CBN Proposes New Guidelines to Ring-Fence Closely Linked Financial Entities
By Aboki Forex —
The Central Bank of Nigeria (CBN) has released a draft regulatory framework aimed at separating the operations of closely linked financial entities. The move is designed to promote a more stable financial system.
In a circular issued on Thursday, the apex bank said the proposed guidelines will ensure a safe, sound and stable financial system. It added that the framework will also safeguard consumer interests and strengthen regulatory oversight across Nigeria’s financial sector.
The guidelines seek to establish clear operational and functional boundaries among closely linked entities. They will also address regulatory arbitrage that arises when activities are commingled across different licence categories.
Key requirements under the guidelines include governance standards, rules for intra-group transactions, segregation of customer funds and data, operational independence, and recovery and resolution planning. The CBN will also push for consolidated supervision of these entities.
“The guidelines are intended to strengthen consumer protection, enhance transparency and accountability, mitigate contagion risks among closely linked entities, and preserve financial stability while supporting innovation and fair competition within the financial services sector,” the regulator stated.
The CBN will make the guidelines available to stakeholders, including banks, payment service providers, financial institutions, and the public, for review and comment. Where a CBN-regulated entity is linked to an entity regulated by another financial services regulator, the CBN said it will collaborate with that regulator to extend the scope of the guidelines.
The regulator noted that the effort will mitigate risks from commingling customer funds with those of closely linked entities. It warned that any breach of the guidelines will attract sanctions, including penalties, replacement of management, or revocation of licence under the Banks and Other Financial Institutions Act (BOFIA) 2020 and other relevant regulations.