(2nd LD) FSS mulls legal action against Kookmin Bank after leak on regulatory audit

(ATTN: ADDS FSS remark in para 5, Kookmin reaction in 7, ADDS more background info
in paras 12-14)

SEOUL, Jan. 15 (Yonhap) -- South Korea's Financial Supervisory Service (FSS) is
considering taking legal action against Kookmin Bank for the alleged leaking of a
memo pertaining to a regulatory investigation into the company, the FSS said
Friday.
The regulator alleged that Kookmin Bank, the flagship unit of KB Financial Group
Inc., leaked the memo detailing questions and documents that had been requested
by the FSS during its preliminary audit of the bank between Dec. 16-23. The
earlier audit came ahead of a full-scale probe into the two firms that began on
Thursday.
The regulator suspects the bank leaked the records to people outside of the bank,
possibly media outlets.
"FSS plans to take legal actions including requesting (prosecutor or police)
investigation after reviewing pertinent banking regulations," Joo Jae-seong, head
of the banking service division at the regulator, told reporters.
"The leakage could disturb fair and efficient investigation as well as hurting
the independence of the FSS's probe operations," Joo said.
Kookmin Bank could be slapped with fines of up to 10 million won (US$8,900) if
proven guilty of interfering with the audit by leaking the information, according
to local laws governing the banking industry.
In a separate statement, Kookmina Bank said it "apologized for troubling
financial authorities as a result of the leak," adding it plans to punish the
person responsible .
The move came one day after FSS launched the regulatory audit into Kookmin Bank
and its parent company on charges that the lender's investment in Kazakhstan's
Bank Center Credit and issuance of US$1 billion in covered bonds in May last year
incurred massive losses for the bank. The regulator was also expected to look
into allegations that KB illegally extended the tenure of its board members.
The FSS said the ongoing regulatory audit is part of a regular annual checkup the
watchdog pledged to carry out from this year, but market watchers suspect
retaliatory action.
The investigation came amid market speculation that the financial authorities may
have pressured Kookmin Bank chief Kang Chung-won to resign on Dec. 31 as chairman
of the parent company.
Kang cited the interests of the group when he stepped down, amid looming scrutiny
by the regulator over alleged wrongdoings by the group and its outside board when
electing Kang to the top position on Dec. 4.
Kang offered to step down on Dec. 31 from chairmanship of KB Financial Group Inc.
amid intense scrutiny by the financial regulator into alleged wrongdoing by the
group's external directors. He was nominated Dec. 3 to lead South Korea's top
financial services company and unanimously approved by the group's outside
directors.
His resignation sparked criticism that the government is trying to exert
influence on an internal decision of a private company that seems to be at odds
with government policy makers.
The financial regulator, which has prepared to overhaul the outside director
system of the nation's banks, asked KB Financial to postpone the selection of its
new chairman, but the group pushed through with the nomination.
On Monday, Kang said he knew financial authorities had asked board members to
delay his appointment as the group chairman but he canceled the remark amid
rising controversy.
pbr@yna.co.kr
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