FRC lacks the ‘authority’ to suspend Stanbic IBTC’s directors, says CBN

Godwin Emefiele
CBN Governor, Godwin Emefiele used to illustrate the story.

The Central Bank of Nigeria (CBN) has waded into the crisis involving Stanbic IBTC Holdings and the Financial Reporting Council of Nigeria (FRC), listing a series of procedural infractions committed by the regulator – rather than the bank – and dismissing all allegations of “financial misstatements” brought against the bank.

On October 26, FRC had urged CBN and the Economic and Financial Crime Commission (EFCC) to investigate Stanbic IBTC and KPMG Professional Services for “financial misstatements”.

It also suspended the registration of four directors of Stanbic IBTC – Atedo Peterside, Sola David-Borha, Arthur Oginga and Dare Owei – and that of its audit engagement partner, KPMG Professional Services, “until KPMG’s innocence is ascertained”.

According to the council, the bank misstated its financial reports for the 2013-2014 fiscal year and ceded its banking application rights to Standard Bank of South Africa against the directives of National Office for Technology Acquisition and Promotion (NOTAP).

“The schedules supplied to the council by Stanbic IBTC revealed that the total fee paid to KPMG Professional Services for non-audit services was inconsistent with what was disclosed in the financial statements for the years under review,” it said. “In 2014 for instance, a total penalty of N28,000,000 was imposed on the group. Among the contraventions was improper disclosure of public sector deposits in 2014…. Stanbic IBTC seems to have a penchant for poor disclosures which further corroborates the findings in this report.”

Issuing a stern response, Stanbic IBTC had described the suspension of the registration of its directors as a recourse to “self-help” and “media publicity”. It claimed to have met the disclosure requirements of the international financial reporting standards (IFRS), and accused FRC of making “inaccurate and unfortunate” allegations and breaching the procedural guidelines laid down in the law.

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“FRCN’s allegations are inaccurate and unfortunate, and the manner in which it has chosen to make them is procedurally defective,” the bank said in a statement issued by Sola David-Borha, its CEO, and Chidi Okezie, company secretary.

“Whilst FRCN takes refuge in Regulation 21 of the Directorate of Inspection and Monitoring Guidelines Regulations 2014 for the wide publicity that it has given to its regulatory decision, Regulation 21 only applies: ‘Where the Panel and the entity agree that accounts are to be rectified by way of revision or restatement’.

“That is not the case here, because Stanbic IBTC does not agree that its accounts are defective or require rectification. Moreover, Regulation 27 makes clear that where a reporting entity does not accept FRCN’s position, FRCN ‘shall institute a legal action against the entity’.

“FRCN has ignored this laid-down process in preference for self-help and media publicity. The matters that FRCN alleges to be wrong are not wrong in any material respect and many are in any event not matters of financial reporting at all, but matters of business decision and judgment for Stanbic IBTC and its board of directors.”

After taking up the invitation of FRC to investigate the allegedly guilty parties, Godwin Emefiele, governor of CBN, wrote a letter dated November 2, 2015 (which is now in PREMIUM TIMES’ possession) to FRC.

In four of the five allegations of infraction levelled against the bank, CBN said it could not spot any wrongdoing.

In the only case where it agreed that Stanbic erred, it said the error neither increased nor decreased the bank’s income or expenditure, such as would have caused material “missreprentation of the financials”.

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On legal issues, CBN expressed concern about the “apparent failure” of FRC to “follow due process as laid down by its own FRC Act and Regulations, in arriving at the Regulatory Decision”.

After listing a series of regulatory breaches made by the council, CBN said FRC lacked the “authority” for suspension “as was done in this case”.

It therefore declined the request of FRC to take disciplinary action against the bank. “Indeed, the CBN does not see any reason to advise/compel SIBTCH to obey the sanctions meted to it by the FRC,” read Mr. Emefiele’s letter.

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