CREDIT, E-MONEY AND FINANCIAL INSTITUTIONS

Mamo TCV advises both local and foreign institutions in the banking and financial services sector and has carried out due diligence exercises for a number of reputed foreign banks in relation to their transactions with local parties. 

 

Credit Institutions and Electronic Money Institutions 

 

The Banking Act (Chapter 371 of the Laws of Malta) forms the legal basis for the regulation and supervision of credit institutions and electronic money institutions operating in or from Malta. The regulatory requirements are set out in detail in Banking Rules issued by the Malta Financial Services Authority (“MFSA”). 

 

The business of banking or of issuing electronic money in or from Malta may only be carried out by a company which is in possession of a licence granted by the MFSA. Credit institutions authorised in another EU/EEA Member State that wish to establish a branch or provide services in Malta may exercise their passport rights in accordance with the relevant provisions of the European Passport Rights for Credit Institutions Regulations (Legal Notice 88 of 2004, as amended), in which case they would be exempt from the licensing requirement under the Banking Act.  

 

European credit institutions that use their passport to provide services in Malta without having a local place of business need to appoint a fiscal representative. 

 

Foreign banks may establish a representative office in Malta. Pursuant to the Representative Offices (Requirements and Activities) Regulations (Legal Notice 113 of 1998, as amended), the activities of such representative offices must be confined solely to the conduct of purely liaison activities and may not include the engagement in financial transactions or the execution of any documents relative thereto, except where necessary for and incidental to the maintenance of the office in Malta. 

 

Every credit institution licensed in Malta to accept deposits from depositors in any designated currency, including a branch of a credit institution operating in another country (subject to certain exceptions), has to participate in and contribute to the Depositor Compensation Scheme established by the Depositor Compensation Scheme Regulations (Legal Notice 269 of 2003, as amended). 

 

Financial Institutions 

 

The Financial Institutions Act (Chapter 376 of the Laws of Malta) is an “offshoot” of the Banking Act. It constitutes the legal basis for the regulatory and supervisory requirements applicable to financial institutions and empowers the MFSA to issue directives as may be required for carrying into effect any of the provisions of the Financial Institutions Act.  

 

A company may not transact the business of a financial institution in or from Malta unless it is in possession of a licence granted by the MFSA. The business of a financial institution is carried out when a person regularly or habitually acquires holdings or undertakes the carrying out of any activity listed in the Schedule to the Financial Institutions Act for the account and at the risk of the person carrying out that activity. The activities listed in the Schedule to the Financial Institutions Act comprise the following:  

 

1. Lending (including personal credits, mortgage credits, factoring with or without recourse, financing of commercial transactions including forfaiting); 

2. Financial leasing; 

3. Venture or risk capital; 

4. Money transmission services; 

5. Issuing and administering means of payment (e.g. credit cards, travellers’ cheques and bankers’ drafts); 

6. Guarantees and commitments; 

7. Trading for own account or for account of customers in: money market instruments (cheques, bills, certificates of deposits, etc.); foreign exchange; financial futures and options; exchange and interest rate instruments; transferable instruments; 

8. Underwriting share issues and the participation in such issues; 

9. Money broking. 

 

Payment services  

 

Since Malta forms part of the euro-zone, cross-border payments are subject to the provisions of the Regulation (EC) No 2560/2001 of the European Parliament and of the Council of 19 December 2001 on cross-border payments in euro. Accordingly, charges levied by an institution in respect of cross-border payments in euro up to EUR 50, 000 must be the same as the charges levied by the same institution in respect of corresponding payments in euro transacted within the Member State in which that institution executing the payment is established.  

 

The anticipated developments in the Central Bank of Malta's retail payment services policy, in combination with the transposition of the Payment Services Directive (PSD) and the implementation of the Single Euro Payments Area (SEPA) are expected to change the payment services market in Malta considerably by the end of the year 2009.