THE LAW OF THE DEMOCRATIC PEOPLE’S REPUBLIC
OF KOREA ON FOREIGN-INVESTED BANK
Adopted by Resolution No. 42 of the Standing Committee of the
Supreme People’s Assembly on November 24, 1993
amended by Decree No. 484 of the Presidium of the Supreme People’s Assembly
on February 26, 1999, and
amended by Decree No. 3400 of the Presidium of the Supreme People’s Assembly
on November 7, 2002
Chapter 1. Fundamentals
Article 1. The law of the Democratic People’s Republic of
Korea on Foreign-invested Bank shall contribute to the expansion and development
of cooperation with different countries the world over in the area of finance.
Article 2. A foreign investor may establish and operate a foreign-invested
bank within the territory of the DPRK.
Foreign-invested banks include joint-venture banks, wholly foreign-owned banks
and branches of foreign banks.
Wholly foreign-owned banks and branches of foreign banks shall be allowed to
be established only in the Rason economic and trade zone.
Article 3. Foreign-invested banks shall have ownership over
their banking property and shall be independent in their management.
Article 4. The state shall protect the legal rights and interests
of foreign-invested banks established in the territory of the DPRK.
Article 5. Operation of foreign-invested banks shall be subject
to the relevant laws and regulations of the DPRK.
Article 6. Foreign-invested banks shall be supervised and controlled
by the Central Bank and foreign exchange control organ.
Article 7. This law prescribes the principles and procedures
for the establishment, operation and dissolution of foreign-invested banks.
Chapter 2. Establishment and Dissolution of Foreign-invested Banks
Article 8. An investor who intends to establish a foreign-invested
bank in the territory of the DPRK shall file an application to the Central Bank,
declaring the name of the bank, the name and curriculum vitae of its president,
the registered capital, paid-up capital, operation fund, investment rate, details
of business, etc.
Article 9. For the purpose of establishing a joint-venture
bank, an application should be filed by the party concerned, who shall attach
to the application such documents as the memorandum, feasibility study report,
copy of the contract on joint venture, list of managing staff, copy of the letter
of approval for foreign exchange transactions and copy of the business licence.
Article 10. For the purpose of establishing a wholly foreign-owned
bank, an application should be filed by the foreign investor concerned, who
shall attach to the application such documents as the memorandum, feasibility
study report, list of managing staff, balance sheet, copy of the business licence,
and copy of the letter of approval for foreign exchange transactions.
Article 11. For the purpose of establishing the branch of a
foreign bank, an application should be filed by the head office of the bank
concerned, which shall attach to the application such documents as the memorandum,
annual reports, balance sheet, profit and loss account, copy of the business
licence obtained by the head office, written guarantee by the head office against
the tax and debts of the branch, feasibility study report of the branch, list
of managing staff, copy of the letter of approval for foreign exchange transactions,
and so on.
Article 12. The Central Bank shall decide upon the approval
or rejection of the application within 50 days from its receipt.
Article 13. A person who has submitted an application for the
establishment of a foreign-invested bank shall, within 30 days after obtaining
approval, register with the People’s Committee of the province (or municipality
directly under central authority) where the bank is to be located or of the
Rason city, be issued business licence therefrom and, within 20 days from the
receipt of the business licence, register for tax purposes with the financial
institution in the area where the bank is to be located.
Article 14. A foreign-invested bank shall be dissolved when
it cannot continue its operation due to such reasons as the expiry of the term
approved, merger of the banks, insolvency, defaulting of the contract and natural
calamities. In this case, an application for dissolution shall be submitted
to the Central Bank for approval 30 days in advance and, upon liquidation under
the supervision of the liquidation committee, the registration shall be cancelled
with the institutions concerned.
Article 15. Where a foreign-invested bank intends to continue
its banking business beyond its term, an application should be submitted to
the Central Bank for the approval of the extension of the term 6 months before
its term expires.
Article 16. Should the memorandum be revised, the bank be merged
or divided, the registered capital, operating capital and place of business
be changed, categories of business activities be increased or decreased, or
the president or vice-president of the bank be replaced with another, the foreign-invested
bank shall apply to the Central Bank for approval 30 days in advance and shall
have the registration altered.
