Hana Financial hit by savings bank scandal

Hana Financial hit by savings bank scandal

Kim Seung-yu, former Hana Financial Group Chairman Ex-head to be questioned over kickbacks allegations By Kim Jae-won Prosecutors raided the main office of Hana Capital in southern Seoul, Wednesday, to find out whether former Hana Financial Group Chairman Kim Seung-yu had pressured the subsidiary to participate in a capital increase for the troubled Mirae Savings Bank. The prosecution said it wasn’t ruling out summoning the former chairman, and Kim Jong-jun, CEO of Hana Bank, the flagship banking unit of the nation’s third-largest financial group, for questioning over their roles in a 14.5 billion won investment by Hana Capital into Mirae in September last year. The two were suspected of approving Mirae Chairman Kim Chan-kyung’s request, though the company was not qualified to receive any money. The prosecution declined to reveal details of the ongoing investigation. The Mirae chairman, now under arrest, told prosecutors about the former Hana chairman’s involvement. Kim Seung-yu met Kim Chang-kyung through his college friend Cheon Shin-il, the head of Sejoong Namo, who went to Korea University, President Lee Myung-bak’s alma mater. A focus of the questioning of the former Hana chairman is whether he took bribes; something Kim denied in an interview with an Internet portal. The money Hana Capital invested in Mirae was backed by five paintings owned by the company, stocks of Chairman Kim Chan-kyung, his apartment in Apgujeong-dong in southern Seoul and the main office of Mirae in Secho-dong, southern Seoul as collateral. However, experts say the real estate has no real value as they have already been seized by other creditors. They also argue that it is not common practice for paintings to be used as collateral because their value changes so quickly and erratically. The Mirae chairman was arrested earlier this week and charged with embezzling corporate funds and breach of trust. Shares of Hana Financial closed slightly lower on the news at 36,600 won, down 150 won, or 0.41 percent from Tuesday. Hana Capital is not listed. Experts, however, say the scandal will negatively affect the group if it turns out that Kim Seung-yu was involved in bribery. Foreign investors have about a 62 percent stake in Hana Financial, and the corruption scandal may see them sell their stocks due to business uncertainties caused by the fallout, according to observers. The financial authorities suspended four savings banks — Solomon, Mirae, Hanju and Hankuk — earlier this month as they did not meet government standards. All four failed to meet the 8 percent BIS ratio guideline, and some of them even saw their debts surpass assets. The nation’s savings banks have lured customers with higher interests compared to commercial lenders, but many of them filed for bankruptcy recently as they provided loans to project financing in the construction industry, which have been in trouble since the prolonged slump in the property market following the global financial crisis in 2008. Some businessmen in the industry lobbied influential politicians to keep their businesses afloat, but failed to save them and the companies and their wrongdoings have been uncovered in investigations by the financial authorities and prosecutors.