KB Financial head penalized for investment losses

SEOUL, Sept. 9 (Yonhap) -- South Korea's financial watchdog on Wednesday
finalized a decision to impose "stern discipline" on the chairman of KB Financial
Group Inc. for inflicting investment losses on a state-owned bank.
The Financial Services Commission decided to suspend Hwang Young-key from
exercising his duties for three months. Hwang is responsible for Woori Bank's
1.62 trillion won (US$1.3 billion) worth of losses from investments in derivative
products from 2005-2007, while he headed the bank and its parent, Woori Finance
Holdings Co.
The FSC decision came one week after the Financial Supervisory Service, the
implementing body of the FSC, decided to penalize Hwang.
Although the penalty was finalized, Hwang will still be able to retain his
current position by South Korean law. However, he will be barred from seeking a
second term as KB Financial's chief and holding executive posts at any domestic
financial firm for four years.
Hwang was named CEO of KB Financial, South Korea's top financial services
company, in September last year, when the holding company was established.
According to the watchdog, Woori Bank incurred the loss by investing in overseas
credit default swaps, which protect investors against the risk of default, and
other derivatives. The bank posted its first loss in almost seven years in the
fourth quarter of last year.
In the wake of the 1997-98 Asian financial crisis, the government injected more
than 12 trillion won into Woori Bank to turn it around. The government holds a 73
percent stake in the lender.
The punishment for Hwang has sparked a debate over the appropriateness of the
penalty. Opponents argue that the financial regulator shares responsibility
because of its lax supervision, saying the watchdog belatedly handed down
disciplines and sat idly by until the bailed-out Woori Bank suffered huge losses.
sooyeon@yna.co.kr
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