Lee Chan-jin, head of the Financial Supervisory Service, urged strong vigilance and a firm response to financial firms' practices that encourage excessive "debt investing" ahead of the launch of single-stock leveraged exchange-traded funds (ETFs).
The Financial Supervisory Service said on the 19th that it held the "2nd Consumer Risk Response Council" on the 18th, chaired by Lee, and reviewed major issues related to financial consumers.
The council on the day noted the potential for rising demand for leveraged and inverse ETFs amid continued volatility in the stock market. The Financial Supervisory Service (FSS) in particular judged that, given the high-risk nature of the products, retail investors' loss risk could expand if market volatility increases.
Accordingly, the Financial Supervisory Service (FSS) will intensively monitor the management status, tracking error, and trading trends of leveraged and inverse ETFs, distribute cautions to investors, and conduct marketing checks on the asset management industry. A representative measure is to clearly disclose key risk factors such as "single-stock" and "leveraged/inverse" in product names and advertisements to avoid confusion with general ETFs.
At the meeting, the risk of cyberattacks abusing artificial intelligence (AI) was also discussed as a key issue. The Financial Supervisory Service (FSS) assessed that AI-based hacking and security threats are rapidly advancing following the recent announcement of the high-performance AI "Mythos."
In particular, the new AI technology can identify security vulnerabilities in a short period and carry out simultaneous attacks, raising concerns that an attack on the financial sector could lead to large-scale damage such as the suspension of core services including online banking. Because the financial sector relies heavily on large funds, non-face-to-face channels, external software, and open-source supply chains, it could become a primary target for AI-based cyberattacks, the explanation said.
The Financial Supervisory Service (FSS) believes the current security framework alone may have limits in responding to sophisticated AI-based attacks, and it will work with relevant agencies to establish a response system tailored to the characteristics of the financial sector. At the same time, it plans to use Generative AI for security purposes to advance the financial sector's information protection framework.