it is not subject to regular periodic amortization. Instead, the carrying amount of such intangible is to be tested for impairment at least annually. An impairment loss would be recognized if the carrying amount exceeds the fair value. Finitelived intangible assets are amortized over their estimated economic useful lives and are reviewed for

181

impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoveries after impairment loss recognition are not permitted for all intangible assets. Allowance for Loan Losses Under U.S. GAAP, the allowance for loan losses for specifically identified impaired loans is based on (i) the present value of expected future cash flows discounted at the loan’s effective interest rate or as a practical expedient, (ii) the loans observable market price or (iii) the fair value of the collateral if the loan is collateral dependent. For homogeneous pools of corporate and consumer loans, allowances are based on historical losses using a risk rating migration model adjusted for qualitative factors, while a delinquency roll-rate model adjusted for qualitative factors is used for homogeneous pools of credit cards. Under Korean GAAP, the allowance for loan losses is recorded at the higher of (i) the amount determined using the expected loss method, which estimates the potential exposure at default (“EAD”), based on the probability of default (“PD”), and loss given default (“LGD”), and (ii) the amount determined using the guidelines promulgated by the Financial Services Commission, which estimates the allowance by multiplying a certain percentage as determined by the Financial Services Commission to loan balances in each classification. The following percentages represent guidelines required by the Financial Services Commission as of December 31, 2008: Corporate Loans Normal(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Precautionary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Doubtful . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Estimated Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.85% or more 7.00% or more 20.00% or more 50.00% or more 100.00% Retail Loans 1.00% or more 10.00% or more 20.00% or more 55.00% or more 100.00%

Note: (1) In the case of normal credits comprising loans to borrowers in the construction, wholesale and retail, accommodation and restaurant or real estate and housing industries (as classified under the Korean Industry Classification Standard), the applicable figure is 0.90% or more.

Loan Fees and Origination Costs Under U.S. GAAP, loan origination fees net of direct loan origination costs are deferred and recognized over the life of the loan as adjustment to yield (interest income) using the effective interest rate method. Direct loan origination costs include incremental direct costs of loan origination incurred in transactions with independent third parties for that loan and certain costs directly related to specified activities performed by the lender for that loan. Those activities are evaluating the prospective borrower’s financial condition, evaluating and recording guarantees and collateral and negotiating loan terms, among others. Under Korean GAAP, loan origination costs related to wages and salaries are generally recognized as expense when paid, further, other loan origination costs may be recognized as expense as incurred based on materiality. Accounting for Transfers of Financial Assets Under Korean GAAP, the Bank records a transfer of financial assets as a sale when it surrenders control over those financial assets to the extent that consideration other than beneficial interests in the transferred

182

asset is received in exchange. Otherwise, the transfer is accounted for as a collateralized borrowing transaction. The Bank considers control surrendered when all conditions prescribed by the relevant Korean accounting standards are met. Those conditions focus on whether the transferred financial assets are isolated beyond the reach of the Bank and the Bank’s creditors, the constraints, if any, imposed on the transferee or beneficial interest holders, and the Bank’s rights and obligations to reacquire transferred financial assets. However, transactions conducted in accordance with the Korean Asset Securitization Act are recorded as sales which in principal focus mainly on the legal isolation criteria. Gains or losses on sales are determined as the difference between the carrying amount of the assets sold and the net proceeds received. Under U.S. GAAP, transfer of financial assets (on all or a portion of a financial asset) in which the transferor surrenders control over financial assets is accounted for as a sale to the extent that consideration other than beneficial interests in the transferred assets is received in exchange. The transferor has surrendered control, if and only if, all of the following conditions are met: Š transferred assets have been isolated from the transferor presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership; each transferee (or, if the transferee is a qualifying special-purpose entity, each holder of its beneficial interests) has the right to pledge or exchange the assets (or beneficial interests) it received, and no condition both constrains the transferee (or holder) from taking advantage of its right to pledge or exchange and provides more than a trivial benefit to the transferor; and the transferor does not maintain effective control over the transferred assets through either (i) an agreement that both entitles and obligates the transferor to repurchase or redeem them before their maturity; or (ii) the ability to unilaterally cause the holder to return specific assets, other than through a cleanup call.

Š

Š

Impairment of Investment Securities Under U.S. GAAP, declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other-than-temporary are recorded in earnings. Various quantitative and qualitative factors are assessed to determine whether impairment is other-than-temporary such as the duration and extent of the decline, the current operating and future expected performance, market values of comparable companies, changes in industry and market prospects, and the intent and ability of the holder to hold the security for a sufficient period of time for subsequent expected recovery in market value. Under Korean GAAP, declines in the fair value that are deemed to be permanent are recorded in earnings. The determination of whether a decline in the fair value of a security is permanent is generally based on whether investees are in bankruptcy or liquidation. Under Korean GAAP, the reversal of impairment loss for all investment securities, when it is objectively related to an event occurring after the recognition of impairment loss, is recognized as current income. However, the new carrying amount after the reversal of impairment loss cannot exceed the carrying value of the investment security that would have been measured at the date of reversal had no impairment loss been recognized. Under U.S. GAAP, other-than-temporary impairment losses with respect to investment securities cannot be reversed. Foreign Currency Translation in Available-for-Sale Securities Under U.S. GAAP, effects of changes in foreign exchange rates of foreign available-for-sale securities are reflected as a component of other comprehensive income. Under Korean GAAP, effects of such changes in foreign exchange rates are reflected in earnings. Hedge Accounting Treatment for Derivatives Under U.S. GAAP, for a derivative to qualify for hedge accounting, it must be highly effective at reducing the risk associated with the exposure being hedged. The hedging relationship must be designated and

183

formally documented at inception along with the particular risk management objective and strategy for the hedge, identification of the derivative used as the hedging instrument, the hedged item and the risk exposure being hedged, and the method of assessing hedge effectiveness. As the criteria for documenting the designation of hedging relationships and hedge effectiveness are more rigorous under U.S. GAAP, the derivatives accounted for as hedges under Korean GAAP may not qualify for hedge accounting under U.S. GAAP. Share-based Compensation Under Korean GAAP, for cash-settled, share-based payments granted prior to December 31, 2006, the liability is remeasured under the intrinsic value method at each subsequent reporting date, with any changes in fair value recognized in profit or loss for the period. But for cash-settled, share-based payments granted after December 31, 2006, the liability is remeasured using option-pricing models at each subsequent reporting date. For equity-settled, share-based payments, the cost of employee services received in exchange for an award of equity instruments is measured based on the grant-date fair value of the award and that cost is recognized over the period during which an employee is required to provide service in exchange for the award. Under U.S. GAAP, for all awards granted, modified or repurchased as of the first annual reporting period after June 15, 2005 for public entities, the cost of employee services received in exchange for an award of equity instruments is measured based on the grant-date fair value of the award (with limited exceptions) estimated using option-pricing models adjusted for the unique characteristics of those instruments in accordance with SFAS 123(R). If an amount is classified as liability, the fair value of such award is remeasured subsequently at each reporting date through the settlement date with the changes in fair value during the requisite service period recognized as compensation cost over that period. Accounting for Income Taxes Under Korean GAAP, a deferred tax asset is recognized only when its realization is probable based on almost certain future taxable income. An appropriate write-down of a previously recognized deferred tax asset is deducted directly from the deferred tax asset with a corresponding increase to income tax expense. Under U.S. GAAP, deferred tax assets are not directly written down, but rather reduced by a valuation allowance if, in the opinion of management, it is more likely than not that some portion or all of the deferred tax asset will not be realized. The valuation allowance is established through a charge to income tax expense. In June 2006, the FASB issued FIN No. 48, Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109. This Interpretation clarifies accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. This Interpretation prescribes a recognition threshold and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. This Interpretation is effective for fiscal years beginning after December 15, 2006. Under Korean GAAP, additional tax assessments or tax refunds are recorded as expenses when tax assessment or tax refund actually occurs except when contingent liabilities are recorded for tax contingencies. Under FIN No. 48, tax positions are required to be evaluated and tax benefits can be recognized only when the technical merits of uncertain tax positions meet the more-likely-than-not recognition threshold and to be measured as the largest amount of tax benefit that is more than 50% likely of being recognized.

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INDEX TO FINANCIAL STATEMENTS Audited Non-consolidated Financial Statements Independent Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-Consolidated Balance Sheets as of December 31, 2006, 2007 and 2008 . . . . . . . . . . . . . . . . . . . . Non-Consolidated Statements of Income for the years ended December 31, 2006, 2007 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-Consolidated Statements of Appropriation of Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . Non-Consolidated Statements of Changes in Equity for the years ended December 31, 2007 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2007 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes to Non-Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unaudited Non-consolidated Interim Financial Statements Independent Accountants’ Review Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-Consolidated Statements of Financial Position as of March 31, 2009 and December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-Consolidated Statements of Income for the three-month periods ended March 31, 2009 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-Consolidated Statements of Changes in Equity for the three-month periods ended March 31, 2009 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2009 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes to Non-Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-92 F-2 F-3

F-4 F-6

F-7

F-9 F-12

F-93

F-94

F-96

F-98 F-101

F-1

INDEPENDENT AUDITORS’ REPORT The Board of Directors and Stockholders Shinhan Bank: We have audited the accompanying non-consolidated balance sheets of Shinhan Bank (the “Bank”) as of December 31, 2008, 2007 and 2006 and the related non-consolidated statements of income, appropriation of retained earnings and cash flows for the years then ended and the non-consolidated statements of changes in equity for the years ended December 31, 2008 and 2007. These non-consolidated financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these non-consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards accepted in the Republic of Korea. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the non-consolidated financial statements referred to above present fairly, in all material respects, the financial position of Shinhan Bank as of December 31, 2008, 2007 and 2006, the results of its operations, the appropriation of retained earnings and its cash flows for the years then ended and the changes in equity for the years ended December 31, 2008 and 2007 in conformity with accounting principles generally accepted in the Republic of Korea. The accompanying non-consolidated financial statements as of and for the year ended December 31, 2008 have been translated into United States dollars solely for the convenience of the reader. We have audited the translation and, in our opinion, the non-consolidated financial statements expressed in Korean Won have been translated into dollars on the basis set forth in note 2(b) to the non-consolidated financial statements. Without qualifying our opinion, we draw attention to the following: As discussed in note 2(a) to the accompanying non-consolidated financial statements, accounting principles and auditing standards and their application in practice vary among countries. The accompanying non-consolidated financial statements are not intended to present the financial position, results of operations, changes in equity and cash flows in accordance with accounting principles and practices generally accepted in countries other than the Republic of Korea. In addition, the procedures and practices utilized in the Republic of Korea to audit such non-consolidated financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying non-consolidated financial statements are for use by those knowledgeable about Korean accounting principles and auditing standards and their application in practice. KPMG Samjong Accounting Corp. Seoul, Korea February 12, 2009 This report is effective as of February 12, 2009, 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 non-consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

F-2

SHINHAN BANK Non-Consolidated Balance Sheets December 31, 2006, 2007 and 2008 (in millions of Won and thousands of U.S. dollars, except share data) 2006 2007 Won Assets Cash and due from banks (notes 3, 15 and 17) . . . . . . . . . . . . . . . . . . . . . . . . . . Securities (notes 4, 15 and 16) . . . . . . . Loans, net (notes 5 and 15) . . . . . . . . . . Property and equipment, net (notes 6, 16 and 17) . . . . . . . . . . . . . . . . . . . . . . . Other assets, net (notes 7, 8 and 15) . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . Liabilities and Stockholder’s Equity Liabilities: Deposits (notes 9 and 15) . . . . . . . . . Borrowings (notes 10 and 15) . . . . . Debentures, net (notes 11 and 15) . . . . . . . . . . . . . . . . . . . . . . . . Retirement and severance benefits, net (note 12) . . . . . . . . . . . . . . . . . . . Other liabilities (notes 13 and 15) . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . Stockholders’ equity: Common stock of W5,000 par value Authorized — 2,000,000,000 shares Issued and outstanding: 1,585,615,506 shares in 2008 1,505,615,506 shares in 2006 and 2007 . . . . . . . . . . . . . . . . . . Capital surplus . . . . . . . . . . . . . . . . . . . Capital adjustments (note 19) . . . . . Accumulated other comprehensive income (note 33) . . . . . . . . . . . . . . . Retained earnings (note 20) . . . . . . . Total stockholders’ equity . . . . . . Commitments and contingencies (note 28) Total liabilities and stockholder’s equity . . . . . . . . . 2008 2008 U.S. dollars (note 2(b))

W

9,012,559 23,660,184 112,715,269 2,198,966 6,609,817

W

6,312,608 32,329,377 125,405,349 2,312,927 8,745,627

W

8,578,930 US$ 6,822,211 36,592,260 29,099,213 145,341,827 115,579,982 2,292,379 20,763,702 1,822,965 16,511,890 US$169,836,261

W154,196,795

W175,105,888

W213,569,098

W 93,006,183 14,578,285 24,212,505 108,503 12,623,951 W144,529,427

W103,817,875 17,226,283 28,170,915 101,695 14,469,688 W163,786,456

W119,237,971 US$ 94,821,448 20,410,420 16,230,950 32,418,157 132,674 29,421,994 W201,621,216 25,779,847 105,506 23,397,212 US$160,334,963

W

7,528,078 W — (71,304) 1,648,160 562,434 9,667,368

7,528,078 W — (41,320) 1,588,837 2,243,837 11,319,432

7,928,078 US$ 398,080 (52,756) 369,842 3,304,638 11,947,882

6,304,634 316,565 (41,953) 294,109 2,627,943 9,501,298

W154,196,795

W175,105,888

W213,569,098

US$169,836,261

See accompanying notes to non-consolidated financial statements.

F-3

SHINHAN BANK Non-Consolidated Statements of Income For the years ended December 31, 2006, 2007 and 2008 (in millions of Won and thousands of U.S. dollars) 2006 2007 Won Interest and dividend income: Interest on due from bank . . . . . . . . . . . . . . . . Interest and dividends on securities . . . . . . . Interest on loans . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total interest and dividend income . . . . . Interest expense: Interest on deposits . . . . . . . . . . . . . . . . . . . . . . Interest on borrowings . . . . . . . . . . . . . . . . . . . Interest on debentures . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total interest expense . . . . . . . . . . . . . . . . . Net interest income . . . . . . . . . . . . . . . . . . . . . . . . Provision for loan losses . . . . . . . . . . . . . . . . . . . Net interest income after provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Noninterest income: Fee and commission income . . . . . . . . . . . . . Unrealized gain on trading securities . . . . . Gain on sale of trading securities . . . . . . . . . Gain on sale of available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reversal of impairment loss on available-for-sale securities . . . . . . . . . . . . Equity in income of equity method accounted investees . . . . . . . . . . . . . . . . . . . Gain on disposition of equity method accounted investees . . . . . . . . . . . . . . . . . . . Gain on sale of loans . . . . . . . . . . . . . . . . . . . . Fee and commission income from trust management . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on foreign currency transactions . . . . . Gain on derivatives . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total noninterest income . . . . . . . . . . . . . . 2008 2008 U.S. dollars (note 2(b))

W

39,596 883,596 5,824,941 62,732

W 46,816 1,390,017 7,989,361 64,692 W9,490,886 3,449,654 722,327 1,473,814 102,988 W5,748,783 3,742,103 459,621

W

118,817 US$ 94,487 1,929,510 1,534,402 9,555,824 7,599,065 67,859 53,963 US$ 9,281,917 3,653,707 624,146 1,449,244 100,305 US$ 5,827,402 3,454,515 738,648

W6,810,865 2,237,583 498,888 973,832 54,486 W3,764,789 3,046,076 426,306

W11,672,010 4,594,537 784,863 1,822,424 126,133 W 7,327,957 4,344,053 928,850

2,619,770 719,440 531 34,221 430,881 308,365 59,135 — 36,504 74,847 1,660,077 3,615,104 126,157 W7,065,262

3,282,482 1,018,000 — 30,670 1,043,252 138,324 96,755 — 37,907 83,296 1,349,739 4,578,894 87,444 W8,464,281

3,415,203 990,067 8,761 26,339 123,337 52,935 64,268 97,220 24,629 75,205 6,126,839 30,011,963 468,960 W38,070,523

2,715,867 787,330 6,967 20,946 98,081 42,095 51,108 77,312 19,586 59,805 4,872,238 23,866,372 372,930 US$30,274,770

See accompanying notes to non-consolidated financial statements.

F-4

SHINHAN BANK Non-Consolidated Statements of Income, Continued For the years ended December 31, 2006, 2007 and 2008 (in millions of Won and thousands of U.S. dollars, except earnings per share) 2006 2007 Won Noninterest expense: Fee and commission expense . . . . . . . . . . General and administrative expense (notes 22 and 32) . . . . . . . . . . . . . . . . . . . Unrealized loss on trading securities . . . . Loss on sale of trading securities . . . . . . . Loss on sale of available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment loss on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity in loss of equity method accounted investees . . . . . . . . . . . . . . . . . Loss on disposition of equity method accounted investees . . . . . . . . . . . . . . . . . Loss on sale of loans . . . . . . . . . . . . . . . . . . Contribution to Credit Guarantee Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on foreign currency transactions . . Loss on derivatives . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total noninterest expense . . . . . . . . . Net noninterest expense . . . . . . . . . . . . . . . . . . . . Income before income taxes . . . . . . . . . . . . . . . . Income taxes (note 23) . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings per share in Won and U.S. dollars (note 24) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2008 2008 U.S. dollars (note 2(b))

W 146,358 2,028,331 — 25,031 42,066 101,876 891 — — 130,692 1,552,983 3,447,455 253,377 7,729,060 (663,798) 1,955,972 524,825 W1,431,147

W 129,461 2,353,360 7,895 25,685 7,806 15,866 2,590 136,180 — 184,442 1,187,047 4,456,880 384,640 8,891,852 (427,571) 2,854,911 803,609 W2,051,302

W

214,086 2,116,607 — 35,289 6,085 167,180 8,409 964 20,153

US$

170,247 1,683,186 — 28,063 4,839 132,946 6,687 767 16,026

219,324 5,644,796 30,398,372 751,325 39,582,590 (1,512,067) 1,903,136 456,409 W 1,446,727

174,413 4,488,903 24,173,656 597,476 31,477,209 (1,202,439) 1,513,428 362,950 US$ 1,150,479

W

1,091

W

1,362

W

960

US$

0.76

See accompanying notes to non-consolidated financial statements.

F-5

SHINHAN BANK Non-Consolidated Statements of Appropriation of Retained Earnings For the years ended December 31, 2006, 2007 and 2008 Date of Disposition for 2006: March 19, 2007 Date of Appropriation for 2007: March 18, 2008 Date of Appropriation for 2008: March 17, 2009 (in millions of Won and thousands of U.S. dollars) 2006 2007 Won Unappropriated retained earnings: Balance at beginning of year . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2008 2008 U.S. dollars (note 2(b))

W (901,243) W — 1,431,147 2,051,302 529,904 2,051,302 1,126 986 W2,053,414

W — 1,446,727 1,446,727 8,695 1,433,727 W2,889,149

US$

— 1,150,479 1,150,479 6,915 1,140,140

Transfer from voluntary reserve: Other reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Voluntary reserve . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appropriation of retained earnings: Legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discount on stock issuance . . . . . . . . . . . . . . . . . Loss from disposition of treasury stock . . . . . . Appropriation of other capital adjustment . . . Voluntary reserve . . . . . . . . . . . . . . . . . . . . . . . . . Other reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends (note 25) . . . . . . . . . . . . . . . . . . . . . . . .

2,796 — W 532,700

US$2,297,534

143,300 11,987 59,317 — 986 15,987 301,123 532,700

205,131 — — — 1,433,727 8,040 406,516 2,053,414

144,673 — — 52,756 2,668,724 11,897 11,099 2,889,149

115,048 — — 41,953 2,122,246 9,461 8,826 2,297,534

Unappropriated retained earnings to be carried over to subsequent year . . . . . . . . . . . . . . . . . . . .

W

W

W

US$

See accompanying notes to non-consolidated financial statements.

F-6

SHINHAN BANK Non-Consolidated Statements of Changes in Equity For the years ended December 31, 2007 and 2008 (in millions of Won and thousands of U.S. dollars) Accumulated other comprehensive income

Capital Capital stock surplus Balance at January 1, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appropriation of discount on stock issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appropriation of loss on disposition of treasury stock . . . . . . . . . . . . . . . . . . . . . Acquisition of minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustment in foreign currency rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized gain on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized gain on equity method accounted investments . . . . . . . . . . . . . . . . . . Unrealized loss on equity method accounted investments . . . . . . . . . . . . . . . . . . Balance at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W7,528,078 — — — — — — — — — W7,528,078 W— — — — — — — — — — W—

Capital adjustments W(82,491) — — 11,987 59,317 (30,133) — — — — W(41,320)

Retained earnings

Total

W1,659,347 W 562,434 W 9,667,368 — (301,123) (301,123) — 2,051,302 2,051,302 — (11,987) — — (59,317) — — — (30,133) — 2,528 2,528 (78,422) — (78,422) 8,387 — 8,387 (475) — (475) W1,588,837 W2,243,837 W11,319,432

F-7

See accompanying notes to non-consolidated financial statements.

SHINHAN BANK Non-Consolidated Statements of Changes in Equity, Continued For the years ended December 31, 2007 and 2008 (in millions of Won and thousands of U.S. dollars) Accumulated other comprehensive income

Capital stock Balance at January 1, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition of minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustment in foreign currency rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized gain on available-for-sale securities . . . . . . . . . . . . . . . . . Unrealized gain on equity method accounted investments . . . . . . . . Unrealized loss on equity method accounted investments . . . . . . . . Balance at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at January 1, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition of minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustment in foreign currency rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized gain on available-for-sale securities . . . . . . . . . . . . . . . . . Unrealized gain on equity method accounted investments . . . . . . . . Unrealized loss on equity method accounted investments . . . . . . . . Balance at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W 7,528,078 — — 400,000 — — — — — W 7,928,078 W

Capital surplus — — — 398,080 — — — — —

Capital adjustments

Retained earnings

Total

W (41,320) W 1,588,837 W 2,243,837 W 11,319,432 — — (406,516) (406,516) — — 1,446,727 1,446,727 — — — 798,080 (11,436) — — (11,436) — — 20,590 20,590 — (1,378,144) — (1,378,144) — 143,807 — 143,807 — 15,342 — 15,342 W (52,756) W 369,842 W 3,304,638 W 11,947,882

F-8

W 398,080

US$5,986,543 US$ — — — — 318,091 316,565 — — — — — — — — — — US$6,304,634 US$316,565

US$(32,859) US$ 1,263,489 US$1,784,363 US$ 9,001,536 — — (323,273) (323,273) — — 1,150,479 1,150,479 — — — 634,656 (9,094) — — (9,094) — — 16,374 16,374 — (1,095,940) — (1,095,940) — 114,359 — 114,359 — 12,200 — 12,200 US$(41,953) US$ 294,108 US$2,627,943 US$ 9,501,297

See accompanying notes to non-consolidated financial statements

SHINHAN BANK Non-Consolidated Statements of Cash Flows For the years ended December 31, 2006, 2007 and 2008 (in millions of Won and thousands of U.S. dollars) 2006 2007 Won 2008 2008 U.S. dollars (note 2(b))

Cash flows from operating activities: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W 1,431,147 W 2,051,302 W 1,446,727 US$ 1,150,479 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization . . . . . . . . . . . . 166,087 250,374 236,080 187,738 Provision for loan losses . . . . . . . . . . . . . . . . . . 426,306 459,621 928,850 738,648 Provision for retirement and severance benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,462 94,678 88,387 70,288 Interest income due to amortization of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,202) (36,187) (1,798) (1,430) (Reverse of) Share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,847 47,993 (64,557) (51,338) Unrealized loss (gain) on trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (531) 7,895 (8,761) (6,967) Impairment loss on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,876 15,866 167,180 132,946 Reversal of impairment loss on available-for-sale Securities . . . . . . . . . . . . (308,365) (138,324) (52,935) (42,095) Equity in net income of equity method accounted investees . . . . . . . . . . . . . . . . . . . . (58,244) (94,165) (55,859) (44,421) Loss (gain) on disposition of equity method accounted investees . . . . . . . . . . . . . . . . . . . . — 136,180 (96,256) (76,546) Loss (gain) on valuation of derivatives, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,114 (92,177) 232,354 184,775 Gain on foreign currency transactions, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (107,093) (162,692) (267,564) (212,775) Deferred income tax expense (revenue) . . . . 51,671 56,807 (39,993) (31,804) Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,138 244,685 (11,007) (8,753) Changes in assets and liabilities: Decrease (increase) in trading securities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease (increase) in available-for-sale securities, net . . . . . . . . . . . . . . . . . . . . . . . . . Increase in held-to-maturity securities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase in loans, net . . . . . . . . . . . . . . . . . . . . . Decrease in derivative assets . . . . . . . . . . . . . . Decrease in derivative liabilities . . . . . . . . . . Decrease in other assets . . . . . . . . . . . . . . . . . . Increase in other liabilities . . . . . . . . . . . . . . . . Dividend received from equity method accounted investments . . . . . . . . . . . . . . . . . Decrease in retirement and severance benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease in deposit for severance benefit insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

426,147 4,601,221 (4,164,038) (15,413,063) 690,867 (619,219) (384,272) 1,582,898 18,272 (11,752) (57,482)

(4,516,599) (4,043,835) (365,324) (12,086,713) 888,217 (822,691) (1,856,946) 1,193,299 18,268 (36,778) (40,072)

3,260,801 (8,247,015) (178,625) (17,793,033) 2,268,601 (2,536,144) 988,157 1,677,109 54,936 (45,420) (12,193)

2,593,082 (6,558,262) (142,048) (14,149,529) 1,804,056 (2,016,814) 785,811 1,333,684 43,687 (36,119) (9,696)

Net cash used in operating activities . . . . . W(11,378,208) W(18,827,318) W(18,061,979) US$(14,363,403)

See accompanying notes to non-consolidated financial statements.

F-9

SHINHAN BANK Non-Consolidated Statements of Cash Flows, Continued For the years ended December 31, 2006, 2007 and 2008 (in millions of Won and thousands of U.S. dollars) 2006 2007 Won Cash flows from investing activities: Cash provided by investing activities: Disposal of equity method accounted investees . . . . . . . . . . . . . . . . . . . . . . . . . . . W Proceeds from disposal of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from disposal of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Security deposits received . . . . . . . . . . . . . Disposal of gold bullion, net . . . . . . . . . . . 2008 2008 U.S. dollars (note 2(b))

1,380 W 79,741 — 194,809 402 276,332

415,544 W 9,551 69 58,664 — 483,828

163,996 US$ 91,723 58 86,035 — 341,812

130,414 72,941 46 68,417 — 271,818

Cash used in investing activities: Acquisition of equity method accounted investees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchases of property and equipment . . . . . . Purchases of intangible assets . . . . . . . . . . . . Security deposits paid . . . . . . . . . . . . . . . . . . . . Purchase of gold bullion, net . . . . . . . . . . . . .

(42,900) (483,463) (1,066) (189,092) — (716,521)

(152,510) (379,868) (2,808) (197,122) (14,485) (746,793) (262,965)

(426,552) (305,512) (24,629) (118,028) (32,538) (907,259) (565,447)

(339,206) (242,952) (19,586) (93,859) (25,875) (721,478) (449,660)

Net cash used in investing activities . . . . Cash flows from financing activities: Cash provided by financing activities: Increase in deposits, net . . . . . . . . . . . . . . . Proceeds from borrowings . . . . . . . . . . . . . Proceeds from issuance of debentures . . . Proceeds from borrowings from trust accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from deposits for letters of guarantees and others, net . . . . . . . . . . . . Proceeds from deposits held for subscription of securities, net . . . . . . . . Proceeds from issuance of common stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from transfer of business . . . . . . Increase in foreign exchange remittances pending, net . . . . . . . . . . . . . . . . . . . . . . . .

(440,189)

8,198,567 25,897,957 9,609,530 375,684 — — — — 43,403

10,496,509 24,788,011 12,563,065 78,547 10,367 36,733 — — —

17,648,076 28,966,171 14,407,058 2,139,100 — — 798,080 3,071 —

14,034,255 23,034,728 11,456,905 1,701,074 — — 634,656 2,443 —

W44,125,141 W47,973,232 W63,961,556 US$50,864,061

See accompanying notes to non-consolidated financial statements.

F-10

SHINHAN BANK Non-Consolidated Statements of Cash Flows, Continued For the years ended December 31, 2006, 2007 and 2008 (in millions of Won and thousands of U.S. dollars) 2006 2007 Won 2008 2008 U.S. dollars (note 2(b))

Cash used in financing activities: Decrease in deposits . . . . . . . . . . . . . . . . . . W — W — W (2,044,013) US$ (1,625,458) Repayment of borrowings . . . . . . . . . . . . . (26,055,613) (22,815,985) (28,544,343) (22,699,279) Repayment of debentures . . . . . . . . . . . . . (4,980,807) (8,356,926) (11,819,963) (9,399,573) Payment of debenture issuance costs . . . (72,144) (74,205) (83,558) (66,448) Settlement of foreign exchange remittances, net . . . . . . . . . . . . . . . . . . . . — (34,661) (10,084) (8,019) Refund of deposits for letters of guarantees and others, net . . . . . . . . . . . (5,900) — (8,689) (6,910) Refund of deposits held for subscription of securities, net . . . . . . . . . . . . . . . . . . . (20,502) — (16,594) (13,196) Dividends paid . . . . . . . . . . . . . . . . . . . . . . . — (301,123) (406,516) (323,273) Acquisition of minority interests . . . . . . . — — (18,290) (14,544) (31,134,966) Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) in cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) in cash and due from banks due to merger or conversion of branch to a subsidiary . . . . . . . . . . . . . . . . . Cash and due from banks at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (31,582,900) (42,952,050) (34,156,700)

12,990,175

16,390,332

21,009,506

16,707,361

1,171,778

(2,699,951)

2,382,080

1,894,298

4,314,127 3,526,654

— 9,012,559

(115,758) 6,312,608

(92,054) 5,019,967

Cash and due from banks at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W 9,012,559 W 6,312,608 W 8,578,930 US$ 6,822,211

See accompanying notes to non-consolidated financial statements.

