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Woori Financial chief seals 2nd term despite opposition

Chairman Sohn earns majority support despite pressure to quit over derivatives fiasco

Woori Financial Group Chairman Sohn Tae-seung (Woori Financial Group)
Woori Financial Group Chairman Sohn Tae-seung (Woori Financial Group)

Woori Financial Group Chairman Sohn Tae-seung was reappointed for three more years by shareholders Wednesday, despite disciplinary measures imposed by South Korean financial authorities.

At the group’s annual shareholders meeting, Sohn’s appointment was approved by 50 percent stakeholders -- including private equity fund IMM Private Equity, Fubon Life Insurance, Kiwoom Securities and the Korea Deposit Insurance Corp.

The KDIC is the largest shareholder, with a 17.25 percent stake in the group.

The National Pension Service, the second-largest shareholder, with 7.71 percent stake, alongside foreign investors voted against Sohn, but ultimately failed. The nation’s public pension fund has previously expressed disapproval over his continuation as the board director, citing a violation of shareholders’ rights.

The approval vote came on the heels of the watchdog Financial Supervisory Service’s decision to issue “reprimand” warnings on Sohn and Hana Financial Group Vice Chairman Ham Young-joo in January. Authorities have held them responsible for failing to protect customers, who were mostly retail investors, from the risks of derivatives-linked funds.

Ham and Sohn headed the respective banking units at the time of the revelation of the debacle.

If executives receive such sanctions, they are barred from pursuing careers in the financial sector for three years, but are allowed to finish their current terms.

The FSC on March 4 approved the FSS’ decision, bestowing legal weight to the sanctions. Sohn, however, filed an injunction request to the Seoul Administrative Court to suspend the FSS’ disciplinary actions against him. The court accepted the injunction last week, removing hurdles for Sohn’s second term.

The FSS said Wednesday that it has decided to appeal to a higher court, signaling another round of the messy dispute with Sohn. Industry watchers are divided on the effects of the higher court ruling if it decides to side with the financial watchdog.

Woori Bank, Woori Financial Group’s flagship banking unit that sold the controversial derivatives-linked products to its customers, has so far completed 89 percent of the compensation process, according to an official on Wednesday. A combined 36 billion won ($29.3 million) was paid to 589 out of 661 customers that filed for arbitration.

The DLF products were tied to German sovereign bond yields and currency constant maturity swap rates in 2019, which turned into losers as bond yields in the US, UK and Germany unexpectedly sunk on the fear that key central banks might slash their interest rates.

Woori and Hana were accused of selling the products to retail investors without alerting them to the high risks related to DLF products. 

By Jung Min-kyung (mkjung@heraldcorp.com)
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