Nigeria’s biggest banking groups may be forced to raise as much as N370 billion in fresh capital under proposed Central Bank of Nigeria (CBN) rules that would reshape the country’s financial holding company (HoldCo) structure, a new report disclosed.
The CBN on June 11 released two exposure drafts—the Revised Guidelines for Financial Holding Companies and the Guidelines on Ring-Fencing of Closely Linked Entities, which analysts describe as the most significant overhaul of banking group structures in more than a decade. The documents were signed by Rita I. Sike, director of financial policy and regulation.
While the proposed reforms are designed to strengthen financial stability and shield deposit-taking institutions from group-wide contagion risks, investment research firm Zrosk Investment Management warns that the new requirements could create significant compliance costs, dilute shareholder value, and alter the economics of Nigeria’s integrated financial services model.
At the centre of the proposed changes is a new capital requirement that would compel HoldCos to maintain paid-in capital exceeding the combined paid-in capital of all subsidiaries by at least 20 percent.
The proposal marks a significant departure from the current framework introduced in 2014, which only requires HoldCos to maintain capital equivalent to the aggregate capital of their subsidiaries.
