Draft Rulebook on Aircraft Financial Leasing

Background: The First Phase of the MFSA Aircraft Leasing Consultation

On 5th January 2026, the Malta Financial Services Authority (the “MFSA”) published a consultation paper proposing a notification-based regime for aircraft financial leasing companies. The first phase of the consultation was covered in an earlier article. The core proposition is to create an alternative to full licensing under the Financial Institutions Act (Cap. 376) (the “Act”) allowing companies meeting a specified asset threshold to notify the MFSA and operate under a tailored, lighter-touch framework.

The said consultation invited feedback on the framework’s high-level design and the legislative amendments needed to implement it, including the insertion of a new exemption under Article 3B of the Act. The MFSA reported that industry feedback was positive.

Second Consultation: The Draft Rulebook for Notified Aircraft Financial Leasing Companies

On 24th July 2026, the MFSA published a second consultation paper, this time accompanied by the full draft “Rules for Notified Aircraft Financial Leasing Companies and Related Due Diligence Service Providers” (the “Rulebook”). The Rulebook reflects the feedback received in the first phase and translates the earlier policy outline into more detailed, operative provisions.

The Rulebook addresses the full regulatory cycle: eligibility and notification, governance, due diligence, AML/CFT compliance, ongoing prudential obligations, reporting, and exit. Parallel amendments to the Act and its subsidiary legislation are being progressed separately.

Part A: Notification and Eligibility Requirements under the Draft Rulebook

Defining aircraft financial leasing. The Rulebook adopts a finance-lease standard by means of a leasing arrangement under which substantially all risks and rewards of ownership of an aircraft or engine transfer to the lessee. Annex A, which is yet to be included in the Rulebook sets out the applicable accounting-based criteria.

Eligibility for admission to the List. A company seeking admission to the MFSA’s List of Aircraft Financial Leasing Companies (the “List”) must satisfy each of the following criteria:

• Malta incorporation: the company must be incorporated and registered in Malta.
• Malta-resident director: at least one director must reside in Malta and effectively direct the business from Malta.
• EUR 100 million asset threshold: aggregate total assets must reach at least EUR 100 million, whether in liquid form or in the form of aircraft or engines valued by a reputable independent valuer.
• Exclusive activity: the company’s financial services activities must be limited to aircraft or engine financial leasing (whether directly or through subsidiaries), together with ancillary activities. Holding a separate MFSA financial services authorisation is not permitted.
• Due Diligence Service Provider: a Due Diligence Service Provider (“DDSP”) must be appointed before notification is submitted.

For cell companies established under the Companies Act (Shipping and Aviation Cell Companies) Regulations (S.L. 386.22), or for group and SPV structures, the notification is submitted by the cell company or parent company respectively. The EUR 100 million threshold is assessed on an aggregate basis across the relevant structure. Where cross-border leasing is involved, the company must also comply with the requirements of the relevant foreign jurisdiction.

The notification process. Admission to the List follows a written application, accompanied by the prescribed regulatory form, the applicable fee, and a DDSP declaration confirming that due diligence has been completed on all qualifying shareholders, controllers, and persons effectively directing the business. The MFSA is required to admit or refuse a company within 20 working days of receiving a duly completed application. It bears emphasis that admission to the List does not constitute a licence. It is a regulatory notification, not an authorisation. If the MFSA refuses admission, it must provide written reasons.

Board composition. The board must comprise at least three directors, of whom at least one must be an independent non-executive director and at least one must be resident in Malta. The board is required to submit an annual Compliance Certificate to the MFSA.

The role of the DDSP. The DDSP must carry out a fit-and-proper assessment of every qualifying shareholder, beneficial owner, director, senior manager, MLRO, controller, and relevant service provider. The assessment is conducted against four criteria:

• competence;
• reputation;
• conflicts of interest and independence of mind; and
• time commitment.

A DDSP must be a Company Service Provider authorised under the Company Service Providers Act (Cap. 529). Under-threshold CSPs and individual CSPs are excluded. The MFSA will maintain a public register of approved DDSPs.

AML/CFT obligations. Admitted companies are designated “subject persons” under the Prevention of Money Laundering and Funding of Terrorism Regulations (S.L. 373.01) and are therefore subject to the full suite of AML/CFT obligations. The board must appoint a Money Laundering Reporting Officer (“MLRO”), and any change to that appointment must be notified to the MFSA. A limited exception applies: a director may serve as MLRO where the company’s leasing activity is confined to a maximum of five independent portfolios, each leased to a single lessee or centrally controlled lessee group. The MLRO must submit at least an annual AML/CFT risk report, including a geographic breakdown of lessees and payment origins.

