Banking & Financial Institutions
The Maltese banking sector has been ranked as one of the most solid in the world, so much so, that after the collapse of the financial markets and that of certain major players in the banking scene worldwide, none of the Maltese banks required any government help or intervention. In the aftermath of these challenging times, the Maltese banking sector has proven to be exceptionally resilient. This is thanks to a solid regulatory framework that is in place governing Malta’s financial services. This very important role is entrusted to the Banking Unit within the Malta Financial Services Authority.
With an impeccable reputation, sound regulatory and legal system in place, and a beneficial tax system, it is no surprise that Malta continues to attract banks and financial institutions from around the world to set up shop in Malta.
Banks are regulated by the Banking Act, 1994, whilst financial institutions are regulated by the Financial Institutions Act, 1994. The major difference between the two is that financial institutions carry out activities for the account and at the risk of the person carrying out such business, and are not allowed to take deposits or repayable funds from the public. In this respect, the statutory requirements and obligations of financial institutions are less onerous when compared to those of banks.
Banks and financial institutions require a licence in order to be able to operate. During the application process, due care is given to capital requirements, as well as the four eyes principle and the ‘fit and proper’ criteria.
Once authorised, regulations require that banks and financial institutions maintain at all times a set margin of solvency, assess asset quality, capital adequacy, internal controls, risk management and other areas.
Banks and financial institutions are regularly monitored both on-site and off-site. On-site monitoring is carried out through ad hoc visits, whilst off-site monitoring is mostly attained through the compilation of monthly and quarterly returns which are in turn analysed for trends.
Finally, it is to be noted that once a bank is authorised to carry on business in Malta, it can open branches in Malta simply by informing the competent authority. However it should be noted that prior authorisation is needed for cross border establishments.