Financial Authorities Expand Digital Finance Organizations and Establish AI Operation Guidelines

Deputy Chairman Do Kyusang of the Financial Services Commission Presides
7th Digital Finance Council Meeting Held

[Asia Economy Reporter Park Sun-mi] Financial authorities are expanding and reorganizing the Digital Finance Council to respond to future changes in digital finance, while also preparing AI operation guidelines to promote artificial intelligence (AI) in the financial sector.

On the 13th, Do Gyu-sang, Vice Chairman of the Financial Services Commission, held the 7th Digital Finance Council meeting with financial sector officials to discuss ▲ risk factors arising from the digitalization of finance ▲ presentation of research results on AI operation guidelines ▲ future plans for the operation of the Digital Finance Council.

Vice Chairman Do stated, "As the digitalization of finance is an irreversible global change, policy efforts are needed to prepare for new risk factors. We must strengthen management of the impact of new players entering the financial industry on financial stability, establish a foundation for the safe use of new technologies, and thoroughly prepare for the increase in risks in the financial sector."

In reviewing risk factors related to the digitalization of finance, concerns were raised about the possibility of similar behaviors in the financial sector when using similar data, and the existence of 'black box risks' where financial companies or consumers may find it difficult to understand the processes involved in utilizing innovative technologies. There were also worries about intensified competition both inside and outside the financial industry as fintech companies enter the financial sector directly or through partnerships, which could lead to a deterioration in the profitability of financial companies.

The potential transmission of risks from the non-financial sector to the financial sector remains a challenge. If convergence between financial and non-financial sectors accelerates, there is concern that risks inherent in the non-financial sector could spread to the financial sector, and that credit risk could be transmitted through leverage effects associated with credit provision. With the expansion of financial supply through fintech accelerating de-banking, concerns were also raised about the increased procyclicality of credit supply due to automated lending and investment.

Preparation of AI Guidelines for the Financial Sector in Q2

The Digital Finance Council also discussed the presentation of research results on AI operation guidelines and the preparation of AI guidelines based on these results. Vice Chairman Do said, "Based on the research results on AI guidelines for the financial sector, we plan to prepare AI guidelines for the financial sector in the second quarter and gradually establish practical guidelines for each financial industry sector within this year."

The use of AI in the financial sector is triggering qualitative changes in the financial industry, such as increased use of non-financial and unstructured data and the replacement of financial company branches by non-face-to-face channels. However, except for areas like financial investment, legal regulations on AI use remain unclear. The research results on AI operation guidelines highlighted the need for ▲ expansion of high-quality AI data ▲ establishment of AI explanation testbeds ▲ ensuring AI accuracy ▲ ensuring AI fairness. It was also advised to build governance to assess and manage potential risks of AI systems and to implement appropriate evaluation measures throughout the operation process to ensure reliability.

Meanwhile, the Digital Finance Council will be expanded and reorganized into a body that broadly addresses digital finance issues beyond discussions of an uneven playing field, and will be operated regularly and periodically. To facilitate in-depth multifaceted discussions, subcommittees will be formed, divided into four thematic groups, and related experts in digital and security fields will be added to cover the entire financial industry. Each subcommittee will consist of about 5 to 6 members.

Subcommittee meetings will be held at least once per quarter, and plenary meetings at least once every six months. Major digital finance policy issues discussed in the Digital Finance Council will also be submitted to the Financial Development Deliberation Committee for discussions at the entire financial industry level.

Through the Platform and Open Banking subcommittee, infrastructure to activate fintech will be established, while the Regulatory Innovation subcommittee will promote the advancement of the financial regulatory sandbox. The Data Sharing subcommittee will prepare measures to revitalize the data economy, and the Financial Security subcommittee will establish a safe financial innovation system.

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