Part B: Ongoing Regulatory Obligations for Notified Aircraft Leasing Companies

Once admitted to the List, a company is subject to a range of ongoing regulatory obligations:

• Ongoing DDSP due diligence: The DDSP must continue to perform fit-and-proper assessments on an ongoing basis. It must immediately notify the MFSA of any adverse changes and must maintain records (updated at least annually) at both the DDSP’s own registered office and that of the company. If a new DDSP is appointed, the incoming provider must either confirm that the predecessor’s due diligence was satisfactory or repeat the exercise in full. The MFSA has the power to inspect DDSPs and to take regulatory action where adverse findings emerge.
• External auditor: An external auditor must be appointed under the Accountancy Profession Act (Cap. 281). The auditor is subject to independence requirements and must report to the MFSA in the event of resignation, removal, issuance of a serious qualification, or discovery of a material breach.
• Outsourcing: Outsourcing of functions is permitted, provided the board retains ultimate responsibility for the outsourced activities. Where critical or important functions are outsourced, the arrangement must comply with the applicable EBA Guidelines on Outsourcing Arrangements and must be governed by a written agreement.
• ICT and security risk: Companies must comply with the MFSA’s Guidance on Technology Arrangements, ICT and Security Risk Management, applied proportionately to the company’s size and complexity.
• Reporting: Companies are subject to the following reporting obligations: (i) annual audited financial statements, due within four months of the accounting reference date; (ii) the Aircraft Leasing Companies Return, submitted via the MFSA’s LH Portal; (iii) statistical returns to the Central Bank of Malta; and (iv) an annual Compliance Certificate confirming continued regulatory and AML/CFT compliance and satisfaction of the EUR 100 million threshold, supported by at least annual independent valuation.
• Credit risk management: Companies must establish a credit risk management framework comprising a risk appetite statement, policies and procedures, clearly defined roles and responsibilities, a dedicated credit risk function, and an independent review process. The framework must be approved by the board.
• Breaches register: A breaches register must be maintained at the company’s registered office and made available to the MFSA on request.
• Notification of material events: Companies must promptly notify the MFSA in writing of: fraud or dishonesty by an official; material litigation; a breach of the EUR 100 million threshold; or any change to notified persons (which triggers the requirement for a fresh DDSP declaration). If the asset threshold is breached, the company has six months to restore compliance. Failure to do so requires the company either to apply for a full licence under the Act or to seek removal from the List.
• Removal from the List: The MFSA may remove a company from the List at its sole discretion in the interests of consumer protection, market integrity, or financial stability. A company that ceases to meet the eligibility criteria must seek its own removal by way of a board declaration (confirmed by the external auditor) to the MFSA addressing wind-down matters. Following removal, the company must cease all leasing activities other than those necessary to wind down existing arrangements, and must ultimately be dissolved.

Consultation Deadline and Next Steps

Comments on the draft Rulebook are due by 31st August 2026. Submissions should be sent to spi_consultations@mfsa.mt and should reference the specific rule or provision being commented on. The proposals remain in draft form and are subject to amendment.

The MFSA has indicated that it will subsequently issue notification forms, template declarations, and further guidance on DDSP assessments.

Implications for Malta Aviation Finance

This consultation is a significant step in Malta’s development as a jurisdiction for aircraft financial leasing. The proposed notification framework offers an efficient, proportionate route to market for qualifying lessors — avoiding the cost and administrative burden of full licensing — while maintaining the substance and regulatory oversight that international lessees, financiers, and counterparties expect.

Interested parties should review the draft Rulebook and consider submitting comments before the deadline. Our aviation finance team is available to advise on the proposed framework, its implications for existing and planned aircraft leasing structures, and the consultation process.

Mamo TCV & Aviation

Mamo TCV Advocates is one of the foremost law firms in Malta in the aviation sector and it is a market leader in this area. The firm covers the full spectrum of aviation-related legal work and is noted for its experience in complex corporate structures relating to the ownership and operation of aircraft. The group specialises in all aspects of aviation law including asset finance, sale and purchase of aircraft, liability claims, passenger claim handling, tax and corporate set ups, asset repossession and arrest, European aviation law and drafting of legislation.

Feel free to get in touch with us to discuss our aviation practice and the services we can provide to your business, including assisting you with navigating your legal and regulatory obligations, on aviation@mamotcv.com.