FRC: We are Investigating Stanbic IBTC’s Alleged Infraction

There are indications that the proposed Stanbic IBTC Holdings N18 billion rights issue may not be approved until allegations of financial under dealings brought against the financial institution by its shareholders are resolved.

There are further suggestions that the bank’s 2014 financial statement may be criticised and rejected by the Financial Reporting Council (FRC), should the allegations be further established by regulatory authorities.

This followed a petition by its shareholders to the Securities and Exchange Commission (SEC), the FRC, National Office for Technology Acquisition and Promotion (NOTAP), Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC), over Stanbic IBTC Holdings and Stanbic IBTC Limited’s alleged illegal accrual of tens of billions of naira into a suspense account for the sole benefit of its controlling/majority shareholder in the last five years.

It was alleged that the bank had since 2011 been transferring monies from earned profits into a suspense account for the purpose of crediting the Standard Bank of South Africa for franchise/management fees.

But the bank’s attempts to have NOTAP approve its agreement with foreign technical partners before the monies could be transferred abroad had been unsuccessful without hope that the approval could ever be granted.

Consequently, the shareholders had asked that the monies be returned into the company’s profit and loss account for the benefit of its investors, a prayer which the management has rejected. This prompted their petition to relevant regulatory authorities.

However, speaking to journalists in Abuja during a courtesy visit to NOTAP, to among other things seek clarification on the Stanbic IBTC shareholders’ petition, the Executive Secretary, FRC, Mr. Jim Obazee, said there were indications that the bank has a case to answer.

He said: “We got a petition from some stakeholders talking about issues relating to IBTC and the way they’ve been accruing some monies in their accounts. And there’s nothing wrong when you accrue monies but it must be disclosed properly.

“Now they said the accruals require NOTAP approvals before they can make those payments. Now the person petitioning was saying that there was no need making such accruals because they believe IBTC had not been able to secure the NOTAP approval.

“The petitions kept coming and we invited IBTC to hear their own side of the story. And listening to their own side of the story, we believe that the petitioners actually have a good case. So our next step was to look at the agencies that are involved and were duly copied. NOTAP itself which is to give the approval, Central Bank of Nigeria which is the primary regulator of the banks and the Securities and Exchange Commission, because they were asking for General Mandate for the treatment of third party transactions, which we were against- we didn’t believe that general mandate should be given because that would not be in line with related party transactions accounting standards.”

Continuing, he said: “The first point was to come visit NOTAP because section 8 (M) of FRC Act says we are allowed to engage in such schemes and systems with any organisation whether local or international for the discharge of our functions: so we had to come to NOTAP to find out the kind of approval they’ve given to Stanbic IBTC Bank Plc so far. Do they approve historical fees - that means we are looking at issues relating from 2011 to date.

“If they didn’t get approval for 2011, they didn’t get for 2012, they didn’t get for 2013, then, why are they warehousing these monies? We want to know whether NOTAP grant these historical approvals

“We also wanted to know whether they are aware they Stanbic IBTC were pursuing general mandate, whether they are aware they are pursuing rights issues. If they are pursuing rights issues of N18 billion; they want to shore up their tier-one capital and they have monies they are keeping aside, instead of diluting your share holdings in such a way that would now affect minority share holders who actually need government protection really, why don’t you use the monies you are keeping aside to shore up your capital, rather than going to do rights issues?

He said further: “The other party that is also part of this entanglement is SEC. We intend to immediately put a call to them to stand down on whatever rights issue request that Stanbic IBTC is making in a hurry until this matter is resolved properly because our job as government agencies is protect; in fact, section 11 (A) of FRC Act says our job is to protect investors and other stakeholders’ interest.

“If our job is to protect stakeholders’ interests, we’ve no choice but to run this agenda very quickly in order to protect stakeholders. Stakeholders in this instance now will involve not only stakeholders of IBTC but also government because if you are packing out some money out of profit before tax and you are warehousing it for a number of years, you are actually defrauding the federal government because federal government’s supposed to have taxes from the profit. But if you are keeping monies from profit before tax, it means the money was taken off and government didn’t see it and so government is losing out of it.

“So definitely we want all of these straightened out. We want to know whether they actually reported it correctly in the financial statement otherwise, they’ll be subjected to the FRC disciplinary procedures. We can even ask them to withdraw the financial statement and reissue it because the correct thing will have to be stated. We also want to know the culpability of the external auditors who remembered that our proposed national code of corporate governance had been talking of dealing with the external auditors. Section 61 of the FRC Act actually require the FRC to carry out annual quality reviews of the external auditors.”

Also speaking to journalists after the meeting, the acting Director General, NOTAP, Dr. DanAzumi Ibrahim justified its refusal to grants Stanbic IBTC’s requests to pay management /franchise fees to foreign counterparts.

He said: “NOTAP is expected to register agreement between Stanbic Bank and its technical counterpart and we have a guideline on how we do our registration and we are guided by the forex manual from the CBN. So whatever is not covered within the forex manual for banking operations we don’t give it.

“So they applied for one for franchising agreement, for management fees agreement and we didn’t render them that approval because management service agreement in the last ten to fifteen years, Nigerians have mastered the art of bank management so we don’t think we need foreigners to come and teach us how to manage banks.”

He said: “And we understand franchise is not covered under banking facility-so because we are guided, we strictly adhere to the principles of this scheme and that’s why we didn’t give them that approval.”

When contacted on the matter, both the Head of Corporate Affairs for the bank, Nkiru Olumide-Ojo and the bank’s media agency, XLR8, declined to comment on the ground that the matter was before the court.