Financial Institutions
The Malta Financial Services Authority is responsible for the supervision of entities authorised under the Financial Institutions Act (Cap. 376). These entities, referred to as ‘financial institutions’, fall in two broad categories:
i) Institutions undertaking payment services and/or the issuance of electronic money (more commonly known as ‘payment institutions’ or ‘electronic money institutions’, respectively);
ii) Financial Institutions undertaking other activities such as lending, financial leasing, the provision of guarantees and commitments, foreign exchange services and money brokering.
The Financial Institutions Act, Financial Institutions Rules and other pieces of subsidiary legislation transpose the provisions of the second Payment Services Directive and the second Electronic Money Directive, applicable to authorised payment and electronic money institutions.
The Authority applies a risk-based approach in order to effectively supervise financial institutions. This approach requires the Authority to assess both the system-wide and individual risk posed by each financial institution in order to coordinate its supervisory activities accordingly and allocate its resources to the financial institutions posing the greatest risks.
Those Institutions which are designated as posing the greatest risk are subject to enhanced ongoing supervision which involves:
i) on-site inspections to analyse in detail the different risks, internal control systems, business models or governance of financial institutions;
ii) off-site supervision to continuously monitor the activities of financial institutions through the information which such institutions are required to submit in terms of their legal obligations (such as periodic regulatory returns, financial statements and other documentation submitted).
Financial Institutions
This section provides a list of the main Acts and subsidiary legislation which lay down the framework of the regulatory and supervisory regime applicable to financial institutions. These provide the regulatory structure for the supervision of these entities and include, amongst others, the powers of the MFSA to grant, refuse, cancel and suspend licences issued to financial institutions and to impose administrative penalties on these entities in specific circumstances. The Financial Institutions Act (Chapter 376 of the Laws of Malta), which is the main legislation, also contains enabling clauses allowing the Minister responsible for the regulation of financial services to issue subsidiary legislation as well as the MFSA, as competent authority, to issue Rules to further supplement the provisions in the Act.
Subsidiary Legislation
S.L. 376.02 – Fines and Penalties for Offences Regulations
S.L. 376.03 – Financial Institutions (Fees) Regulations
S.L. 376.04 – Financial Institutions Act (Safeguarding of Funds) Regulations
S.L. 376.06 – Equity Release Financial Products Regulations
S.L. 376.07 – European Passport Rights for Financial Institutions Regulations
S.L. 376.08 – Credit Institutions and Financial Institutions (Payment Accounts) Regulations
Related Legislation
Central Bank of Malta Act (Chapter 204)
Malta Financial Services Authority Act (Chapter 330)
Financial Conglomerates Regulations (S.L. 330.06)
Distance Selling (Retail Financial Services) Regulations (S.L. 330.07)
Credit Institutions and Financial Institutions (Payment Accounts) Regulations (S.L. 371.18)
Prevention of Money Laundering (Chapter 373)
Professional Secrecy Act (Chapter 377)
Consumer Affairs Act (Chapter 378)
Set-Off and Netting on Insolvency Act (Chapter 459)
Financial Collateral Arrangements Regulations (S.L. 459.01)
Other Applicable BRs
BR/01/2020 Application Procedures And Requirements For Authorisation Of Licences For Banking Activities Under The Banking Act 1994
Internet and Electronic Banking Questionnaire
Application for Authority to carry out the Business of Banking in or from Malta
Questionnaire for Qualifying Shareholders other than Individuals
BR/02/2011 Large Exposures for Credit Institutions Authorised Under the Banking Act 1994
BR/03/2012 Own Funds of Credit Institutions Authorised Under the Banking Act 1994
BR/04/2013 Capital Requirements Of Credit Institutions Authorised Under the Banking Act 1994
BR/05/2007 Liquidity Requirements of Credit Institutions Authorised Under the Banking Act 1994
Liquidity Requirements of Credit Institutions authorised under the Banking Act 1994
