* Proposes mandatory 51% ownership stake in subsidiaries to strengthen control, accountability
Nume Ekeghe
The Central Bank of Nigeria (CBN) has proposed a sweeping overhaul of the regulatory framework for Financial Holding Companies (HoldCos), including measures to strengthen the operational independence of subsidiaries by prohibiting parent companies from participating in lending decisions and credit approval processes.
The move would also require the HoldCos to maintain a minimum 51 per cent ownership stake in their subsidiaries.The proposed reforms, contained in the ‘Exposure Draft of the Revised Guidelines for Licencing and Regulation of Financial Holding Companies in Nigeria,’ posted on the apex bank’s website, were aimed at strengthening governance, enhancing accountability and ensuring clearer ownership structures within Nigeria’s increasingly diversified financial groups.
In prohibiting parent companies from participating in lending decisions, it stated that a HoldCo shall not: “Be involved in credit administration and approval processes of any of its subsidiaries.”It added: “Loans by a banking subsidiary to its holdco would be regarded as a return of capital and deducted from the capital of the bank in computing the bank’s capital adequacy ratio.”
