About the Financial Services Sector in Malta
Financial services is the fastest growing sector of the Maltese economy and accounts for approximately 12 percent of the country’s GDP. Malta has gained recognition as a world-class economic center, attracting key players in the international financial services field. In the 2017-2018 Global Competitiveness Report issued by the World Economic Forum, it was ranked in the top 20 financial service jurisdictions with the soundness of banking institutions being ranked in the top tier from 138 nations.
Malta’s banking sector is amongst the most robust of Europe, boasting high profit margins and above average prudential ratios. Over a ten year period the sector has transformed itself into a distinguished and internationally-renowned banking hub of global reach. Malta is currently home to 24 banks which are a mix of domestic and foreign-owned credit institutions. The diverse composition of the banking sector is a testament to the country’s openness to growth, innovation and foreign investment.
The Maltese banking industry accommodates the need for innovative technologies in everyday services, whilst also complying with strict and evolving regulatory requirements. The country’s expanding economy and influx of foreign interest, especially in the field of FinTech, has led to a growing demand for banks that can thrive in an ever-changing environment
In July 2019, Moody’s raised Malta’s rating to ‘A2’, with the agency highlighting positive economic growth.
The power of a Bank
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).
The ECB follows regulations set out by the European Banking Authority (EBA), thus ensuring that the regulatory requirements of the EU banking industry are harmonized through the implementation of the Capital Requirements Directive (CRDIV) and the Capital Requirements Regulation (CRR). (Read the latest CRD IV — CRR/BASEL III monitoring exercise report / Sept 2017)
The licensing process involves the payment of an application fee, the submission of detailed documentation which substantiates the application, followed by a vigorous and diligent vetting process by the MFSA. The applicant must also satisfy the minimum capital requirement of €5million. If the MFSA is sufficiently satisfied with the business proposal, the supporting information provided, and the applicant passes the fit and proper test, the banking application moves to an ‘in principle’ license stage. An ‘in principle license’ is a transitionary period, that enables the company to follow up on action points highlighted by the regulator before it can become fully licensed. Upon this fulfilment, a license is granted and the entity can be fully operational and can publicly be called a bank. Once licensed, banks are required to maintain high compliance standards, and are subject to constant auditing and reviews.