New CBN rule requires investors to get approval to acquire 5% stake in holding companies

The Central Bank of Nigeria (CBN) has restricted the acquisition of controlling stakes in financial holding companies (FHCs).

The apex bank said any investor looking to acquire up to 5 percent of any FHC would need prior approval from it.

A FHC is a company that controls a group of financial institutions engaged in financial activities such as insurance, banking and securities dealing.

Banks such as UBA Group, First City Monument Bank (FCMB), Stanbic IBTC Bank, Access Bank and First Bank have adopted the holding company structure to diversify their portfolio and earnings.

The directive is contained in a circular dated July 13, 2023 and signed by Chibuzo Efobi, director of the financial policy and regulation department.

The circular titled ‘Corporate Governance Guidelines’ was addressed to all commercial, merchant, non-interest and payment service banks, and financial holding companies.

The CBN said the effective date of the new guidelines is August 1, 2023.

The regulation reads: “Except with the prior written approval of the CBN, no FHC or any of its director, shareholder or agent shall enter into an agreement which results in:

i. a change in the control of the FHC, the transfer of shareholding of five per cent (5%) and above in the FHC; and/or an increase in shareholding to five per cent (5%) or more in the FHC.

Provided that CBN’s prior approval and No Objection shall be sought and obtained, before any acquisition of shares of an FHC by an investor (including through the capital market), that would result in equity holding of five per cent (5%) and above.

“ii. the sale, disposal or transfer of the whole or any part of the business of the FHC;
iii. the acquisition or merger of the FHC;
iv. the reconstruction of the FHC; or
v. the employment of a management agent, management by or transfer of its business to any such agent.”

The CBN said that no one can own a controlling stake in more than one bank, except a prior approval is obtained.

The apex bank added that subsidiaries of an FHC were prohibited from acquiring shares in its FHC and/or other subsidiaries within the group.

The CBN said in cases where it has an objection to any of the acquisition, the notice of the objection would be communicated to the FHC, and the company is expected to notify such investor(s) within 48 hours.