Security AI Network Separation Regulations to Be Eased for Savings Banks and Electronic Financial Service Providers

One Company Chosen From Each of Seven Financial Sectors, With Additional Picks Likely
Second Round Expected to Include Low Teens in Total
Financial Sector Bolsters Defenses Against Cyber Threats
Attention on Whether KB Kookmin Bank Succeeds in Its Second Attempt

Financial regulators are set to ease network separation regulations for the use of artificial intelligence (AI) for security purposes, expanding eligibility to savings banks and electronic financial service providers. The relaxation of these regulations, which previously centered on large financial institutions such as banks, securities, and insurance firms, will now be extended to the broader financial industry and fintech companies. The aim is to accelerate the adoption of security-focused AI solutions within the financial sector and respond to increasingly sophisticated cyber threats.

According to financial industry sources on August 31, the Financial Services Commission plans to announce the second round of companies eligible for eased network separation regulations for AI-based security next month. One company will be selected from each of the seven financial sectors (banking, securities, life insurance, non-life insurance, savings banks, card companies, and non-card specialized credit finance companies), with an additional three to five companies to be chosen following expert review. As a result, the number of companies selected in the second round is expected to slightly increase, reaching the low teens, compared to ten in the first round.

The core of this second selection round is the expansion of eligible companies. While the first round focused on large financial institutions, this time savings banks and non-card specialized credit finance companies, which were previously excluded, will be newly included, and electronic financial service providers are also expected to be eligible for regulatory easing. This means the use of security-focused AI, which began with large institutions, will now expand to smaller financial companies and across financial platforms.

Within the savings bank sector, major players such as SBI Savings Bank, OK Savings Bank, and Welcome Savings Bank are being discussed as potential candidates. However, in the case of Welcome Savings Bank, some observers note that a security incident involving an affiliate of Welcome Financial Group last year could influence the selection process. Attention is also focused on whether electronic payment companies such as Naver Pay, Kakao Pay, and Toss Pay will be included among those granted regulatory relief for network separation.

Companies selected for eased network separation regulations will be able to utilize high-performance external AI to identify security vulnerabilities or adopt security solution-type application software (SaaS) to build defensive systems. Financial authorities have, to date, maintained the separation between internal work networks and external networks to prevent hacking and information leaks. However, with AI technology advancing rapidly, some have argued that network separation actually restricts the use of the latest security technologies.

In May, the Financial Services Commission eased network separation regulations for AI-based security purposes and selected ten companies in the first round: Shinhan Bank, Hana Bank, Woori Bank, KakaoBank, KB Securities, NH Investment & Securities, Mirae Asset Securities, Samsung Fire & Marine Insurance, Hanwha Life, and Hyundai Card. At that time, eligibility was restricted to 49 financial institutions with total assets of at least 10 trillion won and at least 1,000 full-time employees, each with a dedicated chief information security officer (CISO). To prevent overrepresentation from any particular financial or securities holding company, selections were evenly distributed. The selected companies receive eased network separation regulations for a period of one year.

Another point of interest is whether KB Kookmin Bank will succeed in its “second attempt.” While KB Securities was chosen from KB Financial Group in the first round, KB Kookmin Bank was the only one among the four major commercial banks not to make the list. With Shinhan, Hana, and Woori Banks selected, along with the online-only KakaoBank, industry observers noted that this left KB Kookmin Bank in an awkward position. As Yang Jonghee, Chairman of KB Financial Group, is focusing on strengthening AI and digital competitiveness, there is heightened interest in whether KB Kookmin Bank, a core affiliate, will be included this time.

Within the financial sector, there are calls for even more proactive relaxation of the network separation regulations, arguing that small and medium-sized financial institutions, which have less internal security personnel and investment capability than large financial firms, have a greater need to bolster their security capabilities using external AI at lower cost.

A financial industry insider stated, “Recently, hackers have been rapidly advancing their attack methods by leveraging AI. For companies with a certain level of security capability, regulations on network separation should be relaxed more boldly so that financial firms can strengthen both their security response capacity and their capacity for financial innovation.”

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