Regulatory Alerts2014-04-17 | FPR/DIR/GEN/CIR/01/006Exposure Draft on guidelines for Licensing and Regulation of Fiancial Holding Companies in Nigeria
Nigeria's Central Bank has established a set of guidelines for financial holding companies, also known as banking groups or conglomerates. These guidelines outline the structure and operation of these entities to ensure their stability and compliance with regulatory requirements. Key highlights of the guidelines include: 1. Definition of financial holding companies (FHCs) as a group that includes at least one licensed bank or other financial institution, and any other entity controlled by this institution through direct or indirect ownership. 2. A FHC must have a clear business purpose and its subsidiaries must be engaged in activities permitted under the relevant sector regulator's guidelines. 3. The maximum number of subsidiaries that a financial holding company can have shall not exceed 50, except with the prior approval of the CBN. 4. A financial holding company is prohibited from engaging in non-banking businesses, unless with the express approval of the CBN and subject to certain conditions. 5. The board of directors of a FHC must consist of not less than seven (7) and not more than twelve (12) persons, with at least 60% of its membership being independent non-executive directors. 6. Intra-group transfers of properties, plants, and equipment shall be conducted in a transparent manner, and at arm's length. 7. A financial holding company must have a minimum paid-up capital that exceeds the sum of the minimum paid-up capital of its subsidiaries. These guidelines establish a clear framework for FHCs in Nigeria, ensuring their stability and compliance with regulatory requirements.