CBN Lists Conditions for Establishing Subsidiaries, SPVs by DFIs


The Central Bank of Nigeria (CBN) has listed conditions for the establishment and operations of subsidiaries and special purpose vehicles (SPVs) by Development Finance Institutions (DFIs).

The Bank in a letter to all DFIs that was signed by its Director, Other Financial Institutions Supervision Department, Mrs. Tokunbo Martins, a copy of which was posted on its website, noted the spate of request from DFIs for special regulatory approvals to operate specials purpose vehicles (SPVs) in furtherance of their operational objectives.

It stressed that it was important that DFIs are transparent in their financial reporting and remained focused on their core objectives.

“In this regard, DFIs are henceforth required to provide comprehensive disclosures on all subsidiaries and SPV operations. In the same vein, the same regulatory standards that apply to the parent DFI will apply to the subsidiaries and/or SPV,” it stated.

Specifically, DFIs were required to submit returns on all SPVs including details of ownership, corporate governance structure, statement of asset and liabilities, income and expenditures, project(s) status, possible risk exposure and mitigants, along with own regulatory returns and report on the financial soundness indicators /prudential ratios of the DFI calculated on a solo and consolidated basis. It further requested that they present for approval, their audited accounts along with that of the SPVs on a consolidated basis and meet a consolidated leverage ratio.

“Finally, DFIs are required to note that Approval of new SPVs shall depend on the successful performance of earlier approved ones and the meeting of the consolidated prudential ratio, leverage ratio and business objectives at all times. A consolidated risk-based examination of all subsidiaries and/or SPVs will be conducted on a periodic basis,” it added.