Lee Junsu, Deputy Governor of the Financial Supervisory Service, Attends East Asia-Pacific Financial Supervisory Authorities Meeting

Discussion on Financial Innovation Supervision and Regulation in the Digital Era, Impact of New International Regulations such as Basel III
One-on-One Meeting with Chair of Australian Prudential Regulation Authority (APRA) Held

The Financial Supervisory Service (FSS) attended the 13th East Asia-Pacific Financial Supervisors and Central Bank Governors Meeting (EMEAP GHOS) held in Penang, Malaysia, where discussions were held on supervision and regulation of financial innovation in the digital era, as well as the impact of new international regulations such as Basel III on the regional financial environment.

According to the FSS, the meeting held on the 15th and 16th was attended by 16 financial supervisory heads and central bank governors from 11 countries in the Asia-Pacific region. From the FSS, Lee Junsu, Deputy Governor in charge of Bank and Small Finance, participated.

Recently, more than 40 digital banks have launched and are rapidly growing in major Asian markets, but new supervisory issues such as cybersecurity and digital financial fraud have emerged. In particular, artificial intelligence (AI) holds the potential to innovate the financial industry by improving and accelerating loan processes and enhancing financial fraud detection, but there are potential risks such as discrimination and opacity due to misuse.

In response, Deputy Governor Lee explained the current status of internet banks in Korea and detailed regulatory and supervisory measures, introducing the efforts of financial supervisory authorities to achieve a balanced approach to innovation, inclusiveness, and soundness of internet banks, stating, "Korea's internet banks have had the effect of promoting competition through innovation within the banking industry and expanding the base of financial services to vulnerable groups."

He continued, "For the sustainable growth of internet banks, it is important to maintain differentiated innovation efforts, advance credit evaluation systems that can maintain asset soundness even while expanding loans to low- and medium-credit borrowers, sustain an appropriate level of household loan growth consistent with stable household debt management, and maintain digital operational resilience to prepare for cyber risks and digital financial fraud."

At this meeting, managing financial system risk factors such as prolonged high interest rates after the end of COVID-19 and responding to the negative impacts of newly introduced international regulations were also presented as important supervisory tasks. In particular, participants shared efforts by each country to minimize negative impacts such as increased regulatory compliance costs due to the introduction of Basel III, Recovery and Resolution Plans (RRP), and climate risk management standards, and discussed ways to expand mutual cooperation including information sharing among member countries.

Meanwhile, Deputy Governor Lee held a meeting with John Lonsdale, Chair of the Australian Prudential Regulation Authority (APRA), where they exchanged views on financial supervisory issues such as supervision of financial companies' risk culture and consideration of geopolitical risks in stress testing, and discussed ways to strengthen cooperation between the two institutions.