Maldives Banking Act (2010)

Law Number: 24/2010

Maldives Banking Act

Introduction and Title

1. (a) This Act is enacted to establish the principles to be followed for issuing licenses for conducting banking business in the Maldives, for regulating the conduct of banks in the Maldives, for ensuring the stable and secure operation of banks, for determining the rules for the operation of banks, for monitoring the conduct of banks whether operating or not, for appointing conservators and receivers, for the liquidation of banks, and for determining the procedures for the winding up of banks.

(b) This Act shall be cited as the "Maldives Banking Act".

Chapter 1

Licensing and Regulation of Stable and Secure Banking Operations

General Provisions

Purpose of the Act

2. (a) The main purpose of this Act is to establish rules for banking to achieve the following objectives:

(1) Maintain stability in the banking system and sustain public confidence in the banking system;

(2) Protect the rights of depositors and creditors of banks;

(3) Prepare for and respond to adverse effects on the banking system;

(4) Prevent financial crimes;

(5) Promote competition in the Maldives banking system and ensure that the banking system provides banking services to the public in a manner that facilitates the economic development of the Maldives.

(b) This Act shall be enforced by the Maldives Monetary Authority (MMA).

Prohibited Acts

3. (a) It is prohibited for any person other than those licensed by the MMA to conduct banking business in the Maldives, to advertise that they accept deposits, or to perform any act that implies they are authorized to accept deposits under this Act. However, the MMA may grant exemptions to the persons listed below from these prohibited acts.

(1) Exemptions may be granted to persons based on the type and scale of their business, subject to the regulations made under this Act. Such exemptions may be granted for specific periods or until specific conditions are met. Specific provisions of this Act may be applied to exempted persons. The MMA may revoke such exemptions at any time or impose additional conditions on them.

(2) Exemptions may be granted to companies conducting licensed business, provided the MMA determines that the company operates under a legal framework that adequately protects public rights. The MMA retains the right to impose additional conditions or revoke such exemptions.

(b) The MMA shall provide a written statement of the reasons for any exemption granted under this section and publish these reasons in the Government Gazette.

(c) It is prohibited for any person other than those licensed by the MMA to use the word "Bank" or any word connected to it, or any word implying its meaning, in their business or service provision in Dhivehi or any other language. Other persons may apply to the MMA for permission to use such words if the MMA is satisfied that such use will not mislead the public regarding the nature of banking services. The MMA may grant such permission.

(d) If the MMA is satisfied that any person is conducting prohibited acts under this section, it has the power to inspect the premises where the business is conducted, books, and accounts. If necessary, the MMA may request the Maldives Police Service to assist in entering premises, inspecting books and accounts, or seizing them. The Maldives Police Service shall provide such assistance.

Chapter 2

Issuance of Licenses

General Conditions for Issuance of Licenses

4. (a) A license issued by the MMA under this Act must be obtained before commencing any of the following acts:

(1) Conducting banking business targeting Maldivian citizens or other persons; (2) Conducting banking business within the Maldives through a company registered under Maldivian law or through a branch office; (3) Opening a branch or subsidiary of a domestic or foreign bank in the Maldives; (4) Opening a branch or representative office of a domestic bank operating in the Maldives or a branch office representing such bank outside the Maldives; (5) Operating an office representing a foreign bank in the Maldives.

(b) A license under this Act may only be issued to domestic entities that are companies registered under the Companies Act No. 11/69. If issued to a foreign bank or an office representing a foreign bank, the entity must be registered under the companies law of the country to which it belongs.

(c) Every license issued under this Act shall be in writing. The validity period of such licenses shall be determined, and licenses are non-transferable. The conditions of the license shall be specified in the license document or accompanying letter, and licensees must comply with these conditions.

(d) A license may be issued to a foreign bank only if the bank has an office in its home country and is supervised by the banking supervisory authority of that country, covering all its branches and offices, to the satisfaction of the MMA.

(e) The MMA is responsible for issuing licenses under this Act.

(f) Before closing a branch of a bank licensed under this Act, the bank must notify the MMA in writing at least 90 days in advance. The bank must submit detailed plans for the closure or transfer of the business to the MMA.

Application for License

5. (a) Applications for licenses under this Act must be submitted in writing to the MMA in the manner determined by the MMA, along with the information required. The MMA may require different forms and information for different types of licenses. The criteria for granting licenses shall be determined by the MMA.

