[한국핀테크포럼] 인터넷전문은행 발표 자료

Chan Park Partner, Corporate & M&A

www.molitorlegal.lu

Chan PARK, Partner

MOLITOR Avocats à la Cour

Internet-only bank, another way to expand your business in Europe

Examples, advantages and legal issues

Seoul, September 17, 2015

Agenda

1. Introduction about internet-only banks & examples in Europe

2. Advantages of establishing an internet-only bank in Luxembourg

3. Luxembourg legal and regulatory aspects

4. Take away

1. INTRODUCTION

1. Introduction about internet-only bank and examples in Europe

Characteristics of internet-only banks

Offer of services exclusively through the Internet

Also called “direct banks”

Only a corporate headquarter, no agency network, no direct contact with clients


Advantages of Internet-only banks

More and more popular with younger generations

No need to support a traditional banking

infrastructure

Higher interest rate on deposits, lower operating

charges, free credit cards

No need for the client to change banks should (s)he

relocate

Less time-limited access to customer support and

accounts

Potential Issues

Security issues (e.g., phishing (though not specific to

internet-only banks as more and more traditional

banks offer online services))

Limited ATM network (resolved through interbank

network alliances)

Obtaining foreign currency may require prior notice

Depositing cash and checks has to be done through

postal mail


5 Internet-only bank, another way to expand your business in Europe

History

Many direct banks in business around the world

2000

One of the first fully functional online-only bank in Asia (finatiQ)

1999

One of the first fully functional online-only bank in Europe (First-e)

1995

One of the first fully functional online-only bank in the USA (Security First Network Bank)

Appeared in the early 1990s



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ING Direct

Holvi

Advanzia Bank

Keytrade Bank Luxembourg

Specializing in euro high-interest

savings accounts and no-fee credit

cards. Caters primarily to

Luxembourgish and German clients.

Within its 1st year of operations, the

bank had become the largest

Luxembourgish issuer of credit cards.

Brand of ING Group for a branchless

direct bank with operations in Austria,

France, Germany, Italy, and Spain.

ING is based out of Amsterdam and

was the world’s largest banking/financial

conglomerate with gross receipts in

2012*.

Subsidiary from Belgium’s first

online only bank. It offers a savings

account and a term account for free

but also debit and credit cards.

Online broker, it offers access to

several markets : Euronext

Brussels, Paris and London Stock

Exchange…

Start-up founded in 2011 in Helsinki. Holvi is the world’s first European financial hub operating with its own Payment Institution License authorized for operations across Europe.

Europe Luxembourg


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• Operating in 20 European markets

• Invite-only system to slowly grow its offering

• Current account: no set up or monthly fees but charge €0.90/payment and 3% fee for credit card transactions

• Offers a number of integrated services aimed at small businesses, entrepreneurs, freelancers and sole traders

• finance management tools: real-time view of finances, management of expenses and invoices

• built-in online store for selling physical and virtual goods



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• Norway origin

• Operating in 3 European markets from Luxembourg with a Luxembourg banking license (Germany, Luxembourg and France)

• Fee-free deposit accounts (0.90% p.a.) with a minimum deposit of €5,000 and fee-free MasterCard Gold

• One of the largest credit card issuers in Germany



• Belgian origin

• Deposit accounts (0.40% p.a.) and term accounts

• Main product: discount online brokerage services with real-time access to main stock exchanges

• Keytrade is currently on sale!



2. ADVANTAGES OF LUXEMBOURG


• Market overview

Premier private banking center in the Eurozone and second largest fund center in the world – presence of more than 140 banks

Modern and flexible legal and regulatory framework based on consultation (ABBL) and regularly updated – light implementation of EU directives

Business and foreign investment friendly environment

Multicultural and multilingual work force - useful to act as EU hub

One banking application can cover all types of banking activities

Excellent infrastructure, rewarding tax environment, high quality of life

High skilled back-up activities (bookkeeping, transfer agency, technical management of deposit, etc.)



• Luxembourg supervisory authority (CSSF) will be the main supervisory authority:

Small and accessible regulator – easy interaction, short response time

Regularly deals with the opening of new banks

Business friendly approach – supervisory stance (to the extent of its possibility), conducts proceedings in English

• Governance:

No requirement to have a Luxembourg citizen as authorized manager

• Other perks:

Possibility to draft corporate documents and contracts in English only

Working with pdf copies for notary deeds (no notarization, no apostille)


3. LEGAL AND REGULATORY ASPECTS

Setting up of an internet-only bank in Luxembourg (generalities)

Essentially just a bank with a few particularities - requires the same

authorizations conditions and procedure as a traditional bank

Written authorization required from the Minister of Finance after approval of the

project by the ECB (European Central Bank)

The authorization can be granted for an unlimited period of time

This single banking authorization entitles the applicant to provide all activities of

a universal bank:

acceptance of deposit, credit financing, payment services, trading in foreign

exchange and money market instruments, intermediation on inter-banking markets

and investment activities (insurance excluded)



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Setting up of an internet-only bank in Luxembourg (in practice)

Have an introductory meeting with the CSSF to give a general overview of the project

Submit an application file to the CSSF and thereafter the Minister of Finance

containing at least the following information:

Presentation of the applicant together with financials statements for the last 3 years

Shareholder details

Administrative and accounting infrastructure details

Three year business plan

Draft articles of incorporation

CVs of authorized management

Name of Luxembourg entity’s external auditor

Internal governance and policies

IT operational model



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Conditions to be met according to the law of 1993 on the financial sector (part I)


Corporate form public limited company (société anonyme); or

corporate partnership limited by shares (société en commandite par

actions); or

cooperative company (société coopérative).

