The Banking Act, 1994 (hereinafter referred to as the ‘Act’) regulates banks in Malta, 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. It could also be the business of someone who borrows or raises money from the public, including by the issue of debentures or debenture stock or other instruments creating or acknowledging indebtedness).
In either case, the accepted and borrowed money is employed wholly or partially by lending or investing the account. This is at the risk of the person accepting such money.
A person is deemed accepting money deposits if they accept 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 do the business of banking in Malta and be a ‘Credit Institution’ shall apply for a banking licence to the MFSA. A 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 business 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.
Opening a Branch in Malta
Companies with banking licences or holding an equivalent authorisation in another country may carry on their banking business as a representative office in Malta. Provided that the MFSA does not object, the company shall give at least a two-month notice of its proposal to establish such an office.
The business of a representative office shall only be authorised to conduct liaison activities purely. They must only engage in financial transactions or executing documents relative to that, except in the case of necessity for and incidental to the maintenance of the office in Malta.
Moreover, Maltese banks enjoy passport rights to open branches in EEA states. The Credit Institution should inform MFSA in writing before opening a new branch, agency or office in Malta.
Unless the MFSA gives their written consent, a Credit Institution shall be prohibited from opening, setting up, or acquiring any subsidiary in any place outside of Malta.
Co-operation and Sharing of Information
A Credit Institution shall be further prohibited from entering a third country where the secrecy laws or other regulations prohibit information flows.
Malta has specific international commitments. The MFSA may share its supervisory duties with overseas regulatory authorities in the event of a Credit Institution or branch operating in Malta that a foreign person fully or partly owns.
The same applies to a Credit Institution fully or partly owned by Maltese residents and is operating overseas.
The MFSA may authorise an institution to carry out further all or any of the additional activities listed below, subject to any other law regulating such activity.
In terms of the Act, carrying out these activities on their own do not constitute the business of banking. Carrying out 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. 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 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, applicants must pay a non-refundable application and processing fee of Euro 35,000.
On the licence issue, applicants must pay a fee of Euro 18,000, 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. It shall be paid primarily on establishing 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. Contact us for more information.