              FINANCIAL INSTITUTIONS  g CAP. 376.        1
CHAPTER 376
FINANCIAL INSTITUTIONS ACT
To regulate the business of financial institutions.
15th November, 1994
 ACT XXII of 1994 as amended by Acts XXIV and XXV of 1995, XVII of
2002 and IV of 2003.
PRELIMINARY
Short title.
Interpretation. 
Amended by:
XXIV. 1995.362; 
XXV. 1995.434;
XVII. 2002.203.
2. (1) In this Act, unless the context otherwise requires -
"body corporate" means a body of persons having a legal
personality distinct from that of its members;
"branch" means premises of a financial institution, other than its
head office, from which the business of the institution is
undertaken;
Cap. 204.
"Central Bank" means the Central Bank of Malta as defined by
the Central Bank of Malta Act;
"close links" refers to a situation in which two or more persons
are linked:
( a ) by participation, through direct ownership or by way
of control of twenty per centum or more of the voting
rights or capital of a body corporate; or 
( b ) by control, through the relationship between a parent
company and subsidiary company; or 
( c ) permanently to one and the same person through a
control relationship;
Cap. 386.
"company" means a limited liability company constituted in
Malta in accordance with the Companies Act or any law which may
from time to time be in force, or a company incorporated outside
Malta, provided that such company if not incorporated in Malta
would qualify to be so incorporated under the laws of Malta;
"competent authority" means the body referred to in article
12(2);
"control" is the power to determine the financial and operating
policies of a body corporate; the power to appoint or remove the
majority of the members of the board of directors or equivalent
governing body and the power to cast the majority of votes at a
meeting of the board of directors or equivalent body;
"controller" is a person who, alone or together with others,
exercises control in relation to a body corporate;
"court" means the Civil Court, First Hall;
"credit facility" means the lending of a sum of money by way of
  2      CAP. 376. h                FINANCIAL INSTITUTIONS 
an advance, overdraft or loan or any other line of credit including
discounting of bills of exchange and promissory notes, guarantees,
indemnities, acceptances, bills of exchange endorsed  pour aval  and
financial leasing;
"director" includes an individual occupying the position of
director of a company, by whatever name he may be called,
empowered to carry out substantially the same functions in relation
to the direction of the company as those carried out by a director
and in respect of a company registered or incorporated outside
Malta includes a member of a local board or agent or representative
of that company;
"equity share" means a nominal share in a company when the
shareholding entitles the shareholder to a right to vote, to profits
available to shareholders for distribution and to assets available for
distribution on a winding up of the company, and "equity
shareholding" shall be construed accordingly;
"financial institution" means any person who regularly or
habitually acquires holdings or undertakes the carrying out of any
activity listed in the Schedule for the account and at the risk of the
person carrying out that activity:
Cap. 371.
Provided that these activities are not funded through the
taking of deposits or other repayable funds from the public as
defined in the Banking Act: 
Cap. 370.
Provided further that this Act shall not apply to any of the
above activities which is regulated under the Investment Services
Act;
"financial institutions directive" means a directive issued by the
competent authority to regulate financial institutions;
Cap. 330.
"Financial Services Tribunal" or "Tribunal" means the Financial
Services Tribunal established under the Malta Financial Services
Authority Act;
"group of companies" means companies having a common
holding company, including the holding company;
Cap. 386.
"holding company" or "parent company" has the same meaning
as is assigned to the term "parent company" in the Companies Act;
"licence" in relation to the business of a financial institution
means a licence granted under this Act;
"Minister" means the Minister responsible for finance;
Cap. 373.
"money laundering" has the same meaning as is assigned to it by
the Prevention of Money Laundering Act;
"officer", in relation to a company, includes a director, partner,
manager or company secretary or any person effectively acting in
such capacity whether formally appointed or not;
"own funds" has the same meaning as is assigned to it by a
financial institutions directive;
"qualifying shareholding" means a direct or indirect equity
shareholding of at least ten per cent of the equity shares of a
              FINANCIAL INSTITUTIONS  g CAP. 376.        3
company; provided that where the rights held as to the percentage
of votes, to profits available for distribution and to rights to assets
available for distribution on a winding up in respect of such equity
shares are not identical, the highest percentage figure shall be
deemed to be the percentage of equity shares held, and "qualifying
shareholder" shall be construed accordingly;
Cap. 386.
"reconstruction" has the same meaning as is assigned to it by the
Companies Act;
Cap. 386.
"subsidiary" has the same meaning as "subsidiary undertaking"
in the Companies Act;
"trade bills" means bills of exchange and promissory notes.
 (2) A person shall not be deemed to be a financial institution by
reason of the fact that that person either -
( a ) belongs to a group of companies and provides any of
the activities listed in the Schedule to this Act to
companies which are not banks or financial
institutions and which belong to the same group of
companies; or
( b ) draws and issues trade bills in the normal course of
business under hire purchase agreements, or under
sales on credit where trade bills are drawn in respect of
the price due:
Provided that where a person is not deemed to be a financial
institution by virtue of the provisions of paragraph ( a ) and ( b ), such
person shall, before commencing his activities, request a
confirmation from the competent authority that he is deemed to be
exempt from the requirement of a licence under article 3.
LICENSING REQUIREMENTS
Licences for 
business of 
financial 
institutions.
