Financial Crime World

European Central Bank Grants Authorisation to Credit Institution

In a significant development, the European Central Bank (ECB) has granted authorisation to a credit institution in collaboration with the Malta Financial Services Authority (MFSA), the national competent authority in Malta.

Background

The ECB’s decision was made following a thorough review of the applicant’s application for a banking licence. The application was accompanied by a range of documentation, including:

  • Audited financial statements for the last three years
  • A business plan outlining the institution’s structure, organisation, management systems, governance arrangements and internal control systems
  • Policies and procedures related to:
    • Operational risk
    • Conduct risk
    • Money laundering risks

Appeal Rights

Under Article 10 of the Banking Act, the applicant has the right to appeal any decision made by the MFSA regarding the granting of a licence. The MFSA is required to determine applications for licences within:

  • Six months of receipt
  • Twelve months if additional information is requested

Classification of Banks in Malta

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

  • Core domestic banks: Rely predominantly on resident deposits for funding
  • Non-core domestic banks: Have a Tier 1 capital adequacy ratio well in excess of that required
  • Internationally-oriented banks: Generate funding mainly through the wholesale market or through their parent banks

Minimum Capital Requirements

The Banking Act requires credit institutions to maintain minimum initial capital of €5 million. However, prudential ratios apply and may result in higher minimum capital requirements for specific proposed banking operations.

Additionally, banks are required to comply with rules provided by:

  • The Capital Requirements Regulation (CRR)
  • Other applicable EU legislation

Significance of the Authorisation

This authorisation marks a significant milestone in the development of the banking sector in Malta. It demonstrates the ECB’s commitment to ensuring that minimum criteria relating to:

  • Prudent conduct
  • Fit and proper persons
  • Integrity and professional staff
  • Safety of potential depositors are fulfilled.

Overall, this authorisation reflects the ECB’s dedication to maintaining a stable and secure financial system in Europe.