Standard Bank: We are Ready for Fair Resolution of Stanbic IBTC-FRCN Tussle

No bank enjoys management fee approval, says NOTAP DG

Confident that the current dispute between Stanbic IBTC and the Financial Reporting Council of Nigeria (FRCN) will be resolved ‘fairly, appropriately and reasonably,’ the Standard Bank Group, to which Stanbic IBTC belongs, has reiterated that the group fully complied with appropriate Nigerian laws and regulations, and with international financial reporting standards applicable in the country.

This came as the acting Director General of the National Office for Technology Acquisition and Promotion (NOTAP), Dr. DanAzumi Ibrahim. yesterday said there was no bank in the country that currently enjoys a franchise or management fee agreement approval from the agency.

The Central Bank of Nigeria (CBN) last week said after it examined the past financial statements of the bank, it did not find any case of ‘material misrepresentation’ by Stanbic IBTC and saw no need to ask it to restate them.

The affirmation by the apex bank came after the FRCN faulted the bank’s audited accounts for 2013 and 2014 and ordered a restatement of the accounts.

Speaking during a meeting with a delegation of the Nigeria-South Africa Chamber of Commerce in Johannesburg, Chief Executive Officer, Standard Bank Group, Sim Tshabalala, tracked the genesis of the controversy to the franchise arrangement between Stanbic IBTC and Standard Bank.

He said the Standard Bank Group’s operating model, which covers a wide range of services, including IT, are provided by the Standard Bank Group to all its franchises in Africa. In the case of Stanbic IBTC, the charges for these services amount to approximately five per cent of the total cost base of Stanbic IBTC.

In resolving the current dispute, Tshabalala said the Standard Bank Group remains committed to doing business in Nigeria, and to building constructive relationships with the Nigerian authorities based on clear communication and transparency.

“In the short term, we will continue to engage with the relevant authorities to resolve these issues as quickly as possible. In the longer run, indeed for as long as there is such a thing as the Standard Bank Group, we will continue to uphold the highest standards of corporate governance, of adherence to the law and of ethical conduct.

“Over the past few years, the Nigerian National Office for Technology Acquisition and Procurement (NOTAP) has objected to the payment of the fees, which resulted in the accumulation of an outstanding inter-company balance between Stanbic IBTC and Standard Bank South Africa as these charges cannot be remitted without NOTAP’s regulatory approval.

“FRCN’s asserted that the absence of approval for the franchise fee and recent IT licence fees from NOTAP invalidates the accruals raised for such intra-group items, and that the reflection of these accruals as liabilities on the financial statements as a misstatement, is incorrect,” he said.

Tshabalala added: “Essentially, in our view, the regulator has sought to reject the validity of an established contractual arrangement between Standard Bank SA and Stanbic IBTC. We argue that the regulator is not in a position to make this call, and we are not alone in this opinion. To quote KPMG, ‘We wish to state categorically that KPMG does not agree with the decision taken by the FRC as it does not reflect the true position in this matter. The decision of the FRC is erroneous on its merits and the process that led to it is significantly flawed and not in compliance with the requirement of the FRC Act.”

The Standard Bank chief said the charges for services and IT licences have been correctly reflected as liabilities under International Financial Reporting Standards, despite the fact that foreign currency payments due to the group cannot be remitted in the absence of NOTAP’s approval.

“More fundamentally, we believe that these are not matters of financial reporting at all but matters under the commercial discretion of Stanbic IBTC’s board of directors.”

While acknowledging that disagreements are inevitable in partnerships, Tshabalala said Nigeria and South Africa, as the continent’s foremost economies, have to complement each other to drive overall growth on the continent.

He expressed the Standard Bank Group’s strategy in eight words: “‘Africa is our home, we drive her growth.’ In other words, we’re firmly committed to doing all we can to support and promote inclusive economic growth in Africa. We believe that the long-term profitability and sustainability of our business is inextricably linked to the development, stability and prosperity of the African continent.”

Speaking to journalists in Abuja, against the backdrop of the ongoing controversy that it approved a management fee agreement for Stanbic IBTC Holdings Plc, he clarified that what was approved for the bank between 2012 and 2015 was the software licence agreement which all banks currently enjoy.

He said: “I want to categorically say that we have not approved franchise agreement for Stanbic IBTC. I think what was approved for them in 2012 was the software licenses agreement and for software licensing agreement-all the banks are enjoying that facility and certainly we cannot deny Stanbic IBTC of that facility.

“They have been given approval for three years from 2012 to 2015, and I think by now, the certificate must have expired. But as far as franchise is concerned, we’ve not given approval to them. I categorically made it clear to them that we are not going to give franchise or management fee agreement approval.”

Tshabalala said NOTAP could not approve a management/ franchise fee agreement for Stanbic IBTC because it could not approve same for other banks.

Defending the agency’s rationale for denying the banks of franchise fee agreement, Ibrahim said: “You see, the banking system has been in this country for a very long period of time and we feel the country has developed enough capacity to manage banks and you don’t expect to bring people from the outside to come and manage banks in Nigeria. It was on that basis that we stopped giving banks the management service agreement or even franchise.”

“Software agreements are still approved by us as we are approving for any other bank because it is the software that drives the operations of all the banks, and our level of development in software has not reached the level that we would deny the banks certificate or registration of software deployment but as far as franchise agreement are concerned, we have not registered it and we are not going to register it.”