1. Reasons for Amendment

This amendment aims to introduce a right to request the accumulation of special reserves for bad debts that can expand the loss-absorption capacity of banks in response to economic conditions, etc., and establish a system for checking the expected loss forecast model to strengthen the bad debt allowance accumulation model for the banking sector.

2. Major Provisions

A. The Financial Services Commission shall request banks to add additional reserves for bad debts when it judges that the allowance/reserves for bad debts are insufficient compared to the bank's expected losses in the future in light of the evaluation results of the Financial Supervisory Service on the adequacy of allowance and reserves for bad debts. (Article 29 (5) newly inserted)

B. Where banks accumulate such bad debt allowance in accordance with Korea International Financial Reporting Standards, they shall check the adequacy through verification by an independent organization every year and submit the results to the Governor of the Financial Supervisory Service. The Governor of the Financial Supervisory Service may request inspections from time to time if necessary and take necessary measures including a request for improvement if the inspection result is judged to be insufficient. (Article 29 (6) newly inserted)