CBN Tightens Oversight Of Banks, Fintechs And Financial Conglomerates

CBN proposes operational and governance separation to strengthen consumer protection and financial system resilience.

The Central Bank of Nigeria (CBN) has unveiled sweeping proposals aimed at isolating risks across banks, fintechs and other closely linked financial institutions.

The proposals, contained in the apex bank’s newly released ‘Exposure Draft Guidelines on Ring-Fencing Operations of Closely Linked Entities in the Nigerian Financial System,’ seek to establish clear operational, governance and financial boundaries among affiliated institutions to prevent distress in one entity from spreading across an entire financial group.

The draft guidelines come amid the growing convergence of banking, payments, lending, wealth management and other financial services businesses, many of which increasingly operate under common ownership structures.

According to the CBN, the framework is designed to “establish clear operational and functional boundaries among closely linked entities within the financial system” and address “regulatory arbitrage arising from the commingling of activities across different licence categories.”

The exposure draft, signed by the Director of Financial Policy and Regulation Department, Dr. Rita Sike, stated that the guidelines were developed “In furtherance of the mandate to promote a safe, sound and stable financial system, safeguard consumer interests and strengthen regulatory oversight within the Nigerian financial system.”

The CBN explained that the framework prescribes requirements relating to governance, intra-group transactions, segregation of customer funds and data, operational independence, recovery and resolution planning, and consolidated supervision.

According to the regulator, 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.

Under the proposed framework, the number of directors permitted to serve simultaneously on the boards of closely linked entities would be capped at 20 per cent of the total number of directors on the board of an institution.

The CBN is also proposing tighter restrictions on personnel sharing within financial groups. It stated that, except as provided under existing Shared Services Guidelines, no employee of an entity would be allowed to serve concurrently in another closely linked entity.

Beyond governance, the regulator is seeking greater operational independence among affiliated institutions, particularly in technology infrastructure.

The draft provides that each entity must maintain independent critical functions and prohibits institutions from using technology platforms to circumvent licensing restrictions.

It specifically stated: “An entity shall not leverage IT applications to offer non-permissible activities as defined by its guidelines even where closely linked entities are permitted to offer those services.”

Furthermore, institutions would be barred from acting as transaction channels for affiliated companies. The draft states: “An entity shall not facilitate customer transactions on behalf of closely linked entities using its Information Technology (IT) application(s).”

The CBN also reserved the right to compel physical technology separation where necessary.

It noted that “where necessary, the CBN may require separation of data centres to reduce contagion and ensure that each entity can operate on a standalone basis.”

The guidelines introduce stricter rules governing intra-group funding and financial support arrangements.

Under the proposal, each regulated institution must satisfy capital adequacy and liquidity requirements independently, regardless of resources available elsewhere within the group.

The regulator further stated that “the prior written approval of the CBN shall be obtained for the extension of any intra-group liquidity support.”

The draft also seeks to protect customers by ensuring greater transparency whenever they are migrated from one affiliated institution to another.

According to the framework, where a customer is to be onboarded onto a service provided by a closely linked entity, the customer’s “express consent shall be expressly sought and obtained.”

The CBN added that customers must be given clear disclosures and informed about alternative options where available to avoid confusion regarding which institution is providing a particular service.

Another significant provision is the requirement for closely linked entities to establish recovery and resolution plans.

The CBN stated that each entity must maintain a recovery and resolution plan explaining how it would restore viability during periods of severe financial stress and, where necessary, wind down operations in an orderly manner without disrupting the broader financial system.

Stakeholders have until July 9, 2026, to submit comments on the exposure draft before the guidelines are finalised.