Malta’s Banking Sector: A Guide to Obtaining a Licence and Funding
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Obtaining a Licence in Malta’s Banking Sector
In Malta, credit institutions (banks) must obtain a licence from the Malta Financial Services Authority (MFSA) before commencing operations. The licence is granted after satisfying specific requirements, including initial capital of at least €5 million.
Procedure for Obtaining a Licence
The MFSA has outlined the procedure for obtaining a licence in its Banking Rule BR/01. The process begins with an application to the MFSA, which must be accompanied by various documents, including:
- A copy of the institution’s Memorandum and Articles of Association
- Audited financial statements
- A business plan
The MFSA reviews the application and conducts a comprehensive assessment, which may include input from other national competent authorities (NCAs) if applicable. Once satisfied that the applicant meets the minimum criteria, the MFSA proposes a draft decision to the European Central Bank (ECB), which makes the final decision.
Timeline for Licence Application
The licence application process typically takes several months, with a maximum timeframe of 12 months. Applicants who are dissatisfied with the outcome have the right to appeal to the independent Financial Services Tribunal.
Funding in Malta’s Banking Sector
Malta’s banking sector can be broadly divided into three groups:
- Core domestic banks: typically rely on resident deposits for funding
- Non-core domestic banks: have a higher Tier 1 capital adequacy ratio and generate more funding from shareholders’ equity
- Internationally-oriented banks: funded mainly through the wholesale market or their parent banks
Funding Sources
Banks in Malta must also comply with prudential ratios and ensure that they meet the minimum capital requirements established by the Banking Act.
Minimum Capital Requirements
The Banking Act requires credit institutions to have an initial capital of at least €5 million. However, prudential ratios apply, and minimum capital requirements for specific proposed banking operations may exceed this amount.
Own Funds Requirements
In addition to meeting the initial capital requirement, banks in Malta must comply with the Capital Requirements Regulation (CRR) and other applicable EU legislation, which sets out own funds requirements that may also exceed the minimum given the size of the bank.
Conclusion
By understanding the licensing and funding requirements in Malta’s banking sector, institutions can better navigate the regulatory environment and ensure a successful entry into the market.