On March 25 2011 the Malta Financial Services Authority (MFSA) published a consultation document proposing amendments to the Financial Institutions Act (Cap 376 of the Laws of Malta) and a new Financial Institutions Rule (FIR/03 on the take-up, pursuit of and prudential supervision of the business of financial institutions authorised to issue electronic money under the Financial Institutions Act 1994).
The purpose of the consultation document is to set out the changes to the Maltese regulatory framework required to implement Directive 2009/110/EC, amending Directives 2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC.
Directive 2009/110/EC aims to:
- enable the creation of new, innovative and secure electronic money services;
- provide market access to new companies; and
- foster real and effective competition between market participants.
Under the above-mentioned amendments to the Financial Institutions Act, the terms 'electronic money' and 'electronic money institution' should be read as follows:
- 'electronic money' is defined as the electronically, including magnetically, stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transactions, as defined in Schedule 2(1) of the Financial Institutions Act and which is accepted by a natural or legal person other than the financial institution that issued the electronic money; and
- an 'electronic money institution' is defined as a financial institution that:
- has been licensed in accordance with the Financial Institutions Act and authorised to issue electronic money; or
- holds an equivalent authorisation in another country in terms of the Electronic Money Directive to issue electronic money.
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Article 6 of the new FIR/03 provides that in the case of credit institutions, the activity of issuing electronic money is listed in the Schedule to Article 2(4) of the Banking Act; they shall therefore be authorised to issue electronic money through their actual banking licence. This means that the specific activity will be regulated and supervised within all the statutory and regulatory criteria for credit institutions as provided for by the Banking Act and the Banking Rules, taking into consideration any of the contents of the proposed rule as may be applicable.
The same article of FIR/03 provides that credit institutions issuing electronic money shall be subject to the provisions on 'issuance and redeemability'(1) and 'prohibition of interest'(2) as laid down in Articles 8F and 10A of the proposed amendments to the Financial Institutions Act and as further supplemented in FIR/03. Alternatively, a credit institution may issue electronic money through a subsidiary financial institution which shall be subject to the prudential regime applicable to financial institutions undertaking the activity of issuing electronic money.
FIR/03 shall not apply to the following:
- monetary value stored on instruments that can be used to acquire goods or services only in the premises used by the issuer or under a commercial agreement with the issuer either within a limited network of service providers or a limited range of goods or services; and
- monetary value that is used to make payment transactions executed by means of any telecommunications, digital or IT device, where the goods or services purchased are delivered to and are to be used through a telecommunications, digital or IT device, provided that the device or IT operator does not act only as an intermediary between the holder of electronic money or the payment service user and the supplier of the goods and services.
In its feedback statement dated April 29 2011, the MFSA summarised the comments raised in the abovementioned consultation document. The MFSA confirmed that all respondents were in agreement with the MFSA's decision to regulate electronic money institutions under the lighter and more flexible regime of the Financial Institutions Act as compared to the Banking Act. All respondents were also in agreement with the main proposals and recommendations made in the consultation document, except for some considerations set out in the feedback statement.
An updated draft of the new FIR/03 and proposed draft amendments to the Financial Institutions Act, as well as consequential amendments to FIR/01 and FIR/03, were attached to the feedback statement. In the same statement the MFSA further announced that given that the bill amending the Financial Institutions Act was being discussed before Parliament, further amendments were not being excluded. Finally, the MFSA announced in the feedback statement that the amendments to the Financial Institutions Act, together with the consequential amendments to the financial institution rules, would come into force upon the promulgation of the act amending the Financial Institutions Act.
For further information on this topic please contact Adrian Cutajar at Simon Tortell and Associates by telephone (+356 21 227974), fax (+356 21 223567) or email ([email protected]).
Endnotes
(1) Under Articles 8F and 10A of the proposed amendments to the Financial Institutions Act and as further supplemented in Article 6 of the FIR/03:
"(1) Financial Institutions authorised to issue electronic money shall issue electronic money at par value on receipt of funds.
(2) A Financial Institution authorised to issue electronic money shall ensure that, at any moment, upon request by the holder thereof, it is in a position to redeem the monetary value of any electronic money held, at par value and without delay.
(3) For the better carrying out of the provisions of this article and to better transpose the provisions of the Electronic Money Directive on issuance and redeemability of electronic money, the competent authority, may, from time to time publish Financial Institutions Rules which shall be binding on licence holders as specified therein."
(2) Under Articles 8F and 10A of the amendments to the Financial Institutions Act and Article 6 of the FIR/03:
"The granting of interest or of any other benefit related to the length of time during which a financial institution providing the services listed in the Third Schedule of this Act holds electronic money shall be prohibited."