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ACT ON SPECIAL CASES CONCERNING ESTABLISHMENT AND OPERATION OF INTERNET-ONLY BANKS

Act No. 15856, Oct. 16, 2018

Amended by Act No. 17294, May 19, 2020

CHAPTER I GENERAL PROVISIONS
 Article 1 (Purpose)
The purpose of this Act is to promote financial innovation and sound competition in the banking business and enhance convenience of financial consumers, thereby contributing to sound development of the financial industry and national economy, by means of providing for special cases on an internet-only bank in which finance and information and communications technology are merged.
 Article 2 (Definition)
The term “internet-only bank” in this Act means a bank which conducts the banking business mainly by means of electronic financial transactions (referring to transactions defined in subparagraph 1 of Article 2 of the Electronic Financial Transactions Act; hereinafter the same shall apply).
 Article 3 (Relationship to Other Statutes)
(1) Except as otherwise provided for in this Act, an internet-only bank shall be governed by the Banking Act.
(2) In interpreting and applying other statutes, except for this Act and the Banking Act, an internet-only bank under this Act shall be deemed a bank established with authorization under the Banking Act.
CHAPTER II ESTABLISHMENT OF INTERNET-ONLY BANK
 Article 4 (Special Cases of Minimum Capital)
(1) Notwithstanding the main sentence of Article 8 (2) 1 of the Banking Act, capital of an internet-only bank may be at least 25 billion won.
(2) An internet-only bank shall maintain the capital under paragraph (1) in conducting the banking business.
 Article 5 (Special Cases of Limits on Stockholding by Non-Financial Investor)
(1) Notwithstanding Article 16-2 (1) and (2) of the Banking Act, a non-financial investor may hold not more than 34/100 of the total outstanding voting stocks of an internet-only bank.
(2) In cases falling under paragraph (1), Article 15, 16, 16-4, or 65-9 of the Banking Act shall apply: Provided, That notwithstanding the qualifications of a person who can hold stocks of a bank and requirements for approval related to holding of stocks thereof in accordance with Article 15 (5) of the Banking Act, the qualifications of a non-financial investor who can hold stocks of an internet-only bank, exceeding the limits specified in the main sentence of Article 15 (3) of the Banking Act, and requirements for approval related to holding of stocks thereof shall be determined in the attached Table in consideration of the following:
1. Investment capability, financial status, and social credibility;
2. Effect on concentration of economic power;
3. Appropriateness of a plan for shareholder composition;
4. Asset ratio of companies which engage in information and communications business;
5. Contribution plan for promotion of convergence between finance and information and communications technology, microfinance support, etc.
(3) Where the Financial Services Commission examines a person holding stocks of an internet-only bank pursuant to paragraph (1) for excess holding requirements, etc. pursuant to Article 16-4 (1) of the Banking Act, it shall examine the requirements determined in the attached Table under paragraph (2).
CHAPTER III MAINTENANCE OF SOUND MANAGEMENT
 Article 6 (Scope of Business of Internet-Only Bank)
Notwithstanding Articles 27 and 27-2 (1) of the Banking Act, an internet-only bank may not provide credit to a corporation: Provided, That this shall not apply to credit granting to small and medium businesses pursuant to Article 2 (1) of the Framework Act on Small and Medium Enterprises.
 Article 7 (Credit Granting Limit on Same Borrowers)
(1) Notwithstanding the main sentence of Article 35 (1) of the Banking Act, an internet-only bank may not grant credit exceeding 20/100 of the equity capital of such internet-only bank to the same borrowers (referring to the same borrowers pursuant to the main sentence of Article 35 (1) of the Banking Act; hereinafter the same shall apply): Provided, That the foregoing shall not apply to cases falling under any of the following, as prescribed by Presidential Decree:
1. Where it is necessary for the national economy or for an internet-only bank to promote effectiveness in securing claims;
2. Where an internet-only bank exceeds the limit specified in the main sentence due to changes in its equity capital or changes in the composition of the same borrowers although it did not grant further credit.
(2) Notwithstanding the main sentence of Article 35 (3) of the Banking Act, an internet-only bank may not grant credit exceeding 15/100 of its equity capital to the same borrowers or corporations: Provided, That this shall not apply to the cases falling under the proviso to paragraph (1).
