You Didn’t Follow Due Process On Stanbic IBTC, Emefiele Tells FRC | Independent Newspapers Limited
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You Didn’t Follow Due Process On Stanbic IBTC, Emefiele Tells FRC

Posted: Nov 4, 2015 at 9:34 am   /   by   /   comments (0)
Days after the October 26, 2015 regulatory sanction meted out on principal officers of Stanbic IBTC Holdings Plc, the Central Bank of Nigeria (CBN) said Tuesday that it would not accede to the request to punish the Nigerian arm of South Africa’s Standard Bank Group for poor disclosure.
A letter reacting to the punishment, written by Godwin Emefiele, the CBN Governor, argued that the FRC did not follow due process in the matter, just as it rushed to conclusion and failed to carry the apex bank along.
Emefiele also regretted that consequently, the action has resulted in an 18 per cent fall in the share price of SIBTCH on the Nigerian Stock Exchange (NSE).
The CBN, he concluded “regrets to inform you that it is unable to accede to your request to take disciplinary action against SIBTCH. Indeed the CBN does not see any reason to advice/compel SIBTCH to obey the sanctions meted to it by the FRCN.”
He however assured of the CBN’s readiness to continue taking “all necessary steps to protect the interest of depositors and to ensure the safety and soundness of the financial system.”
As part of its reglatory decision announced on October 26, the FRC barred Atedo Peterside, chairman of the group and Sola David Borha, as well as top officials of KPMG who undertook the audit from appending their signatures to any document for reglatory filing until the determination of the matter. As a result, Daily Independent noted that the nine-month unaudited result submitted by the group to the NSE last week was signed by other officials, instead of Peterside and David-Borha.
In its reply to the FRC’s letter, with reference number FRC/2015/DIM/REGULATORY/001, requesting the CBN to sanction SIBTCH for alleged infractions, the CBN said a careful review of the underlying documents, as well as the contentious financial statements of SIBTCH, showed that the group obtained “approval from the National Office for Technology Acquisition and Promotion (NOTAP) for the payment of affiliate software license.
“Our review revealed that the bank actually obtained the necessary approval from NOTAP to pay affiliate software license from the Standard Bank South Africa (SBSA), for a period of three years covering 1st June 2012 to 3oth May 2015. The remittance from June 2015 to date is still awaiting approval from NOTAP.
“With regards to the allegation of non-disclosure of intangible assets in SIBTC’s 2013 and 2014 financials, we note that the bank adequately recognized the software as an intangible asset in its 2011 financials and sufficiently disclosed the disposal of the software in the 2012 financials. Consequently, the said software could not have been reported as an intangible asset in the succeeding years 2013 and 2014.
“With respect to the allegations of lumping several expense items under “Others”, we are of the view that the items were not material enough to appear as line items in the Income Statements  and that the non-disclosure of the items did not materially affect the true and fair view of the financial statements.”
The CBN however agreed with FRC “that SIBTC erred in the classification of some line items. However, the identified misclassifications 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 misrepresentation of the financials.
“SIBTC used its judgment to capture the donation of N275 million 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.
“Contrary to FRC’s conclusions, our review of IAS 37 and IAS 32.19 indicate that SIBTC had an obligation to accrue the relevant provisions toward the settlement of the franchise and management fees as agreed between it and SBSA.
On the failure of the FRC to follow due process, Emefiele said the council’s enabling Act requires it to give the entity under investigation “60 days from the service of the Final Notice to restate its accounts where both the Panel and Entity agree on the need for restatement. In this case, our understanding is that FRCN called a meeting with the board of SIBTCH at 11.00 a.m on the 26th October 2015.
“But rather than holding the meeting, FRCN went ahead to convene a press conference at 8a.m on the same day to announce its sanctions against SIBTCH. Our review further indicates that both FRC and SIBTCH did not agree on a need for restatement of the accounts before the sanctions were announced.
“According to the FRC Act, an entity is only punishable under the Act upon conviction by a Court of competent jurisdiction. Yet, in issuing the Final Notice, the FRC had already meted out some punishments to the affected entity, without any conviction by a court.
Emefiele further noted that “while FRC may, following approval of the Minister, review applicable fines, there is no power for compounding offences and imposing penalty in lieu of conviction as was done in this case.
“Both the FRC Act and the Regulations provide for the outcome of the investigation to be made known to a registered professional or a public interest entity and a right of appeal to the Technical and Oversight Committee before resorting to prosecution. In this case, however, there is no evidence that time was allowed to elapse for the appeal process before the imposition of sanction.
“The Regulation provides that if the Entity fails to accept FRC’s position at the end of a Notice period, the Council shall institute legal action against the entity, rather than mete out sanctions. Yet, in this case, sanctions have been meted out without evidence that legal action has been fully exhausted.
“A combined reading of both the Act and the Regulations shows that there are three types of sanctions that may be imposed for contraventions by Entities.
“There is however, no authority for suspension of registration of a professional as was done in this case.
The CBN therefore expressed serious concern that such a drastic regulatory action could be taken on an entity under its supervision “without any form of consultation with (it) especially as the CBN is responsible for promoting a Safe, Stable and Sound financial system.”
In the letter copied to NOTAP, the Securities & Exchange Commission, the Ministry of Industry, Trade and Investment, the board of SIBTCH, Emefiel warned that “such a Regulatory Decision and the manner of the announcement is not only capable of eroding investor confidence but also inimical to financial system stability. Indeed, the FRC’s ability action has already precipitated a fall in the value of the shares of Stanbic IBTC by about 18 percent since the announcement of the Regulatory Decision.”