The Financial Supervisory Service is facing allegations that it failed to prevent its internal information from being leaked concerning the regulatory policies on savings banks.

Among the allegations are that several customers of Busan Savings Bank withdrew large deposits a day before regulators suspended operations of the distressed bank in February.

It has been alleged that key staffers of Busan Savings Bank had been informed of the rumor that the FSS would soon halt the operations.

Despite the spreading rumor ahead of the business suspension, it has been found that regulatory officials in the FSS’ Busan office failed to take necessary measures to block the massive withdrawal by several customers.

At a news briefing Monday, the FSS admitted the leakage of information. But the regulatory body did not confirm the allegation that its Busan staffers overlooked the irregular practices at Busan Savings Bank.

The FSS only said it is making inquiries into the allegations in coordination with the prosecution.

The regulator also added that it will widen the scope of its probe on whether there were similar cases in other savings banks.

According to an opposition and news reports, relatives of several staffers of Busan Savings Banks took out most of their deposits right before the FSS’ handing down sanction of suspension.

During a two-day parliamentary hearing on financial regulators last week, Rep. Shin Kuhn of the main opposition Democratic Party reprimanded the FSS for failing to keep its insider information confidential.

“It has been found that a customer took out 14 billion won in deposits from a branch of Busan Savings Bank a day,” he said.

FSS Governor Kwon Hyouk-se pledged to conduct an intensive probe. “We will consider filing a complaint against individuals (engaged in leaking and sharing information) with the prosecution.”

In a similar vein, opposition lawmakers claimed Monday that several financial regulatory officials withdrew their deposits from savings banks right before the distressed secondary banking sector hit the market.

By Kim Yon-se (kys@heraldcorp.com)