The Financial Services Commission has announced new guidelines allowing financial firms to utilise generative AI and cloud computing, aiming to enhance innovation while maintaining stringent security measures.
Financial Regulator Eases Restrictions to Boost Innovation in Financial Firms
In a significant move to enhance innovation within the financial sector, the Financial Services Commission (FSC) has announced that financial firms will now be permitted to utilise generative artificial intelligence (AI) and cloud computing technology, subject to stringent security measures. This update, declared on Tuesday, marks a shift from the stringent network regulations imposed since 2013, designed initially to avert hacking incidents.
Since September 2013, financial institutions were mandated to maintain their networks isolated from the internet, a precautionary measure aimed at safeguarding against cyber threats. While effective in mitigating hacking attempts, this policy has faced criticism for stifling work efficiency and hindering the development of innovative financial products that leverage advanced technologies.
“Especially, network separation is being named a cause of a decline in the country’s financial competitiveness as the software market is quickly transitioning from on-premise service to cloud computing-based Software as a Service (SaaS), while the use of generative AI is changing the future of industries,” the FSC stated in its press release.
Presently, the scope for financial firms to deploy AI or cloud computing technologies is vastly limited, predominantly confined to back-office functions. However, the FSC’s new guidelines will enable these firms to connect to the internet to harness such technologies, provided they implement robust security measures and acquire validation from relevant bodies like the Financial Supervisory Service.
Moreover, the guidelines allow the usage of cloud computing for certain essential front-office operations, such as customer relationship management (CRM), following appropriate security protocols. This regulatory adjustment is anticipated to come into effect by the end of the current year.
FSC Chief Kim Byoung-hwan, addressing a meeting with associated agencies and industry leaders, stated, “We are at a point where we need to improve network separation rules to better adapt to the quickly changing IT environment around cloud computing and generative AI. The proposed roadmap to improve network separation rules will lead to the enhanced competitiveness of the financial industry and also increased use of services by financial consumers.”
This strategic transition highlights the FSC’s recognition of the need to align regulatory frameworks with rapid advancements in information technology, ensuring that financial firms remain competitive in a landscape increasingly dominated by cloud-based solutions and sophisticated AI applications. As financial firms prepare to adopt these innovative technologies, the emphasis on maintaining high security standards remains paramount to protect against potential cyber threats.
