KB Financial Group’s messKB Financial Group Chairman Lim Young-rok and KB Kookmin Bank Chief Executive Lee Kun-ho are expected to receive mild warnings for causing an in-house feud and jeopardizing shareholders’ interests in the nation’s largest financial institution. The two were widely expected to receive the heaviest penalties on the five-level regulatory scale for financial executives, but the Financial Supervisory Service has decided to deliver second-lowest reprimand, concluding that the two cannot be found directly accountable for a series of scandals that undermined the credibility of the bank in the first half of the year.
The financial watchdog ended up losing face by backtracking on its own words when faced with criticism about excess meddling in corporate affairs and causing more confusion in the industry by closing the case without a clear explanation.
The slap-on-the-wrist punishment of the executives can only aggravate the conflict between the parent group and its flagship banking unit and the uneasiness of customers and investors. The power struggle between the group and bank chief executives on the pretext of replacing porous computer systems, for instance, affected management and operation of the country’s largest financial group and bank. Major business decisions and appointments were put on hold for months. Business cannot return to normal with the rivalry and distrust between the group chairman handpicked by the government and the bank president who refuses to take orders from him.
The FSS has been inept in its role from the beginning by mixing up its priorities. It failed to read the essence of the conflict at KB Financial Group. Mismanagement and accidents like the leak of customer data should have been investigated and punished according to regulations. But the KB crisis worsened because scandals and mishaps coincided with a power struggle and conflict in leadership due to resentment of revolving-door appointments.
The financial regulator should have come up with comprehensive measures to settle disputes in the ownership structure of KB Financial Group. If that was beyond its authority, it should have worked with the Financial Services Commission on a fundamental solution. The conflict and business impasse at the country’s largest financial group must be resolved through changes in ownership and management structure.
JoongAng Ilbo, Aug. 23, Page 30