FRC allegations: CBN clears Stanbic IBTC, says FRC lacks authority to suspend directors
The Central Bank of Nigeria (CBN) has cleared Stanbic IBTC Holdings Plc and its directors of all allegations levelled against the financial services provider.
CBN’s decision was communicated in a letter addressed to the Executive Secretary/Chief Executive of the Financial Reporting Council (FRC) dated 2nd November, 2015 signed by the CBN Governor, Godwin Emefiele CON, titled “RE: Regulatory Decision in The Matter of Financial Statements of Stanbic IBTC Plc for Years Ended December 2013 and 2014”.
The apex bank and chief regulator of the financial services sector stated that consequently upon due diligence measures contrary to the allegation of the FRC that Stanbic IBTC did not obtain approval from National Office for Technology Promotions (NOTAP) for the payment of affiliate software licence, its investigations revealed that the bank actually obtained the necessary approval from NOTAP to pay affiliate software licence from its parent company the Standard Bank Group for the period of three years covering 1st June 2012 to 30th May 2015. The remittance from June 2015 to date is still awaiting approval from NOTAP.
The regulator went further to state that with respect to the allegation of non-disclosure of intangible assets in SIBTC’s 2013 and 2014 financials; that Stanbic IBTC adequately recognized the software as an intangible asset in its 2011 financial and sufficiently disclosed the disposal of the software in the 2012 financials. It also overruled the FRC on the allegation of lumping several expense items under “Others”, arguing that it is of the opinion that the items were not material enough to appear as line items in the Income Statement and that the non-disclosure of the items did not materially affect the true and fair view of the financial statements.
According to CBN, “SIBTC used its judgment to capture the donation of N275million under “Others” because it was of the opinion that it was not a charitable donation but a mandatory contribution towards the victims of terrorism in the country. For the avoidance of doubt, this contribution was agreed at a Bankers’ committee Meeting, with the share for each bank clearly spelt out. Therefore we agree with SIBTC’s position, as presented.”
On the allegation of identified misclassifications, the CBN cleared Stanbic IBTC of any financial infringement that it did not understate or overstate its assets and liabilities, neither did it increase nor decrease its income or expenditure, such as would have caused a material of the financials. It also exonerated SIBTC that it had an obligation to accrue the relevant provisions towards the settlement of the franchise and management fees as agreed between it and Standard Bank Group.
The Central Bank stated that it was concerned about the apparent failure issues of the FRC to follow due process as laid down by its own FRC Act and Regulations, in arriving at the Regulatory Decision. In this regard, the CBN faulted the FRC in its conduct of the investigation stating that the FRC ought to have given the entity concerned sixty (60) days from service of Final Notice to restate its accounts where both the panel and entity agree on the need for restatement.
CBN also expressed concerns that such a drastic regulatory decision could be taken on an entity under the regulation and supervision of the Central Bank of Nigeria without any form of consultation with the bank, especially as the CBN is responsible for promoting a Safe, Stable and Sound financial system. Adding that yet, such a regulatory decision and manner of the announcement is not only capable of eroding investor confidence but also inimical to financial system stability. Indeed, the FRC’s action has already precipitated a fall in the value of the shares of Stanbic IBTC by about 18 per cent since the announcement of the regulatory decision.
It concluded by saying that in the light of the forgoing facts, which clearly show that FRC did not follow due process, the CBN is unable to accede to the FRC’s request to take any disciplinary action against SIBTCH. As it does not see any reason to advise/compel SIBTC to obey the sanctions meted to it by the FRC.