The Korean financial authorities have decided to relax network separation regulations for foreign financial companies that have their branches in Korea and computing systems in their main offices abroad. The reason is that it is not easy for them to adopt physical network separation in Korea. Most Korean banks, in the meantime, have already completed the separation between their intranets and the Internet.
The Financial Supervisory Service and the Financial Services Commission are currently discussing how to revise the relevant regulations to this end. A revised plan is scheduled to be made available early next month. Regulations on Korean financial institutions’ email and groupware servers are expected to be relaxed, too.
“There seems to be no problem even after the deregulation, because the beneficiaries, such as HSBC and JP Morgan, are smaller in size and have different target customers than major Korean banks,” said an industry source, adding, “Without the deregulation, foreign banks have to set up new servers in Korea at a huge cost, which means physical network separation is practically impossible for them.” Standard Chartered Korea and Citibank Korea do not benefit from the deregulations, though.
The Financial Services Commission has moved ahead with financial network separation since 2013, when five commercial banks’ computing systems were paralyzed on March 20. Domestic financial companies completed network separation last year, and banks have to do so by the end of this year. The deadline is the end of next year for non-bank entities.