"Naver and Kakao Designated as Financial Conglomerates to Prepare for Risks"

Hyo-seop Lee, Senior Research Fellow at the Korea Capital Market Institute

[Asia Economy Reporter Eunju Lee] There has been a call to designate big tech companies such as Naver and Kakao as financial conglomerates. This diagnosis points out the need for preemptive measures as the financial system risks posed by big tech companies are rapidly increasing.

The Korea Financial Investment Association and the Korea Deposit Insurance Corporation jointly held a policy symposium on the 9th at the Korea Deposit Insurance Corporation auditorium under the theme "Policy Tasks and Response Directions Following the Digitalization of Finance."

Lee Hyoseop, Senior Research Fellow at the Korea Capital Market Institute, who delivered the keynote speech that day, stated, "As big tech and fintech expand their entry into finance, various side effects such as threats to financial stability and harm to financial consumers may occur," emphasizing the need for policy tasks to ensure financial stability. He diagnosed that domestic big tech companies are subject to somewhat lighter business conduct regulations and soundness regulations compared to traditional financial companies, increasing the likelihood of threatening financial stability.

He mentioned, "Recently, major domestic big tech and fintech companies have threatened financial stability by having their deposit and withdrawal inquiries, transfers, and payment services halted for considerable periods due to IT system failures," adding, "Given the strong expansion capability of financial services by big tech and fintech, the possibility of causing serious financial instability cases in the future cannot be ruled out."

Accordingly, Lee argued that business conduct regulations and soundness regulations applied to financial institutions should also be applied to big tech companies above a certain scale. He also saw the need to designate these companies as financial conglomerates. He said, "They should be designated as financial conglomerates and be required to comply with internal controls, establish risk management policies, strengthen capital soundness, mitigate internal transactions and concentration risks, and fulfill risk transfer mitigation obligations, just like traditional financial companies."

He added, "For major big tech companies designated as financial conglomerates, a consultative body with public institutions possessing expertise in supervising IT operational risks should be formed to operate supervisory consultative bodies and impose reporting obligations." He further stated, "Financial conglomerates with significant potential system risks should be required to prepare their own recovery plans and submit them to supervisory authorities, and the Korea Deposit Insurance Corporation should consider establishing resolution plans."

On the same day, Kim Soyoung, Vice Chairman of the Financial Services Commission, said in a congratulatory speech, "The most concerning risks are unpredictable risks," and added, "The Korea Deposit Insurance Corporation must closely examine whether there are any risk factors threatening the stability of the financial system in response to changes in the financial environment."

Yu Jaehun, President of the Korea Deposit Insurance Corporation, said in a welcoming address, "The KDIC will continue to strengthen financial stability and protect financial consumers through ongoing institutional improvements and strive to eliminate blind spots in protection and supplement investor protection systems."

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