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U.S. sanctions rumor hurts finance stocks

Claim that Treasury is targeting Korean bank spooks investors

Nov 01,2018
A rumor that the United States Treasury is considering including a Korean bank in a secondary boycott in early November has pushed down the shares of major financial institutes, although the country’s financial regulator and banks deny the claim.

A rumor surfaced early this week through Kakao Talk and other internet messengers that the U.S. Treasury Department will announce sanctions against a South Korean bank for illegally trading with North Korea before Nov. 6. While not specifying the bank, the rumor said that the bank was notified on Oct. 12.

The Financial Services Commission (FSC) refuted the claim on Wednesday, calling it a groundless rumor. Local banks echoed the denial.

“The rumor that the U.S. is pushing forward with a secondary boycott is not true as we confirmed with local banks,” said the regulator in a statement.

The measure was designed to punish third-party companies that engage in illicit trade with Pyongyang.

Because of its experience of running a branch in Pyongyang, Woori Bank was suspected to be the targeted institution, but the bank denies it is involved.

“The rumor is far from the truth,” said a spokesperson at Woori.

Despite the denial, investors still seem uncertain - shares of banking and financial companies have plunged this week.

Woori Bank, for instance, tumbled 4.35 percent on Tuesday to close at 15,400 won ($13.50), though it rebounded on Wednesday to gain 2.27 percent.

Hana Financial Group also lost 4.8 percent on Tuesday and continued its losing streak on Wednesday, with its share price falling 0.65 percent to 38,300 won.

Investors appear to have been spooked by Washington’s recent attempts to keep tabs on Korean businesses. The U.S. Embassy in Seoul contacted key companies including Samsung and SK to discern the status of current projects involving cooperation with the North.

An unidentified deputy assistant secretary at the U.S. Treasury Department’s Office of Terrorism and Financial Intelligence also held a teleconference last month with officials from the Korea Development Bank, Shinhan, KEB Hana, Woori and KB Kookmin to urge them to comply with UN sanctions on North Korea.

A report, drafted by the FSC and revealed during a parliamentary audit, says that the U.S. Treasury expressed “deep concerns” over the banks’ compliance with UN sanctions.


BY PARK EUN-JEE [park.eunjee@joongang.co.kr]


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