[2025 Financial Forum] Seo Byungho: "AI Regulations Will Undermine Global Competitiveness... Enforcement Should Be Delayed"

Concerns Over the AI Basic Act:
Ambiguous Regulations May Increase Costs and Legal Risks for Financial Companies
Calls for Delaying Enforcement and Focusing on Practical Governance

Seobyungho, Head of Financial Innovation Research Office at Korea Financial Research Institute, attended the "2025 Asian Financial Forum" held at the Western Chosun Hotel in Jung-gu, Seoul on the 21st and gave a lecture on the topic "Changes in AI Regulatory Environment and Response Directions of Financial Companies." 2025.5.21 Photo by Jo Yongjun

Seo Byungho, Head of the Financial Innovation Research Office at the Korea Institute of Finance, explained recent trends in regulatory changes and their impact on the financial sector amid the active adoption of artificial intelligence (AI) in finance. He stated, "Introducing the Basic Act on Artificial Intelligence (hereinafter referred to as the AI Basic Act), which concerns the advancement of AI and the establishment of a trust-based foundation, is premature at a time when AI technology has not yet sufficiently developed."

At the "2025 Asian Financial Forum" hosted by Asia Economy and held at the Westin Chosun Seoul in Jung-gu, Seoul on the 21st, Seo delivered a presentation during the session titled "Changes in AI Regulatory Environment and Response Directions for Financial Companies." He said, "Unlike the United States and China, which are leading countries in AI and have adopted a 'negative regulation' approach, Korea has chosen a comprehensive regulatory approach. This will lead to increased costs and a rise in legal disputes."

Recently, the most significant issue related to AI regulation, including in the financial sector, has been the AI Basic Act, which was promulgated in January this year and is scheduled to take effect in January next year. The main content of the AI Basic Act is that it classifies AI that can impact fundamental human rights as high-impact AI and imposes a wide range of obligations. The scope of application includes not only companies developing AI but also those utilizing it in their operations, effectively making all financial companies that use AI subject to the law.

Seo pointed out, "There are many ambiguous aspects in the AI Basic Act, and there is no concrete method established for its application in the financial sector, which will cause confusion." He further explained, "Since the enforcement decree of the AI Basic Act has not yet been outlined, and the position of the Ministry of Science and ICT remains unclear, it is difficult for financial supervisory authorities to provide explanations regarding the interpretation of the law."

He also raised concerns that ambiguous laws will increase costs for the financial sector. Seo said, "Because the law itself contains many unclear provisions, financial companies will see a sharp increase in AI development and operational costs." He predicted, "As a result, financial institutions will become reluctant to utilize AI, which will weaken their global competitiveness."

Seobyungho, Head of Financial Innovation Research Office at Korea Financial Research Institute, is attending the '2025 Asian Financial Forum' held at the Western Chosun Hotel in Jung-gu, Seoul on the 21st, delivering a lecture on the topic of 'Changes in AI Regulatory Environment and Response Directions for Financial Companies.' 2025.5.21 Photo by Joyongjun

Seo identified not only increased costs but also heightened legal risks as risk factors. He pointed out, "From the perspective of financial companies, there are already numerous regulations and obligations, such as the AI Basic Act, the Credit Information Act, and the Personal Information Protection Act. If the AI Basic Act is also enforced, it will result in not only increased costs but also greater legal risks."

Financial authorities have provided guidelines such as: division of roles and responsibilities for AI development and utilization; emphasizing that AI is an auxiliary tool; and minimizing risks to financial stability. These guidelines stress not only the establishment of internal control systems but also the strengthening of responsibility for executives and employees in the event of legal violations. For example, if AI discriminates against certain regions, genders, ages, or occupations during the learning process for loan screening or credit evaluation (as per the Financial Consumer Protection Act), it will be considered a legal violation by the AI, and responsibility will be imposed on executives and employees.

As countermeasures, Seo proposed a practical approach, the establishment of governance structures considering changes in the regulatory environment, and a postponement of the enforcement of the AI Basic Act.

He said, "There are various areas where AI can be used, but this also leads to increased operational costs. Therefore, it is necessary to conduct satisfaction surveys and focus on 'selection and concentration.'" He added, "It is also necessary to reorganize the responsibility structure, such as appointing managers and supervisors for AI services, taking into account the regulatory environment."

Most importantly, Seo emphasized, "With only about seven months left until enforcement, there is an absolute lack of preparation time." He warned, "If comprehensive regulations are applied when we have not yet achieved AI competitiveness, global AI competitiveness may decline, and issues of overlapping regulations with existing laws such as the Financial Consumer Protection Act may arise."