Payments

Regulation

The Central Bank of Malta Act (Cap. 204) was originally published by means of Act XXXI of 1967. However, given the evolving nature of the payment services industry due to technological innovations which enable the emergence of new payment solutions by market players, there have been a number of amendments to the Act, affecting the Bank, its competencies, as well as its organisation.

Recently, the Central Bank of Malta Act has been amended to introduce new terminologies, such as payment applications, payment card schemes and payment transactions, under the scope of the Act. This ensures that the Bank has the necessary legal powers to regulate new payment solutions which may be introduced by market players.

In fact, the amended Act introduces a mandate on licenced institutions to inform the Bank prior to the provision of a new service. Thus, the Bank has the power to review the rules and procedures of each service, in collaboration with the institution, to ensure that the functions delegated to the Bank by the Act are adequately fulfilled.

Also, the amended Act enables the Bank to restrain a licenced institution from taking an action which may impede the stability of the payments landscape in Malta, as well as to suspend the provision of any services under the scope of the Act which may be in breach of any relevant local or European legislation.

The Maltese payments landscape is characterised by a high usage of paper-based instruments, such as cash and cheques. A shift from the use of cash and cheques to electronic modes of payment could lead to greater efficiencies in the Maltese economy mainly due to improvements to business' back-office operations, reductions in processing costs of government benefit transfers and collections, and significant improvements in the overall payment processing efficiency. While such shifts in methods of payment are usually induced by market initiatives, at times the regulator needs to take a more pro-active approach to promote changes in the payments landscape at a national level. In this regard, the Bank has the right to issue, amend or revoke directives in order to incentivise the take-up of efficient modes of payment while at the same time disincentivise the use of traditional means of payment.

Central Bank of Malta Directives related to Payment and Securities Settlement Systems

The list hereunder depicts the current Directives issued by the Central Bank of Malta in relation to payment and securities settlement systems:

Directive No. 1: The Provision and Use of Payment Services

This Directive repeals the previous Directive No 1 which was modelled on the requisites of Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market, more commonly referred to as the Payment Services Directive (PSD1).

The new Directive transposes Titles III and IV of the revised Payment Services Directive (PSD2) being Directive EU 2015/2366 of the European Parliament and of the Council of 25 November 2015 on the payment services in the internal market, amending Directive 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC.

This Directive lays down provisions aimed at improving the payment industry and reinforce consumer protection by providing more stringent provisions on strong customer authentication and secure communication.

Documentation:

Directive No. 2: Payment and Securities Settlement Systems

This Directive applies to the operation of, and the participation in, domestic payment and securities settlement systems, as well as to any other form of cash or security transactions, whether domestic or cross-border, that may be involved therein. The Directive seeks to reduce the legal and systemic risks that are associated with participation in payment and securities settlement systems and to minimise the disruption to a system that can be caused by insolvency proceedings against a participant in that system.

Directive No. 6: New Generation Trans-European Automated Real-Time Gross Settlement Express Transfer System (TARGET)

This Directive lays down the legal framework for participation in the TARGET-Malta which is part of the TARGET component system. TARGET comprises payment systems in euro that settle in central bank money and provide central liquidity management services, real-time gross settlement for payments and services for ancillary system settlement. The legal framework is divided into three sections, namely (i) Harmonised Conditions for Participation in TARGET (Annex I), (ii) Target Governance Arrangements (Annex II), and (iii) Definitions (Annex III). The Directive also includes a description of optional liquidity management features outlining the payments within the scope of the system, and establishes security and contingency requirements.

Directive No. 13: Approval of Payment Systems

This Directive sets out the parameters as well as the applicable terms and conditions for the approval of payment systems prior to commencement of operations.

Application Process

All persons, whether corporate or not, who are currently operating, or who intend to operate a payment system (as defined in the Central Bank of Malta Act) in Malta, should have the approval and authorisation from the Central Bank of Malta as established under the Central Bank of Malta Act.

Enquiries and applications for approval and authorisation are to be directed to the Manager, Regulation and Oversight Office either via our Contact Us Form or by mail.

Documentation:

Directive No. 19: The Use of Cheques and Bank Drafts

This Directive lays down the rules for the safe and effective use of cheques and bank drafts, where the payer, payee and the regulated institutions servicing the paper-based instruments are all located in Malta.

This Directive also lays down the responsibilities of the parties involved in the processing of paper-based instruments, ensuring that proper records of the parties involved and of the actions undertaken are retained.

Directive No. 20: Cross-Border Payments

This Directive stipulates that the Central Bank of Malta remains the competent authority for Regulation (EU) 2021/1230 of the European Parliament and of the Council of 14 July 2021 on cross-border payments in the Union. The Regulation codifies and repeals Regulation (EC) No 924/2009, in order to ensure clarity and rationality after several amendments.