FIN 5361

FINANCIAL LEGAL FRAMEWORK

BAFIA 1989

OTHER LEGAL POWERS

FIN 5362

THE BANKING AND FINANCIAL INSTITUTIONS ACT 1989 (BAFIA)

Introduction Rationale Scope Major provisions

FIN 5363

BAFIA 1989

Introduction

– To replace Banking Act 1973 and Finance Companies Act 1969.

– To provide an integrated supervisions of the financial system.

– To modernise and streamline the laws relating to banking.

FIN 5364

BAFIA 1989

Rationale

– ONE SUPERVISORY AND REGULATORY REGIME.

– INCORPORATED PROVISIONS TO ALLOW THE CENTRAL BANK TO SPEEDILY INVESTIGATES AND PROSECUTE ANY ILLEGAL ACTIVITIES.

FIN 5365

BAFIA 1989

ScopeLICENSED INSTITUTIONS :

– COMMERCIAL BANKS– MERCHANT BANKS– FINANCE CO.– DISCOUNT HOUSES– MONEY BROKERS– FOREX BROKERS

FIN 5366

BAFIA 1989

SCHEDULED INSTITUTIONS :

– ISSUERS OF CHARGE/CREDIT CARDS & TRAVELLERS CHEQUES

– OPERATORS OF CASH DISPENSING MACHINES– DEVELOPMENT FINANCE INST.– BUILDING SOCIETIES & HOUSING CREDIT INST.– FACTORING & LEASING CO.– REP. OFFICES OF FOREIGN BANKS

FIN 5367

BAFIA 1989

NON-SCHEDULED INSTITUTIONS :

– OTHER STATUTORY BODIES AND INST INVOLVED IN THE PROVISION OF FINANCE & CREDIT.

FIN 5368

BAFIA 1989

Major provisions– Deposit taking– Definition of deposit– Powers and duties of auditors– Shareholding– Power of investigation, search and seizure– Secrecy– Electronic fund transfer– Penalties– Local incorporation

FIN 5369

Deposit taking

2 objectives:– Developmental – to stimulate and generate growth and innovation

in the bond and the commercial papers markets.– Regulatory – adequate supervision

S 25 – prohibit any person from carrying on deposit taking business.

S 26 – prohibit any person from solicit a deposit / enter into / offer to enter into any agreement to the acceptance of deposit.

FIN 53610

Definition of deposit

A sum of money received or paid, under which it will be repaid with or without interest or at a premium or discount, either in money or money’s worth.

FIN 53611

Powers & duties of auditors

S 40 enhanced the powers and duties of auditors of licensed institutions.

Report to BNM if he discovers:– Any contravention of BAFIA or any other law– Losses had been incurred to the extent of reducing the capital funds by

50% or more– Any irregularities that can jeopardies the interests of depositors / creditors.– Any other serious irregularities– Unable to confirm that the claims of depositors / creditors are covered by

the assets of that institutions.

FIN 53612

Shareholding

S 45 – where any person wishes to enter into an agreement to acquire or dispose any interest in the shares of a licensed local institution, both the disposer and acquiror must seek written approval of the Minister of Finance if the interest in shares is 5% or more

FIN 53613

Powers of investigation, search and seizure

BNM officers have powers of entry, search, seizure, detention, examination of suspects and their business associates.

Information may be disclosed to the police or other public officers.

Rationale: officers can gather necessary evidence

FIN 53614

Secrecy

S 99 disclosure is permitted where;

– Customer has given written permission– Customer is declared bankrupt– In court proceedings between FI and its customer– Relates only to credit facilities given by branch of licensed

foreign bank to its head office.– It is to be made to police and authorised under any Federal

law

FIN 53615

Electronic Fund Transfer

S 119 : no person may operate any electronic fund transfer system unless he has obtained authorisation from BNM.

BNM can harmonise and supervise the development of the EFT.

FIN 53616

Penalties

The quantum of penalties under BAFIA have been enhanced.

– Imprisonment terms– Fines amount

FIN 53617

Local incorporation

Requirement for domestic banks to formally exchange their licenses for new one issue under BAFIA.

Foreign bank were given 5 years period to be locally incorporated.

– Maintain the status quo– Change the legal form – branch to wholly owned subsidiary