The Central Bank of Nigeria (CBN) has proposed a revision of the regulatory framework governing financial holding companies to bolster the resilience and stability of the country's financial system. The regulator disclosed the plan in a circular signed by Rita Sike, the director of its Financial Policy and Regulation Department, on Thursday, inviting stakeholders to submit their reviews of the guidelines by July 9.
"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 stated that the guidelines would further promote a safe, sound, and resilient financial system.
The overhaul was necessary after years of implementing the existing framework introduced in 2014 to mitigate risks arising from non-core banking activities within banking groups. The regulation 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 to ensure 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 to prevent potential abuse or undue advantage over banking subsidiaries.
According to the CBN, the revision establishes clear eligibility requirements for promoters seeking to set up financial holding companies. The framework streamlines the structure of financial holding companies by permitting 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% equity stake in each subsidiary and be registered as persons with significant control with the appropriate corporate registration authority.
