MFSA Launches Consultation On Framework For Aircraft Financial Leasing Companies

Aircraft Financial Leasing Framework

The Malta Financial Services Authority (MFSA) has issued a Public Consultation proposing the establishment of a dedicated regulatory framework for aircraft financial leasing companies. This represents a significant development in Malta's financial services landscape, particularly in the context of aviation finance.

In collaboration with the Malta Financial Services Advisory Council, the MFSA is seeking to establish a streamlined regulatory regime for aircraft financial leasing entities that meet a specified asset threshold, creating a more proportionate, efficient and resilient framework that enables companies to conduct their operations with greater ease and certainty.

What are the Main Features of the Proposed Framework?

At the heart of the framework is the introduction of a lighter regulatory regime for aircraft financial leasing companies that meet specific criteria. Instead of requiring a full licence, eligible companies would be admitted to a newly established List of Aircraft Financial Leasing Companies maintained by the MFSA under the Financial Services Register. These companies would consequently be classified as "Notified" persons.

The framework would apply exclusively to companies incorporated in Malta that carry out only aircraft financial leasing activities and that hold assets of at least EUR 100 million (or the equivalent in another currency). This asset threshold may be met through own funds or asset ownership, including aircraft and aircraft engine.

Moreover, the MFSA proposes that the due diligence for aircraft financial leasing companies would be carried out by an independent Due Diligence Service Provider (DDSP), responsible for assessing the fitness and properness of beneficial owners, officials, and relevant service providers on an initial and ongoing basis. The MFSA proposes that licensed Corporate Service Providers (excluding under-threshold CSPs) may be accepted to act as DDSPs, subject to the Authority's confirmation that they possess sufficient resources and expertise.

Under the proposed framework, Aircraft Financial Leasing Companies listed in the Financial Services Register would be subject to limited ongoing obligations, including basic regulatory reporting, which would be set out in a dedicated Rulebook to be issued by the MFSA. The limited ongoing obligations would nevertheless include a level of regulatory reporting.

Entities covered by this framework would be required to adhere to AML/CFT laws and accordingly appoint an MLRO.

At the same time as introducing this framework, the MFSA proposes to maintain the existing Article 3A licence exemption under the Financial Institutions Act (Cap. 376) for aircraft and ship financial leasing; companies which do not qualify under this exemption, and which do not satisfy the conditions under the new proposed framework, would need to apply for a licence under the Financial Institutions Act to engage in aircraft financial leasing.

Legislative Amendments

In order to give effect to the proposed framework, several legislative changes are envisaged. Amendments to the Financial Institutions Act would introduce a new exemption specific to aircraft financial leasing and empower the Minister to issue supporting regulations.

The MFSA also proposes that a new subsidiary legislative instrument, the Financial Institutions Act (List of Notified Aircraft Financial Leasing Companies) Regulations, would be enacted for the purpose of establishing the framework for aircraft financial leasing companies and its core features, including the notification process.

Further amendments are proposed to the Financial Institutions Act (Fees) Regulations (S.L. 376.03), intending to introduce both an initial notification fee and an annual renewal fee.

Financial leasing, including aircraft leasing, is subject to AML/CFT obligations under the FATF Recommendations and Directive (EU) 2015/849. Currently, paragraph (b) of Regulation 2(1) of the PMLFTR captures only activities carried out by licensed financial institutions. As aircraft financial leasing under the proposed framework will operate on a notification basis, it would fall outside this definition. To address this, paragraph (b) is proposed to be amended to include notified activities, ensuring that companies on the List of Notified Aircraft Financial Leasing Companies are recognized as AML/CFT subject persons and must comply with all relevant obligations.

Looking Ahead

The MFSA's proposal reflects a move towards proportional and risk-based regulation. By easing unnecessary regulatory burdens while keeping safeguards in place, the Authority aims to make Malta a more attractive and competitive location for aviation finance without compromising regulatory standards. As with all MFSA consultations, the proposals are not yet binding and may be revised in light of the feedback received. Nevertheless, if implemented, this framework could mark an important step in strengthening Malta's position as a hub for aircraft financial leasing.

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