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MFSA Sets Out Requirements for Financial Institutions Seeking Licences

In a move to ensure the stability and integrity of Malta’s financial services sector, the Malta Financial Services Authority (MFSA) has outlined the requirements that financial institutions must meet in order to be granted a licence.

Minimum Requirements

Companies seeking a credit institution or financial institution licence must demonstrate certain minimum requirements. These include:

  • Having an initial capital of at least €5 million
  • Being effectively directed by at least two individuals
  • Satisfying the MFSA that both the persons directing the business and the shareholders are suitable to ensure the sound and prudent management of the company

Additionally, entities seeking a licence must identify all shareholders and members with a qualifying interest of 10% or more in the shares or voting rights, as well as any significant influence over the company. The MFSA must be satisfied that these individuals do not pose a risk to the stability of the financial system.

Investment Services Licence

Companies seeking an investment services licence must also demonstrate certain minimum requirements. These include:

  • Satisfying initial capital requirements
  • Providing a programme of operations outlining the services they intend to provide and how they will operate

Directors, Members, and Shareholders

The MFSA has set out specific requirements for the directors and members of the management of licensed financial services firms, as well as their qualifying shareholders. These individuals are required to submit a personal questionnaire with background details, including qualifications and past experience, and must be approved by the MFSA before taking up office.

Exemptions

European credit institutions, payment service providers, e-money institutions, and investment services firms that wish to provide services in Malta under the European Passport Rights may be exempt from obtaining a licence, provided they are authorized to do so in their home country.

Regulation

The MFSA has powers emanating from various pieces of legislation, including:

  • The Malta Financial Services Authority Act, which grants it wide powers to regulate, monitor and supervise financial services in Malta
  • Subsidiary legislation
  • Sector-specific rule books

Scope of Regulation

The main areas of regulation for credit institutions, financial institutions, and investment services firms include:

  • Authorisation and licensing
  • Operation and prudential supervision
  • Fitness and properness of qualifying shareholders, directors, and officers
  • Capital requirements
  • Market stability
  • Prevention of market abuse
  • Safekeeping of client assets

Sector-Specific Organisations

While there is no parallel self-regulatory framework that applies to financial institutions in Malta, sector-specific organisations such as:

  • The Malta College of Stockbrokers
  • The Malta Bankers Association

promote the sector and assist operators within the sector by promoting their common interest.

Correct on Date

The information above is accurate as of 30 May 2021.