F-11

SHINHAN BANK Notes to Non-Consolidated Financial Statements December 31, 2006, 2007 and 2008 (1) General Description

Shinhan Bank (the “Bank”) was established through the merger of Hansung Bank, which was established on February 19, 1897, and Dongil Bank, which was established on August 8, 1906, to engage in commercial banking and trust operations. The Bank is headquartered in 120, Taepyeongro 2-ga, Jung-gu, Seoul, Korea. The Bank acquired Chungbuk Bank and Kangwon Bank in 1999, and acquired the former Shinhan Bank on April 3, 2006, and then changed the name of the Bank to Shinhan Bank. As of December 31, 2008, the Bank had 1,585,615,506 outstanding shares with par value of W7,928,078 million and Shinhan Financial Group Co., Ltd. owns 100% of them. As of December 31, 2008, the Bank operates through 924 domestic branches, 102 depositary offices, and 10 overseas branches (2) (a) Summary of Significant Accounting Policies and Basis of Presenting Financial Statements Basis of Presenting Financial Statements

The Bank maintains its accounting records in Korean Won and prepares statutory non-consolidated financial statements in the Korean language in conformity with accounting principles generally accepted in the Republic of Korea. Certain accounting principles applied by the Bank that conform with financial accounting standards and accounting principles in the Republic of Korea may not conform with generally accepted accounting principles in other countries. Accordingly, these non-consolidated financial statements are intended solely for use by only those who are informed in Korean accounting principles and practices. The English language non-consolidated financial statements have been condensed and restructured from the Korean language non-consolidated financial statements field with the Financial Services Commission. Certain information included in the Korean language non-consolidated financial statements, but not required for a fair presentation of the Bank’s financial position, results of operations, cash flows or changes in stockholder’s equity, is not presented in the English language non-consolidated financial statements. The accompanying non-consolidated financial statements include only the accounts of the Bank, and do not include the accounts of any of its subsidiaries. (b) Basis of Translating Financial Statements

The non-consolidated financial statements are expressed in Korean Won and, solely for the convenience of the reader, have been translated into U.S. dollars at the rate of W1,257.50 to US$1, the basic exchange rate on December 31, 2008. These translations should not be construed as a representation that any or all of the amounts shown could be converted into U.S. dollars at this or any other rate. (c) Application of the Statements of Korean Financial Accounting Standards

Effective January 1, 2008, the Bank adopted Statements of Korean Accounting Standards (“SKAS”) No.15 Investments in Associates, SKAS Interpretation 53-70 Accounting for Derivative Instruments, and Korea Accounting Institute Opinion 06-2 (Deferred Income Taxes on Investments in Subsidiaries, Associates and Interests in Joint Ventures). Except for the adoption of the aforementioned accounting standards, the accounting policies were consistently applied for the non-consolidated financial statements as of and for the years ended December 31, 2006, 2007 and 2008. Certain accounts of the prior year were reclassified to conform to the current year’s presentation for comparative purposes. (d) Investments in Securities (excluding in associates, subsidiaries or interests in joint ventures) Classification Upon acquisition, the Bank classifies debt and equity securities (excluding investments in subsidiaries, associates and joint ventures) into the following categories: held-to-maturity, available-for-sale or trading securities. This classification is reassessed at each balance sheet date.

F-12

Investments in debt securities where the Bank has the positive intent and ability to hold to maturity are classified as held-to-maturity. Securities that are acquired principally for the purpose of selling in the short term are classified as trading securities. Investments not classified as either held-to-maturity or trading securities are classified as available-for-sale securities. Initial recognition Investments in securities (excluding investments in subsidiaries, associates and joint ventures) are initially recognized at cost. Subsequent measurement and income recognition Trading securities are subsequently carried at fair value. Gains and losses arising from changes in the fair value of trading securities are included in the non-consolidated income statement in the period in which they arise. Available-for-sale securities are subsequently carried at fair value. Gains and losses arising from changes in the fair value of available-for-sale securities are recognized as accumulated other comprehensive income, net of tax, directly in equity. Investments in available-for-sale securities that do not have readily determinable fair values are recognized at cost less impairment, if any. Held-to-maturity investments are carried at amortized cost with interest income and expense recognized in the non-consolidated income statement using the effective interest method. Fair value information The fair value of marketable securities is determined using quoted market prices as of the period end. Non-marketable debt securities are fair valued by discounting cash flows using the prevailing market rates for debt with a similar credit risk and remaining maturity. Credit risk is determined using the issuer’s credit rating as announced by accredited credit rating agencies in Korea. Non-marketable beneficiary certificates are recorded at the fair value using the standard trading yield rate determined by fund management companies. Impairment The Bank reviews investments in securities whenever events or changes in circumstances indicate that the carrying amount of the investments may not be recoverable. Impairment losses are recognized when the reasonably estimated recoverable amounts are less than the carrying amount and there is no clear evidence that impairment is not necessary. Impairment, if any, is recorded as a reduction in the carrying amount of the securities and included in the non-consolidated income statement in the period in which they arise. Recovery of impairment loss, when it is objectively related to an event occurring after the recognition of impairment loss, is recognized as current income. However, the new carrying amount after the reversal of impairment cannot exceed the carrying value of the investment security that would have been measured at the date of reversal had no impairment loss been recognized. (e) Investments in Associates and Subsidiaries

Associates are all entities of which the Bank has the ability to significantly influence the financial and operating policies and procedures, generally through 15% to 50% of the voting rights. Subsidiaries are entities controlled by the Bank. Investments in associates and subsidiaries are accounted for using the equity method of accounting and are initially recognized at cost. The Bank’s investments in associates and subsidiaries include goodwill identified on acquisition (net of any accumulated impairment loss). Goodwill is calculated as the excess of the acquisition cost of an investment in an associate or subsidiary over the Bank’s share of the fair value of the identifiable net assets acquired. Goodwill is amortized using the straight-line method over its estimated useful life of five years. Amortization of goodwill is recorded together with equity income (losses).

F-13

When events or circumstances indicate that the carrying value of goodwill may not be recoverable, the Bank reviews goodwill for impairment and records any impairment loss immediately in the non-consolidated income statement. The Bank’s share of its post-acquisition profits or losses in investments in associates and subsidiaries is recognized in the non-consolidated income statement, and its share of post-acquisition movements in equity is recognized in equity. The cumulative post-acquisition movements are adjusted against the carrying amount of each investment. Changes in the carrying amount of an investment resulting from dividends by an associate or subsidiary are recognized when the associate or subsidiary declares the dividend. When the Bank’s share of losses in an associate or subsidiary equals or exceeds its interest in the associate or subsidiary, including preferred stock or other long-term loans and receivables issued by the associate or subsidiary, the Bank does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate or subsidiary. If the investee is a subsidiary, net income and net assets of the parent company’s separate financial statements should agree with the parent company’s share in the net income and net assets of the consolidated financial statements, except when the Bank discontinues the application of the equity method due to its investment in a subsidiary being reduced to zero. Unrealized gains on transactions between the Bank and its associates or subsidiaries are eliminated to the extent of the Bank’s interest in each associate or subsidiary. (f) Interest in Joint Ventures

Joint ventures are those operations or assets over whose activities the Bank has joint control. In respect of jointly controlled operations, the Bank includes, in its non-consolidated financial statements, the assets that it controls and the liabilities and expenses it has incurred, plus its share of the income from the joint operation. For its interest in jointly controlled assets, the Bank recognizes, in the non-consolidated financial statements, its share of the assets it jointly controls, the liabilities jointly incurred and net income, plus the liabilities and expenses it has solely incurred, if any. The Bank accounts for its interest in a jointly controlled entity using the equity method of accounting. (g) Allowance for Loan Losses

In estimating the allowance for corporate and household including credit card loan losses, the Bank records the greater amount resulting from the provisioning methods described below for each loan classification. (i) Expected Loss Method

The Bank estimates the allowance for corporate and household loan losses by applying the expected loss method, which analyzes factors of estimated loss based on probability of default (“PD”) and loss given default (“LGD”). This provisionary method considers both financial and non-financial factors of borrowers to assess PD and LGD. PD is determined by considering the type of borrowers, the nature of loans and delinquent days and LGD is determined by considering the type of loan and collateral. The period of historical data used to calculate PD and LGD are updated annually; PD and LGD applied data for the past seven years and seventy months for corporate loans and five years and sixty months for household loans as of December 31, 2008 and for the past six years and fifty-six months for corporate loans and four years and forty-six months for household loans as of December 31, 2007. The allowance for loan losses is calculated by multiplying outstanding loan balance by the PD and LGD.

F-14

(ii)

FSS Guideline

The Bank applies the FSS guidelines for corporate and household loans in accordance with the Regulations for the Supervision of Banks revised on December 7, 2007. The prescribed minimum levels of provision per the FSS guidelines are as follows, 2006 Corporate loans . . . . . . . . . . . Normal (*) . . . . . . . . . . . . Precautionary . . . . . . . . . . Substandard . . . . . . . . . . . Doubtful . . . . . . . . . . . . . . Estimated loss . . . . . . . . . Normal . . . . . . . . . . . . . . . . Precautionary . . . . . . . . . . Substandard . . . . . . . . . . . Doubtful . . . . . . . . . . . . . . Estimated loss . . . . . . . . . 0.7% 7% 20% 50% 100% 1% 10% 20% 55% 100% 2007 0.85% 7% 20% 50% 100% 1% 10% 20% 55% 100% 2008 0.85% 7% 20% 50% 100% 1% 10% 20% 55% 100%

Household loans . . . . . . . . . .

(*)

0.9% for construction, real estate and rental services, retail and wholesale, lodging and restaurant; industries susceptible to market

In addition, the Bank includes interbank loan, call loan, bills bought under repurchase agreement and deposit from banks except for Bank of Korea in estimating the allowance for loan losses classified as normal. Additionally, the Bank considers the borrower’s ability to repay and the recovery value of collateral in estimating expected loss on high-risk large volume loan balance. Loans are charged-off if they are deemed to be uncollectible by falling under any of the following categories: Š Loans for which collection is not foreseeable due to insolvency or bankruptcy, dissolution or the closure of the business by the debtor; Payments outstanding on unsecured consumer loans, which have been overdue for more than six months; or The portion of loans classified as “estimated loss”, net of any recovery from collateral, which is deemed to be uncollectible.

Š

Š

(h)

Troubled Debt Restructuring

A loan in which the contractual terms are modified in a troubled debt restructuring program is accounted for at the present value of the expected future cash flows of the modified loan discounted at the effective interest rate of the original loan. The excess of the carrying amount over the present value of expected future cash flows is recorded as provision for loan losses in the current period. The present value discounts are recorded in allowance for loan losses and reflected as a deduction from the nominal value of the loans. The present value discounts are amortized using the effective interest method and recognized as interest income. (i) Deferred Loan Origination Fees

Certain fees associated with lending activities which meet specified criteria, are deferred and amortized over the life of the loan as an adjustment to the carrying amount of the loan using the effective yield method and recognized as interest income.

F-15

(j)

Transfer of Assets

Transfers of financial assets to third parties are accounted for as sales when control is surrendered to the transferee. The Bank derecognizes financial assets from the balance sheet including any related allowance, and recognizes all assets obtained, and liabilities incurred, including any recourse obligations to the transferee, at fair value. Any resulting gain or loss on the sale is recognized in earnings. Conversely, the Bank only recognizes financial assets transferred from third parties on the balance sheet when the Bank obtains control of financial assets. (k) Interest Income

Interest income on bank deposits, loans and securities is recognized on an accrual basis, except for interest on loans that are past due and loans to customers who are bankrupt which are placed on nonaccrual. Any unpaid interest previously accrued on such loans is reversed from income, and thereafter interest is recognized only to the extent payments are received. Payments on delinquent loans are first applied to delinquent interest, to normal interest, and then to the principal balance. (l) Property and Equipment

Property and equipment are stated at cost except in the case of revaluations made in accordance with the Asset Revaluation Law which allowed for asset revaluation prior to the law being revoked. Assets acquired through investment in kind or donation, are recorded at fair value. Significant additions or improvements extending useful lives of assets are capitalized. However, normal maintenance and repairs are charged to expense as incurred. Depreciation is computed by the declining-balance method using rates based on the estimated useful lives or the straight-line method over the estimated useful lives of the respective assets as follows: Descriptions Buildings Leasehold improvements Furniture, office equipment and other Depreciation method Straight-line Straight-line Declining-balance Useful lives 40–60 years 5 years 5 years

For property and equipment at overseas branches, the depreciation methods regulated by the respective local regulatory authority are applied. The Bank reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognized when the expected estimated undiscounted future net cash flows from the use of the asset and its eventual disposal are less than its carrying amount. The Bank recognizes an impairment loss by reducing its carrying amount to the estimated recoverable amount. (m) Intangible Assets Intangible assets which mainly consist of software, are stated at cost less accumulated amortization and impairment loss, if any. Such intangible assets are amortized using the straight-line method over five years. The Bank reviews intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Bank reduces its carrying amount to the recoverable amount and the amount impaired is recognized as impairment loss. (n) Leases

The Bank classifies and accounts for lease transactions as either an operating or capital lease, depending on the terms of the lease. Leases where the Bank assumes substantially all the risks and rewards of ownership are classified as capital leases. All other leases are classified as operating leases.

F-16

Substantially all the risks and rewards of ownership are evidenced when one or more of the criteria listed below are met: Š Š Ownership of the leased property will transfer to the lessee at the end of the lease term. The lessee has a bargain purchase option and it is reasonably certain at the inception of the lease that the option will be exercised. The lease term is equal to 75% or more of the estimated economic useful life of the leased property. The present value at the beginning of the lease term of the minimum lease payments equals or exceeds 90% of the fair value of the leased property.

Š Š

In addition, if the leased property is specialized to the extent that only the lessee can use it without any major modification, it would be considered a capital lease. Otherwise, the lease is classified as an operating lease and recognized in income on a straight-line basis over the lease term. The financing lease is recorded as the net investment in the lease asset at lease inception representing the aggregate future minimum lease payments. Lease income is recognized to approximate a level rate of return on the net investment by using the effective yield method over the lease term. The Bank also recognizes initial direct costs incurred in negotiating and arranging leases. Initial direct costs incurred for operating leases are initially recorded as a separate asset and expensed as fee and commission expense over the lease term on the same basis in which lease income is recognized. Initial direct costs incurred for financing leases are included in the net investment in the lease asset and reduces lease income over the lease term using the effective yield method. (o) Discount (Premium) on Debentures

Discount (premium) on debentures issued, which represents the difference between the face value and issuance price of debentures, is amortized (accreted) using the effective interest method over the life of the debentures. The amount amortized (accreted) is included in interest expense. (p) Retirement and Severance Benefits

Employees who have been with the Bank for more than one year are entitled to lump-sum payments based on salary rates and length of service at the time they leave the Bank. The Bank’s estimated liability under the plan which would be payable if all employees left on the balance sheet date is accrued in the accompanying non-consolidated balance sheets. A portion of the liability is covered by an employees’ severance insurance where the employees have a vested interest in the deposit with the insurance company in trust. The deposit for severance benefit insurance is, therefore, reflected in the accompanying non-consolidated balance sheets as a reduction of the liability for retirement and severance benefits. (q) Allowance for Unused Loan Commitments

The Bank estimates the allowance for unused corporate and household loan commitments by each classification considering the credit conversion factor (“CCF”), the ratio in which the off-balance sheet commitments are converted into outstanding amounts based on historical data. In addition, the Bank applies the FSS guidelines for unused corporate and household loan commitments in accordance with the Regulations for the Supervision of Banks revised at December 7, 2007 as follows: for unused corporate loan commitments a minimum of 0.85% for normal (0.9% for construction, real estate and rental services, retail and wholesale, lodging and restaurant; industries susceptible to market), 7% for precautionary, 20% for substandard, 50% for doubtful and 100% for estimated loss, respectively; and for unused household loan commitments a minimum of 1.0% for normal, 10% for precautionary, 20% for substandard, 55% for doubtful and 100% for estimated loss, respectively.

F-17

The Bank records the greater amount resulting from the provisioning methods described above by each classification as other allowances included in other liabilities with the respective changes recorded in other non-interest expense. (r) Allowance for Loss on Guarantees and Acceptances

The Bank estimates allowance for losses on outstanding guarantees and acceptances, contingent guarantees and acceptances and endorsed bills in accordance with the same loan classification criteria applied in estimating allowance for loan losses and recorded as other liabilities with the respective changes recorded as other non-interest expense. (s) Bonds under Resale or Repurchase Agreements

Bonds purchased under resale agreements are recorded as loans and bonds sold under repurchase agreements are recorded as borrowings when the Bank purchases or sells securities under resale or repurchase agreements. (t) Income Taxes

Income tax on the income or loss for the year comprises current and deferred tax. Income tax is recognized in the non-consolidated statement of income except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted. Deferred tax is provided using the asset and liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognized only to the extent that it is probable that future taxable income will be available against which the unused tax losses and credits can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Deferred tax assets and liabilities are classified as current or non current based on the classification of the related asset or liability for financial reporting or the expected reversal date of the temporary difference for those with no related asset or liability such as loss carry forwards and tax credit carryforwards. The deferred tax amounts are presented as a net current asset or liability and a net non current asset or liability. Changes in deferred taxes due to a change in the tax rate except for those related to items initially recognized outside profit or loss (either in other comprehensive income or directly in equity) are recognized as income in the current year. (u) Derivatives and Hedge Accounting

The Bank holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, and a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative. Derivatives are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at their fair value. Attributable transaction costs are recognized in profit or loss when incurred.

F-18

Hedge accounting Where a derivative, which meets certain criteria, is used for hedging the exposure to changes in the fair value of a recognized asset, liability or firm commitment, it is designated as a fair value hedge. Where a derivative, which meets certain criteria, is used for hedging the exposure to the variability of the future cash flows of a forecasted transaction, it is designated as a cash flow hedge. The Bank documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Bank documents its assessment, both at hedge inception and on a monthly basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting the changes in fair values or cash flows of hedged items. Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the nonconsolidated statement of income, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in equity as other comprehensive income. The gain or loss relating to any ineffective portion is recognized immediately in the earnings. Amounts accumulated in equity are recycled to the income statement in the periods in which the hedged item will affect profit or loss. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at the time remains in equity and is recognized when the forecast transaction is ultimately recognized in earnings. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the statement of income. Derivatives that do not qualify for hedge accounting Changes in the fair value of derivative instruments that are not designated as fair value or cash flow hedges are recognized immediately in the statement of income. Separable embedded derivatives Changes in the fair value of separable embedded derivatives are recognized immediately in the statement of income. (v) Share-Based Payment

The Bank has granted shares or share options to its employees and other parties. For equity-settled sharebased payment transactions, the Bank measures the goods or services received, and the corresponding increase in equity as a capital adjustment at the fair value of the goods or services received, unless that fair value cannot be estimated reliably. If the entity cannot estimate reliably the fair value of the goods or services received, the Bank measures their value, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity instruments granted. If the fair value of the equity instruments cannot be estimated reliably at the measurement date, the Bank measures them at their intrinsic value and recognizes the goods or services received based on the number of equity instruments that ultimately vest. For cash-settled share-based payment transactions, the Bank measures the goods or services acquired and the liability incurred at the fair value of the liability. Until the liability is settled, the Bank remeasures the fair value of the liability at each reporting date and at the date of settlement, with changes in fair value recognized in profit or loss for the period.

F-19

(w) Translation of Foreign Currency Denominated Assets and Liabilities Assets and liabilities denominated in foreign currencies are translated into Korean Won at the balance sheet dates, with the resulting gains and losses recognized in current results of operations. Assets and liabilities denominated in foreign currencies are translated into Korean Won at W929.60, W938.20 and W1,257.50 to US $1 based on the basic exchange rate and the cross exchange rates announced by the Seoul Money Brokerage Services Ltd. on December 31, 2006, 2007 and 2008, the last business day of each respective period, respectively. Foreign currency assets and liabilities of foreign-based operations and branches accounted for using the equity method are translated at the rate of exchange at the respective balance sheet dates. Foreign currency amounts in the non-consolidated statement of income are translated using an average rate. Translation gains and losses arising from collective translation of the foreign currency financial statements of foreign-based operations are recorded net as accumulated other comprehensive income. These gains and losses are subsequently recognized as income in the year the foreign operations or companies are liquidated or sold. (x) Valuation of Receivables and Payables at Present Value

Receivables and payables arising from long-term cash loans/borrowings and other similar transactions are stated at present value. The difference between the nominal value and present value of these receivables or payables is amortized using the effective interest method. The amount amortized is included in interest expense or interest income. (y) Accounting for Trust Accounts

The Bank accounts for trust accounts separately from its bank accounts under the Trust Business Act and thus are not included in the accompanying non-consolidated financial statements. Funds transferred between a bank account and a trust account is recognized as borrowings from trust accounts in other liabilities with fees for managing the accounts recognized as noninterest income by the Bank. Furthermore, the Bank recognizes as loss in other noninterest expense any excess amount of the guaranteed principal and earnings over the sum of trust fee income and a special provision which consist of up to 25% of total trust fees or 5% of certain trust accounts. (z) Provision and Contingent Liabilities

Provisions are recognized when all of the following are met: (1) an entity has a present obligation as a result of a past event; (2) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and (3) a reliable estimate can be made of the amount of the obligation. Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation. Where the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement is recognized as a separate asset when, and only when, it is virtually certain that reimbursement will be received if the Company settles the obligation. The expense generated by the provision is presented net of the amount of expected reimbursement. (aa) Cash Management Account (“CMA”) The Bank recognizes income from CMA investments consisting of highly liquid investments and expense from CMA deposits as other interest income and other interest expense, respectively. (bb) Use of Estimates The preparation of non-consolidated financial statements in accordance with accounting principles generally accepted in the Republic of Korea requires management to make estimates and assumptions that affect the amounts reported in the non-consolidated financial statements and related notes to the non-consolidated financial statements. Actual results could differ from those estimates.

F-20

(3) (a)

Cash and Due from Banks Cash and due from banks as of December 31, 2006 , 2007 and 2008 consisted of the following: 2006 2007 2008 (in millions of Won)

Cash on hand: Won . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W2,491,981 219,971 2,711,952

W1,970,867 222,812 2,193,679

W1,542,963 294,732 1,837,695

Due from banks in Won: Reserve deposits with the Bank of Korea . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,570,774 147,443 5,718,217

2,786,870 205,940 2,992,810

4,705,622 33,165 4,738,787

Due from banks in foreign currencies: Demand deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

356,692 157,191 6,526 520,409

735,203 161,913 199,495 1,096,611 29,508 W6,312,608

1,008,295 66,764 868,652 1,943,711 58,737 W8,578,930

Due from banks invested in gold . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

61,981 W9,012,559

(b)

Restricted due from banks as of December 31, 2006 , 2007 and 2008 were as follows: 2006 2007 2008 (in millions of Won) Restriction

Due from banks in Won: Reserve deposits with the Bank of Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W5,570,774 6,643 5,577,417

W2,786,870 250 2,787,120 627,785

W4,705,622 27,647 4,733,269 957,184

Bank of Korea Act

Due from banks in foreign currencies: . . . . .

371,515

Bank of Korea Act & other

W5,948,932

W3,414,905

W5,690,453

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(c)

The maturities of due from banks as of December 31, 2006 , 2007 and 2008 were as follows: Due from banks in Foreign Won currencies Gold (in millions of Won) W5,718,217 — — — W5,718,217

At December 31, 2006

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due after 3 months through 6 months . . . . . . . . . . . . . . . Due after 6 months through 1 year . . . . . . . . . . . . . . . . . . Due after 3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W509,198 W — W6,227,415 7,460 — 7,460 3,730 61,981 65,711 21 — 21 W520,409 W61,981 W6,300,607

At December 31, 2007

Due from banks in Foreign Won currencies Gold (in millions of Won) W2,986,870 — — 5,940 W2,992,810 W1,083,662 10,480 2,452 17 W1,096,611 W29,508 — — — W29,508

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due after 3 months through 6 months . . . . . . . . . . . . . . Due after 6 months through 1 year . . . . . . . . . . . . . . . . . Due after 3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W4,100,040 10,480 2,452 5,957 W4,118,929

At December 31, 2008

Due from banks in Foreign Won currencies Gold (in millions of Won) W4,705,622 5,257 27,908 W4,738,787 W1,943,697 — 14 W1,943,711 W58,737 — — W58,737

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due after 1 year through 3 years . . . . . . . . . . . . . . . . . . . Due after 3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W6,708,055 5,258 27,922 W6,741,235

(4)

Securities

Securities as of December 31, 2006 , 2007 and 2008 consisted of the following: 2006 2007 (in millions of Won) W 5,165,303 19,203,963 7,368,540 591,571 W32,329,377 2008

Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Held-to-maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity method accounted investments . . . . . . . . . . . . . . . . . . . . .

W

656,599 15,594,423 7,001,883 407,279

W 1,913,263 25,855,258 7,552,933 1,270,806 W36,592,260

W23,660,184

F-22

(a)

Trading Securities (i) Trading securities as of December 31, 2006, 2007 and 2008 consisted of the following: 2006 2007 2008 (in millions of Won) W 3,026 25,286 505,883 — 531,169 — — 4,631,108 W5,165,303 W 10,837 16,897 238,720 — 255,617 115,704 — 1,531,105 W1,913,263

Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Debt securities: Government bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W 92,034 61,227 282,764 39,972 383,963

Beneficiary certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities in foreign currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— 13,617 166,985 W656,599

(ii)

Details of equity securities as of December 31, 2006, 2007 and 2008 were as follows: 2006 Acquisition cost Fair value Book value (in million of Won)

Trading equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W90,603

W92,034

W92,034

2007 Acquisition cost Fair value Book value (in million of Won) Trading equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W 2,959 W 3,026 W 3,026

2008 Acquisition cost Fair value Book value (in million of Won) Trading equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W11,166 W10,837 W10,837

(iii) Details of debt securities as of December 31, 2006, 2007 and 2008 were as follows: 2006 Face value Acquisition Amortized cost cost Fair value (*) (in million of Won) W 61,051 283,152 39,941 W384,144 W 61,212 283,470 40,162 W384,844 W 61,733 288,225 40,164 W390,122 Book value (**)

Government bonds . . . . . . Finance debentures . . . . . Corporate bonds . . . . . . . .

W 62,000 290,000 40,000 W392,000

W 61,227 282,764 39,972 W383,963

F-23

2007 Face value Acquisition Amortized cost cost Fair value (*) (in millions of Won) W 25,361 510,741 W536,102 W 25,548 510,747 W536,295 2008 Face value Acquisition Amortized cost cost Fair value (*) (in millions of Won) W 16,568 236,326 W252,894 W 16,698 236,388 W253,086 W 17,589 242,038 W259,627 Book value (**) W 25,690 510,229 W535,919 Book value (**)

Government bonds . . . . . . Finance debentures . . . . .

W 26,300 511,000 W537,300

W 25,286 505,883 W531,169

Government bonds . . . . . . Finance debentures . . . . .

W 16,300 241,000 W257,300

W 16,897 238,720 W255,617

(*)

Debt securities are measured at fair value by applying the lesser of two quoted bond prices provided by two bond pricing agencies as of the latest trading date from the balance sheet date. The difference between fair value and book value is recorded as accrued income.

(**)

(iv) Details of beneficiary certificates as of December 31, 2008 were as follows: 2008 Acquisition cost Fair value (in millions of Won) W110,000 W115,704

Face value

Book value

Beneficiary certificates . . . . . . . . . . . . . . . . . . (b) Available-for-Sale Securities (i)

W110,949

W115,704

Available-for-sale securities as of December 31, 2006, 2007 and 2008 consisted of the following: 2006 2007 (in million of Won) W 4,585,847 228,363 1,338,850 6,946,559 3,074,784 11,360,193 1,722,008 1,216,268 91,284 W19,203,963 2008

Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment in private equity funds and other . . . . . . . . . . Debt securities: Government bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W 4,022,165 87,958 1,235,770 3,907,389 3,051,278 8,194,437 2,306,030 946,864 36,969 W15,594,423

W 2,867,700 294,979 2,901,996 12,781,662 3,135,070 18,818,728 2,209,522 1,621,694 42,635 W25,855,258

Beneficiary certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities in foreign currencies . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-24

(ii)

Details of equity securities as of December 31, 2006, 2007 and 2008 were as follows: 2006 Acquisition cost Fair value (*) (in million of Won)

Book value

Marketable stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-marketable stocks** . . . . . . . . . . . . . . . . . . . . . . . . Equity investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W1,565,348 302,538 86,978 W1,954,864

W3,671,527 350,638 87,958 W4,110,123

W3,671,527 350,638 87,958 W4,110,123

2007 Acquisition cost Fair value (*) (in million of Won) Marketable stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-marketable stocks** . . . . . . . . . . . . . . . . . . . . . . . . Equity investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W2,074,462 277,992 215,673 W2,568,127 W4,259,082 326,765 228,363 W4,814,210

Book value

W4,259,082 326,765 228,363 W4,814,210

2008 Acquisition cost Fair value (*) (in million of Won) Marketable stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-marketable stocks** . . . . . . . . . . . . . . . . . . . . . . . . Equity investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W2,413,544 315,850 299,356 W3,028,750
(*)

Book value

W2,540,300 327,400 294,979 W3,162,679

W2,540,300 327,400 294,979 W3,162,679

For available-for-sale equity securities at December 31, 2008, Korea Housing Guarantee and nineteen items in the non marketable stocks, Hyundai Construction and six items which were restricted for sale in the marketable stocks, MKOF and eight items in the equity investment were measured at fair values calculated using reasonable valuation models and estimates based on the professional judgments of an independent external pricing agency. The external pricing agency calculates fair values using more than one valuation methods of Discounted Cash Flow Model, Imputed Market Value Model, Discounted Free Cash Flow to Equity Model, Dividends Discount Model, and Risk-adjusted Discount Rate Model, which are deemed appropriate, considering the characteristics of the items to be measured. Among investments in nonmarketable securities, Samsung Life Insurance Co., Ltd of W23,539 million and Korean Asset Management Corporation (KAMCO) of W12,960 million as of December 31, 2006, 2007 and 2008 and other W16,766 million, W35,777 million and W24,076 million as of December 31, 2006, 2007 and 2008, respectively, are valued at cost as fair value was not reasonably estimable.

