Banks in Malta are regulated by the Banking Act, 1994 (hereinafter referred to as the ‘Act’) together with the Banking Rules provided by the Malta Financial Services Authority (hereinafter referred to as ‘MFSA’), which are binding on licence holders.
The business of banking is defined in the Act as the business of a person who accepts deposits of money from the public withdrawable or repayable on demand or after a fixed period or after notice, or who borrows or raises 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), in either case for the purpose of employing such money in whole or in part by lending to otherwise or otherwise investing the account and at the risk of the person accepting such money. A person is deemed to be accepting deposits of money if he accepts from the public deposits as a regular feature of his business or if he advertises or solicits for such deposits.
Application for a Licence
Any company that wishes to commence the business of banking in Malta to become a ‘Credit Institution’ shall apply in writing to MFSA for a licence to be issued in accordance with the Act. Such company will only be granted a licence if:
(a) Its initial capital amounts to not less than five million Euro (€5,000,000);
(b) There shall be at least two individuals to direct the business of the Credit Institution in Malta;
(c) All qualifying shareholders, controllers and all persons who shall effectively direct the businesstion to a body corporate, unincorporated body or association formed in accordance with or existing under the laws of a foreign country, premises in Malta from which the business of banking is promoted or assisted in any way, and in relation to a body corporate, unincorporated body or association formed in accordance with and existing under the laws of Malta, premises outside of Malta from which the business of banking is promoted or assisted in any way.
In order for a company, which is licensed or holding an equivalent authorisation in another country outside Malta, which carries on the business of banking to establish a representative office in Malta, it shall give the MFSA at least a 2-month notice of its proposition to establish such an office, providing that the MFSA does not object to setting up such office in Malta. The business of a representative office shall only be authorised to conduct purely liaison activities which do not include engaging in financial transactions or executing documents relative thereto, except in the case of necessity for and incidental to the maintenance of the office in Malta.
Branch in Malta
Maltese banks enjoy passport rights to open branches in EEA states. The Credit Institution would be required to inform MFSA in writing prior to opening a new branch, agency or office in Malta. Unless MFSA give their written consent, a Credit Institution shall be prohibited from opening a branch, agency or office or set up or acquire any subsidiary in any place outside of Malta. A Credit Institution shall be further prohibited from opening a branch, subsidiary or representative office in a third country where the secrecy laws or other regulations of the tat country prohibit information flows deemed necessary for adequate consolidated supervision.
Co-operation and Sharing of Information
Malta has certain international commitments and in view of these, the MFSA may share its supervisory duties with overseas regulatory authorities in the event of a Credit Institution or branch operating in Malta which is fully or partly owned by a foreign person or in the case of a Credit Institution fully or partly owned by Maltese residents which is operating overseas.
In granting a banking licence, the MFSA may, subject to any other law regulating such activity, authorise an institution to further carry out all or any of the additional activities listed below. The carrying out of these activities on their own do not constitute the business of banking in terms of the Act. The carrying out of any other activity not included below is prohibited unless so authorised by the MFSA. Such authorisations are without prejudice to the Credit Institution obtaining any other appropriate licence that it may require under any other law and the MFSA may require the Credit Institution to carry out such activities through a subsidiary:
(a) Financial Leasing;
(b) Payment Services as defined in the Financial Institutions Act;
(c) Issuing and administering other means of payment (travellers’ cheques, bankers’ drafts and similar instruments;
(d) Guarantees and commitments;
(e) Trading for own account or for account of customers in:
i. Money market instruments (cheques, bills, certificates of deposit and similar instruments);
ii. Foreign exchange
iii.Financial futures and options
iv.Exchange and interest-rate instruments
v. Transferable securities
(f) Participation in securities issues and the provision of services related to such issues;
(g) 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;
(h) Money broking;
(i) Portfolio management and advice;
(j) Safekeeping and administration of securities;
(k) Credit reference services;
(l) Safe custody services;
(m) Issuing electronic money.
On the application for the grant of a banking licence, a non-refundable application and processing fee of Euro 35,000 should be paid. On the issue of the licence, a fee of Euro 18,000 should be paid, as well as an annual supervision fee calculated in the following manner: 0.0002 x Deposit Liabilities, but not less than Euro 25,000 and not more than Euro 1,200,000. The annual fee for representative offices is Euro 3,600 and shall be paid primarily on the establishment of the representative office and subsequently on the anniversary of such date.
Integritas can assist you in the procedure to set up a banking licence under the Act. Kindly contact us for more information.