3. (1) No business of a financial institution shall be
transacted in or from Malta except by a company which is in
possession of a licence granted under this Act by the competent
authority.
(2) In the event of reasonable doubt as to whether an activity
constitutes the business of a financial institution, or whether the
business of a financial institution is or is not being transacted in or
from Malta by any person, the matter shall be conclusively
determined by the competent authority.
(3) The granting of a licence shall be subject to an annual fee
as the competent authority may determine from time to time.
Application for a 
licence.
Amended by:
XVII. 2002.204.
4. (1) Any company desirous of commencing the business of
a financial institution in Malta shall, before commencing any such
business, apply in writing to the competent authority for a licence
under this Act. 
 (2) All applications for a licence shall be in such form and
accompanied by such information and shall conform with such
conditions as shall be prescribed from time to time by a financial
  4      CAP. 376. h                FINANCIAL INSTITUTIONS 
institutions directive and an application may only be withdrawn by
written notice to the competent authority at a time before it has
been granted or refused.
(3) The competent authority shall have the power to require
any person to provide such information as it shall deem necessary
for the purposes of determining an application for a licence or for
the purposes of determining whether to restrict or revoke a licence.
Issuing of a 
licence.
Amended by:
XVII. 2002.205.
5. (1) No company shall be granted a licence unless -
( a ) its own funds whether in Maltese liri or in another
currency acceptable to the competent authority are
equal to such amount established by the competent
authority as appropriate for the activities to be
undertaken by the applicant;
( b ) there are at least two individuals who will effectively
direct the business of the financial institution in Malta;
( c ) all qualifying shareholders, controllers and all persons
who will effectively direct the business of the financial
institution are suitable persons to ensure its prudent
management;
( d ) the competent authority is satisfied that, where there
are close links between that company and another
person or persons, such links do not through any law,
regulation, administrative provision or in any other
manner prevent it from exercising effective
supervision of that company under the provisions of
this Act or any financial institutions directive:
Provided that -
 (i) in respect of paragraphs ( a ), ( b ) and ( c ), if the
applicant is a financial institution authorised in
another country, it has its head office in the
same country where it is registered and, or
licensed;
(ii) in respect of paragraph ( d ), the company shall,
after being licensed under this Act, inform the
competent authority forthwith of any change in
circumstances concerning the application of the
said paragraph ( d ) and shall be further required
to provide the competent authority with
information necessary to monitor compliance
with the conditions referred to in the said
paragraph ( d ) on a continuous basis.
(2) The competent authority shall determine each application
for a licence within three months of receipt of the application or, if
the application does not comply with article 4(2) or additional
information is required, within three months of compliance with the
said subarticle or the furnishing of the information as the case may
be, whichever be the later. In any event an application shall be
determined within six months of its receipt.
(3) The competent authority may grant or refuse to grant a
              FINANCIAL INSTITUTIONS  g CAP. 376.        5
licence applied for under this Act and where it refuses an
application it shall inform the applicant in writing with the reasons
for the refusal.
(4) In granting a licence the competent authority may subject
an institution to such conditions as it may deem appropriate and
having granted a licence it may, from time to time, vary or revoke
any condition so imposed or impose new conditions.
(5) Where the competent authority for any reason fails to
determine an application for a licence within the time prescribed
under subarticle (2), such fact shall be deemed to constitute a
refusal to grant a licence.
(6) A company, after being licensed under the Act, shall not
allow its own funds to fall below the amount established in its
licence or as may be required by the competent authority from time
to time, unless such a reduction is of a temporary nature and is
effected after having obtained the prior approval of the competent
authority.
Restriction and 
revocation of a 
licence.
Amended by:
XVII. 2002.206.
 6. (1) A licence shall automatically cease to have any effect
if the holder -
( a ) renounces the licence, or
( b ) does not commence business pursuant to the licence
within six months of its issue or within such other
period of time as may be specified in the licence; or
( c ) is declared bankrupt or goes into liquidation or makes
a composition with its creditors or is otherwise
dissolved; or
( d ) has ceased to operate as a result of a merger with
another financial institution; or
( e ) is a branch of an institution incorporated outside Malta
and the competent authorities in the country of
incorporation withdraw the authorisation to the
institution.
(2) The competent authority may impose restrictions on a
licence or may revoke a licence in any of the following
circumstances:
( a ) if any document or information accompanying an
application for a licence or any information given in
connection therewith is false in any material particular
or if the holder of a licence conceals from, or fails to
notify to the competent authority any document or
information or change therein which it was its duty to
reveal or notify under this Act; or
( b ) if the holder ceases to carry on the business of a
financial institution in Malta for more than three
months; or
( c ) if the holder fails to comply with any of the provisions
of this Act or with the conditions under which the
licence is granted; or
  6      CAP. 376. h                FINANCIAL INSTITUTIONS 
( d ) if the holder no longer possesses sufficient own funds;
or
( e ) if the holder is likely to become unable to meet its
obligations; or
( f ) if the holder has insufficient assets to cover its
liabilities; or
( g ) if the competent authority considers that, by reason of
the manner in which the financial institution is
conducting or proposes to conduct its affairs, or for
any other reason, the integrity of the country’s
financial system is threatened.
