The Central Bank of Nigeria (CBN) has proposed new rules to prevent commercial banks from using customer deposits to support their fintech subsidiaries and other affiliated companies.
In a circular dated June 10 titled ‘Exposure of the draft guidelines on ring-fencing operations of closely linked entities in the Nigerian financial system’, the apex bank outlined a framework that would force banks and their related entities — including fintechs — to operate as independent entities.
The proposed guidelines, which are currently open for public feedback until July 9, aim to stop the common practice of channelling depositors’ funds into intra-group lending, proprietary trading, servicing group debts, or covering the operational expenses of affiliated companies.
“Customer funds shall not be used for intra-group lending, proprietary trading, servicing group debts or covering the operational expenses of affiliated companies,” the circular read.
The CBN said the move is 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.
Under the proposed framework, closely linked entities — defined as businesses that directly or indirectly control, are controlled by, or share common ownership, directors, systems, or branding with another entity — would be required to maintain separate governance and risk management structures.
They must also meet capital adequacy and liquidity standards individually, regardless of resources available at the group level.
The regulator further proposed tighter controls on intra-group transactions. No closely linked entity would be allowed to extend loans to or guarantee the obligations of another without the CBN’s prior written approval. All intra-group exposures must be conducted at arm’s length and reported quarterly.
On customer data, the CBN said data held by an entity must be segregated and stored independently from data systems of closely linked entities to prevent unauthorised access or commingling.
Customers must also give express consent before being onboarded onto products or services offered by related entities, with institutions required to disclose such arrangements in “clear, simple language” and provide alternative options where available.
The CBN said promoters of closely linked entities would be required to establish a non-operating holding company. Shareholders unwilling to adopt that structure may opt to merge their businesses and surrender excess licences.
The proposal follows a separate draft on guidelines for financial holding companies, also dated June 10, which seeks tighter ownership rules including a minimum 51 percent stake in subsidiaries.
Stakeholders and members of the public have been invited to submit comments on the draft guidelines no later than July 9.
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