The president of Kookmin Bank stepped down on Thursday soon after the financial watchdog imposed heavier punishment against him and the chairman of the bank's parent, KB Financial Group, for management failures over an expensive computer system change.
"I've done what I have to do as a bank president. I believe that the watchdog has made the right decision on my conduct," said Lee Kun-ho, the bank's president.
Just before his resignation, Financial Supervisory Service Gov. Choi Soo-hyun overturned an earlier decision by a disciplinary panel and raised the level of punishment on Lee and KB Financial Chairman Lim Young-rok.
Choi stiffened the penalties to the level of "censure," the third-highest among five tiers that it can mete out to officials of financial institutions. The three highest levels of punishments are considered to be heavy.
The disciplinary board, after dragging out its deliberations for some two months, had closed the case in late August by giving the two heads a "warning," a much lighter level of reprimand than the "censure" given by the FSS.
"Lim and Lee have neglected their duties to oversee and control their internal affairs, and therefore, they impeded management of the companies," Choi told reporters in a press conference.
"The FSS decided to bring them to account for committing the serious wrongdoing."
The heavier punishment announced by Choi would ban the two executives from getting a new job in the financial industry for three years. But it does not effectively force them to resign.
Choi's decision marks the first time that an FSS governor has overturned a decision by the disciplinary panel.
KB Financial and Kookmin Bank have been under FSS inspection following a clash between the heads of the holding company and its flagship bank over an expensive mainframe system change to a UNIX-based system from an International Business Machines (IBM) mainframe.
The transition was approved by the bank's board of the directors in April based on reports compiled by Kookmin Bank.
The FSS said the reports submitted by the bank were filled with fabricated facts. It underestimated risks of the system change in the country's fourth-biggest lender by assets, and scaled down the involved expenses to 206.4 billion won from 305.5 billion won.
The two leaders failed to detect the distorted facts and misconduct of their officials and caused the board to make its decision based on false information, the FSS said. (Yonhap)