FSS slaps heavy sanctions for Woori, Hana chiefs

By Kim Bo-eun

The Financial Supervisory Service's headquarters on Yeouido, Seoul / Korea Times file

The Financial Supervisory Service (FSS) said Thursday it has imposed heavy sanctions for the heads of Woori and Hana banks involved in the “DLF fiasco” which will prevent them from keeping their positions.

The FSS sanctions review committee contended the bank chiefs were responsible because they failed to set up proper internal control systems. The two banks engaged in mis-selling of high-risk investment options referred to as derivative-linked funds (DLFs) which caused major losses for investors last year.

The sanctions have yet to be finalized by the Financial Services Commission (FSC). If it approves of the sanction, Woori Bank CEO Son Tae-seung and Hana Financial Group Vice Chairman Ham Young-joo, who was the former CEO of KEB Hana Bank, may be barred from serving additional terms as well as banned from serving other positions in the finance sector for three to five years.

Son was approved by Woori Financial's committee last month to lead the group for another term. This was set to be finalized at the group's general shareholders' meeting in March.

Yet if the FSC approves the sanction after this, Son's term will be extended.

Ham may be barred from serving as Hana Financial Group's chairman

Woori and Hana sold DLF options worth a total of 795 billion won to over 3,000 investors, close to 50 percent of whom were elderly customers in their 60s and above.

Some investors saw 98 percent of their principal wiped out due to a sharp fall in yields on underlying assets, such as German treasuries.

The FSS directed the banks to compensate victims of mis-selling by between 40 percent to 80 percent of the losses they incurred.

The banks are proceeding with the compensation process according to FSS standards. Woori has processed 60 percent of compensation claims, and Hana, 30 percent to 40 percent.

Meanwhile, Woori Financial Group was set to decide on its final candidate for the bank's CEO Wednesday, but deferred the decision to Friday. This was seen as a move to make the decision after sanctions on the bank and Son were finalized.