In Malta, the retail banking industry is one of the most determining drivers of our economy. This notwithstanding, the banking landscape has evolved from an industry that provides purely retail banking to service the local population, to an industry that provides a vast array of products and services within a global arena without regional confines, particularly in view of the European Single Passport Regime that permeates the EU’s financial services agenda. The consolidation of financial services markets acts as a catalyst to the development of hybrid innovative products as exemplified by the ever-growing phenomenon of bancassurance. Furthermore, the big bang of financial conglomerates, envisaging single financial services entities offering cross-sectoral financial services activities across European borders, has called for increased regulation and prudential supervision at European level to secure a stable and viable market.

Moreover, not only does the island’s strategic location render Malta easily accessible to European markets, but, owing to it being located between Europe and North Africa, and enjoying easy access to Middle Eastern markets, Malta has become an important stepping stone for banking and financial institutions wishing to share in the wealth generated in the region. Hence, in view of Malta being regarded as a highly reputable and well regulated financial centre, equipped with the necessary professional skills and legislative and regulatory framework, our island assumes a strategic role in harnessing and propagating the Islamic finance ideology as a sound and competitive model to its conventional counterpart.

MA & A Legal Practice

In the light of the above-mentioned challenges, our expertise of all financial services-related legislation and extensive knowledge of the banking industry allow us to advise both local and foreign banking and financial institutions on the prevailing industry practices, matters relating to licensing and regulatory compliance, ongoing transactional and operational matters in relation to the activities of credit and financial institutions, as well as, to provide advice on the substantive law dimension on any issues that might arise in connection thereto.

Regulation and Licensing

The establishment, regulation and supervision of the banking industry for licensed banking or financial ventures operating in and/or from Malta is determined by:

  1.  with respect to credit institutions and electronic money institutions – the Banking Act (Chapter 371 of the Laws of Malta) and the Banking Rules and Electronic Money Institutions Rules, respectively, issued by the MFSA; and
  2. with respect to financial institutions – the Financial Institutions Act (Chapter 376 of the Laws of Malta) and the Financial Institutions Rules issued by the MFSA.

The Banking Act authorises banks to conduct the business of electronic banking in virtue of their banking license. This notwithstanding, stand-alone electronic money ventures must operate within the framework set out by EU Directive 2000/46/EC.

Unlike credit institutions, financial institutions are prohibited from accepting deposits or other repayable funds from the public, but are authorised to perform any of the exhaustive activities listed in the Schedule to the Financial Institutions Act, ranging from lending, to financial leasing and investment and securities-related transactions.

The MFSA, qua the single regulator of financial services on the island, is responsible for licensing, regulating and supervising the activities of credit institutions, electronic money institutions and financial institutions. When issuing a license, the MFSA abides by strict standard conditions which may be adapted, provided the essence thereof is not compromised. In line with European law, the MFSA will base its decision on the core standards of probity and honesty and provided the minimum ‘Own funds’ requirement is complied with.