Reports emerged last week that Korea's Hana Bank has been severely disciplined by the country's financial regulator, Financial Supervisory Service, for offering false guarantees on a W19 billion ($19 million) private placement it issued last year.

Regulators reported that for several months last year, Hana officials falsely used the CEO's stamp on documents insuring an annual 24% interest rate. Local media reported that two bankers were arrested, one of whom committed suicide in August.

Hana has been ordered to fully reimburse investors and conduct a thorough check of its internal management processes. Foreign bankers expressed surprise that any issuer would be prepared to offer such a generous guaranteed return in the first place, citing that the benchmark interest rate is less than 4%.

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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