 (3) Restrictions imposed by the competent authority pursuant
to subarticle (2) shall be such restrictions as the competent
authority shall consider appropriate for the proper compliance by
the financial institution with the provisions of this Act and the
conditions, if any, of its licence and for the protection of the
integrity of the country’s financial system and may include
(without prejudice to the generality hereof) -
( a ) the removal of any officer of the financial institution
or the replacement of any officer by such person as the
competent authority may designate;
( b ) the requirement for any person who directly or
indirectly possesses a qualifying shareholding in the
financial institution to divest himself of all or part of
that holding;
( c ) the requirement for the financial institution to take or
refrain from taking any action;
( d ) the requirement that the financial institution be
prohibited from undertaking any transaction or
transactions or any activity listed in the Schedule to
this Act or be permitted to undertake any transaction
or transactions or any activity listed in the Schedule to
this Act only upon such terms as the competent
authority may prescribe.
 (4) The competent authority shall have the power to vary or
remove any restrictions imposed under this article.
(5) A licence granted to a branch of an institution incorporated
outside Malta may only be revoked after consultation with the
competent authorities of the country of incorporation, unless the
competent authority decides that the matter is urgent or that there
are circumstances which make such prior consultation
inappropriate.
 (6) Upon the restriction or revocation of a licence of a financial
institution incorporated in Malta, the competent authority shall
inform the competent authorities of the country of any foreign
states in which the financial institution or its subsidiaries are
carrying on any activity under the Schedule to this Act or any other
activity as the competent authority may deem complementary to the
institution’s activities in Malta.
              FINANCIAL INSTITUTIONS  g CAP. 376.        7
(7) Where the competent authority is satisfied that the
circumstances so warrant, it may at any time make public any
action it has taken under this article.
Notification of 
proposed variation, 
restriction or 
revocation of a 
licence.
Amended by:
XVII. 2002.207.
7. (1) Where the competent authority intends -
( a ) to vary any condition to which the licence is subject or
to impose a condition thereon; or
( b ) to restrict or revoke a licence or to vary any restriction
thereon,
it shall serve written notice of its intention on the financial
institution and shall specify the grounds upon which it intends to
take such action.
 (2) Every notice given under subarticle (1) shall specify a
period in which the financial institution shall be entitled to make
representations to the competent authority as to why such action
should not be taken.
(3) Unless the competent authority decides that the matter is
urgent, it shall not impose or vary any restriction or condition or
revoke a licence before the expiry of the period as set under
subarticle (2).
Changes in 
information.
Added by:
XVII. 2002.208.
7A. A financial institution licensed under this Act shall provide
the competent authority with particulars of any changes in the
information provided under this Act as soon as such financial
institution becomes aware of such change.
OBLIGATIONS OF LICENCE HOLDERS AND OTHERS
Opening of 
branches.
8. (1) A financial institution shall inform the competent
authority in writing before opening a new branch in Malta.
(2) Unless with the written consent of the competent authority,
no financial institution incorporated in Malta may open a branch
agency or office, or set up or acquire any subsidiary in any place
outside Malta.
Agency 
arrangements.
Added by:
XVII. 2002.209.
8A. (1) No company licensed under this Act shall enter into
agency arrangements, with third parties, unless it has obtained the
prior written approval of the competent authority; and a person who
is appointed as agent of a company licensed under this Act shall
only act as agent:
(i) in respect of those activities for which the
financial institution to which he will act as
agent, is licensed under this Act;
(ii) to not more than one person licensed under this
Act.
(2) In granting its approval under subarticle (1), the competent
authority may:
( a ) subject the company licensed under this Act and the
person who will be appointed as agent to such
conditions as it may deem appropriate and having
  8      CAP. 376. h                FINANCIAL INSTITUTIONS 
granted its approval it may from time to time, vary or
revoke such approval or any condition so imposed or
impose new conditions;
( b ) subject the person who will be appointed as agent to
any of the obligations imposed on the company
licensed under this Act.
(3) The competent authority may grant or refuse to grant the
approval applied for under this Article and if it refuses to grant
approval it shall inform the licensed financial institution in writing
of the reasons for the refusal:
Provided that the competent authority shall refuse to grant
its approval for the establishment of an agency agreement where
the competent authority is:
( a ) of the opinion that the agency agreement would give
the licensed financial institution a competitive
advantage on other licensed financial institutions
which could give rise to an obstacle to the
maintenance of effective competition and choice; or
( b ) of the opinion that the activities to be performed by the
agent could be performed by the licensed financial
institution through its head office, or a branch or
subsidiary; or
( c ) not satisfied that the person who will be appointed as
agent is competent to provide the activities which will
form part of the agency agreement.
Notification of new 
or variation in 
participation or 
control.