(**)

F-25

(iii) Available-for-sale securities restricted for sale for certain periods as of December 31, 2008 were as follows: Book value (in millions of Won) Daewoo International Corporation . . . . . . . . . . . . . . . . . . Daewoo Electronics Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . Saehan Media Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ssangyong Cement Industrial Co., Ltd. . . . . . . . . . . . . . . Ssangyong Engineering & Construction Co., Ltd. . . . . Hynix Semiconductor Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . SK Networks Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hyundai Engineering & Construction Co., Ltd. . . . . . . . Pantech Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pantech & Curitel Co., Ltd . . . . . . . . . . . . . . . . . . . . . . . . . Korean private carbon fund 1st . . . . . . . . . . . . . . . . . . . . . . W 31,169 4,266 172 60,820 7,601 172,463 120,759 231,053 209 5,943 1,390 W635,845 (iv) Details of available-for-sale debt securities in Won as of December 31, 2006, 2007 and 2008 were as follows: 2006 Face value Government bonds . . . . . . . . . . Finance debentures . . . . . . Corporate bonds . . Acquisition cost Amortized cost Fair value (*) (in millions of Won) W 1,223,082 3,895,458 3,042,989 W 8,161,529 2007 Face value Government bonds . . . . . . . . . . Finance debentures . . . . . . Corporate bonds . . Acquisition cost Amortized cost Fair value (*) (in millions of Won) W 1,350,253 7,020,042 3,106,541 W11,476,836 2008 Face value Government bonds . . . . . . . . . . Finance debentures . . . . . . Corporate bonds . . Acquisition cost Amortized cost Fair value (*) (in millions of Won) W 2,785,149 12,640,633 3,090,285 W18,516,067 W 2,988,355 12,927,265 3,153,424 W19,069,044 Book value (**) W 1,385,934 7,029,483 3,281,815 W11,697,232 Book value (**) W 1,269,164 3,943,349 3,067,338 W 8,279,851 Book value (**) Restricted until

Joint-sale by creditors March 31, 2009 December 31, 2010 Merger & Acquisition Merger & Acquisition Merger & Acquisition Joint-sale by creditors Merger & Acquisition December 31, 2011 December 31, 2011 August 20, 2022

W 1,261,145 3,938,430 3,290,990 W 8,490,565

W 1,252,422 3,910,599 3,098,769 W 8,261,790

W 1,235,770 3,907,389 3,051,278 W 8,194,437

W 1,387,990 7,070,930 3,249,683 W11,708,603

W 1,359,154 7,019,379 3,250,932 W11,629,465

W 1,338,850 6,946,559 3,074,784 W11,360,193

W 2,867,424 12,729,930 3,185,120 W18,782,474

W 2,764,945 12,638,521 3,169,335 W18,572,801

W 2,901,996 12,781,662 3,135,070 W18,818,728

F-26

(*)

Debt securities are recorded at fair value by applying the lesser of two quoted bond prices provided by two bond pricing agencies at the latest trading date from the balance sheet date. The difference between fair value and book value is recorded as accrued income.

(**)

(v)

As of December 31, 2006, 2007 and 2008, the maturities of debt securities in Won classified as available-for-sale were as follows: Government bonds Finance debentures Corporate Bonds (in millions of Won) W 124,139 137,321 635,548 1,923,992 230,278 W3,051,278

At December 31, 2006

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . . . . . . Due after 3 months through 6 months . . . . . Due after 6 months through 1 year . . . . . . . . Due after 1 year through 3 years . . . . . . . . . . Due there after . . . . . . . . . . . . . . . . . . . . . . . . . .

W

44,446 40,319 240,337 675,718 234,950

W1,091,417 795,473 1,045,347 965,466 9,686 W3,907,389

W1,260,002 973,113 1,921,232 3,565,176 474,914 W8,194,437

W1,235,770 Government bonds

At December 31, 2007

Finance Corporate debentures Bonds (in millions of Won) W1,568,234 632,929 663,309 4,030,190 51,897 W6,946,559 W 230,441 214,780 1,063,095 1,395,412 171,056 W3,074,784

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . . . . Due after 3 months through 6 months . . . . Due after 6 months through 1 year . . . . . . . Due after 1 year through 3 years . . . . . . . . . Due there after . . . . . . . . . . . . . . . . . . . . . . . . .

W

49,965 19,951 442,403 689,214 137,317

W 1,848,640 867,660 2,168,807 6,114,816 360,270 W11,360,193

W1,338,850 Government bonds

At December 31, 2008

Finance Corporate debentures Bonds (in millions of Won) W 3,433,329 2,069,556 1,653,604 5,036,641 588,532 W12,781,662 W 240,980 152,872 417,376 1,436,990 886,852 W3,135,070

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . . . Due after 3 months through 6 months . . . Due after 6 months through 1 year . . . . . . Due after 1 year through 3 years . . . . . . . Due there after . . . . . . . . . . . . . . . . . . . . . . . .

W 100,402 70,447 139,698 928,476 1,662,973 W2,901,996

W 3,774,711 2,292,875 2,210,678 7,402,107 3,138,357 W18,818,728

F-27

(vi) Available-for-sale securities in foreign currencies classified by currency as of December 31, 2007 and 2008 were as follows: 2007 U.S. dollar Won equivalent Ratio (%) U.S. dollar 2008 Won Ratio (%) equivalent

(in millions of Won) USD . . . . . . . . JPY . . . . . . . . . INR . . . . . . . . SGD . . . . . . . . HKD . . . . . . . CHF . . . . . . . . US$1,213,500 45,671 27,571 4,220 227 5,196 W1,138,528 42,825 25,868 3,959 213 4,875 93.60% US$1,163,005 W1,462,477 3.52% 90,115 113,317 2.13% 14,284 17,964 0.33% 16,667 20,959 0.02% — — 0.40% 5,548 6,977 100.00% US$1,289,619 W1,621,694 90.18% 6.99% 1.11% 1.29% — 0.43% 100.00%

US$1,296,385 W1,216,268

(vii) Beneficiary certificates wholly owned by the Bank Details of the underlying assets of beneficiary certificates wholly-owned by the Bank as of December 31, 2008 were as follows: (in millions of Won) Due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Call loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Available-for-sale equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Available-for-sale debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (viii) Changes in impairment loss on available-for-sale securities Details of impairment loss and reversal of impairment loss of available-for-sale securities for the years ended December 31, 2006, 2007 and 2008 were as follows: 2007 2008 2006 Impairment Reversal Impairment Reversal Impairment Reversal (in millions of Won) Equity securities and investments . . . . . . . Debt securities . . . . . . Beneficiary certificates . . . . . . . Securities in foreign currencies . . . . . . . . Other securities . . . . . W 178,091 791 104,420 1,346,676 28,263 1,658,241 3,088 W1,655,153

W 18,336 W 96,017 83,314 212,101 — — 226 — — 247

W 7,117 W 60,187 — 78,137 — 8,749 — — — —

W

5,612 W — 9,900 52,935 40,282 — — —

101,754 9,632

W101,876 W308,365

W15,866 W138,324

W167,180 W52,935

F-28

(ix) Changes in unrealized gain (loss) Details of changes in unrealized gain (loss) of available-for-sale securities for the years ended December 31, 2006, 2007 and 2008 were as follows: 2006 Beginning Balance Valuation Realized Other gain(loss) loss (gain) (merger)(*) (in millions of Won) W 624,739 W(532,744) W 568,309 Ending Balance

Equity securities . . . Investment in private equity funds and other . . Debt securities . . . . Total before tax . . . Tax effect . . . . . . . . . Total after tax . . . . .

W1,684,872

W2,345,176

— (94,150) 1,590,722 (437,449) W1,153,273

19,751 35,585 680,075 (187,021) W 493,054

(3,235) 64,806 (471,173) 129,573 W(341,600)

2,960 (45,803) 525,466 (144,504) W 380,962

19,476 (39,562) 2,325,090 (639,401) W1,685,689

Beginning Balance

2007 Valuation Realized gain(loss) loss (gain) (in millions of Won)

Ending Balance

Equity securities and investments . . . . . . . . . . . . . . . . . . . . Debt securities . . . . . . . . . . . . . . . . . . . Beneficiary certificates . . . . . . . . . . . Securities in foreign currencies . . . . Other securities . . . . . . . . . . . . . . . . . . Total before tax . . . . . . . . . . . . . . . . . . Tax effect . . . . . . . . . . . . . . . . . . . . . . . . Total after tax . . . . . . . . . . . . . . . . . . . .

W2,345,108 (45,457) 3,530 5,963 15,946 2,325,090 (639,401) W1,685,689

W 847,390 (115,305) 1,470 (66,297) 17,185 684,443 (188,221) W 496,222

W(794,434) 8,510 (1,999) (158) (1,531) (792,612) 217,969 W(574,643)

W2,395,064 (152,252) 3,001 (60,492) 31,600 2,216,921 (609,653) W1,607,268

Beginning Balance

2008 Valuation Realized gain(loss) loss (gain) (in millions of Won)

Ending Balance

Equity securities and investments . . . . . . . . . . . . . . . . . . . Debt securities . . . . . . . . . . . . . . . . . . Beneficiary certificates . . . . . . . . . . . Securities in foreign currencies . . . Other securities . . . . . . . . . . . . . . . . . . Total before tax . . . . . . . . . . . . . . . . . Tax effect . . . . . . . . . . . . . . . . . . . . . . . Total after tax . . . . . . . . . . . . . . . . . . .

W2,395,064 (152,252) 3,001 (60,492) 31,600 2,216,921 (609,653) W1,607,268

W(1,955,082) 430,968 (25,531) (227,772) (8,524) (1,785,941) 507,289 W(1,278,652)

W(144,594) 23,944 (2,363) (832) (13,386) (137,231) 37,739 W (99,492)

W 295,388 302,660 (24,893) (289,096) 9,690 293,749 (64,625) W 229,124

F-29

(c)

Held-to-Maturity Securities (i) Held-to-maturity securities as of December 31, 2006, 2007 and 2008 consisted of the following: 2006 Debt securities: Government bonds . . . . . . . . . . . . . . . . . . . . . . . . Finance debentures . . . . . . . . . . . . . . . . . . . . . . . Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . Securities in foreign currencies . . . . . . . . . . . . . . . . . 2007 (in millions of Won) W1,441,514 4,205,649 1,703,392 7,350,555 17,985 W7,368,540 2008

W1,147,223 4,458,219 1,355,077 6,960,519 41,364 W7,001,883

W2,580,157 3,508,180 1,439,550 7,527,887 25,046 W7,552,933

(ii)

Details of held-to-maturity debt securities in Won as of December 31, 2006, 2007 and 2008 were as follows: 2006 Face Value Government bonds . . . . . . . . . Finance debentures . . . . Corporate bonds . . . . . . . . . Acquisition Amortized cost cost (in millions of Won) W1,150,214 4,457,121 1,356,484 W6,963,819 W1,147,262 4,458,219 1,354,824 W6,960,305 2007 Face Value Government bonds . . . . . . . . . Finance debentures . . . . Corporate bonds . . . . . . . . . Acquisition Amortized cost cost (in millions of Won) W1,434,710 4,208,875 1,706,642 W7,350,227 W1,441,511 4,205,648 1,703,392 W7,350,551 Fair value (*) Book value Fair value (*) Book value

W1,152,019 4,490,000 1,350,000 W6,992,019

W1,168,262 4,525,844 1,365,246 W7,059,352

W1,147,223 4,458,219 1,355,077 W6,960,519

W1,477,412 4,214,000 1,706,161 W7,397,573

W1,457,552 4,223,737 1,693,346 W7,374,635

W1,441,514 4,205,649 1,703,392 W7,350,555

Face value Government bonds . . . . . . . . . Finance debentures . . . . Corporate bonds . . . . . . . . .

2008 Acquisition Amortized cost cost (in millions of Won) W2,562,695 3,509,004 1,437,744 W7,509,443 W2,580,157 3,508,180 1,439,550 W7,527,887

Fair value (*)

Book value

W2,651,438 3,519,000 1,446,968 W7,617,406

W2,726,857 3,608,205 1,483,729 W7,818,791

W2,580,157 3,508,180 1,439,550 W7,527,887

(*)

Debt securities are recorded at fair value by applying the lesser of two quoted bond prices provided by two bond pricing agencies as of the latest trading date from the balance sheet date.

F-30

(iii) As of December 31, 2006, 2007 and 2008 the maturities of debt securities classified as held-to maturity were as follows: Government Finance Corporate bonds debentures Bonds (in millions of Won) W 5,880 53,420 92,568 951,070 44,285 99,923 421,922 1,078,157 2,848,217 10,000 4,458,219

At December 31, 2006

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . . . . . . Due after 3 months through 6 months . . . . . Due after 6 months through 1 year . . . . . . . . Due after 1 year through 3 years . . . . . . . . . . Due thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . .

30,011 135,814 5,000 480,342 150,178 1,320,903 1,029,627 4,828,914 140,261 194,546 1,355,077 6,960,519

W1,147,223

At December 31, 2007

Government Finance Corporate bonds debentures Bonds (in millions of Won) W 60,488 11,936 360,081 778,348 230,661 739,161 727,778 998,680 1,357,800 382,230 4,205,649

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . . . . . . Due after 3 months through 6 months . . . . . Due after 6 months through 1 year . . . . . . . . Due after 1 year through 3 years . . . . . . . . . . Due there after . . . . . . . . . . . . . . . . . . . . . . . . . .

— 799,649 89,864 829,578 601,952 1,960,713 613,965 2,750,113 397,611 1,010,502 1,703,392 7,350,555

W1,441,514

At December 31, 2008

Government Finance Corporate bonds debentures Bonds (in millions of Won) W 264,836 299,117 68,792 809,450 1,137,962 W2,580,157 229,250 255,213 662,773 1,888,051 472,893 3,508,180

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . . . . . . Due after 3 months through 6 months . . . . . Due after 6 months through 1 year . . . . . . . . Due after 1 year through 3 years . . . . . . . . . . Due there after . . . . . . . . . . . . . . . . . . . . . . . . . .

114,990 609,076 99,970 654,300 170,001 901,566 484,061 3,181,562 570,528 2,181,383 1,439,550 7,527,887

F-31

(iv) Held-to-maturity securities in foreign currencies classified by currency as of December 31, 2006, 2007 and 2008 were as follows: 2006 2007 Ratio (%) U.S. dollar Won Ratio (%) U.S. dollar Won equivalent equivalent (in millions of Won and thousands of U.S. dollars) USD . . . . . . . . . . . . . . JPY . . . . . . . . . . . . . . . $35,246 6,250 $41,496 W32,765 8,599 W41,364 79.21 20.79 100.00 $14,238 4,932 $19,170 W13,358 4,627 W17,985 74.27 25.73 100.00

2008 U.S. dollar Won Ratio (%) equivalent USD . . . . . . . . . . . . . . JPY . . . . . . . . . . . . . . . INR . . . . . . . . . . . . . . . $ 7,000 2,743 10,174 $19,917 W 8,803 3,449 12,794 W25,046 35.15 13.77 51.08 100.00

F-32

(d)

Equity Method Accounted Investments (i) Details of equity method accounted investments as of December 31, 2006, 2007 and 2008 were as follows:
2006 Changes in Equity accumulated Overseas Succession method other operation Beginning Due to Acquisition income comprehensive translation Dividends Ending Ownership balance merger (redemption) (loss) income debit(credit) received balance (%) (in millions of Won)

Shinhan Finance Ltd. . . . . . . . . . . . . . Shinhan Data System Co., Ltd. . . . . . . . . . Macquarie Shinhan Infrastructure Management (*) . . Daewoo Capital Corporation (*) . . . Shinhan Corporate Restructuring Fund 6th . . . . . . . . . Shinhan Corporate Restructuring Fund 7th . . . . . . . . . Shinhan Corporate Restructuring Fund 8th (*) . . . . . . Shinhan National Pension Service PEF1st . . . . . . . . . . . SH Asset Management Co., Ltd. . . . . . . . . . . . . . Shinhan Asia Ltd. . . . Shinhan Bank America . . . . . . . . . Shinhan Bank Europe GmbH . . . . Shinhan Vina Bank . . . . . . . . . . . .

100.00 W 100.00

— —

73,508 2,439

— —

8,066 589

(127) —

(3,276) —

— —

78,171 3,028

14.00 14.79

— —

29,127 59,553

(859)

— (29,652)

— —

(27,322) —

946 45,837

— 15,936

60.00

2,097

(1,380)

(11)

706

58.82

3,000

1,740

433

5,173

14.40

11,100

(21)

11,079

26.66

4,000

4,000

28,800

402

37,202

79.77 99.99 100.00 100.00 50.00

62,363 37,315 62,312 30,662 12,660 W209,312

— — — — — 170,724

— 13,651 — 8,940 — — — 3,561 3,986 2,264

(176) (170) 18 — — (29,674)

— (3,072) (5,130) 585 (1,042) (11,935)

(3,590) — — — —

72,248 43,013 60,761 35,233 13,882

41,520 58,244

(30,912) 407,279

(*)

These investees are accounted for under the equity method as equity ownership among the Bank, its subsidiaries and its affiliates, as a group is greater than 15% and have significant management control.

Investments in Shinhan Finance Ltd., Shinhan Data System Co., Ltd., Macquarie Shinhan Infrastructure Management, Daewoo Capital Corporation, Shinhan Corporate Restructuring Fund 6th and the 13.33% stake in Shinhan National Pension Service PEF1st were transferred to the Bank as part of the merger described in note 38. Other than Macquarie Shinhan Infrastructure Management, SH Asset Management, Daewoo Capital and Shinhan National Pension Service PEF 1st, unaudited and unreviewed management’s financial statements of all other investees were used for the equity method valuation. Additional review procedures were performed to assess the reliability of those financial statements.

F-33

2007 Changes in Equity accumulated Overseas method other operations Beginning Acquisition income comprehensive translation Dividends Ending Ownership balance (redemption) (loss) income debit(credit) received balance (%) (in millions of Won) Shinhan Finance Ltd. . . . . . . . . . . . Shinhan Data System Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . Macquarie Shinhan Infrastructure Management . . . Daewoo Capital Corporation . . . . Shinhan Corporate Restructuring Fund 6th . . . . . . . . . . . . . . . . . . . . Shinhan Corporate Restructuring Fund 7th . . . . . . . . . . . . . . . . . . . . Shinhan Corporate Restructuring Fund 8th . . . . . . . . . . . . . . . . . . . . Shinhan National Pension Service PEF1st . . . . . . . . . . . . . . SH Asset Management Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . LG Card Co., Ltd. . . . . . . . . . . . . . . Shinhan Asia Ltd. . . . . . . . . . . . . . . Shinhan Bank America . . . . . . . . . Shinhan Bank Europe . . . . . . . . . . Shinhan Vina Bank . . . . . . . . . . . . . Shinhan Khmer Bank Limited . . . 100.00 W 78,171 100.00 14.00 14.79 60.00 58.82 14.40 26.67 100.00 — 99.99 100.00 100.00 50.00 100.00 3,028 946 45,837 706 5,173 11,079 37,202 72,248 — 43,013 60,761 35,233 13,882 — W407,279 — — (344) 615 — — 15 — 3,851 (920) — (318) (30,920) — (210) 581 — — — (27,921) 722 — — — — — — — — — 429 745 4,584 140 — 6,620 — — (3,848) — — — — — (12,565) — — — — (1,855) — 78,549 3,643 10,753 71,839 5,878 3,606 12,960 61,228 90,738 — 83,311 93,596 43,914 20,500 11,056

— 13,640 — 26,002 240 (750) 2,000 25,600 1,081 103 (119) (1,256)

47,056 14,919 (20,865) 20,865 32,806 7,273 27,025 4,484 — 4,097 4,657 3,676 11,927 (871) 129,696 94,165

(18,268) 591,571

Other than SH Asset Management Co., Ltd., Daewoo Capital Corporation and Shinhan National Pension Service PEF 1st, unaudited and unreviewed management’s financial statements of all other investees were used for valuation under the equity method. Additional review procedures were performed to assess the reliability of those financial statements. For Macquarie Shinhan Infrastructure Management and Daewoo Capital Corporation, management’s financial statements as of September 30, 2007 were used for valuation under the equity method. However, significant transactions or events during September 30 to December 31, 2007 were properly considered. Although the ownership interest in Macquarie Shinhan Infrastructure Management and Daewoo Capital Corporation is less than 15%, the Bank used the equity method of accounting as the Bank has the ability to significantly influence financial and operating policy decisions. And the Bank used the equity method accounting to Shinhan Corporate Restructuring Fund 8th because the sum of ownership interests of the Bank and Shinhan Capital Corporation exceeds 15%. The Bank disposed of all of the 8,960,005 shares of LG Card Co., Ltd. to Shinhan Financial Group Co., Ltd., its parent, through a public tender offer on July 3, 2007.

F-34

Equity method Beginning Acquisition income Ownership balance (redemption) (loss) (%)

2008 Changes in accumulated Overseas other operations comprehensive translation Dividends income debit(credit) received

Other

Ending balance

(in millions of Won) Shinhan Finance Ltd. . . . . . . . . . . . . . . . Shinhan Data System Co., Ltd. . . . . . . . . . . Macquarie Shinhan Infrastructure Management . . . . . . . Daewoo Capital Corporation . . . . . . . Shinhan Corporate Restructuring Fund 6th . . . . . . . . . . Shinhan Corporate Restructuring Fund 7th . . . . . . . . . . Shinhan Corporate Restructuring Fund 8th . . . . . . . . . . Shinhan National Pension Service PEF 1st . . . . . . . . . . . Shinhan PEF 2nd . . . . . SH Asset Management Co., Ltd. . . . . . . . . . . Shinhan Bank Kazakhstan . . . . . . . . Shinhan Asia Ltd. . . . . Shinhan Bank China Limited . . . . . . . . . . . Shinhan Bank Canada . . . . . . . . . . . . Shinhan Bank America . . . . . . . . . . . Shinhan Aitas . . . . . . . . Shinhan Bank Europe . . . . . . . . . . . . Shinhan Vina Bank . . . Shinhan Khmer Bank Limited . . . . . . . . . . .

100.00 W 78,549 100.00 3,644

— —

62 1,283

— —

26,733 —

— —

— —

105,344 4,927

14.00 14.39

10,754 71,839

4,980

— (154)

— —

(12,444) (2,884)

— —

3,290 89,536

(964) 21,699

60.00

5,879

(6,458)

(11)

590

58.82

3,606

(150)

80

(150)

(990)

2,396

14.40

12,960

761

(118)

13,603

26.67 26.09 100.00 100.00 99.99 100.00 100.00 100.00 89.58 100.00 50.00 80.10

61,227 — 90,736 — 83,311 — — 93,595 — 43,914 20,501 11,056 W591,571

— 33,840

(6,823) 2,864

53 — (1,662) — (10,780) — — 434 — — — — (11,669)

— — — (434) 35,737 70,355 376 29,680 — 12,315 3,889 4,098 182,749

— — (38,500) — — — —

— — — — — — —

54,457 36,704 — 52,564 165,543 372,480 31,149 150,636 40,401 76,666 50,626 20,484

(64,608) 14,034 54,295 55,405 298,006 30,773 27,146 54,633 13,662 21,950 3,823 (1,297) 1,870 4,119 — (219) (59) 6,775 4,286 1,455

— — — (14,173) — — — — — 52

521,353 55,859

(54,936) (14,121) 1,270,806

Other than SH Asset Management Co., Ltd., Daewoo Capital Corporation. Shinhan National Pension Service PEF 1st, Shinhan PEF 2nd , and Shinhan Data System, unaudited and unreviewed management’s financial statements of all other investees were used for valuation under the equity method. Additional review procedures were performed to assess the reliability of those financial statements. For Macquarie Shinhan Infrastructure Management and Daewoo Capital Corporation, management’s financial statements as of September 30, 2008 were used for valuation under the equity method. However, significant transactions or events between September 30 and December 31, 2008 were properly considered. Although the ownership interest in Macquarie Shinhan Infrastructure Management and Daewoo Capital Corporation is less than 15%, the Bank used the equity method of accounting as the Bank has the ability to significantly influence financial and operating policy decisions. And the Bank used the equity method accounting to Shinhan Corporate Restructuring Fund 8th because the sum of ownership interests of the Bank and Shinhan Capital Corporation exceeds 15%. In December, 2008, the Bank disposed of the 100% equity on SH Asset Management to Shinhan Financial Group at W157,718 million and recognized W93,110 million, the difference from the book value, as the gain on the disposition of equity method accounted investment.

F-35

(ii)

Condensed financial statements of investees accounted for by the equity method as of December 31, 2006, 2007 and 2008 were as follows: 2006 Total assets Total Stockholder’s equity liabilities (in millions of Won) 1,445 1,709 38,551 1,160,410 370 22 51 21,264 8,467 122,605 495,999 220,637 151,114 2,222,644 2007 Total assets Total Stockholders’ liabilities equity (in millions of Won) — 3,480 18,699 2,695,330 67 152 894 — 7,729 79,591 769,957 245,809 171,197 22,936 4,015,841 78,549 3,643 32,380 587,139 9,798 6,131 90,028 229,601 90,440 83,056 93,077 43,205 41,001 11,325 1,399,373 Net Income(loss) 78,170 3,028 82,490 478,942 139,505 1,179 8,795 76,455 90,561 43,013 60,761 35,233 27,763 1,125,895 Net Income(loss)

Shinhan Finance Ltd. . . . . . . . . . . . . . . . . . . . . Shinhan Data System Co., Ltd. . . . . . . . . . . . Macquarie Shinhan Infrastructure Management . . . . . . . . . . . . . . . . . . . . . . . . . . Daewoo Capital Corporation . . . . . . . . . . . . . Shinhan National Pension Service PEF1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan Corporate Restructuring Fund 6th . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan Corporate Restructuring Fund 7th . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan Corporate Restructuring Fund 8th . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SH Asset Management Co., Ltd. . . . . . . . . . . Shinhan Asia Ltd. . . . . . . . . . . . . . . . . . . . . . . . Shinhan Bank America . . . . . . . . . . . . . . . . . . Shinhan Bank Europe GmbH . . . . . . . . . . . . . Shinhan Vina Bank . . . . . . . . . . . . . . . . . . . . . .

W

79,615 4,737 121,041 1,639,352 139,875 1,201 8,846 97,719 99,028 165,618 556,760 255,870 178,877

10,594 409 79,508 46,640 2,159 (21) 2,958 (145) 17,112 8,940 3,561 3,986 4,400 180,101

W3,348,539

Shinhan Finance Ltd. . . . . . . . . . . . . . . . . . . . . Shinhan Data System Co., Ltd. . . . . . . . . . . . Macquarie Shinhan Infrastructure Management Co., Ltd. . . . . . . . . . . . . . . . . . Daewoo Capital Corporation . . . . . . . . . . . . . Shinhan Corporate Restructuring Fund 6th . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan Corporate Restructuring Fund 7th . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan Corporate Restructuring Fund 8th . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan National Pension Service PEF 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SH Asset Management Co., Ltd. . . . . . . . . . . Shinhan Asia Ltd. . . . . . . . . . . . . . . . . . . . . . . . Shinhan Bank America . . . . . . . . . . . . . . . . . . Shinhan Bank Europe . . . . . . . . . . . . . . . . . . . Shinhan Vina Bank . . . . . . . . . . . . . . . . . . . . . . Shinhan Khmer Bank Limited . . . . . . . . . . . .

W

78,549 7,123 51,079 3,282,469 9,865 6,283 90,922 229,601 98,169 162,647 863,034 289,014 212,198 34,261

(344) 616 27,879 108,197 1,827 121 (827) (4,711) 16,449 7,017 3,965 3,387 7,352 (871) 170,057

W5,415,214

F-36

2008 Total assets Total Stockholders’ liabilities equity (in millions of Won) — 1,806 13,130 4,380,135 511 120 903 105,344 4,927 11,159 657,086 140,697 4,073 94,492 204,213 64,989 165,353 150,625 76,333 101,253 52,564 371,575 31,149 12,713 25,573 2,274,118 Net Income(loss)

Shinhan Finance Ltd. . . . . . . . . . . . . . . . . . . . . Shinhan Data System Co., Ltd. . . . . . . . . . . . Macquarie Shinhan Infrastructure Management Co., Ltd. . . . . . . . . . . . . . . . . . Daewoo Capital Corporation . . . . . . . . . . . . . Shinhan PEF 2nd . . . . . . . . . . . . . . . . . . . . . . . . Shinhan Corporate Restructuring Fund 7th . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan Corporate Restructuring Fund 8th . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan National Pension Service PEF 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SH Asset Management Co., Ltd. . . . . . . . . . . Shinhan Asia Ltd. . . . . . . . . . . . . . . . . . . . . . . . Shinhan Bank America . . . . . . . . . . . . . . . . . . Shinhan Bank Europe . . . . . . . . . . . . . . . . . . . Shinhan Vina Bank . . . . . . . . . . . . . . . . . . . . . . Shinhan Bank Kazakhstan . . . . . . . . . . . . . . . Shinhan Bank China Limited . . . . . . . . . . . . . Shinhan Bank Canada . . . . . . . . . . . . . . . . . . . Shinhan Aitas . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan Khmer Bank Limited . . . . . . . . . . . .

W 105,344 6,733 24,289 5,037,221 141,208 4,193 95,395

62 1,283 14,158 11,630 10,977 135 5,283 (25,586) 14,330 1,936 288 7,152 8,572 (1,297) 3,215 — 2,011 1,591 55,740

204,213 — 97,880 32,891 248,220 82,867 1,174,510 1,023,885 367,794 291,461 349,858 248,605 53,044 480 1,375,994 1,004,419 31,149 — 14,874 2,161 70,387 44,814 W9,402,306 7,128,188

(e)

Structured notes as of December 31, 2008 consisted of the following: Par value Book value Inherent risk (in millions of Won)

Available-for-sale securities . . . . . . . . . . . . . .

Floating rate notes with long term Korean government bond interest Credit linked notes(*)

W 20,000

20,625

Decline in long term rates will reduce interest income Loss from occurrence of a credit event Deviation from the CD interest section will reduce interest income

271,243

123,421

Held-to-maturity securities . . . . . . . . . . . . . .

Floating rate noted linked to CD interest

20,000

20,000

W311,243
(*)

164,046

If one or more credit events occur including bankruptcy, payment defaults, default on obligation, refusal of payment or restructuring, the Bank will receive the underlying bonds issued or guaranteed by reference company or cash equivalent to the market value at the time of the credit event from the counterparty.

F-37

(5) (a)

Loans Loans outstanding as of December 31, 2006, 2007 and 2008 consisted of the following: 2006 2007 (in millions of Won) 2008

Call loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Domestic import usance bills . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency bills bought . . . . . . . . . . . . . . . . . . . . . . . . Korean Won bills bought . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bought under resale agreement . . . . . . . . . . . . . . . . . . . . . . . Loans in Won . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loans in foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loans in gold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Factoring receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Advances for customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Privately placed bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash management account (note 31) . . . . . . . . . . . . . . . . . . Bills discounted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance lease receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W

351,344 347,573 547,556 2,054,998 2,363,947 2,729,955 3,224,444 3,425,754 3,107,023 2,744,051 1,981,339 1,856,588 700,000 — 2,190,000 89,603,033 105,994,705 119,796,979 7,348,077 8,248,782 9,579,399 3,236 4,608 6,246 157,914 51,807 210,542 14,651 6,717 76,154 4,687,286 3,669,493 3,082,240 606,559 787,067 732,039 2,866,079 495,247 3,891,025 17,951 764 — 114,379,623 127,377,803 (1,875,607) (96,847) 125,405,349 147,805,746 (2,369,249) (94,670) 145,341,827

Less:

allowance for loan losses . . . . . . . . . . . . . . . . . . . . . deferred loan origination fees . . . . . . . . . . . . . . . . .

(1,627,388) (36,966) W112,715,269

(b)

The maturities of loans as of December 31, 2006, 2007 and 2008 were as follows: Loans Loans in in foreign Won currencies Other (in millions of Won) W17,020,271 12,164,951 22,839,646 13,920,570 23,657,595 W89,603,033 1,236,325 1,612,323 1,762,928 1,952,903 783,598 7,348,077 11,649,591 1,595,013 1,636,686 2,326,418 220,805 17,428,513

At December 31, 2006

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . . . . . . . Due after 3 months through 6 months . . . . . . . Due after 6 months through 1 year . . . . . . . . . . Due after 1 year through 3 years . . . . . . . . . . . . Due thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . .

