Consultation On Aircraft Financial Leasing

The Malta Financial Services Authority ("MFSA"), in collaboration with the Malta Financial Services Advisory Council ("MFSAC"), has issued a Consultation on the Proposed Establishment of a Framework for Aircraft Financial Leasing Companies. Feedback should be submitted by not later than 9^th February 2026.

The MFSA is proposing to reduce the regulatory burden for aircraft financial leasing in Malta by means of a light touch statutory regime. Essentially, it is proposed that lessors or financiers of aircraft and aircraft engines that have more than EUR 100 million in assets will not require a banking or other financial services license to undertake financial leasing business. A notification will be required to be made to the MFSA in order to apply, and the MFSA will maintain a register of notified persons for this purpose, to be called the "List of Aircraft Financial Leasing Companies".

Eligibility for Lessors

Broadly, it is proposed that in order for a lessor (an "aircraft financial leasing company") to be eligible it would be required to notify the MFSA by submitting a request for its admission to the List of Aircraft Financial Leasing Companies (the "List"), provided that all of the following conditions are met.

1. The lessor is a company established and registered in Malta in accordance with applicable laws.
2. At the time of notification and on an ongoing basis thereafter, the lessor must maintain total assets having an aggregate value of not less than EUR 100 million or the equivalent amount in any other currency, which requirement may be satisfied through own funds or through the ownership of assets, including aircraft and aircraft engines.
3. The financial services activities of the lessor must be limited exclusively to the financial leasing of aircraft and, or aircraft engines and to activities that are ancillary thereto.
4. The lessor must appoint a due diligence service provider to carry out the necessary due diligence process to ensure that the ultimate beneficial owner(s), the board of directors, qualifying shareholder(s), money laundering reporting officer ("MLRO") and any other service providers or functionaries the lessor may appoint, satisfy at the time of admission and on an ongoing basis thereafter, the high standards of fitness and properness required of the lessor. The lessor will be required to appoint a MLRO to carry out the money laundering reporting function in this respect.

It is proposed that a request for a lessor to be admitted to the List must be made in writing and in accordance with any applicable rules. The MFSA will be required to accept the admittance of the lessor to the List within 20 working days.

Lessors are required to carry out, in or from Malta, the activity of financial leasing with respect to aircraft and aircraft engines registered in the National Aircraft Register, as defined in the Aircraft Registration Act, Chapter 503 of the Laws of Malta, or registered in any other jurisdiction whatsoever.

It is proposed that lessors will be subject to limited ongoing requirements, with some regulatory reporting such as details of the jurisdiction where the lessor's clients are incorporated, operating branches or otherwise conducting their business.

Current Exemption for Financial Leasing of Ships and Aircraft

It is also proposed that the current exemption for financial leasing of ships and aircraft found in the Financial Institutions Act, Chapter 376 of the Laws of Malta ("Financial Institutions Act") shall remain in place. Article 3A provides that any entity, whether established or operating in Malta or otherwise, carrying out the activity of financial leasing in or from Malta, and all related transactions involving aircraft and aircraft engines and ships do not require a licence from the MFSA, where such entity is owned and controlled, or is a subsidiary of, or exclusively funded by and any relevant financial leasing transaction, or the relevant underlying asset, being an aircraft, an aircraft engine, or a ship, is exclusively financed by authorised or regulated persons or entities as described in Annex II to Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments (such as credit institutions, investment firms and insurance companies), or persons or entities who are recognised as eligible counter-parties in accordance with Article 30 of such Directive 2014/65/EU.

Legislative Amendments

As part of the Consultation, the MFSA is proposing a number of legislative amendments as follows.

1. It is proposed that the Financial Institutions Act, be amended to introduce, amongst others, an additional exemption for the above-described aircraft financial leasing, further to that outlined in Article 3A.
2. It is proposed that a new "Financial Institutions Act (List of Notified Aircraft Financial Leasing Companies) Regulations" be enacted to regulate lessors subject to this framework. It is expected that these regulations will regulate the regime and set out its main features.
3. It is proposed that amendments be made to the Financial Institutions (Fees) Regulations, S.L. 376.03 of the Laws of Malta, in order to regulate the payment of fees to the MFSA upon notification and thereafter, on an annual basis.
4. It is proposed that amendments be made to the Prevention of Money Laundering and Funding of Terrorism Regulations, S.L. 373.01 of the Laws of Malta, in order to capture that any form of financial leasing, including aircraft financial leasing, is subject to adherence to AML/CFT obligations.

Rulebook

In addition, it is proposed that the initial and ongoing requirements of the framework and lessors registered on the List will be regulated in further detail in an "Aircraft Financial Leasing Companies Rules" to be issued by the MFSA.

National Strategy for the Financial Services Sector

The Consultation comes in the wake of the MFSAC's National Strategy for the Financial Services Sector which is proposing areas where Malta could become a centre of excellence, particularly in the aircraft leasing space. Malta is already a well-established jurisdiction in the aviation sector, with legislative and accounting frameworks, and commercial and infrastructural systems which are conducive to attracting further investment in the aviation industry.

The MFSAC, together with FinanceMalta and other stakeholders, is focused on identifying factors such as availability of space, financing, and personnel experienced in aviation set-up to enhance Malta's competitiveness. The local legal infrastructure is being improved with measures relating to the enforcement of share pledges in Maltese aviation companies, and further facilitation tools have been added relating to aircraft importations. The authorities have been looking at a possible expansion of Malta's double tax treaty network, in particular with key jurisdictions representing potential targets for aircraft leasing business.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.