Stanbic IBTC faults FRC’s sanctions; says action “procedurally defective

The Management of Stanbic IBTC bank on Monday faulted the decision of the Financial Reporting Council of Nigeria (FRCN) to suspend its Chairman, Atedo Peterside, and other senior officials over accounting irregularities in the bank’s 2013 and 2014 financial statements.

The Council said in a statement on Monday that the bank officials were suspended along with those KPMG Professional Services for attesting to “misleading” financial statements and general financial reporting. It said they would remain suspended till investigations were concluded.

Those sanctioned alon Mr. Peterside, included the bank’s managing director, Sola David-Borha, and KPMG’s Arthur Oginga, Daru Owei and Ayodele Othihiwa.

But, in its reaction, Stanbic IBTC described the Council’s allegations as inaccurate and unfortunate, pointing out that although the matter was in court, it was constrained to respond for the benefit of its shareholders and the general public.

A joint statement by Mrs. David-Borha, and Company Secretary, Chidi Okezie, faulted FRCN’s allegations as “procedurally defective.”

“Stanbic IBTC does not agree that its accounts are defective or require rectification,” the statement said. “FRCN has ignored 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.

“Stanbic IBTC is a very responsible organisation and fully complies with all extant laws and regulations in Nigeria and international best practices applicable to the conduct of its business. It is the only Nigerian bank that is AAA rated by Fitch.

“It has met the disclosure requirements of Nigerian law and international financial reporting standards applicable in Nigeria.”

In sanctioning the officials, the Council urged the Central Bank of Nigeria (CBN) to take further regulatory disciplinary actions against them to guarantee the integrity of the financial statements and safeguard Stanbic IBTC interest.

Besides, the FRC asked the Federal Inland Revenue Service (FIRS) to ensure that government was not unduly short-changed of related taxes that were supposed to have been paid, while the Economic and Financial Crimes Commission (EFCC) should question those involved in the concealment and sale of the banking application software developed in Nigeria.

The Council had accused Stanbic IBTC of regularly flouting the CBN regulations, citing an instance in 2014 where a total penalty of N28 million was imposed on the group for such acts.

“Stanbic IBTC seems to have a penchant for poor disclosures, which further corroborates the findings in this report,” the statement said.

The council instructed the directors of Stanbic IBTC to withdraw the Financial Statements of and restate them in accordance with the provisions of the law.

Following preliminary reports against the bank, the Council said it wrote to the Securities and Exchange Commission (SEC) on September 3, 2015 that there was likely to be material adjustments in Stanbic IBTC financial statements that may affect shareholders’ decision.

The Council said following its request, the SEC on September 7, 2015 suspended the bank’s Rights and Scrip Issues until the conclusion of investigation and the relevant financial statements corrected.

Stanbic IBTC Holdings Plc, a company domiciled in Nigeria, is a member of Standard Bank Group with headquarters in South Africa, with a controlling stake of 53.25 per cent.

The Holding is made up of eight subsidiaries, namely Stanbic IBTC Bank (including Stanbic Nominees Nigeria Limited), Stanbic IBTC Pension Managers Limited, Stanbic IBTC Asset Management Limited and Stanbic IBTC Stockbrokers Limited.

Others include Stanbic IBTC Trustees Limited, Stanbic IBTC Ventures Limited, Stanbic IBTC Capital Limited, Stanbic IBTC Investments Limited.

The bank was also accused of non-disclosure in 2012 of the source code for the agreement Sale, Purchase and Assignment Agreement between Standard Bank of South Africa Limited and Stanbic IBTC Bank Plc on banking application software.

The software was expected to disclose its expenses on Research and Development costs relating to its development in the Statement of Profit or Loss and other comprehensive income and intangible asset in its financial statement.

Instead, Stanbic IBTC was said to have submitted to National Office for Technology Acquisition and Promotion (NOTAP) a request for approval and registration of the application software sold to Standard Bank of South Africa for a fee of ZAR 151,586,277.

With the application, the Nigeria bank was to cede all its rights to the software to the purchaser, to become one of the 17 countries paying annual license fees for the use of the software, a request NOTAP declined urging Stanbic IBTC to license the application software in Nigeria instead.

The bank was also sanctioned for disclosing in the financial statements that the auditors earned a total of N62million as “Fees for other services” in addition to the audit fee between 2011 and 2014.

Again, Stanbic IBTC was sanctioned for contravening the regulation for the presentation of requirements of taxes in International Financial Reporting Standards (IFRS) requiring current and deferred taxes assets and liabilities to be presented separately in Financial Statements.

They were also accused of concealment of information “other operating expenses” in line items requiring further explanation, particularly on “professional fees” of about N20.65 billion between 2011 and 2014.