Amended by:
XVII. 2002.210.
9. (1) If -
( a ) any person takes or intends to take any action to
acquire or dispose of a qualifying shareholding in a
financial institution or to increase or reduce such
qualifying shareholding so that the proportion of the
voting rights or of the share capital held by him in that
financial institution reaches, exceeds or falls below 20
per cent, 33 per cent or 50 per cent or so that the
financial institution becomes or ceases to be the
subsidiary of such person; or
( b ) any financial institution takes or intends to take action
to sell or dispose of its business or any significant part
thereof, merge with any other company, undergo any
reconstruction or vary its nominal or issued share
capital or effect any material change in voting rights, 
without obtaining the prior consent of the competent authority or,
alternatively, if after having obtained such consent it subsequently
appears to the competent authority that any of these actions is
operating, or is likely to operate, to the detriment of the prudent
and sound management of the financial institution, then, without
prejudice to any other penalty which may be imposed under this
Act, the competent authority shall have the power to make an order:
(i) restraining the person or financial institution
from taking or continuing the action;
              FINANCIAL INSTITUTIONS  g CAP. 376.        9
(ii) declaring the action to be void and of no effect;
(iii) requiring the person or financial institution to
take such steps as may be necessary to restore
the position existing immediately before the
action was taken;
(iv) restraining the person or financial institution
from exercising any rights which the action
would, if lawful, have conferred upon them,
including the right to receive any payment or to
exercise any voting rights attaching to the shares
acquired;
(v) restraining the person or financial institution
from taking any similar action or any other
action within the categories set out in paragraphs
( a ) and ( b ).
(2) If, as a result of an acquisition of shares in a financial
institution, the financial institution in which a person proposes to
acquire the shareholding would become a subsidiary or be subject
to the control of the person acquiring those shares, it shall be
within the discretion of the competent authority to consider any
request made by such person for the consent of the competent
authority under the provisions of this article to constitute a request
to apply for a licence to conduct the business of a financial
institution under the provisions of this Act.
Cap. 345. 
(3) Subarticle (1) shall apply whether or not any of the relevant
shares are shares listed on a recognised stock exhange under the a
recognised  stock exchange under the Financial Markets Act.
(4) Where a person intends to take any action as set out in
subarticle (1)( a ) and ( b ), he shall before taking such action notify
the competent authority. The competent authority shall within two
months of receiving such notification give its consent or otherwise
and if that period elapses without the competent authority having
given its decision such fact shall be deemed to be a refusal.
(5) ( a ) A financial institution shall notify to the competent
authority full particulars of any person who is
proposed to become a controller or director of the
financial institution or any person who is proposed to
cease to be a controller or director of the financial
institution.
( b ) If the competent authority is of the opinion that any
person who is or is proposed to become a controller or
director of a financial institution is not a suitable
person to be a controller or director, the competent
authority may make an order requiring such a person
to cease to be a controller or director, or restraining
such a person from becoming a controller or director.
Prohibited 
transactions.
Amended by:
XVII. 2002.211.
10. (1) A financial institution shall not -
( a ) grant any credit facility against the security of its own
shares or against any other securities issued by the
financial institution itself or against any shares or any
  10      CAP. 376. h                FINANCIAL INSTITUTIONS 
other securities of another body corporate in which the
financial institution has control;
( b ) grant or permit to be outstanding credit facilities or
extend other services under terms and conditions more
favourable than the financial institution would have
otherwise applied -
(i) to any one of its directors or their spouses
whether jointly or severally as well as with third
parties:
Provided that, in any case where unsecured
credit facilities are granted, these shall not in the
aggregate exceed the sum of ten thousand
Maltese liri;
(ii) to any person in whom or in which the financial
institution or any one or more of its directors is
interested as a director, partner, manager, agent
or member or to any person of whom or of which
any one or more of the financial institution's
directors is a guarantor;
(iii) to any body of persons in which the financial
institution or any one or more of its directors
jointly or severally maintains control, not being
itself a financial institution or the parent
undertaking of the financial institution, a
subsidiary of this parent undertaking or a
subsidiary of the financial institution;
and where the competent authority has reason to
believe that such favourable terms and conditions have
been applied, it shall have the power to require the
financial institution to rectify the position and if the
financial institution fails to take the necessary action
to rectify the position as required, the competent
authority shall take such measures as it deems
appropriate until the position is rectified;
( c ) grant to or permit to be outstanding in respect of any
officer, other than a director, or any employee,
unsecured credit facilities which in the aggregate
exceed twelve months’ emoluments of such officer or
employee.
 (2) In subarticle (1)( b )   and   ( c ) the expression "unsecured credit
facilities" shall mean credit facilities made without security or, in
respect of any credit facility made with security, any part thereof
which at any time exceeds the market value of the assets
constituting that security, or where the competent authority is
satisfied that there is no established market value, on the basis of a
valuation approved by the competent authority itself.
Financial 
institutions unable 
to meet 
obligations.
11. Notwithstanding any investigation provided for in this Act,
( a ) where a financial institution considers that it is likely
to become unable to meet its obligations it shall
forthwith inform the competent authority and the
              FINANCIAL INSTITUTIONS  g CAP. 376.        11
Central Bank in writing;
( b ) where the competent authority becomes aware that a
financial institution is likely to become unable to meet
its obligations it shall forthwith inform the Central
Bank in writing;
( c ) where the Central Bank becomes aware that a financial
institution is likely to become unable to meet its
obligations it shall forthwith inform the competent
authority in writing.
REGULATORY AND INVESTIGATORY POWERS
Powers and duties 
of the Minister.
Amended by:
XVII. 2002.212.
12. (1) The Minister shall by order in the Gazette nominate a
body to be the competent authority for the purposes of this Act to
carry out the functions of the competent authority under this Act.
