CBN Proposes New Rules to Tighten Separation Between Banks, Fintechs

The Central Bank of Nigeria (CBN) has proposed new guidelines aimed at strengthening regulatory oversight and drawing clearer operational boundaries between banks, fintech firms and other closely linked financial institutions.

The proposals are contained in the apex bank’s Exposure Draft Guidelines on Ring-Fencing Operations of Closely Linked Entities in the Nigerian Financial System.

According to the CBN, the framework is designed to address regulatory arbitrage arising from the blending of activities across different licence categories and to ensure greater transparency within the financial sector.

Under the proposed rules, financial institutions operating within the same group structure would be required to maintain greater operational independence, with stricter limits on customer sharing and service integration among affiliated entities.

A key provision requires customers moving between related entities to undergo separate onboarding processes. The receiving institution would be required to establish an independent business relationship and obtain Know-Your-Customer (KYC) information directly from the customer.

“The closely linked entity shall obtain the customer’s KYC information directly from the customer,” the draft guideline states.

If implemented, the measure could significantly change current practices where customers are seamlessly migrated across connected digital platforms within financial groups.

The CBN also proposed restrictions on the use of technology platforms to provide services outside approved licence categories.

Under the draft, institutions would be prohibited from using IT applications to offer non-permissible services, even where affiliated entities within the same group are licensed to provide such services. Financial institutions would also be barred from facilitating transactions on behalf of related entities through their own systems.

To strengthen oversight, the regulator is seeking to impose tighter controls on shared services arrangements among affiliated companies. Such arrangements would require prior written approval from the CBN before implementation.

The proposed framework further mandates annual independent reviews of shared service agreements, including value-for-money audits conducted by external consultants, with reports submitted to the regulator.

The apex bank said the measures are intended to reinforce operational independence among closely linked entities, reduce contagion risks and improve transparency across Nigeria’s rapidly evolving banking and fintech ecosystem.

While parent companies may continue to provide capital support to subsidiaries, the CBN stressed that no institution within a group should rely on another entity’s balance sheet for routine operational support.