CBN has proposed a major overhaul of financial holding companies and barred parent firms from loan decisions.
NewsOnline Nigeria reports that the Central Bank of Nigeria (CBN) has proposed far-reaching reforms to the regulatory framework governing Financial Holding Companies (HoldCos), including measures that would prevent parent companies from participating in lending decisions and credit approval processes within their subsidiaries.
The proposed reforms are contained in the “Exposure Draft of the Revised Guidelines for Licensing and Regulation of Financial Holding Companies in Nigeria,” recently published on the apex bank’s website.
According to the CBN, the review became necessary after several years of implementing the existing framework introduced in 2014, with the aim of strengthening governance, enhancing accountability, and improving regulatory oversight across Nigeria’s increasingly diversified financial groups.
ALSO: CBN Proposes New Rules to Separate Banks, Fintechs and Related Financial Entities
A financial holding company is a corporate entity that owns controlling interests in one or more financial institutions, including banks, but does not directly engage in banking operations.
Parent Companies Barred From Lending Decisions
One of the most significant provisions in the revised framework is the prohibition of parent companies from influencing lending and credit decisions within their subsidiaries.
The draft guidelines explicitly state that a HoldCo shall not be involved in the credit administration or approval processes of any of its subsidiaries.
The regulator further warned that any loan granted by a banking subsidiary to its parent holding company would be treated as a return of capital and deducted from the bank’s capital when calculating its capital adequacy ratio.
Minimum 51% Ownership Requirement
The CBN also proposed a mandatory ownership threshold requiring financial holding companies to maintain at least a 51 per cent equity stake in each subsidiary under their control.
According to the apex bank, HoldCos must also be formally recognised as persons with significant control by the appropriate corporate registration authorities.
The regulator believes the measure will strengthen oversight, eliminate ambiguities around control structures, and improve accountability within financial groups.
Stronger Operational Independence for Subsidiaries
The draft guidelines seek to establish a clear separation between parent companies and subsidiary institutions.
Under the proposed framework, HoldCos will be prohibited from assuming the powers or responsibilities of subsidiary boards and management teams.
The CBN also moved to stop the practice of board and management members simultaneously participating in the governance structures of both parent and subsidiary companies.
The regulator stated that, without prejudice to the provisions of the Banks and Other Financial Institutions Act (BOFIA) 2020, members of the board or management of a subsidiary should not attend meetings of the HoldCo board, and vice versa.
In addition, parent companies would be barred from interfering in the daily operations of subsidiaries or compelling them to follow directives in business and operational decision-making.
Higher Capital Requirements
To strengthen financial resilience, the CBN proposed stricter capital requirements for holding companies.
Under the new framework, a HoldCo would be required to maintain regulatory capital that exceeds the combined minimum capital requirements of its subsidiaries by at least 20 per cent.
The regulator clarified that only paid-in capital would be recognised in determining compliance with this requirement.
It also stated that excess capital held by one subsidiary cannot be used to offset capital deficiencies in another subsidiary within the group.
Tighter Oversight of Shared Services and Intra-Group Transactions
The apex bank further introduced stricter controls on shared services arrangements and intra-group transactions.
According to the draft, all transactions between a HoldCo and its subsidiaries must be conducted on an arm’s-length basis to ensure transparency and fairness.
The guidelines also require approval from the boards of both the HoldCo and the relevant subsidiary before shared services arrangements can be implemented.
To improve accountability, the CBN proposed mandatory value-for-money audits of shared services every two years, with audit reports to be submitted to the Banking Supervision Department of the Central Bank.
Insider Borrowing Prohibited
The proposed framework also tightens rules around insider-related transactions.
The CBN stated unequivocally that insider-related borrowing within a financial holding company structure would not be permitted.
Stakeholder Consultation Underway
The apex bank noted that the draft guidelines have been released for stakeholder engagement and public review as part of its efforts to strengthen governance standards and ensure the long-term stability of Nigeria’s financial system.
If implemented, the reforms are expected to reshape the operations of financial holding companies, strengthen subsidiary independence, improve transparency, and reduce governance risks across the banking and financial services sector.





