Such body shall be nominated for such period as the Minister may
determine and the Minister shall have the power at any time to
prolong, renew or terminate such nomination by order in the
Gazette.
 (2) The Minister may make regulations as may be required for
carrying into effect any of the provisions of this Act and may
amend or revoke such regulations.
Powers and duties 
of the competent 
authority.
13. (1) It shall be the duty of the competent authority to carry
out the functions prescribed by this Act and to ensure that financial
institutions carrying on business in Malta comply with this Act,
regulations and directives issued under this Act and with the
conditions of their licences. In pursuance of that duty the
competent authority shall at all times afford such co-operation to
the Central Bank as the Central Bank may require in the discharge
of its duties.
(2) The competent authority may make financial institutions
directives as may be required for carrying into effect any of the
provisions of this Act. The competent authority may amend or
revoke such financial institutions directives.
(3) Financial institutions directives and any amendment or
revocation thereof shall be officially communicated to all financial
institutions and the competent authority shall make copies thereof
available to the public. 
(4) Financial institutions directives made under this Act may
provide for different regulatory requirements to be applicable to
different classes of financial institutions, licensed under this Act, to
ensure that business is conducted in a prudent manner.
Power of 
competent 
authority to require 
information.
Amended by:
XVII. 2002.213.
14. (1) A financial institution shall submit to the competent
authority such information and statements relating to its branches
in or outside Malta as the competent authority may require in the
discharge of its duties under this Act or any other law.
 (2) All statements required under subarticle (1) shall be
submitted in such form and at such periods the competent authority
may from time to time prescribe by financial institutions directives.
  12      CAP. 376. h                FINANCIAL INSTITUTIONS 
(3) The provisions of this article shall also apply to all
branches, agencies or offices in Malta of a financial institution
which is not incorporated in Malta.
(4) A financial institution shall submit to the Central Bank such
information as the Central Bank may require in the discharge of its
duties and the Central Bank may enquire into and ask for
clarifications of any information so submitted.
(5) All statements and other information furnished by any
financial institution under subarticle (1) and (4) shall be regarded
as secret and confidential except as between that financial
institution and the competent authority or the Central Bank, as the
case may be, save that the competent authority shall furnish such
information under this article as may be required by the Minister or
the Central Bank and shall inform the Minister and the Central
Bank if at any time in its opinion there is concern regarding the
state of affairs of that financial institution.
(6) The competent authority may, by notice in writing, require
a financial institution or any of its officers to do all or any of the
following:
( a ) to furnish to the competent authority, at such time and
place and in such form as it may specify, such
information and documentation as it may require and
of such description as may be so specified in the
notice;
( b ) to furnish to the competent authority any information
or documentation aforesaid verified in such manner as
it may specify;
( c ) to attend before the competent authority, or before a
person appointed by it, at such time and place as it
may specify, to answer questions and provide
information and documentation as the competent
authority may reasonably require for the performance
of its functions under this Act.
(7) The competent authority may take copies of any documents
furnished or provided under this article.
(8) Where the person required to provide information or
documentation under this article does not have the relevant
information or documentation, he shall disclose to the competent
authority where, to the best of his knowledge, that information or
documentation is, and the competent authority may require any
person, whether indicated as aforesaid or not, who appears to it to
be in possession of that information or documentation, to provide
it.
(9) A statement made and documentation provided in
pursuance of any requirement under this article may be used in
evidence against the person making the statement or providing the
documentation as well as against any person to whom they relate.
(10) Where the competent authority has appointed a person
under subarticle (6)( c ), such person shall, for the purposes of
              FINANCIAL INSTITUTIONS  g CAP. 376.        13
carrying out his functions under his appointment, have all the
powers conferred on the competent authority by this article and a
requirement made by him shall be deemed to be and have the same
force and effect as a requirement of the competent authority.
(11) The competent authority may require a person it has
appointed under subarticle (6)( c ) to submit a report in such form as
it may specify.
(12) The competent authority may also exercise the powers
conferred by subarticles (1) and (6) in relation to any person who is
or has at any relevant time been -
( a ) a holding company, subsidiary or a company which is
a connected person of that financial institution;
( b ) a subsidiary or a company which is a connected person
of a holding company of that financial institution;
( c ) a holding company of a subsidiary of that financial
institution;
( d ) a controller of that financial institution; or
( e ) a qualifying shareholder of that financial institution,
and the provisions of this article shall apply to that person.
(13) The competent authority may also exercise its powers under
this article where it has reasonable grounds for suspecting that a
person is guilty of committing any offence under this Act.
Appointment of 
inspectors.
Amended by:
XVII. 2002.214.
  15. (1) The competent authority may, whenever it deems it
necessary or expedient, appoint an inspector or inspectors to
investigate and report on the affairs of a financial institution.
(2)An inspector appointed under subarticle (1) -
( a ) may also, if he thinks it necessary or expedient for the
purposes of that investigation, investigate the affairs
of any other person as prescribed under article 14(12);
( b ) shall have and may exercise all the powers conferred
on the competent authority by article 14, and any
requirement made by him shall be deemed to be and
have the same force and effect as a requirement of the
competent authority;
( c ) may, and if so directed by the competent authority
shall, make interim reports and on the conclusion of
his investigation shall make a final report to the
competent authority.
