Financial Institutions

Financial Institutions

Financial Institutions can be described as entities which regularly or habitually acquire holdings or undertake the carrying out of any prescribed activities such as lending, finance, leasing, trading in financial instruments, money brokering, the issuing of guarantees and underwriting of share issues amongst others. What differentiates a financial institution from a bank or credit instruction is the fact that financial institutions do not take deposits from funds repayable to the public.

Financial Institutions in Malta

The main legislative framework which regulates financial institutions in Malta is the 1994 Financial Institutions Act (Chapter 376 of the Laws of Malta). The Act transposes the provisions of the EU Payment Services Directive (2007/64/EC) and Electronic Money Directive (Directive 2009/110/EC).

Essentially, the act considers any person who regularly or habitually provides and executes payment services in relation to banknotes, coins, scriptural money and electronic money qualifies as a payment institution, more precisely Payment Services Providers (PSPs) and Electronic Money Institutions (EMIs).

The Malta Financial Services Authority (MFSA) is the regulator responsible for the licensing, regulation and supervision of all financial services operating in or from Malta, thus it specifically regulates payment institutions and electronic money institutions which are respectively required to obtain a licence to provide and execute payment services and issue electronic money respectively.

Whilst keeping an open mind in order to allow a certain degree of flexibility, the MFSA requires the highest standards of probity and honesty and it does so by setting up a meticulous and detailed licensing process in order to ensure that only serious applicants are granted a licence. This fosters a professional environment for financial institutions which gives Malta licensed financial institutions added reputability for being credible and dependable.

Malta Payment Service Providers (PSPs)

Malta has become a destination of choice for the set-up of Payment Server Providers (PSPs), attracting a number of PSPs with low operational costs and a competitive fiscal environment, a highly-skilled English speaking workforce, a sound ICT structure, as well as the ability to offer payment services cross-border throughout the EU on the basis of a Malta Payment Services licence without the need for further licences or authorisation.

PSPs may engage in various activities, including the execution of payment transactions, issuing and/ or acquiring of payment instruments, as well as money remittance. Like other financial institutions, PSPs are not allowed to receive deposits or other repayable funds from the public and must use funds exclusively to provide payment services.

Chetcuti Cauchi’s dedicated financial services regulatory team provides assistance to potential payment services operators with their local set up procedures, assisting clients with the preparation of all application documents, managing correspondence with the local regulator and advising on regulatory, tax and corporate matters. Moreover we provide practical ‘on the ground’ knowledge of the jurisdiction and introduce clients with key contacts in their field.

Electronic Money Institutions (EMIs)

With its state-of-the art telecoms infrastructure, as well as over 250 i-gaming companies established on its shores, Malta has attracted a number of Electronic Money Institutions (EMIs). These have either established operations in Malta or passported to Malta from other EU Member States. The country’s licence for EMIs offers the opportunity to start operations with a lower capital requirement when compared to a full banking licence, making them a much more cost-effective vehicle.

Financial Institutions in Cyprus

As a European Member State, Cyprus also adheres to the Payment Services Directive, which was transposed into the national legislation of Cyprus as per the Payment Services Law 128(1) of 2009. The Central Bank of Cyprus is the competent authority which grants authorisation to PSPs and also acts as a regulator and supervisory body.

Similarly, the Central Bank of Cyprus acts as the licensing and supervisory body of Electronic Money Institutions which are regulated by the Electronic Money Law (2012) and the Electronic Money Directive

At Chetcuti Cauchi we have garnered an excellent know-how of the industry which allows us to provide excellent advisory service with respect to the set-up and licensing, as well as post-license compliance support for financial institutions in Cyprus.

Our Financial Institutions Practice

Our fully-fledged Financial Institutions team is comprised of legal, accounting and tax and finance professionals and is fully geared towards providing assistance and advice with respect to general prudential requirements, including initial capital, own funds and safeguarding requirements as set out in the applicable local legislation. Furthermore, it provides both pre-licensing and post-licensing legal services. At the pre-licensing stage, prospective financial institutions are advised as to the statutory license requirements to be fulfilled relative to the application procedures and requirements for authorisation under the respective legislation, and are granted legal guidance in order to satisfy the statutory licensing criteria.

At post-licensing stage, assistance is given  in order to ensure compliance with the statutory obligations binding license holders and the statutory notification and authorisation requirements which must be satisfied vis-à-vis the regulator.

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