Hwang’s career looks bleak after FSC confirms ban

Hwang Young-key, former chairman of Woori Finance Holdings, is facing the darkest moment of his career following confirmation that a ban preventing him from taking an executive position in the local financial industry stands.

The Financial Services Commission, the foremost upper body of Seoul financial authorities, yesterday approved the ban on Hwang, nicknamed “Gladiator” for his aggressive and often controversial management style. But it didn’t impose any penalties on Woori.

The decision will not force Hwang, the chairman of KB Financial Group, out of his current job but he won’t be able to renew his contract or work for other financial firms for four years.

The FSC made an unusually quick decision only six days after its lower body, the Financial Supervisory Service, decided on the punishment and sent the case to the FSC for approval.

Hwang, 57, is considering an appeal or other legal actions against the regulators’ decision.

Woori Bank, which is Woori Finance Holdings’ flagship unit, invested more than 1.8 trillion won ($1.5 billion) in risky derivatives including collateralized debt obligations and credit default swaps during Hwang’s tenure as chairman from 2004 to 2007.

Woori was forced to write off nearly 90 percent of the derivatives from its books after the global credit crunch drove the derivatives into default. Losses were calculated at more than 1.6 trillion won.

Officials said Hwang violated several regulations on financial safety measures when Woori took the plunge into the hazardous derivative deals.

Hwang has long argued that last year’s financial crisis was an unforeseeable calamity equivalent to a natural disaster.

He said no laws were violated, and even if they were, regulators hadn’t raised any objections.

Hwang also faces more legal setbacks as the state-run Korea Deposit Insurance Corp., the biggest shareholder in Woori Finance Holdings, is preparing a possible lawsuit against him for the damages caused by what the KDIC called Hwang’s mismanagement.

Hwang’s mounting legal debacle is expected to deal a blow to KB Financial Group, Hwang’s current employer, which operates Korea’s largest bank, Kookmin Bank.

Since he took the seat at KB Financial Group last year, Hwang has repeatedly highlighted his intention to beef up the group’s size by taking over smaller brokerages or insurers.

But such plan may be put on hold amid the uncertainty over its leadership.

Hwang is not the only one facing criticism. Industry observers and experts point out that financial regulators are also to be blamed for Woori’s spectacular investment failure.

The financial watchdog mentioned little publicly about the risks on Woori’s derivative trading for years until the credit crunch last year finally revealed the enormous risks Woori had been exposed to.

“One should take the latest dispute as an opportunity for soul-searching among banks that rushed to take a plunge in highly risky investments and the regulators’ practice that did little to prevent such mishaps from happening,” said Jang Bum-shik, a professor of economics at Soongsil University.

By Jung Ha-won [hawon@joongang.co.kr]