CBN Proposes Major Overhaul of Financial Holding Company Regulations
By Aboki Forex —
The Central Bank of Nigeria (CBN) has announced plans to revise the regulatory framework for financial holding companies. The move aims to strengthen the resilience and stability of the country’s financial system.
The CBN disclosed the plan in a circular signed by Rita Sike, director of its Financial Policy and Regulation Department, on Thursday. The regulator invited stakeholders to submit their reviews of the proposed guidelines by 9 July.
“Following several years of implementation, the CBN has identified areas within the extant guidelines that require enhancement to strengthen the operational effectiveness and regulatory oversight of financial holding companies,” the statement noted.
The CBN said the overhaul was necessary after years of implementing the existing framework introduced in 2014. That framework was designed to mitigate risks from non-core banking activities within banking groups.
The review addresses gaps and aligns with evolving regulatory and market developments.
Key Revisions
Among the key revisions is the clarification and enhancement of minimum capital requirements for financial holding companies. This ensures their capacity to serve as a reliable source of financial strength to their subsidiaries.
The revised guidelines also address identified gaps in shared services arrangements. This is to prevent potential abuse or undue advantage over banking subsidiaries.
The CBN said the revision considers clear eligibility requirements for promoters seeking to set up financial holding companies.
The framework streamlines the structure of financial holding companies. It permits them, instead of their Nigerian banking subsidiaries, to directly own equity interests in foreign subsidiaries.
It also requires financial holding companies to maintain a minimum 51 per cent equity stake in each subsidiary. They must also be registered as persons with significant control with the appropriate corporate registration authority.
The CBN stated that the guidelines would promote a safe, sound and resilient financial system.