SEOUL—The head of South Korea's largest lender, Kookmin Bank, moved to manage a widespread corruption probe, apologizing and bowing deeply before the media after the bank admitted wrongdoing by employees in three separate ongoing investigations.
Lee Kun-ho, the chief executive of Kookmin Bank, bowed in apology for the alleged wrongdoings by the lender. Kookmin Bank
South Korea's financial authorities and prosecutors are looking into allegations that Kookmin employees faked government bonds used to fund housing policy and embezzled the money from their sale; that the bank's Tokyo branch lent more than permitted to a Japan-based firm to secure returns used to set up a slush fund; and that the bank didn't return interest as required to businesses for a mortgage product.
Kookmin Bank has admitted all three allegations, though it says the extent of wrongdoing, such as the number of employees and amount of money involved in each case has yet to be established.
Kookmin Bank CEO Lee Kun-ho. Kookmin Bank
"We have disappointed people with a series of shameful incidents recently. As the head of the bank, I feel deep responsibility and sincerely apologize along with 22,000 executives and employees," Kookmin Bank Chief Executive Officer Lee Kun-ho said on Wednesday.
South Korea's Financial Supervisory Service has dispatched two separate teams to Kookmin's headquarters in Seoul to look into the cases.
Kookmin says the fake bond case was found during an internal audit after an employee reported the alleged wrongdoing. The bank said in a statement Saturday it has taken legal action against the employees involved but declined to provide further details of the case.
"Currently, we're looking into how big a loss has been caused [from the fake bond case] and who was involved, but we estimate the loss will be as much as billions of won," the lender said over the weekend.
The investigation into the alleged illegal lending has progressed further after the financial watchdog handed the case over to prosecutors this week. Kookim hasn't provided any further details of that case or the investigation into its Tokyo branch.
"We will cooperate with the financial watchdog's ongoing probes and pursue fundamental reform to prevent recurrence" of the alleged wrongdoings, Mr. Lee said.
Financial Services Commission Chairman Shin Je-yoon was asked about the investigations at a news briefing on Wednesday.
"If [the cases are] true, it leaves a significant question about Kookmin's internal control system," he said. "We will see if there's [more] to be done from the regulator's end to improve the system."
Former Kookmin CEO Min Byong-deok, who left the bank in July, said on Wednesday he is prepared to return his final bonus because of the alleged wrongdoing.
"I'm aware of [the criticism by some] that it's not proper to receive the performance-based bonus given that the probes are ongoing," Mr. Min said in an emailed letter to reporters. "I'm willing to return the bonus any time," he wrote.
KB Financial Group Inc., 105560.SE +0.63% the parent of Kookmin Bank, said that the performance-based bonus for its former chairman, Euh Yoon-dae, hasn't been paid yet, and no decision has been made on the payment.
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