Merkanti Holding plc has confirmed that the board of directors of both the company and its subsidiary, Merkanti Bank Limited, have formally approved the bank’s planned conversion into an unregulated entity, marking a significant step forward from the initial announcement made in December.

In a company announcement issued last week, Merkanti Holding said that the approval remains subject to regulatory clearance and any additional instructions from the Malta Financial Services Authority (MFSA). The conversion process is expected to progress over the coming months.

The company reiterated that all customer deposits will be repaid in full, including deposits held with the bank by Merkanti Holding itself. It also stressed that the transition is not expected to have a material impact on the group’s financial position or on its ability to meet obligations to bondholders.

The update follows reporting in December that Merkanti Bank intended to voluntarily surrender its Maltese banking licence and convert into an unregulated company, a move the group said would allow it to streamline its cost structure and improve profitability. At the time, the company had stressed that the plan was still in the planning phase and had not yet received formal board or regulatory approvals.

Merkanti Holding has a €25 million bond issue listed on the Malta Stock Exchange, which was amended in 2024 following bondholder approval. The changes included a seven-year extension of the bond’s maturity to 2033 and an increase in the interest rate from 4.00 per cent to 5.70 per cent. The company has consistently maintained that the bank’s licence surrender and conversion would not affect its ability to honour bond commitments.

Merkanti Bank, formerly known as BAWAG Malta Bank, operates as a specialist trade and structured finance bank and is a subsidiary of Scully Royalty Ltd, which is listed on the New York Stock Exchange.

The bank had previously explored a potential merger with Sparkasse Bank Malta, with an agreement announced in 2022. However, the transaction was ultimately abandoned in 2023, with Merkanti citing timing considerations and shifts in global interest rate policy rather than regulatory issues.