(3) Where an internet-only bank exceeds the limit specified in the main sentence of paragraph (1) or (2), as prescribe in paragraph (1) 2, it shall ensure that it meets the limit prescribed in the main sentence of paragraph (1) or (2) within one year from the date on which it exceeds such limit: Provided, That in cases of extenuating circumstances prescribed by Presidential Decree, the Financial Services Commission may extend it by setting such period.
 Article 8 (Prohibition against Credit Granting to Large Shareholders)
(1) Notwithstanding Article 35-2 (1) of the Banking Act, an internet-only bank shall not grant credit to its large shareholders (referring to large shareholders under Article 35-2 (1) of the Banking Act; hereafter the same shall apply in this Article): Provided, That this shall not apply where credit granted to a person not a large shareholder becomes credit granted to a large shareholder due to corporate merger, business transfer, change in the constitution of the same borrowers, etc. and where other extenuating circumstances exist as prescribed by Presidential Decree.
(2) No internet-only bank shall make an exchange with other banks to grant credit to circumvent the prohibition against credit granting pursuant to paragraph (1).
(3) No internet-only bank shall gratuitously transfer its assets to its large shareholders, or trade its assets under substantially unfavorable conditions compared with ordinary terms and conditions of transactions.
(4) Where an internet-only bank grants credit pursuant to the proviso of paragraph (1), it shall settle such credit within one year from the date of credit granting: Provided, That in cases falling under extenuating circumstances prescribed by Presidential Decree, the Financial Services Commission may extend it by setting such period.
 Article 9 (Prohibition of Acquisition of Equity Securities Issued by Large Shareholders)
(1) Notwithstanding the main sentence of Article 35-3 (1) of the Banking Act, an internet-only bank shall not acquire equity securities (referring to equity securities under Article 4 (4) of the Financial Investment Services and Capital Markets Act; hereafter the same shall apply in this Article) issued by its large shareholders (referring to large shareholders under the main sentence of Article 35-3 (1) of the Banking Act; hereinafter the same shall apply): Provided, That this shall not apply where it is necessary to exercise a right such as a security right or whether other extenuating circumstances exist as prescribed by Presidential Decree.
(2) Where an internet-only bank acquires equity securities issued by large shareholders pursuant to the proviso of paragraph (1), it shall dispose of the equity securities within one year from the date on which such equity securities are acquired: Provided, That in cases falling under extenuating circumstances prescribed by Presidential Decree, the Financial Services Commission may extend it by setting such period.
 Article 10 (Prohibition on Exercise of Unfair Influence by Large Shareholders)
No large shareholders of an internet-only bank shall perform any of the following acts, contrary to the internet-only bank's interests:
1. Requesting the internet-only bank to present its internal data or information not yet disclosed to the general public: Provided, That this shall not apply to the exercise of rights under Article 33 (6) of the Act on Corporate Governance of Financial Companies and Article 466 of the Commercial Act;
2. Exercising unfair influence over personnel affairs or management of the internet-only bank in collusion with another shareholder on condition of providing any such consideration as economic gains, etc.;
3. Exercising influence over the management of the internet-only bank, such as requesting it to make the early recovery of credit from a rival company in regard to the business activities of the rival company;
4. Obtaining credit from the internet-only bank by causing it to violate Article 8 (1);
5. Obtaining credit from another bank by causing the internet-only bank to violate Article 8 (2);
6. Causing the internet-only bank to violate Article 8 (3) to gratuitously transfer its asset to or trade the asset with a large shareholder;
7. Causing the internet-only bank to violate Article 9 (1) to acquire equity securities issued by a large shareholder.
CHAPTER IV SUPERVISION AND INSPECTIONS
 Article 11 (Requests for Data from Large Shareholders)
Where an internet-only bank or its large shareholder is suspected of violating Articles 8 through 10, the Financial Services Commission may request the internet-only bank or its shareholder to submit necessary data.
 Article 12 (Inspection of Large Shareholders)
(1) Where a large shareholder of an internet-only bank is suspected of violating Article 10, the Financial Services Commission may inspect the affairs and property status of the large shareholder to a minimum extent necessary for such purpose.
(2) Article 48 (2) through (4) of the Banking Act shall apply mutatis mutandis to inspections conducted under paragraph (1).
