[4th In-Bank] 4th In-Bank Emphasizing 'Customer Differentiation and Innovative Regional Finance,' Outline to Emerge in Early Next Year

Financial Authorities Announce New Approval Criteria and Procedures for Internet-Only Banks
Focus on Funding Stability, Innovation, Inclusion, and Feasibility
Key to Innovative Business Models: 'Customer Segmentation + Regional Financial Contribution'
Preliminary Approval Results to Be Announced in First Half of Next Year... Final Approval Also Scheduled for Next Year

Financial authorities will accept preliminary license applications in the first quarter of next year according to the evaluation criteria established for the approval of the fourth internet-only bank, and announce the evaluation results within the first half of the year. Based on the performance of the existing three internet-only banks, the authorities plan to place greater emphasis on assessing the stability of funding, innovativeness of business plans, inclusiveness of business plans, and feasibility of business plans. Consortia that focus on areas where traditional financial sectors face difficulties in funding supply, and differentiate their regional financial funding plans targeting small and medium-sized enterprises (SMEs) and small business owners outside the metropolitan area, are expected to receive higher scores in the evaluation.

On the 28th, financial authorities announced the "Evaluation Criteria and Procedures for New Internet-Only Bank Licensing," which centers on these points. The new evaluation criteria maintain continuity with the previous internet-only bank licensing standards while reflecting the outcomes of internet-only bank implementation and the competitive assessment results of the financial industry, including the SME loan market.

First, to ensure that new internet-only banks can establish themselves stably in the market, the authorities decided to increase the score allocation for the "Capital and Funding Plan" evaluation item from 100 points to 150 points, thereby intensifying the assessment of funding stability. In particular, the funding capability of major shareholders will be a key focus of the evaluation. It will also assess whether major shareholders can maintain a certain level of shareholding through their own funds during the capital increase process after licensing.

Additionally, to prepare for cases where funding may be restricted due to sanctions on major shareholders, the authorities will require response plans and implementation guarantee measures. In response to concerns that payment commitment letters alone are insufficient to ensure implementation, funding plans for each major shareholder must also be explicitly stated.

A Financial Services Commission official explained, "Considering the capital levels of the existing three banks, we will thoroughly evaluate whether the new banks have sufficient capital strength and can establish themselves stably in the market. We will focus on the funding capability of major shareholders and verify the feasibility of funding plans based on the payment commitment letters submitted by major shareholders."

The score allocation for the inclusiveness of business plans will be increased from 150 points to 200 points, and evaluations of innovativeness and competition promotion in business plans will be strengthened. While maintaining assessments of support for low-income financial services and mid-interest rate loan supply, the authorities plan to enhance evaluations of business plans targeting differentiated customer groups. According to a recent competitive assessment of the financial loan market conducted by the authorities, competitive pressure in the SME and small business owner credit loan market is low, and financial supply is insufficient compared to demand in non-metropolitan regions. It is explained that new internet-only banks need to fulfill roles in areas where financial supply has been inadequate.

A Financial Services Commission official stated, "New internet-only banks need to play roles in areas where traditional financial sectors have not sufficiently supplied funds. We will evaluate the provision and feasibility of business plans targeting differentiated customer groups."

Whether the establishment of an "alternative credit evaluation model" to smoothly supply funds to key customer groups is in place will also be an evaluation item. The plan is to examine the innovativeness of the alternative credit evaluation model in connection with technologies and information held by major shareholders. Beyond alternative credit evaluation, strategic alliances with fintech (finance + technology) and data companies to create synergies such as innovative financial services will also be a key judgment criterion. Additionally, the evaluation will consider whether differentiated financial techniques can be used to provide services in areas where traditional financial sectors face difficulties in supplying funds.

Furthermore, financial authorities plan to closely examine the feasibility of business plans from the evaluation stage. When the existing three banks were evaluated for their mid- to low-credit borrower loan plans, qualitative assessments were conducted instead of evaluations based on clear criteria. As a result, there have been criticisms that mid- to low-credit borrower loan plans were not sufficiently realized and that alternative credit evaluation models were not implemented as expected.

In this evaluation, a technical evaluation subcommittee composed of experts will be newly established within the private external evaluation committee to review the validity and feasibility of business plans and the implementability of credit evaluation models. Moreover, if a bank fails to implement the submitted business plan after licensing, some banking operations will be restricted to enhance the implementation rate of business plans.

Meanwhile, financial authorities plan to accept preliminary license applications according to the new evaluation criteria in the first quarter of next year. The specific application schedule will be finalized after collecting opinions from prospective operators at a licensing briefing session scheduled for next month. After receiving preliminary license applications and undergoing external evaluation committee reviews, the preliminary license evaluation results will be announced within the first half of next year.

A Financial Services Commission official explained, "The actual number of licenses will be decided after evaluation. We will announce the preliminary license evaluation results within two months after receiving applications and then proceed with the final licensing process."