Hana chief cleared of severe punishment in DLF crisis

Hana Financial Group Chairman Ham Young-joo (Hana Financial Group)

After a four-year legal battle, Hana Financial Group Chairman Ham Young-joo has escaped regulatory punishment imposed for internal control failure involving the misselling of derivatives-linked funds.

On Thursday, the Supreme Court upheld the appellate court's decision to cancel the major disciplinary action taken by financial authorities on Ham over the losses from the overseas interest rate-linked derivative fund incident in 2019.

The top court confirmed the lower court’s ruling, which partially favored Chairman Ham, former Hana Card President Chang Kyung-hoon and Hana Bank in their lawsuit against the Financial Services Commission and the Financial Supervisory Service governor.

In 2019, a global drop in bond yields caused principal losses in high-risk derivative-linked financial products tied to overseas bond rates, leading to criticism of several commercial banks for improper sales practices.

In March 2020, financial authorities imposed a six-month partial suspension and a fine of 16.78 billion won ($12.1 million) on Hana Bank. Chairman Ham, who was CEO at the time, received a reprimand classified as a "heavy sanction," potentially restricting reappointment and future employment in the financial sector for three years. Chang received a three-month suspension.

While the first-instance court ruled against Hana Bank entirely, the appellate court overturned the decision and canceled the disciplinary actions.

The appellate court upheld the grounds of “incomplete sale of DLFs” and “receipt of undue benefits,” but found the claims of “violation of internal control standards” and “obstruction of inspection duties” largely unsubstantiated. However, it confirmed the six-month partial suspension of Hana Bank’s operations as justified.

As a result, the severe sanctions against Ham and Chang have been canceled. Based on the final court ruling, financial authorities are expected to impose a different level of disciplinary action.

With the legal risk resolved, Chairman Ham’s chances of reappointment have increased. His term, which began in March 2022, runs until next March.

Meanwhile, Hana Financial Group reported Friday a net profit of 2.69 trillion won for the first half of the year, a 2.4 percent increase on-year and achieving the highest performance for the period.

The net profit for the second quarter stood at 1.35 trillion won, up 12.6 percent from the previous year.

The banking division's net profit fell by 4.8 percent on-year to 1.75 trillion won in the first half. Hana attributed this drop mainly to increased one-time expenses for equity-linked securities misselling compensation and losses from currency appreciation.