Transcript Non-Interest Banking and Finance

Regulation and Supervision of
Non-Interest Banks in Nigeria
A Presentation of the Financial Policy and
Regulation Department of the Central
Bank of Nigeria at the Two-Day NDIC
FICAN Workshop 2011 Held Dutse, Jigawa,
November 28, 29, 2011
Regulation and Supervision of
Banking Business
Definition: Control over the creation, operation and
liquidation of banks
• Objective: Protect the interests of depositors given
their higher leverage
• Ensure effective functioning of the banking industry
units
• Prevent systemic collapse
Part of the mandate of the CBN:
Ensure Monetary and Price stability
Promote a sound financial system
Approaches to the Regulation of
Islamic Banking
100% Islamic
Banking
• Sudan
• Iran
Dual Banking
System with
distinct
regulations for
Islamic banking
• Majority
countries
• Eg Malaysia,
Pakistan, Brunei,
Mauritius,
Phillipines
Maldives, Gambia
etc
Dual Banking
System with
distinct
regulations for
Islamic banking
products
• UK,
Singapore,
Kenya
Infrastructure of Effective
Regulation of Islamic Banking
Sound Legal
Framework
Meet
Internationa
l Prudential
Requiremen
ts
Components
of Effective
Supervisory
Review
Provision
of a level
playing
field
Consistence
with Islamic
Principles
Approaches to the Legal
Framework
Enactment of Islamic Banking Act
Iran, Sudan Malaysia, Pakistan,
Maldives, UAE
, Gambia, Brunei, Syria, Yemen
Specific Provision allowing Islamic Banking within the Banking Act
Nigeria, Indonesia, Philippines
Pakistan, Jordan, Kuwait, Turkey
No Specific Provision in the Banking Act but regarded as covered by the General Banking
Regulation with regulations for Shariah Compliant products
UK, Singapore
Kenya
The CBN Guidelines for the Regulation and Supervision of NonInterest Banking – A Walk-through
• Title: Guidelines for the Regulation and Supervision of
Institutions Offering Non-Interest Financial Services in
Nigeria.
• Introduction:
– Regards non-interest banks as specialised banks, which
under BOFIA 1991 (as amended) are the third component
of the three banking structures of our banking system. The
other 2 are: commercial banks and merchant banks.
– Guidelines recognise Non-Interest Financial Institutions
based on two principles:
• Islamic Commercial Jurisprudence
• Any established non-interest banking principle.
These Guidelines are for Non-Interest Financial
Institutions operating under the principles of Islamic
Commercial Jurisprudence.
The Guidelines – A Walk-through
CBN New Banking
Model
Specialized Banks
Non-Interest
Financial Institutions
Commercial Banks
Microfinance Banks,
Development Banks,
Primary Mortgage
Institutions, etc
Merchant Banks
The Guidelines – A Walk-through (cont’d)
• Principles upon which transactions are regarded as
permissible under the model
• Non-Interest Financial Institutions (NIFIs) are broadly
categorised into 7:
i. Full-fledged Islamic bank or full-fledged Islamic banking subsidiary of a
conventional bank;
ii. Full-fledged Islamic merchant or full-fledged Islamic banking subsidiary of a
conventional merchant bank;
iii. Full-fledged Islamic microfinance bank;
iv. Islamic branch or window of a conventional bank;
v. Islamic subsidiary, branch or window of a non-bank financial institution;
vi. A development bank regulated by the CBN offering Islamic financial services;
vii. A primary mortgage institution licensed by the CBN to offer Islamic financial
services either full-fledged or as a subsidiary; and
viii. A finance company licensed by the CBN to provide financial services, either full-fledged
or as a subsidiary.
The Guidelines – A Walk-through (Cont’d)
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Objectives and Legal basis
Corporate Powers and statement in MEMART
Technical Agreement with a reputable non-interest bank or financial institution for
a period of not less than 3 years from the period of operation
Licence shall be for a national or regional bank in case of money-deposit noninterest banks
Conventional banks/financial institutions may offer non-interest services through
subsidiaries, branches or windows, which may operate using existing branch
networks or facilities of the parent institution.
In addition to CBN guidelines on Corporate Governance, NIFIs shall have as part of
their governance structure internal compliance review mechanism to ensure
compliance with the principles of the model and an Advisory Committee of
Experts.
CBN Advisory Council of Experts - to advise on and approve issues of compliance
to the principles of the model.
A uniform logo to be developed to identify these institutions. It shall not include
the word “Islamic”.
New products and services shall require the approval of each institution’s
Committee of Experts and final approval from the CBN.
Adequate disclosures to Profit Sharing Investment Account (PSIA) holders.
The Guidelines – A Walk-through (Cont’d)
• Auditing, Accounting and Disclosure Requirements:
– Accounting and Auditing Organisation of Islamic Financial Institutions (AAOIFI)
– Islamic Financial Services Board (IFSB)
– National Accounting Standards Board (NASB)
• Prudential requirements:
– CAR
– Liquidity Requirement - Section 15 of BOFIA,
– Investment of funds in non-interest-bearing securities.
• Risk Management:
– Relevant CBN guidelines and
– IFSB Guidelines
• Anti-Money Laundering and Combating of Terrorism Policies and
Procedures.
• Non-Discrimination Clause
Conclusion
Thank You