Multiple mishaps hit Hana Bank

Hana Bank is set to go through a period of turbulence, with the forthcoming sanctioning of its CEO and its losses in a fraudulent loan scandal topping the list of its troubles.

The Financial Supervisory Service (FSS) informed its CEO Kim Jong-jun, Monday, of plans to sanction him for his alleged decision to ignore proper procedures in investing in a troubled savings bank when he was chief of Hana Capital.

Kim has been requested to submit a response to the allegations before the scheduled disciplinary review committee meeting of the FSS on April 17.

The possible heavy punitive measures the FSS may take against the embattled CEO include recommending his dismissal and partial or entire suspension of work, but he can also just get a slap on the wrist in the form of a warning.

The FSS can ban a person from working in the financial industry for up to five years after completing their existing term if he or she gets a heavy penalty.

Kim’s previous two-year term ended in March but he was reappointed for another one year. Although his current term is guaranteed, there are predictions that he may resign if he is given a heavy penalty, based on similar cases in the past.

In September 2009, then KB Financial Group Chairman Hwang Young-key stepped down after receiving a sanction for investment losses he inflicted on the group while heading Woori Bank. Former KB Kookmin Bank CEO Kang Chung-won also resigned in 2010 when he was scheduled to receive heavy punishment over losses from investment in a Kazakh bank.

Meanwhile, a Hana Financial official insisted that nothing has been confirmed yet. “Even if he gets a severe penalty, he is entitled to finish his term. It is too early to say he may resign, as the committee meeting is yet to open.”

Former Hana Financial Group Chairman Kim Seung-yu is expected to receive a light punishment over the questionable investment into the savings bank as he was leading the group at the time of the investment.

Earlier this year, Hana was also hit by a fraudulent loan scandal in which a staffer at KT ENS and heads of its subcontractors fabricated loan-application documents which they used to borrow 1.8 trillion won from 17 financial companies. Hana extended the largest amount, some 440 billion won, and about 160 billion won of it has not yet been paid back.

The FSS and the prosecution are investigating the bank. “We think the bank’s loan review process had a problem, as it failed to detect years of fraudulent loans involving a huge amount of money,” an FSS official said. “We are also inspecting whether bank staffers colluded with the suspects.”

Because of the uncertainty about the ability of the subcontractors to repay the loan, Hana Bank had to set aside about 89 billion won in loan-loss reserves. This move revised down Hana Financial’s net earnings in 2013 from 1.2 trillion won to 933.8 billion won. This was the first time the group posted a less-than-1-trillion-won net profit since 2009. By Kim Rahn