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CBN Sets Rules For Shared Services In Banks, Others

CBN Set Rules For Shared Services In Banks, Others

The Central Bank of Nigeria (CBN) has issued guidelines on shared services arrangement among subsidiaries within a banking group.

The new rules for shared services released on Monday also apply to Payment Services Banks (PSBs) and other payment service providers licensed by the financial regulator.

The apex bank said the companies should develop charges or fees for services rendered by entities to one another within a group in order to ensure cost efficiency and good corporate governance.

The CBN stated, “Nigerian banks with foreign parents and banks within the non-operating financial holding company (HoldCo) structure participate in centralized or shared services arrangements with their parent companies and other entities in the group.

“The main drivers for sharing of services among group entities are the need to ensure cost efficiencies, leverage existing expertise and maintain consistency throughout the group. An intra-group charge is billed  to the benefitting group members, in consideration of the services provided to them.”

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It said the guidelines are necessary because “the absence of standards for  the application of costs related to shared services and ensuing pricing arrangements has resulted in uneven management of shared services in the banking industry and has been a source of concern for regulators, especially in view of its governance, financial and tax implications.”

Specifically, it stated the objectives of the guidelines to include setting “out supervisory expectation in respect of shared services arrangements between a parent company and its subsidiary; to ensure that the fees received or paid reflect the services rendered, taking into account the assets used and the risks assumed.

other objectives of the rules, according to the financial regulator, will ensure that financial institutions comply with the extant transfer pricing regulation in Nigeria and reduce the operational cost of benefitting institutions.

About Author

Ife Ogunfuwa is an award-winning reporter who is versed in reporting business and economy, technology, gadgets reviews, telecoms, tax, and business policy review, among others. She loves telling stories behind the numbers. She has professional certifications in business and financial reporting. You can reach her via – [email protected]

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