CBN’s 20% HoldCo buffer could force banks to raise N1.7 trillion—RenCap

Renaissance Capital (RenCap) has warned that Nigerian banks could be required to raise more than N1.7 trillion in fresh capital and undertake major restructuring of their group operations if the Central Bank of Nigeria (CBN) proceeds with its proposed Financial Holding Company (FHC) framework.

In a report titled “Nigerian Banks: More Capital, Declining Returns” published on July 16, 2026 and obtained by Nairametrics, the investment bank warned that the apex bank’s proposal requiring holding companies to hold at least 20% capital above the sum of its subsidiaries’ paid-up capital could significantly dilute shareholder value and reduce returns on equity.

According to RenCap, the proposal comes at a time when profitability across the banking sector is already moderating following record earnings recorded in recent years.

What the report is saying

RenCap argues that the proposed additional buffer is the most consequential aspect of the reforms and could become highly value-destructive for shareholders.

• “We think the additional 20% capital requirement is excessive given that the current capital requirement, that the holding company’s capital is equal to the sum of subsidiaries’ capital, is sufficient for the Holdco to be the lender of last resort to the subsidiaries,” the report stated.

The investment bank noted that because holding companies are non-operating entities, capital held at that level generates little or no return.

• “Since HoldCo is a non-operating subsidiary, holding that much capital is a value-destruction play to providers of capital,” RenCap added.

According to the report, the impact would be even more severe for banking groups with extensive international operations that may be forced to adopt more complex holding company structures under the proposed framework.

RenCap estimates that under its base-case scenario, several banking groups would need substantial capital injections to comply with the proposed rules.

Among existing HoldCo structures, Access Holdings faces the largest capital requirement at N656.04 billion.

Other estimated requirements include:

• First HoldCo – N135.03 billion
• FCMB Group – N112.84 billion
• GTCO – N56.02 billion
• Stanbic IBTC Holdings – N11.84 billion

The report notes that Access Holdings would need to raise capital equivalent to nearly 50% of its market capitalization, making it the most impacted among existing HoldCos.

By comparison, GTCO, Stanbic IBTC Holdings and First HoldCo would face relatively smaller funding gaps when measured against market value.

RenCap noted that the draft framework contains no exemptions for banking groups operating outside formal HoldCo structures.

Section 4.6 of the proposed guidelines requires closely linked entities to be consolidated under a single non-operating holding company, potentially bringing institutions such as Zenith Bank, United Bank for Africa (UBA), and Fidelity Bank within the scope of the new requirements.

The report estimates their potential capital needs as follows:

• UBA – N416.01 billion
• Fidelity Bank – N188.83 billion
• Zenith Bank – N166.88 billion

Measured against market capitalization, UBA would face the largest burden at approximately 23.1%, followed by Fidelity Bank at 15.3%, while Zenith Bank’s requirement would represent about 3.8% of its market value.

Get up to speed

The proposed guidelines represent the most significant review of Nigeria’s holding company framework since the original rules were introduced in 2014 following the transition away from universal banking.

• The CBN said its review was necessitated by gaps observed over a decade of implementation, including governance weaknesses, compliance inconsistencies, and operational inefficiencies.
• Under the draft framework, banking groups would be limited to two hierarchical layers and required to adopt one of two approved structures.
• Groups with international operations would operate under a two-tier structure, while primarily domestic groups would adopt a single-tier model.

One of the most significant changes is the requirement that foreign subsidiaries be owned directly by the holding company rather than by the operating bank.

This means banks currently operating international licences through their banking subsidiaries would be required to transfer ownership of offshore operations to the HoldCo level.

More insights

RenCap warned that the timing of the proposed reforms could further pressure shareholder returns.

According to the report, the average Return on Average Equity (ROAE) of Nigerian banks declined to 20.63% in FY 2025 from peak levels of 31.03% recorded during FY 2023 and FY 2024.

The firm argued that raising additional equity to meet the proposed buffer requirement would become increasingly expensive in an environment of moderating earnings.

• “Against this backdrop of moderating profitability, we think raising fresh equity to meet the 20% buffer would prove both difficult and expensive. Capital raised to sit at a non-operating HoldCo earns little to nothing, so the buffer itself would further dilute group ROAE,” RenCap stated.

A major issue identified by RenCap is the treatment of excess capital that may arise if banks downgrade their operating licences.

The investment bank’s base-case scenario assumes that banks with international licences may opt to downgrade to national licences.

Under current recapitalisation requirements, international banks were required to raise N500 billion in capital, while national banks need only N200 billion.

Such downgrades could create significant excess capital within banking subsidiaries.

RenCap argues that whether banks can recover and redeploy this capital will determine the overall impact of the reforms on shareholders.

• “The key open question is whether the excess capital would be recalled and used as cash for redeployment across the group or returned to shareholders,” the report stated.
• The firm described regulatory approval for capital recall as “the single most important determinant of shareholder value under the new framework.”

RenCap’s recommendations

To reduce the potential negative impact of the reforms while preserving the CBN’s broader objectives, RenCap urged the regulator to reconsider several aspects of the draft framework.

The investment bank recommended that the CBN:

• Remove the additional 20% HoldCo capital buffer.
• Permit the recall and redeployment of excess capital following licence downgrades.
• Clarify the treatment of solo capital adequacy requirements at the HoldCo level.
• Relax proposed restrictions on intra-group financing and shared-service arrangements.

According to RenCap, these changes would allow the CBN to achieve stronger group-level supervision and more effective ring-fencing without imposing unnecessary costs on shareholders.

• “In our view, these changes would preserve stronger group-level capital and cleaner ring-fencing, whilst removing the elements that are most value-destructive,” the report concluded.

What you should know

Last week, a group of shareholders had urged the CBN to reconsider a proposed capital requirement for Financial Holding Companies (HoldCos), warning that it could lead to repeated capital raising, investor fatigue and weaken confidence in the banking sector.

The shareholders, in a submission on the CBN’s Exposure Draft of the Revised Guidelines for Licensing and Regulating Financial Holding Companies in Nigeria issued on Thursday, said they support the apex bank’s efforts to strengthen financial stability but raised concerns over provisions requiring additional capital at multiple holding company levels.