BANKING SYSTEM OF MALTA

Malta's banking system has undergone rapid development and is continually upgrading its services to complement the accelerated industrial development taking place in Malta. The Central Bank plays a vital role in the implementation of the Government's monetary policies, and its main functions are similar to those of European Central Banks. These include the issue of currency, maintenance of the external reserves and acting as a banker to Government and the commercial banks.

Banking business in Malta is regulated by the Banking Act, 1994, which came into force on 15 November, 1994 and amended during 2002. The law, which replaced the Banking Act, 1970 has adopted European Union directives as the main reference for the regulatory concepts and supervisory practices which it introduced.

The Banking Act, 1994 has introduced a modern regulatory regime with all the flexibility necessary in a modern and dynamic banking environment. To achieve this flexibility, the Act has provided for the appointment of a competent authority responsible to administer the provisions of the Act, particularly as regards regulation and supervision of banks. The Malta Financial Services Authority (MFSA), as the competent authority, is empowered to issue directives to credit institutions to monitor risks and establish other regulatory requirements.

The Financial Institutions Act, 1994 regulates non-bank financial institutions, that is institutions which do not fund their activities through the taking of deposits. The activities of financial institution amongst other activities include lending, financial leasing, venture or risk capital and foreign exchange dealing. The Act authorizes the competent authority so appointed to issue directives to financial institutions for supervisory, regulatory and prudential purposes.

The Malta Financial Services Authority Act, among other provisions, include those that cover the regulation of the remaining offshore banking business which Malta, has stopped registering in 1994. The licenses of banks operating under this regime had expired on September 2004.

The Malta Financial Services Authority (MFSA) was established by law on 23 July 2002. It is a fully autonomous public institution and reports to Parliament on an annual basis. The MFSA has taken over supervisory functions previously carried out by the Central Bank of Malta, the Malta Stock Exchange and the Malta Financial Services Center and is the single regulator for financial services. The sector incorporates all financial activity including banking, investment and insurance. The MFSA also manages the Registry of Companies and has also taken over responsibility as the Listing Authority. The organizational structure of the MFSA ensures that the regulatory and operational functions of the Authority are exercised within strict legal demarcations. The Board of Governors, presided by the Chairman, sets out policy and general direction and is assisted by the Legal and International Affairs Unit. The Director of this Unit is also the Secretary to the Board of Governors. The Supervisory Council, headed by the Director General, is exclusively responsible for issuing licenses and regulation and is composed of the Directors responsible for Banking, Securities, Pensions, Insurance, Company Compliance and Corporate Services. Operations are the responsibility of the Board of Management and Resources composed of the Directors responsible for Business Development, Human Resources, Information Technology and Administration led by the Chief Operations Officer. Co-ordination between these two organs is ensured at Co-ordination Committee level.

Over the past decade, Malta has moved from being an offshore to an onshore jurisdiction. It has completed a program of reforming all its finance sector legislation in line with international best practice and was one of the first six countries in the world to reach an advanced accord on fiscal matters with the Organization for Economic Co-operation and Development (OECD). As a result of this agreement Malta is NOT considered as a tax haven. It is actively involved with the OECD, the EU and the Commonwealth in modeling global regulatory policy.
Malta’s finance industry has benefited significantly from the country’s national policy of moving to the mainstream. Financial services is the fastest growing sector of the Maltese economy and one of the most important employers of trained professional staff.
Creating the MFSA as a single regulator was a structured part of Malta’s long term strategy to create a mainstream finance center in the country. Malta is a jurisdiction that follows and helps develop international best practice.
Finance companies have benefited from a reduction in bureaucracy, streamlined procedures, lower fees and compliance costs and a more consistent implementation of standards. The MFSA is also responsible for consumer education and consumer protection in the financial services sector. This function is vested in the Consumer Complaints Manager.  The MFSA has a staff of over 130 people, consisting of specialist regulators, lawyers, accountants and support staff that are involved in communications and organizational administration.
The consumer therefore has one single point of decision making and policy creation. More importantly, the founding of the MFSA means that Malta now has one skilled, experienced and powerful body seeking to protect consumers whilst encouraging fair and open competition in the financial services sector.

The following banking institutions are currently licensed in Malta:

Akbank T.A.S.
APS Bank Limited
Bank of Valletta plc
BAWAG Malta Bank Ltd
Disbank Malta Limited
Erste Bank (Malta) Limited
First International Merchant Bank plc
HSBC Bank Malta plc
HSBC Home Loans (Malta) Limited
Investkredit International Bank plc
Izola Bank Limited
Lombard Bank Malta plc
Raiffeisen Malta Bank plc
Sparkasse Bank Malta plc
Turkiye Garanti Bankasi A S
Volksbank Malta Limited