Woori to sue Citigroup and others over risky derivatives

Woori Bank said yesterday that it plans to lodge a lawsuit against Citigroup, BoA-Merrill Lynch and Royal Bank of Scotland in a U.S. court claiming that their improper sale of risky derivatives incurred heavy losses.

Woori Bank suffered losses worth 1.62 trillion won ($1.43 billion) after the U.S. subprime crisis made sour its 2005-09 investment in U.S. collateralized debt obligations and credit default swaps.

A spokesman at Woori Bank said it plans to sue the three foreign lenders in a district court in New York within this year, arguing that they sold investment vehicles to Woori Bank without properly giving information about risks.

The potential legal action would be related to the bank’s losses worth $200 million to $300 million, he added.

Woori Bank was hit hard by its investment in derivatives during the global financial crisis. In 2009, the financial regulator penalized Hwang Young-key, a former head of Woori Bank, for inflicting investment losses on a state-owned bank.