Twelve years after Holdcos, CBN seeks stronger oversight of financial group

The proposed amendments reflect lessons from past financial crises, including the 2008 global financial crisis and Nigeria’s banking sector intervention in 2009. By strengthening ownership requirements, introducing a capital buffer, restricting cross-shareholding and enhancing governance standards, the CBN aims to build a more resilient financial system. The reforms seek to improve transparency, ensure clearer lines of ownership and accountability, and protect depositors’ funds from risks arising within complex financial groups. Ultimately, the revised framework is designed to reduce the likelihood of systemic failures, strengthen market confidence and promote the long-term stability of Nigeria’s financial sector.

Introduction

The Central Bank of Nigeria’s decision to review the Guidelines for Licensing and Regulation of Financial Holding Companies (HoldCos) marks the latest chapter in a regulatory journey that began in 2010 with the discontinuation of universal banking under the former CBN Governor, Lamido Sanusi.

Before 2010, Nigerian banks operated under a universal banking model that allowed them to engage in a wide range of financial activities, including commercial banking, insurance, pensions, asset management and investment banking, all within a single corporate structure. However, the global financial crisis of 2008 exposed the risks associated with complex financial conglomerates and weak risk management practices across the financial system.

In Nigeria, the crisis coincided with growing concerns over excessive margin lending, poor corporate governance and deteriorating asset quality in several banks. The situation culminated in a major banking sector intervention in 2009, when then Central Bank Governor Lamido Sanusi announced a rescue package of about $4 billion for nine troubled banks and removed their chief executives.

From universal banking to HoldCos

The banking crisis prompted a broader rethink of the structure of Nigeria’s financial system. Regulators became increasingly concerned about the transmission of risks across different business lines within financial groups and the potential threat to depositors’ funds.

In response, the CBN repealed the Universal Banking Guidelines in 2010 and introduced a new banking model that required banks to either divest from non-core businesses.

The HoldCo framework, formally introduced in 2014, was designed to allow banking groups retain interests in non-banking financial businesses while ring-fencing depositors’ funds from risks arising from those activities. The model created a parent holding company that would own banking and non-banking subsidiaries while remaining a non-operating entity.

Why the CBN is reviewing the framework

Twelve years later, the CBN says its experience supervising HoldCos has revealed structural gaps, rising overhead costs and governance practices that were not originally envisaged under the 2014 framework. The revised exposure draft therefore seeks to strengthen governance, improve group structures and enhance prudential oversight of financial conglomerates.

Ownership and control take centre stage

One of the most publicised changes is the proposal requiring HoldCos to maintain a minimum 51 percent equity stake in each subsidiary. The amendment seeks to eliminate ambiguity around ownership and control within financial groups. However, a review of the 2025 financial statements of major HoldCos indicate that many already maintain ownership stakes well above the proposed threshold.

Stanbic IBTC Holdings owns between 88.24 per cent and 100 per cent of its subsidiaries, while GTCO Holdings and First HoldCo maintain 100

per cent ownership in the subsidiaries disclosed in their annual reports. FCMB Group owns 91.71 per cent of FCMB Pensions and 100 per cent of most of its other subsidiaries. While most major HoldCos maintain ownership stakes comfortably above the proposed minimum, Access Holdings reported interests of 50.7 per cent in Access ARM Pensions and 51.6 per cent in Access Golf, indicating that ownership structures vary across the industry.

This suggests that the 51 per cent requirement is less a radical new rule and more a formalisation of a principle that already existed under the 2014 framework, which defined control as ownership of more than 50 per cent of the voting shares of a subsidiary. The proposal therefore appears aimed at eliminating ambiguity around control and strengthening accountability within financial groups rather than forcing widespread restructuring. The guidelines also stipulate that a HoldCo may cease to qualify as one if it loses control of its Nigerian banking subsidiary for more than six consecutive months, underscoring the importance the regulator places on maintaining clear lines of ownership and accountability within financial groups.

A higher capital bar for HoldCos

A potentially more consequential amendment is the introduction of a new capital requirement for HoldCos. Under the 2014 Guidelines, a HoldCo was only required to maintain capital exceeding the aggregate minimum capital of its subsidiaries. The revised draft goes further by requiring HoldCos to maintain regulatory capital at least 20 per cent above the combined minimum regulatory capital of their subsidiaries. In practical terms, a HoldCo whose subsidiaries collectively require N500 billion in regulatory capital would now be expected to maintain at least N600 billion in capital, creating an additional buffer that can be deployed to support subsidiaries during periods of financial stress. The requirement also applies at the point of entry. Investors seeking to establish a new HoldCo would be required to provide capital exceeding the combined regulatory capital of the proposed subsidiaries by 20 per cent before receiving a licence from the CBN.

Furthermore, excess capital in one subsidiary cannot be used to offset a capital shortfall in another, ensuring that each entity remains adequately capitalised on a standalone basis. The framework also prohibits subsidiaries from acquiring shares in their parent HoldCo or sister subsidiaries. This effectively strengthens ring-fencing within financial groups and could influence future acquisition plans, dividend policies and capital raising decisions.

A new approach to foreign subsidiary ownership

Another notable amendment relates to the ownership of foreign subsidiaries. Historically, many Nigerian banking groups have owned their foreign operations through the banking subsidiary. For example, the foreign subsidiaries of Access Bank and UBA are largely held through their respective banking entities. The revised guideline would allow HoldCos to directly own foreign subsidiaries, simplifying group structures and potentially improving regulatory oversight.

Redefining shared services within financial groups

The CBN has also revised the framework governing shared services. While the 2014 Guidelines permitted HoldCos to provide services ranging from risk management and compliance to ICT and facilities management, the revised draft draws a clearer distinction between policy direction and operational support. HoldCos are expected to provide broad policy guidance in areas such as human resources, risk management, internal controls and compliance, while operational shared services are restricted to facilities, legal and ICT functions, among others approved by the regulator.

This distinction reinforces the principle that HoldCos should provide oversight and strategic direction without becoming involved in the day-to-day management of subsidiaries. It also addresses one of the regulator’s stated concerns regarding unintended governance practices within financial groups.

What it means for investors and financial groups

Taken together, the proposed amendments suggest that the CBN is not seeking to redesign the HoldCo model introduced in 2014. Rather, the regulator is attempting to refine it after more than a decade of implementation. The proposed ownership threshold formalises existing control requirements, the capital buffer strengthens the financial resilience of HoldCos, the foreign subsidiary provision simplifies group structures, and the revised shared-services framework seeks to improve governance and operational efficiency.

Beyond the immediate regulatory changes, the proposals reflect the lessons learned from past financial crises. The collapse of major international institutions during the 2008 global financial crisis and the subsequent intervention in Nigeria’s banking sector underscored the risks that can emerge when financial groups become too complex, weakly governed or inadequately capitalised. By strengthening ownership requirements, ring-fencing capital, improving transparency and reinforcing oversight, the CBN is seeking to reduce the risk of contagion within financial groups and better protect depositors’ funds.

For investors and shareholders, the impact may not be immediate, particularly as most major HoldCos already maintain ownership stakes above the proposed threshold. However, the new capital requirements and enhanced governance expectations could shape future expansion plans, acquisitions and capital management strategies across Nigeria’s financial services industry. More importantly, the reforms are aimed at strengthening confidence in the financial system, promoting transparency and reducing the likelihood of the kind of systemic failures that prompted regulatory intervention in the past.