(3) The competent authority shall have the power to order that
all expenses of, and incidental to, an investigation pursuant to this
article be paid by the persons or financial institution concerned.
Right of entry.
authority, on producing, if required, evidence of his authority, may
enter premises occupied by a person on whom a notice has been
served under article 14 or whose affairs are being investigated
under article 15, for the purpose of obtaining there the information
  14      CAP. 376. h                FINANCIAL INSTITUTIONS 
or documents required by that notice, or otherwise for the purpose
of the investigation, and of exercising any of the powers conferred
by the said articles.
(2) Where any officer, employee or agent of the competent
authority has reasonable cause to believe that if such notice as is
referred to in subarticle (1) were served it would not be complied
with or that any documents to which it could relate would be
removed, tampered with or destroyed, such person may, on
producing, if required, evidence of his authority, enter any
premises referred to in subarticle (1) for the purpose of obtaining
there any information or documents specified in the authority,
being information or documents that could have been required
under such notice as is referred to in subarticle (1).
 (3) For the purposes of any action taken under the provisions of
this article, the competent authority may request the assistance of
the Commissioner of Police, who may for such purpose exercise
such powers as are vested in him for the prevention of offences and
the enforcement of law and order:
Provided that where an entry as is mentioned in this article
involves premises that are occupied for the purpose of habitation,
such entry shall be carried out in the presence of an officer of the
Police of a rank not below that of inspector and shall moreover not
take place between nine in the evening and five in the morning.
Power of the 
Central Bank to 
take control of 
financial 
institutions.
Amended by:
XVII. 2002.215.
17. (1) If, whether from any report made under article 14 or
article 15 or otherwise, it appears to the competent authority, that
any of the circumstances indicated in article 6(2) apply, the
competent authority, after consulting with the Central Bank, may,
without prejudice to the powers to impose restrictions or revoke a
licence under the provisions of article 6(2) -
( a ) require the financial institution forthwith to take such
steps as the competent authority may consider
necessary to remedy or rectify the matter;
( b ) appoint a competent person to advise the financial
institution in the proper conduct of its business;
( c ) appoint a competent person to take charge of the assets
of the financial institution or any portion of them for
the purpose of safeguarding the interests of the
integrity of the financial system in Malta;
( d ) appoint a competent person to assume control of the
business of the financial institution and either to carry
on that business or to carry out such other function or
functions in respect of such business or part thereof, as
the competent authority may direct;
( e ) require the financial institution to wind up its business
or to wind up its business in Malta;
( f ) fix the remuneration to be paid by the financial
institution to any competent person appointed under
this subarticle.
 (2) Upon receipt of a report or information otherwise received
              FINANCIAL INSTITUTIONS  g CAP. 376.        15
as is mentioned in subarticle (1), the competent authority shall
inform the Central Bank authority on whether it intends to take any
action pursuant to such report and of any action it intends to take
thereon.
AUDITORS
Appointment and 
duties of auditors.
Amended by: 
XXV. 1995.434;
XVII. 2002.216.
18. (1) ( a ) Every financial institution shall each year appoint
an approved auditor or auditors whose duty shall be to report on the
financial statements of the financial institution examined by them
and on all financial statements prepared by the financial institution.
Cap. 386.
( b ) For the purpose of this article an approved auditor
shall be a person who is qualified to be an auditor in accordance
with the Companies Act:
Provided that in the case of a financial institution not
incorporated in Malta the competent authority may grant exemption
from paragraph ( b ) subject that the same does not materially detract
from the main objects of this article.
(2) If a financial institution fails to appoint an auditor under
subarticle (1) or, at any time fails to fill any vacancy in the office
of an auditor, the competent authority shall have the power to
appoint an auditor for that institution and shall fix the remuneration
to be paid by that financial institution to such auditor.
(3) A financial institution shall forthwith give written notice to
the competent authority:
( a ) on the appointment of its auditors;
( b ) if it proposes to give notice to its shareholders to -
(i) replace its auditors at the expiration of their term
of office;
(ii) remove its auditors before the expiration of their
term of office;
( c ) if the auditors cease to be auditors of the financial
institution for any reason other than those in paragraph
( b ).
(4) The competent authority may require a financial institution
to change its appointed auditors where, in the competent
authority’s opinion, such auditors are considered unfit for this
appointment, at any time during their term of office.
(5) An auditor shall immediately inform the competent
authority in writing if:
( a ) he resigns;
( b ) he does not seek to be re-appointed; or
( c ) he decides to qualify the audit report.
(6) If, in his capacity as an auditor of a financial institution or
due to a direct request by the competent authority under article 14
or under article 15, an auditor becomes aware of any matter which
relates to and may have a serious adverse effect upon the stability
  16      CAP. 376. h                FINANCIAL INSTITUTIONS 
and soundness of the financial institution or a branch or office in
Malta of a financial institution not incorporated in Malta or the
integrity of the financial system in Malta he shall immediately
inform the competent authority through the financial institution’s
management or, if circumstances so warrant, directly to the
competent authority.
Cap. 386.
(7) In so far as the provisions of this article are inconsistent
with the provisions of the Companies Act, the provisions of this
article shall prevail and the provisions of the said Act shall, to the
extent of the inconsistency, not apply to financial institutions.
