Proposed Changes Bearing on Rules of Proxy Solicitation for Financial Institutions

The Financial Supervisory Commission ("FSC") is currently considering to change the rules of proxy solicitation applicable to financial institutions because many have considered the current rules make it too easy for someone with a relatively small number of shares to obtain the control of a financial institution by soliciting proxies from other shareholders.

Under the current rules, anyone holding 0.2% or 800,000 shares of the outstanding shares of a financial institution for more than 6 months can solicit proxies for up to a maximum of 3% of the outstanding shares (inclusive of the number of shares already owned by him). If a solicitation group is formed for the purpose of solicitation and the number of the shares held are 10% of the outstanding shares or more, the proxies solicited will have no limitations on the number of shares (i.e. the 3% rule does not apply). The proposed new regulation would change the 10% threshhold to 15%, the holding period from 6 months to 12 months, and the minimum number of shares from 800,000 to 4,000,000 shares. In addition, under the proposed regulation, if the shares are encumbered (as in the case of pledge), the voting power of such shares will be discounted. There is no word, however, as to the percentage of such discount.