Article 17. An investor in a foreign-invested bank may, with
the approval of the Central Bank, transfer a part or whole of the capital invested
to a third person. In this case the investor should reach an agreement with
Chapter 3. Capital and Reserve Funds of Foreign-invested Banks
Article 18. A joint venture bank and a wholly foreign-owned
bank shall respectively hold the registered capital in convertible currency
worth at least 2,250,000,000 Korean won and the primary paid-up capital of at
least 50 per cent of the registered capital. A branch of the foreign bank shall
hold the operating capital in convertible currency equivalent to more than 600,000,000
Article 19. For the purpose of obtaining business license,
a foreign-invested bank shall deposit the primary paid-up capital and operating
capital with a bank designated by the Central Bank within 30 days from the date
when it obtained the approval of establishment and shall have it confirmed by
a certified public accountant.
Article 20. A foreign-invested bank shall maintain its own
capital of more than 5 per cent of the amount guaranteed by the bank or the
amount of its liabilities.
Article 21. A joint-venture bank and a wholly foreign-owned
bank shall set aside as reserve fund 5 per cent of its annual profits each year
until the reserve fund grows to 25 per cent of the registered capital. The reserve
fund shall be used exclusively for the purpose of either compensating for the
loss in the settlement of accounts or of increasing capital fund.
Article 22. A foreign-invested bank may reserve such funds
in need as bonus fund, welfare fund and R&D fund. The type, size and the
ratio of funds shall be defined independently by the foreign-invested bank.
Chapter 4. Transactions and Settlement of Foreign-invested Banks
Article 23. A foreign-invested bank may engage in part or
whole of the following transactions:
a) Accepting deposits of foreign currencies of foreign-invested enterprises,
foreign enterprises and foreigners,
b) Granting loans in foreign currencies, overdrafting on the current account
and discounting of foreign currency bills,
c) Dealing in foreign exchange,
d) Investment in foreign currencies,
e) Guarantee against liabilities in foreign currencies and defaulting of contract
f) Remittance of foreign currencies,
g) Clearing of the importer’s and exporter’s bills of exchange,
h) Offshore banking,
i) Transactions of securities in foreign currencies,
j) Trust banking,
k) Credit survey and consultation, and
Article 24. A foreign-invested bank shall not be allowed to
lend more that 25 per cent of its capital exclusively to one business.
Article 25. A foreign-invested bank shall open an account with
the branch of the Central Bank in the area where it is located and deposit the
reserve fund for deposit payment.
Article 26. The financial year of a foreign-invested bank shall
begin on January 1 and end on December 31 each year.
Annual business settlement shall be done by not later than February next year.
Article 27. A foreign-invested bank shall submit to the foreign
exchange control organ the annual balance sheet and profit and loss account
confirmed by a certified public accountant within 30 days from the date of the
completion of the annual business settlement, and the quarterly financial statement
and necessary statistics by the 15th day of the first month of the ensuing quarter
of the year.
Article 28. A foreign-invested bank shall be granted the following
a) In case the term of business is longer than 10 years, the enterprise income
tax shall be exempted for the first profit-making year and may be reduced by
up to 50 per cent for the following 2 years,
b) No turnover tax shall be payable for the interest accruing from loans granted
on favourable terms to the banks and enterprises of the DPRK,
c) No tax or, otherwise, low-rate tax shall be payable and no reserve fund for
deposit payment shall be required for the income accruing from offshore banking,
d) The income accruing from the banking business and the residual fund, if any,
left over after the liquidation of the bank may, subject to the laws and regulations
of the DPRK on foreign exchange control, be remitted abroad without a tax.
Chapter 5. Penalties and Settlement of Disputes
Article 29. A foreign-invested bank shall be liable to fining
in the following cases;
a) In case it has changed its president or vice-president or the location of
the bank without approval,
b) In case it has failed to set aside the reserve fund of required amount,
c) In case it has obstructed or caused difficulties in inspection, and
d) In case it has failed to submit regular reports within a fixed period of
time, or submitted false ones.
Article 30. In case a foreign-invested bank engages in other
transactions than those approved, or revises the memorandum, or increases or
decreases the registered capital and operating capital without approval, it
may be ordered out of operation.
Article 31. In case an applicant for establishment of a bank
fails to commence banking business within 10 months from the date of the approval,
the approval granted for establishment of the bank may be withdrawn.
Article 32. Disputes concerned with banking business shall
be settled through consultation. In case of failure in consultation, they shall
be settled through arbitration or legal procedures provided by the DPRK.