29,906,187 15,372,287 26,239,260 18,199,891 24,661,998 114,379,623

At December 31, 2007

Loans Loans in in foreign Other Won currencies (in millions of Won) W 19,579,925 15,288,425 27,036,825 17,424,050 26,665,480 W105,994,705 1,573,101 1,860,153 1,533,253 1,416,204 1,866,071 8,248,782 8,427,098 1,460,943 1,374,951 1,738,769 132,555 13,134,316

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . . . . . . Due after 3 months through 6 months . . . . . . Due after 6 months through 1 year . . . . . . . . . Due after 1 year through 3 years . . . . . . . . . . Due thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . .

29,580,124 18,609,521 29,945,029 20,579,023 28,664,106 127,377,803

F-38

At December 31, 2008

Loans Loans in in foreign Won currencies Other (in millions of Won) W 24,341,987 19,500,953 28,566,301 17,137,260 30,250,478 W119,796,979 1,859,976 1,691,393 2,108,701 1,628,241 2,291,088 9,579,399 14,458,601 1,461,788 1,466,683 678,087 364,209 18,429,368

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . . . . . . Due after 3 months through 6 months . . . . . . Due after 6 months through 1 year . . . . . . . . . Due after 1 year through 3 years . . . . . . . . . . Due thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . .

40,660,564 22,654,134 32,141,685 19,443,588 32,905,775 147,805,746

(c)

Loans classified by country as of December 31, 2006, 2007 and 2008 were as follows: 2006 Loans in Loans in foreign Won currencies

Other

Total

Ratio (%)

(in millions of Won) Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . China . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S.A . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . W89,603,033 — — — — — — W89,603,033 5,506,179 17,296,714 112,405,926 657,284 16,535 673,819 316,333 41,254 357,587 322,187 17,212 339,399 73,750 13,245 86,995 80,570 11,645 92,215 391,774 31,908 423,682 7,348,077 17,428,513 2007 Loans in Loans in foreign Won currencies 114,379,623 98.27 0.59 0.31 0.30 0.08 0.08 0.37 100.00

Other

Total

Ratio (%)

(in millions of Won) Korea . . . . . . . . . . . . . . . . . . . . . . . . . . Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . China . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S.A . . . . . . . . . . . . . . . . . . . . . . . . . . U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vietnam . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . W105,994,705 — — — — — — W105,994,705 5,155,611 12,736,284 123,886,600 763,774 2,089 765,863 414,349 2,087 416,436 447,805 68,973 516,778 29,100 — 29,100 95,722 10,098 105,820 1,342,421 314,785 1,657,206 8,248,782 13,134,316 127,377,803 97.26 0.60 0.33 0.41 0.02 0.08 1.30 100.00

F-39

2008 Loans in Loans in foreign Won currencies

Other

Total

Ratio (%)

(in millions of Won) Korea . . . . . . . . . . . . . . . . . . . . . . . . . . Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . China . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S.A . . . . . . . . . . . . . . . . . . . . . . . . . . U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vietnam . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . W119,796,979 — — — — — — W119,796,979 (d) 5,310,782 18,029,630 143,137,391 1,409,232 483 1,409,715 271,221 13,605 284,826 621,460 1,899 623,359 43,099 — 43,099 210,120 27,433 237,553 1,713,485 356,318 2,069,803 9,579,399 18,429,368 147,805,746 96.85 0.95 0.19 0.42 0.03 0.16 1.40 100.00

Loans classified by industry as of December 31, 2006, 2007 and 2008 were as follows: 2006 Loans in Loans in foreign Won currencies

Other

Total

Ratio (%)

(in millions of Won) Manufacturing . . . . . . . . . . . . . . . . . . . Retail and wholesale . . . . . . . . . . . . . . Real estate and rental services . . . . . Construction . . . . . . . . . . . . . . . . . . . . . Lodging and restaurant . . . . . . . . . . . . Financial services and insurance . . . Other corporate loans . . . . . . . . . . . . . Household loans . . . . . . . . . . . . . . . . . . W13,750,538 7,353,655 10,923,275 3,066,255 2,057,809 864,168 3,644,348 47,942,985 W89,603,033 2,661,301 868,514 921,845 161,976 306,555 302,300 2,125,586 — 7,348,077 7,224,222 1,302,579 1,836,382 416,154 1,228,280 1,926,716 1,836,627 1,657,553 17,428,513 2007 Loans in Loans in foreign Won currencies 23,636,061 9,524,748 13,681,502 3,644,385 3,592,644 3,093,184 7,606,561 49,600,538 114,379,623 20.67 8.33 11.96 3.19 3.14 2.70 6.65 43.36 100.00

Other

Total

Ratio (%)

(in millions of Won) Manufacturing . . . . . . . . . . . . . . . . . . Retail and wholesale . . . . . . . . . . . . . Real estate and rental services . . . . Construction . . . . . . . . . . . . . . . . . . . . Lodging and restaurant . . . . . . . . . . . Financial services and insurance . . . . . . . . . . . . . . . . . . . . . Other corporate loans . . . . . . . . . . . . Household loans . . . . . . . . . . . . . . . . . W 16,335,887 9,627,975 15,208,719 4,142,356 3,063,302 1,085,276 4,273,920 52,257,270 W105,994,705 3,316,594 764,781 938,232 122,243 231,629 648,118 2,227,185 — 8,248,782 7,846,794 1,274,750 855,444 592,034 387,072 1,623,301 554,921 — 13,134,316 27,499,275 11,667,506 17,002,395 4,856,633 3,682,003 3,356,695 7,056,026 52,257,270 127,377,803 21.58 9.16 13.35 3.81 2.89 2.64 5.54 41.03 100.00

F-40

2008 Loans in Loans in foreign Won currencies

Other

Total

Ratio (%)

(in millions of Won) Manufacturing . . . . . . . . . . . . . . . . . . Retail and wholesale . . . . . . . . . . . . . Real estate and rental services . . . . Construction . . . . . . . . . . . . . . . . . . . . Lodging and restaurant . . . . . . . . . . . Financial services and insurance . . . . . . . . . . . . . . . . . . . . . Other corporate loans . . . . . . . . . . . . Household loans . . . . . . . . . . . . . . . . . W 19,438,907 10,704,077 16,260,301 5,479,997 3,146,517 1,947,053 6,688,888 56,131,239 W119,796,979 (e) 3,357,846 844,099 1,296,019 48,069 177,052 939,459 2,916,855 — 9,579,399 6,722,918 1,620,349 1,127,995 800,494 162,718 6,818,423 1,176,471 — 18,429,368 29,519,671 13,168,525 18,684,315 6,328,560 3,486,287 9,704,935 10,782,214 56,131,239 147,805,746 19.96 8.91 12.64 4.28 2.36 6.57 7.29 37.99 100.00

Restructured loans due to commencement of bankruptcy proceedings, composition proceedings or workout programs for the year ended December 31, 2008 were as follows: Corporate loans Household Loans Total (in millions of Won) 16,457 12,249 4,208 59,576 45,926 13,650

Loan balance before restructuring (*) . . . . . . . . . . . . . . . . . . . . . . . . . . . Loan balance after restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss resulting from restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(*)

W43,119 33,677 W 9,442

The troubled debt restructurings were due to modification of terms, specifically reduction in stated interest rate.

(f)

Details of loans transferred for the year ended December 31, 2008 were as follows: Loans sold to Amount sold (in millions of Won) W 484,036 486 783,215 30,996 230,653 W1,529,386 Note

Shinhan Chang-i ABS Specialty Co., Ltd. . . . . . . . . . . . . . . . . Credit recovery fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan mortgage 1st ABS Specialty Co., Ltd. . . . . . . . . . . . . Shinhan 8th ABS Specialty Co., Ltd. . . . . . . . . . . . . . . . . . . . . . Korea Asset Management Corporation . . . . . . . . . . . . . . . . . . .

without recourse without recourse without recourse without recourse under resettlement

F-41

(g)

For the years ended December 31, 2006, 2007 and 2008, changes in allowance for loan losses were as follows: 2006 2007 2008 (in millions of Won) Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allowance related to loans transferred . . . . . . . . . . . . . . . . . . . . . . . Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W 888,794 1,627,388 1,875,607 (160,636) (186,316) (340,942) 127,040 77,114 63,877 (88,428) (45,136) (45,397) 384,466 421,870 752,382 476,152 (19,313) 63,722 W1,627,388 1,875,607 2,369,249

(h)

As of December 31, 2006, 2007 and 2008, details of allowance for loan losses by asset credit risk classification were as follows: 2006 Balance (*) Allowance (**) (in millions of Won)

Corporate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Normal . . . . . . . . . W 64,817,456 Precautionary . . . 1,087,181 Substandard . . . . . 293,444 Doubtful . . . . . . . . 2,907 Estimated loss . . . 233,484 66,434,472

515,392 109,226 95,489 1,517 233,484 955,108 474,147 17,175 35,323 79,283 49,306 655,234 17,046 1,627,388 79,342 1,706,730

Household loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Normal . . . . . . . . . Precautionary . . . Substandard . . . . . Doubtful . . . . . . . . Estimated loss . . .

47,414,615 171,747 176,613 123,168 49,306 47,935,449 — 114,369,921 91,143 W114,461,064

Present value discount related to restructured loans . . . . Total loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(*) (**)

The loan balances include suspense receivable of W7,344 million as of December 31, 2006. Allowance for loan losses includes allowance for provisional payments and deposits except reserve deposits.

F-42

2007 Balance Allowance (in millions of Won) Corporate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Normal . . . . . . . . Precautionary . . . Substandard . . . . Doubtful . . . . . . . Estimated loss . . W 73,528,964 899,039 344,694 48,380 299,456 75,120,533 Household loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Normal . . . . . . . . Precautionary . . . Substandard . . . . Doubtful . . . . . . . Estimated loss . . . . . . . . . . . . 51,806,448 172,055 151,434 79,124 48,209 52,257,270 — 127,377,803 154,154 — 154,154 W127,531,957
(*)

695,280 87,613 88,026 37,356 299,456 1,207,731 518,064 17,206 30,353 41,474 48,209 655,306 12,570 1,875,607 113,870 2,097 115,967 1,991,574

Present value discount related to restructured loans . . . . . . . Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Present value discount related to restructured account . . . . Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Provisional payments, W11,922 million, and the related allowance, W7,540 million, are included in the balance and the allowance.

F-43

2008 Balance Allowance (in millions of Won) Corporate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Normal . . . . . . . . . Precautionary . . . Substandard . . . . . Doubtful . . . . . . . . Estimated loss . . . W 89,274,208 1,311,041 574,576 179,864 334,818 91,674,507 Household loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Normal . . . . . . . . . Precautionary . . . Substandard . . . . . Doubtful . . . . . . . . Estimated loss . . . 55,673,021 199,627 125,135 101,323 32,133 56,131,239 — 147,805,746 722,745 — 722,745 W148,528,491
(*)

883,745 171,348 151,158 125,128 334,818 1,666,197 556,730 19,960 25,004 54,137 32,133 687,964 15,088 2,369,249 290,801 1,377 292,178 2,661,427

Present value discount related to restructured loans . . . . . . . Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Present value discount related to restructured account . . . . . Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Provisional payments, W204,795 million, and the related allowance, W141,620 million, are included in the balance and the allowance. With regard to derivatives, the Bank set W62,245 million as the allowance for other assets considering the counter parties’ risks.

(i)

The ratios of allowance for loan losses as of December 31, 2006, 2007 and 2008 were as follows: 2006 2007 (in millions of Won) 127,531,957 1,991,574 1.56 2008

Loan balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ratio (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (j)

W114,461,064 1,706,730 1.49

148,528,491 2,661,427 1.79

Changes in deferred loan origination fees for the years ended December 31, 2006, 2007 and 2008 were as follows: 2007 2008 2006 (in millions of Won)

Beginning Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ending Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W — 36,966 96,847 44,807 92,340 63,640 (7,841) (32,459) (65,817) W36,966 96,847 94,670

F-44

(6)

Property and Equipment

Property and equipment as of December 31, 2006, 2007 and 2008 consisted of the following: 2006 2007 2008 (in millions of Won) 1,142,850 869,480 172,079 1,119,952 92,115 3,396,476 1,152,600 974,063 201,803 1,083,612 50,508 3,462,586

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vehicles and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W 1,093,380 802,174 137,689 1,060,737 127,133 3,221,113

Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated impairment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,016,694) (1,078,243) (1,164,901) (5,453) (5,306) (5,306) W 2,198,966 2,312,927 2,292,379

The officially declared values of land used in domestic branches at December 31, 2006, 2007 and 2008, as announced by the Ministry of Land, Transport and Maritime Affairs, were as follows: Acquisition cost Declared value 2006 2007 2008 2006 2007 2008 (in millions of Won) Land (domestic only) . . . . . . . . . . W1,092,835 1,142,270 1,151,630 1,138,307 1,270,865 1,373,770

The officially declared value, which is used for government purposes, does not represent fair value. (7) Other Assets

Other assets as of December 31, 2006, 2007 and 2008 consisted of the following: 2006 2007 2008 (in millions of Won)

Security deposits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable, net of present value discount . . . . . . . . . . . . . . . . Accrued income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Derivative assets (note 27) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax asset (note 23) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating lease assets, net of accumulated depreciation and allowance for loss on disposition (note 8) . . . . . . . . . . . . . . . . . . . . . . Gold bullion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible assets, net of accumulated amortization . . . . . . . . . . . . . . . . Sundry assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W 953,934 1,092,392 1,123,592 3,029,568 3,741,199 5,417,344 826,814 931,048 1,010,820 45,626 62,913 55,237 1,277,006 1,986,445 12,070,755 — — 251,624 79,972 7,337 8,305 460,597 6,689,159 67,567 21,822 9,431 948,777 8,861,594 (79,342) 8,745,627 50,276 54,360 30,065 991,807 21,055,880 (79,342) 20,763,702

Less: allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(292,178) W6,609,817

F-45

(8) (a)

Operating Leases As of December 31, 2006, 2007 and 2008 details of operating lease were as follows: 2006 2007 2008 (in millions of Won) Operating lease assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allowance for loss on disposition of operating lease assets . . . . . . . W 196,864 196,864 175,621 (116,428) (128,833) (124,881) (464) (464) (464) W 79,972 67,567 50,276

(b)

Future operating lease receivable as of December 31, 2008 is as follows: Operating lease receivables in Foreign currencies Won (in millions of Won and thousands of U.S. dollars) $15,258 W19,187 16,458 20,696 21,519 27,060 18,974 23,860 $72,209 W90,803

To be collected in

2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) (a)

Deposits Deposits as of December 31, 2006 , 2007 and 2008 consisted of the following: 2006 2007 (in millions of Won) 2008

Demand deposits: Deposits in Won . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits in foreign currencies . . . . . . . . . . . . . . . . . . . . . . .

W37,093,616 1,434,726 38,528,342

37,790,416 1,539,758 39,330,174

36,055,900 2,384,739 38,440,639

Time and savings deposits: Deposits in Won . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits in foreign currencies . . . . . . . . . . . . . . . . . . . . . . .

35,305,181 2,165,919 37,471,100

39,744,682 3,088,380 42,833,062 15,167,654 5,613,464 723,278 150,243 103,817,875

56,067,664 4,502,000 60,569,664 13,123,642 6,113,710 770,300 220,016 119,237,971

Negotiable certificates of deposit . . . . . . . . . . . . . . . . . . . . . . Deposits in bills issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash management account . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits in gold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12,966,851 3,357,410 609,835 72,645 W93,006,183

F-46

(b)

The maturities of deposits as of December 31, 2006, 2007 and 2008 were as follows: Time and Negotiable savings certificates deposits of deposit (in millions of Won) 8,764,981 4,045,761 1,552,114 4,302,650 3,019,755 46,571 12,966,851

At December 31, 2006

Demand deposits

Other

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . Due after 3 months through 6 months . . . . . . . . . . . . . . . . . . . . . . . . Due after 6 months through 1 year . . . Due after 1 year through 3 years . . . . . Due there after . . . . . . . . . . . . . . . . . . . . .

W 8,131,639

3,486,638 13,425 10,779 23,891 505,157 4,039,890

24,429,019 6,840,298 21,181,439 7,523,756 33,031,671 93,006,183

— 5,274,759 — 16,868,010 — 4,480,110 30,396,703 2,083,240 W38,528,342 37,471,100

At December 31, 2007

Demand deposits

Time and Negotiable savings certificates deposits of deposit (in millions of Won) 10,814,346 5,281,328 2,389,614 4,010,452 3,407,783 78,477 15,167,654

Other

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . Due after 3 months through 6 months . . . . . . . . . . . . . . . . . . . . . . . . Due after 6 months through 1 year . . . Due after 1 year through 3 years . . . . . Due there after . . . . . . . . . . . . . . . . . . . . .

W 7,670,875

6,029,434 7,587 14,489 31,193 404,282 6,486,985

29,795,983 8,918,814 24,132,717 9,136,679 31,833,682 103,817,875

— 6,521,613 — 20,107,776 1,338,082 4,359,621 30,321,217 1,029,706 W39,330,174 42,833,062

At December 31, 2008

Demand deposits

Time and Negotiable savings certificates deposits of deposit (in millions of Won) 12,883,889 2,572,805 3,226,453 4,883,392 2,411,053 29,939 13,123,642

Other

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . Due after 3 months through 6 months . . . . . . . . . . . . . . . . . . . . . . . . Due after 6 months through 1 year . . . Due after 1 year through 3 years . . . . . Due thereafter . . . . . . . . . . . . . . . . . . . . . .

W 7,061,549

6,637,742 5,833 13,161 21,693 425,597 7,104,026

29,155,985 9,214,895 41,164,373 8,906,139 30,796,579 119,237,971

— 5,982,609 — 36,267,820 1,798,830 4,674,563 29,580,260 760,783 W38,440,639 60,569,664

F-47

(10) Borrowings (a) Borrowings as of December 31, 2006, 2007 and 2008 consisted of the following: 2006 Balance Interest rate (%) 2007 Interest rate (%) (in millions of Won) Balance 2008 Balance Interest rate (%)

Call money Won . . . . . . . . . . . . . . . . . . . W Foreign currency . . . . . . .

760,300 643,559 1,403,859

4.05~4.55 W 0.47~7.31

145,700 4.25~5.24 W 2,652,200 2.25~3.03 836,329 0.75~10.25 1,932,165 1.90~6.92 982,029 4,584,365 3.15~6.16 716,331 3.00~8.02

Bills sold . . . . . . . . . . . . . . . . . Sold with repurchase agreements . . . . . . . . . . . . . Won . . . . . . . . . . . . . . . . . . . Foreign currency . . . . . . .

391,194

3.15~5.24

1,032,819

3,011,957 1,410,232 4,422,189

1.58~5.45 0.50~5.45

3,021,832 1,443,733 4,465,565

3.30~7.25 1.00~5.78

1,917,792 3.00~3.30 552,745 4.03~4.35 2,470,537

Borrowings in Won Bank of Korea . . . . . . . . . . Other . . . . . . . . . . . . . . . . . .

1,029,819 2,028,819 3,058,638

2.75 1.20~5.50

601,142 2,486,754 3,087,896

3.25 1.00~6.00

1,004,027 2.25~3.50 2,855,968 0.00~7.00 3,859,995

Borrowings in foreign currencies Nostro . . . . . . . . . . . . . . . . . Banks . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . .

789,482 3.12~11.50 2,849,347 0.63~5.55 1,541,248 3.00~8.50 5,180,077

1,325,053 3,534,316 2,668,220 7,527,589

1.31~5.77 0.98~7.48 0.98~7.50

2,698,815 3.01~4.26 2,844,968 2.12~6.50 3,017,317 5.87 8,561,100

Due to the Bank of Korea in foreign currencies . . . .

122,328 W14,578,285

0.10

130,385 W17,226,283

0.10

218,092 W20,410,420

0.10

F-48

(b)

The maturities of borrowings by remaining periods as of December 31, 2006, 2007 and 2008 were as follows: Borrowings in foreign currencies Other (in millions of Won) 2,514,561 2,862,270 1,358,460 849,629 860,064 2,548,163 400,099 79,508 46,893 — 5,180,077 6,339,570

At December 31, 2006

Borrowings in Won

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due after 3 months through 6 months . . . . . . . . . . . . . . Due after 6 months through 1 year . . . . . . . . . . . . . . . . . Due after 1 year through 3 years . . . . . . . . . . . . . . . . . . . Due thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W1,395,236 42,417 72,336 330,522 1,218,127 W3,058,638

6,772,067 2,250,506 3,480,563 810,129 1,265,020 14,578,285

At December 31, 2007

Borrowings in Won

Borrowings in foreign currencies Other (in millions of Won) 3,631,048 2,063,008 1,370,833 242,070 220,630 7,527,589 3,697,274 1,256,829 1,620,762 35,933 — 6,610,798

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due after 3 months through 6 months . . . . . . . . . . . . . . Due after 6 months through 1 year . . . . . . . . . . . . . . . . . Due after 1 year through 3 years . . . . . . . . . . . . . . . . . . . Due thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W 710,837 104,962 245,564 1,000,937 1,025,596 W3,087,896

8,039,159 3,424,799 3,237,159 1,278,940 1,246,226 17,226,283

At December 31, 2008

Borrowings in Won

Borrowings in foreign currencies Other (in millions of Won)

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due after 3 months through 6 months . . . . . . . . . . . . . . Due after 6 months through 1 year . . . . . . . . . . . . . . . . . Due after 1 year through 3 years . . . . . . . . . . . . . . . . . . . Due thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W1,148,549 170,240 407,470 1,013,184 1,120,552 W3,859,995

5,863,649 6,410,862 13,423,060 1,233,373 730,800 2,134,413 729,463 827,266 1,964,199 475,946 20,397 1,509,527 258,669 — 1,379,221 8,561,100 7,989,325 20,410,420

(11) Debentures (a) Debentures as of December 31, 2006, 2007 and 2008 consisted of the following: 2006 2007 2008 (in millions of Won) 25,122,264 3,089,994 28,783,277 3,661,125

Debentures in Won . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Debentures in foreign currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W21,703,458 2,578,295

Less: discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

24,281,753 28,212,258 32,444,402 (69,248) (41,343) (26,245) W24,212,505 28,170,915 32,418,157

F-49

(b)

Details of debentures in Won as of December 31, 2006, 2007 and 2008 were as follows: Maturity 2006 2007 2008 Interest rate (%)

(in millions of Won, except interest rate) Discount . . . . . . . . . . . . . . . . . . . . . . . . . . Within 1 year W 2,130,000 1,350,000 660,000 Within 3 years 30,000 Coupon . . . . . . . . . . . . . . . . . . . . . . . . . . . Within 1 year 290,000 1,115,672 3,404,152 Within 2 years 5,170,000 5,257,715 5,980,610 Within 3 years 3,360,000 5,507,171 4,334,279 Over 3 years 1,060,000 1,674,286 2,570,042 Over 5 years 4,335,000 5,860,000 6,240,000 Subordinated . . . . . . . . . . . . . . . . . . . . . . Over 5 years 3,988,397 4,343,207 4,346,221 Hybrid . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 years 495,033 495,033 922,469 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 944,004 — — 21,802,434 25,603,084 28,457,773 Loss(Gain) on fair value hedge, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.17~7.25 4.10~8.10 4.80~7.81 4.70~7.78 4.80~7.70 4.28~10.75 4,56~7.70 5.70~7.80

(98,976)

(480,820)

325,504

W21,703,458 25,122,264 28,783,277 (c) Details of debentures in foreign currencies issued by the Bank as of December 31, 2006, 2007 and 2008 were as follows:
2006 (in millions of Won) Subordinated: W232,400 46,480 185,920 185,920 325,360 278,880 27,888 2007 2008 Issue date Maturity date Interest rate Remarks (%)

234,550 46,910 187,640 187,640 328,370 281,460 —

— 62,875 251,500 251,500 440,125 377,250 —

September 8, 2003 February 24, 2004 November 3, 2004 November 3, 2004 July 15, 2005 February 28, 2006 May 30, 2006

September 8, 2013 February 24, 2014 November 3, 2014 November 3, 2014 July 15, 2015 February 28, 2016 May 30, 2007

6.25 6M Libor+189bp 4.625 4.50 5.125 5.75 5.55

GMTN GMTN

GMTN GMTN GMTN

1,282,848 1,266,570 1,383,250 Non-subordinated: 185,920 27,888 18,592 18,592 46,480 23,240 27,888 46,480 27,888 27,888 46,480 29,898 48,462 18,592 46,480 18,592 18,592 43,001 — — —

187,640 — 18,764 18,764 — — 28,146 — — 28,146 — — — — 46,910 — 18,764 45,833 32,447 48,671 46,910

— August 5, 2003 September 24, 2004 — September 30, 2004 25,150 October 27, 2004 — November 5, 2004 — November 9, 2004 — November 26, 2004 — December 8, 2004 — December 14, 2004 — March 16, 2005 — June 15, 2006 — July 6, 2006 — July 13, 2006 — November 8, 2006 — November 17, 2006 — November 21, 2006 — November 22, 2006 — December 21, 2006 43,777 January 19, 2007 — February 26, 2007 — February 26, 2007

August 5, 2008 September 24, 2014 September 30, 2014 October 27, 2014 November 5, 2007 November 9, 2007 November 26, 2009 December 8, 2007 December 14, 2014 March 16, 2010 June 15, 2007 July 6, 2007 July 13, 2007 November 8, 2007 November 17, 2008 November 21, 2007 November 22, 2008 June 23, 2008 January 19, 2009 February 26, 2008 February 26, 2008

3MLibor+100bp 6.83 6.30 6.40 3M Libor+35bp 3M Libor+20bp 4.75 6M Libor+32bp 5.10 5.50 4.00 5.25 3M Libor+7bp 3MLibor+ 7.5bp 3M Libor+15bp 3M Libor+ 8bp 5.30 3M JPY Libor + 0.125 3M SOR + 0.11 3.615 3M Libor + 0.10

GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN

F-50

2006

2007

2008

Issue date

Maturity date

Interest rate Remarks (%)

(in millions of Won) — — — — — — — — — — — — — — — — — — — — 24,052 205,712 123,427 46,910 32,447 32,447 45,699 32,447 46,910 36,078 43,294 — — — — — — — — — — 217,500 130,500 — 43,777 — 61,655 — 62,875 — — 16,225 13,792 32,450 25,150 24,338 43,777 19,260 19,470 487,863 March 19, 2007 June 8, 2007 June 8, 2007 June 18, 2007 June 29, 2007 September 12, 2007 September 17, 2007 October 17, 2007 October 25, 2007 October 26, 2007 November 2, 2007 May 2, 2008 May 14, 2008 May 15, 2008 June 4, 2008 June 10, 2008 June 17, 2008 July 9, 2008 July 17, 2008 July 28, 2008 March 19, 2008 June 8, 2010 June 8, 2010 June 18, 2008 June 29, 2009 September 12, 2008 September 17, 2009 October 17, 2008 October 25, 2010 October 26, 2008 November 2, 2008 May 4, 2010 May 16, 2011 May 15, 2010 June 4, 2011 June 10, 2009 June 17, 2010 July 9, 2009 July 17, 2009 July 28, 2011

4.50 3M AUD BBSW +0.3 6.875 5.60 3M SOR + 0.08 6M SOR + 0.14 4.85 2.90 3M Liobr+0.36 4.84 4.38 3M Hibor+0.9 4.24 3M Hibor+1.06 3M Libor+1.30 3.26 3.78 2.75 3M Hibor+0.8 3M Tibor+1.45

GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN GMTN

720,953 1,190,418 1,267,559 Hybrid: 278,880 325,360 604,240

281,460 328,370 609,830

377,250 March 2, 2005 440,125 September 20, 2006 817,375

March 2, 2035 September 20, 2036

5.663/3M Libor+199bp 6.819/3M Libor+252bp

Loss on fair value hedge, net: (29,746) 23,176 192,941 W2,578,295 3,089,994 3,661,125

(d)

The maturities of debentures by remaining period as of December 31, 2006, 2007 and 2008 were as follows: Debentures Debentures in foreign in Won currencies (in millions of Won) W 1,616,066 1,332,010 4,554,263 8,010,849 6,190,270 W21,703,458 — 74,368 231,745 321,880 1,950,302 2,578,295

At December 31, 2006

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due after 3 months through 6 months . . . . . . . . . . . . . . . . . . . . . . . . . Due after 6 months through 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due after 1 year through 3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,616,066 1,406,378 4,786,008 8,332,729 8,140,572 24,281,753

F-51

At December 31, 2007

Debentures Debentures in foreign in Won currencies (in millions of Won) W 2,955,089 1,186,980 5,006,950 6,244,786 9,728,459 W25,122,264

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due after 3 months through 6 months . . . . . . . . . . . . . . . . . . . . . . . . . Due after 6 months through 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due after 1 year through 3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

144,224 3,099,313 118,316 1,305,296 311,286 5,318,236 532,300 6,777,086 1,983,868 11,712,327 3,089,994 28,212,258

At December 31, 2008

Debentures Debentures in foreign in Won currencies (in millions of Won) W 3,977,996 2,382,889 3,305,056 7,089,363 12,027,973 W28,783,277

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due after 3 months through 6 months . . . . . . . . . . . . . . . . . . . . . . . . . Due after 6 months through 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due after 1 year through 3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

43,777 4,021,773 68,115 2,451,004 100,385 3,405,441 1,030,131 8,119,494 2,418,717 14,446,690 3,661,125 32,444,402

(12) Retirement and Severance Benefits Changes in retirement and severance benefits for the years ended December 31, 2006, 2007 and 2008 were as follows: 2006 2007 2008 (in millions of Won) Balance at beginning of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustment due to foreign currency rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfer from affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase due to merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease due to conversion of China branches to a foreign subsidiary . . Balance at end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Deposit for severance benefit insurance . . . . . . . . . . . . . . . . . . . . . . . . . Contribution to National Pension Fund . . . . . . . . . . . . . . . . . . . . . . . . . Net balance at end of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W 177,848 (34) (30,824) 90,462 — 67,722 — 303,194 6 (61,420) 94,678 — — 336,458 235 (45,662) 88,387 242 (37)

303,194 336,458 379,623 (194,684) (234,756) (246,949) (7) (7) — W 108,503 101,695 132,674

F-52

(13) Other Liabilities (a) Other liabilities as of December 31, 2006, 2007 and 2008 consisted of the following: 2006 2007 2008 (in millions of Won) 59,926 113,669 445,931 318,999 1,226,974 3,366,074 131,556 148,681 3,816,262 5,282,220 2,600,805 3,221,566 140,039 177,906 138,495 137,965 2,300,707 11,608,174 325,908 — 399,009 294,903 59,006 42,412 2,825,070 4,709,425 14,469,688 29,421,994

Allowance for loss on guarantees and acceptances (note 14) . . . . . Other allowances (note 13 (b)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Borrowings from trust accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign exchange remittances pending . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unearned revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits for letters of guarantee and others . . . . . . . . . . . . . . . . . . . . . Derivative liabilities (note 27) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax liabilities (note 23) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposit held for subscription of securities . . . . . . . . . . . . . . . . . . . . . . Sundry liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W

51,675 322,608 1,148,427 157,257 3,100,671 2,153,832 149,524 128,128 1,303,499 297,926 251,184 22,273 3,536,947

W12,623,951 (b)

Other allowances as of December 31, 2006, 2007 and 2008 consisted of the following: 2006 2007 2008 (in millions of Won) 341,750 4,512 25,627 8,698 51,311 333 13,700 445,931 249,442 4,195 32,709 7,919 8,009 1,268 15,457 318,999

Allowance for unused commitments (*) . . . . . . . . . . . . . . . . . . . . . . . . Allowance for expected loss related to tax inspection . . . . . . . . . . . Allowance for expected loss related to lawsuits . . . . . . . . . . . . . . . . . Allowance for children education fund of honor retired employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allowance related to escheated funds . . . . . . . . . . . . . . . . . . . . . . . . . . Allowance for loans sold under repurchase agreements (**) . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W

213,276 83,077 10,562 9,605 — 268 5,820

W
(*) (**)

322,608

The Bank set other allowances by applying the credit conversion factor to unused limits considering the possibility of loss. The Bank set other allowances for loans sold to Korean Asset Management Corporation under repurchase agreements.

