KOR

Research Staff

Research Staff

Lee, Hyo Seob Senior Research Fellow, Head of Financial Services Industry
Secretary General, Secretariat of Seoul IB Forum
Research Field

Profile

TEL
82-2-3771-0650
E-mail
hslee@kcmi.re.kr
Education
Ph.D. in Finance, KAIST Business School
B.A. in Mathematics(double major in Computer ScienceEngineering), POSTECH
Professional Experience
Korea Capital Market Institute(2010.6~present)
- Senior Research Fellows
- Research Areas: Financial Economics, Asset Management, Derivatives
Visiting Scholar at San Diego State University(2018.1~2018.12)
- Finance Department
KAIST Business School(2010.9~2011.12)
- Visiting Professor of MBA Program
KAIST Student Investment Fund(2008.3~2010.2)
- Managing Fellow
Penta Security Systems(2000.12~2004.5)
- Computer Programmer, work for military service

Publications

Opinion

How the Proliferation of Generative AI is Reshaping the Financial Services Industry and Future Challenges / Jul. 09, 2024
As the financial services industry increasingly integrates generative AI, it is expected to enhance the allocation of resources and risk diversification among economic agents. This integration will likely foster the convergence of financial and non-financial sectors and drive the emergence of innovative industries. Global financial services companies are aggressively adopting generative AI to boost internal operational efficiency, enhance customer consultation capabilities, and expand their innovative financial services. In contrast, their Korean counterparts encounter challenges such as limited digital capabilities and stringent regulatory constraints, resulting in a slower adoption of generative AI. Meanwhile, the widespread use of generative AI raises concerns about information leakage and data illusion and misuse. Notably, the utilization of generative AI by financial services companies may disrupt financial stability, harm consumer protection, and expose them to legal risks, including intellectual property infringement.In Korea, the regulatory framework should be overhauled to enable financial services companies to expand generative AI-driven innovative services and mitigate financial risks associated with generative AI. First, financial services companies in Korea should be encouraged to increase investments in generative AI-related talent and infrastructure. Second, it is necessary to revise the network separation regulations, which currently hinder the utilization of generative AI, facilitate the integration of heterogeneous data, alleviate restrictions on subsidiaries’ ownership, and expand the scope of ancillary business activities. Lastly, the Financial Regulatory Sandbox and the AI Guidelines for the Financial Sector should be enhanced to systematically manage financial risks stemming from the use of generative AI.
Implications of Japan’s “New Form of Capitalism Realization” Policy for the Korean Landscape / Jan. 16, 2024
With the inauguration of Japan’s Kishida Cabinet, the “New Form of Capitalism Realization” policy was introduced to address structural issues, including wage stagnation, low fertility rates, and widening income inequality. The financial industry-related initiatives of the policy include improving corporate governance, increasing household income, fostering startups, and advancing both green transformation (GX) and digital transformation (DX). Despite its relatively short implementation period, the Kishida administration’s policy has yielded positive results, well demonstrated by the recent surge in Japanese stock indices, the escape from the deflationary trend, and the upward revision of economic growth prospects. Given Korea’s challenges of low growth, declining fertility rates, and population aging, it is crucial for the Korean government to actively examine the “New Form of Capitalism Realization” policy and incorporate some policy measures into the Korean system. First, Korea should draw reference from Japan Exchange Group (JPX)’s improvement in corporate governance and urge listed companies to make efforts toward profitability and growth. Second, it is essential to substantially expand tax benefits for individual savings accounts (ISAs) and personal pension plans and facilitate the utilization of trust instruments designed for addressing low fertility rates, thereby increasing household income. Third, Korea needs to foster top talent to bolster competitiveness in transition finance and digital finance, while providing active support for the launch of startups, particularly in key areas such as carbon footprint reduction and artificial intelligence (AI).
Challenges for Eradicating OTC Derivatives-based Illegal Transactions / May. 30, 2023
In the aftermath of the SG Securities scandal, some argue that CFDs should be removed from the market. CFDs are OTC derivatives based on private contracts. If investment in CFDs is prohibited, investors may flock to new types of OTC derivatives, such as TRSs and new margin trading, which could cause a more serious problem. As Korea has tightened the regulation on OTC derivatives’ market entry since 2010, investors tend to herd toward speculative financial instruments by increasing their exposure to high-risk instruments such as virtual assets, FX margins, overseas leveraged products, and CFDs. It is noteworthy that eliminating the CFD from the market has limitations in preventing the SG Securities scandal and fundamental regulatory improvements are needed to eradicate a range of unfair trade practices involving OTC derivatives. First, transparency in OTC derivatives trading should be enhanced through the reform of the KRX trade repository (TR) reporting system and the Suspicious Transaction Report (STR). Second, the market surveillance system should be upgraded to swiftly detect and investigate new types of unfair trade practices using OTC derivatives in advance. It is also necessary to expand the personal information disclosure for criminals and restrict their participation in the capital market in order to wipe out unfair trading. Third, the financial authorities should prohibit financial services firms from inducing investors to register as individual professional investors to recommend high-risk OTC derivatives, with the aim of preventing potential mis-selling. In addition, the duty of explanation should be imposed on financial services firms that recommend OTC derivatives for individual professional investors. Fourth, the financial authorities should actively induce financial services firms to overhaul the internal control and the compensation system to improve their sales behavior of recommending high-risk financial instruments with high sales fees attached to boost short-term performance.
Real Estate Shadow Banking: Risk Assessment and Countermeasures / Mar. 07, 2023
Shadow banking for Korea’s real estate sector is expanding at a rapid pace, which raises concerns about systemic risk. Real estate shadow banking represents a greater presence in Korea relative to the size of its economy, is highly connected with the capital market and entails a high level of complexity. Compared to other non-bank financial institutions, small-to-medium-size firms tend to engage in real estate shadow banking more actively, potentially resulting in a string of losses in the entire sector. Korea’s real estate shadow banking has long, complicated financing intermediation channels and uses high leverage. Accordingly, the insolvency in real estate shadow banking could not only spread across financial institutions but also bring about a slowdown in the real economy, which requires caution. Against this backdrop, Korea’s financial authorities need to consider shadow banking regulations implemented by international financial supervisory organizations. Based on such regulations, they should curb the rapid growth of real estate shadow banking, strengthen information transparency criteria, and conduct stress tests on a regular basis, aiming for stepping up risk management for real estate shadow banking.

Seminar Presentation

관련 세미나 이미지
2019 Oct 02
Digital Innovation Challenges for Korea’s Financial Investment Services Industry
  • Presenter Senior Research Fellow Lee, Hyo Seob
관련 세미나 이미지
2016 Jan 20
Derivatives Market Outlook and Key Issues (Korean)
  • Presenter Senior Research Fellow Lee, Hyo Seob
관련 세미나 이미지
2014 Jan 15
Capital Market Trends and Outlook: Derivatives Market (Korean)
  • Presenter Senior Research Fellow Lee, Hyo Seob