EFTA00638144.pdf

From: "Kobre & Kim LLP" To: jeevacation@gmail.com Subject: Know Your Regulators: FSC, FSS, and KB Financial Date: Tue, 27 Jan 2015 13:56:34 +0000 a New York I London I Hong Kong I Washington DC I San Francisco I Miami I Cayman Islands I British Virgin Islands 27 January 2015 Know Your Regulators: FSC, FSS, and KB Financial WjtiRola M When operating in a foreign jurisdiction, it is important for a financial institution to understand the roles the various local regulatory authorities play and how the different regulatory bodies interact with one another. This is doubly true in Korea, in which financial regulators manage and regulate the industry very closely. For the financial sector players, the two key regulatory bodies in Korea are the Financial Services Commission (FSC) and the Financial Supervisory Services (FSS). The FSC covers banking, securities, insurance, and non-bank financial institutions. The primary function of the FSS is to examine and supervise a broad array of activities conducted by these financial institutions, and it can extend to other oversight and enforcement functions. One recent development involving KB Financial Group's (listed on NYSE: KB) efforts to replace their electronic system demonstrates just how closely FSC and FSS supervise banks. KB Financial Group's main subsidiary Kookmin Bank holds and manages approximately US$ 267 billion for its clients and itself, which is the largest in asset size among the Korean financial institutions. Kookmon Bank has been using IBM Korea's main electronic system since 2008, and was planning to move on to the Unix-based system Kobre & Kim Korean Litigation Team Michael S. Kim Robin J. Baik S. Nathan Park Min Jean Kim Practice Areas Govemment Enforcement Defense EFTA00638144 when the IBM deal expired in the fall of 2015. The decision was at the final approval stage when IBM Korea offered a deep discount for renewal pricing, which Kookmin Bank's president Gunho Lee brought to the Kookmin Bank board to consider as an alternative. This proposal was ultimately rejected, and in April 2014, the Kookmin Bank board decided to proceed with the Unix deal. Shortly after the decision, Lee reported the incident to the FSS, alleging KB Financial's Chairman Yongrok Lim exercised undue influence over the Kookmin Bank board members and caused them to falsify relevant records, pushing for the Unix deal. Based on the FSS's special investigation, the FSC decided to take disciplinary actions against both bank president Lee and holding company chairman Lim for failing to adequately supervise the review and determination process. Lee later resigned and Lim was reprimanded. Lim's appeal from the disciplinary action was withdrawn 10 days after commencement. KB Financial has announced that it will review the replacement plan from the scratch, and it is reported that IBM Korea will most likely be able to renew the existing contract. This event is a clear example of the willingness of Korea's financial regulators to severely discipline even the highest level executives. In Korea, banks are very closely regulated to a point that the Korean financiers joke, with some justification, that the government runs all of Korea's financial institution. This is particularly true for a large institution like KB Financial and Kookmin Bank. Although, as a matter of form, there is a process of selecting the chief executives of KB Financial and Kookmin Bank in a neutral manner, the actual selection process involves heavy politicking, with much of the pressure coming from the Korean government itself. On a cursory look, a row over selection of internal IT system may not appear to be a scandal significant enough for not one, but