CBN to revise rules governing financial holding companies

The Central Bank of Nigeria (CBN) is proposing significant revisions to the regulatory framework governing financial holding companies. This move aims to bolster the resilience and stability of the country's financial system, according to a circular issued Thursday.

Stakeholders have until July 9 to submit their reviews of the proposed guidelines. The CBN stated that after years of implementing the current framework, introduced in 2014, areas requiring enhancement have been identified to strengthen operational effectiveness and regulatory oversight. The overhaul is necessary to mitigate risks from non-core banking activities within banking groups and align with evolving market developments.

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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.

Key revisions include clarifying and enhancing minimum capital requirements for financial holding companies to ensure they can reliably support their subsidiaries. The updated guidelines also address identified gaps in shared services arrangements to prevent potential abuse. Furthermore, the framework clarifies eligibility requirements for promoters and allows financial holding companies, rather than their Nigerian banking subsidiaries, to directly own equity in foreign subsidiaries. They will be required to maintain a minimum 51 percent equity stake in each subsidiary.

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CBN stated that it would further promote a safe, sound and resilient financial system with the guidelines.