Obtain a banking license in Malta

01.04.2024

For fast communication via telegram

A small island in the center of the Mediterranean Sea, Malta, has established itself as one of the leading financial centers in Europe. This country is particularly attractive to the banking sector due to its membership in the European Union, which grants banks licensed in Malta the right to operate in any EU country without additional licensing. This creates unique conditions for expanding operations, optimizing taxation, and conducting efficient international financial institutions.

Moreover, Malta is famous for its innovative assistance of fintech projects and digital banking technologies, making it an optimal site for the creation of contemporary banking services and products.

In our review, we will thoroughly examine all aspects of acquiring and making use of a Malta banking license, including the capital needs, regulatory environment, application procedure, and much more, to provide you all the knowledge you need to decide whether to launch or grow your banking enterprise on this alluring island.

Size and definition of banking operations

All businesses looking to conduct banking operations in Malta must adhere to the regulations for acquiring a banking license. Any individual or entity that wishes to conduct banking operations in or out of Malta must register as a limited liability company and get the necessary license from the Competent Authority designated in line with Article 3(1) of this Act, according to the Banking Act 1994.

What constitutes a financial activity in Malta

The term "banking activities" in Malta refers to a wide range of activities, such as acceptance of deposits from the public (including through the issuance of bonds or other instruments creating or acknowledging debt), which may be withdrawn on demand or after a specific period of time or notice. These monies are subsequently utilized to make investments on behalf of the entity receiving them or loans to other people, all at the risk of the recipient entity.

An institution just has to have the formal option to undertake banking activity—even if they don't—in order to apply for a banking license in Malta. Nonetheless, the very act of conducting banking operations, even in the absence of authorization from constitutional authorities, transforms the organization into a credit institution in need of appropriate license and oversight.

Crucially important: there are stringent regulations regarding the use of the word "bank" or its variants in a company's name. These words may only be used by organizations that have received a banking license from the Malta Financial Services Authority (MFSA). In addition to safeguarding customers, this rule makes sure that only organizations that have been granted licenses and are subject to regulation may pose as banks.

Advantages of acquiring a banking permit in Malta

Banks and other financial companies can benefit greatly from obtaining a banking license in Malta. Malta's strategic location as a member of the European Union and its regulatory and tax environment both contribute to these benefits. The primary advantages are described in detail below:

Stable and reliable jurisdiction

Since Malta joined the EU in 2004, banking and financial institutions may be assured of stability and dependability. As a result, banks with a Maltese license may take use of all the benefits of the EU single market, including the ability to conduct business in any of the member states.

Efficient tax model

Malta has one of the most desirable tax systems in Europe: a return scheme allows the 35% corporate tax rate to be lowered to 5-6%. Banking licensees enjoy tax preferences, and there is no tax on capital gains except for the sale of real estate and local securities. Malta also provides effective tax planning through double taxation avoidance agreements with more than 70 countries.

Standardization according to international criteria

Malta carefully complies with all international laws regulating the financial industry, particularly those issued by the EU and the Basel Committee on Banking Supervision. This guarantees that international investors and partners will have a high degree of faith in the nation's financial system and its players.

Adaptable regulatory framework

MFSA is renowned for its regulatory control policy, which is both flexible and strict. It works closely with banks and other financial institutions to help them comply with regulations while also allowing enough leeway to support economic growth and innovation.

Developed infrastructure

Malta offers advanced infrastructure for conducting banking and financial operations, including cutting-edge IT solutions, professional legal and consultancy services, coupled with highly skilled labor resources.

Exceptional skilled workforce

Malta is a great option for international economic activity because of its highly competent multilingual populace and outstanding command of the English language. This makes it easier to hire local experts and creates the best environment for serving international clients.

The procedure for acquiring a banking license in Malta

The application process for a banking license necessitates thorough planning and great attention to every detail. In order to prove that they have complied with the standards, applicants must produce a comprehensive collection of paperwork and closely follow the guidelines provided by the MFSA. The primary steps for filing an application are listed below, along with a list of necessary files.

Preliminary consultation

The applicant meets with MFSA experts and personnel at this early stage to discuss their plan to establish a bank. This meeting's goal is to give the regulator a summary of the proposed bank's financial goals, operating processes, management structure, and business strategy. Additionally, it's a chance to talk about the details of the proposed banking operations and get early input from the MFSA on possible problems that can come up throughout the Malta banking license process.

The creation of a thorough business plan is a crucial component of the planning phase. Financial forecasts for the first few years of operation, target market identification, an explanation of the intended banking goods and services, and a description of risk management techniques are all required. Furthermore, at this point, important players in the bank's management are identified, and their first MFSA compliance is evaluated.

