FSS presses KB Financial to hold off exec bonuses

The financial regulator has demanded KB Financial Group Inc. put off any bonuses for former and incumbent executives, citing the ongoing probe into suspected corruption at its flagship unit Kookmin Bank, regulatory officials said Tuesday.

The Financial Supervisory Service (FSS) has apparently decided that KB Financial's bonus payouts to its executives would be inappropriate given the current circumstances in which Kookmin Bank has been scrutinized by the financial authorities on corruption allegations, according to multiple FSS sources.

The flagship arm of South Korea's No. 2 banking group has been investigated by the FSS for three separate allegations -- suspected slush fund operations at its Tokyo branch, unreasonably high lending rates and a 9 billion won ($8.47 million) embezzlement scheme by a head-office employee.

The FSS' call came after KB Financial paid former Kookmin Bank chief Min Byong-deok a stock grant worth hundreds of millions of won early this month, even though the bank was being probed by the regulator.

Min headed Kookmin Bank for a three-year term until June this year, about a month before he was succeeded by Lee Kun-ho.

Since the series of alleged events took place during Min's term, the watchdog raised the question of moral hazard in regards to the bank's stock grant payment to him.

But an official at Kookmin Bank said the stock grant was paid to Min merely in compliance with the provision that a board member must be given the bonus within the next four months following his resignation.

The bank instead said its board has put off all discussion regarding the stock grant for former president of KB Financial Group Euh Yoon-dae, since the extent of his involvement in the alleged irregular practices is still called into question, a KB Financial official said.

Euh served his term as the head of KB Financial between 2010-2013.

Currently, 24 former and incumbent executives at KB Financial hold a combined stock grant of about 320,844 shares, or an average of 13,000 shares worth 450 million won, according to regulatory data. (Yonhap News)