Malta Financial Services Industry 

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Financial institutions are regulated by the Financial Institutions Act 1994 (Cap 376 of the laws of Malta). The Malta FSA is the single regulator for investment services and other financial services activity.  It also carries out the supervisory functions.

 

Financial Institutions fall in 2 broad categories:

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1. Institutions undertaking payment services and/or the issuance of electronic money (more commonly known as ‘payment institutions’ or ‘electronic money institutions’, respectively)

2. Financial Institutions undertaking other activities such as lending, financial leasing, the provision of guarantees and commitments, foreign exchange services and money brokering.

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The Financial Institutions Act, Financial Institutions Rules and other pieces of subsidiary legislation transpose the provisions of the PSD 2 and EMD 2. 

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Activities of Financial Institutions 

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1. Lending (including personal credits, mortgage credits, factoring with or without recourse, financing of commercial transactions including forfaiting)

2. Financial leasing

3. Venture or risk capital

4. Payment services

5. Issuing and administering other means of payment in so far as this activity is not covered by point 4 above;

6. Guarantees and commitments

7. 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

8. Underwriting share issues and participation in such issues

9. Money broking

10. Issuing of electronic money.

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Payment Services Provider 

 

 Payment Service Providers (“PSPs”) is a platform that offers the ability to process payments through the internet and a single payment gateway system and it manages the technical connection as well as the relationships with the merchants and the correspondent banks. The initial capital requirement depends on the services it intends to provide and can be between Eur50,000 – Eur125,000. 

 

A payment institution licensed in Malta may undertake the following activities:

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1. Services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account

2. Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account

3. Execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider among which, execution of:

   • direct debits, including one-off direct debits

   • payment transactions through a payment card or a similar device

   • credit transfers, including standing orders

4. Execution of payment transactions where the funds are covered by a credit line for a payment service user among which execution of:

   • direct debits, including one-off direct debits

   • payment transactions through a payment card or a similar device

   • credit transfers, including standing orders

5. Issuing and/or acquiring of payment instruments

6. Money remittance

7. Execution of payment transactions where the consent of the payer to a payment transaction is transmitted by means of any telecommunication, digital or IT device and the payment is made to the telecommunication, IT system or network operator, acting solely as an intermediary on behalf of the payment service user and the supplier of the goods and services

8. Additional Services:

   • The provision of operational and closely related ancillary services such as ensuring execution of payment transactions, foreign exchange services strictly in relation to payment services, safekeeping activities, and storage and processing of data

   • The operation of payment systems (in terms of the Malta Financial Institutions Act, “Payment System” means a funds transfer system with formal and standardised arrangements and common rules for the processing, clearing and/or settlement of payment transactions)

   • Business activities other than the provision of payment services, provided that these do not impair or threaten to impair either the financial soundness of the institution or the ability of the competent authority to monitor the financial institution’s compliance with applicable laws and regulations

   • When payment institutions engage in the provision of payment services, they may only hold payment accounts used exclusively for transactions; any funds received by payment institutions from payment service users with a view to the provision of payment services shall not constitute a deposit or other repayable funds within the meaning of the Banking Act.

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Payment institutions may grant credit related to payment services referred to in paragraphs 4, 5 & 7 above only is satisfying some prescribed conditions.

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Electronic Money Institution

 

Electronic Money Institutions ("EMIs") may issue electronic money and provide other related services.  EMIs can also provide payment services of PSPs, but the EMI is not allowed to receive deposits or other repayable funds from their customers and must use funds exclusively to provide e-wallet functionalities or payment services in exchange for the electronic money.

 

The minimum capital requirements is a follows:

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• Eur50,000 when considered as small EMI which generates average outstanding electronic money less that Eur1 million

• Eur100,000 when considered as small EMI which generates average outstanding electronic money less that Eur2 million

• Eur350,000 for a regular EMI's. 

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In addition to issuing electronic money, EMIs are entitled to engage in any of the following activities:

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1. the provision of certain payment services

2. the granting of credit related to certain payment services. Provided that any such credit shall not be granted from the funds received in exchange of electronic money and held in accordance with the prescribed safeguarding requirements

3. the provision of operational services and closely related ancillary services in respect of the issuing of electronic money or to the provision of payment services such as ensuring execution of payment transactions, foreign exchange services strictly in relation to payment services, safekeeping activities, and storage and processing of data

4. the operation of payment systems

5. business activities other than the issuance of electronic money, having regard to the applicable law regulating such activities.

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