Banking Licenses in Malta
Banking licenses within Europe are issued by the European Central Bank (ECB). Ongoing supervision of banks considered significant institutions is carried out by the ECB whilst the ongoing supervision of less significant institutions is carried out by the National Competent Authority(in the case of Malta, the MFSA, in the case of UK, FCA; and in the case of Germany, BaFIN). So, beyond country by country supervision, European based banks are further licensed by the European Central Bank (ECB) which follows regulations set out by the European Banking Authority (EBA) which follow the European Union’s banking legislation known as (CRD IV/CRR). In other words all EU banks must follow EU legislations and Basel III monitoring. (Read the latest CRD IV — CRR/BASEL III monitoring exercise report / Sept 2017)
In terms of the actual licensing process; apart from high application costs followed by a vigorous licensing process, along with a minimum capital requirement of €5 Million, a banking application might move to an ‘in principle license’. An ‘in principle license’ is a transitionary period, that enables the company to follow up on action points highlighted by the regulator before it to become fully compliant. Upon this fulfilment a license is granted and the entity can publicly be called a bank. Moving forward once regulated, banks are required to maintain high compliant processes, constant auditing and reviews.
As put correctly so by Chris Skinner:
‘’The reality is that banks and banking is a complicated affair. That’s why it involves so much regulation — five times more regulation applies to banks than the average technology firm’’ Source: TheFinanser — Chris Skinner
Banking Services in Malta. What can a Maltese bank offer its customers?
What a bank is and what can a bank do is articulated in ‘The Banking Act’. According to the ‘The Banking Act, which is Chapter 371, in the Laws of Malta:
‘The “business of banking” means the business of a person who as set out in article 2A accepts deposits of money from the public withdraw-able or repayable on demand or after a fixed period or after notice or who borrows or raises money from the public(including the borrowing or raising of money by the issue of debentures or debenture stock or other instruments creating or acknowledging indebtedness), in either case for the purpose of employing such money in whole or in part by lending to others or otherwise investing for the account and at the risk of the person accepting such money;’ Source: Chapter 371 The banking Act’
For its customers, regulated banks in Malta and the EU can offer a portfolio of services, these typically being:
· Bank accounts
· Overdrafts
· Personal Loans
· Direct Debits
· Payment services
· Wealth Management
It’s worth noting that a banking license within the EU, allows for client’s funds to be protected up to €100,000 under the European Deposit Insurance Scheme. This means that if something were to happen to the bank, that up to €100,000 of your funds would be returned to you in due course.
Follow us on Medium for more articles about Banking. Keep posted for our next article about the regulatory and operational difference between Banks and Electronic Money Institutes (EMIs).
