`Shinhan Financial Group Chief Opened Illegal Bank Account`

The Financial Supervisory Service said Thursday that Shinhan Financial Group Chairman Ra Eung-chan is confirmed to have broken the law by opening a borrowed-name bank account.

The financial watchdog will hold a meeting early next month at the latest to determine Ra`s punishment.

The group’s internal feud began with Shinhan suing its president Shin Sang-hoon, and will likely expand due to controversy over Ra’s acceptance of early retirement.

A senior official at the watchdog said Ra is confirmed to have managed his funds in a bank account under a borrowed name, suggesting that a Shinhan employee must have opened the account under the chairman’s order.

Ra’s punishment will be determined considering that his deeds were intentional and involved a large amount of money, the official added.

The official also cited a similar case involving the head of Kyungnam Bank, who received a disciplinary warning due to a financial scandal, indicating that Ra will likely be subject to heavy punishment.

The financial watchdog will inform Ra and Shinhan of its disciplinary action plan before giving them two to three weeks to explain their case. It will also hold a sanctions committee meeting in early November to make a final decision on the punishment.

Disciplinary action against financial company executives comprise five steps ranging from warnings to recommendation for dismissal. According to the financial watchdog’s regulations, a staff member who makes an illegal transaction exceeding 300 million won (268,456 U.S. dollars) faces suspension of duty at the very least.

If Ra receives a warning or higher level of punishment, he is banned from assuming an executive position at a financial company for three to five years after his term expires in March 2013.

A Shinhan source said the sanctions committee, which mostly consists of private sector figures, will find it hard to decide on heavy punishment because of questions over how deeply Ra was implicated in the opening of the borrowed-name account.

A senior official at the financial watchdog, however, said his agency has concrete evidence to prove Ra broke the law.

Since August, the supervisory agency had been investigating the allegation that Ra transferred 5 billion won (4.4 million dollars) via an account under a borrowed name.

weappon@donga.com