As the single regulator for financial services activities in Malta, the Malta Financial Services Authority (MFSA) regulates and supervises Malta-based banks, financial institutions, investment funds and investment services providers, trust and insurance business and also houses the Malta Registry of Companies.
Maltese banks are subject to the provisions of the Banking Act (Chapter 371 of the laws of Malta), which is largely based on European legislation, as well as the various regulations and MFSA Banking Rules, Directives and Notices issued thereunder from time to time.
Credit Institutions/ Banks – Licensable Activity
The legal definition of the ‘business of banking’ is:
- the acceptance of deposits of money from the public (whether as principal or agent) withdrawable or repayable on demand or after a fixed period or after notice. This would generally be the case where an entity accepts deposits from the public as a regular feature of its business or if it advertises or solicits such deposits; or
- borrowing or raising money from the public (including the borrowing or raising of money by the issue of debentures or debenture stock or other instruments creating or acknowledging indebtedness) for the purpose of employing all or part of such money by lending to others or investing such money at its own risk.
In addition to the above-mentioned banking activities, Maltese banks may (with the authorisation of the MFSA) undertake any or all of the following activities:
- Financial leasing;
- Payment Services;
- Issuing and administering other means of payment (travellers’ cheques, bankers’ drafts and similar instruments);
- Guarantees and commitments;
- Trading for own account or for account of customers in: money market instruments; foreign exchange; financial futures and options; exchange and interest-rate instruments; transferable securities;
- Participation in securities issues and the provision of services related to such issues;
- Advice to undertakings on capital structure, industrial strategy and related questions and advice as well as services relating to mergers and the purchase of undertakings;
- Money broking;
- Portfolio management and advice;
- Safekeeping and administration of securities;
- Credit reference services;
- Safe custody services; and
- Issuing electronic money.
Malta Banking Licence Application
The minimum requirements for a Malta banking licence application to be considered by the MFSA are as follows:
- The applicant must have a minimum initial capital of five million Euro (€5,000,000);
- At least two competent individuals must direct the business of the bank in Malta;
- All shareholders, officers and senior managers must successfully undergo the MFSA’s ‘fit and proper’ and competence assessments in respect of the role/s which they are proposed to undertake within the bank;
- The applicant must show that the bank will ensure prudent conduct, integrity and professionalism and adequate flows of information in accordance with the relative MFSA rules;
- Where the promoter/s of the applicant bank is/are not authorised as a bank, either in Malta or in its/ their own country of domicile, the MFSA may require an active participation both by way of shareholding interest and/or management by an authorised credit institution or bank of repute.
At present, Maltese banks may be established in one of the following legal forms:
- Branches of foreign banks;
- Subsidiaries being legally independent entities, wholly or majority owned by a duly licensed bank which is incorporated either in Malta or in a foreign jurisdiction of repute;
- Joint ventures which are controlled by two or more parent entities where at least one such entity is duly licensed to undertake the business of banking.
As such, applicants for a Malta banking licence should assume that the participation by another regulated bank, by way of shareholding and active participation in the management of the proposed entity, is required at the outset.
Banks which are duly licensed in Malta may avail of ‘passporting’ rights in order to establish branches in other EU/ EEA member states, subject in all cases to the satisfaction of the corresponding prescribed procedure.