Financial authorities decided to impose a severe penalty on the top-ranking officials of KB Financial Group and KB Kookmin Bank in what appears to be a warning to other financial companies.

Late on Monday, the Financial Supervisory Service informed key officials of KB Financial Group, including group chairman Lim Young-ho and bank president Lee Kun-ho, that they have been subject to severe punishment for the group’s recent internal feud.

The final decision will be made at an FSS disciplinary committee meeting on May 26. Prior to this, the concerned officials may vindicate themselves to reduce the severity of the penalties headed their way.

However, it may be tough for them to get out of this one, as the financial watchdog seems determined to hit the financial industry with a hard blow. The sector has been caught up in a series of financial irregularities, varying from a customer information leak and illicit loans to management-directorate strife.

“Among the 200 or so financial officials, several are subject to a heavy penalty owing to the gravity of the case,” said an official of the FSS. “We will thoroughly examine the details and make the final decision, based on facts and principles.”

The hard-line stance from the FSS came as an unexpected blow for KB Financial, especially so for the bank’s management.

In April, the bank’s board of directors decided to replace the current computing system but management opposed the plan, citing system error risks.

After weeks of quarreling, which included mutual claims of a shady deal with the system operator, the management requested FSS involvement.

But despite the voluntary report, bank president Lee now faces a top-level warning along with the key members of the board.

There are also lingering controversies about whether group chairman Lim should be held directly responsible for the internal strife at KB Kookmin Bank.

“There was little room for group chairman Lee to interfere as the change of the computing system, as well as the resulting feud, was primarily at the disposal of the bank’s directorate board,” said an official of KB Financial.

The FSS, however, remained unmoved by KB Financial’s explanations, reflecting Gov. Choi Soo-hyun’s determination to secure a tight grip on scandal-ridden financial companies.

Apart from the KB Financial officials, the FSS’ blacklist included a number of current and former financial chiefs, such as former Standard Chartered Bank president Richard Hill and Citibank Korea chairman Ha Yung-ku.

By Bae Hyun-jung (tellme@heraldcorp.com)