In a bid to reposition the Nigerian banking system to ensure sustainable viability, the Central Bank of Nigeria (CBN) has introduced a New Banking Model.
The New Banking Model, which was initiated in 2010 to replace the universal banking system, permits banks/banking groups to retain non-core banking businesses by evolving into a non-operating Holding
Company (HoldCo) structure.
Under this Model, a non-operating HoldCo is expected to hold equity investment in banks and non-core banking businesses in a subsidiary arrangement. This arrangement seeks to ring-fence depositors’ funds
from risks inherent in non-core banking businesses.
A financial holding company shall be a source of financial and managerial strength to the subsidiaries.
In serving as a financial and managerial strength to its subsidiaries, a financial holding company shall maintain financial flexibility and capital-raising capabilities for supporting its subsidiaries.
It shall also stand ready to use available resources to augment capital funds of its subsidiaries in periods of financial stress or adversity.
This Guidelines, issued in exercise of the powers conferred on the CBN under the Central Bank of Nigeria Act, 2007(CBN Act) and the Banks and Other Financial Institutions Act, Cap B3, Laws of the Federation of
Nigeria, 2004(BOFIA), complements CBN Regulation on the Scope of Banking Activities and Ancillary Matters, No 3, 2010 and is intended to facilitate understanding of then requirements for the adoption and operations of a financial holding company in Nigeria.
It covers the definition and structure of a financial holding company, licensing requirements, ownership and control, corporate governance, permissible and non-permissible activities, prudential regulation, as well as supervision.
The Guidelines shall be read in conjunction with the provisions of the CBN Act, the BOFIA, other subsidiary legislations made under the Acts, as well as written directives, notices, circulars, frameworks and other guidelines that the CBN and other regulators in the financial services sector have issued or may issue from time to time.