FINANCIAL LEGAL FRAMEWORK

BAFIA

1989
LEGAL POWERS

OTHER

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THE BANKING AND FINANCIAL INSTITUTIONS ACT 1989 (BAFIA)

Introduction Rationale Scope Major provisions

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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.

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BAFIA 1989

Rationale

ONE SUPERVISORY AND REGULATORY REGIME. INCORPORATED PROVISIONS TO ALLOW THE CENTRAL BANK TO SPEEDILY INVESTIGATES AND PROSECUTE ANY ILLEGAL ACTIVITIES.

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BAFIA 1989

Scope
LICENSED INSTITUTIONS :

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

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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

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BAFIA 1989
NON-SCHEDULED INSTITUTIONS :

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

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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

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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.
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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 moneys worth.

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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.

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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

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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
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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
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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.

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Penalties

The quantum of penalties under BAFIA have been enhanced.

Imprisonment terms Fines amount

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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

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