 Article 13 (Sanctions against Internet-Only Banks)
(1) Where an internet-only bank is deemed likely to undermine soundness in its management in violation of this Act or any regulation, order or instruction under this Act, the Financial Services Commission may take either of the following measures on the recommendation of the Governor of the Financial Supervisory Service or may authorize the Governor of the Financial Supervisory Service to take appropriate measures, such as issuing an order to cease the relevant violation or giving a warning:
1. A corrective order for the relevant violation;
2. Partial suspension of business for not more than six months.
(2) If an internet-only bank falls under any of the following subparagraphs, the Financial Services Commission may order the bank to suspend its business completely for not more than six months or may revoke authorization for the banking business:
1. Where it fails to comply with a corrective order issued under paragraph (1) 1;
2. Where the interests of depositors or investors are likely to be significantly undermined in violation of this Act or any order or dispositions issued under this Act, except for cases falling under subparagraph 1.
(3) An internet-only bank shall be dissolved when its authorization for banking business is revoked pursuant to paragraph (2).
 Article 14 (Sanctions against Executive Officers and Employees)
(1) Where an executive officer of an internet-only bank willfully violates this Act or any regulation, order, or instruction under this Act, the Financial Services Commission may, upon the recommendation of the Governor of the Financial Supervisory Service, order the executive officer to suspend the execution of his or her functions or recommend that the executive officer be dismissed through the general meeting of shareholders and may have the Governor of the Financial Supervisory Service take an appropriate measure, such as giving a warning.
(2) Where any employee of an internet-only bank willfully violates this Act or any regulation, order, or instruction under this Act, the Governor of the Financial Supervisory Service may require the head of the internet-only bank to take any appropriate disciplinary measure, such as dismissal or suspension from office, deduction of salary, or reprimand.
 Article 15 (Notification of Details of Measures on Retired Executive Officers)
(1) Where deemed that a retired executive officer or resigned employee of an internet-only bank would have received a measure under Article 14 (1) or (2) if he or she had held office or had been in office, the Financial Services Commission (including the Governor of the Financial Supervisory Service, who may take a measure under Article 14 (1) or require any disciplinary measure under Article 14 (2)) may notify the head of the relevant bank of the details of the measure.
(2) The head of the bank in receipt of notification under paragraph (1) shall notify the relevant retired executive officer or resigned employee thereof and shall record and preserve the details thereof.
CHAPTER V SUPPLEMENTARY PROVISIONS
 Article 16 (Protection and Convenience Enhancement of Financial Consumers)
Notwithstanding Article 2, where it is deemed essential for the protection of users of an internet-only bank and the enhancement of their convenience, the bank may conduct the banking business by means prescribed by Presidential Decree. In such cases, the bank shall report in advance the content, method, scope, etc. of the business to the Financial Services Commission, as prescribed by Presidential Decree.
 Article 17 (Special Cases concerning Public Disclosure)
An internet-only bank may substitute the obligation of keeping or posting documents or making them available for perusal at the statutory head office, branches or agencies with public disclosure of relevant documents by electronic means through the website, etc.
 Article 18 (Special Cases concerning Documents)
Notwithstanding other statutes and regulations, in providing services prescribed in Articles 27, 27-2 and 28 of the Banking Act, an internet-only bank may substitute the submission, provision, and receipt of documents in accordance with relevant statutes and regulations with the submission, provision, and receipt of electronic documents defined in Article 2 (1) of the Framework Act on Electronic Documents and Transactions, and matters to be stated in handwriting according to relevant statutes and regulations may be substituted with verifying such matters by means of digital signature defined in subparagraph 2 of Article 2 of the Digital Signature Act or by means of tape-recording.
 Article 19 (Entrustment of Authority)
The Financial Services Commission may entrust part of its authority under this Act to the Governor of the Financial Supervisory Service, as prescribed by Presidential Decree.
