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(LEAD) Woori Bank to sue 3 foreign banks over derivative losses

All Headlines 16:51 November 16, 2011

(ATTN: FIXES typo in para 3)

SEOUL, Nov. 16 (Yonhap) -- Woori Bank, South Korea's No. 2 lender, said Wednesday that it plans to lodge a lawsuit against Citigroup, BoA-Merrill Lynch and Royal Bank of Scotland with a U.S. court, claiming that their improper sale of risky derivatives incurred heavy losses.

Woori Bank suffered heavy losses worth 1.62 trillion won (US$1.43 billion) after the U.S. subprime crisis made sour its 2005-2007 investment in U.S. collateralized debt obligations (CDOs) and credit default swaps.

A spokesman at Woori Bank said it plans to sue the three foreign lenders with New York federal court within this year, arguing that they sold such risky investment vehicles to Woori Bank without properly giving information about entailing risks.

The potential legal action, reviewed by the board last month, would be related to the bank's losses worth US$200 million to $300 million, he added.

Woori Bank was hit hard by its investment in the derivatives and the global financial crisis. In 2009, the financial regulator penalized Hwang Young-key, a former head of Woori Bank, for inflicting investment losses on a state-owned bank.


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