F-53

(14) Guarantees and Acceptances (a) Guarantees and acceptances as of December 31, 2006, 2007 and 2008 were as follows: 2006 2007 2008 (in millions of Won)

Guarantees and acceptances outstanding Guarantees and acceptances in Won: Performance guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Credit-linked derivatives (note 28(d)) . . . . . . . . . . . . . . . . . . . . . . . . . Guarantees on loan collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Guarantees on debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Guarantees on letter of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Guarantees on bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W1,367,116 18,081 765,755 111,603 978 — 11,500 2,275,033

2,567,378 7,215 622,355 86,288 1,354 6,647 — 3,291,237

1,053,616 5,446 28,755 105,685 116,887 5,273 380,895 1,696,557

Guarantees and acceptances in foreign currencies: Performance guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Credit-linked derivatives (note 28(d)) . . . . . . . . . . . . . . . . . . . . . . . . . Acceptances on letter of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acceptances for letters of guarantee for importers . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

768,953 279,718 130,144 255,952 146,472 42,731 1,623,970

2,532,767 358,177 197,022 325,576 122,726 — 3,536,268

5,518,522 518,100 — 467,476 72,386 — 6,576,484

Contingent guarantees and acceptances Letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Performance guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,952,614 — 430 2,953,044 W6,852,047

3,503,450 3,547,919 430 7,051,799 13,879,304

2,992,617 4,978,090 — 7,970,707 16,243,748

F-54

(b)

Guarantees and acceptances classified by country as of December 31, 2006, 2007 and 2008 are as follows: 2006 Guarantees and acceptances outstanding in Won Foreign currencies Balance Ratio Balance Ratio (%) (%) (in millions of Won)

Contingent guarantees and acceptances Balance Ratio (%) W2,826,071 33,235 4,738 5,002 3,724 11,405 3,881 47,452 17,536 W2,953,044 95.70 1.12 0.16 0.17 0.13 0.39 0.13 1.61 0.59 100.00

Korea . . . . . . . . . . . . . . . . . . . . . . . U.S.A. . . . . . . . . . . . . . . . . . . . . . . Japan . . . . . . . . . . . . . . . . . . . . . . . U.K. . . . . . . . . . . . . . . . . . . . . . . . . India . . . . . . . . . . . . . . . . . . . . . . . . Vietnam . . . . . . . . . . . . . . . . . . . . . China . . . . . . . . . . . . . . . . . . . . . . . Singapore . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . .

W2,275,033 — — — — — — — — W2,275,033

100.00 — — — — — — — — 100.00

W1,310,610 74,207 25,683 32,536 23,242 11,280 29,484 29,999 86,929 W1,623,970 2007

80.70 4.57 1.58 2.00 1.43 0.70 1.82 1.85 5.35 100.00

Guarantees and acceptances outstanding in Won Foreign currencies Balance Ratio Balance Ratio (%) (%) (in millions of Won) Korea . . . . . . . . . . . . . . . . . . . . . . . U.S.A. . . . . . . . . . . . . . . . . . . . . . . Japan . . . . . . . . . . . . . . . . . . . . . . . U.K. . . . . . . . . . . . . . . . . . . . . . . . . India . . . . . . . . . . . . . . . . . . . . . . . . Vietnam . . . . . . . . . . . . . . . . . . . . . China . . . . . . . . . . . . . . . . . . . . . . . Singapore . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . W3,291,237 — — — — — — — — W3,291,237 100.00 — — — — — — — — 100.00 W3,231,872 46,889 17,008 8,971 10,785 17,049 10,152 13,819 179,723 W3,536,268 91.39 1.33 0.48 0.26 0.30 0.48 0.29 0.39 5.08 100.00

Contingent guarantees and acceptances Balance Ratio (%) W6,953,727 18,865 12,701 6,973 759 7,109 19,706 7,763 24,196 W7,051,799 98.61 0.27 0.18 0.10 0.01 0.10 0.28 0.11 0.34 100.00

2008 Guarantees and acceptances outstanding in Won Foreign currencies Balance Ratio Balance Ratio (%) (%) (in millions of Won) Korea . . . . . . . . . . . . . . . . . . . . . . . U.S.A. . . . . . . . . . . . . . . . . . . . . . . Japan . . . . . . . . . . . . . . . . . . . . . . . U.K. . . . . . . . . . . . . . . . . . . . . . . . . India . . . . . . . . . . . . . . . . . . . . . . . . Vietnam . . . . . . . . . . . . . . . . . . . . . China . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . W1,696,557 — — — — — — — W1,696,557 100.00 — — — — — — — 100.00 W6,327,999 46,341 21,610 9,225 15,630 13,440 342 141,897 W6,576,484 96.22 0.70 0.33 0.14 0.24 0.20 0.01 2.16 100.00

Contingent guarantees and acceptances Balance Ratio (%) 99.56 0.18 0.02 — 0.00 0.07 0.09 0.08 100.00

W7,936,169 14,599 1,314 — 351 5,305 6,883 6,086 W7,970,707

F-55

(c)

Guarantees and acceptances classified by industry as of December 31, 2006, 2007 and 2008 are as follows: 2006 Guarantees and acceptances outstanding in Won Foreign currencies Balance Ratio Balance Ratio (%) (%) (in millions of Won)

Contingent guarantees and acceptances Balance Ratio (%)

Manufacturing . . . . . . . . . . . . . . . Retail and wholesale . . . . . . . . . Construction . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . .

W 635,009 332,040 149,291 1,158,693 W2,275,033

27.91 14.60 6.56 50.93 100.00

W1,163,338 140,805 115,445 204,382 W1,623,970

71.63 8.67 7.11 12.59 100.00

W2,008,060 641,763 52,048 251,173 W2,953,044

68.00 21.73 1.76 8.51 100.00

2007 Guarantees and acceptances outstanding in Won Foreign currencies Balance Ratio Balance Ratio (%) (%) (in millions of Won) Manufacturing . . . . . . . . . . . . . . . Retail and wholesale . . . . . . . . . Construction . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . W1,464,844 475,853 170,478 1,180,062 W3,291,237 44.51 14.46 5.18 35.85 100.00 W2,671,930 186,201 289,650 388,487 W3,536,268 75.56 5.27 8.19 10.98 100.00

Contingent guarantees and acceptances Balance Ratio (%)

W5,840,922 874,024 82,099 254,754 W7,051,799

82.83 12.39 1.16 3.62 100.00

2008 Guarantees and acceptances outstanding in Won Foreign currencies Balance Ratio Balance Ratio (%) (%) (in millions of Won) Manufacturing . . . . . . . . . . . . . . . Retail and wholesale . . . . . . . . . Construction . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . W 512,600 468,465 129,142 586,350 W1,696,557 (d) 30.21 27.61 7.61 34.57 100.00 W5,430,286 247,715 366,162 532,321 W6,576,484 82.57 3.77 5.57 8.09 100.00

Contingent guarantees and acceptances Balance Ratio (%)

W7,075,981 509,150 98,147 287,429 W7,970,707

80.15 7.54 3.65 8.66 100.00

Customers of guarantees and acceptances as of December 31, 2006, 2007 and 2008 consisted of only corporations.

F-56

(e)

As of December 31, 2006, 2007 and 2008, details of allowances for loss on guarantees and acceptances outstanding were as follows: 2006 Normal Precautionary Substandard Doubtful (in millions of Won) Estimated loss Total

Guarantees and acceptances outstanding Balance . . . . . . . . . . . . . . . . . W 3,744,601 Allowances . . . . . . . . . . . . . . 20,117 Ratio (%) . . . . . . . . . . . . . . . . 0.54

152,406 15,558 10.21

225 45 20.00

29 12 41.38

1,742 3,899,003 1,742 37,474 100.00 0.96

Contingent guarantees and acceptances Balance . . . . . . . . . . . . . . . . . W 2,850,004 Allowances . . . . . . . . . . . . . . 4,541 Ratio (%) . . . . . . . . . . . . . . . . 0.16

93,998 3,127 3.33

1,086 116 10.68

1,911 191 9.99

6,045 2,953,044 6,045 14,020 100.00 0.47

Endorsed bills Balance . . . . . . . . . . . . . . . . . W 7,279,473 Allowances . . . . . . . . . . . . . . 181 Ratio (%) . . . . . . . . . . . . . . . . 0.002

— — —

— — —

— — —

— 7,279,473 — 181 — 0.002

Total Balance . . . . . . . . . . . . . . . . . W13,874,078 Allowances . . . . . . . . . . . . . . 24,839 Ratio (%) . . . . . . . . . . . . . . . . 0.18

246,404 18,685 7.58

1,311 161 12.28

1,940 203 10.46

7,787 14,131,520 7,787 51,675 100.00 0.37

F-57

2007 Normal Precautionary Substandard Doubtful (in millions of Won) Guarantees and acceptances outstanding Balance . . . . . . . . . . . . . . . . . W 6,813,809 Allowances . . . . . . . . . . . . . . 36,674 Ratio (%) . . . . . . . . . . . . . . . . 0.54 Estimated loss Total

9,309 626 6.72

1,313 176 13.40

— — —

3,074 6,827,505 3,074 40,550 100.00 0.59

Contingent guarantees and acceptances Balance . . . . . . . . . . . . . . . . . W 7,034,428 Allowances . . . . . . . . . . . . . . 12,396 Ratio (%) . . . . . . . . . . . . . . . . 0.18

9,422 552 5.86

452 48 10.62

1,836 310 16.88

5,661 7,051,799 5,661 18,967 100.00 0.27

Endorsed bills Balance . . . . . . . . . . . . . . . . . W15,569,645 Allowances . . . . . . . . . . . . . . 355 Ratio (%) . . . . . . . . . . . . . . . . 0.002

260 54 20.77

— — —

— — —

— 15,569,905 — 409 — 0.003

Total Balance . . . . . . . . . . . . . . . . . W29,417,882 Allowances . . . . . . . . . . . . . . 49,425 Ratio (%) . . . . . . . . . . . . . . . . 0.17

18,991 1,232 6.49

1,765 224 12.69

1,836 310 16.88

8,735 29,449,209 8,735 59,926 100.00 0.20

F-58

2008 Normal Precautionary Substandard Doubtful (in millions of Won) Guarantees and acceptances outstanding Balance . . . . . . . . . . . . . . . . . W 8,069,575 Allowances . . . . . . . . . . . . . . 43,699 Ratio (%) . . . . . . . . . . . . . . . . 0.54 Estimated loss Total

153,730 16,793 10.92

42,684 8,598 20.14

688 440 63.95

6,364 8,273,041 6,364 75,894 100.00 0.92

Contingent guarantees and acceptances Balance . . . . . . . . . . . . . . . . . W 7,782,043 Allowances . . . . . . . . . . . . . . 17,824 Ratio (%) . . . . . . . . . . . . . . . . 0.23

69,968 2,941 4.20

111,421 10,495 9.42

1,042 151 14.49

6,233 7,970,707 6,233 37,644 100.00 0.47

Endorsed bills Balance . . . . . . . . . . . . . . . . . W14,872,121 Allowances . . . . . . . . . . . . . . 131 Ratio (%) . . . . . . . . . . . . . . . . 0.00

— — —

— — —

— — —

— 14,872,121 — 131 — 0.00

Total Balance . . . . . . . . . . . . . . . . . W30,723,739 Allowances . . . . . . . . . . . . . . 61,654 Ratio (%) . . . . . . . . . . . . . . . . (f) 0.20

223,698 19,734 8.82

154,105 19,093 12.40

1,730 591 34.13

12,597 31,115,869 12,597 113,669 100.00 0.37

As of December 31, 2006, 2007 and 2008, the ratios of allowance to guarantees and acceptances and endorsed bills were as follows: 2006 2007 2008 (in millions of Won, except ratio)

Guarantees and acceptances and endorsed bills . . . . . . . . . . . . . . . . . Allowance for loss on guarantees and acceptances . . . . . . . . . . . . . . Ratio (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W14,131,520 29,449,209 31,115,869 51,675 59,926 113,669 0.37 0.20 0.37

F-59

(15) Foreign Currency Denominated Assets and Liabilities Details of assets and liabilities denominated in foreign currency as of December 31, 2006, 2007 and 2008 were as follows: Foreign currency Won equivalent 2006 2007 2008 2006 2007 (in millions of Won and thousands of U.S. dollars) Assets: Cash and due from banks . . . . . . . . . . . . Securities . . . . . . . . . . Loans . . . . . . . . . . . . . . Other assets . . . . . . . .

2008

$

796,450 1,406,334 1,780,074 1,326,271 1,668,280 2,125,036 14,222,132 15,607,382 12,881,106 2,172,427 2,491,565 2,460,306 21,173,561 19,246,522

W

740,380 1,319,423 2,238,443 1,232,903 1,565,179 2,672,232 13,220,894 14,642,845 16,197,991 2,019,488 2,337,586 3,093,835 19,865,033 24,202,501

$18,517,280 Liabilities: Deposits . . . . . . . . . . . Borrowings . . . . . . . . . Debentures . . . . . . . . . Other liabilities . . . . .

W17,213,665

$ 3,873,328 7,913,291 2,773,553 2,531,668 $17,091,840

4,932,996 10,592,663 3,293,534 2,118,167 20,937,360

5,476,532 8,784,103 2,911,431 2,275,559 19,447,625

W 3,600,645 7,356,195 2,578,295 2,353,439 W15,888,574

4,628,138 6,886,739 9,938,036 11,046,010 3,089,994 3,661,125 1,987,264 2,861,515 19,643,432 24,455,389

(16) Pledged Assets Assets pledged as collateral as of December 31, 2006, 2007 and 2008 were as follows: Accounts 2006 2007 2008 (in millions of Won) Secured party

Debt securities . . . .

W3,531,200 3,309,443 1,722,357 1,549,652 3,143,595 3,082,932 116,167 134,688 40,000 40,000 — 65,492 38,000 282,728 10,395 8,475,330

Property and equipment . . .

9,563 W8,600,882

Bank of Korea and other Fortis and other Customer Repurchase Agreement Samsung Futures and other CHB NPL 1st SPC Other Futures and Securities Finance Corporation 4,072,707 Deutsche Bank, HSBC Goodmorning Shinhan Securities Co., Ltd. and 10,933 other 12,374,441

4,102,107 1,400,398 2,504,652 63,994 — 219,650

F-60

(17) Insured Assets Insured assets as of December 31, 2008 were as follows: Type of insurance Amount covered (in millions of Won) W 5,000 1,082,904 50,000 W1,137,904 In addition, the Bank maintains vehicle insurance, medical insurance, fire insurance for its assets, and employee compensation insurance covering loss and liability arising from accidents. (18) Average Asset and Liability Balances and related Interest Income and Expense (a) Average asset balances and related interest income as of and for the years ended December 31, 2006, 2007 and 2008 were as follows: Average asset balance Interest income 2007 2008 2006 2007 2008 (in millions of Won) 1,161,647 29,481,804 122,789,328 153,432,779 5,038,165 34,785,228 140,530,553 180,353,946 39,596 865,044 5,824,941 6,729,581 46,816 1,308,965 7,989,361 9,345,142 118,817 1,656,857 9,555,824 11,331,498

Theft insurance for cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . All risk policy for property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Key personnel indemnity insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2006

Due from banks (*) . . . . Securities . . . . . . . . . . . . . Loans . . . . . . . . . . . . . . . .

W

1,148,340 24,394,026 106,096,008

W131,638,374
(*)

The average reserve deposit with the Bank of Korea, W3,137,753 million and the interest income, W71,224 million are included in the amount of 2008.

(b)

Average liability balances and related interest expense as of and for the years ended December 31, 2006, 2007 and 2008 were as follows: Average liability balance Interest expense 2006 2007 2008 2006 2007 2008 (in millions of Won)

Deposits . . . . . . . . . . . . . . . Borrowings . . . . . . . . . . . . Debentures . . . . . . . . . . . .

W 85,555,389 16,488,112 22,042,757

99,460,418 17,287,162 26,989,663

113,082,071 20,216,609 31,632,772 164,931,452

2,237,583 498,888 973,832 3,710,303

3,449,654 722,327 1,473,814 5,645,795

4,594,537 784,863 1,822,424 7,201,824

W124,086,258 143,737,243

F-61

(19) Capital Adjustments Capital adjustments as of December 31, 2006, 2007 and 2008 consisted of the following: 2006 2007 2008 (in millions of Won) Discount on stock issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss from disposition of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other capital adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,987) — — (59,317) — — W — (41,320) (52,756) W(71,304) (41,320) (52,756) (20) Retained Earnings Retained earnings as of December 31, 2006, 2007 and 2008 consisted of the following: 2006 2007 2008 (in millions of Won) Legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Voluntary reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other reserve (*) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unappropriated retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W — 143,300 348,431 — 986 1,433,727 32,530 48,249 75,753 529,904 2,051,302 1,446,727 2,243,837 3,304,638

W562,434
(*)

The Bank appropriated as other reserve an amount equal to legal reserves required for overseas branches in Japan, India, Singapore and Vietnam, in accordance with the regulations of Japan, India, Singapore and Vietnam.

(21) Share-Based Payment (a) Granted by the Bank

The Bank grants shares to directors and other employees upon resolution at the stockholder’s meeting. The number of shares exercisable will be determined based on the relative increase of Shinhan Financial Group Co., Ltd.’s stock price over that of the banking industry and the Bank’s return on equity ratio (ROE). Details of cash-settled share-based payment as of December 31, 2008 were as follows: The Bank concluded to cash-settle the remaining stock options and the Bank will pay the difference between the market price and exercise price by applying a stock exchange ratio of 0.1354 shares of Shinhan Financial Group Co., Ltd. for 1 share of the Bank. 5th grant (in Won, except shares) Grant date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Number of shares granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exercisable shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Type of share-based payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exercise price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vesting period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March 25, 2004 302,350 22,350 Cash-settled W5,000 March 26, 2006 March 25, 2009

F-62

Stock compensations costs calculated as of December 31, 2006, 2007 and 2008 were as follows: 2006 2007 2008 (in millions of Won) Compensation costs recorded for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Compensation costs to be recorded in subsequent periods . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expense related to compensation cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (b) Granted by Shinhan Financial Group Co., Ltd. W 94 — 365 339 — 330 (119) — —

The Bank grants shares of Shinhan Financial Group Co., Ltd. (“Group”) to directors and other employees. For the 1st~5th grants, pursuant to SKAS Interpretation 39-35, the Bank recognized compensation costs as an expense and a liability. For the sixth grant and the seventh grant, pursuant to SKAS No.22, the Bank recognized compensation costs as an expense and a liability in accrued expense. The fair value of options with market conditions is calculated using the Monte Carlo simulation and Partial Differential Equation (PDE) Solution model. Effective January 1, 2008, the Bank modified its valuation model for options with performance conditions (based on return on equity) from the Black-Scholes model to the PDE Solution model for equitable and consistent measurement of fair value of options. In addition, the Bank changed its methodology in estimating weighted-average volatility of the stock price. The Bank applied these changes in methodology prospectively as it is considered a change in accounting estimate. (i) Details of cash-settled share-based payment granted as of December 31, 2008 are as follows: 1st grant 2nd grant 3rd grant (in Won, except shares) May 15, 2003 W11,800 796,700 Within four years and after two years from grant date March 25, 2004 W21,595 888,300 Within three years and after two years from grant date 4th grant

Grant date . . . . . . . . . . . . . . . . . . . . . . . . . Exercise price in Won . . . . . . . . . . . . . . Number of shares granted . . . . . . . . . . . Vesting period . . . . . . . . . . . . . . . . . . . . .

May 22, 2002 W18,910 727,500 Within four years and after two years from grant date

March 30, 2005 W28,006 1,871,400 Within four years and after three years from grant date

Changes in number of shares granted: Outstanding at January 1, 2008 . . . . Exercised and etc. . . . . . . . . . . . . . . . . Outstanding at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . Exercisable at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . .

238,914 (238,914) — —

311,732 (203,139) 108,593 108,593

510,857 (337,504) 173,353 173,353

1,570,871 (230,859) 1,340,012 1,340,012

F-63

(ii)

Details of share-based payments with the choice of settlement by Shinhan Financial Group Co., Ltd. as of December 31, 2008 are as follows: 5th grant 6th grant 7th grant (in Won, except share) March 20, 2007 W54,560 715,500 Within four years and after three years from grant date March 19, 2008 W49,053 322,950 Within four years and after three years from grant date

Grant date . . . . . . . . . . . . . . . . . . . . . . . . . . Exercise price in Won . . . . . . . . . . . . . . . Number of shares granted . . . . . . . . . . . . Vesting period . . . . . . . . . . . . . . . . . . . . . .

March 21, 2006 W38,829 2,143,800 Within four years and after three years from grant date

Conditions: Service period . . . . . . . . . . . . . . . . . . . . Two years from grant date Market performance Management . . . . . . . . . . . . . . . . . . . . . Increase rate of stock price and target ROE Employee . . . . . . . . . . . . . . . . . . . . . . . . Net income for two years

Two years from grant date Increase rate of stock price and target ROE Achievement of annual target ROE for three consecutive years

Two years from grant date Increase rate of stock price and target ROE Increase rate of stock price and target ROE

Changes in number of shares granted: Outstanding at January 1, 2008 . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . Canceled or forfeited . . . . . . . . . . . . . . Outstanding at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . Exercisable at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . Assumptions used to determine the fair value of options: Risk-free interest rate . . . . . . . . . . . . . Expected exercise period . . . . . . . . . . Expected stock price volatility . . . . . Expected dividend yield . . . . . . . . . . . Weighted average fair value . . . . . . .

1,648,177 — (13,350) 1,634,827 —

565,456 — (655) 564,801 —

— 322,950 (24,575) 298,375 —

— — — — —

3.35% 3.22 years 34.83% 1.99% Management: W2,391 Employee: W2,529

3.53% 4.22 years 32.80% 2.35% Management: W3,728

Stock compensations costs calculated as of December 31, 2006, 2007 and 2008 were as follows: 2007 2008 2006 (in millions of Won) Compensation costs recorded for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Compensation costs to be recorded in subsequent periods . . . . . . . . . . . . . . . . . . Accrued expense related to compensation cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . W42,753 47,654 21,706 4,305 76,292 101,187 (64,438) 806 9,912

F-64

(22) General and Administrative Expense Details of general and administrative expense for the years ended December 31, 2006, 2007 and 2008 were as follows: 2007 2008 2006 (in millions of Won) Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retirement and severance benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retirement and severance benefits paid due to early retirement . . . . . . Other employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Entertainment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taxes and dues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W 671,470 90,462 133,405 440,475 92,953 10,124 165,341 746 62,970 47,671 312,714 W2,028,331 (23) Income Taxes (a) The components of income tax expense for the years ended December 31, 2006, 2007 and 2008 were as follows: 2006 2007 2008 (in millions of Won) Current income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in deferred tax arising from temporary differences . . . . . . . . Deferred tax expense adjusted to equity . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (b) W490,001 740,316 80,075 34,468 (45,251) 28,825 W524,825 803,609 496,402 (577,532) 537,539 456,409 840,285 94,678 139,310 435,263 126,933 13,708 249,088 1,286 87,335 53,680 311,794 2,353,360 742,137 88,387 1,049 372,779 140,291 13,549 232,418 3,662 98,737 45,807 377,791 2,116,607

Deferred tax assets and liabilities are measured using the tax rate to be applied for the year in which temporary differences are expected to be realized, and the change in deferred tax assets (liabilities) due to the change in the income tax rate amounting W61,081 million of which W(-)14,889 million was recognized directly to equity and W75,970 million was recognized in current income tax expense for the year ended December 31, 2008. The income tax expense calculated by applying statutory tax rates to the Bank’s taxable income for the year differs from the actual tax expense in the statement of income for the years ended December 31, 2007 and 2008 for the following reasons: 2008 2007 (in millions of Won)

(c)

Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expense (benefit) for income taxes at normal tax rates . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments : Non-taxable income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-deductible expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effect of tax rate change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effective tax rate (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W2,854,911 785,087 (25,540) 33,260 (9,152) — 19,954 18,522 W 803,609 28.15

1,903,136 523,332 (73,344) 16,610 (14,525) 75,970 (71,634) (66,923) 456,409 23.98

F-65

(d)

Changes in significant accumulated temporary differences and tax effects for the years ended December 31, 2006, 2007 and 2008 were as follows: 2006 Beginning balance (*) Increase due to merger Ending balance Deferred tax asset (liability)

Increase Decrease (in millions of Won) (259,020) 35,766 — (1,007) 127,447 (9,535) 36,966 (79,559) 33,067 37,807 (190,850) — 169,560 (1,703) 306,321 (34,192) — (73,239) 4,392 3,249

Accrued income . . . . . . . . . . . . Accounts receivable . . . . . . . . . Loan . . . . . . . . . . . . . . . . . . . . . . . Trading securities . . . . . . . . . . . Available-for-sale securities . . . . . . . . . . . . . . . . . Equity method accounted investments (**) . . . . . . . . . . Loan origination fee . . . . . . . . . Derivatives . . . . . . . . . . . . . . . . . Accrued expense . . . . . . . . . . . . Accrued severance benefits . . . . . . . . . . . . . . . . . . Deposits for insurer severance benefit insurance . . . . . . . . . . . . . . . . Accumulated depreciation . . . Other allowances . . . . . . . . . . . Allowance for losses on guarantees and acceptances . . . . . . . . . . . . . . Allowance related to asset revaluation . . . . . . . . . . . . . . . Unrealized gain on available-for-sale securities . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . .

W

(56,187) (134,663) 98,543 — 169,560 — (372) (1,331) 753,777 (66,153) — 19,253 4,045 106,709 553,553 (74,003) — (92,492) — 40,624

(259,020) 134,309 — (1,007) 1,128,456 (115,499) 36,966 (79,559) 32,720 181,891

(71,231) 36,935 — (277) 310,325 (31,762) 10,166 (21,879) 8,998 50,020

(106,709) — 271,077

(30,163) — —

(48,268) (27,423) 237,193

(3,249) — 271,077

(181,891) (27,423) 237,193

(50,020) (7,541) 65,228

36,501 (4,190)

27,065 (77,371)

— —

11,878 —

51,688 (81,561)

14,214 (22,429)

(1,590,722) (525,465) (2,325,090) (2,116,187) (2,325,090) 188,160 82,738 102,322 184,816 188,404 (176,708) (231,508) (2,139,334) (1,468,127) (1,079,423)

(639,401) 51,811 (296,843)

Temporary differences not qualified for deferred tax assets or liabilities: Equity method accounted investments (**) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(*) (**)

(39,934) 43,877 (1,083,366)

(10,982) 12,065 (297,926)

W20,233 million of differences resulting from the finalization of the prior year tax return are reflected in the beginning balance. Deferred tax liabilities from temporary differences related to equity method accounted investments are estimated considering the possibility of realization and the amount of deferred tax liabilities.

F-66

2007 Beginning balance (*) Increase Decrease (in millions of Won) (390,449) 59,120 7,932 54,670 (23,265) 96,847 (22,793) 41,757 (25,858) 69,913 (69,913) — 350,251 8,251 — — (260,544) 12,578 (995) 445,171 10,032 36,966 (90,621) 33,566 — 33,151 (33,151) — 237,193 — — — Ending balance Deferred tax asset (liability)

Accrued income . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable . . . . . . . . . . . . . . . . . . . Trading securities . . . . . . . . . . . . . . . . . . . . . Available-for-sale securities . . . . . . . . . . . . Equity method accounted investments (**) . . . . . . . . . . . . . . . . . . . . Loan origination fee . . . . . . . . . . . . . . . . . . . Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expense . . . . . . . . . . . . . . . . . . . . . . Accrued retirement and severance benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deposits for severance benefit insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depreciation . . . . . . . . . . . . . . Other allowances . . . . . . . . . . . . . . . . . . . . . . Allowance for losses on guarantees and acceptances . . . . . . . . . . . . . . . . . . . . . . . . . Allowance related to asset revaluation . . . Deemed dividend . . . . . . . . . . . . . . . . . . . . . . Unrealized gain on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W (260,544) 136,278 (995) 1,154,355 (114,608) 36,966 (90,621) 33,566 28,675 181,910 (181,910) (23,065) 237,193 51,675 (81,544) 23,542

(390,449) 182,820 7,932 763,854 (147,905) 96,847 (22,793) 41,757 2,817 218,672 (218,672) (23,065) 350,251 59,926 (81,544) 23,542

(107,374) 50,276 2,181 210,060 (40,674) 26,633 (6,268) 11,483 775 60,135 (60,135) (6,343) 96,319 16,480 (22,425) 6,474 (609,653) 32,699 (339,357)

(2,325,090) (2,216,921) (2,325,090) (2,216,921) 138,380 23,725 43,198 118,907 (1,055,837) (2,036,733) (1,858,546) (1,234,024)

Temporary differences not qualified for deferred tax assets or liabilities: Equity method accounted investments (**) . . . . . . . . . . . . . . . . . . Other allowance . . . . . . . . . . . . . . . . . . . . . Net deferred tax asset (liability) . . . . . . . .
(*) (**)

(39,934) 43,877

— —

8,972 43,877

(48,906) —

(13,449) — (325,908)

(1,059,780) (2,036,733) (1,911,395) (1,185,118)

W23,586 million of differences resulting from the finalization of the prior year tax return are reflected in the beginning balance. Deferred tax liabilities from temporary differences related to equity method accounted investments are estimated considering the possibility of realization and the amount of deferred tax liabilities.