Communication by 
auditors, etc. with 
the competent 
authority.
19. No duty (including the duty of professional secrecy) to
which -
( a ) an auditor of a financial institution may be subject,
shall be regarded as contravened by reason of his
communicating in good faith to the competent
authority, whether or not in response to a request from
it, any information or opinion on a matter of which the
auditor has become aware in his capacity as auditor of
that institution and which is relevant to any functions
of the competent authority under the provisions of this
Act or is required to be communicated by virtue of this
Act;
( b ) a person appointed to make a report under article 14 or
article 15 may be subject, shall be regarded as
contravened by reason of communicating in good faith
to the competent authority any matter which relates to
the business or affairs of the financial institution in
relation to which the report is made.
CO-OPERATION AND SHARING OF INFORMATION
Co-operation and 
sharing of 
information.
Amended by:
XVII. 2002.217;
IV. 2003.186.
20. (1) On the basis of international agreements, or upon
reciprocity agreements, the competent authority may share its
supervisory duties with other foreign competent authorities in the
case of a financial institution or branch operating in Malta which is
fully or partly owned by a foreign person or in the case of a
financial institution fully or partly owned by Maltese residents
which is operating abroad.
(2) The competent authority may further, on the basis of
international agreements, or upon reciprocity agreements, disclose
information to other foreign competent authorities.
(3) The competent authority may disclose information under
the provisions of subarticle (2) only to the extent that the foreign
authorities receiving the information restrict its use for supervisory
and regulatory purposes or for such other purposes as may be
specifically agreed upon with the competent authority.
(4) The competent authority may further, on the basis of
international agreements, or upon reciprocity agreements, authorise
other foreign competent authorities to carry out themselves, or
through the intermediation of competent persons they appoint, on-
              FINANCIAL INSTITUTIONS  g CAP. 376.        17
site inspections for supervisory and regulatory purposes in
branches or subsidiaries of financial institutions having their head
office in the country of the competent authority making the
inspection.
(5) The competent authority shall further, upon a request in
writing, disclose to the Central Bank any information in the
possession of or accessible to the competent authority which is
required for the discharge of the duties of the Central Bank under
the law.
(6) A person appointed under article 14 or article 15 shall be
given access to any accounts, returns, or other information with
regard to any financial institution which are in the possession of the
competent authority. 
(7) There shall be meetings held between a financial
institution, its appointed auditors and the competent authority on a
trilateral or bilateral basis as circumstances may warrant. These
meetings may be called by any of the parties concerned but shall
always be chaired by the competent authority.
Cap. 371.
(8) The competent authority and the Central Bank shall discuss
matters of mutual interest on financial institutions under the Joint
Banking Committee as constituted under article 27 of the Banking
Act.
APPEALS, REMEDIES, DISQUALIFICATION AND 
CONFIDENTIALITY
Appeals.
Substituted by:
XVII. 2002.218.
 21. Any person who is aggrieved by a decision of the
competent authority -
( a ) under article 3(2);
( b ) to refuse an application for a licence;
( c ) to impose any condition of the licence;
( d ) to impose or vary any restriction;
( e ) to revoke a licence;
( f ) to make any order under article 9;
( g ) to make a public statement, under the provisions of
article 25A, as to a person’s misconduct;
( h ) to impose an administrative penalty under the
provisions of article 23; or
( i ) by the failure of the competent authority to determine
an application for a licence under article 5(5),
Cap. 330.
may appeal against the decision to the Tribunal within such period
and under such conditions as established under the Malta Financial
Services Authority Act..
Offences.
Amended by:
XVII. 2002.219.
22. (1) Any person who -
( a ) contravenes or fails to comply with any of the
provisions of this Act;
( b ) contravenes or fails to comply with the provisions of
  18      CAP. 376. h                FINANCIAL INSTITUTIONS 
any financial institutions directive, regulations or
licence condition;
( c ) fails to comply with any lawful order or requirement
of the competent authority or the Central Bank;
( d ) fails to comply with any lawful order or requirement
of the Financial Services Tribunal;
( e ) fails to comply with any lawful order or requirement
of any other person made under this Act;
( f ) without reasonable excuse alters, suppresses, conceals,
destroys or refuses to produce any document which he
is lawfully required to produce by any person under
this Act,
shall be guilty of an offence.
(2) Any person who is knowingly a party to, or procures or aids
and abets the commission of any offence under subarticle (1) shall
be guilty of an offence and shall be liable to the same penalties as
the principal offender.
(3) The Minister may by regulations under this subarticle
prescribe the penalties to which a person guilty of an offence
against this Act shall be liable and may in particular by such
regulations:
( a ) prescribe different penalties for different offences
against this Act;
( b ) prescribe different penalties calculated in accordance
with the duration of the offence:
Provided that such penalties shall not be more than that of
imprisonment for a term of more than two years or a fine ( multa ) of
more than two hundred thousand Maltese liri or both such fine and
imprisonment.
(4) The Minister may by regulations under this subarticle
prescribe administrative penalties that may be imposed by the
competent authority recoverable as a civil debt against the offender
in lieu of criminal proceedings, such administrative penalties shall
not be greater than forty thousand Maltese liri in respect of any one
offence.
(5) No criminal proceedings for an offence against this Act
shall be commenced without the consent of the Attorney General.
