Guidelines on Operation of Group Structure by Merchant Banks in Nigeria

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Wednesday, August 26/ 2015, 06.28 AM / CBN

Following the introduction of the revised banking model in 2010, which made provision for the re-emergence of merchant banking activities in Nigeria, the CBN licensed a number of merchant banks. The activities of merchant banks were stated in: The CBN Regulation tagged CBN Scope, Conditions and Minimum Standards for Merchant Banking N0 2 2010 Permissible activities under the guidelines include assets management and capital activities.

However, efforts by the newly licensed merchant banks carry on capital market and asset management activities were constrained by provision of section 188 of Investment & Securities Act, (ISA) 2007 and Pension Commission rules, which require banks to incorporate a separate legal entity to carry out such activities. These developments hindered effective operations or merchant banking issues in Nigeria.

To address this challenge and elevate merchant banks to the right position to play active role in the capital and pension sub-sectors of the economy, the CBN hereby amends the provision of section 5(1)(e) of regulation 3 to allow merchants bank own subsidiaries for the sole purpose of capital market and asset management activities, the CBN has attached herewith, Guidelines on Operation of Group Structure by merchant banks that own downstream. This amendment, which takes immediate effect, is expected to strengthen the operations of merchant banking in Nigeria.

Please, note that no merchant bank is allowed to depositors’ funds for the incorporation of a capital market or asset management subsidiary. Furthermore, Merchant banks shall not use depositors; funds for any trading activity through the subsidiaries, except when carrying out express instruction from clients.

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