Kim suspected of peddling influence to help savings bank


A former chief of Korea’s financial regulator appeared before prosecutors Thursday to face questioning over allegations of influence peddling in a widening investigation into corruption at mutual savings banks.

Kim Jong-chang, who was until March governor of the Financial Supervisory Service, is suspected of exerting his influence to help Busan Mutual Savings Bank receive lax inspections and avoid sanctions while he was in office.

A handful of former and current FSS officials have been questioned with respect to the savings bank scandal so far, but Kim is the highest ranking official. He is also the third FSS chief ever to be summoned and questioned for alleged corruption while in office.

Kim arrived at the Supreme Public Prosecutors’ Office in southern Seoul at around 9:50 a.m. and went straight inside, without saying a word to reporters gathered at its entrance. 

“It is likely to be an intensive, hour-long questioning, because there’s a lot to ask,” an SPO official said.

The prosecution is said to have secured statements from Eun Jin-soo, a former state auditor arrested last week, that he asked Kim to pull strings for the troubled bank.

The FSS is the nation’s top financial regulatory body that examines and supervises savings banks and other financial institutions. In February, it suspended Busan Mutual Savings Bank and its four affiliate banks, citing severe capital shortage. Prosecutors have so far found that the banks had engaged in massive illegal lending, window-dressing and other irregularities totaling nearly 7 trillion won ($6.5 billion).

In February 2010, Kim allegedly stopped for about a week an examination into the now-suspended banks, jointly conducted by the FSS and the Korea Deposit Insurance Corp., which allowed the lenders some time to cover up irregularities.

In April that year, the governor strongly protested against the Board of Audit and Inspection over its report which pointed out lax monitoring of the Busan banks by the FSS. Kim reportedly demanded that the BAI cancel the report.

There are also suspicions regarding a real estate trust company where Kim had been registered as a board member. The firm, Asia Trust Co., invested 9 billion won in Busan Mutual in June last year.

The former FSS head is said to have disposed of all of the company’s shares held by his wife upon inauguration as FSS chief in March 2008, but it was revealed later that the titles to shares were only transferred to one of his friends on trust arrangement.

By Lee Sun-young (milaya@heraldcorp.com)