[4InBank] "Decision Made After Reviewing Number of New Approvals"

Q&A on New Licensing Criteria and Procedures for Internet-Only Banks

According to the "New Internet-Only Bank Licensing Criteria and Procedures" announced by the financial authorities on the 28th, applications for preliminary approval of the 4th internet-only bank will be accepted during the first quarter of next year. After receiving the preliminary approval applications, the authorities plan to announce the preliminary approval results in the first half of next year following evaluations by an external review committee.

The new internet-only bank licensing criteria maintain continuity with the existing criteria while considering the performance of internet-only banks introduced so far and the competitive landscape of related financial industries such as the SME loan market. The financial authorities plan to evaluate based on ▲stability of funding ▲innovation of business plans ▲inclusiveness of business plans ▲feasibility of business plans.

Below is a Q&A regarding the new internet-only bank licensing criteria and procedures.

What is the reason for promoting new internet-only bank licensing?

The new internet-only bank licensing is being promoted to encourage competition that the public can tangibly experience in terms of financial costs and services by introducing new players into the banking industry.

Unlike before, there is no mention of the number of licenses; how many new licenses are planned?

The actual number of licenses will be decided through the evaluation process. Licenses will be granted after strict examination of legal requirements focusing on sufficient capital strength, soundness, and innovative business plans.

What is the schedule for receiving preliminary approval applications? Will they be accepted all at once?

According to information confirmed through the media, several consortia are currently pursuing new internet-only bank licenses. Considering this, the preliminary approval process will proceed by accepting and reviewing applications collectively, as in previous rounds.

The specific schedule for application submission will be finalized and announced after gathering opinions from prospective applicants at a briefing session in December, with the expectation of receiving applications roughly during the first quarter of next year.

If a business operator receives preliminary approval, when is the expected timing for final approval and commencement of operations?

At present, the timing for final approval and commencement of operations is unknown. It may vary depending on the preliminary approval review period (within two months) and the preparation status of the business operator after preliminary approval.

What is the scope of major shareholders subject to focused evaluation of funding capability?

Basically, it refers to shareholders exceeding ownership limits under the Banking Act and the Internet-Only Bank Act.

You mentioned evaluating whether innovative business models are provided in areas where existing financial sectors face difficulties in revitalization. Specifically, which areas does this refer to?

It is necessary to be cautious about mentioning specific areas as it may influence the business plan concepts of new entrants. However, the new licensing is being promoted to encourage competition that the public can tangibly experience in terms of financial costs and services, and it is believed that providing new services that contribute to the development of the financial industry through differentiated financial techniques is necessary.

You mentioned evaluating whether innovative business models are provided in areas where existing financial sectors face difficulties in revitalization. Do you believe new internet-only banks can be revitalized?

Internet-only banks were introduced to enhance financial consumer benefits through innovation in financial services and competition by converging finance and ICT. Unlike commercial banks, entry barriers such as major shareholder regulations have been relaxed to promote the entry of innovative management entities including ICT companies. From this perspective, it is expected that new internet-only banks will provide diverse and creative business models to induce innovation in existing financial practices.

Will new internet-only banks be required to meet target ratios for loans to low- and medium-credit borrowers like the existing three banks?

In this evaluation, as before, plans for supporting low-income finance and supplying mid-interest loans will be assessed in terms of the inclusiveness of the business plan. However, the financial authorities have not set specific target ratios for loans to low- and medium-credit borrowers in previous evaluations, and the same approach will be taken this time by evaluating based on the business plans submitted by applicants.

Unlike the previous internet-only bank licensing, conditions for license approval related to non-fulfillment of business plans have been imposed. Isn't this excessive?

The existing three banks submitted advanced credit evaluation models combining financial and alternative information and plans for supplying funds to low- and medium-credit borrowers at the time of application. However, there was a lack of means to guarantee the effectiveness of the submitted business plans.

Therefore, imposing licensing conditions was considered as a means to ensure the implementation of the business plans submitted by applicants. However, the financial authorities are not setting related targets but aim to ensure that applicants implement their submitted business plans.

Why were the scoring weights for major shareholders, shareholder composition plans, personnel, and business facilities lowered?

Scoring was not assigned or was lowered for matters that must naturally meet legal requirements. However, even if no score is assigned, failure to meet these requirements may constitute grounds for disqualification from licensing.