F-67

2008 Deferred Beginning Ending tax asset balance Increase Decrease balance (liability) (in millions of Won) Accrued income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W (390,449) (235,118) (390,449) Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . 182,820 14,593 68,493 Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,932 (8,744) 7,932 Available-for-sale securities . . . . . . . . . . . . . . . . . . 763,854 131,223 127,338 Equity method accounted investments (*) . . . . . (147,905) (263,818) (61,280) Loan origination fee . . . . . . . . . . . . . . . . . . . . . . . . . 96,847 94,670 96,847 Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,793) 143,449 (22,793) Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,757 65,022 41,757 Accrued expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,817 8,075 2,817 Accrued retirement and severance benefits . . . . 218,672 72,346 44,283 Deposits for severance benefit insurance . . . . . . (218,672) (72,346) (44,283) Accumulated depreciation . . . . . . . . . . . . . . . . . . . (23,065) — (1,064) Other allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350,251 318,999 350,251 Allowance for losses on guarantees and acceptances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,926 113,669 59,926 Allowance related to asset revaluation . . . . . . . . (81,544) — (1,480) Deemed dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,542 — — Unrealized gain on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,216,921) (293,749) (2,216,921) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,907 144,970 66,636 (1,234,024) 233,241 (1,871,990) Temporary differences not qualified for deferred tax assets or liabilities: Equity method accounted investments (*) . . . Net deferred tax asset (liability) . . . . . . . . . . . . . .
(*)

(235,118) 128,920 (8,744) 767,739 (350,443) 94,670 143,449 65,022 8,075 246,735 (246,735) (22,001) 318,999 113,669 (80,064) 23,542 (293,749) 197,241 871,207

(56,166) 28,549 (2,116) 172,764 (77,482) 20,827 29,570 14,305 1,776 54,282 (54,282) (4,840) 76,184 25,007 (21,870) 5,179 (64,625) 46,064 193,126

(48,906) (216,996)

(265,902)

(58,498) 251,624

(1,185,118) 450,237 (1,871,990) 1,137,109

Deferred tax liabilities from temporary differences related to equity method accounted investments are estimated considering the possibility of realization and the amount of deferred tax liabilities.

(e)

The deferred tax assets and liabilities that were directly charged or credited to equity as of December 31, 2006, 2007 and 2008 were as follows: 2007 2008 2006 Deferred Deferred Deferred Temporary tax asset Temporary tax asset Temporary tax asset difference (liability) difference (liability) difference (liability) (in millions of Won)

Unrealized gain on available-forsale securities, net . . . . . . . . . . . . W2,325,090 (639,401) Unrealized holding loss on equity method accounted investments, net . . . . . . . . . . . . . . . . . . . . . . . . . . (43,892) 12,071 Allowance related to asset revaluation . . . . . . . . . . . . . . . . . . 77,371 (21,277) W2,358,569 (648,607)

2,216,921

(609,653)

293,749

(64,625)

(29,579) 77,371 2,264,713

11,148 (21,277) (619,782)

137,059 77,371 508,179

3,659 (21,277) (82,243)

F-68

(f)

The gross amounts of deferred tax asset, deferred tax liability, income tax payable and prepaid income tax before the offset as of December 31, 2007 and 2008 were as follows: 2007 2008 (in millions of Won)

Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24) Earnings Per Share

W514,745 840,653 734,209 335,200

3,210,295 2,958,671 585,423 290,520

Earnings per common share is calculated by dividing net income by the weighted average number of shares of common stock outstanding. Earnings per share for the years ended December 31, 2006, 2007 and 2008 were computed as follows: 2006 2007 2008 (in millions of Won, except shares outstanding and earnings per share) Net income available for common stock . . . . . . . . . . . . . . . Weighted average number of common shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings per share in Won . . . . . . . . . . . . . . . . . . . . . . . . . . . (25) Dividends (a) Dividends for the years ended December 31, 2006, 2007 and 2008 were as follows: 2006 2007 (share, Won) 2008 W 1,431,147 1,311,684,720 W 1,091 2,051,302 1,505,615,506 1,362 1,446,727 1,507,364,140 960

Total number of share issued and outstanding . . . . . . . . . . Par value per share in Won . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends as a percentage of par value . . . . . . . . . . . . . . . . Dividend per share in Won . . . . . . . . . . . . . . . . . . . . . . . . . . . (b)

W1,505,615,506 1,505,615,506 1,585,615,506 5,000 5,000 5,000 4.00% 5.40% 0.14% W 200 270 7

Payout ratios for the years ended December 31, 2006, 2007 and 2008 were calculated as follows: 2006 2007 2008 (in millions of Won) 406,516 2,051,302 19.82% 11,099 1,446,727 0.77%

Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends as a percentage of net income . . . . . . . . . . . . . . . . . . . . . . . .

W 301,123 1,431,147 W 21.04%

F-69

(26) Related Party Transactions (a) As of December 31, 2008, parent/subsidiary relationship between the Bank and other companies were as follows: Control relationship Parent company Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary

Name of company Shinhan Financial Group Co., Ltd. (“SFG”) Shinhan Data System Co., Ltd. (“Shinhan Data System”) Shinhan Aitas Shinhan Asia Ltd. (“Shinhan Asia”) Shinhan Bank America (“Shinhan Bank America”) Shinhan Bank Europe (“Shinhan Bank Europe”) Shinhan Khmer Bank Limited (“Shinhan Khmer Bank”) Shinhan Bank China Limited (“Shinhan Bank China”) Shinhan Bank Kazakhstan Shinhan Bank Canada Trust account (*)
(*) The Bank had guaranteed repayment of principal and minimum interest earnings.

(b)

Significant transactions with the related parties for the years ended December 31, 2006, 2007 and 2008 were as follows: 2006 Revenue Expense 2007 Revenue Expense (in millions of Won) 2008 Revenue Expense

Related party / Account

(i)

Parent company: SFG Rent income . . . . . . . . . . . . . . . . . . . . . . . . Commission expense . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . W — — — — — — — — 38 — — 38 — — 26,454 26,454 735 — — 735 — 90,911 7,329 98,240

(ii)

Other members of SFG:

Shinhan Card Co., Ltd. (including former LG Card Co., Ltd., Shinhan Card Co., Ltd. and SH management) Interest income . . . . . . . . . . . . . . . . . . . . . Commission income . . . . . . . . . . . . . . . . Rental income . . . . . . . . . . . . . . . . . . . . . . Gain on derivatives . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . Commission expense . . . . . . . . . . . . . . . . Loss on derivatives . . . . . . . . . . . . . . . . .

1,556 70,051 1,731 — — — — W73,338

— — — — 197 661 — 858

21,199 117,793 — 5,606 — — — 144,598

— — — — 1,700 849 8,215 10,764

5,093 117,324 3,006 22,452 — — — 147,875

— — — — 1,505 7,862 96,436 105,803

F-70

Related party / Account

2006 Revenue Expense

2007 Revenue Expense (in millions of Won)

2008 Revenue Expense

Goodmorning Shinhan Securities Co., Ltd. Interest income . . . . . . . . . . . . . . . . . . . . . Rental income . . . . . . . . . . . . . . . . . . . . . . Gain on derivatives . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . Commission expense . . . . . . . . . . . . . . . . Rental expense . . . . . . . . . . . . . . . . . . . . . Loss on derivatives . . . . . . . . . . . . . . . . .

W 699 650 — — — — — 1,349

— — — 249 — 129 — 378

892 1,154 220 — — — — 2,266

— — — 409 — 163 387 959

1,104 1,315 4,174 — — — — 6,593

— — — 8,610 106 550 1,536 10,802

Shinhan Life Insurance Interest income . . . . . . . . . . . . . . . . . . . . . Rental income . . . . . . . . . . . . . . . . . . . . . . Commission income . . . . . . . . . . . . . . . . Gain on derivatives . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . Loss on derivatives . . . . . . . . . . . . . . . . . Commission expense . . . . . . . . . . . . . . . .

4,202 2,052 518 376 — — — 7,148

— — — — 940 2,627 586 4,153

4,999 3,743 10,904 2,732 — — — 22,378

— — — — 12,656 1 487 13,144

7,032 4,349 14,857 29,703 — — — 55,941

— — — — 4,268 205 2,110 6,583

Shinhan Capital Co., Ltd. Interest income . . . . . . . . . . . . . . . . . . . . . Commission income . . . . . . . . . . . . . . . . Rental income . . . . . . . . . . . . . . . . . . . . . . Gain on derivatives . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . Loss on derivatives . . . . . . . . . . . . . . . . .

37 — 405 1,449 — — 1,891

— — — — 2,895 1,149 4,044

41 40 672 489 — — 1,242

— — — — 2,196 387 2,583

10 8 792 1,730 — — 2,540

— — — — 773 49,017 49,790

Jeju Bank Interest income . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . .

127 — 127

— 5 5

85 — 85

— 60 60

763 — 763

— 24 24

Shinhan Credit Information Co., Ltd. Rental income . . . . . . . . . . . . . . . . . . . . . . Commission expense . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . .

85 — — 85

— 6,951 108 7,059

154 — — 154

— 6,332 95 6,427

147 — — 147

— 6,275 31 6,306

Shinhan Private Equity Commission income . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . W

— — —

— 714 714

— — —

— 38 38

131 — 131

— — —

F-71

Related party / Account

2006 Revenue Expense

2007 Revenue Expense (in millions of Won)

2008 Revenue Expense

SH&C Life Insurance Co., Ltd. Commission income . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . .

W12,487 — 12,487

— 4 4

27,048 — 27,048

— 3 3

22,633 — 22,633

— 4 4

Shinhan Macquarie Financial Advisory Co., Ltd. Commission income . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . .

— — —

— 242 242

— — —

— 227 227

2,000 — 2,000

— 190 190

Shinhan BNP Paribas Investment Trust Management Co., Ltd. Commission income . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . Rental income . . . . . . . . . . . . . . . . . . . . . .

406 — — 406

— 148 — 148

568 — — 568

— 659 — 659

381 — 1 382

— 2,027 — 2,027

(iii) Subsidiaries and equity method accounted investees: Shinhan Finance Interest income . . . . . . . . . . . . . . . . . . . . . Gain on derivatives . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . Loss on derivatives . . . . . . . . . . . . . . . . . 3,858 202 — — 4,060 Shinhan Asia Interest income . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . — — 386 381 767 — — — — — — — — — — — — — — — — — — — —

796 — 796

— 8,016 8,016

2,151 — 2,151

— — —

— — —

— — —

Shinhan Data System Rental income . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . Commission expense . . . . . . . . . . . . . . . .

118 — — 118

— 42 10,834 10,876

134 — — 134

— 63 16,795 16,858

132 — — 132

— 188 15,518 15,706

SH Asset Management Commission income . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . W

2 — 2

— 1,143 1,143

— — —

— 1,080 1,080

9 — 9

— 970 970

F-72

Related party / Account

2006 Revenue Expense

2007 Revenue Expense (in millions of Won)

2008 Revenue Expense

Shinhan Bank America Interest income . . . . . . . . . . . . . . . . . . . . Shinhan Bank Europe Interest income . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . .

W

796

3,367

1,333

3,642 — 3,642

— 6,068 6,068

2,181 — 2,181

— — —

540 — 540

— — —

Shinhan CRV 6th Interest expense . . . . . . . . . . . . . . . . . . . Shinhan CRV 7th Interest expense . . . . . . . . . . . . . . . . . . . Shinhan CRV 8th Interest expense . . . . . . . . . . . . . . . . . . . Deawoo Capital Interest expense . . . . . . . . . . . . . . . . . . . Macquarie Shinhan Infrastructure Management Co., Ltd. Interest expense . . . . . . . . . . . . . . . . . . . Shinhan Bank China Interest income . . . . . . . . . . . . . . . . . . . . Shinhan Aitas Commission expense . . . . . . . . . . . . . . . Trust Accounts Gain on trust . . . . . . . . . . . . . . . . . . . . . . Commission income . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . Loss on trust . . . . . . . . . . . . . . . . . . . . . .

1

20

4

20

4

134

23

1

32

59

363

483

159

74,847 10 — — 74,857 W180,696

— — 37,327 68 37,395 80,799

83,296 6 —

— — 55,421

75,205 11 —

— — 73,724

83,302 289,513

55,421 134,910

75,216 317,453

73,724 370,722

F-73

(c)

Significant balances with the related parties as of December 31, 2006, 2007 and 2008 were as follows: 2006 Assets Liabilities 2007 Assets Liabilities (in millions of Won) 2008 Assets Liabilities

Related party / Account

(i)

Parent company: SFG Demand deposits . . . . . . . . . . . . . . . . Security deposits . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . Time deposits . . . . . . . . . . . . . . . . . . . W — — — — — 2,627 9,915 28,847 — 41,389 — — — — — 1,910 9,915 5 — 11,830 — — — — — 5,770 9,982 10,147 300,000 325,899

(ii)

Other members of SFG:

Shinhan Card Co., Ltd. (including formerly LG Card Co., Ltd., Shinhan Card Co., Ltd. and SH Management) Available-for-sale securities . . . . . Call loans . . . . . . . . . . . . . . . . . . . . . . Loans in Won . . . . . . . . . . . . . . . . . . . Derivative assets . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . Demand deposits . . . . . . . . . . . . . . . . Time deposits . . . . . . . . . . . . . . . . . . . Certificate of deposit . . . . . . . . . . . . Security deposits . . . . . . . . . . . . . . . . Derivative liabilities . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . .

— 10,800 — 1,634 31 — — — — — — 12,465

— — — — — 1,587 650 — 3,306 — 6,574 12,117

50,126 — 502,300 7,240 — — — — — — — 559,666

— — — — — 167,323 436,000 — 3,394 8,215 11,454 626,386

39,654 32,200 80,000 11,487 — — — — — — — 163,341

— — — — — 104,658 500,100 4,100 5,013 84,246 4,282 702,399

Goodmorning Shinhan Securities Co., Ltd. Leasehold Deposits . . . . . . . . . . . . . . Derivative assets . . . . . . . . . . . . . . . . Demand deposits . . . . . . . . . . . . . . . . Time deposits . . . . . . . . . . . . . . . . . . . Security deposits . . . . . . . . . . . . . . . . Derivative liabilities . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . .

8,562 — — — — — — 8,562

— — 1,677 6,189 20,573 — 114 28,553

9,674 220 — — — — — 9,894

— — 7,518 23,047 19,317 372 253 50,507

11,128 4,174 — — — — — 15,302

— — 13,520 76,923 16,284 1,527 534 108,788

Shinhan Life Insurance Derivative assets . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . Deposits for severance benefit insurance . . . . . . . . . . . . . . . . . . . . . Demand deposits . . . . . . . . . . . . . . . . Debentures in Won . . . . . . . . . . . . . . Security deposits . . . . . . . . . . . . . . . . Time deposits . . . . . . . . . . . . . . . . . . . Derivative liabilities . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . .

353 1,105 — — — — — — — W 1,458

— — — 8,070 54,738 8,320 — 7 104,320 175,455

3,084 — 133,192 — — — — — — 136,276

— —

30,019 1,770

— — — 17,044 58,823 9,861 45,939 — 8,278 139,945

— 142,851 15,790 — 60,784 — 9,637 — — — — — 4,528 — 90,739 174,640

F-74

Related party / Account

2006 Assets Liabilities

2007 Assets Liabilities (in millions of Won)

2008 Assets Liabilities

Shinhan Capital Co., Ltd. Derivative assets . . . . . . . . . . . . . . . . . . Derivative liabilities . . . . . . . . . . . . . . . Demand deposits . . . . . . . . . . . . . . . . . . Time deposits . . . . . . . . . . . . . . . . . . . . . Security deposits . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . .

W 1,449 — — — — — 1,449

— — 692 50,568 216 508 51,984

1,938 — — — — — 1,938

— — 21,850 — 663 40 22,553

— — — — — — —

— 46,187 55 16,062 660 2 62,966

Jeju Bank Due from banks in Won . . . . . . . . . . . . Loans in Won . . . . . . . . . . . . . . . . . . . . . Loans in foreign currencies . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . .

10,690 — 2,885 87 13,662

— — — — —

— — 3,908 4 3,912

— — — — —

3,200 9,484 — 165 12,849

— — — — —

Shinhan Credit Information Co., Ltd. Demand deposits . . . . . . . . . . . . . . . . . . Time deposits . . . . . . . . . . . . . . . . . . . . . Bonds sold with repurchase agreement . . . . . . . . . . . . . . . . . . . . . . Security deposits . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . .

— — — — — —

1,494 1,180 2,032 822 613 6,141

— — — — — —

1,446 3,172 — 1,569 870 7,057

— — — — — —

824 4,897 — 855 477 7,053

Shinhan Private Equity Inc. Demand deposits . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . .

— — —

2,996 — 2,996

— — —

528 13 541

— — —

713 169 882

SH&C Life Insurance Co., Ltd. Other assets . . . . . . . . . . . . . . . . . . . . . . . Demand deposits . . . . . . . . . . . . . . . . . . Security deposits . . . . . . . . . . . . . . . . . .

396 — — 396

— 2,090 — 2,090

1,344 — — 1,344

— 1,531 35 1,566

1,052 — — 1,052

— 1,796 35 1,831

Shinhan Macquarie Financial Advisory Co., Ltd. Demand deposits . . . . . . . . . . . . . . . . . . Time deposits . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . W

— — — —

4,338 4,172 26 8,536

— — — —

2,454 4,172 — 6,626

— — — —

1,082 4,172 254 5,508

F-75

Related party / Account

2006 Assets Liabilities

2007 Assets Liabilities (in millions of Won)

2008 Assets Liabilities

Shinhan BNP Paribas Investment Trust Management Co., Ltd. Other assets . . . . . . . . . . . . . . . . . . . . . . . Demand deposits . . . . . . . . . . . . . . . . . . Time deposits . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . .

W

133 — — — 133

— 1,432 3,300 57 4,789

124 — — — 124

— 2,289 24,000 281 26,570

— — — — —

— 4,201 33,300 — 37,501

(iii) Subsidiaries are equity method investees: Shinhan Asia Due from banks in foreign currencies . . . . . . . . . . . . . . . . . . . . . . Loans in foreign currencies . . . . . . . . . Prepaid expense . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . Demand deposits . . . . . . . . . . . . . . . . . . Borrowings in foreign currency . . . . . Call money in foreign currency . . . . .

14,267 47,898 87 587 — — — 62,839

— 72 — 29,967 — — — 687 12 — 8,645 — 45,180 — 53,837 30,726

— 265 — 22,006 — — — — — — — — — — — 22,271

— — — — — — — —

Shinhan Data System Co., Ltd. Demand deposits . . . . . . . . . . . . . . . . . . Time deposits . . . . . . . . . . . . . . . . . . . . . Security deposits . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . .

— — — — —

1,284 2,027 112 — 3,423

— — — — —

1,763 3,160 112 46 5,081

— — — — —

1,089 3,405 110 93 4,697

SH Asset Management Demand deposits . . . . . . . . . . . . . . . . . . Certificates of deposit . . . . . . . . . . . . . . Time deposits . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . .

— — — — —

3,807 39,245 — 409 43,461

— — — — —

6,420 15,145 — — 21,565

— — — —

1,409 21,945 10,400 850 34,604

Shinhan Bank America Due from banks in foreign currencies . . . . . . . . . . . . . . . . . . . . . . Call loans . . . . . . . . . . . . . . . . . . . . . . . . . Loans in foreign currencies . . . . . . . . .

2,551 — — W 2,551

— — — —

— 60,983 — 60,983

— — — —

— — 1,332 1,332

— — — —

F-76

Related party / Account Shinhan China Due from banks in foreign currencies . . . . . . . . . . . . . . . . . . . Call loans . . . . . . . . . . . . . . . . . . . . . Loans in foreign currencies . . . . . Borrowings in foreign currencies . . . . . . . . . . . . . . . . . . .

2006 Assets Liabilities

2007 Assets Liabilities (in millions of Won)

2008 Assets Liabilities

W

— — — — —

— — — — —

— — — — —

— — — — —

116 12,575 93,684 — 106,375

— — — 31,531 31,531

Shinhan Bank Europe Due from banks in foreign currencies . . . . . . . . . . . . . . . . . . . Call loans in foreign currency . . . Loans in foreign currencies . . . . . Borrowings in foreign currency . . . . . . . . . . . . . . . . . . . .

15,718 61,354 47,261 — 124,333

— — — 117,823 117,823 162 — — — 9,404 277 — — 277

30,420 — 66,885 — 97,305 — — —

— — — — — 270 355 — 355

941 — 50,300 — 51,241 — — —

— — — — — — 226 3 229

Shinhan CRV 6th Demand deposits . . . . . . . . . . . . . . . Shinhan CRV 7th Demand deposits . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . .

— — — —

Shinhan CRV 8th Demand deposits . . . . . . . . . . . . . . . Daewoo Capital Co., Ltd. Demand deposits . . . . . . . . . . . . . . . Certificate of deposit . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . .

— — — — —

— — — —

922 493 — — 493

— — — —

1,000 314 23,000 570 23,884

Macquarie Shinhan Infrastructure Management Co., Ltd. Demand deposits . . . . . . . . . . . . . . . Certificate of deposit . . . . . . . . . . .

— — —

4,324 — 4,324

— — —

2,748 17,000 19,748

— — —

5,535 1,800 7,335

Shinhan Khmer Bank Due from banks in foreign currencies . . . . . . . . . . . . . . . . . . . Shinhan Aitas Demand deposits . . . . . . . . . . . . . . . Trust Accounts Other Assets . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . Trust accounts payable . . . . . . . . .

— — 90,511 — — 90,511 W318,359

— — — 564 183,444 184,008 750,769

52 — — — — — 902,220

— — — — 313,566 313,566 1,206,375

19 — — — — — 548,422

— 81 — — 253,528 253,528 1,749,661

F-77

(d)

Details of compensation paid to certain employees at the management level for the year ended December 31, 2008 were as follows: 2008 (in millions of Won)

Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Performance-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retirement benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (e)

W 9,115 3,936 (18,704) 97

Guarantees and acceptances provided to related parties as of December 31, 2006, 2007 and 2008 were as follows: Account 2006 2007 2008 (in millions of Won)

Related party

Shinhan Asia . . . . . . . . . . . . . . . . . . . . . . . Guarantees for letter of credit . . . . . . . . . . . W 511 — — SHC Management . . . . . . . . . . . . . . . . . . . Performance guarantees . . . . . . . . . . . . . . . . — — 94 Shinhan Capital Co., Ltd. . . . . . . . . . . . . Guarantees for letter of credit . . . . . . . . . . . 3,017 28,146 4,942 Letters of guarantee for importers . . . . . . . — — 1,346 Shinhan Card Co., Ltd. . . . . . . . . . . . . . . Guarantees in foreign currency . . . . . . . . . . 465 — — Daewoo Capital Co., Ltd. . . . . . . . . . . . . Guarantees for letter of credit . . . . . . . . . . . — 25,331 33,953 Payment guarantees for bond issuance . . . — — 118,540 W3,993 53,477 158,875 (f) Details of investment in related parties as of December 31, 2008 were as follows: Ownership Net asset value Book value (%) (in millions of Won) 26.67 26.09 100.00 14.00 14.39 89.58 58.82 14.40 99.99 100.00 100.00 50.00 80.10 100.00 100.00 100.00 100.00 W 204,213 140,697 4,927 11,159 657,086 12,713 4,073 94,492 165,353 150,625 76,333 101,253 25,573 52,564 371,575 31,149 105,344 W2,209,129 54,457 36,704 4,927 3,290 89,536 40,401 2,396 13,603 165,543 150,636 76,666 50,626 20,484 52,564 372,480 31,149 105,344 1,270,806

Related party

Shinhan National Pension Service PEF 1st . . . . . . . . . . . . . . . . . . Shinhan PEF 2nd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan Data System Co., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Macquarie Shinhan Infrastructure Management . . . . . . . . . . . . . . Daewoo Capital Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan Aitas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan Corporate Restructuring Fund 7th . . . . . . . . . . . . . . . . . . Shinhan Corporate Restructuring Fund 8th . . . . . . . . . . . . . . . . . . Shinhan Asia Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan Bank America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan Bank Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan Vina Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan Khmer Bank Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan Bank Kazakhstan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan Bank China Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan Bank Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shinhan Finance Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-78

(27) Derivatives and Hedge Accounting (a) Details of the notional amounts of unsettled derivative instruments as of December 31, 2006, 2007 and 2008 were as follows: 2006 Purpose of transactions Trading Hedge Total (in millions of Won) Currency related: Forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Options bought . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Options sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W22,194,084 14,819,698 4,690,519 2,906,867 44,611,168

— — — — —

22,194,084 14,819,698 4,690,519 2,906,867 44,611,168

Interest rate related: Futures sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Futures bought . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Options bought . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Options sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

784,882 — 64,950 — 401,991 — 555,991 — 45,837,524 9,549,661 47,645,338 9,549,661

784,882 64,950 401,991 555,991 55,387,185 57,194,999

Stock price index related: Options bought . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Options sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Futures bought . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15,395 48,413 5,417 725,127 794,352

— — — — —

15,395 48,413 5,417 725,127 794,352

Commodity related: Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35,152 W93,086,010

— 9,549,661

35,152 102,635,671

F-79

2007 Purpose of transactions Trading Hedge (in millions of Won) Currency related: Forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Options bought . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Options sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

W 59,760,899 16,742,964 11,962,045 22,972,500 111,438,408

— — — — —

59,760,899 16,742,964 11,962,045 22,972,500 111,438,408

Interest rate related: Futures bought . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Futures sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Options bought . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Options sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,585 — 254,040 — 1,489,800 — 2,476,800 — 80,620,000 12,612,301 84,851,225 12,612,301

10,585 254,040 1,489,800 2,476,800 93,232,301 97,463,526

Stock price index related: Stock index options bought . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stock index options sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

211,478 190,162 1,679,383 2,081,023

— — — —

211,478 190,162 1,679,383 2,081,023

Other: Commodity forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commodity options bought . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commodity options sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gold swap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

120,175 16,462 16,462 93,194 246,293 W198,616,949

— — — — — 12,612,301

120,175 16,462 16,462 93,194 246,293 211,229,250

F-80

2008 Purpose of transactions Trading Hedge (in millions of Won) Currency related: Forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Options bought . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Options sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

W 62,787,638 14,516,713 8,339,285 32,405,639 118,049,275

— — — — —

62,787,638 14,516,713 8,339,285 32,405,639 118,049,275

Interest rate related: Futures bought . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Futures sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Options bought . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Options sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,131,750 — 1,131,750 22,522 — 22,522 5,231,200 — 5,231,200 7,869,411 — 7,869,411 104,066,364 13,398,448 117,464,812 118,321,247 13,398,448 131,719,695

Stock price index related: Futures bought . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Futures sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stock index options bought . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stock index options sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exchange traded options bought . . . . . . . . . . . . . . . . . . . . . . . . . . Exchange traded options sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

79,840 4,169 403,393 652,896 37,125 157,585 2,167,053 3,502,061

— — — — — — — —

79,840 4,169 403,393 652,896 37,125 157,585 2,167,053 3,502,061

Other: Credit-linked derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commodity forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commodity options bought . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commodity options sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gold swap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

88,025 12,926 263,809 263,809 84,608 713,177 W240,585,760

— — — — — — 13,398,448

88,025 12,926 263,809 263,809 84,608 713,177 253,984,208

F-81

(b)

Details of valuation of trading and fair value hedging derivative instruments as of December 31, 2006, 2007 and 2008 were as follows: 2006 Valuation gain (loss) Fair value Trading Hedge Total Assets Liabilities (in millions of Won)

Currency related: Forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Options bought . . . . . . . . . . . . . . . . . . . . . . . . . . . . Options sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W(158,647) 182,079 (2,843) 12,283 32,872

— (158,647) — 182,079 — (2,843) — 12,283 — 32,872

232,757 662,358 15,161 17,678 927,954

393,746 314,421 51,760 12,874 772,801

Interest rate related: Options bought . . . . . . . . . . . . . . . . . . . . . . . . . . . . Options sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(574) — 759 — (56,511) (41,909) (56,326) (41,909)

(574) 759 (98,420) (98,235)

2,685 124 289,626 292,435

67 3,278 468,445 471,790

Stock price index related: Options bought . . . . . . . . . . . . . . . . . . . . . . . . . . . . Options sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(588) (300) 1,104 216

— — — —

(588) (300) 1,104 216

140 57 56,333 56,530

57 2,552 56,212 58,821

Commodity related: Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27

27

87

87 1,303,499

W (23,211) (41,909)

(65,120) 1,277,006

F-82

2007 Valuation gain (loss) Fair value Trading Hedge Total Assets Liabilities (in millions of Won) Currency related: Forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Options bought . . . . . . . . . . . . . . . . . . . . . . . . . . . Options sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W 87,456 117,164 (63,998) 18,631 159,253

— — — — —

87,456 117,164 (63,998) 18,631 159,253

522,984 144,854 24,855 534,400 1,227,093

504,940 65,324 115,179 259,454 944,897

Interest rate related: Options bought . . . . . . . . . . . . . . . . . . . . . . . . . . . Options sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,147 — 10,147 (8,996) — (8,996) (103,938) (316,025) (419,963) (102,787) (316,025) (418,812)

29,425 — 600,782 630,207

— 24,468 1,220,307 1,244,775

Stock price index related: Options bought . . . . . . . . . . . . . . . . . . . . . . . . . . . Options sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7,043) 3,712 1,623 (1,708)

— — — —

(7,043) 3,712 1,623 (1,708)

16,934 — 97,366 114,300

— 7,058 97,366 104,424

Other: Commodity forwards . . . . . . . . . . . . . . . . . . . . . Commodity options bought . . . . . . . . . . . . . . . . Commodity options sold . . . . . . . . . . . . . . . . . . Gold swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

178 525 (449) 8,055 8,309 W 63,067

— — — — —

178 525 (449) 8,055 8,309

6,265 525 — 8,055 14,845

6,086 — 525 — 6,611 2,300,707

(316,025) (252,958) 1,986,445

F-83

2008 Valuation gain (loss) Fair value Trading Hedge Total Assets Liabilities (in millions of Won) Currency related: Forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . Options bought . . . . . . . . . . . . . . . . . . . . . . . Options sold . . . . . . . . . . . . . . . . . . . . . . . . . Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W 2,025,661 1,561,030 (835,743) (2,566,521) 184,427

— 2,025,661 — 1,561,030 — (835,743) — (2,566,521) — 184,427

5,577,839 1,810,906 24,731 2,043,802 9,457,278

3,532,308 67,305 908,047 4,436,211 8,943,871

Interest rate related: Options bought . . . . . . . . . . . . . . . . . . . . . . . Options sold . . . . . . . . . . . . . . . . . . . . . . . . . Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

32,342 — (48,794) — (439,455) 908,629 (455,907) 908,629

32,342 (48,794) 469,174 452,722

92,343 — 1,990,021 2,082,364

— 99,951 2,104,710 2,204,661

Stock price index related: Stock index options bought . . . . . . . . . . . Stock index options sold . . . . . . . . . . . . . . Exchange traded options . . . . . . . . . . . . . . Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

31,470 (63,296) 2,716 98,629 69,519

— — — — —

31,470 (63,296) 2,716 98,629 69,519

75,359 — 1,549 406,427 483,335

— 85,759 274 297,652 383,685

Other: Credit-linked derivatives . . . . . . . . . . . . . . Commodity forwards . . . . . . . . . . . . . . . . . Commodity options bought . . . . . . . . . . . Commodity options sold . . . . . . . . . . . . . . Gold swaps . . . . . . . . . . . . . . . . . . . . . . . . . .

