Ndubuisi Francis in Abuja
Renowned financial economist and President, Capital Market Academics of Nigeria (CMAN), Prof. Uche Uwaleke has applauded the Central Bank of Nigeria’s (CBN) recent exposure drafts on the Revised Guidelines for Financial Holding Companies (HoldCos) and the Ring-Fencing of Closely Linked Entities, saying it is perhaps the most far-reaching restructuring of Nigeria’s financial conglomerate architecture since the introduction of the holding company framework in 2014.
In an article titled “Proposed HoldCo Reforms: Balancing Financial Stability with Operational Efficiency,” which he made available to THISDAY, weekend, the one-time Commissioner for Finance in Imo State, explained that coming at a time when the banking industry is still adjusting to the recapitalisation exercise, the proposals seek to strengthen corporate governance, enhance regulatory oversight, protect depositors’ funds and insulate banks from risks arising from non-bank subsidiaries and related entities.
Uwaleke said the broad objectives of the reforms were both timely and commendable, adding that over the last decade, Nigerian banking groups had evolved into increasingly complex financial conglomerates with extensive Pan-African operations and diverse subsidiaries spanning insurance, pensions, payments, asset management and fintech businesses.
He noted, “While this diversification has created opportunities for growth and efficiency, it has also generated new channels through which risks originating from one part of the group can spread to the regulated banking entity.
“Consequently, the CBN’s determination to reinforce financial stability and align Nigeria’s supervisory framework with global standards is understandable. However, as with most regulatory reforms, the question is not whether change is necessary, but how such changes should be implemented in a manner that preserves the efficiency gains of financial conglomeration while strengthening prudential safeguards.
“It goes without saying that good regulation should not only pursue sound objectives but should also achieve them in a manner that is proportionate, practical and capable of minimizing unintended consequences.”
He observed that at the heart of the proposed reforms lies an attempt to restore the original philosophy underpinning the HoldCo model.
“The CBN deserves commendation for its determination to strengthen governance, enhance resilience and protect depositors within Nigeria’s increasingly complex financial system. The direction of the reforms is broadly consistent with global regulatory trends and reflects important lessons from previous financial crises.
“Nevertheless, effective regulation requires more than good intentions. It demands a careful balance between prudential safeguards and operational efficiency. Excessive rigidity can destroy valuable synergies, raise costs and create unintended distortions.
“Conversely, insufficient oversight may expose the system to contagion and systemic vulnerabilities. All said, the challenge before both the CBN and the industry is to strike the right balance between stability and efficiency.
“If implemented gradually, supported by clear guidance and accompanied by appropriate flexibility, these reforms could leave Nigeria with a stronger, more transparent and more resilient financial system.
“But if pursued too aggressively or without sufficient accommodation for practical realities, the costs may outweigh the benefits. The objective should therefore not be regulation for its own sake, but regulation that promotes resilience without sacrificing competitiveness, innovation and efficiency.
“In the final analysis, good regulation is not merely about rules; it is equally about judgment, proportionality and successful execution,” Uwaleke who is who is also the Director, Institute of Capital Market Studies. Nasarawa State University, said.