Credit & Financial Institutions in Malta

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In Malta, banks and other credit institutions are regulated by the Banking Act (Cap. 371 of the Laws of Malta). Malta has implemented all the relevant EU Directives which serve as the main reference for regulatory concepts and supervisory practices.  The Banking Act is supplemented by a number of Regulations and Banking Rules which are issued by the single financial services regulator, the Malta Financial Services Authority, and are binding on license holders. Compliance with these statutory requirements is ensured by the Authority through its supervisory activities which are grounded upon the risk-based approach. In relation to such supervision, the European Central Bank also plays an integral role in terms of EU Council Regulation 1024/2013.

Financial Institutions, are similar to banks but differ notably in the fact that their activities are not funded through deposits from the public. These financial institutions include Payment Services Gateways, Electronic Money Institutions, Money brokers and Forex entities are licensed under the Financial Institutions Act (FIA) (Cap. 376 of the Laws of Malta). They are also governed by the specific Rules issued by the MFSA and services are also provided in terms of the Electronic Money Directive (Directive 2009/110/EC) Directive and the Payment Services Directive (Directive 2007/64/EC). 

The Banking Act defines the business of banking as follows:

“The business of a person who accepts deposits of money from the public withdrawable or repayable on demand or after a fixed period of 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 care for the purpose of employing such money in whole or in part by lending to other or otherwise investing for the account and the risk of the person accepting such money.”

Credit institutions may also be licensed to undertake the following additional activities:

  1. Financial Leasing;
  2. Payment Services as defined in the Financial Institutions Act;
  3. Issuing and administering other means of payment (e.g. travellers cheques, bankers’ drafts and similar instruments), provided that such means of payment are not covered under activity 2 above;
  4. Guarantees and commitments;
  5. Trading for own account or for the account of customers in:
    1. Money market instruments (cheques, bills, certificates of deposit and similar instruments);
    2. Foreign exchange;
    3. Financial futures and options;
    4. Exchange and interest-rate instruments; and
    5. Transferable securities.
  6. Participation in securities issues and the provision of services related to such issues;
  7. Advice to undertakings on capital structure, industrial strategy and related question and advice as well as services relating to mergers and the purchase of undertakings;
  8. Money broking;
  9. Portfolio management and advice;
  10. Safekeeping and administration of securities;
  11. Credit reference services; and
  12. Safe custody services.

On the other hand, the activities permissible for Financial Institutions licensed under the FIA include:

  • 1. Lending (including personal credits, mortgage credits, factoring with or without recourse, financing of commercial transactions including forfeiting);
  • 2. Financial Leasing;
  • 3. Venture or risk capital;
  • 4. Payment Services;
  • 5. Issuing and administering other means of payment (e.g. travellers cheques, bankers’ drafts and similar instruments), provided that such means of payment are not covered under activity 4 above;
  • 6. Guarantees and commitments;
  • 7. Trading for own account or for the account of customers in:
    1. Money market instruments (cheques, bills, certificates of deposit and similar instruments);
    2. Foreign exchange;
    3. Financial futures and options;
    4. Exchange and interest-rate instruments; and
    5. Transferable securities.
  • 8. Underwriting share issue and the participation in such issues; and
  • 9. Money broking.