Annex 2 – Liquidity Maturity Ladder
Annex 3 & 4 – Liquidity Ratio – Deposit Liabilities
Annex 5- Liquid-Asset Requirement
Annex 6 – Declaration Form to be used in filing Annexes 2 and 5 of the Rule
BR/06/2007 Statutory Financial Information To be Submitted By Credit Institutions Authorised Under the Banking Act 1994
Instructions to the Schedule Appendices 1 – 11
BR/07/2014 Publication of Annual Report And Audited Financial Statements of Credit Institutions Authorised Under The Banking Act 1994
BR/08/2012 Capital Adequacy Of Credit Institutions Authorised Under the Banking Act 1994
BR/09/2016 Measures Addressing Credit Risk Arising From the Assessment Of the Quality of Asset Portfolios Of Credit Institutions Authorised Under the Banking Act 1994
BR/10/2013 Supervision On A Consolidated Basis of Credit Institutions Authorised Under The Banking Act 1994
BR/11/2007 Extension Of The Applicability Of The ‘Arm’s Length’ Principle By Credit Institutions Authorised Under The Banking Act 1994
BR/13/2009 Prudential Assessment Of Acquisitions And Increase Of Shareholdings In Credit Institutions Authorised Under The Banking Act 1994
BR/14/2020 Outsourcing By Credit Institutions Authorised Under The Banking Act 1994
Outsourcing by Credit Institutions Authorised under the Banking Act 1994
BR/22/2020 Complaints-Handling Procedures for Credit Institutions Authorised under the Banking Act 1994
Complaints-Handling Procedures for Credit Institutions Authorised under the Banking Act 1994
Superseded FIRs
FIR/01/2011
FIR/01/2020
FIR/01/2019
FIR/02/2011
FIR/03/2011
FIR/04/2015
Security of Internet Payments of Credit, Payment and Electronic Money Institutions
FIR/03/2019
Superseded BRs
BR/14/2019 Outsourcing By Credit Institutions Authorised Under The Banking Act 1994
BR/14/2019 – Outsourcing by Credit Institutions Authorised under the Banking Act 1994
Other BRs Applicable up to 31 December 2013
BR/02/2011 Large Exposures Of Credit Institutions Authorised Under The Banking Act 1994
Large Exposures of Credit Institutions
Appendix 1 – Reporting Schedules
BR/03/2012 Own Funds Of Credit Institutions Authorised Under The Banking Act 1994
Own Funds of Credit Institutions
Appendix 1 – Reporting Schedule
Appendix 2 – Definition of Components Constituting Own Funds
BR/04/2013 Capital Requirements Of Credit Institutions Authorised Under The Banking Act 1994
Appendix 2 – Section I Credit Risk Standardised Approach
Appendix 2 – Section II IRB Approach
Appendix 2 – Section III CRM (Credit Risk Mitigation)
Annex II – Classification of Off-Balance Sheet items
Annex III – Types of Derivatives
Annex IV – Treatment of Interest and foreign exchange instruments
Annex V – Transitional Provisions
BR/07/2013 Publication Of Annual Report And Audited Financial Statements Of Credit Institutions Authorised Under The Banking Act 1994.
BR/08/2012 Capital Adequacy Of Credit Institutions Authorized Under The Banking Act 1994
Capital Adequacy of Credit Institutions Authorized Under the Banking Act 1994
Appendix A – Calculation of Capital Requirements Ratio
Appendix C – The Trading Book and Hedging Exposures
Appendix D – Instruments which qualify for inclusion in the Trading Book
Appendix E – Calculation of Consolidated Capital Requirements Ratio
Appendix F – Business Activities subject to Capital Requirements
Appendix G – Capital Adequacy Rule Summary Schedule
Annex I – Calculating Capital Requirements for Foreign Exchange Risk
Appendix I – A – Calculating the Net Open Position
Appendix I – B – Calculation of the Capital Requirement for Foreign Exchange
Appendix I – C(c-i) – Return of Long Currency Positions
Appendix I – C(c-ii & iii) – Return of Long Currency Positions (Codes)
Appendix I – C(c-iv) Return of Short Currency Positions
Appendix I – C(c-v & vi) Return of Short Currency Positions (Codes)
Appendix I – D – Simple Method for Options (Carve-out)
Appendix I – E – Total Capital Requirements for Foreign Exchange Risk (Return)
Annex II – Calculating Capital Requirements for Settlement and Counterparty Risk
Appendix II – A – Recognised Clearing Houses and Exchanges
Annex III – Calculating Capital Requirements for Position Risk
Appendix III – A – Interest Rate Specific Risk (Return)
Appendix III – B – Interest Rate General Risk Method 1 – Maturity Bands, Risk Weights (Return)
Appendix III – C – Interest Rate General Risk Method 2 – Duration Bands, Risk Weights (Return)
