KB Financial in freefall on CEO risk

KB Financial Group Inc. plunged more than 5 percent on the South Korean stock market on Monday as the chief of the country's No. 2 banking group by market value comes under pressure from the company board to resign.

KB Financial stocks were trading at 38,850 won on the main bourse as of 11:22 a.m., sharply down 5.59 percent from Friday's close, after KB Financial's board of directors recommended chairman Lim Young-rok to resign.

Last week, the country's financial regulator suspended Lim for three months over management lapses and other transgressions, the second-highest penalty against a financial firm executive, following immediate dismissal.

The Financial Services Commission's sanction is heavier than the Financial Supervisory Service's "censure" that was imposed on Lim and the group's flagship Kookmin Bank chief executive officer Lee Kun-ho.

Kookmin Bank chief Lee resigned after the financial watchdog's sanction, but Lim claimed that he did nothing wrong in handling the process of employing a new computer system at the group's banking unit, vowing to take all possible measures to defend himself, including legal action.

During a meeting earlier in the day, KB Financial's board members agreed that Lim should make a good judgment, which was interpreted as recommending him to resign.

If Lim does not accept the recommendation, the board may decide on Wednesday that Lim be dismissed, according to industry sources.

In April, the bank's board approved the expensive transition to a new computer system, based on reports compiled by the bank that were full of fabricated information.

The reports underestimated risks of the system change in KB Financial, the country's fourth-biggest lender by assets, and scaled down the related expenses, according to the watchdog.

KB Financial and its units have also been plagued by a series of accidents, including massive data leaks and illegal loan extensions.

Meanwhile, the FSS, the financial watchdog, said earlier in the day that it will sue key executives over the IT system change. (Yonhap)