(38,867) 7 35,222 (35,222) 10,681 (28,179)

— — — — — —

(38,867) 7 35,222 (35,222) 10,681 (28,179) 678,489

— 1,875 35,222 — 10,681 47,778 12,070,755

38,867 1,868 — 35,222 — 75,957 11,608,174

W (230,140) 908,629 (28) Commitments and Contingencies (a) Litigation

As of December 31, 2008, the Bank was involved in 190 pending lawsuits as a defendant (total claim amount: W184,724 million). As of December 31, 2008, the Bank recorded a provision of W32,709 million in respect to these lawsuits in other allowances included in other liabilities. The Bank’s management expects that the ultimate losses as a result of these lawsuits would not have a significant effect on the Bank’s financial position or result of operations.

F-84

(b)

Commitments and endorsed bills

Details of commitments and endorsed bills as of December 31, 2008 were as follows: (in millions of Won) Guarantees and acceptances outstandings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contingent guarantees and acceptances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Endorsed bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (c) Subsidy for trust accounts W 8,273,041 7,970,707 62,221,048 14,872,121 W93,336,917

As of December 31, 2008, the Bank had guaranteed repayment of principal and, in certain cases, minimum interest earnings on trust account assets under management amounting to W3,511,088 million. The Bank did not recognize any loss from trust management for the period ended December 31, 2008. Additional losses may be recorded based on future performance of these guaranteed trust accounts. (d) Credit-linked derivatives

Details of credit-linked derivatives held by the Bank as of December 31, 2008 were as follows: Credit Guarantee Contracts Sold Overseas Domestic Total (in millions of Won) Credit Default Swap on CDO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Credit Default Swap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . KTB Swap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W37,725 50,300 — W88,025 — — 28,755 28,755 37,725 50,300 28,755 116,780

Credit guarantee contracts can cause losses if one or more credit events occur by the reference entity including bankruptcy, payment defaults, or default on obligation. (e) Potential recovery of bad debts

The Bank has receivables which were written-off as they were deemed to be uncollectible. However, for certain receivables, the Bank still retains the legal right for recovery under Commercial Law as the receivables have not been repaid or legally terminated. As of December 31, 2006, 2007 and 2008, such receivables amounted to W3,027,902 million , W3,001,824 million and W3,251,555 million, respectively. (f) Contingency gain from lawsuit against Samsung Motors Co., Ltd.

On September 1999, the creditors of Samsung Motors Co,. Ltd.(“Samsung Motors”) including the Bank, reached a written agreement with Samsung affiliates regarding the disposal of Samsung Motors. According the agreement, the creditors were supposed to dispose of 350 million shares of Samsung Life Insurance Co., Ltd. by December 31, 2000, which were provided to them with regard to liquidation of Samsung Motors. And if the proceeds from the disposal of the shares were less than W2,450 billion, Samsung Group was to reimburse the shortage by investing in the creditors’ equity or buying subordinated bonds issued by the creditors. Otherwise, Samsung Group was to make payment of interests based on the bank’s delinquent interest rate.

F-85

On December 9, 2005, the Bank, with the other creditors, filed a lawsuit against Samsung Group CEO Gun-hee, Lee and Samsung affiliates to claim the agreed amount. The Seoul Central District Court ruled in favor of the creditors on January 31, 2008. The inflow of resources by this lawsuit is probable, but not finalized. Therefore the Bank did not record an asset regarding this. (g) Loans to construction and shipbuilding companies

Loans to companies identified for reorganization as a result of the credit banks’ credit risk evaluation announced on January 20, 2009 amount to W1,140,854 million and the corresponding allowance for loan losses amounts to W193,761 million. Additional loss on such loans may be incurred in the course of the reorganization process. (29) Non-consolidated Statements of Cash Flows (a) Cash and cash equivalents as of December 31, 2006, 2007 and 2008 in the non-consolidated statements of cash flows are equivalent to cash and due from banks on the non-consolidated balance sheets. Significant transactions not involving cash inflows or outflows in investing and financing activities for the years ended December 31, 2006, 2007 and 2008 were as follows: 2006 2007 2008 (in millions of Won) 21,301 151,659 — 149,076 — —

(b)

Unrealized holding gain on equity method investment securities, net . . . . Transfer from available-for-sale securities to equity method investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase in equity method investment securities due to conversion of China branches to a foreign subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase in capital due to merger (note 38) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease in capital due to spin-off (note 37) . . . . . . . . . . . . . . . . . . . . . . . . . . . (30) Information on Business Divisions (a) (i) Business Divisions

W (44,321)

— 528,090 — 4,091,532 170,000 — — —

The Bank has the following business divisions as of December 31, 2008:

Functional information by business units: Description Retail Banking Group Corporate / Merchant Banking Group Treasury and International Group Area of business Loans to or deposits from individual customers or households Loans to or deposits from corporations including small and medium sized companies Internal asset and liability management, trading of securities and derivatives, investment portfolio management and other related business/ Overseas subsidiaries and branch operations and other international business Business related to Investment Banking Loans to or deposits from hospitals, airports and schools Comprehensive financial asset management services to individuals Administration of bank operations

Investment Banking Group Institutional Banking Group Private Banking Group Other

F-86

(ii)

Financial information by division: Income (loss) before income taxes Loans Securities (in millions of Won)

Retail Banking Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate / Merchant Banking Group . . . . . . . . . . . . . . . . . . . . . . . Treasury and International Group . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment Banking Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Institutional Banking Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Private Banking Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W 770,498 786,181 (208,719) 265,220 259,033 43,453 (12,530) W1,903,136

70,382,698 — 59,625,813 2,617,769 7,261,751 28,835,220 895,213 2,506,871 7,227,477 — 485,842 — 1,926,952 2,632,400 147,805,746 36,592,260

(b)

Financial Information by Geographic Location

The Bank principally operates in the Republic of Korea and its business can be divided into domestic and overseas segments. Details of financial information by geographic location for the year ended December 31, 2008 were as follows: Domestic Overseas (in millions of Won) Operating revenue (*) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income (*) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(*)

Total

W 47,750,028 1,757,251 49,507,279 1,767,053 138,759 1,905,812 143,837,226 3,968,520 147,805,746 35,540,806 1,051,454 36,592,260

Based on presentation in the Korean language non-consolidated financial statements. Operating revenue and expense mainly consist of the following:

Operating revenue Interest and dividend income Gain on valuation and disposition of securities Gain on valuation and disposition of loans Gain on foreign currency transactions Commission income Fees and commissions from trust accounts Gain on derivatives (31) Cash Management Assets

Operating expense Interest expense Provision for credit losses Loss on valuation and disposition of securities Loss on valuation and disposition of loans Loss on foreign currency transactions Selling and administrative expense Loss on derivatives

Cash management assets as of December 31, 2006, 2007 and 2008 consisted of the following: 2006 2007 2008 (in millions of Won) Bills discounted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W265,150 341,409 — W606,559 650,572 88,018 48,477 787,067 667,000 65,039 — 732,039

F-87

(32) Value Added Tax Items included in general and administrative expense necessary to calculate value added tax for the years ended December 31, 2006, 2007 and 2008 were as follows: 2006 2007 2008 (in millions of Won) Salary expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for retirement and severance benefit . . . . . . . . . . . . . . . . . . . . . . . . . . Retirement and severance benefit paid due to early retirement . . . . . . . . . . . . Other employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taxes and dues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (33) Accumulated Other Comprehensive Income (a) Accumulated other comprehensive income as of December 31, 2006, 2007 and 2008 consisted of the following: 2006 2007 2008 (in millions of Won) Unrealized gain on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . Unrealized gain on equity method accounted investments . . . . . . . . . . . . . Unrealized loss on equity method accounted investments . . . . . . . . . . . . . W1,685,689 1,607,268 229,124 12,911 21,298 165,105 (50,440) (39,729) (24,387) W1,648,160 (b) 1,588,837 369,842 W671,470 90,462 133,405 440,475 92,953 165,341 62,970 840,285 742,137 94,678 88,387 139,310 1,049 435,263 372,779 126,933 140,291 249,088 232,418 87,335 98,737

Comprehensive income for the years ended December 31, 2006, 2007 and 2008 were as follows: 2006 2007 2008 (in millions of Won)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other comprehensive income (loss): . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized gain (loss) on available-for-sale securities . . . . . . . . . . . Unrealized gain (loss) from equity method accounted investments, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on valuation of derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (34) Date of Authorization for Issue

W1,431,147 2,051,302 1,446,727 491,269 (70,509) (1,218,995) 532,416 (78,421) (1,378,144) (40,809) (337) W1,922,417 7,912 — 1,980,793 159,149 — 227,732

The 2008 financial statements were authorized for issue on February 2, 2009, at the Board of Directors Meeting. (35) Results of Operations for the Last Interim Period 2006 4th Quarter 2007 2008 4th Quarter 4th Quarter (in millions of Won) 5,111,855 255,546 197,387 131 20,209,155 376,393 356,682 236

Operating Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W4,153,959 344,845 249,130 143

F-88

(36) Accounting Changes (a) (i) Changes in accounting policies Statement of Korea Accounting Standards No.15

According to SKAS No.15, Equity Method-Revised, the difference between cost and book value arising from purchase of minority interests of subsidiary shares should be retrospectively reclassified to capital surplus or capital adjustment from accumulated other comprehensive income. Shinhan Bank acquired minority interest of SH Asset Management Co., Ltd. in 2000 and in 2007 and the difference between acquisition cost and book value was retrospectively reclassified from accumulated other comprehensive income to other capital adjustment. (ii) Korea Accounting Institute Opinion 06-2

Korea Accounting Institute Opinion 06-2, Deferred Income Taxes on Investments in Subsidiaries, Associates, and Joint Ventures, was revised to include consideration of deferred taxes related to unrealized gain/loss arising from intercompany transactions. As a result, deferred income tax is recognized in the same manner as in consolidated financial statements. (iii) Interpretation of Generally Accepted Accounting Principles 53-70 According to the revised Interpretation 53-70, Accounting for Derivatives Instruments, credit-linked derivatives such as credit default swaps, which were previously classified as guarantees, were reclassified to derivatives under the Interpretation 53-70. The bank reversed the existing allowances for possible losses of acceptance and guarantees by W28,735 million and recorded W38,867 million as derivative liabilities by fair value measurement as of December 31, 2008. (iv) Reclassification The Bank accounts for the court deposits for postal charges as other liabilities, which were previously classified as deposits. According to the accounting change, the Bank reclassified deposits amounting to W204,024 million as of December 31, 2007 to other liabilities. (b) Changes in accounting estimates

In estimating the fair value of options of the sixth and the seventh grants with performance conditions (based on return on equity), the Bank changed its valuation model from the Black-Scholes model which was used in 2007 to the PDE Solution model for a more reasonable and consistent measurement. Beginning the first quarter in 2008, the Bank applies the volatility of individual stock prices in estimating weightedaverage volatility of the stock price rather than the volatility of the average stock price. (37) Spin-off of the Credit Card Division According to the split-merger agreement dated December 30, 2005 between Chohung Bank and Shinhan Card Co., Ltd. and the approval by the respective shareholders of Chohung Bank and Shinhan Card Co., Ltd. on February 15, 2006, the credit card division of Chohung Bank was merged with Shinhan Card Co., Ltd. on April 1, 2006. Shinhan Card Co., Ltd. issued 41,207,856 shares of common stock in consideration (0.980941772 shares in consideration for 1 share of Chohung Bank).

F-89

The Bank transferred all assets, liabilities and stockholder’s equity at book value in the amount of W1,967,701 million, W1,784,007 million and W13,694 million, respectively. The details of the condensed balance sheet of the credit card division at April 3, 2006 were as follows: (in millions of Won) Assets: Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Credit card accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property and equipment, net of accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W

24,730 2,034,912 (124,497) 5,037 27,519

W1,967,701 Liabilities: Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W1,690,000 94,007 1,784,007

Stockholders’ equity: Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

210,042 (40,042) 13,694 183,694 W1,967,701

(38) Merger with Shinhan Bank (a) Merger

According to the merger agreement dated December 30, 2005 between Chohung Bank and Shinhan Bank and the approval by the respective shareholders of Chohung Bank and Shinhan Bank on February 15, 2006, Shinhan Bank merged with Chohung Bank (excluding the card division of Chohung Bank) with Chohung Bank as the surviving legal entity. In connection with the merger, Chohung Bank issued 828,505,540 shares of common stock in consideration (3.867799182 shares in consideration for 1 share of Shinhan Bank). After the merger, Chohung Bank changed its name to Shinhan Bank. (b) General information of Shinhan Bank prior to the merger with Chohung Bank

Shinhan Bank was incorporated on September 15, 1981 under the General Banking Act of the Republic of Korea to engage in commercial banking and trust business. As of the merger date, April 1, 2006, the capital stock of Shinhan Bank amounted to W1,224,034 million, it had 409 domestic and overseas branches and 162 automated teller machine locations. The shares of Shinhan Bank were transferred in their entirety to Shinhan Financial Group Co., Ltd. on September 1, 2001 and it became a wholly-owned subsidiary of Shinhan Financial Group Co., Ltd.. As a result, Shinhan Bank was delisted from the Korea Stock Exchange on September 10, 2001.

F-90

(c)

Condensed financial statements

The condensed financial statements of Chohung Bank and Shinhan Bank as of December 31, 2005 and April 1, 2006 were as follows: (i) Condensed balance sheets: As of December 31, 2005 As of April 1, 2006 Formerly Formerly Formerly Formerly Shinhan Bank Chohung Bank Shinhan Bank Chohung Bank (in millions of Won) Assets: Cash and due from banks . . . . . . . . Securities . . . . . . . . . . . . . . . . . . . . . . . Loans . . . . . . . . . . . . . . . . . . . . . . . . . . Fixed assets . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . W 3,286,458 13,289,065 55,191,023 675,937 3,199,485 W75,641,968 Liabilities: Deposits . . . . . . . . . . . . . . . . . . . . . . . . Borrowings . . . . . . . . . . . . . . . . . . . . . Debentures . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . Stockholders’ equity Capital stock . . . . . . . . . . . . . . . . . . . . Capital surplus . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . Capital adjustments . . . . . . . . . . . . . 1,224,034 796,531 2,271,756 307,147 4,599,468 W75,641,968 (ii) Condensed statements of income: For the year ended For the three-month period ended December 31, 2005 April 1, 2006 Formerly Formerly Formerly Formerly Shinhan Bank Chohung Bank Shinhan Bank Chohung Bank (in millions of Won) Operating income . . . . . . . . . . . . . . . Operating expense . . . . . . . . . . . . . . Net operating income . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . . Other expense . . . . . . . . . . . . . . . . . . Ordinary income . . . . . . . . . . . . . . . . Extraordinary gain . . . . . . . . . . . . . . Income before income taxes . . . . . Income tax expense (benefit) . . . . Net income . . . . . . . . . . . . . . . . . . . . . W6,163,895 5,223,326 940,569 229,790 104,381 1,065,978 — 1,065,978 291,556 774,422 7,310,666 6,667,084 643,582 412,727 360,247 696,062 — 696,062 (60,443) 756,505 1,934,566 1,616,883 317,683 53,094 3,752 367,025 — 367,025 138,926 228,099 2,383,889 2,131,549 252,340 19,755 24,078 248,017 — 248,017 47,152 200,865 3,595,592 — (865,910) 1,096,540 3,826,222 66,609,526 1,224,034 796,531 2,070,967 369,692 4,461,224 78,443,209 3,595,592 — (669,272) 1,017,398 3,943,718 68,043,024 W43,996,904 9,096,330 12,327,937 5,621,329 71,042,500 41,404,814 5,788,793 7,848,891 7,740,806 62,783,304 43,700,733 9,848,839 13,652,818 6,779,595 73,981,985 38,789,273 5,427,874 8,528,879 11,353,280 64,099,306 3,526,654 10,644,933 44,648,308 1,233,314 6,556,317 66,609,526 3,861,542 14,021,292 56,189,094 685,194 3,686,087 78,443,209 2,459,202 10,512,399 44,719,073 1,239,110 9,113,240 68,043,024

F-91

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT The Board of Directors and Stockholders Shinhan Bank: We have reviewed the accompanying non-consolidated statement of financial position of Shinhan Bank (the “Bank”) as of March 31, 2009 and the related non-consolidated statements of income, changes in equity and cash flows for the three-month periods ended March 31, 2009 and 2008. These non-consolidated financial statements are the responsibility of the Bank's management. Our responsibility is to issue a report on these non-consolidated financial statements based on our review. We conducted our review in accordance with the Review Standards for Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. These Standards require that we plan and perform the review to obtain moderate assurance as to whether the financial statements are free of material misstatement. A review consists principally of inquiries of company personnel and analytical procedures applied to financial data and, thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the non-consolidated financial statements referred to above are not presented fairly, in all material respects, in accordance with accounting principles generally accepted in the Republic of Korea. The non-consolidated statement of financial position of the Bank as of December 31, 2008 and the related non-consolidated statements of income, appropriation of retained earnings, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us and our report thereon, dated February 12, 2009, expressed an unqualified opinion. The accompanying non-consolidated statement of financial position of the Bank as of December 31, 2008, presented for comparative purposes, is not different from that audited by us in all material respects. The accompanying non-consolidated financial statements have been translated into United States dollars solely for the convenience of the reader. We have reviewed the translation and, nothing has come to our attention to suggest that the non-consolidated financial statements expressed in Korean Won have not been translated into dollars on the basis set forth in note 2(b) to the non-consolidated financial statements. The following matters may be helpful to the readers in their understanding of the non-consolidated financial statements: As discussed in note 2 to the non-consolidated financial statements, accounting principles and review standards and their application in practice vary among countries. The accompanying non-consolidated financial statements are not intended to present the financial position, results of operations, changes in equity and cash flows in accordance with accounting principles and practices generally accepted in countries other than the Republic of Korea. In addition, the procedures and practices utilized in the Republic of Korea to review such non-consolidated financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying non-consolidated financial statements are for use by those knowledgeable about Korean accounting procedures and review standards and their application in practice. KPMG Samjong Accounting Corp. Seoul, Korea April 28, 2009 This report is effective as of April 28, 2009, 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 non-consolidated financial statements and notes thereto. Accordingly, the readers of the review report should understand that there is a possibility that the above review report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

F-92

SHINHAN BANK Non-Consolidated Statements of Financial Position March 31, 2009 and December 31, 2008 (In millions of Won and thousands of U.S. dollars) 2009 Won 2008 2009 2008 U.S. dollars (note2(b))

Assets Cash and due from banks (notes 3, 13 and 19) . . . . . . . . . . . . . . . . . . . . . . . W 13,900,126 8,578,930 $ 10,093,766 6,229,707 Securities (notes 9, 13 and 19) . . . . . . . . . . . . . . . . 40,547,236 36,592,260 29,443,930 26,571,970 Loans, net of allowance for loan losses and deferred loan origination fees (notes 5 ,13, 16 and 19) . . . . . . . . . . . . . . . . . . . . 140,633,828 145,341,827 102,123,178 105,541,956 Property and equipment, net of accumulated depreciation (notes 7 and 9) . . . . . . . . . . . . . . . . 2,265,310 2,292,379 1,644,986 1,664,642 Other assets, net of allowance for doubtful accounts (notes 7 and 19) . . . . . . . . . . . . . . . . . . 18,902,864 20,763,702 13,726,573 15,077,847 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W216,249,364 213,569,098 $157,032,433 155,086,122 Liabilities and Stockholder’s Equity Liabilities: Deposits (notes 8 and 19) . . . . . . . . . . . . . . . . . . W126,849,319 119,237,971 $ 92,113,368 Borrowings (notes 11 and 19) . . . . . . . . . . . . . . 17,475,672 20,410,420 12,690,198 Debentures (notes 12 and 19) . . . . . . . . . . . . . . 28,138,694 32,418,157 20,433,298 Retirement and severance benefits (note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,897 132,674 91,422 Other liabilities (notes 15 and 19) . . . . . . . . . . 31,692,483 29,421,994 23,013,929 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . Stockholder’s equity: Common stock of W5,000 par value Authorized — 2,000,000,000 shares Issued and outstanding — 1,585,615,506 shares . . . . . . . . . . . . . . . Capital Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital adjustments . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive income (note 24) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . Total stockholder’s equity . . . . . . . . . . . . . . . 204,282,065 201,621,216

86,586,283 14,821,306 23,540,888 96,343 21,365,184

148,342,215 146,410,004

7,928,078 398,080 — 322,736 3,318,405 11,967,299

7,928,078 398,080 (52,756) 369,842 3,304,638 11,947,882

5,757,082 289,071 — 234,359 2,409,706 8,690,218

5,757,082 289,071 (38,309) 268,566 2,399,708 8,676,118

Total liabilities and stockholder’s equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W216,249,364 213,569,098 $157,032,433 155,086,122

See accompanying notes to non-consolidated financial statements.

F-93

SHINHAN BANK Non-Consolidated Statements of Income For the three-month periods ended March 31, 2009 and 2008 (In millions of Won and thousands of U.S. dollars) 2009 Won Interest and dividend income: Interest on due from bank . . . . . . . . . . . . . . . . . . . . . . . Interest and dividends on securities . . . . . . . . . . . . . . Interest on loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total interest and dividend income . . . . . . . . . . . . Interest expense: Interest on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest on borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . Interest on debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . Net interest income after provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-interest income: Fee and commission income . . . . . . . . . . . . . . . . . . . . . Unrealized gain on trading securities . . . . . . . . . . . . . Gain on sale of trading securities . . . . . . . . . . . . . . . . Gain on sale of available-for-sale securities . . . . . . Reversal of impairment loss on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity in income of equity method accounted investees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . Fee and commission income from trust management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on foreign currency transactions . . . . . . . . . . . . Gain on derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total non-interest income . . . . . . . . . . . . . . . . . . . . . 2008 2009 2008 U.S. dollars (note 2(b))

W

14,364 18,361 449,144 467,519 2,159,885 2,238,401 17,830 15,800 2,641,223 2,740,081

$

10,431 13,333 326,152 339,495 1,568,430 1,625,446 12,948 11,473 1,917,961 1,989,747

1,132,769 1,046,600 151,440 201,505 403,336 423,206 45,280 23,275 1,732,825 908,398 332,482 1,694,586 1,045,495 108,925

822,576 109,970 292,888 32,881 1,258,315 659,646 241,437

760,003 146,326 307,317 16,901 1,230,547 759,200 79,097

575,916 197,299 — 6,662 69,878 40 8,739 15,103

936,570 261,348 1,188 6,749 31,334 30,260 12,670 1,094

418,209 143,272 — 4,838 50,743 29 6,346 10,967

680,103 189,781 863 4,901 22,754 21,974 9,200 794

16,527 20,944 5,667,004 450,260 11,129,352 5,128,356 125,660 105,020 W17,236,264 6,049,223

12,001 15,209 4,115,172 326,962 8,081,731 3,724,026 91,250 76,262 $12,516,349 4,392,726

See accompanying notes to non-consolidated financial statements.

F-94

SHINHAN BANK Non-Consolidated Statements of Income, Continued For the three-month periods ended March 31, 2009 and 2008 (In millions of Won and thousands of U.S. dollars, except earnings per share) 2009 Won Non-interest expense: Fee and commission expense . . . . . . . . . . . . . . . . . . General and administrative expense . . . . . . . . . . . . Unrealized loss on trading securities . . . . . . . . . . . Loss on sale of trading securities . . . . . . . . . . . . . . Loss on sale of available-for-sale securities . . . . Impairment loss on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity in loss of equity method accounted investees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on disposition of equity method accounted investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contribution to Credit Guarantee Fund . . . . . . . . . Loss on foreign currency transactions . . . . . . . . . . Loss on derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total non-interest expense . . . . . . . . . . . . . . . . Net non-interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . Income taxes (note 21) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings per share in Won and U.S. dollars (note 22) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W 2008 2009 2008 U.S. dollars (note 2(b))

W

52,323 556,200 2,651 4,084 2,311 24,548 23,358

26,741 $ 641,395 — 5,108 3,594 60,633 677

37,995 403,892 1,925 2,966 1,678 17,826 16,962

19,418 465,758 — 3,709 2,610 44,029 492

— 964 57,937 51,675 5,451,057 422,545 11,298,010 5,135,062 235,368 111,838 17,707,847 (471,583) 104,333 30,602 73,731 6,460,232 (411,009) 525,561 143,798 381,763 $

— 700 42,072 37,525 3,958,360 306,837 8,204,204 3,728,896 170,916 81,212 12,858,795 (342,446) 75,763 22,222 53,541 4,691,186 (298,460) 381,643 104,421 277,222

W

47

254

$

0.034

0.184

See accompanying notes to non-consolidated financial statements.

F-95

SHINHAN BANK Non-Consolidated Statements of Changes in Equity For the three-month periods ended March 31, 2009 and 2008 (In millions of Won and thousands of U.S. dollars) Accumulated other Capital Capital comprehensive Retained income earnings stock adjustments Balance at January 1, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W7,528,078 Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Adjustment in foreign currency rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Unrealized gain on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Unrealized gain on equity method accounted investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Unrealized loss on equity method accounted investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Balance at March 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W7,528,078 Balance at January 1, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,466,617 Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Adjustment in foreign currency rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Unrealized gain on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Unrealized gain on equity method accounted investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Unrealized loss on equity method accounted investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Balance at March 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,466,617 (41,320) — — — — — — (41,320) (30,006) — — — — — — (30,006)

Total

1,588,837 2,243,837 11,319,432 — (406,516) (406,516) — 381,763 381,763 — 5,363 5,363 (250,234) — (250,234) 14,945 7,651 — — 14,945 7,651

F-96

1,361,199 2,224,447 11,072,404 1,153,756 1,629,393 8,219,760 — (295,197) (295,197) — 277,222 277,222 — 3,894 3,894 (181,710) — (181,710) 10,853 5,556 — — 10,853 5,556 8,040,378

988,455 1,615,312

See accompanying notes to non-consolidated financial statements.

SHINHAN BANK Non-Consolidated Statements of Changes in Equity, Continued For the three-month periods ended March 31, 2009 and 2008 (In millions of Won and thousands of U.S. dollars) Accumulated other Capital Capital Capital comprehensive Retained income earnings stock surplus adjustments Balance at January 1, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W7,928,078 398,080 Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — Appropriation of other capital Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — Adjustment in foreign currency rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — Unrealized gain on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — Unrealized gain on equity method accounted investments . . . . . . . . . . . . . . . . . . . . . . . . . — — Unrealized loss on equity method accounted investments . . . . . . . . . . . . . . . . . . . . . . . . . — — F-97 Balance at March 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W7,928,078 398,080 Balance at January 1, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,757,082 289,071 Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — Appropriation of other capital Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — Adjustment in foreign currency rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — Unrealized gain on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — Unrealized gain on equity method accounted investments . . . . . . . . . . . . . . . . . . . . . . . . . — — Unrealized loss on equity method accounted investments . . . . . . . . . . . . . . . . . . . . . . . . . — — (52,756) — — 52,756 — — — — — (38,309) — — 38,309 — — — — —

Total

369,842 3,304,638 11,947,882 — (11,099) (11,099) — 73,731 73,731 — (52,756) — — 3,891 3,891 (10,500) — (10,500) 33,965 — 33,965 (70,571) — (70,571) 322,736 3,318,405 11,967,299 268,566 2,399,708 8,676,118 — (8,060) (8,060) — 53,541 53,541 — (38,309) — — 2,826 2,826 (7,625) — (7,625) 24,664 — 24,664 (51,246) — 51,246 8,690,218

Balance at March 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,757,082 289,071

234,359 2,409,706

See accompanying notes to non-consolidated financial statements.

SHINHAN BANK Non-Consolidated Statements of Cash Flows For the three-month periods ended March 31, 2009 and 2008 (In millions of Won and thousands of U.S. dollars) 2009 Won Cash flows from operating activities: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization . . . . . . . . . . . . . . . . Provision for credit losses . . . . . . . . . . . . . . . . . . . . Provision for retirement and severance benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest income due to amortization of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation expense . . . . . . . . . . . Unrealized loss (gain) on trading securities . . . . Impairment loss on available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reversal of impairment loss on available-for-sale securities . . . . . . . . . . . . . . . . Equity in net loss (income) of equity method accounted investees . . . . . . . . . . . . . . . . . . . . . . . Loss on disposition of equity method accounted investments . . . . . . . . . . . . . . . . . . . . . Loss on valuation of derivatives, net . . . . . . . . . . Gain on foreign currency transactions, net . . . . . Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . Change in assets and liabilities: Increase in trading securities, net . . . . . . . . . . . . . Increase in available-for-sale securities, net . . . Increase in held-to-maturity securities, net . . . . Decrease (increase) in loans, net . . . . . . . . . . . . . . Decrease in derivative assets . . . . . . . . . . . . . . . . . Decrease in derivative liabilities . . . . . . . . . . . . . . Decrease (increase) in other assets . . . . . . . . . . . . Increase (decrease) in other liabilities . . . . . . . . . Dividend received from equity method accounted investments . . . . . . . . . . . . . . . . . . . . . Retirement and severance benefits paid . . . . . . . Decrease in deposit for severance benefit Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash provided by (used) in operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2008 2009 2008 U.S. dollars (note 2(b))

W

73,731

381,763

$

53,541

277,222

45,833 332,482 42,027 (765) (6,278) 2,651 24,548 (40) 14,619 — 13,490 (106,830) (40,807) (1,958,942) (1,080,985) (440,550) 8,491,313 4,229,558 (4,261,190) 72,704 (230,110) — (116,692) 67,797 2,202,656

52,807 108,925 48,955 (1,228) (8,718) (1,188) 60,633 (30,260) (11,993) 964 16,974 (27,715) 143,798 (458,690) (2,105,722) (262,550) (6,948,597) 1,823,745 (1,811,962) (8,169,985) 8,086,376 3,874 (15,939) 26,175 4,706,679

33,282 241,436 30,518 (556) (4,559) 1,925 17,826 (29) 10,616 1 9,796 (77,575) (29,633) (1,422,513) (784,972) (319,911) 6,166,083 3,071,351 (3,094,321) 52,795 (167,098) — (84,737) 49,232 1,599,489

38,347 79,097 35,549 (892) (6,331) (863) 44,029 (21,974) (8,709) 700 12,326 (20,126) 104,421 (333,084) (1,529,099) (190,654) (5,045,819) 1,324,337 (1,315,781) (5,932,746) 5,872,033 2,813 (11,574) 19,007 3,417,822

W 7,370,220

(4,392,879) $ 5,351,987

(3,189,949)

See accompanying notes to non-consolidated financial statements.

