Passporting a Maltese Banking Licence

Dr Cristina Maria Scerri | 08 Feb 2012

Passporting a Maltese Banking Licence


EU Passporting Rights

Malta, a full member of the European Union ever since its accession on the 1st May 2004, has adopted the relevant EU Directives regulating the banking sector. The Banking Directive[1] which harmonizes the authorization and supervision of credit institutions operating within the EU aims to create a single market by virtue of provisions on the freedom of establishment and the freedom to provide services of credit institutions within the EU single market.

EU Passporting rights entitle credit institutions which are licensed within an EU Member State to establish a branch or provide services, in another Member State or EEA State other than that in which it has its head office.  EU passporting rights may be exercised after following the prescribed notification procedure.  An EU based credit institution which intends to carry on activities with a cross-border element is required to make a notification to its home state regulator that it wishes to passport, either by way of provision of cross-border services or by way of establishment of a branch.  The credit institution would need to apply for a branch passport if it intends to hold a physical presence within the host Member State whilst a cross-border services passport would be required to provide services on a remote basis such as through the internet.

The Maltese Legal Framework for Bank Passporting

The Maltese European Passport Rights for Credit Institutions Regulations[2] regulate the exercise of passporting rights of European and Maltese credit institutions. A credit institution is defined as ‘an undertaking whose business is to receive deposits or other repayable funds from the public and to grant credits for its own account.’[3]

European Credit Institutions

A credit institution which is authorized by a regulatory authority in a Member State of the European Union or the European Economic Area (a “European Credit Institution”) may benefit from the European passport to establish a branch in Malta or provide cross-border services in Malta, without being required to obtain a separate licence from the Malta Financial Services Authority (MFSA) which is the Maltese regulatory and supervisory authority governing the banking sector.

Banks licensed in EU or EEA states referred to as ‘European credit institutions’ may open branches in Malta. A branch is defined as ‘a place of business which forms a legally dependant part of a credit institution and which carries out directly all or some of the transactions inherent in the business of credit institutions’.[4]

A European credit institution must submit a notice to its European regulatory authority in its home Member State or EEA State containing the requisite details in terms of the Capital Requirements Directive. The MFSA is to receive a consent notice from the European credit Institution’s regulatory authority stating that it has given its consent to the credit institution to establish a branch in Malta.[5]

The branch of a European credit institution may commence business in Malta provided it has been informed by the MFSA that it may establish the branch or two months have elapsed from the date when the MFSA received the consent notice from the European credit Institution’s regulatory authority.

A European credit institution intending to provide services in Malta is to provide notice of its intention to the regulatory authority of its home Member State. Services may be provided by means of the cross-border passport once the MFSA has been informed of the intention of the European credit institution to provide services in Malta by the European credit Institution’s regulatory authority.

Maltese credit institutions, that is, credit institutions which are licensed under the Maltese Banking Act and have established their head office in Malta, are entitled to exercise European passporting rights in order to carry on banking activities in a Member State or EEA State other than Malta.

Passporting a Maltese Credit Institution

A Maltese bank which is licensed by the MFSA may benefit from the right of establishing branches or providing cross-border services in all the states of the EU or the EEA without being burdened with additional formalities or licensing requirements in the host State.

A Maltese credit institution intending on establishing a branch in other Member State is required to submit to the MFSA a notice of its intention to establish a branch together with the required accompanying information indicating the Member State in which it plans to establish a branch, a programme of operations, the address of the proposed branch in the host Member State from which documents may be obtained and the names of those responsible for the management of the branch.

The MFSA, once it issues the consent notice, is then bound to the forward the consent notice to the European regulatory authority of the intended host Member State within three months from the receipt of a complete notice of intention to establish a branch from the Maltese credit institution. A Maltese credit institution may commence business through its branch once the European regulatory authority notifies the Maltese credit institution of the host state’s rules with which the Maltese credit institution will be required to comply or if two months have elapsed from the date on which the MFSA has forwarded the consent notice without receipt of any communication from the European regulatory authority.[6]

The EU passporting rights which emerge from the relevant EU Directives and which are incorporated under Maltese law render Malta an ideal platform from where to establish oneself and embark on a cross-border project to provide banking services across the EU and thus benefit from the EU’s Single Market.

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+356 22056111

Dr Priscilla Mifsud Parker

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+356 22056122

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