The setting up of Malta banks or Malta credit institutions, and the pertinent legislation is founded on EU legislation and is compliant with the Basel Core Principles. Any company which intends to carry out the business of banking shall prior to the commencement of any such business, file an application for a licence with the Malta Financial Services Authority ("MFSA/Authority").

As per the Banking Act, no business of banking shall be transacted by a company, in or from Malta, unless it is in possession of a licence granted by the MFSA under the said Act. The activities covered by a banking licence in terms of the Banking Act are as follows:

• Financial leasing
• Payment services as defined in the Financial Institutions Act (Chapter 376 of the laws of Malta)
• Issuing and administering other means of payment (travellers' cheques, bankers' drafts and similar instruments) insofar as this activity is not covered by activity 2 above
• Guarantees and commitments
• Trading for own account or for account of customers in:
  • money market instruments (cheques, bills, certificates of deposit, and similar instruments)
  • foreign exchange
  • financial futures and options
  • exchange and interest-rate instruments
  • transferable securities
• Participation in securities issues and the provision of services related to such issues
• Advice to undertakings on capital structure, industrial strategy and related questions and advice as well as services relating to mergers and the purchase of undertakings
• Money broking
• Portfolio management and advice
• Safekeeping and administration of securities
• Credit reference services
• Safe custody services
• Issuing electronic money

An application for a Malta banking licence may be filed for the following types of establishments:

• branches of foreign banks - such operating entities do not have a separate legal status and are thus integral parts of the foreign credit institution
• subsidiaries being legally independent institutions, wholly or majority owned by a credit institution which is incorporated either in Malta or in a foreign country
• joint ventures being legally independent institutions controlled by two or more parent institutions being either foreign or domestic and not all of which being necessarily credit institutions
• other entities proposing to carry out the business of banking but not having a credit institution as part of the group's shareholding structure

A credit institution licenced or holding an equivalent authorisation in a Member State or EEA State is entitled to exercise its rights under EU Law. Generally, a company shall be granted a licence solely if:

• its own funds amount to not less than €5,000,000
• there are at least two individuals who will effectively direct the business of the credit institution in Malta
• the Authority is notified with the identity of the shareholders/members having qualifying holdings (if applicable), or of the twenty largest shareholders/members
• all qualifying shareholders, controllers and all persons who will effectively direct the business of the credit institution are suitable persons to ensure its prudent management
• the Authority is satisfied that there are no close links between that company and another person(s) which through any law, regulation, administrative provision or in any manner prevent the company from exercising effective supervision of that company under the provisions of the Banking Act
• the Authority is satisfied that the arrangements, processes and mechanisms required to be in place by the bank enable sound and effective risk management

Application for Authorisation

Any company desirous of commencing the business of banking in or from Malta shall, before commencing any such business apply in writing to the Authority for a licence.

All applications for a licence shall be filed in accordance with its official application forms as applicable and shall be accompanied at a minimum by:

• a copy of the Memorandum and Articles of Association of the institution
• audited financial statements for the last three years (if applicable)
• a business plan including the structure, organization, management systems, governance arrangements and internal control systems of the prospective bank which demonstrates that these arrangements, control mechanisms and procedures are proportionate, appropriate, sound and adequate to the business model proposed for the applicant
• a detailed overview on the internal control framework of the applicant, including an outline of the policies and procedures dealing with matters relevant
• an outline of the systems and policies for assessing and managing the risks of money laundering and terrorist financing
• the identity of all directors, controllers and managers of the institution; identity of the individuals who will be effectively directing the business of the applicant
• the identity of all shareholders with a qualifying shareholding

Malta Branch of an Overseas Credit Institutions

A branch constitutes a fundamental part of the institution to which it belongs. A licence issued to an institution incorporated outside Malta to operate its banking business through a Malta branch is consequently deemed to having been granted to that institution as a whole. In the case of an institution whose principal place of business is in a country outside Malta, the Authority may at its discretion, consider that the minimum criteria for authorisation are fulfilled if:

• The foreign banking supervisory informs the MFSA that it is satisfied with respect to the prudent management and overall financial soundness of the applicant; and
• The MFSA is satisfied as to the nature and scope of the supervision exercised by that country's relative authority.

The MFSA will examine the planned business of the proposed Malta branch, its internal controls, accounting and other records and personnel and management arrangements. If there are any concerns, the MFSA will discuss them with the applicant and where necessary recourse is made to the foreign competent authority. The MFSA may also require information regarding directors, controllers and managers of the overseas institutions operating through branches in Malta, even though these may be less detailed than that required from institutions registered in Malta.

Representative Office

A company which is licenced or which holds an equivalent authorisation outside Malta, and which carries on the business of banking can establish a representative office in Malta only after it has given at least two months’ notice to the MFSA that it intends establishing such office.

The notice ought to specify the name it is proposing to use in relation to the activities of the representative office and the address of such office. Furthermore, the notice shall be accompanied by a certified copy of the authorisation of the company to conduct the business of banking in a country other than Malta. The MFSA may also require the presentation of such additional information or documents as it may reasonably to require.