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Financial watchdog to step up crackdown on Big Tech

Financial Supervisory Service headquarters in western Seoul (Yonhap)
Financial Supervisory Service headquarters in western Seoul (Yonhap)
South Korea’s financial watchdog pledged Monday to announce its own monitoring measures for Big Tech firms’ financial services.

As part of its annual plan for this year, the Financial Supervisory Service said it would prepare “Korean-type Big Tech monitoring measures to stimulate competition and innovation from Big Tech’s foray into the finance sector and to achieve financial stability and customer protection.”

The purpose of the measures is to establish systematic monitoring to enforce adoption of healthy market rules, and actively supporting financial innovation in the era of the “big blur” -- a locally-used term referring to the blurring of boundaries between industries.

The FSS’ announcement comes as tech giants Naver and Kakao’s fast-growing online and mobile financial services have become serious competitors to traditional banks. It also comes amid concerns that regulations on Big Tech companies’ customer protection and data use related to their financial platforms remain unclear.

To bolster transparency in online and mobile finance, the FSS seeks to check on the current state of electronic finance transaction fees and build a related data and information disclosure system. The watchdog, concerned with the lack of standards in assessing environmental, social and governance-related financial products, vowed to come up with a solid yardstick for ESG bonds. It said it would review ESG-related disclosure systems and adopt stricter assessment process for ESG-related funds.

The FSS picked customer protection as another key task for this year, saying it plans to implement stricter regulations to prevent financial institutions’ exaggerated marketing and selling of risky products.

To minimize financial polarization in the country, it plans to roll out plans to help the elderly and consumers suffering from the fast-declining numbers of brick-and-mortar bank branches and automatic teller machines. According to separate data compiled by the FSS, the number of offline branches operated across the country by the four major banks here –- KB Kookmin, Hana, Shinhan and Woori -– decreased by 203 on-year as of end-September 2021 to 3,203.

Pointing to concerns surrounding the nation’s household debt, the FSS said it will enforce stricter loan regulations. The watchdog will prepare an integrated screening system for both household loans and special loan programs for the self-employed. This measure is to prevent abuse of the small business loan program, which tends to have less strict requirements.

Data released by the Bank of Korea earlier this year showed that total household loans extended by banks declined 400 billion won ($333 million) on-month as of end-January, while the total extended to the self-employed added 2.1 trillion won in the same period. This has sparked concerns from onlookers that borrowers were abusing the small business loan programs for other personal uses, such as stock and real estate investments, as the government has been tightening its screening and regulations on household loans.

By Jung Min-kyung (mkjung@heraldcorp.com)
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