SEOUL: Woori Bank is preparing to sue Citigroup, Bank of America Merrill Lynch and Royal Bank of Scotland over losses on as much as $300 million in derivatives investments, a spokesman of the South Korean bank said, in the latest legal salvo against large banks that sold risky debt.
South Korea's Woori was the biggest victim of the US subprime mortgage crisis among its domestic peers, which led to the global financial meltdown in 2008, forcing Woori to write off most of its around $1.5 billion investments in credit default swaps and collateralised debt obligations it had made in 2005 and 2006.
The bank was reprimanded by Korean regulators in 2009 over its CDO and CDS investments and poor internal controls which they said led to 1.6 trillion won ($1.4 billion) in losses.
A Woori spokesman said its board had recently approved the plan for the legal action. He declined to say when or where the suit may be filed in advance of the filing itself.
A senior executive at the bank said its legal team is now reviewing the case and plans to pick external law firms for a possible legal case in New York. The spokesman and the senior executive did not want to be identified because of the sensitivity of the matter.
A Citi spokesman and a spokesman at Bank of America Merrill Lynch in Hong Kong declined to comment. The RBS Seoul office had no comment.
OTHER LAWSUITS
Investors have accused big US and European banks in dozens of US federal and state lawsuits of having misled them about the risks of the investments they made.
Since April 2010, Citigroup, Goldman Sachs Group Inc and JPMorgan Chase & Co have agreed to pay a combined nearly $1 billion to settle US Securities and Exchange Commission lawsuits over alleged defective CDOs. None of the banks admitted wrongdoing.
Citigroup's $285 million accord has yet to win court approval, and the federal judge handling that case has expressed deep skepticism about whether the settlement is fair.
Woori's parent Woori Finance Holdings is 57 percent owned by the Korean government.
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