NIGERIA – Two of Nigeria’s national commercial banks, Access Bank and Sterling Bank have received Approval-in-Principle from the Central Bank of Nigeria (CBN) to restructure into a holding company.
The two Banks have joined a list of conventional banks in Nigeria, that are diversifying and restructuring their operations into holding companies.
The proposed holding company structure would enable the bank to further accelerate their objectives around business diversification, improved operational efficiencies, talent retention, and robust governance.
The move is in line with a policy shift by the Central Bank of Nigeria (CBN) to transition bank management models from the universal banking model introduced to a bank holding company business model.
Under the previous model, the banks operated on a universal banking license is essentially a “one-stop shop” for all financial services, ranging from the traditional deposit money banking to investment banking, asset management, project finance and insurance, etc.
The general legal structure of most banks under the universal banking regime is that a bank will be an operating company for banking services and at the same time a holding company for non-bank subsidiaries.
A major drawback of this structure is that in addition to the inherent risk in the bank’s own operations, the bank as a holding company is unduly exposed to the risks of its subsidiaries which in turn mean higher risks for the banking public.
Under the proposed holding company structure, the holding company’s role is effectively taken away from the bank to a holding company, which must be resident in Nigeria.
This is expected to facilitate better risk management and supervision; ring-fence the risks associated with other riskier non-banking activities in the relevant entities rather than under the bank.
The Holding Company model would also ensure better specialisation in the different financial services; and support clearer responsibility and reporting lines.
In addition, to changing its management structure, Access Bank also disclosed its intent in expanding its territory within the African space, by bolstering its market in Mozambique and South Africa.
Sterling Bank on the other hand, noted that its desire to operate as a Holding Company was driven by its plan to spin off its Non-Interest Banking window which became operational in January 2014 into an autonomous entity.
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