Documentation submission stage

Following the first meeting and considering the comments received, the applicant sends the formal bundle of documents to the MFSA.

To apply for a banking license in Malta, you must submit the subsequent papers:

License request
A thorough business plan that includes financial projections for the next 3 years, target market information, a description of the products and services, and a marketing strategy.
The company's legal documents, such as the articles of incorporation and association.
Verification of funding sources and financial soundness.
AML/CTF policies and procedures.
Program for internal auditing and risk management.
Bios and professional references for important individuals (board of directors, management).

The application is sent to the MFSA once all required paperwork has been prepared. The application must contain the filled-out application form, all ready-made documentation, and proof that the necessary application processing costs have been paid.

Evaluation of applications by MFSA

The applicant's financial health, the suitability of the business plan and risk management approach, and the credentials and standing of the suggested management team are all evaluated by MFSA during a thorough review of the submitted documentation. In order to clarify the specifics of the application or to get clarity on any provided papers, MFSA may also schedule meetings with the applicant during this time.

Licensing

Following its examination and evaluation of the application, the MFSA decides whether to grant a Maltese banking license. If the application is approved, the applicant gets a license to carry out banking operations. If the MFSA declines, it explains the resolution.

In Malta, the banking license application procedure often takes 6 to 12 months. Depending on how complicated the application is and how quickly the necessary information is provided, the timeline may change. Document precision and readiness for efficient and clear communication with the regulatory authority are critical factors influencing the outcome of this procedure.

Note that gaining authorization to carry out banking activities in Malta does not mean breaking off ties with the MFSA. The bank must continue rigorously adhering to all specified regulatory standards and regulations once the license authority is issued. This commitment entails the regular filing of reports on the financial institution's operational operations, risk management approach, and current state of affairs, in addition to adherence to established capital and liquidity standards.

Malta's statutory requirements for getting a banking license

A candidate must fulfill the requirements set forth by the MFSA, the related rules, and the Banking Act of 1994 in order to be granted a license to engage in banking operations in Malta. These standards are intended to safeguard the rights and interests of customers and depositors while also assuring the stability and safety of the banking industry.

Corporate governance

A clear and efficient corporate governance framework, with an open hierarchy of management and supervisory responsibilities, should be developed and implemented by banks. This entails appointing a competent board of directors to oversee the bank's strategic direction in addition to creating specialized committees (such as audit, risk, and nominations) to handle certain management and control issues.

Appointment of a minimum of 2 individuals to oversee the credit institution's operations

The MFSA stipulates that the administration of the credit institution must comprise a minimum of a specified number of people who will efficiently monitor the bank in Malta in order to provide effective management and control over the operations of the bank (the "four-eyes" concept). These people should be well regarded in the business community and have the skills, background, and credentials required to oversee the bank. When there are two or more managers there are, the distribution of tasks is facilitated and the possibility of abuse or managerial errors is reduced.

Minimum initial share capital

In order to be eligible for a banking license in Malta, an initial share capital of at least 5 million euros must be present. This condition guarantees that the bank can start operations with enough capital and can endure future swings in the economy without jeopardizing its stability. The share capital must be accessible to the bank and completely paid up as soon as it starts conducting business. This criterion is applicable to international institutions looking to open branches on the island as well as banks that are registered in Malta.

Keeping banking operations and sound governance

In order to be granted a license in Malta, banks have to prove that they are dedicated to maintaining the highest levels of financial activity and corporate governance. This means that efficient procedures for internal control, risk management, and auditing must be developed and put into place. In order to guarantee operational transparency, asset and customer interest protection, and compliance with all relevant regulatory requirements, the bank has to have a well-defined corporate structure, rules, and processes.

Information accessibility for oversight

The applicant is responsible for making sure the regulatory authority has access to appropriate data to enable efficient supervision. This entails supplying frequent reporting, granting access to internal records, and assisting with audits and inspections.

Privacy concerns

A crucial component of financial operations is privacy. Licensed Maltese banks are required to follow stringent guidelines for safeguarding customers' accounts and personal information. This includes adhering to local regulatory acts and data protection laws, such as the General Data Protection Regulation in the European Union.

To stop financial fraud and illegal access, banks should create and put into place efficient information protection systems, such as transaction monitoring, access control, and data encryption.

The requirements for getting a banking license in Malta are made to keep the banking industry transparent, stable, and trustworthy. It is essential to strictly follow these guidelines in order to receive the license and then start doing banking business in Malta.

Fees associated with getting a Maltese banking license

In Malta, the MFSA sets various fees that must be paid in order to get a financial institution permit. These costs fall into 3 categories: an annual supervision charge, a license fee, and a non-refundable application and processing fee.

