Big Tech-Financial Firms 'Same Function, Same Regulation'... Full Support for Innovative Growth and Digital Transformation

Financial Services Commission Announces 'Post-COVID Era Financial Policy Directions'
Reaffirms 'Same Function, Same Regulation' Principle to Address Financial Firms' Discrimination
System Reforms Focused on Innovation Growth, Digital Finance, Inclusive Finance, and Financial Stability

[Asia Economy Reporter Kim Hyo-jin] Financial authorities have reiterated their intention to comprehensively organize infrastructure in preparation for the entry of big tech (large information technology companies) into the financial industry, aiming to establish a fair competition foundation between big tech and financial companies. This means ensuring regulatory fairness to prevent reverse discrimination against financial companies.

On the morning of the 24th, the Financial Services Commission held the Financial Development Council (Geumbalsim) at the Seoul Government Complex in Gwanghwamun, Seoul, chaired by Vice Chairman Son Byung-doo, and announced the "Post-Corona Era Financial Policy Promotion Direction" containing these details.

The financial authorities plan to gather market opinions going forward, investigate cases where regulatory arbitrage and fairness issues arise between big tech companies such as Naver, which are actively entering the financial industry, and existing financial companies, and improve regulations if necessary. Furthermore, they plan to review the regulatory system in the mid-to-long term to realize "same function, same regulation" from the perspective of financial consumers. To this end, the day before, Financial Services Commission Chairman Eun Sung-soo proposed forming a "Big Tech Consultative Body" with the heads of the five major financial holding companies next month and agreed to continue discussions until the end of this year to seek development plans that allow coexistence and mutual growth between the two sides. The tasks derived from the consultative body will be reflected in next year's work plan and promoted, according to the financial authorities.

The financial authorities also plan to establish a management system to prevent risks related to payment, security, and consumer protection that may arise from the expansion of platform channels such as big tech. In particular, they will establish principles that financial companies and platform companies must comply with during partnerships or collaborations and consider institutionalizing these as model regulations by industry.

In addition, in line with the spread of untact (non-face-to-face) trends within the financial sector, the authorities plan to revise regulations related to identity verification and network separation and innovate infrastructure such as digital payment regulatory systems.

Accordingly, they intend to expand the approval of verification methods based on digital new technologies in addition to the existing identity verification methods using ID cards. Along with this, to support the expansion of routine telecommuting and the creation of flexible working environments in financial companies, they will continuously seek ways to rationalize network separation regulations. The financial authorities plan to prepare innovation plans for authentication and identity verification systems in the third quarter of this year and rationalization plans for network separation regulations in the fourth quarter.

Furthermore, the financial authorities plan to focus on nurturing new players and building data infrastructure through bold support for innovative fields such as big data, artificial intelligence (AI), and cloud computing. To this end, they will designate a data-specialized institution next month and announce a "Sales Network Finance Activation Plan" in September. In October, the formal approval process for the MyData business will proceed. Additionally, they plan to establish an AI activation plan for the financial sector within this year.

Additional Supply of 2.7 Trillion KRW + α to Microfinance
Expansion of Financial Services for the Digitally Disadvantaged
Focused Financial Support for New Growth and Domestic Return

Meanwhile, the financial authorities plan to supply more than 2.7 trillion KRW additionally to microfinance over the next three years to support financially vulnerable groups struggling due to the aftermath of the COVID-19 pandemic. They also plan to allow financial companies to sell written-off personal bonds only if future interest has been waived in advance and limit the number of debt collection contacts to seven times per week, while enabling debtors to request restrictions on collection contacts at specific times and by specific methods.

Additionally, to support elderly consumers who are easily excluded from financial digitalization, the financial authorities will promote the development of elderly-exclusive mobile applications and educational content based on financial literacy guidance. They also plan to provide customized services to support smooth non-face-to-face financial service use for people with disabilities. When vulnerable groups such as the elderly attempt to trade high-risk products through non-face-to-face channels, video consultation services will be provided, and "complete sales post-monitoring" will be conducted on high-risk products traded non-face-to-face to strengthen consumer protection systems.

In line with the goal of supporting stable growth of the real economy in the "post-corona" era, the financial authorities plan to strengthen strategic financial support for companies restructuring their businesses into new growth industries and companies "returning" to Korea from overseas. At the same time, to revitalize the capital market, they plan to expand the sales channels of public offering funds from banks and securities companies to integrated advisory platforms and online fund supermarkets. The financial authorities plan to prepare a capital market revitalization plan within this year, including regulatory improvement measures to strengthen the competitiveness of asset management companies.

The financial authorities also intend to focus on managing financial vulnerabilities exposed by the COVID-19 crisis. They plan to induce capital increases to suppress excessive market borrowings (such as asset-backed securities) by credit finance companies and prevent their expansion, while strengthening autonomous liquidity risk management by individual credit finance companies. Furthermore, they plan to strengthen the won currency liquidity ratio regulation for securities companies issuing derivative-linked securities and encourage holding foreign currency liquidity when issuing derivative-linked securities related to overseas indices. They will also prepare measures requiring mandatory reporting to supervisory authorities if liquidity deteriorates.

This content was produced with the assistance of AI translation services.