The Central Bank of Nigeria (CBN) has unveiled a draft regulatory framework aimed at strengthening corporate governance and reducing risks within the country’s financial system.

Under the proposed guidelines, Financial Holding Companies (HoldCos) will no longer be allowed to participate in the credit approval or lending decisions of their banking subsidiaries. The move is designed to ensure that banks operate independently and make lending decisions without undue influence from their parent companies.

The CBN also proposed that HoldCos must maintain a minimum 51 per cent equity stake in each of their subsidiaries. According to the apex bank, this requirement will eliminate ambiguity over ownership and improve accountability within financial groups.

The draft further states that HoldCos must not interfere in the day-to-day operations of their subsidiaries or compel them to take instructions regarding business decisions. Members of the boards and management teams of subsidiaries would also be restricted from attending each other’s meetings in ways that could compromise operational independence.

In addition, the CBN proposed stricter capital requirements, requiring HoldCos to maintain regulatory capital that exceeds the combined minimum capital requirements of their subsidiaries by at least 20 per cent.

The revised framework also introduces tighter controls on shared services, intra-group transactions and insider lending, insisting that all dealings between HoldCos and subsidiaries must be conducted on an arm’s-length basis.

The CBN said the review became necessary after years of implementing the existing guidelines introduced in 2014, adding that the new measures are intended to strengthen oversight, promote transparency, protect depositors and enhance the resilience of Nigeria’s financial system.

Stakeholders have been invited to review the exposure draft and submit their comments before the proposed regulations are finalised.