Non-refundable application and processing fee of EUR 35,000

When applying for a Maltese banking license, this cost must be paid just once. The MFSA charges a fee of 35,000 euros to cover the expenditures for preliminary paperwork processing and analysis, which includes confirming that the application complies with all statutory standards and regulations.

No matter how your application is evaluated, it is important to note that the licensing fee you have already paid is not refundable. This underscores the importance of thorough planning and ensuring full compliance with regulatory requirements preceding document submission.

License fee of EUR 18,000

Upon approval and issuance of the banking license, the applicant must pay a one-time licensing fee of 18,000 euros. This fee covers the issuance of the license and grants formal authority to commence banking operations in Malta. Payment of the fee confirms completion of every condition for the license and marks the initial step towards the institution's operational commencement.

Annual supervision fee of min. EUR 25,000 and max. EUR 1,200,000

In addition to one-time fees, banks holding a Maltese license are also required to pay a yearly oversight charge, the sum of which is based on the magnitude of their deposit liabilities. The lowest charge is EUR 25,000, while the highest is EUR 1,200,000. It serves to cover the costs incurred by the MFSA for regular audits, inspections, and compliance reviews of banks that hold licenses. The annual supervisory fee is calculated as a percentage of the bank's deposit liabilities at the end of the previous year in order to guarantee that contributions are proportionate to the size and scope of the bank's operations.

Roles of the European Central Bank (ECB) and the MFSA in the authorization process

Approval processes from the ECB and MFSA are necessary in order to get a banking license in the eurozone, including Malta. The European Union's strict safety and stability standards are met by banks thanks to this crucial process step. Interaction and collaboration between national regulators and the ECB are also promoted by it.

The role of the European Central Bank

Through the Single Supervisory Mechanism (SSM), the ECB is a key player in the process of licensing banks in the member states of the Eurozone. The ECB is in charge of directly overseeing major credit institutions inside the SSM. In addition, the ECB makes sure that all member nations follow the same norms and procedures, which helps to build a safe and stable banking sector throughout the EU.

The role of MFSA

The principal regulatory and supervisory body for Malta's financial services, including the banking industry, is the MFSA. In the context of Maltese banking licenses, its functions and authority cover a broad spectrum of tasks, from granting licenses to continuing to oversee licensed establishments.

A thorough summary of the main facets of the MFSA's authority and duty is as follows:

Licensing

Every application that has been filed for a license to carry out banking operations in Malta is examined by MFSA. Candidates in this procedure are assessed according to how well they fulfill the specified criteria. The evaluation covers the company's financial stability, the existence of a strong business strategy, the management team's expertise, and the amount of money available. The MFSA issues a license, allowing the right to carry out banking operations in compliance with Maltese legislation, provided all requirements are satisfied.

Supervision

The MFSA continuously monitors banks' activities to make sure they adhere to all relevant laws and regulations. This entails evaluating risk management, transaction transparency, and financial stability. The organization conducts routine audits and inspections to assess the efficiency of risk management systems as well as the operational operations and financial standing of banks. Furthermore, the MFSA is always developing and revising new policies, guidelines, instructions, and directives for licensed businesses as part of its ongoing efforts to enhance and modernize the legal framework pertaining to the banking industry.

Consumer protection

MFSA takes measures to protect the interests of depositors and investors, including monitoring banks' compliance with transparency and fairness requirements towards their clients. The management participates in the process of resolving disputes between banks and their clients, facilitating fair and timely resolution of conflicts.

Anti-Money Laundering

In order to prevent money laundering and the funding of terrorism, the MFSA monitors banks' adherence to AML/CFT regulations. This includes verifying pertinent protocols and control mechanisms.

Cooperation with international regulators

The MFSA actively cooperates with global organizations and regulators to share information, collectively oversee multinational banking groups, and take part in the creation of global financial regulatory standards.

Conclusion

Those who wish to apply for a banking license in Malta must complete a variety of intricate and varied procedures. In addition to creating and delivering an extensive documentation, these responsibilities also entail paying all applicable fees and adhering strictly to business guidelines. High proficiency with local law and knowledge of Malta's regulatory framework are prerequisites for the licensing procedure.

YB CASE presents itself as a trustworthy partner with the ability to give thorough assistance throughout the whole process of acquiring a banking license in Malta. YB CASE ensures a high level of professionalism and productivity in addressing tasks related to licensing Maltese banks because of years of expertise in legal advice and a thorough awareness of the regulatory environment in Malta.

By working with YB CASE, you may reduce risks and speed up the licensing process while making sure that all standards and requirements specified by the MFSA are met. We offer a comprehensive suite of services, ranging from initial consulting and strategy planning to document preparation and filing, along with post-licensing assistance.