By Kim Yon-se
Staff Reporter

The Financial Supervisory Commission (FSC) Friday took harsh and unprecedented disciplinary action against Kim Jung-tae, president of Kookmin Bank, the nation’s largest bank, for accounting irregularities involving 550 billion won in 2003.

Following the FSC announcement Friday, the 57-year-old Kim said in a statement, ``We still believe we conducted appropriate bookkeeping in 2003 for enhancing corporate value and benefiting shareholders.’’

The disciplinary warning has automatically disqualified the 57-year-old Kim from heading the firm for a second three-year term and also entails 2 billion won in fines and possibly 300 billion won in back taxes. In addition, he is barred from employment at any financial firm for the next three years.

It is the first time in Korea that the incumbent CEO of a bank has lost his position due to a regulatory censure.

The commission also disciplined other KB executives, including Yoon Jong-kyu, the bank’s vice president; Donald MacKenzie, vice president for risk management; and Lee Sung-nam, former standing auditor and now a member of the central bank’s policy-setting committee.

The commission said the regulatory crackdown was based on a report by its investigation arm, the Financial Supervisory Service, which stated that the bank had overstated its loss by 550 billion won in the course of absorbing its troubled card unit last year in an attempt to save on taxes.

In addition, the FSC reported that the bank fabricated its financial statements to the total of 158 billion won in regular business activities.

But Kim Tae-dong, a member of the Bank of Korea’s policy-setting body, and other analysts saw the action as retaliation for the CEO’s uncooperative attitude in the government’s bailout plan for the troubled LG Card last year. The central bank official said that those who had refused to take responsibility for the credit card crisis, which had a stronger and more negative impact on the economy than the oil shocks of the late 1970s, were now driving out a banker who did well according to market principles.

Samil Accounting, a member of U.S.-based PricewaterhouseCoopers, is prohibited from providing audit services for Kookmin over the next two years.

Kookmin Bank plans to release an official statement concerning the regulator’s sanction after holding an executive meeting on Monday. The bank is said to have three options _ acceptance of the warning without any conditions; legal action taken by the bank; or legal action taken by the CEO.

kys@koreatimes.co.kr