Offshore banking sector of Malta is regulated by Banking Act of 1994 and Financial Institutions Act of 1994. Legislation of Malta is consistent with EU banking regulations.

Initially International Banking Institutions were created as offshore companies defined by Malta International Business Activities Act of 1988. However under the Banking Act earlier registered banking institutions are required to reregister as a “credit institution”. Now banks are licensed under Banking Act. Malta gradually moves to the complete abolition of exchange controls that blurs distinction between international and Malta-based banks, or between so-called “offshore banking” and “onshore banking”.

Both Malta’s onshore and offshore banking sectors are regulated and supervised by Malta Financial Services Authority. To apply for banking license an applicant must have minimum capital of five million Euros. Foreign banks providing offshore banking services can operate through branches, but they are still subject to supervisory measures of MFSC.

Up to now Maltese banking sector is domestic to large extent. There are few international banks operating on the island, but with the appearance of HSBC in Malta there is hope that there is going to be more foreign banks in Malta.

In 2007 government of Malta set up new non-for-profit agency with the primary function to promote Malta as a regional offshore banking center. The new agency combines promotional activities that were conducted by Malta Financial Services Authority and private companies in the past.

Nowadays financial services sector plays extremely important role in the economy of Malta. Currently it accounts for 12% on Malta’s Gross Domestic Product. In 2006 value added by the sector was €208 billion. In addition productivity growth was 37% compared to 2005.

Maltese authorities set an objective to become leading offshore banking jurisdiction in 2015. Recently Australian banking institutions show increasing interests in Malta as a in jurisdiction, where they can conduct business with EU and at the same time enjoy low taxes.

The Australian banking industry is reportedly looking to Malta with growing interest as a place to conduct business within the European Union, but at a lower cost in terms of taxation. The Commonwealth Bank of Australia was one of the first Australian banks that took advantage of Maltese advantages and set up CommBank Europe Ltd that soon became Malta’s biggest offshore banking institutions. CommBank now owns $1.3 billion capital and $4.7 billion assets.