Share capital EUR 8,700,000.-

of which EUR 6,200,000.- must be fully paid up

Shareholders Number depends on the form of the company

Do not have to be financial institutions

Structure needs to be clear and the people “suitable”

Board of Managers At least 3 members in practice

Need professional standing and experience

No need for a Luxembourgish national person


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Conditions to be met according to the law of 1993 on the financial sector (part II)


Authorized

management

At least 2 people

Need professional standing and experience

Handle day-to-day management of the bank

Internal governance

and risk

management

Risk control function

Internal audit function

Compliance function

Deposit guarantee Participation of the bank in a deposit guarantee and investor-

compensation schemes;

Banks have to set aside reserves in order to be able to participate;

The amount to be set aside is proportional to the amounts of the

bank that are guaranteed and the total amounts guaranteed.


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Particularities of Internet-only banks

Because an internet-only bank has no direct, physical

contact with the clients, the CSSF requires increased

vigilance in three main areas:

Fight against money laundering

Internet relations require enhanced customer KYC due

diligence.

Risk monitoring

How the bank will monitor risk related to its activities

through internet

IT

As the online bank has no physical presence and

operates only online, the CSSF will pay increased

attention to the bank’s system’s level of security


Particularities of internet-only banks

Fight against money

laundering

IT Risk

monitoring


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• It notifies the CSSF of the activities it whishes to perform through an online form;

• The CSSF then communicates this information to the competent authority of the host member state within one month;

• The bank can start to provide its services in the host member state as from the date on which the CSSF transmitted this information to the competent authority of the host member state;

• No authorization from the host member state is required.

Quick and simple procedure to benefit from the European Passport (automatically granted with the Luxembourgish

authorization). The first time a bank wishes to carry on business within the territory of another member state in the

form of provision or services:

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Provision of services across the European Union



Differences between authorizations for banks, payment institutions and e-money institutions (1/2)

Banks Payment institutions E-money institutions

Differences in

conditions

• Reduced choice of legal

forms (S.A., S.C.A., S.C.)

• Highest requirement for

share capital (EUR 8,7 Mio)

• Approval of the project by

European Central Bank

necessary

• Lowest requirement for share capital

(between EUR 20K and EUR 125K

depending on the type of service

provided).

• Reduced choice of legal forms

(S.A., S.C.A., S.C.)

• Medium requirement for share

capital (EUR 350K)


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Differences between authorizations for banks, payment institutions and e-money institutions (2/2)

Banks Payment institutions E-money institutions

Authorized

activities

All banking activities (only

insurance is prohibited)

• Provision of operational and closely

related ancillary services to payment

services (such as ensuring the

execution of payment transactions,

foreign exchange services,

safekeeping activities, and the

storage, processing of data, and

operating payment systems)

• Reduced ability to grant credits

• Prohibition to take deposits or

other repayable funds from the

public

• Provision of operational

services and closely related

ancillary services to the issuing

of e-money service (such as

enabling cash to be placed or

withdrawn on a payment

account, operating a payment

account, execution of payment

transactions, issuing and/or

acquiring of payment

instruments and money

remittance).

• Reduced ability to grant credits

• Prohibition to take deposits

or other repayable funds

from the public

Passport Yes Yes Yes


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4. TAKE AWAY

4. Take away

1 • Luxembourg could be a strategic entry point of the European Union

2 • The supervisory authority is accessible

3 • The legal and regulatory framework is modern and business friendly

4 • The banking authorization could benefit from the European passport, which can be used throughout the

European Union

5 • Internet-only banks are very cost-efficient to operate

6 • There is no requirement that the shareholder be a financial institution

7 • Korean companies have an edge on internet related financial and security business


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Your Contact

Chan PARK

Partner, Corporate & M&A, Banking &

Finance

[email protected]

T +352 297 298 1

M +352 621 249 750

MOLITOR Avocats à la Cour

8, rue Sainte-Zithe, P.O. Box 690

L-2016 Luxembourg

T +352 297 298 1

F +352 297 299

www.molitorlegal.lu

mailto:[email protected]

mailto:[email protected]

Avocats à la Cour 8, rue Sainte-Zithe, P.O. Box 690 L-2016 Luxembourg T +352 297 298 1 F +352 297 299 www.molitorlegal.lu

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THANK YOU!

[한국핀테크포럼] 인터넷전문은행 발표 자료

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Transcript of [한국핀테크포럼] 인터넷전문은행 발표 자료