CBN plans new rules for linked financial firms in Nigeria

The Central Bank of Nigeria (CBN) has come up with new rules to manage how closely linked financial entities operate in Nigeria. This is to help keep the financial system stable.

The CBN shared the drafted guidelines in a circular on Thursday. They aim to create a safe and stable financial environment.

According to the CBN, the guidelines will help protect consumers and improve oversight in Nigeria’s financial system. They look to set clear boundaries for operations among financial entities that are closely linked.

The guidelines will also tackle issues that come from mixing activities across different license types. They will provide requirements for governance, intra-group transactions, separating customer funds and data, independence in operations, planning for recovery and resolution, and overall supervision.

“The guidelines are 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 CBN stated.

The CBN will share these guidelines with stakeholders, including banks, payment service providers, and the general public, for feedback and comments. They want to ensure everyone has a say.

If a CBN-regulated entity is closely related to another entity under a different financial regulator, the CBN will work with that regulator. This will help extend the guidelines to cover both entities.

The guidelines “shall be read in conjunction with the provisions of the CBN Act 2007, the Banks and Other Financial Institutions Act 2020, other subsidiary legislation 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.”

This new effort aims to reduce risks that come from mixing customer funds with those of closely linked entities.

The CBN warned that anyone who breaks these rules or fails to follow the guidelines will face strict penalties. This could include fines, changes in management, or even losing their license in line with BOFIA 2020 and other relevant rules.