[Op-Ed] Financial Security Must Shift from Regulation to Changes in Supervisory Rules

Excessive Regulation on Financial Security Is Becoming an Obstacle to Innovation

Network separation rules enacted in 2013 are out of step with today’s complex financial reality

Financial consumers can be properly protected only by analyzing the changed financial market and revising the rules accordingly

As the digital transformation of financial operations accelerates, demand for new digital technologies has risen sharply. However, strict regulation of financial security is becoming an obstacle to innovation. If the financial industry is to develop, regulatory change is essential.

Financial security regulations underestimate the potential of IT technologies. Technologies such as cloud computing, big data, and artificial intelligence (AI) are used in a wide range of ways by financial companies, from improving customer service to automating operations. These technologies increase efficiency and accuracy, providing greater convenience to consumers.

To reliably support digital transformation in the financial sector, the most urgent task is to improve regulations on network separation. In 2013, internet networks and internal business networks were separated to prevent external intrusion and strengthen security. Now, 11 years later, it has become clear that network separation rules are inefficient for development work.

Network separation rules prevent the use of Software as a Service (SaaS) connected to external cloud systems. As a result, workplace productivity is constrained and the use of information technology becomes more difficult. In the past, the internal IT infrastructure of financial companies was simple, but today it has become highly complex.

At a time when diverse financial services are being provided, uniform regulation does not fit reality. This is because regulations are being imposed without taking into account differences by company and by task. Regulations based on outdated standards reduce the efficiency of development work and make it difficult to utilize innovative technologies.

Going forward, the approach to financial security issues should shift away from regulation and toward changes in supervisory rules. It would be far more efficient to strengthen ex post accountability when financial companies fail to establish autonomous security systems or when security incidents occur.

It has become increasingly important to assess whether each financial company’s operational characteristics and internal security systems are functioning properly and to supervise them regularly. An autonomous security system is precisely the kind of innovative rule that enables financial companies to act responsibly and firmly protect financial consumers.

Regulations must change so that financial companies can compete fairly and create market value. Reform of network separation rules is essential if the fintech industry is to be revitalized and the financial industry is to advance. Financial consumers can be properly protected only by analyzing the changed financial market and revising the rules in a rational manner.

Chaerin Kim, Intern Researcher, Center for Free Enterprise (CFE)

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Original title: [칼럼] 금융보안, 규제 아닌 '감독 규정 변화'로 방향 바꿔야 한다

Author: Chae-rin Kim

Date: 2024-11-29

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&idx=27118