Debate Erupts Over Culprit in Woori`s Derivatives Losses

A heated debate erupted yesterday over who was responsible for Woori Bank’s heavy losses in derivatives investment.

At the National Assembly`s audit on the Financial Services Commission and the Financial Supervisory Service, the blame went back and forth between former Woori President Hwang Young-key, who was disciplined for the losses, and financial watchdogs.

Financial Services Commission Chairman Chin Dong-soo said the Korea Deposit Insurance Corp. will change its methods of inspecting financial companies that use public funds.

Hwang, who appeared as a witness at the audit, said that until March 2007 when he was Woori president, he neither ordered investment in collateralized debt obligations and credit default swaps nor had knowledge of it.

“I urged our investment banking team to invest in advanced packages and those with ‘AAA’ grades,” he said. “I didn’t know that the team invested in collateralized debt obligations and credit default swaps.”

After main opposition Democratic Party lawmaker Shin Hak-yong, who blamed financial authorities, asked Hwang a question, Hwang responded that he was unfairly disciplined. “Financial authorities are accountable as much as I am and vice versa,” he said.

On Strategy and Finance Minister Yoon Jeung-hyun’s emphasis on investment banking when he led the supervisory commission, Hwang said, “The commission’s policy at the time to foster investment banking was timely and appropriate. I believe the blame for the loss should fall on the staff in charge, not on Yoon.”

Ruling and opposition lawmakers blamed financial authorities for the losses, but also blasted Hwang for trying to avoid blame. They questioned his excuses of having no knowledge of the investment and attributing the losses to an unexpected crisis after his retirement.

Democratic Party lawmaker Shin Kun said, “On the Woori Bank incident, Hwang keeps making excuses by blaming subordinates,” adding, “What is the president for then? You should’ve done your duty of risk control as the president of a bank that uses public funds. Now you’re passing the buck to your subordinates.”

Defending the government’s financial watchdogs, Financial Supervisory Service Chairman Kim Jong-chang said, “Financial authorities promoted investment banking investment, but we did it under the premise of thorough risk control. On risk control against derivatives, we set proper rules and standards and constantly instructed banks.”

He said Hwang ignored such procedures.

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