To attract reverse Korean retail investors trading U.S. stocks (overseas individual investors who invest in the domestic stock market), the financial authorities will allow foreign individual investors to invest in Korea-listed exchange-traded funds (ETF) and exchange-traded notes (ETN). They are also pushing a plan to fully abolish the network separation regulation for financial firms with advanced artificial intelligence (AI) technology and security capabilities.
Lee Eog-weon, chairperson of the Financial Services Commission, held a press briefing at the Seoul Government Complex on the morning of the 21st and said, "We will actively promote the globalization of the capital market, where global funds and quality asset flow in," and stated accordingly.
The chairperson said, "Overseas individual investors want to buy Korean stocks and are sending many love calls," adding, "In reality, the mechanisms to accommodate those requests are not properly in place."
Currently, overseas individual investors can open an "integrated foreign investor account service" at a local securities firm and trade Korean stocks directly. However, only individual stock transactions are allowed, and ETF and ETN transactions are restricted.
The Financial Services Commission has decided to amend the relevant regulations to allow foreign individual investors to invest in domestic ETFs and ETNs. Before the rule change, it plans to issue no-action letters to securities firms prepared to sell ETFs and ETNs to permit their business. According to the Financial Services Commission (FSC), from on the 26th of last month to on the 15th of this month, transaction amounts by foreign individual investors in Korean stocks totaled 5.8 trillion won.
The Financial Services Commission (FSC) also decided to host "Korea Premium Week," a global Korea investment investor relations (IR) event, in September to expand foreigners' investment in domestic stocks.
Starting in June, the Financial Services Commission (FSC) will gradually ease network separation regulations when financial firms use AI for security purposes. Network separation is a regulation that completely separates a financial company's external internet network from its internal business network to prevent hacking.
To enable financial companies to boost productivity and launch innovative products using AI, authorities will also consider selecting financial firms with advanced security capabilities and AI utilization skills and fully abolishing the network separation regulation for them.
The chairperson said, "AI attacks must be defended with AI, but (the network separation regulation) is blocking the transition of the security framework," adding, "There are also concerns that building the security system needed in the AI era is difficult."
The chairperson also outlined plans to operate the "Inclusive Finance Strategy Task Force." The task force is a body that will discuss ways to strengthen the public role of finance emphasized by President Lee Jae-myung. Within the task force, the Financial Services Commission (FSC) will establish an inclusive finance strategy with four divisions: ▲ general coordination ▲ policy for low-income people ▲ financial industry ▲ credit infrastructure.
To institutionalize inclusive finance on a permanent basis, the Financial Services Commission (FSC) will consider requiring financial firms to designate a responsible executive (CIFO, Chief Inclusion Financial Officer). It will also prepare measures to rationalize prudential regulations so that financial firms can expand inclusive finance.
Authorities also reiterated their intention to enforce regulations on "nonresident single-home" holdings for speculative purposes. The chairperson said, "In the Seoul metropolitan area, single-home jeonse loan balances are estimated at 9.2 trillion won across about 59,000 cases," adding, "We are continuing to discuss how to define and screen out speculative purposes."