Decision to Establish Supervisory System Amid Controversies Over Regulatory Arbitrage
[Asia Economy Reporter Kim Hyo-jin] As big tech companies such as Naver and Kakao accelerate their entry into the financial industry, financial supervisory authorities have decided to establish a comprehensive supervisory system for them.
This aims to resolve issues such as regulatory arbitrage, gaps in supervisory administration, and reverse discrimination against financial companies that may arise when big tech companies, which are not financial institutions, engage in financial business.
According to financial and political circles on the 13th, the Financial Supervisory Service (FSS) announced this plan through materials distributed ahead of the National Assembly's Political Affairs Committee audit. Accordingly, the FSS plans to create a 'Big Tech Comprehensive Supervision Plan' covering responsible business conduct such as internal controls and customer information protection measures.
To this end, the FSS intends to categorize cases of regulatory arbitrage associated with big tech's entry into the financial industry and apply appropriately stringent regulations to realize the principle of 'same business, same regulation' with financial companies. Yoon Seok-heon, Governor of the FSS, said, "We will prepare a reasonable supervisory plan so that the emergence of new market participants such as big tech does not cause consumer harm or anxiety and ensures fair competition among market participants."
Big tech's entry into the financial industry, backed by massive platforms, is evaluated as a considerable threat to financial companies. There are ongoing concerns within the financial sector that if big tech enters finance based on the vast consumer information collected from platforms, the entire financial industry could become dependent on big tech.
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The financial sector cites the asymmetry of data sharing as a representative case of regulatory arbitrage. For example, regarding the MyData (Personal Credit Information Management) system, banks are required to disclose virtually all information, whereas big tech only needs to disclose information of their subsidiaries, causing unfair competition from the outset.
Including this, while financial companies must obtain approval from financial authorities to transfer segmented personal credit information, big tech does not require such approval, leading to ongoing controversies within the financial sector about 'reverse discrimination against financial companies' and a 'tilted playing field.' Earlier, on July 5th, the chairpersons of the five major financial holding companies met with Financial Services Commission Chairman Eun Sung-soo and specifically pointed out these issues, reflecting high concern.
Considering these controversies and concerns, the Financial Services Commission launched the 'Digital Finance Council' last month, involving financial authorities, financial companies, big tech, and fintech companies to seek solutions to various issues. The Digital Finance Council plans to meet regularly until the end of this year to continue discussions.
However, there is a growing view that discussions will not proceed smoothly as the financial authorities expect. A representative from a commercial bank hinted, "The atmosphere is one of repeatedly confirming the differences in positions between big tech and financial companies."
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