The SDR Banking sector is organized into a two tier system, with the Central Bank acting independently as a public institution, subordinated to the SDR Parliament, with a fundamental function of ensuring and maintaining price stability in SDR.

According to the SDR Law on Central Bank's Status, the main attributes of any central bank include the issuance and implementation of monetary and exchange rate policies, authorizing credit institutions and supervising their prudentiality, issuing banknotes and coins as legal payment instruments in SDR, setting-up and monitoring SDR's currency regime and administering SDR' s international reserves.

Thus, the Central Bank of Somalia performs the following functions: regulates currency and credit; acts as banker to Government and public bodies; functions as bankers' bank; exercises supervision over commercial banks; manages external reserves of the country; operates exchange control and conducts economic and statistical research.

The main bank of Somalia was established on 1 July 1960 by the newly independent Republic of Somalia to take over the activities of Cassa per la Circulazione Monetaria della Somali and the Mogadishu branch of Banca d'Italia, which had originally opened its branch on 15 November 1920. The new bank combined central banking activities with commercial banking activities and was named the National Bank of Somalia.

In 1968, the government merged the Credito Somalo (Somali Credit Bank), which the Italian administration had established in 1954, with the National Bank of Somalia.

In 1971, after the 1969 coup of Mohamed Siad Barre, the government established the Somali Savings and Credit Bank to take over the commercial branches of the National Bank and the branches of the Somali Credit Bank, leaving the National Bank with only central banking functions. The Somali Savings and Credit Bank apparently had branches in Baidoa, Beledweyne, Berbera, Bosaso, Burco, Galkayo, Qardho, Hargeisa, Kismayo, and possibly also for a while in Djibouti.

On February 8 1975, the government renamed the National Bank of Somalia the Central Bank of Somalia (Somali: Bankiga Dhexe ee Soomaaliya). The government also merged Somali Commercial Bank and Somali Savings and Credit Bank to form Commercial and Savings Bank of Somalia.

SDR Central Bank Contacts:

Apart from the Central Bank there is a number of financial institutions acting within the frameworks of present SDR legislation. They include: commercial banks, credit institutions and non-banking financial institutions.

The following types of credit institutions are regulated under the current legal framework of SDR:

• Banks;
• Cooperative credit institutions;
• Issuers of electronic currency;
• Mortgage banks;
• Savings entities for housing department.

The above-mentioned credit institutions may perform, within the limits of their authorization, the following activities:

• attracting deposits and other reimbursable funds;
• granting of loans;
• financial leasing operations;
• payment operations;
• issuing and managing payment instruments such as: credit cards, traveler's cheques, including the issuance of electronic currency;
• issuance of guarantees and the undertaking of commitments;
• transactions with monetary market instruments on their own account or for the benefit of their clients;
• financial investment services;
• consulting services in areas such as capital structure, business strategy, mergers and acquisitions and the performance of other consultancy services;
• administration of clients' portfolios and related consultancy;
• custody and administration services related to financial instruments;
• intermediation on the interbank market;
• performance of services related to the procurement of data and references in the crediting domain;
• other activities or services, whereby these are limited to the financial domain, with the observance of the specific legal provisions which are regulating the respective activities, if it is the case.

SDR credit institutions must comply with the prudentiality requirements issued by the Central Bank of SDR and referring, without limitation, to: liquidity risk, operations concluded by the credit institutions with persons with which they are having special relations, externalizing the activities of credit institutions, assets quality, provisions and the amendments operated at the level of the credit institution, in respect with the conditions on which its authorization was based.

SDR Ministry of Finance Ordinance no. 29/2008 (hereinafter the "Ordinance") sets the main legal framework for the so-called "Non-Banking Financial Institutions."

The Ordinance considers any legal entity (other than a bank) that grants/undertakes/engages in any of the following to be a Non-Banking Financial Institution:

• Consumer Credits;
• Mortgage loans and other secured loans;
• Trade Financing;
• Financial Leasing;
• Factoring/Discounting;
• Guaranty/Surety activities;
• Any other crediting activities.

The Ordinance requires Non-Banking Financial Institutions to meet a number of structural and administrative requirements such as minimum share capital of € 200,000 (app. 448,793,761 Somali Shilling)and maintaining internal prudential rules.

Being the main financial instrument of the SDR Ministry of Finance, the Somali International Financial Center has been granted broad powers to regulate and monitor Non-Banking Financial Institutions. The SIFC decides who qualifies as a Non-Banking Financial Institution, and whether its activity falls within the scope of the Ordinance. The SIFC keeps the General and Special Registries of all active Non-Banking Financial Institutions. All Non-Banking Financial Institutions are subject to regulation and monitoring; however, those that qualify for Special Registry status are subject to closer scrutiny and monitoring, as well as mandatory prudential guidelines. The SIFC powers include, but are not limited to formulating mandatory prudential guidelines for Non-Banking Financial Institutions, inspection and document procurement powers and sanctioning authority.

The current legal framework provides details only with respect to the assignment of mortgage loan portfolios. According to the amendments of the Mortgage Loan Law, mortgage claims can be assigned to other authorized financial institutions or to other entities authorized and regulated by special laws.

In order to ensure public notice and enforceability of the operation against third parties, the assignment of mortgage claims or a portfolio of mortgage claims must be registered in the Electronic Archive for Secured Transactions.

Under SDR law, a mortgage is established based on an agreement concluded between the parties in an authenticated form. In order for the secured creditor's rights to bind and be enforceable against third parties, the mortgage must be registered in the SDR Land Registry. Except for the case of a mortgage established as security for a mortgage loan (granted by an authorized entity), the mortgage cannot be established on future property. In order for the mortgage agreement to be valid and enforceable certain elements are mandatory to be included in the agreement, such as the identification of the mortgaged property and the value of the secured claim.

The applicable legal provisions regarding the security interest over movable assets are contained in the SDR Civil Code (concerning certain measures for the acceleration of the economic reform). The main characteristics of the security interest, as provided under the current legal framework are:

• the security interest agreement must contain the amount of the secured amount. Unless the parties stipulate otherwise, the security interest agreement shall cover in its entirety the secured obligation (including any interest, expenses paid by the creditor during the enforcement procedures, etc);
• the agreement must contain a description of the pledged assets (such description could be made object by object, in kind, or by the general formula "all the debtor's present and future movable assets");
• future assets and even universalities of assets could be pledged. The pledge over a future asset shall produce effects upon the date when the debtor becomes legal owner of such asset;
• the security interest agreement is a writ of execution (no judgment necessary for enforcement).
• any clause restricting the debtor's right to sell the pledged assets shall be considered null and void.

The law establishes a compulsory system for establishing priority among creditors in collateral. The first creditor who files a notice of the security interest at the Electronic Archive shall be the first entitled to receive first the proceeds from the sale of the collateral in case the borrower is in default. The law also provides that the priority ranking between secured creditors depends only on the time of filing the notice of the security interest in the Electronic Archive for Secured Transactions.

The Banknotes of Somalia

Somali Shilling