F-98

SHINHAN BANK Non-Consolidated Statements of Cash Flows, Continued For the three-month periods ended March 31, 2009 and 2008 (In millions of Won and thousands of U.S. dollars) 2009 Won Cash flows from investing activities: Cash provided by investing activities: Proceeds from disposal of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Disposal of equity method accounted investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Security deposits received . . . . . . . . . . . . . . . . . . . . . 2008 2009 2008 U.S. dollars (note2(b))

W

214 — 65,703 65,917

32,218 150 107,188 139,556

$

155 — 47,712 47,867

23,396 109 77,835 101,340

Cash used in investing activities: Purchase of property and equipment . . . . . . . . . . . . Acquisition of equity method accounted investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase of intangible assets . . . . . . . . . . . . . . . . . . . Security deposits paid . . . . . . . . . . . . . . . . . . . . . . . . . Purchase of gold bullion, net . . . . . . . . . . . . . . . . . . .

(17,099) (5,000) (14,886) (621,382) (15,023) (673,390)

(87,115) (19,834) (7,476) (124,083) (7,275) (245,783) (106,227)

(12,417) (3,631) (10,810) (451,225) (10,908) (488,991) (441,124)

(63,260) (14,403) (5,429) (90,105) (5,282) (178,479) (77,139)

Net cash used in investing activities . . . . . . . . . . Cash flows from financing activities: Cash provided by financing activities: . . . . . . . . . . Increase in deposits . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from borrowings . . . . . . . . . . . . . . . . . . . Proceeds from issuance of debentures . . . . . . . . . Proceeds from borrowings from trust accounts, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase in foreign exchange remittances pending, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from deposits for letters of guarantees and others, net . . . . . . . . . . . . . . . . .

(607,473)

8,473,418 3,861,465 243,277 2,811,557 — 30,654 W15,420,371

5,539,468 3,055,792 3,963,087 — 3,492 — 12,561,839

6,153,088 4,022,560 2,804,056 2,219,005 176,659 2,877,850 2,041,651 — 22,259 $11,197,713 — 2,536 — 9,121,951

See accompanying notes to non-consolidated financial statements.

F-99

SHINHAN BANK Non-Consolidated Statements of Cash Flows, Continued For the three-month periods ended March 31, 2009 and 2008 (In millions of Won and thousands of U.S. dollars) 2009 Won Cash used in financing activities: Decrease in deposits . . . . . . . . . . . . . . . . . . . . . . . . . Repayment of borrowings . . . . . . . . . . . . . . . . . . . . Repayment of debentures . . . . . . . . . . . . . . . . . . . . Payment of debenture issuance costs . . . . . . . . . . Payment of borrowing from trust accounts, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Refund of deposits for letters of guarantees and others, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Refund of deposits held for subscription of securities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2008 2009 2008 U.S. dollars (note2(b))

W (2,056,430) (3,006,485) $ (1,493,305) (2,183,200) (8,931,654) (575,350) (6,485,843) (417,798) (5,841,570) (1,684,596) (4,241,936) (1,223,292) (43) — (31) — (10,079) — (11,047) (11,099) (400,217) (4,505) (26,723) (406,516) (7,319) — (8,023) (8,060) (290,623) (3,271) (19,405) (295,199)

(16,861,922) (6,104,392) Net cash provided (used) by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net increase (decrease) in cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and due from banks at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and due from banks at end of period . . . . . . .

(12,244,517) (4,432,788)

(1,441,551)

6,457,447

(1,046,804)

4,689,163

5,321,196

1,958,341

3,864,059

1,422,075

8,578,930 W 13,900,126

6,312,608 8,270,949

6,229,708 $ 10,093,767

4,583,987 6,006,062

See accompanying notes to non-consolidated financial statements.

F-100

SHINHAN BANK Notes to Non-Consolidated Financial Statements March 31, 2009 (Unaudited) (1) General Description

Shinhan Bank (the “Bank”) was established through the merger of Hansung Bank, which was established on February 19, 1897, and Dongil Bank, which was established on August 8, 1906, to engage in commercial banking and trust operations. The Bank is headquartered in 120 Bungi, Taepyeongro 2-ga, Jung-gu, Seoul, Korea. The Bank acquired Chungbuk Bank and Kangwon Bank in 1999, and acquired the former Shinhan Bank on April 1, 2006, and then changed the name of the Bank to Shinhan Bank. As of December 31, 2008, the Bank has 1,585,615,506 outstanding shares with par value of W7,928,078 million and Shinhan Financial Group Co., Ltd. owns 100% of them. As of March 31, 2009, the Bank operates through 820 domestic branches, 100 depositary offices, and 10 overseas branches. (2) (a) Summary of Significant Accounting Policies and Basis of Presenting Financial Statements Basis of Presenting Financial Statements

The Bank maintains its accounting records in Korean Won and prepares statutory non-consolidated financial statements in the Korean language in conformity with accounting principles generally accepted in the Republic of Korea. Certain accounting principles applied by the Bank that conform with financial accounting standards and accounting principles in the Republic of Korea may not conform with generally accepted accounting principles in other countries. Accordingly, these non-consolidated financial statements are intended solely for use by those who are informed in Korean accounting principles and practices. The English non-consolidated financial statements have been condensed and restructured from the Korean language non-consolidated financial statements filed with the Financial Services Commission. Certain information included in the Korean language non-consolidated financial statements, but not required for a fair presentation of the Bank's financial position, results of operations, cash flows or changes in stockholder’s equity, is not presented in the English non-consolidated financial statements. The accompanying non-consolidated financial statements include only the accounts of the Bank, and do not include the accounts of any of its subsidiaries. (b) Basis of Translating Financial Statements

The non-consolidated financial statements are expressed in Korean Won and, solely for the convenience of the reader, have been translated into U.S. dollars at the rate of W1,377.10 to US$1, the basic exchange rate on March 31, 2009. These translations should not be construed as a representation that any or all of the amounts shown could be converted into U.S. dollars at this or any other rates. (c) Application of the Statements of Korean Financial Accounting Standards

The accounting policies were consistently applied for the non-consolidated financial statements both as of and for the three-month period ended March 31, 2009 and as of and for the year ended December 31, 2008. (d) Investments in Securities (excluding in associates, subsidiaries or interests in joint ventures) Classification Upon acquisition, the Bank classifies debt and equity securities (excluding investments in subsidiaries, associates and joint ventures) into the following categories: held-to-maturity, available-for-sale or trading securities. This classification is reassessed at each reporting date.

F-101

Investments in debt securities where the Bank has the positive intent and ability to hold to maturity are classified as held-to-maturity. Securities that are acquired principally for the purpose of selling in the short term are classified as trading securities. Investments not classified as either held-to-maturity or trading securities are classified as available-for-sale securities. Initial recognition Investments in securities (excluding investments in subsidiaries, associates and joint ventures) are initially recognized at cost. And equity securities and debt securities are recorded by the moving average method and the individual identification method, respectively. Subsequent measurement and income recognition Trading securities are subsequently carried at fair value. Gains and losses arising from changes in the fair value of trading securities are included in the non-consolidated income statement in the period in which they arise. Available-for-sale securities are subsequently carried at fair value. Gains and losses arising from changes in the fair value of available-for-sale securities are recognized as accumulated other comprehensive income, net of tax, directly in equity. Investments in available-for-sale securities that do not have readily determinable fair values are recognized at cost less impairment, if any. Held-to-maturity investments are carried at amortized cost with interest income and expense recognized in the non-consolidated income statement using the effective interest method. Fair value information The fair value of marketable securities is determined using quoted market prices as of the period end. Non-marketable equity securities are recorded at the fair value calculated by the valuation model using reliable data of independent professional institutes. Non-marketable debt securities are fair valued by discounting cash flows using the prevailing market rates for debt with a similar credit risk and remaining maturity. Credit risk is determined using the issuer’s credit rating as announced by accredited credit rating agencies in Korea. Non-marketable beneficiary certificates are recorded at the fair value using the standard trading yield rate determined by fund management companies. Private placement fund The invested assets of private placement fund are deposit, call loan and securities. The bank recognizes the private placement fund as beneficiary certificate and benefit from it as interest income. Impairment The Bank reviews investments in securities whenever events or changes in circumstances indicate that the carrying amount of the investments may not be recoverable. Impairment losses are recognized when the reasonably estimated recoverable amounts are less than the carrying amount and there is no clear evidence that impairment is not necessary. Impairment, if any, is recorded as a reduction in the carrying amount of the securities and included in the non-consolidated income statement in the period in which they arise. Recovery of impairment loss, when it is objectively related to an event occurring after the recognition of impairment loss, is recognized as current income. However, the new carrying amount after the reversal of impairment cannot exceed the carrying value of the investment security that would have been measured at the date of reversal had no impairment loss been recognized. (e) Investments in Associates and Subsidiaries

Associates are all entities of which the Bank has the ability to significantly influence the financial and operating policies and procedures, generally through 15% to 50% of the voting rights. Subsidiaries are entities controlled by the Bank. Investments in associates and subsidiaries are accounted for using the equity method of accounting and are initially recognized at cost.

F-102

The Bank’s investments in associates and subsidiaries include goodwill identified on acquisition (net of any accumulated impairment loss). Goodwill is calculated as the excess of the acquisition cost of an investment in an associate or subsidiary over the Bank’s share of the fair value of the identifiable net assets acquired. Goodwill is amortized using the straight-line method over its estimated useful life of five years. Amortization of goodwill is recorded together with equity income (losses). When events or circumstances indicate that the carrying value of goodwill may not be recoverable, the Bank reviews goodwill for impairment and records any impairment loss immediately in the non-consolidated income statement. The Bank’s share of its post-acquisition profits or losses in investments in associates and subsidiaries is recognized in the non-consolidated income statement, and its share of post-acquisition movements in equity is recognized in equity. The cumulative post-acquisition movements are adjusted against the carrying amount of each investment. Changes in the carrying amount of an investment resulting from dividends by an associate or subsidiary are recognized when the associate or subsidiary declares the dividend. When the Bank’s share of losses in an associate or subsidiary equals or exceeds its interest in the associate or subsidiary, including preferred stock or other long term loans and receivables issued by the associate or subsidiary, the Bank does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate or subsidiary. If the investee is a subsidiary, net income and net assets of the parent company’s separate financial statements should agree with the parent company’s share in the net income and net assets of the consolidated financial statements, except when the Bank discontinues the application of the equity method due to its investment in a subsidiary being reduced to zero. Unrealized gains on transactions between the Bank and its investees are eliminated from the account of investments in associates and subsidiaries to the extent of the Bank’s interest in each. (f) Interest in Joint Ventures

Joint ventures are those operations or assets over whose activities the Bank has joint control. With respect to jointly controlled operations, the Bank includes, in its non-consolidated financial statements, the assets that it controls and the liabilities and expenses it has incurred, plus its share of the income from the joint operation. For its interest in jointly controlled assets, the Bank recognizes, in the non-consolidated financial statements, its share of the assets it jointly controls, the liabilities jointly incurred and net income, plus the liabilities and expenses it has solely incurred, if any. The Bank accounts for its interest in a jointly controlled entity using the equity method of accounting. (g) Allowance for Loan Losses

In estimating the allowance for corporate and household loans including the credit card loan, the Bank records the greater amount than the result from the provisioning methods described below. i) Expected Loss Method

The Bank estimates the allowance for corporate and household loan losses by applying the expected loss method, which analyzes factors of estimated loss based on probability of default (“PD”) and loss given default (“LGD”). This provisionary method considers both financial and non-financial factors of borrowers to assess PD and LGD. PD is determined by considering the type of borrowers, the nature of loans and delinquent days and LGD is determined by considering the type of loan and collateral. For PD are applied data of the past seven years for corporate loans and of five years for household loans. For LGD are applied data of the past seventy months for corporate loans, of sixty months for household loans and of one-hundred-eight months for loans secured by real estate. The allowance for loan losses is calculated by multiplying outstanding loan balance by the PD and LGD.

F-103

ii)

FSS Guideline

The Bank applies the FSS guidelines for corporate and household loans. The prescribed minimum levels of provision per the FSS guidelines are as follows, Corporate loans Normal (*) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Precautionary . . . . . . . . . . . . . . . . . . . . . . . . . . . . Substandard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Doubtful . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Estimated loss . . . . . . . . . . . . . . . . . . . . . . . . . . .
(*)

Household loans 1% 10% 20% 55% 100%

(*) 0.85% 7% 20% 50% 100%

0.9% for construction, real estate and rental services, retail and wholesale, lodging and restaurant; industries susceptible to market

In addition, the Bank includes interbank loan, call loan, bills bought under repurchase agreement and deposit from banks except for Bank of Korea in estimating the allowance for loan losses classified as normal. Additionally, the Bank considers the borrower’s ability to repay and the recovery value of collateral in estimating expected loss on high-risk large volume loan balance. Loans are charged-off if they are deemed to be uncollectible by falling under any of the following categories: — Loans for which collection is not foreseeable due to insolvency or bankruptcy, dissolution or the closure of the business by the debtor; Payments outstanding on unsecured consumer loans, which have been overdue for more than six months; or The portion of loans classified as “estimated loss”, net of any recovery from collateral, which is deemed to be uncollectible. Troubled Debt Restructuring

(h)

A loan in which the contractual terms are modified in a troubled debt restructuring program is accounted for at the present value of the expected future cash flows of the modified loan discounted at the effective interest rate of the original loan. The excess of the carrying amount over the present value of expected future cash flows is recorded as provision for loan losses in the current period. The present value discounts are recorded in allowance for loan losses and reflected as a deduction from the nominal value of the loans. The present value discounts are amortized using the effective interest method and recognized as interest income. (i) Deferred Loan Origination Fees

Certain fees associated with lending activities which meet specified criteria, are deferred and amortized over the life of the loan as an adjustment to the carrying amount of the loan using the effective yield method and recognized as interest income. (j) Transfer of Assets

Transfers of financial assets to third parties are accounted for as sales when control is surrendered to the transferee. The Bank derecognizes financial assets from the statement of financial position including any related allowance, and recognizes all assets obtained, and liabilities incurred, including any recourse obligations to the transferee, at fair value. Any resulting gain or loss on the sale is recognized in earnings. Conversely, the Bank only recognizes financial assets transferred from third parties on the statement of financial position when the Bank obtains control of financial assets.

F-104

(k)

Interest Income

Interest income on bank deposits, loans and securities is recognized on an accrual basis, except for interest on loans that are past due and loans to customers who are bankrupt which are placed on non-accrual. Any unpaid interest previously accrued on such loans is reversed from income, and thereafter interest is recognized only to the extent payments are received. Payments on delinquent loans are first applied to delinquent interest, to normal interest, and then to the principal balance. (l) Property and Equipment

Property and equipment are stated at cost except in the case of revaluations made in accordance with the Asset Revaluation Law which allowed for asset revaluation prior to the Law being revoked. Assets acquired through investment in kind or donation, are recorded at fair value. Significant additions or improvements extending useful lives of assets are capitalized. However, normal maintenance and repairs are charged to expense as incurred. Depreciation is computed by the declining-balance method using rates based on the estimated useful lives or the straight-line method over the estimated useful lives of the respective assets as follows: Descriptions Buildings Leasehold improvements Furniture, office equipment and others Depreciation method Straight-line Straight-line Declining-balance Useful lives 40~60 years 5 years 5 years

For property and equipment at overseas branches, the depreciation methods regulated by the respective local regulatory authority are applied. The Bank reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognized when the expected estimated undiscounted future net cash flows from the use of the asset and its eventual disposal are less than its carrying amount. The Bank recognizes an impairment loss by reducing its carrying amount to the estimated recoverable amount. (m) Intangible Assets Intangible assets which mainly consist of software are stated at cost less accumulated amortization and impairment loss, if any. Such intangible assets are amortized using the straight-line method over five years. The Bank reviews intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Bank reduces its carrying amount to the recoverable amount and the amount impaired is recognized as impairment loss. (n) Leases

The Bank classifies and accounts for lease transactions as either an operating or capital lease, depending on the terms of the lease. Leases where the Bank assumes substantially all the risks and rewards of ownership are classified as capital leases. All other leases are classified as operating leases. Substantially all the risks and rewards of ownership are evidenced when one or more of the criteria listed below are met: — — Ownership of the leased property will transfer to the lessee at the end of the lease term. The lessee has a bargain purchase option and it is reasonably certain at the inception of the lease that the option will be exercised.

F-105

— —

The lease term is equal to 75% or more of the estimated economic useful life of the leased property. The present value at the beginning of the lease term of the minimum lease payments equals or exceeds 90% of the fair value of the leased property.

In addition, if the leased property is specialized to the extent that only the lessee can use it without any major modification, it would be considered a capital lease. Otherwise, the lease is classified as an operating lease and recognized in income on a straight-line basis over the lease term. Financing lease is recorded as the net investment in the lease asset at lease inception representing the aggregate future minimum lease payments. Lease income is recognized to approximate a level rate of return on the net investment by using the effective yield method over the lease term. The Bank also recognizes initial direct costs incurred in negotiating and arranging leases. Initial direct costs incurred for operating leases are initially recorded as a separate asset and expensed as fee and commission expense over the lease term on the same basis in which lease income is recognized. Initial direct costs incurred for financing leases are included in the net investment in the lease asset and reduces lease income over the lease term using the effective yield method. (o) Bonds under Resale or Repurchase Agreements

Bonds purchased under resale agreements are recorded as loans and bonds sold under repurchase agreements are recorded as borrowings when the Bank purchases or sells securities under resale or repurchase agreements. (p) Discount (Premium) on Debentures

Discount (premium) on debentures issued, which represents the difference between the face value and issuance price of debentures, is amortized (accreted) using the effective interest method over the life of the debentures. The amount amortized (accreted) is included in interest expense. (q) Retirement and Severance Benefits

Employees who have been with the Bank for more than one year are entitled to lump-sum payments based on salary rates and length of service at the time they leave the Bank. The Bank's estimated liability under the plan which would be payable if all employees left on the reporting date is accrued in the accompanying non-consolidated statements of financial position. A portion of the liability is covered by an employees’ severance insurance where the employees have a vested interest in the deposit with the insurance company in trust. The deposit for severance benefit insurance is, therefore, reflected in the accompanying non-consolidated statements of financial position as a reduction of the liability for retirement and severance benefits. (r) Provision and Contingent Liabilities

Provisions are recognized when all of the following are met: (1) an entity has a present obligation as a result of a past event, (2) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and (3) a reliable estimate can be made of the amount of the obligation. Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation. Where the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement is recognized as a separate asset when, and only when, it is virtually certain that reimbursement will be received if the Company settles the obligation. The expense generated by the provision is presented net of the amount of expected reimbursement.

F-106

(s)

Allowance for Loss on Guarantees and Acceptances

The Bank estimates allowance for losses on outstanding guarantees and acceptances, contingent guarantees and acceptances and endorsed bills in accordance with the same loan classification criteria applied in estimating allowance for loan losses and recorded as other liabilities with the respective changes recorded as other non-interest expense. (t) Allowance for Unused Loan Commitments

The Bank estimates the allowance for unused corporate and household loan commitments by each classification considering the credit conversion factor (CCF), the ratio in which the off-balance sheet commitments are converted into outstanding amounts based on historical data. In addition, the Bank applies the FSS guidelines for unused corporate and household loan commitments in accordance with the Regulations for the Supervision of Banks revised at December 7, 2007 as follows: for unused corporate loan commitments a minimum of 0.85% for normal (0.9% for construction, real estate and rental services, retail and wholesale, lodging and restaurant; industries susceptible to market), 7% for precautionary, 20% for substandard, 50% for doubtful and 100% for estimated loss, respectively; and for unused household loan commitments a minimum of 1.0% for normal, 10% for precautionary, 20% for substandard, 55% for doubtful and 100% for estimated loss, respectively. The Bank records the greater amount resulting from the provisioning methods described above by each classification as other allowances included in other liabilities with the respective changes recorded in other non-interest expense. (u) Translation of Foreign Currency Denominated Assets and Liabilities

Assets and liabilities denominated in foreign currencies are translated into Korean Won at the reporting date, with the resulting gains and losses recognized in current results of operations. Assets and liabilities denominated in foreign currencies are translated into Korean Won at W1,377.10 and W1,257.50 to US$1 based on the basic exchange rate and the cross exchange rates announced by the Seoul Money Brokerage Services Ltd. on March 31, 2009 and December 31, 2008, the last business day of each respective period, respectively. Non-monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are translated into Korean Won at the foreign exchange rate on the date of the transaction. Foreign currency assets and liabilities of foreign-based operations and branches accounted for using the equity method are translated at the rate of exchange at the respective reporting date. Foreign currency amounts in the non-consolidated statement of income are translated using an average rate. Translation gains and losses arising from collective translation of the foreign currency financial statements of foreign-based operations are recorded net as accumulated other comprehensive income. These gains and losses are subsequently recognized as income in the year the foreign operations or companies are liquidated or sold. (v) Derivatives and Hedge Accounting

The Bank holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, and a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative. Derivatives are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at their fair value. Attributable transaction costs are recognized in profit or loss when incurred. Hedge accounting Where a derivative, which meets certain criteria, is used for hedging the exposure to changes in the fair value of a recognized asset, liability or firm commitment, it is designated as a fair value hedge. Where a derivative, which meets certain criteria, is used for hedging the exposure to the variability of the future cash flows of a forecasted transaction it is designated as a cash flow hedge.

F-107

The Bank documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Bank documents its assessment, both at hedge inception and on a monthly basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting the changes in fair values or cash flows of hedged items. Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the non-consolidated statement of income, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in equity as other comprehensive income. The gain or loss relating to any ineffective portion is recognized immediately in the earnings. Amounts accumulated in equity are recycled to the income statement in the periods in which the hedged item will affect profit or loss. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at the time remains in equity and is recognized when the forecast transaction is ultimately recognized in earnings. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the statement of income. Derivatives that do not qualify for hedge accounting Changes in the fair value of derivative instruments that are not designated as fair value or cash flow hedges are recognized immediately in the statement of income. Separable embedded derivatives Changes in the fair value of separable embedded derivatives are recognized immediately in the statement of income. (w) Share-Based Payment The Bank has granted shares or share options to its employees and other parties. For equity-settled sharebased payment transactions, the Bank measures the goods or services received, and the corresponding increase in equity as a capital adjustment at the fair value of the goods or services received, unless that fair value cannot be estimated reliably. If the entity cannot estimate reliably the fair value of the goods or services received, the Bank measures their value, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity instruments granted. If the fair value of the equity instruments cannot be estimated reliably at the measurement date, the Bank measures them at their intrinsic value and recognizes the goods or services received based on the number of equity instruments that ultimately vest. For cash-settled share-based payment transactions, the Bank measures the goods or services acquired and the liability incurred at the fair value of the liability. Until the liability is settled, the Bank remeasures the fair value of the liability at each reporting date and at the date of settlement, with changes in fair value recognized in profit or loss for the period. (x) Income Taxes

Income tax on the income or loss for the year comprises current and deferred tax. Income tax is recognized in the non-consolidated statement of income except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted.

F-108

Deferred tax is provided using the asset and liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. A deferred tax asset is recognized only to the extent that it is probable that future taxable income will be available against which the unused tax losses and credits can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Deferred tax assets and liabilities are classified as current or non-current based on the classification of the related asset or liability for financial reporting or the expected reversal date of the temporary difference for those with no related asset or liability such as loss carry forwards and tax credit carry forwards. The deferred tax amounts are presented as a net current asset or liability and a net non-current asset or liability. Changes in deferred taxes due to a change in the tax rate except for those related to items initially recognized outside profit or loss (either in other comprehensive income or directly in equity) are recognized as income in the current year. (y) Valuation of Receivables and Payables at Present Value

Receivables and payables from long-term cash loans/borrowings and other similar transactions are stated at present value. The difference between the nominal value and present value of these receivables or payables is amortized using the effective interest method. The amount amortized is included in interest expense or interest income. (z) Accounting for Trust Accounts

The Bank accounts for trust accounts separately from its bank accounts under the Trust Business Act and thus are not included in the accompanying non-consolidated financial statements. Funds transferred between a bank account and a trust account are recognized as borrowings from trust accounts in other liabilities with fees for managing the accounts recognized as non-interest income by the Bank. Furthermore, the Bank recognizes as loss in other non-interest expense any excess amount of the guaranteed principal and earnings over the sum of trust fee income and a special provision which consist of up to 25% of total trust fees or 5% of certain trust accounts. (aa) Cash Management Account (“CMA”) The Bank recognizes income from CMA investments consisting of highly liquid investments and expense from CMA deposits as other interest income and other interest expense, respectively. (ab) Use of Estimates The preparation of non-consolidated financial statements in accordance with accounting principles generally accepted in the Republic of Korea requires management to make estimates and assumptions that affect the amounts reported in the non-consolidated financial statements and related notes to the non-consolidated financial statements. Actual results could differ from those estimates.

F-109

(3) (a)

Cash and Due from Banks Cash and due from banks as of March 31, 2009 and December 31, 2008 consisted of the following: 2009 2008 (in millions of Won)

Cash on hand: Won . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W 2,002,746 303,409 2,306,155

1,542,963 294,732 1,837,695 4,705,622 33,165 4,738,787

Due from banks in Won: Reserve deposits with the Bank of Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,562,499 2,170,836 9,733,335

Due from banks in foreign currencies: Demand deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,656,231 1,008,295 92,041 66,764 19,389 868,652 1,767,661 1,943,711 92,975 58,737 W13,900,126 8,578,930

Due from banks invested in gold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b)

Restricted due from banks as of March 31, 2009 and December 31, 2008 were as follows: 2009 2008 (in millions of Won) Restriction

Due from banks in Won: Reserve deposits with the Bank of Korea . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W7,562,499 175,818 7,738,317

4,705,622 27,647 4,733,269 957,184 5,690,453

Bank of Korea Act

Due from banks in foreign currencies: . . . . . . . . . . . .

1,543,924 W9,282,241

Bank of Korea Act & others

F-110

(c)

The maturities of due from banks as of March 31, 2009 and December 31, 2008 were as follows: Due from banks in Foreign Won currencies Gold (in millions of Won) W9,552,499 — — 5,208 175,628 W9,733,335

At March 31, 2009

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due after 3 months through 6 months . . . . . . . . . . . . . . . . . . . Due after 6 months through 1 year . . . . . . . . . . . . . . . . . . . . . Due after 1 year through 3 years . . . . . . . . . . . . . . . . . . . . . . . Due after 3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,744,524 92,975 11,389,998 16,195 — 16,195 6,748 — 6,748 194 — 5,402 — — 175,628 1,767,661 92,975 11,593,971

At December 31, 2008

Due from banks in Foreign Won currencies Gold (in millions of Won) W4,705,621 5,258 27,908 W4,738,787

Total

Due in 3 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Due after 3 months through 3 years . . . . . . . . . . . . . . . . . . . . . . Due after 3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,943,697 58,737 6,708,055 — — 5,258 14 — 27,922 1,943,711 58,737 6,741,235

(4)

Securities

Securities as of March 31, 2009 and December 31, 2008 consisted of the following: 2009 2008 (In millions of Won) Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Available-for-sale securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Held-to-maturity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity method accounted investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W 3,869,554 1,913,263 27,337,841 25,855,258 7,998,917 7,552,933 1,340,924 1,270,806 W40,547,236 36,592,260

F-111

(a)

Trading Securities (i) Trading securities as of March 31, 2009 and December 31, 2008 consisted of the following: 2009 2008 (in millions of Won) Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Debt securities: Government bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W 10,280 209,157 50,879 238,148 498,184 Beneficiary certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,837 16,897 238,720 — 255,617

112,215 115,704 3,248,875 1,531,105 W3,869,554 1,913,263

(ii)

Details of trading equity securities as of March 31, 2009 and December 31, 2008 were as follows: 2009 Acquisition cost Fair value Book value (in millions of Won)

Trading equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

W10,202

10,280

10,280

2008 Acquisition cost Fair value Book value (in million of Won) Trading equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W11,166 10,837 10,837

(iii) Details of trading debt securities as of March 31, 2009 and December 31, 2008 were as follows: 2009 Acquisition Amortized cost cost Fair value (*) (in millions of Won) 209,811 50,719 238,771 499,301 209,818 50,707 238,437 498,962 212,648 51,169 240,116 503,933

Face value

Book value (**)

Government bonds . . . . . . Finance debentures . . . . . Corporate bonds . . . . . . . .

W202,000 50,000 230,000 W482,000

209,157 50,879 238,148 498,184

F-112

2008 Face value Acquisition Amortized cost cost Fair value (*) (in millions of Won) 16,568 236,326 252,894 16,698 236,388 253,086 17,589 242,038 259,627 Book value (**)

Government bonds . . . . . . Finance debentures . . . . .

W 16,300 241,000 W257,300

16,897 238,720 255,617

(*)

Debt securities are measured at fair value by applying the lesser of two quoted bond prices provided by two bond pricing agencies at the latest trading date from the reporting date. The difference between fair value and book value is recorded as accrued income.

(**)

(iv) Details of beneficiary certificates as of March 31, 2009 and December 31, 2008 were as follows: 2009 Acquisition cost Fair value (in millions of Won) 110,000 112,215

Face value

Book value

Beneficiary certificates . . . . . . . . . . . . . . . . . .

W110,949

112,215

Face value

2008 Acquisition cost Fair value (in millions of Won) 110,000 115,704

Book value

Beneficiary certificates . . . . . . . . . . . . . . . . . . (v)

W110,949

115,704

Details of commercial paper as of March 31, 2009 and December 31, 2008 were as follows: 2009 Acquisition cost Fair value (in millions of Won) 3,247,226 3,248,875

Face value

Book value

Commercial paper . . . . . . . . . . . . . . . . . . . . .

W3,261,331

3,248,875

Face value

2008 Acquisition cost Fair value (in millions of Won) 1,523,814 1,531,105

Book value

Commercial paper . . . . . . . . . . . . . . . . . . . . .

W1,538,600

1,531,105

F-113

(b)

Available-for-Sale Securities (i) Available-for-sale securities as of March 31, 2009 and December 31, 2008 consisted of the following: 2008 2009 (in millions of Won) Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment in private equity funds and Other . . . . . . . . . . . . . . . . . . . . . . . . . . Debt securities: Government bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W 2,994,217 295,055 4,128,268 12,193,394 3,532,249 2,867,700 294,979 2,901,996 12,781,662 3,135,070

Beneficiary certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities in foreign currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19,853,911 18,818,728 2,498,752 2,209,522 1,653,166 1,621,694 42,740 42,635 W27,337,841 25,855,258

(ii)

Details of available-for-sale equity securities as of March 31, 2009 and December 31, 2008 were as follows: 2009 Acquisition cost Fair value Book value (in million of Won)

Marketable stocks . . . . . . . . . . . . . . . . .