October 2008

1. The Korean Financial Market and Economy :Resilience AmidstTurbulence October 2008

2. Strong Macroeconomic Performance

3. Robust Macroeconomic Fundamentals Robust Exports Sound GDP Growth Export (US$ bn) (YoY growth, %) 30.9% Lower Debt Levels Than OECD Peers Continuous Fiscal Surpluses Consolidated Government Balance (% of GDP) Net Government Debt (%) OECD average: 77%

4. Improving Current Account Surplus Diversified Export Markets Diversified Export Products Others 19.8% China 22.1% Middle East 5.3% Central &South America 6.9% EU 15.1% Japan 7.1% North America 13.3% ASEAN 10.4% Source: KITA, as of 2007 Current Account Balance Expected to Turn to Surplus in 4Q 2008 2008 Current account balance (US$ bn) • As of August 2008 Korea has a current account deficit of around US$12.6bn • The deficit stems from the deteriorating goods-trade account caused by surging import prices, especially oil • Price of Imports have increased 24.8%, driven primarily by crude oil prices • It is expected that the goods-trade account will swing to a surplus as energy prices continue to decline 1.0 - 4.0 (8.5 – 9.0) 4

5. Strong Financial Sector Adequate Profitability Improved Asset Quality Avg. NPL (%) Avg. ROE (%) Sound BIS Ratio Stable Liquidity BIS Ratio (%) * Includes commercial banks only

6. Attractive Corporate Sector PER Comparison (September 2008, MSCI Index) Improved Earnings of Listed Companies Decreasing Debt/Equity Ratio Low Bill Defaults Debt/Equity Ratio (%) Bill Defaults (%) * Includes companies listed in the MSCI Index

7. Visions for the Korean Financial Markets • Improve competitiveness of Financial Institutions • Foster homegrown global players • Attract highly-skilled professionals from abroad Strengthen Financial Institutions Create Investor-friendly Financial Environment • Implement regulatory reforms • Adopt global standards • Enhance financial market stability World-Class Financial Market Achieve Continuous Growth of Economy • Foster autonomy and market competition • Enhance innovation Have Korean Financial Market Revaluated • Developed market status under FTSE index • Promote Financial Center Policy

8. Fact or Fiction? Korea in the Current Market Turbulence

9. Fact or Fiction? Market Speculation Fact or Fiction? FICTION • A closer look at Korea’s external debt composition reveals that significant amount of external debt is risk-free • In addition, Korea has a healthy external sector with abundant foreign reserves and high liquidity “Korea is at risk of external debt defaults.” #1 FICTION “The Korean Banking System is too levered and faces a liquidity crisis.” • The banking sector has seen moderating loan growth in 2008 with continued low levels of delinquency • Furthermore, there is no mismatch between foreign currency assets and liabilities held by Korean banks; foreign currency liquidity ratio remains high #2 FICTION “The Korean housing sector is under stress and may collapse.” #3 • The Korean Housing Sector has maintained balanced growth rates supported by robust mortgage regulations

10. Moderate External Debt Level Long-term Debt: US$ 244.1bn Short-term Debt: US$ 175.7bn Domestic Banks and Corporates US$ 85.4bn #1 Korea maintains a balanced external debt profile. Balanced Short and Long-term Debt Large Portion of FX Debt is Hedging Total Debt: US$ 419.8bn Total Debt: US$ 419.8bn Foreign investor’s loan Regarded as FDI US$ 7.1bn Advance receipts on shipbuilding exports contracts US$ 50.9bn FX Trade Hedging US$ 93.8bn Government, BOK US$ 10.7bn Domestic branches Of Foreign Banks US$ 79.5bn 48.6% of Short-Term Debt Debt with Potential Risk US$ 268bn 10

11. Highly Liquid Foreign Reserves #1 Korea has the 6th largest foreign reservesworldwide,comprised of highly liquid assets. Adequate Amount of ForeignReserves Highly Liquid Foreign Reserves FX reserves (US$ bn) Total reserves (US$ bn) AA rated or above bondsUS$ 217.2bn (90.6%) 6th Largest Reserves Globally (August 2008) FX reserves (US$ bn) 1,808 DepositUS$ 22.0bn (9.2%) Others US$ 0.5bn (0.2%) Median of peers1: US$ 29.2bn Source: Bank of Korea 1 Includes Hong Kong (AA+), Slovenia (AA), Portugal (AA-), Italy (A+), Chile (A+), Czech Republic (A) and Estonia (A). Credit ratings by S&P. Source: IMF. 11

12. Korean Banks’ Healthy Liquidity #2 The government has paid careful attention to minimize risks from currency and duration mismatches. No Currency Mismatch Exists High Liquidity Ratio: Low Risk from Duration Mismatch 7-day maturity mismatch ratio (%) Foreign currency assets/liabilities - Korean banks (US$ bn, as of Jun.08) 7-day Guidance: 0% 3-month foreign currency liquidity rate (%) Guidance: 85% 1) NPL : 0.3% 2) Estimates (not included in liabilities) 12

