Exercise of EU passporting rights

Passporting of EU and EEA Financial Institutions (other than those providing Payment Services)

A credit institution (other than a financial institution undertaking payment services) which is licenced outside Malta (but is situated within the EEA) may establish a branch in Malta if it proposes to undertake any activities found under the First Schedule to the Financial Institutions Act (with the exception of Articles 4 and 10) and satisfies a number of conditions.

The conditions to be satisfied are:

  1. The parent undertaking or undertakings must be licensed or have an equivalent authorisation as a credit institution in another Member State.
  2. The activities in question are actually carried on within the territory of the Member State where the parent undertaking or undertakings is/are licensed/authorised;
  3. The parent undertaking or undertakings hold(s) 90% or more of the voting rights attached to shares in the capital of the subsidiary financial institution established in the member state;
  4. the parent undertaking or undertakings satisfies/satisfy its home regulatory authority/authorities regarding the prudent management of the subsidiary financial institution and has/have declared, with the consent of the same regulatory authority/authorities, that it/they guarantee(s) the commitments entered into by the said subsidiary; and
  5. the subsidiary financial institution is effectively included, for the activities in question in particular, in the consolidated supervision of the parent undertaking, or of each of the parent undertakings, in accordance with the provisions of Directive 2006/48/EC, the Capital Requirements Directive, in particular for the calculation of the capital requirements, for the control of large exposures and for the purposes of the limitation of holdings.

In such situations the financial institution in question is obliged to notify its home authority in writing before establishing a branch in Malta.

Passporting of EU and EEA Financial Institutions providing Payment Services

On the other hand, a financial institution licensed or holding equivalent authorisation in an EU Member State or EEA State as a payment institution, may provide the activities for which it has been authorised either through the establishment of a branch or the freedom to provide services, including by engaging an agent.

In situations where the payment institution wishes to provide payment services in Malta, it must communicate certain information to its home regulatory authority consisting of the name and head office address of the payment institution and the kind of payment services it intends to provide. In the event that the payment institution would like to establish itself in Malta, it would also need to communicate the: (1) the address of the proposed branch, (2) the names of those responsible for the management of the proposed branch; and (3) the organisational structure of the proposed branch.

If a payment institution wishes to provide payment services in Malta by engaging an agent, the home regulatory authority is bound to provide information related to: (1) the name and head office address of the payment institution; (2) the name and address of the proposed agent in Malta; (3) the kind of payment services the proposed agent intends to provide in Malta on behalf of the payment institution, and, additionally in the case of engaging a legal person established in Malta as an agent in Malta: (4) the names of those responsible for the management of the proposed agent; and (5) the organisational structure of the proposed agent.

In the event that the Malta Financial Services Authority has reasonable grounds to suspect that, through such proposed branch or agent, money laundering or terrorist financing, within the meaning of the Prevention of Money Laundering Act (Cap 373) or Council Directive 2005/60/EC and the Prevention of Money Laundering and Funding of Terrorism Regulations, has been committed or will be attempted, or that the engagement of such agent or establishment of such branch could increase the risk of money laundering or terrorist financing, or in the event that the MFSA holds adverse information relating to the suitability, fitness and properness of the proposed branch or agent, it shall advise the home regulatory authority who may refuse to register the branch or agent, or may withdraw the registration of the branch or agent.

Passporting of other Financial Institutions

In exceptional circumstances, an institution established outside Malta within the EEA  (but does not fall within the requirements discussed above) or a third country may be able to establish a branch in Malta if it can fulfill all the above requirements as well as the home regulatory authority proving to the MFSA that: (1) it is satisfied with respect to the prudential management and overall financial soundness of the applicant and (2) satisfies the MFSA as to the nature and scope of the supervision provided by such home regulatory authority. Nevertheless, in all cases, the MFSA reserves the right to make its own judgment regardless of any assurances provided by the home regulatory authority.

 

EU Passporting Rights

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David Gonzi
David Gonzi
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Lawrence Gonzi
Lawrence Gonzi
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