On 28 February 2025, the MFSA published a Conduct of Business Rulebook (the “Rulebook”) for credit institutions offering retail products and services with the aim of enhancing consumer protection in the banking sector. The Rulebook was accompanied by the publication of a Feedback Statement which outlines the salient changes implemented by the MFSA to the consultation version of the Rulebook which was published in February 2024 as well as certain clarifications.[1] The Rulebook will come into force 1 March 2026, although products such as consumer credit, home loans and payment accounts will at this stage continue to be governed by the provisions of the relative legal notices which regulate them pending repeal and substitution of these legal notices by the Rulebook provisions..
Scope and Applicability
In line with the approach undertaken by the MFSA at consultation stage, the Rulebook is aimed at primarily at consolidating conduct of business requirements into one document.
This translated amongst others into the merging of requirements emanating from (i) the Mortgage Credit Directive (Directive 2014/17/EU) (the “MCD”), (ii) the Consumer Credit Directive (Directive 2008/48/EC) (the “CCD”), and (iii) the Payment Accounts Directive (Directive 2014/92/EU) (the “PAD”), as transposed locally into regulations, into one comprehensive Rulebook. Furthermore, the Rulebook incorporates conduct-related rules and other guidance issued by the EBA, such as its Guidelines on product oversight and governance arrangements for retail banking products and the Guidelines on loan origination and monitoring, amongst others.
In terms of the level of application of the Rulebook, the MFSA introduces ‘Rules’ (provisions preceded by the letter ‘R’) that create legally binding obligations on banks, and ‘Guidance’ (provisions preceded by the letter ‘G’), which are aimed at clarifying Rules and are not necessarily compulsory.
The Rulebook is applicable to ‘Regulated Persons’, which namely credit institutions licensed under the Banking Act (Chapter 371 of the laws of Malta) in relation to the business of banking, including credit institutions authorised in another Member State having a physical presence in Malta by way of the establishment of a branch in exercise of the passporting rights available under EU law.
A notable feature of the Rulebook in terms of scope is the definition of the term ‘Client’, which signifies the customers in respect of which banks must apply the requirements of the Rulebook. ‘Client’ is defined to include natural persons making use of a bank’s retail products “acting for purposes of his/her personal accord, including instances whereby he/she is carrying out a business venture, trade or profession under his/her own personal name”. The inclusion of micro-enterprises from the scope of the Rulebook which had been proposed by the MFSA in its consultation has therefore been removed, however, sole traders remain within scope.
Furthermore, the retail products which are regulated in the Rulebook include credit agreements relating to immovable property, other credit agreements for clients provided by manufacturers (i.e. banks designing the products) and which would therefore include personal lending, deposit accounts, payment accounts, payment services, payment instruments, other forms of payment not covered by the term ‘payment services’ and electronic money.
Structure and Content
The Rulebook is divided into the following five chapters:
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Disclosures
Emphasis is made throughout the first chapter on the requirement to ensure clients make well-informed decisions by allowing them access to high-quality information via suitable means, both on a pre- and post- contractual basis.
The Rulebook acknowledges that different methods of banking services may be used, including mobile banking and internet banking, and that the use of such banking methods and facilities must therefore be accompanied with an instructions document. Digital communication is therefore also addressed within this chapter.
This chapter includes a set of generic rules as well as specific disclosures related to particular products, such as deposit accounts. In so far as credit agreements relating to residential immovable property and consumer credit agreements, the Rulebook incorporates the requirements currently contained in the relative regulations[2]. Similarly, the current prescribed requirements in terms of payment accounts, such as the content of the fee information document and the statement of fees have been incorporated into this chapter.
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Marketing Rules
Advertisements of retail products are being regulated in this chapter. The requirements are applicable to adverts or information issued in or from Malta by a bank in scope of the Rule and adverts or information circulated, published, broadcasted or received in Malta.
Content of adverts relating to retail products in or from Malta is to be approved by the bank. Banks shall appoint their Compliance Officers for the issuance and approval of such adverts.
Information circulated orally is also being addressed in the Rulebook together with warning statements which shall be prominently situated in an advertisement. The Rulebook also addresses specific adverts such as those issued on social media.
- Product Oversight Requirements
This chapter refers to the EBA Guidelines on product oversight and governance, which are currently implemented in Annex I to Banking Rule BR/24 on ‘Product Oversight and Governance Arrangements for Retail Banking Products’[3].
A product governance and oversight policy must be established, implemented and reviewed by all banks when products are being designed and brought to the market. Arrangements for the establishment, implementation and oversight of products must be in place to ensure that there are appropriate measures guaranteeing the adequacy of the products.
Annex I to this chapter also lays out good practice examples in respect of product oversight and governance arrangements.
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Conflicts of interest
Mis-selling of retail products may occur as a result of conflicts of interest. Consequently, banks should address shortcomings and implement adequate measures to identify, manage and report instances of conflicts of interest.
This chapter of the Rulebook requires banks to empower staff members and members of the management to constantly act in the best interest of clients by setting out the requirements of the conflicts of interest policy and remuneration policy rules, distinguishing between general requirements and those applicable to certain categories of staff.
Furthermore, Annex I to this chapter sets out examples of detrimental cross-selling practices whereas Annex II provides examples of instances leading to conflicts of interest.
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Bank-Client Relationship
On the basis of the principle requiring banks to treat clients honestly, fairly and professionally, this chapter provides rules promoting client protection from the initial stages of the bank-client relationship up to the end of its lifetime.
The Rulebook establishes record-keeping requirements together with rules on visits, calls and other communication made by banks with clients. Cold calls can only be made provided that certain requirements are met, and home visits require explicit consent of the client.
Entry into force
The entry into force of the Rulebook is outlined in the Feedback Statement, which establishes a transitory period for the application of the Rulebook intended to allow banks to tailor internal systems and processes to satisfy the new obligations. Provisions transposing the MCD, the CCD and the PAD will enter into force when the local legislation transposing such Directives is repealed to be replaced by the provisions in the Rulebook, whilst the rest of the provisions of the Rulebook which do not emanate from the said Directives will come into force on 1 March 2026.
There is no doubt that this transitory period will need to be utilised by banks to conduct a comprehensive assessment of the Rulebook’s potential implications on their overall business operations. This assessment will amongst others require an evaluation of any changes or alignment which will be required to internal processes, systems, client-facing documentation, websites, adverts and procedures. In addition, in view of the various areas addressed by the Rulebook, bank staff in different roles will need to familiarize themselves with the new Rulebook to ensure smooth implementation and adherence.
[1] Reference is made to the article published on 27 February 2024 on the MFSA’s consultation: https://ganado.com/news/practice-news/the-mfsa-consults-on-a-draft-conduct-of-business-rulebook-for-banks/
[2] The Consumer Credit Regulations and the Credit Agreements for Consumers Relating to Residential Immovable Property Regulations.
[3] The Feedback Statement refers to the eventual repeal of Annex 1 to Banking Rule 24 on 1 March 2026, together with the repeal of the Banking Notice 05 on Advertising for Deposits.