two, chief executives to lose their positions. However, because the FSC and the FSS do not hesitate to exercise their far-reaching power, any internal dissension exposed to the eyes and ears of Korea's financial regulators raises the possibility that severe consequences may follow. In certain instances, such drastic measure could be taken to resolve the issue quickly, rather than going through the long way of conducting thorough investigation. In short, when operating a financial business out of Korea, one must always remember that any internal strife may implicate regulatory scrutiny, and manage the company accordingly. * * * Investigations & Monitorships Class & Derivative Actions Financial Products & Services Litigation Bankruptcy & Debtor-Creditor Disputes International Judgment Enforcement & Offshore Asset Recovery Intellectual Property Joint Venture & Partnership Disputes International Arbitrations Trusts & Estates Litigation EFTA00638145 口 早엇이 감시자I 욤직이게 하는7h 국민욘행 사건에 부쳐한국에서의 금용업 早I 이해하'I 위해서는 반드시 금S위원회와 금용갑득원의 억할과 기눙에 대하 여 이해하여야 합니다． 금용위윈회는 금용정책 및 금용감독 업무를 담당하는 국 니1 최고의 금용감독기관으로서 위휜장욘 장관급이며， 금S감독원 （ ' 금감원“）온 금 용기관에 대한 검사． 감독업무 둥을 실짙척으로 수행하는 금S위윈회 산하 키관 입니다． 口 이와 관련하여 최근oh 붇71진 KB국민욘행의 주전산키 교云I 사EH는 금융위윈 회 및 금S감독윈의 역할과 기눙 및 국나1 최대 금S그！의 싣태를 여싣히 보여주 는 아주 홍미로운 사건입니다． 나 자산 267조원의 국내 州 욘행인KB국민욘행 （ " 국민욘행 ' ）욘2008넌부E1 한국 IBM이 저공하는 주전산시스템을 사용하1 왔는데． 유닉스뮬 차'I 주 전산시스目 기종으로 선정하여 KB금S치주 이사회의 걸의만을 남겨 두고 있었습니다． 그런 더 한국尼M이 갑자끼 파걱척으로 낮욘 협상가걱을 저시하자 , 이건호 국민욘행장 이 우4 이사회에1 결의안의 번겅읕 요청하었습니다． 그러나 이사회는 이를 국샅한 채 유닉스를 그대로 선정하었台니다． 이oil 이 행장욘 KB 금용치주'F 내부 검토 보고서뮬 부당하:7카 위조하었다고 주장하며 금감원에 이！ 보고하었고 . 금융위원 회는 금감원의 조사 결과를 바랗으로KB금S치주의 임엉콕 회장과 이 행장 모두 에 대해 죵징계를 내리게 됩니다． 걸국 이 행장숀 사의휼 표멍하고 임 회장욘 하1 임되었으며． 국민욘행욘 주전산71 교체안0il 대하01 전면 재검토를 선언하였고1 IBM의 기존 시스템 계악이 갱신될 것이 학싣시 되고 있습니다． 텨 지주회사 채xl 및 욘행업이 압도척으로 죵요한 우리 나라의 목성상． 행장욘 회장으로 가는 관문 성걱이 강합니다． 그러다 보니 회장이 직． 간점척으로 행장 선출에 관여함에도 블구하고 1 인자인 회장이 2인차인 행장을 건저하는 현상이 종종 밭생합니다． 그리고 금용시주 회장에겨1 귄럭이 집죵되다 보니 회장이 행장 의 자율성을 보장해주'I 보다는 사사건건 욘행 업무에 관여하:7카 되01 같둥이 자 주 생키게 쵭니다． EFTA00638146 助게다가 관치금용이라 블릴 정도로 금용갑톡원의 강4特 갑시p 받는 국내 금 용그云의 끅성상！ KB치주금8 회장 및 국민욘행쟝욘 이믄바 ' 낙하샨으로 정치귄 이나 겅체 관료의 입깁이 작용하는 경우'F 만았台니다． 그러다 보니 회장과 욘행 쟝 사이에 갈둥이 죵폭되는 겅우 , 금감윈이 사건의 싣체i 파악하기보다는 서듣 러 문제를 해결하는 데에만 주럭하는 입장을 총종 취해 왔合니다． 이 사건 역시 금감씬이 사건의 실체 （주전산71 교쳐1 과정에서 평'F 보고서 조작 통 비리'F 있었 는지 여부） 파악보다는 최고 겅엉자의 동반 사퇴라는 극단척인 방법으로 너早 쉽 'I 같둥을 해결하려 한 것이 아니냐 하는 우려의 목소리도 나왔合니다． 싣저로 임 회장과 이 행장 모두 동뱐 사퇴를 염두에 두고 이번 사타따 키우치늪 앉았을 것이 'I 때문입니다． 결국 한국에서의 금8 업무를 효읕척으로 추진하키 위해서는 금 S감독당국으1 강럭한 규저와 엉항럭을 항상 염두에 두0杓F 하겠습니다． About Kobre & Kim's Korea Team: 100% devoted to litigation, arbitration, and investigations Led by a former U.S. Department of Justice prosecutor All members of the team are fluent in Korean and English 어ces in New York, London, Hong Kong, Washington DC, Miami, Cayman Islands and British Virgin Islands 區旨저 소송／죵재 전문 로폄 코브레 & 깁의 한국밉은： 10어兀 소色 죵Xii , 키업 내부조사만을 전문적으로 수행합니다J전직 미국 연방검사가 이뀨고 있台니다． 1 모든 밉원듣이 영어와 한국어클 눙동하거1 구사합니다 . 1뉴욕 , 런던 , 용콩 . 워싱턴 DC. 마 이애미 , 케이먼 군도 그리고 엉국벙 버진 아잎랜드 사무소0私 유기적으로 할동하고 있台니다． It匕s ma川no 아ov小引nrc.m出n and convnen四 이니09찌 邸此S 心너 dove뗘men四 山恤rest to our 이由nt的nd Mends and Sb에너 not be constr此da引叩이 ad너ce on any rnattec The con始nit of these ma伯Ii曲 may constitule aft여Th카 미加0tt,引ng 너bonier叩U놔'ci寸 아 various如ri吐나'ci也 ]Oupdate inrcim出'A 아 너目ubscrlbe. please ems 白 2015 Kobre & 씨m LLP．川 Rights Rese寸ved. Prior Readis Do N이 G1膨帥伯eASimdarC山Won叱． EFTA00638147 Share this email: Manage your preferences I Opt out using TrueRemove.' Got this as a forward? Sign up to receive our future emails. View this email online. ICBC Tower 6th Floor 3 Garden Road Central, I HK ;53owered by emma This email was sent to jeevacation@gmail.com. To continue receiving our smalls. add us to your address book. EFTA00638148