Kookmin Bank takes internal feud over system change to prosecution

South Korea's No. 2 Kookmin Bank took the protracted feud over a computation system change to the prosecution, deepening the chasm between the bank and its parent financial group who both have been reprimanded by the watchdog for management fumbles.

Kookmin Bank filed a complaint with the prosecution on Tuesday against three executives, including Kim Jae-youl, chief information officer of KB Financial Group Inc., accusing the officials of having underestimated the potential risks of the system change and not promptly reporting them to the board of directors.

Inside sources said that bank president Lee Kun-ho is determined to pursue the case, which has tarnished the bank's reputation.

The heads of Kookmin Bank and its parent, KB Financial Inc., have clashed over a 200 billion won (US$195.6 million) project to change the bank's computation system.

KB Financial Chairman Lim Young-rok pushed to change the system and got the backing of the board of directors in May, but bank president Lee opposed the move and reported the case to the Financial Supervisory Service (FSS), citing procedural flaws.

Last week, the FSS disciplinary committee handed down heavy punishment to the three officials accused of neglecting their duties to check on and report possible problems in the system change. Lim and Lee, however, were given "advisory warnings," a much lower form of punishment than was initially indicated by the FSS.

"This is a very important matter," Lee said. "If our computation system is paralyzed, it can bring chaos to the country's economy," Lee said. "It would be an obstruction of duty if they had lied about the risks. They should face legal penalties as well."

Lee on Tuesday fired one of the three officials who were in charge of information technology affairs at Kookmin Bank.

He said he intends to prove how the accused officials manipulated their report to the board of directors and helped the board push for the system change.

Market watchers see Kookmin Bank's move as a second round of conflict between Lim and Lee and a proxy war between the holding company and its subsidiary bank, which by business scale is more influential.

The chairman of the holding company wields managerial power over the flagship bank, but the bank accounts for a majority share of the group's earnings.

KB Financial posted a net profit of 765.2 billion won for the first six months of the year, with Kookmin Bank making up 546.2 billion won, or 71.4 percent. (Yonhap)