13. Sound Banking Sector #2 Low Delinquency Ratio Moderating Loan Growth Loan Growth (%) Delinquency Ratio (%) Moderate Loan-to-Deposit Ratio Sufficient Room to Withstand Further Default Risks Loan-to-Deposit Ratio (%) • Sufficient buffer to absorb the impact of further default risk • Coverage ratio is approximately 186% • LTV ratio is approximately 47% • Well-diversified lending exposure to various sectors • Manufacturing (35.2%), real estate (17.1%), private sector (14.3%), construction (9.7%) • Stringent risk management systems implemented after Asian Financial Crisis Source: Financial Supervisory Services

14. Robust Real Estate Sector #3 Historically, Korean real estate prices have lagged GDP growth, especially when compared to other markets. This balanced growth has been supported by prudent housing and mortgage ratios. Improving Mortgage Loan-to-Value Ratio Balanced Real Estate Price Growth Housing Price Index LTV ratio (%) EXCEL SOURCE copied at 21-Oct-2008 14:56:07 : C:\Documents and Settings\ssohn\Local Settings\Temp\cache\OLK484\한미주택가격3 (2).xls(Chart2) EXCEL SOURCE copied at 22-Oct-2008 11:51:04 : C:\Documents and Settings\ssohn\Local Settings\Temp\cache\OLK484\지역별주택가격.xls(Chart1) EXCEL SOURCE copied at 22-Oct-2008 11:53:37 : C:\Documents and Settings\ssohn\Local Settings\Temp\cache\OLK484\지역별주택가격.xls(Chart1) EXCEL SOURCE copied at 22-Oct-2008 11:54:09 : C:\Documents and Settings\ssohn\Local Settings\Temp\cache\OLK484\지역별주택가격.xls(Chart1) Stable Housing Price Changes More Stringent Mortgage Regulations than Others Housing Price Changes (yoy, %) EXCEL SOURCE copied at 22-Oct-2008 18:14:25 : HKCMG2008\Korea\MOFE\Project Taegukgi\NDR\주택가격지수 2.xls(Chart1) EXCEL SOURCE copied at 22-Oct-2008 18:14:58 : HKCMG2008\Korea\MOFE\Project Taegukgi\NDR\주택가격지수 2.xls(Chart1) EXCEL SOURCE copied at 22-Oct-2008 18:17:55 : HKCMG2008\Korea\MOFE\Project Taegukgi\NDR\주택가격지수 2.xls(Chart1) EXCEL SOURCE copied at 22-Oct-2008 18:18:18 : HKCMG2008\Korea\MOFE\Project Taegukgi\NDR\주택가격지수 2.xls(Chart1) EXCEL SOURCE copied at 22-Oct-2008 18:22:13 : HKCMG2008\Korea\MOFE\Project Taegukgi\NDR\주택가격지수 2.xls(Chart1) 14 1 Portion

15. The Korean Government’s Response

16. Addressing Key Areas of Concern To date, there has been minimal damage realized as a result of market turbulence. However, the Korean government has been highly preemptive in identifying and addressing potential risks. 1. PF Lending and Savings Banks • The Financial Authority will monitor banks thoroughly to ensure that they comply enhanced requirements, including the 30% Rule and reserve accumulation • Structure a system which incentivizes banks to restructure 2. SME Lending • SME liquidity support measures announced on October 1st • Run fast-track program until June 2009 • Support liquidity through debt maturity extension, minimal interest burden, and debt/equity swap incurred from KIKO into lending EXCEL SOURCE copied at 21-Oct-2008 14:56:07 : C:\Documents and Settings\ssohn\Local Settings\Temp\cache\OLK484\한미주택가격3 (2).xls(Chart2) 3. Household Lending • Measures to support household sector announced on October 21st • Extend redemption maturity of conditional lending • Accelerated deregulation of the housing sector • Support credit recovery fund for ones with poor credit ratings 4. Construction Sector • Support measures for Construction sector announced on October 1st • Promotion and support of private real estate fund to purchase unsold houses • Mortgage expansion for new housing inventory • Financial support to construction companies • Government purchase of land held by homebuilders

17. Korea’s Stabilization Package (Oct 19th)A comprehensive package to stabilize the financial system The government will take decisive action to minimize downside risks to the economy. #1 3 year guarantees of FX debt issuance up to US$ 100bn Additional dollar liquidity equivalent to US$ 30bn to the banking sector by utilizing foreign exchange reserves #2 Strong Support for Financial System #3 Provisions to support Won liquidity Enhanced Foreign and Local Currency Liquidity EXCEL SOURCE copied at 21-Oct-2008 14:56:07 : C:\Documents and Settings\ssohn\Local Settings\Temp\cache\OLK484\한미주택가격3 (2).xls(Chart2) #4 Foreign exchange stabilization smoothing operation Tax incentives for long-term holdings of funds #5 Coordinated Action with Other Governments Undertaking for potential recapitalization of financial institutions and deposit guarantees, if necessary #6 #7 Expand bilateral currency swap schemes to G20 Ensure Credit Availability to SME’s Capital Injection of KRW 1trn into Industrial Bank of Korea, translating into additional loans worth KRW 12trn available to SMEs #8

18. Comparison with Asian Financial Crisis Korea’s financial condition has improved vastly over the past ten years and the country is well-prepared to manage the current crisis Asian Financial Crisis (late 1997) Current Causes Foreign Exchange Banks Corporates 1 as of September 2008 2 as of June 2008 3 as of March 2008 4 as of end of 2007

19. Thank You