KB Financial chief offers to resign over investment losses

(ATTN: RECASTS paras 2,4, 10; UPDATES throughout)
By Kim Soo-yeon
SEOUL, Sept. 23 (Yonhap) -- The head of KB Financial Group, South Korea's top
financial holding firm, offered Wednesday to resign two weeks after the financial
regulator punished him for inflicting investment losses on a state-owned bank.
On Sept. 9, the Financial Services Commission (FSC) decided to suspend Hwang
Young-key from exercising his duties for three months, a move that has become
controversial.
According to the watchdog, Hwang was responsible for Woori Bank's 1.62 trillion
won (US$1.35 billion) worth of losses from investments in derivative products
from 2005-2007 when he headed the bank and its parent, Woori Finance Holdings Co.
"Although legally I can retain my position as president of KB Financial, I have
decided to step down in order not to burden the group with my problems," Hwang
said in a statement.
"I feel grave responsibility for the investment losses of Woori Bank... But it is
regrettable that my argument was not accepted." He had earlier denied accusations
by the regulator that he was personally responsible for the investment losses,
saying that they resulted from the U.S.-sparked global financial meltdown.
Hwang was named CEO of KB Financial in September last year, when the holding
company was established.
After handing down the punishment, the FSC said that it judged that Hwang
"effectively" ordered the expansion of investment in derivative products carrying
high risks by setting lofty targets for asset and profitability growth.
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's disciplinary moves were
belated and that it sat idly by until the bailed-out Woori Bank suffered huge
losses.
Meanwhile, the state-run Korea Deposit Insurance Corp., the biggest shareholder
of Woori Finance, plans to convene an ad hoc committee earlier next month to
finalize its disciplinary actions against Hwang. The agency checks the business
performances of Woori Bank and Woori Finance on a quarterly and half-yearly
basis, respectively.
sooyeon@yna.co.kr
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