Big Tech Entering Finance... How to Minimize Risks?

[Asia Economy Reporter Eunju Lee] As the era of big blur fully unfolds, intense discussions are underway on how to regulate big tech companies entering the financial industry. One of the arguments is that big tech companies should also be designated as financial conglomerates.

On the 9th, a symposium titled "Policy Tasks and Response Directions Following the Digitalization of Finance" was held at the main auditorium of the Korea Deposit Insurance Corporation. On this day, Hyoseop Lee, Senior Research Fellow at the Korea Capital Market Institute, expressed concerns that the risks posed by domestic big tech companies could spread throughout financial activities. He suggested that it is necessary to designate Korea’s big tech companies, which are subject to relatively low business conduct regulations, as financial conglomerates to provide means to control various risks.

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 emphasized the need to designate these companies as financial conglomerates. He stated, "Big tech companies 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 obligations to reduce risk transfer, just like traditional financial firms."

He added, "For major big tech companies designated as financial conglomerates, a supervisory consultative body should be formed in cooperation with public institutions possessing expertise in IT operational risk supervision, and the operation of this supervisory consultative body and reporting obligations should be imposed." He further stated, "Financial conglomerates with significant potential systemic risks should be required to prepare their own normalization plans and submit them to supervisory authorities, and the Korea Deposit Insurance Corporation should consider establishing resolution plans."

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