1. 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

2. 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

3. Approaches to the Regulation of 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

4. Infrastructure of Effective Regulation of Islamic Banking
Components of Effective Supervisory Review
Sound Legal Framework
Consistence with Islamic Principles
Provision of a level playing field
Meet International Prudential Requirements

5. 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

6. The CBN Guidelines for the Regulation and Supervision of Non-Interest 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.

7. The Guidelines – A Walk-through
CBN New Banking Model
Specialized Banks
Non-Interest Financial Institutions
Microfinance Banks, Development Banks, Primary Mortgage Institutions, etc
Commercial Banks
Merchant Banks

8. 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.

9. The Guidelines – A Walk-through (Cont’d)
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 non-interest 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.

10. 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

11. Conclusion
Thank You