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Woori Financial Group Chairman Sohn Tae-seung (Yonhap) |
South Korea’s financial watchdog on Thursday said it has decided to impose heavy sanctions on the top executives of two major banking groups -- Woori Bank and KEB Hana Bank -- for misselling derivatives-linked funds last year.
The Financial Supervisory Service’s sanctions committee has decided to hand Woori Financial Group Chairman and Woori Bank CEO Sohn Tae-seung as well as Hana Financial Vice Chairman and former Hana Bank CEO Ham Young-joo “reprimands and warnings,” which are classified as “heavy sanctions” by the watchdog.
The decision from the FSS is likely to deal a blow to both holding groups’ governance, as the two executives will be barred from serving another term in the future.
While Ham has recently clinched his second term as group vice chairman, Sohn may not be able to follow through with his reappointment as chairman. He was nominated by Woori Financial’s external board members in December and is awaiting his appointment to be confirmed at a shareholders meeting in March.
But Ham apparently has not completely dodged the bullet, as industry watchers say he was a strong candidate to be the holding group’s next chairman.
In a preliminary action in December, the financial watchdog notified the two banks that Ham and Sohn may face “reprimands and warnings” separately from penalties and compensation duties of the banks.
The FSS has also decided to fine the two lenders 20 billion won ($16.8 million) each and ordered the partial suspension of their business for six months.
The sanctions committee's decision requires final approval by either the FSS governor or the policymaking Financial Services Commission, in order to carry legal weight.
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(Yonhap) |
Thursday’s announcement came as a result of the FSS’ third and final round of sanctions committee meetings, which had to be scheduled after the FSS fell short of deciding a punishment for the two lenders in the previous rounds.
The derivatives -- designed to track the performance of constant maturity swap rates of the US dollar and UK pound or German bond yield -- led to massive losses for investors. The victims were mostly individual investors who were ill-informed of the high risks involved with the products.
Sohn and Ham both attended Thursday’s FSS panel meeting, according to an FSS official.
Their attendance was not mandatory, but the two had been expected to be present as they had attended the previous two sessions, held Jan. 16 and Jan. 22.
Woori Financial Group, the holding company of Woori Bank, held its external board meeting Wednesday to appoint the commercial lender’s new CEO, but later decided to delay the decision until Friday. The move was interpreted as the holding group’s attempt to minimize damage to its governance by making the key decision after the FSS’ penalty announcement.
The group had initially planned to finalize the appointment of the CEO before the Lunar New Year holidays, which fell Jan. 24-27 this year, according to a statement released early this month.
Woori Bank said Thursday it has so far compensated 70 percent of its customers who faced losses in their DLF investments. Nearly 26.7 billion won ($22.5 million) in compensation has been provided to 466 out of the 661 investors, it said. It launched the compensation process on Jan. 17.
Hana Bank is moving at a relatively slower pace in terms of compensation, as several of their DLF products have yet to reach maturity. Hana has so far compensated around 30 percent of its DLF victims, according to an official there.
The FSS last year advised Woori and KEB Hana Bank to provide compensation of up to 80 percent of customers’ losses.
By Jung Min-kyung (
mkjung@heraldcorp.com)
