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CBN Issues Guidelines, Regulation Of Payments Service Holding Companies

The Central Bank of Nigeria (CBN) on Tuesday issued guidelines for licensing and regulation of Payments Service Holding Companies (PSHCs) in the country.

The new guidelines and regulation were contained in a circular issued by the apex bank to all Deposits Money Banks (DMBs), Payment Service Providers (PSBs) and Other Financial Institutions (OIFs).

Specifically, the guidelines directed: “The regulation requires companies desirous of operating more than one licence category, to set up a PSHC, with activities of subsidiaries clearly delineated.

“This arrangement would prevent commingling of activities, facilitate management of risks and enable the CBN exercise adequate regulatory oversight on all the companies operating within the Group.

“The affected regulated payment activities are: Mobile Money Operations, Switching and Processing, Payment Solution Services and any other activity as may be approved by the CBN”, the circular added.

On activities that are permissible and non permissible for the DMBs, PSBs and the OFIs, the CBN further stated in the circular that: “Except as listed in Section 5.2, the activities of the PSHC shall be restricted to the holding of equities in financial and technological subsidiaries that facilitate and/or enhance innovative digital financial services.

“The PSHC can provide broad policy direction, shared services and/or enter into technical or management service contract with any of its subsidiaries, with the prior written approval of the CBN, in respect of the following areas: Human Resources services; Risk Management services; Internal Control services; Compliance services; Information and Communication Technology; Legal services; Facilities (office accommodation including electricity, security, cleaning services in that accommodation); and, Any other services as may be approved by the CBN from time to time.

“Shared services shall be provided on arm’s length basis. Transactions in respect of such services shall require the consent of the Board of Directors of the subsidiary.

“A PSHC is prohibited from undertaking the following activities: Establishment, divestment and closure of subsidiaries, without the prior written approval of the CBN.

“Deriving or receiving income from sources other than as listed herein: Dividend income from its subsidiaries/associates; Income from shared services, where applicable; Interest earned from idle funds invested in government securities or placement with licensed financial institutions.

“Patents, royalties and copyrights; Profit on divestment from subsidiaries/associates; and any other source as may be approved by the CBN”, the apex bank added.

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