CHAPTER VI IMPOSITION AND COLLECTION OF PENALTY SURCHARGES
 Article 20 (Penalty Surcharges)
Where an internet-only bank violates Article 6, 7, 8 or 9 or its large shareholder violates Article 10, the Financial Services Commission may impose penalty surcharges according to the following classification:
1. Where credit is granted in violation of Article 6: Not more than 5/100 of the amount of relevant credit granted;
2. Where exceeding the credit granting limit under Article 7 (1) or (2): Not more than 30/100 of the amount of credit granted in excess;
3. Where credit is granted in violation of Article 8 (1): Not more than the amount of relevant credit granted;
4. Where assets are gratuitously transferred, or traded under substantially unfavorable conditions, in violation of Article 8 (3): Not more than the book values of the relevant assets or the amount of the relevant trade;
5. Where equity securities issued by large shareholders are acquired in violation of Article 9 (1): Not more than the aggregate of the book values of the equity securities acquired;
6. Where a large shareholder violates Article 10 and thus the internet-only bank grants credit in violation of Article 8 (1): Not more than the amount of credit granted;
7. Where a large shareholder violates Article 10 and thus the assets of the internet-only bank are gratuitously transferred, or traded under significantly unfavorable conditions, in violation of Article 8 (3): Not more than the book values of the relevant assets or the amount of the relevant trade;
8. Where a large shareholder violates Article 10 and thus the internet-only bank acquires equity securities issued by the large shareholder in violation of Article 9 (1): Not more than the aggregate of the book values of the equity securities acquired.
CHAPTER VII PENALTY PROVISIONS
 Article 21 (Penalty Provisions)
(1) Any of the following persons shall be punished by imprisonment with labor for not more than 10 years, or by a fine not exceeding 500 million won:
1. A person who grants credit to or trades with a large shareholder in violation of Article 8, and a large shareholder who is granted credit by or trades with him or her;
2. A person who acquires equity securities issued by a large shareholder, in violation of Article 9 (1);
3. A person who violates Article 10.
(2) Any person who grants credit in violation of Article 7 (1) or (2) shall be punished by imprisonment with labor for not more than three years, or by a fine not exceeding 100 million won.
(3) Any person who grants credit to a juristic person in violation of Article 6 shall be punished by imprisonment with labor for not more than one year, or by a fine not exceeding 30 million won.
 Article 22 (Joint Penalty Provisions)
Where the representative of a corporation, or an agent or employee of or any other person employed by the corporation or an individual commits any violation described in Article 21 in connection with the business of the corporation or individual, not only shall such violator be punished, but the corporation or individual shall also be punished by a fine prescribed in that Article: Provided, That this shall not apply where the corporation or individual has not neglected to pay due attention to and supervision over the relevant business in order to prevent such violation.
 Article 23 (Administrative Fines)
(1) Any of the following persons shall be subject to an administrative fines not exceeding 100 million won:
1. A person who fails to comply with the request for data submission under Article 11;
2. A person who refuses, obstructs, or evades an inspection conducted under Article 12 (1).
(2) The Financial Services Commission shall impose and collect administrative fines under paragraph (1), as prescribed by Presidential Decree.
ADDENDA <Act No. 15856, Oct. 16, 2018>
Article 1 (Enforcement Date)
This Act shall take into effect three months after the date of its promulgation.
Article 2 (Transitional Measures)
A bank that the Financial Services Commission authorizes in accordance with the Banking Act on condition that the bank conducts the banking business by means of electronic financial transactions before this Act enters into force shall be deemed an internet-only bank.
Article 3 (Transitional Measures concerning Credit Granting to Same Borrowers)
An internet-only bank which grants credit in excess of the limit under Article 7 at the time this Act enters into force shall ensure that it complies with Article 7 within one year from the date this Act enters into force: Provided, That the Financial Services Commission may extend the period where it is deemed essential in consideration of the size, etc. of credit granted to the same borrowers of the internet-only bank.
Article 4 (Transitional Measures concerning Credit Granting to Large Shareholders)
An internet-only bank granting credit which is prohibited under Article 8 as at the time this Act enters into force shall ensure that it complies with Article 8 within one year from the date this Act enters into force: Provided, That the Financial Services Commission may extend the period where deemed essential in consideration of the size, etc. of credit granted to the large shareholders of the internet-only bank.
Article 5 (Transitional Measures concerning Equity Securities Issued by Large Shareholders)
An internet-only bank holding equity securities which are prohibited for acquisition under Article 9 as at the time this Act enters into force shall dispose of the equity securities: Provided, That the Financial Services Commission may extend the period where it is deemed essential in consideration of the size, etc. of equity securities issued by large shareholders of the internet-only bank.
Article 6 (Relationship to Other Statutes or Regulations)
A citation in a statute or regulation to a bank under the Banking Act or a bank authorized under the Banking Act as at the time this Act enters into force shall be deemed to include a citation to an internet-only bank under this Act.
ADDENDUM <Act No. 17294, May 19, 2020>
This Act shall enter into force on the date of its promulgation.