The recent series of hacking incidents in the financial sector and the controversy surrounding the introduction of single-stock leveraged exchange-traded funds (ETFs) emerged as key issues during the National Assembly's audit on October 8. Lawmakers from both sides of the aisle questioned the effectiveness of financial authorities' policies and their supervisory responsibilities. Despite stringent loan regulations, rising housing prices raised concerns about whether the authorities' responses were adequate.
During the audit conducted by the National Assembly's Political Affairs Committee, which focused on the Financial Services Commission, Korea Development Bank, and IBK Industrial Bank, vulnerabilities in the financial sector's security systems were highlighted.
Representative Kim Hyung-yeon of the Justice Party criticized the Financial Supervisory Service for not specifying a review period in its emergency self-assessment checklist following the recent hacking incidents. He stated, "Some banks report no issues after only three months of checks. Is a three-month assessment equivalent to a one-year assessment?" He pointed out that the IP address used in the Shinhan Bank hacking had previously accessed two internet banks in January, calling for an expansion of the review scope.
In response, Financial Services Commission Chairman Lee Ok-yeon stated, "After this incident, we quickly instructed a review of 12 items," and he indicated that they would consider the need for further assessments based on the results.
Representative Park Min-kyu of the Democratic Party raised concerns about regulations limiting the use of artificial intelligence (AI) security services, to which Lee acknowledged the need for gradual improvements, saying, "If we restrict AI, we will ultimately have to use it."
The debate over the effectiveness of financial authorities' policies extended to household loan regulations. Representative Shin Dong-wook of the People Power Party argued that the June 27 measures, which capped mortgage loans at 600 million won, have failed as housing prices in Seoul continue to rise. Lee countered, stating, "If we hadn't implemented those measures, the situation might have been worse. At that time, high-priced homes in Gangnam were driving the market, and most evaluations suggest that the 600 million won policy was effective."
The predictability of loan regulations was also scrutinized. Representative Han Min-soo of the Democratic Party pointed out that the Financial Services Commission raised its target for household loan growth from 1.5% to 3% this year, noting that the loan restrictions imposed by 13 domestic banks had reached 149 instances over 20 months. Lee reaffirmed the necessity of total volume management, considering the high level of household debt.
Concerns regarding internal controls and supervisory blind spots within financial companies were also raised. Choi Byung-chae, CEO of Inka Financial Services, who testified, explained that the clause allowing for the recovery of up to 120% of commissions from agents upon contract termination was intended as a punitive measure for early contract cancellations. When asked when he became aware of the cases involving young agents, he replied, "I learned about it from news articles," and agreed to submit the basis for commission recovery and deductions to the National Assembly.
Issues regarding the stability of mutual finance institutions were linked to the responsibilities of financial authorities. Lee noted that 52% of credit union associations and 51% of Saemaul Geumgo reported losses in the first half of this year, emphasizing the need to consider not only stability management but also the business models of mutual finance institutions.
Additionally, allegations of external pressure regarding the introduction of single-stock leveraged ETFs and the lack of investor protection measures were raised. Lee apologized for the inconveniences caused during the policy implementation process but explained that the system was introduced after consultations with relevant departments, and investor protection measures such as pre-education and basic deposit requirements were established.
The management of long-term delinquent debts from past credit card crises and the responsibility for compensating victims of voice phishing were also discussed. Representative Kim Yong-man of the Democratic Party pointed out that IBK received 21.5 billion won in dividends from a debt collection company over 19 years, to which IBK CEO Jang Min-young responded, "We take this responsibility seriously." Lee stated that he would consider strengthening the responsibilities of financial companies and telecommunications firms regarding the introduction of a no-fault compensation system for voice phishing victims.
* This article has been translated by AI.
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