Central Bank of Nigeria (CBN) has proposed new guidelines aimed at separating the operations of banks and other closely linked financial entities, including financial technology (fintech) companies, to strengthen consumer protection and safeguard financial stability.
The proposal is contained in a circular dated June 10 and titled, “Exposure of the Draft Guidelines on Ring-Fencing Operations of Closely Linked Entities in the Nigerian Financial System.”
According to the apex bank, the proposed framework is designed to establish clear operational and functional boundaries among related entities while addressing regulatory arbitrage arising from the commingling of activities across different licence categories.
The CBN said the guidelines would cover governance, intra-group transactions, segregation of customer funds and data, operational independence, recovery and resolution planning, as well as consolidated supervision.
“The Guidelines is intended to strengthen consumer protection, enhance transparency and accountability, mitigate contagion risks among closely linked entities, and preserve financial stability while supporting innovation and fair competition within the financial services sector,” the bank stated.
The apex bank explained that a closely linked entity refers to any organisation that directly or indirectly controls, is controlled by, or is under common control with another entity through ownership, voting rights, common directors or senior management, shared systems or branding, or contractual dependence.
Under the proposed framework, such entities would be required to operate independently, maintain separate governance and risk management structures, and individually meet capital adequacy and liquidity requirements regardless of group-level resources.
The CBN also proposed stricter controls on transactions between related entities.
It stated that no closely linked entity would be permitted to extend loans to or guarantee the obligations of another related entity without prior written approval from the regulator.
According to the draft, all intra-group exposures must be conducted on an arm’s-length basis and reported to the CBN on a quarterly basis.
The proposed guidelines further seek to strengthen consumer rights by requiring financial institutions to obtain customers’ express consent before onboarding them onto products or services offered by related entities.
The regulator said institutions would also be required to clearly disclose such arrangements in simple language and provide customers with alternative options where available.
To protect depositors and consumers, the CBN proposed that customer funds must not be used for intra-group lending, proprietary trading, servicing group debts or covering the operational expenses of affiliated companies.
The draft also includes provisions for enhanced data protection, requiring customer information to be stored independently from the systems of related entities to prevent unauthorised access or commingling.
In addition, promoters of closely linked entities would be required to establish non-operating holding companies to oversee their businesses.
However, shareholders unwilling to adopt the structure may opt to merge their operations and surrender excess licences.
The CBN said the draft guidelines had been released for stakeholder consultation and public review.
It invited comments and recommendations from stakeholders, noting that submissions must be made on or before July 9.
The proposal follows another draft guideline on financial holding companies issued by the apex bank on June 10, which seeks tighter ownership requirements, including a minimum 51 per cent stake in subsidiaries.
The CBN said the reforms were part of ongoing efforts to strengthen regulatory oversight and ensure the resilience of Nigeria’s financial system.