Appendix III – D – The Carve-Out Method for Options
Appendix III – E – Relevant Credit Rating Agencies and Investment Grade Ratings
Appendix III – F – Equity Position Risk (Return)
Appendix III – G – Position Risk Summary (Return)
Annex V – Calculating Capital Requirements for Commodities Risk
Appendix V – A – Maturity Ladder Approach for Commodities Risk (Example)
Annex VI – Calculating Capital Requirements for Large Exposures Risk
Appendix VI – A – Calculation of Incremental Trading Book Capital Requirement (Example)
Annex VII – Use of Internal Models to calculate Capital Requirements
BR/10/2013 Supervision On A Consolidated Basis Of Credit Institutions Authorised Under The Banking Act 1994
Supervision on a Consolidated Basis of Credit Institutions authorised under the Banking Act 1994
BR/12/2013 The Supervisory Review Process Of Credit Institutions Authorised Under The Banking Act 1994
The Supervisory Review Process Of Credit Institutions Authorised Under The Banking Act 1994
Appendix 1 Internal Governance
Annex 2A – ICAAP Report – Recommended Structure
Annex 2B – Technical Criteria on Organisation & Treatment of Risks
Annex 2C – List of Definitions
Annex 2D – Principles on Stress Testing
Annex 2E – Principles for Remuneration Policies
Annex 2F – Principles for the Management of IRRBB
Annex 2G – Principles for the Mgmt of Concentration Risk
Annex 2H – Principles on Risk Management
Annex 2I – Principles for the Management of Operational Risk in Market-Related Activities
Annex 3A – SREP-ICAAP interaction process
Annex 3B – Technical Criteria on SREP
Annex 3C – Prudential Measures
Appendix 4 Obligations of the Authority as Consolidating Supervisor
Directives and Other Rules – For Reference Purposes Only
BR/03/2008 Own Funds of Credit Institutions Authorised Under the Banking Act 1994
BD/04/2002 Solvency Ratio Of Credit Institutions Authorised Under The Banking Act 1994
Solvency Ratio of Credit Institutions
Capital Adequacy Summary Return
Other Capital and Non-Capital Liabilities
Int and For Exchange Rate Related Contracts
BD/06/2005 Statutory Financial Information To Be Submitted By Credit Institutions Under The Banking Act 1994
Statutory Financial Information Directive
In this section you will find the Conduct Rules applicable to credit and financial institutions by the MFSA. These Rules supplement the requirements contained in the Main Legislation and in the Subsidiary Legislation which applies to credit and financial institutions. They address in more detail certain requirements such as disclosures, product oversight and governance, selling processes, management of conflicts of interests. Credit and financial institutions are legally bound to comply with these Rules.
Final List of the Most Representative Services Linked to a Payment Account
European Union Template – Fee Information Document
European Union Template – Statement of Fees
Equity Release Financial Products Rulebook
Equity Release Financial Products Regulations, 2019 – Application Forms
Digital Finance: FinTech and Innovation Circulars
Nature and Art of Financial Supervision
In this section, you will find the Circulars issued by the Authority which are applicable to the conduct supervision of credit institutions. These Circulars are a means of keeping the industry updated mainly on regulatory matters. Circulars may be issued to provide updates and clarifications in relation to requirements emanating from banking – related regulatory requirements (for example the Payments Accounts Regulations); to inform the industry on proposed decisions taken by the MFSA and to inform the industry on any relevant documents published by the European Banking Authority (EBA).
In this section you will find the Consultation Documents issued by the MFSA and which are of interest to credit institutions. These documents are issued to explain to the industry any new regulatory requirements which the Authority may be proposing to implement and the manner in which these will be implemented. During the consultation period, credit institutions will have the opportunity to provide their feedback which the Authority review. Following the consultation period, the Authority may issue the Feedback statement with a summary of the comments received in the course of the consultation period on that particular topic and the final position of the Authority with respect to the matters forming the subject of the consultation.
