cBN GOVERThe Central Bank of Nigeria (CBN) has set a non-refundable N1 million as the minimum paid-up capital requirement for the licensing of a Payments Service Holding Company (PSHC), while six months after the acquisition of Approval-in-Principle from the CBN, the promoters of a PSHC shall submit an application for the granting of final license at a non-refundable fee of N5 million.
Musa Jimoh, director of payments system management department at the bank, made this disclosure in a guideline for the licensing and regulation of the PSHC in Nigeria.
Accordingly, said the CBN, a payment service holding company intending to offer both switching and processing and mobile money services shall have a minimum paid-up capital which shall exceed the sum of the minimum regulatory capital or total equity of all its subsidiaries, while the excess capital in one subsidiary shall not be used to make up a shortfall in another subsidiary. Thus, it is the capital of the PSHC that is applied to the subsidiaries.
This development, according to the apex bank, is in line with its commitment to promote an efficient and credible payments system, and approve new license categorisations for participants in the payments system.
It further noted that the regulations require firms who are intending to operate more than one licence category to set up a PSHC with clear activities of the subsidiaries listed out. The bank also revealed that the plans on ground would prevent commingling of activities, facilitate management of risks and enable the Central Bank of Nigeria to exercise adequate regulatory oversight on all the companies operating within the group.
According to CBN guidelines, “Under this arrangement, a non-operating PSHC shall be formed to hold equity investment in the separate companies in a “parent-subsidiary” arrangement. In serving as a source of financial strength to its subsidiaries, a PSHC shall maintain financial flexibility and capital-raising capabilities to support its subsidiaries. It shall also be capable to provide and use available resources to augment the capital of its subsidiaries, in the event of financial stress or adverse conditions.
“These guidelines are intended to facilitate understanding of the requirements for the adoption and operations of a PSHC in Nigeria and covers the definition and structure of a PSHC, licensing requirements, ownership and control, corporate governance, permissible and non-permissible activities, as well as supervision,” it noted.
The CBN further stated that the PSHC shall not be able to pay dividends on its shares unless all adequate provisions have been made satisfactorily to the apex bank and in compliance with the capital requirements where the PSHC owns 100 per cent of the subsidiaries. Also, in the area of investments into non-assets, the PSHC shall ensure that it has adequate free funds to support any acquisition of non-current assets such as property, plant and equipment, IT infrastructure/ platforms, among others.
Similarly, the total exposure of a PSHC on contingent liabilities on behalf of its subsidiaries shall not exceed 20 percent of the company’s shareholders’ funds unimpaired by losses.
Meanwhile, the CBN also noted that PSHCs shall be required to render returns to the Payments System Management Department of the CBN on a quarterly basis, or in frequency and format, prescribed by the CBN from time to time. Thus, the returns shall include information on compliance with corporate governance guidelines; whistleblowing; assets and liabilities of the PSHC and its subsidiaries; risk management; internal control; and intra-group transactions.