(LEAD) FSS mulls legal action over Kookmin Bank's leakage involving regulatory audit

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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 audit
was launched prior to 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.
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.
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 speculations that the financial authorities
may have influenced Kookmin Bank chief Kang Chung-won's resignation 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.
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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