Merkanti Bank has announced that it will be voluntarily surrendering its Maltese banking licence and repaying all customer deposits in full.

In company update released on Tuesday (yesterday), the bank said it plans to convert into an unregulated company “to streamline its consolidated cost structure, thereby increasing its profitability going forward.”

The company stressed that the move is in the “planning phase” and no formal board or regulatory approvals have yet been obtained.

The announcement comes after a report last week that the lender is preparing to shut down its local operations, with staff issued termination notices ahead of the “strategic business decision.”

Merkanti Holding plc has a bond issue of €25 million listed on the Malta Stock Exchange. In 2024, bondholders agreed to change the terms of the bond issue to a seven-year extension to the maturity date to 2033, along with an increase in the interest rate payable from 4.00 per cent to 5.70 per cent.

The company said that “based on information presently available,” the surrender of its banking licence and shift to an unregulated entity are not expected to have an impact on its ability to meet its obligations to bondholders.

Merkanti Bank was formerly known as BAWAG Malta Bank. It is a specialty trade and structured finance bank and a subsidiary of Scully Royalty Ltd, a merchant banking group listed on the New York Stock Exchange.

The bank had previously floated a potential merger with Sparkasse Bank Malta, with the two niche banks coming to an agreement in 2022. However, the transaction failed to materialise, with Merkanti Holding in 2023 stating that the reason behind the termination “is not related to any aspect of the regulatory approval process but is related to timing and the change in global interest rate policy during this period.”