Conflicts between Financial Supervisory Service and Hana Financial Group seem to be building up after the Hana Bank president shrugged off the watchdog’s disciplinary action.

An online news provider reported on Wednesday that the FSS recently kicked off an investigation into whether former group chairman Kim Seung-yu made undue profits during his term from 2005-2012.

Kim, upon leaving his post in 2012, received an unprecedented severance pay of 3.5 billion won ($3.4 million) and pocketed over 500 million won for his two-year service as the group’s special adviser.

He is also suspected of pushing Hana Bank to purchase more than 4,000 pieces of expensive artwork, which is an unconventional form of asset for a bank.

But the FSS refuted the report and denied any ongoing probe concerning the former magnate.

Kim was earlier handed down a “warning” for influencing Kim Jong-jun, the incumbent president of Hana Bank and former head of Hana Capital, to fund a financially jeopardized savings bank.

But this warning was not the end of the story, Yonhap quoted an FSS official as saying.

“There is no ongoing investigation whatsoever concerning Kim,” said Jeong Seong-woong, director general of the FSS’ public affairs office.

“We already gave out a warning to Kim earlier this month and the decision is now over and done with, unless Kim wishes to raise an objection to the disciplinary committee.”

Although the report may have been incorrect, the FSS and Hana Financial have indeed been at odds recently, especially over the rule of bank chief Kim and the unseen influence of retired group head Kim.

On April 14, the FSS issued a penalty on Kim for his involvement in the ill-advised loan during his years as Hana Capital head, banning him from taking office within the financial sector for three years after his current term ends.

Kim, however, refused to step down as is the custom, and pledged to serve out his term, which is scheduled to end in March 2015. The FSS reacted by revealing the entire text of the disciplinary decision on its website.

Former chairman Kim, who is still rumored to dominate the financial group, clearly expressed his ill feeling towards such response.

“(The strong penalty) is quite unprecedented, and I cannot believe that the FSS is so idle an organization to dig into a single company,” Kim told reporters.

“As for the warning made against me, I don’t mind so much but the penalty on the incumbent bank is excessive.”

By Bae Hyun-jung (tellme@heraldcorp.com)