(6) The provisions of this Act shall not affect any criminal
proceedings that may be competent under any other law.
Administrative 
penalties.
Substituted by:
XVII. 2002.220.
23. (1) Where the competent authority decides to impose an
administrative penalty on a person in lieu of criminal proceedings,
no proceedings in respect of the same offence may be brought
against the same person before a court of criminal jurisdiction and
the competent authority shall notify such decision by notice in
writing served on the person on whom the administrative penalty is
so imposed.
              FINANCIAL INSTITUTIONS  g CAP. 376.        19
Cap. 12.
(2) Where within thirty days of service of a notice as is referred
to in subarticle (1), the person on whom the notice is served has not
paid the administrative penalty or has not appealed against the
decision of the competent authority before the Tribunal as provided
in article 21, or where within fifteen days of the decision of the
Tribunal such person has not paid the administrative penalty as
confirmed or reduced by the Tribunal, then the competent authority
may with respect to the recovery of the amount due to it as
administrative penalty serve a copy of the notice or of the decision
of the Tribunal, as the case may be, on the person by whom the
administrative penalty is due, by means of a judicial Act, and such
notice or decision, as the case may be, shall thereupon constitute an
executive title for all effects and purposes of Title VII of Part I of
Book Second of the Code of Organisation and Civil Procedure.
Disqualification of 
officers.
 24. (1) No person - 
( a ) who has been adjudged bankrupt or has made a
composition with his creditors or has been an officer
of a financial institution which has had its licence
revoked under article 6(2) and who has not been
exempted in writing by the competent authority from
the provision of this article; or
( b ) who is interdicted or incapacitated or who has been
involved in money laundering or found guilty of a
crime affecting public trust, theft, fraud, extortion or
of knowingly receiving property obtained by theft or
fraud,
shall act or continue to act as an officer of a financial institution.
Confidentiality.
Amended by:
XVII. 2002.221.
 25. (1) Nothing in this Act shall authorise the competent
authority to enquire or cause an enquiry to be made in a financial
institution into the affairs of any individual customer of a financial
institution except -
( a ) for the purpose of ensuring compliance with any of the
provisions of this Act; or
( b ) where it is believed that the customer’s exposure could
contribute a threat to the integrity of the country’s
financial system.
(2) No person, including past and present officers or agents of a
financial institution, shall disclose any information relating to the
affairs of that institution or of a customer of that institution which
he has acquired in the performance of his duties or the exercise of
his functions under this Act except -
( a ) when authorised to do so under any of the provisions
of this Act;
( b ) for the purpose of the performance of his duties or the
exercise of his functions;
( c ) when lawfully required to do so by any court or under
a provision of any law.
  20      CAP. 376. h                FINANCIAL INSTITUTIONS 
Cap. 373.
(3) When an officer of a financial institution has reason to
believe that a transaction or a proposed transaction could involve
money laundering, he shall act in accordance with the regulations
laid down under the Prevention of Money Laundering Act and any
guidelines provided by the competent authority. Compliance with
the provisions of this subarticle shall not constitute a breach of
confidentiality.
(4) Officers of the competent authority and of the Central
Bank, including past and present officers, shall not disclose
information obtained from financial institutions in the course of
carrying out supervisory and other duties, which is governed by the
obligation of professional secrecy, except for the purpose of the
performance of their duties or the exercise of their functions, or
when lawfully required to do so by any court or under a provision
of any law.
(5) Notwithstanding the provisions of any other law, a financial
institution may, if circumstances so warrant, communicate any
information which is in its possession and which relates to the
affairs of a customer, to other members of the group of companies
of which that financial institution forms part.
(6) For the purposes of subarticle (5), the term "group of
companies" shall include any body corporate registered or
operating in Malta or in a foreign jurisdiction and forming part of
the group of companies and which is further licensed or otherwise
authorised under the laws of Malta or of that jurisdiction to carry
out any activity equivalent to the business of banking or of the
issuing of electronic money or any of the activities referred to in
the Schedule.
(7) Exchange of information on mutual or connected customers
between the financial institution, its holding company or its
subsidiaries where a credit facility has been or may be granted to
that customer shall not constitute a breach of confidentiality.
MISCELLANEOUS
Application of 
Exchange Control 
Act. 
Cap. 233.
26. The Central Bank may exclude the application of the
Exchange Control Act to transactions carried out by licence holders
with persons not resident in Malta for the purposes of the said Act.
Application of Act 
to the Central 
Bank.
27. The provisions of this Act shall not apply to the Central
Bank, save where and to the extent that the Central Bank is referred
to by name.
              FINANCIAL INSTITUTIONS  g CAP. 376.        21
SCHEDULE
(Article 2)
ACTIVITIES OF FINANCIAL INSTITUTIONS
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. Money transmission services;
5. Issuing and administering means of payment  ( e.g. credit cards, travellers’ cheques
and bankers’ drafts );
6. Guarantees and commitments;
7. Trading for own account or for account of customers in:
( a ) money market instruments (cheques, bills, Certificates of deposits,
etc.);
( b ) foreign exchange;
( c ) financial futures and options;
( d ) exchange and interest rate instruments;
( e ) transferable instruments;
8. Underwriting share issues and the participation in such issues;
9. Money broking.
