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Thu, Sep 24, 2009 - Page 10 News List

KB Financial chief steps down over derivatives losses

AFP , SEOUL

The head of South Korea’s top banking group resigned yesterday after the financial watchdog punished him for huge investment losses at a state-run bank that he previously headed.

Hwang Young-key, CEO of KB Financial, said in a statement he stood down to take responsibility for the losses at Woori Bank.

“I would like to say once again that I feel heavy responsibility for the losses incurred at Woori Bank which I once worked for,” Hwang said.

The Financial Services Commission earlier this month suspended Hwang from duty at KB Financial for three months. It blamed him for losses of 1.62 trillion won (US$1.3 billion) which Woori Bank sustained on its investments in derivatives between 2005 and 2007.

The punishment made it impossible for Hwang to extend his term at KB, which ends in about two years. It also barred him from holding a top post at any domestic financial firm for four years.

The watchdog said Woori Bank incurred its losses by investing in overseas credit default swaps, designed to protect investors against the risk of default, and other derivatives.

The investments went sour during the global financial crisis.

Hwang has reportedly said that last year’s crisis was the equivalent of a “natural disaster” and he should not be accountable for losses caused by it.

In his statement yesterday the banker said it was “regrettable” the financial watchdog had not taken his explanations into account.

He became chief of KB Financial, the country’s largest financial group in terms of assets, in September last year.

Woori posted its first loss in almost seven years in the fourth quarter of last year.

The government holds a 73 percent stake in Woori after rescuing it in the aftermath of the 1997 to 1998 East Asian financial crisis.

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