News Column

CBN Issues Guidelines to Regulate Holding Companies

August 31, 2014

Sola Alabadan



The Central Bank of Nigeria (CBN) has issued guidelines for licensing and regulating financial holding companies in the country in line with the new banking model which requires that banking groups with non-core banking actives should incorporate a holding company structure.

CBN's Director, Financial Policy and Regulation Department, Kevin Amugo, who disclosed this in a circular to all banks and other financial institutions on Friday, stated that the guidelines is expected to ensure adequate ring-fencing of financial institutions under the purview of the CBN.

In accordance with the guidelines, for any financial holding company structure to emerge, there shall be at least, two subsidiaries and the focus of the conglomerate shall be in the financial services sector.

While the promoters of financial holding company are required to submit a formal application for the grant of a licence addressed to the Governor of the CBN, the guidelines state that the licensing process shall be in two phases: Approval-in-Principle (A.I.P) and Final Licence.

To get A.I.P, the application must be accompanied with a non-refundable application fee of N2 million, evidence of meeting the prescribed minimum paid-up capital, and detailed business plan, among other documents.

Not later than six months after obtaining A.I.P, the promoters of a proposed financial holding company are required to submit an application to the CBN for the grant of a final licence and this must be accompanied with a non-refundable licensing fee of N10 million, evidence of payment of capital contribution by each shareholder and certified true copy of Certificate of Incorporation of the financial holding company, among other documents.

On the minimum paid-up capital requirements, the guidelines provide that a financial holding company shall have a minimum paid up capital which shall exceed the sum of the minimum paid up capital of all its subsidiaries, where the financial holding company owns 100 per cent of the subsidiaries.

Where an institution elects to adopt a financial holding company or any other structure, such a structure shall not be reversible until that institution has operated under the approved structure for a minimum of three years.


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Source: AllAfrica


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