Lee Se-hoon, senior deputy governor of the Financial Supervisory Service, noted that most IT system failures at financial firms resulted from inadequate basic internal controls. Lee said that if the same accidents recur, the agency will impose clear monetary penalties.
The Financial Supervisory Service (FSS) held the first Consumer Risk Response Council on the 20th to review key risk factors related to financial consumers. In particular, as market volatility has increased recently due to the Middle East war, the council proactively identified risk factors such as product sales from the consumer perspective and livelihood crimes, and discussed response measures.
The council pointed out that as financial market volatility has grown recently, overloads or errors have occurred one after another in the Korea Exchange (KRX) and in some securities firms' and banks' IT systems. On the 5th, an account balance service error occurred in the mobile trading system (MTS) of Korea Investment & Securities Co., and on the 9th, an error in processing crude oil futures at the Korea Exchange caused a temporary suspension of transaction orders.
At a briefing on the council that day, Senior Deputy Governor Lee said, "Diagnosing the causes of financial firms' IT incidents shows that many occurred due to basic lapses in management," and emphasized, "Going forward, we will impose clear penalties in monetary terms for such accidents so that firms pay more attention to upfront information technology (IT) investment."
Lee explained, "Previously, when multiple IT incidents were combined, mitigation rules applied, such as capping fines at 10 times the statutory maximum, but from now on, if the incident is deemed to stem from poor management, we intend to minimize mitigation."
The Financial Supervisory Service (FSS) also decided to run a constant monitoring system through its 24-hour financial incident intake center and to immediately link to on-site inspections when a major financial incident occurs. Before that, it ordered company-by-company self-checks to prevent financial firms' IT incidents, including securities firms' transaction systems (HTS and MTS) and banks' foreign-exchange systems.
The council also voiced concern over the recent sharp increase in "debt-fueled investing," such as securities firms' margin lending. It guided securities firms to fully explain to consumers the core risks of margin trading, such as collateral maintenance ratios and forced liquidation methods, and said that if risk factors are feared to spread, it will immediately issue a consumer alert.
Lee said, "We will focus on securities firms' margin lending while also conducting a comprehensive analysis and response on small and midsize financial institutions' stock loans (linked credit) and banks' overdraft loans."
In particular, as the "money move" into the stock market accelerates, the incomplete sale of high-risk products and other issues could increase, so the agency will focus monitoring on areas where consumer harm is a concern.
In addition, the Financial Supervisory Service (FSS) is closely examining whether there is any possibility of incomplete sales in the process of selling integrated managed accounts (IMA).
An IMA is a principal-payment-obligation product that pools customer deposits and supplies a certain percentage to domestic venture capital. Recently, following Mirae Asset Securities and Korea Investment & Securities Co., NH Investment & Securities was authorized as a comprehensive financial investment business entity (comprehensive securities firm) with more than 8 trillion won, and IMA product launches are expected to increase.
Lee said, "Since the recent authorization of new licenses such as the IMA, moves have been detected to expand related businesses, and in that process, opinions have been raised that consumer harm could occur."
He added, "Even with IMAs, we are checking for signs of incomplete sales so that a 'second Hong Kong equity-linked securities (ELS)' incident does not recur," and emphasized, "If such a situation does occur, we will take follow-up measures immediately."