SC First Bank Executives Face Punishment
By Cho Jin-seo
Staff Reporter
Financial regulators will decide how much SC First Bank will be penalized on April 8 for the firm's accounting error of 130 billion won ($114.5 million), which occurred at the end of 2008.
Several local newspapers reported that the Financial Supervisory Service (FSS) has already informed the bank that its chief finance officer Janice Lee will either be suspended or have her pay reduced, and chief executive Richard Hill could be penalized as well. But Samjong KPMG, SC First's accounting firm, is not on the investigation list, the FSS said.
"We are still looking into this and nothing is decided yet about the penalty," said Ryu Tae-sung, manager of the FSS. If a bank executive is suspended or has their pay reduced, he or she cannot be reappointed within four years or three years, respectively.
The investigation raises a question whether the FSS is seriously considering a penalty or the regulators in charge of the banking sector are simply playing a game of cat and mouse with the U.K.-owned bank. The probe excludes Samjong KPMG, the accounting firm that is responsible for the faulty audit report. "We haven't launched any inquiry into the accounting firm, and we are not even aware of such an issue," said an official in charge of the accounting sector at the FSS.
According to its own report, SC First Bank recorded some of its profit at the end of 2008 on its 2009 balance sheet. This resulted in the reduction of 2008's operating profit by 130 billion won on paper, and an increase of 2009 profit by the same amount. CEO Hill was the CFO at the time, and Lee was a senior executive in charge of finance.
SC First Bank, the Korean arm of Standard Chartered Bank of the United Kingdom, said that it was an unintentional mistake, which was caused by confusion between the U.K and Korean accounting practices.
"We voluntarily reported the error to the regulators last year as soon as we found it, and then we paid all relevant taxes," a spokeswoman said. "As for now, all we can do is wait for the FSS's decision."
SC First has been under fire from the local press since last year. They have criticized the bank for being reluctant to cooperate with the government's financial policies in pursuit of profit.
Hill was the CFO between January 2008 and December 2009 before he was promoted to CEO. Lee was CFO of Hanarotelecom and moved to SC First in July 2008. At the telecom company, she was in charge of corporate restructuring, representing its private equity owners.