CBN Proposes Guidelines on Bank Holdings, Seeks Stakeholders’ Memos

The Central Bank of Nigeria (CBN) has issued an exposure draft of new guidelines aimed at strengthening oversight of closely linked financial institutions and curbing regulatory arbitrage within the Nigerian financial system.

The proposed Guidelines on Ring-Fencing Operations of Closely Linked Entities in the Nigerian Financial System seek to establish clear legal, operational, and governance boundaries among financial institutions operating under common ownership or control, including banks, fintechs, payment service providers, and other regulated entities.

Several banks with subsidiaries in the financial services sector and others have constituted them under an umbrella or holding company, which the apex bank feel could expose customers to risks.

According to the apex bank, the initiative is designed to address growing concerns over the commingling of activities across different licence categories, which could expose customers and the broader financial system to heightened risks.

The CBN said the framework is intended to strengthen consumer protection, enhance transparency and accountability, mitigate contagion risks, and preserve financial stability while supporting innovation and fair competition.

Under the draft guidelines, boards of directors will be required to ensure operational independence among affiliated entities and implement robust ring-fencing policies. The CBN also proposed limits on overlapping board memberships, stipulating that no more than 20 per cent of directors may serve on the boards of closely linked entities.

In addition, staff sharing will be restricted except as permitted under existing Shared Services Guidelines, while external auditors will be required to provide annual certification on the effectiveness of ring-fencing arrangements.

The proposed framework further requires each regulated entity to maintain independent capital and liquidity positions. Intra-group transactions and exposures must be conducted on an arm’s-length basis and reported quarterly to the regulator, while prior approval from the CBN will be required before any intra-group liquidity support can be provided.

To reinforce operational separation, the guidelines mandate that closely linked entities maintain legal, structural, and operational independence. Customer onboarding into affiliated entities will require fresh Know Your Customer (KYC) procedures, explicit customer consent, and the establishment of separate accounts or wallets.

The CBN also proposed restrictions on the use of shared technology infrastructure to facilitate activities outside an entity’s licensed scope or to process transactions on behalf of affiliated companies without approval.

On customer protection, the draft rules require strict segregation of customer funds and data. Financial institutions will be prohibited from using customer funds for intra-group lending, collateral arrangements, or the operational expenses of related entities. Customer data sharing will only be permitted in line with the Nigeria Data Protection Act and with explicit customer consent.

A key provision of the draft framework requires promoters of closely linked entities to establish a non-operating holding company structure, except where an existing financial holding company framework already applies. Such holding companies will be required to maintain enhanced regulatory capital levels and will not be permitted to engage directly in financial service operations.

The guidelines also require affected institutions to develop Recovery and Resolution Plans (RRPs) and Business Continuity Plans (BCPs) to ensure critical services remain operational during periods of stress or in the event of separation from the wider group.

As an alternative to establishing a holding company, shareholders may choose to merge closely linked entities and surrender surplus licences, provided the resulting institution operates strictly within the scope of the retained licence.

The CBN has invited financial institutions, payment service providers, industry stakeholders, and members of the public to review the exposure draft and submit comments on or before July 9, 2026. The regulator said the final guidelines will take effect on a date to be announced after the consultation process is completed.