Banking and Financial Institutions

Whilst credit institutions are regulated in terms of the Banking Act, Financial Institutions, including Electronic Money Institutions (EMIs) and Payment Services Providers (PSPs) are regulated by the Financial Institutions Act. In this regard the Electronic Money Directive (EMD) as well as the Payment Services Directive (PSD) have been transposed in the Financial Institutions Act and the respective Financial Institution Rules.

The Banking Licence

Banking services are primarily the following:

• the acceptance of deposits of money from the public, withdrawable or repayable on demand or after a fixed period; or
• borrowing or raising money from the public for the purpose of employing all or part of such money by lending to others or investing such money at its own risk.

Licensing Requirements

No business of a financial institution can be carried out without a licence. Application for a licence is to be in the format as required in the Financial Institutions Directive.

Statutory licence requirements include minimum own capital acceptable to the MFSA, four eyes principle, ‘fit and proper’ criteria and close links ‘criteria’.

Obligations of the License Holder

Once a licensed financial institution becomes aware of any changes in the information provided to the MFSA, it shall provide the MFSA the relevant details of such changes. Once authorised, the company can open branches in Malta by informing the MFSA and obtaining prior authorisation for cross border establishments.

The law also limits certain activities and transactions that can be undertaken by the company, including:

• Granting of credit facilities against own shares or other securities;
• Granting unsecured credit facilities where there would be conflict of interest;
• Granting unsecured facilities to its own staff; and
• Investment by acquisition of equity in other entities in relation to the financial institution’s own funds and in