Tension is expected to escalate this week in the financial circles as the regulators tightened grip over the persisting recruitment scandals which allegedly involve some of the banking groups’ chiefs while the corresponding banks remained in denial, gesturing at taking the case to court if necessary.

Adding further to the conflict is their discord over stock dividends. In the wake of improved operating profits last year, banks are seeking to increase shareholders’ dividends but regulators have disapproved the plan, calling for better financial soundness.

Last week, the Financial Supervisory Service included a detailed list of “recruitment VIPs” of KB Kookmin Bank and KEB Hana Bank, when handing over the recruiting irregularity investigation data to the prosecution, according to officials on Sunday.

The list was similar to the 37 VIP names which Woori Bank was recently found to have kept in 2015-2017 to offer favors to family members of directorate members or high-profile financial officials.

The regulators argue that KEB Hana Bank manipulated the recruiting test results in favor of an acquaintance of its nonexecutive director and graduates of specific prestige universities. Hana Financial Group earlier had come at odds with the Financial Services Commission over the reappointment of Chairman Kim Jung-tae, despite his suspected affiliation to the state scandal which drove former President Park Geun-hye out of power.

As for KB Kookmin Bank, the grand-niece of group Chairman Yoon Jong-kyoo and children of former executive members have been suspected of receiving special favors in their recruitment interviews.

Announcing the list of possible recruitment irregularities late last week, the financial watchdog said that they may even call for the resignation of the top chief in charge, should the allegations be confirmed.

The strong offense from the regulators led to specualtions that both Kim and Yoon may choose to step down in light of the probe, as did Woori Bank chief Lee Kwang-goo did last year.

Both banks, however, have strongly refuted all allegations, while the FSS assured they had evidence.

“We have confirmed the (VIP) list and our announcement was based on significant proof data,” FSS Gov. Choe Heung-sik said, in response to the banks’ denials.

Another issue of conflict involves the stock dividend that is to follow the banking groups’ earnings announcement next week.

While leading banking companies have been seeking to increase their shareholders‘ profits, the FSS has repeatedly called for capital expansion, citing the incoming capital requirement regulations.

The third installment of the Basel Accords, or Basel III, demands that banks guarantee a higher level of capital capacity by increasing liquidity and decreasing bank leverage.

Bae Hyun-jung (tellme@heraldcorp.com)