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Banking in Malta: A Guide to Obtaining a Licence and Funding

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Malta’s banking sector plays a significant role in the country’s economy, with various types of banks operating in the market. For any credit institution wishing to operate in Malta, obtaining a licence and securing funding are essential steps.

Licensing Requirements

According to Article 7 of the Banking Act, several requirements must be satisfied to obtain a banking licence:

  • An initial capital of at least €5 million
  • At least two individuals effectively directing the company’s business
  • Notification of shareholders/members with qualifying holdings (if applicable)
  • The Authority’s satisfaction that the shareholders/members and controllers are suitable persons
  • The absence of close links with another person or entity that prevent effective supervision
  • Sound and effective risk management arrangements

Procedure for Obtaining a Licence

The procedure for obtaining a banking licence is outlined in MFSA’s Banking Rule BR/01. The Authority must be satisfied that the applicant meets certain minimum criteria, including those related to:

  • Prudent conduct
  • Fit and proper persons
  • Integrity
  • Professional staff

Applications are sent by the applicant to the MFSA, which then notifies the European Central Bank (ECB) of its receipt within 15 working days. The MFSA reviews the application, requests additional information if necessary, and conducts a complementary assessment with the ECB and other relevant authorities.

Appeal Process

An applicant who is dissatisfied with the Authority’s decision may appeal to an independent Financial Services Tribunal.

Funding of Banks in Malta

The banking sector in Malta can be broadly divided into three groups:

  • Core domestic banks: rely primarily on resident deposits for funding
  • Non-core domestic banks: generate more funding from shareholders’ equity
  • Internationally-oriented banks: funded mainly through the wholesale market or their parent banks

Minimum Capital Requirements

The Banking Act requires a credit institution to have an initial capital of at least €5 million. However, prudential ratios apply, and minimum capital requirements may exceed this amount for specific proposed banking operations. Banks must also ensure that they comply with the Capital Requirements Regulation (CRR) and other applicable EU legislation.

By understanding these licensing requirements, procedures, and funding mechanisms, credit institutions can navigate the complex landscape of Malta’s banking sector and establish a successful operation in the country.