South Korea's Financial Services Commission has granted preliminary approval for the setting-up of two consortia to set up Internet-only banks.

The two consortia - one led by Kakao and the other by KT Corp - were chosen out of three bidders. The FSC unveiled its plan to support the setting-up of such banks in June.

Under the Banking Act, the FSC has given out preliminary licenses on two conditions: that the two consortia must "operate their banking business in the form of electronic financial transaction business" (the definition of which dwells heavily on the non-face-to-face nature of the user's interaction with the business, which might create money-laundering problems); and that they must meet various criteria regarding manpower, organisation and electronic facilities before applying for the final licences.

The South Korean National Assembly is in the process of revising the Banking Act to ease regulations in respect of minimum equity capital and ownership for Internet-only banks. Assuming that this law is passed, the FSC will issue the final licenses under that.

Kakao Bank is owned by: Korea Investment Holdings (50%); Kakao (10%, with a 4% exercisable shareholder right); Kookmin Bank (10%) and others.

K Bank is owned by: Woori Bank (10%); GS Retail (10%); Hanhwa Life (10%); Danal (10%); KT (8%) and others.