The Central Bank of Nigeria (CBN) has proposed a regulatory framework seeking to ring-fence the operations of closely linked financial entities in Nigeria to promote a stable financial system.
The drafted guidelines will ensure a safe, sound and stable financial system, the apex bank said in a circular on Thursday.
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It added that the guidelines will also safeguard consumer interests and strengthen regulatory oversight in Nigeria’s financial system.
The guidelines seek to establish clear operational and functional boundaries among closely linked entities in the financial system.
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It will also focus on addressing regulatory arbitrage arising from the commingling of activities across different licence categories.
The guidelines set requirements for governance, intra-group transactions, segregation of customer funds and data, operational independence, recovery and resolution planning, and consolidated 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 regulator said.
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It added that it will make the guidelines available to stakeholders, including banks, payment service providers, financial institutions, and members of the public, for review and comment.
The regulator explained that where a CBN-regulated entity is closely linked to an entity regulated by another financial services regulator, it will collaborate with the relevant regulator to extend the scope of the guidelines to the entity.
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It stated that 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.”
It noted that the effort will mitigate the risks arising from the commingling of customer funds with those of closely linked entities.
The CBN warned that any breach of or failure to comply with the provisions of the guidelines shall attract appropriate sanctions, including penalties, replacement of management, and/or revocation of licence in line with BOFIA 2020 and other relevant extant regulations.
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