Lee Sang-deuk, 76, was summoned for questioning earlier this week amid allegations that he took bribes from two bankers in exchange for his influence in investigations against their banks, prosecution officials said Thursday.
No charges have been filed against him, and prosecution officials said they were still investigating whether there is enough evidence to seek his arrest.
Lee's arrest would embarrass the president, who last year was outspokenly confident about the integrity of his government and has campaigned for fairness. His presidential term ends in February.
"I'm very heart-stricken," Lee Sang-deuk told reporters Tuesday as he entered prosecutors' office for questioning.
The controversy implicating the close family of the president also called to mind the scandal surrounding former President Roh Moo-hyun, who committed suicide in 2009 amid allegations that he and his relatives took bribes in exchange for their influence.
Roh's older brother was given a 2 1/2-year prison term for exerting his influence in business deals in exchange for money.
Lee, a former lawmaker, is accused of taking half a million dollars in bribes from the bankers in exchange for his influence, South Korean media reported.
Prosecution officials refused to comment on the report.
The two bankers from Solomon and Mirae savings banks implicated in the scandal have been charged with embezzlement and bribery.
Regulators have suspended operations at a series of savings banks, including Solomon and Mirae, since last year for lax oversight and capital shortages. Some were found to have lobbied politicians illegally to avoid the shutdown.
Lee, one of the president's three older siblings, was a six-term lawmaker for South Korea's ruling party until he chose not to run in this year's April elections.