By Kang Seung-woo
Former Kookmin Bank CEO Kang Chung-won will be barred from working in the financial industry for three years for his mismanagement during six years as the top manager of Korea’s leading bank.
The Financial Supervisory Service (FSS) handed down the severe penalty on the 59-year-old, Thursday, at a disciplinary committee meeting.
Eight other executives also face disciplinary action, while 79 were reprimanded ― penalties will be made final by FSS Governor Kim Jong-chang.
The total number of those subject to such measures is the largest ever in terms of penalties imposed on financial institutions.
Kang stepped down on July 13, three months before his term ended.
The financial watchdog said the bank suffered a loss of 400 billion won ($341.2 million) in acquiring Kazakhstan’s Bank Credit Center (BCC) in 2008, by ignoring obvious unfavorable conditions.
In addition, the FSS issued punitive measures on nine banks which sold knock-in knock-out contracts (KIKO), heavily penalizing four and reprimanding 68.
The nine were Woori, Shinhan, Hana, Citi, SC First, the Korea Exchange Bank (KEB), Korea Development Bank (KDB), and Daegu and Busan banks.
The regulator said the institutions improperly assessed the high risks involved in the KIKO deals ― a derivative financial product sold by banks to hedge against currency fluctuations.
The product came under criticism after its subscribers; mostly small- and mid-sized companies; experienced massive losses due to the Korean won’s steep depreciation against the U.S. dollar during the global financial crisis in 2008.
As a result, they filed complaints to the FSS and the Fair Trade Commission in an attempt to take legal action against the banks, claiming that KIKO contracts were unfairly designed, placing them at a disadvantage.