(b) Applications must be accompanied by the minimum information listed below:

(1) Certified copies of the company's charter, corporate governance documents, financial statements, and audited annual reports for the past three years; (2) Details of the proposed capital, including the amount, method of raising capital, and the portion of capital to be held by the MMA or a depository bank. A letter confirming that the held funds are not payable to other parties must be provided; (3) The name under which the banking business will be conducted and the address of the proposed office; (4) Names, permanent addresses, income sources, and occupations of each proposed administrator and major shareholder, along with financial status and other information determined by the MMA; (5) A signed statement from each administrator and major shareholder confirming they have not been convicted of any crime, are not bankrupt, and are not involved in the management of any bankrupt company; (6) Details of the main objectives and business activities, including the bank's structure, internal controls, anti-money laundering and counter-terrorism financing measures, and projected financial statements for the next three years; (7) If the applicant is a foreign bank or a subsidiary of a foreign bank, a statement from the supervisory authority in the home country confirming no objection to conducting banking business in the Maldives and outlining consolidated supervision arrangements; (c) For domestic banks or companies applying for licenses, the MMA may require additional information regarding the financial status and operations of the applicant, including details of major shareholders and administrators. The MMA may use this information to:
(1) Assess the financial viability of domestic subsidiary banks; (2) Determine the suitability of major shareholders and administrators.

(d) For foreign banks opening branches or representative offices, the MMA may require additional information, including the financial status of the proposed manager and other relevant details.

(e) The MMA may require any additional information or documents deemed necessary for the application.

(f) The application fee determined by the MMA must be paid.

(g) The applicant must submit all required information and documents within three months of the application date. Failure to do so may result in the rejection of the application and forfeiture of the fee.

Decision on License Application

6. (a) The MMA shall decide to issue or refuse the license within three months of receiving all required information. If refused, the reasons must be communicated in writing.

(b) If the MMA is not satisfied that the conditions of this Act are met, it may reject the application. The criteria for granting licenses shall be publicized. If refused, the reasons must be communicated in writing.

(c) The MMA may issue a license if it is satisfied that:
(1) The applicant, major shareholders, and administrators have a sound financial status; (2) Major shareholders and administrators have the necessary qualifications and experience; (3) The applicant has the financial and operational capacity to conduct banking business, including the number of staff, capital level, and expected liabilities; (4) The applicant has established procedures, systems, internal controls, audit mechanisms, and corporate governance to mitigate risks; (5) The business plan and proposed activities are sound and acceptable to the MMA.

(d) The MMA may also consider the extent to which the applicant benefits banking activities in other countries, the level of training provided to Maldivians, and the impact on the number of banks in the region and internationally.

(e) If a license is granted, the MMA shall notify the applicant and publish the name in the Government Gazette and the Bank Register.

(f) If the license is refused, the applicant may appeal to the court under Article 97 of this Act.

Bank Register

7. The MMA shall maintain a Bank Register. The register shall include the names and addresses of licensees, administrators, and details of branches or representative offices, as well as other information deemed necessary by the MMA.

Conditions of License Issuance

8. (a) Licensees must comply with the following conditions:

(1) All information provided in the application must be true; (2) Business must commence within 12 months of license issuance, or the license shall be void; (3) Licensees must maintain minimum capital levels and comply with all rules and guidelines for stable and secure banking operations; (4) Licensees must establish internal controls, audit procedures, and systems to mitigate risks; (5) Business must be conducted in a stable manner, in compliance with laws and regulations; (6) Licensees must not engage in fraud, deception, theft, money laundering, terrorist financing, or other criminal activities; (7) Business must be conducted under the name approved by the MMA; (8) All business activities must be conducted through an office established in the Maldives, with at least two staff members and proper record-keeping; (9) Major shareholders and administrators must always be "fit and proper" persons.

(b) The MMA may amend license conditions in writing and publish such changes in the Gazette.

(c) The MMA has the power to revoke licenses or take action if licensees violate conditions.

Chapter 3

Islamic Banking Licensing

9. Licenses may be issued to domestic banks or foreign Islamic bank branches/offices to operate according to Islamic principles, provided they do not conflict with this Act. The MMA may also authorize Islamic banking services within existing banks. Such banks and departments are subject to MMA supervision.

Non-Interest Banking Services

11. Islamic banks shall operate on a non-interest basis for all banking services, financing, and investments.

Permitted Activities

11. Islamic banks may engage in customer, commercial, financial, and investment activities, as well as construction projects, provided these activities are Sharia-compliant and do not resemble conventional banking services. The MMA may issue guidelines on the nature of these services.

Chapter 4

Capital

Domestic Banks, Tier 1

12. (a) Domestic banks shall maintain minimum paid-up capital as follows:

(1) Tier 1 Banks: Must maintain a minimum paid-up capital of MVR 1,000,000,000 (One Billion Rufiyaa) or such higher amount as determined by the MMA. Tier 1 banks may conduct all banking activities under Article 25, subject to its conditions.

(2) Tier 2 Banks: Must maintain a minimum paid-up capital of MVR 100,000,000 (One Hundred Million Rufiyaa) or such higher amount as determined by the MMA. Tier 2 banks may only conduct deposit-taking activities as specified in Article 25(1)(a).