I'm not taking sides but I think Emiefele's response 2 d FRC is a classic. Wondering Wats going thru d mind of FRC's boss right now.


CBN’s Regulatory Decision in the Matter of Financial Statements of Stanbic IBTC Holdings Plc for Years Ended 31st December 2013 and 2014

I write in response to your letter dated 26thOctober 2015, with reference number FRC/2015/DIM/REGULATORY/001, in which the CBN was notified of a Regulatory Decision (RD) by the Financial Reporting Council of Nigeria (FRC) against Stanbic IBTC Holdings Plc (SIBTCH) over allegations of infractions contained in SIBTCH’s Financial Statements (FS) for the year ended 31st December 2013 and 31st December, 2014. The said letter also requested the CBN to sanction SIBTCH for alleged infractions.

The CBN understands that both the Final Notice and Regulatory Decision were based on the FRC Act NO.6 of 2011 and Regulation 21 of the FRC Guidelines/Regulations for inspection and Monitoring of Entities 2014 (the Regulations). On the strength of this understanding, we have carefully reviewed these underlying documents, as well as the financial statements of SIBTCH which are in contention. In addition to relying on our Routine Examination Reports on SIBTCH for 2013 and 2014, we have revisited the bank to scrutinize all underlying records relation to these financial statements.

Consequent upon these due diligence measures, we have the following comments and reactions to the allegations leveled against SIBTCH as contained in the Final Notice.

Financial Issues

Contrary to the allegations of the FRC that Stanbic IBTC ( SIBTC) did not obtain 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 1stJune 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.

We agree 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

Legal Issues

Without prejudice to the foregoing financial issues, the CBN is concerned about the apparent failure of the FRC to follow due process as aid down by its own FRC Act and regulations, in arriving at the regulatory decision, in this regard, the bank wishes to make the following observations:

In conducting investigation to possible breaches of the FRC Act and/or the Regulations, the FRC is required to give the Entity concerned sixty (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 26thOctober 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 sactions 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.
iii. 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.
These are:

Imposition of monetary penalty/fine.
Imprisonment for a term of years.
Deregistration of a professional or issuance of a Warning Notice.

There is however, no authority for suspension of registration of a professional as was done in this case.
Implications of FRCN’s Actions on Nigeria’s Financial System Stability

We are seriously concerned that such a drastic Regulatory Decision could be taken on an entity under the regulation and supervision of the Central Bank of Nigeria (CBN) without any form of consultation with the Bank especially as the CBN is responsible for promoting a Safe, Stable and Sound financial system. Yet, 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.

In the light of the foregoing facts, which clearly show that FRCN did not follow due process, the Bank regrets to inform you that it is uable 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.

The CBN would however continue to take all necessary steps to protect the interest of Depositors and to ensure the safety and soundness of the financial system.

In the interim, please accept the assurances of my kind regards.
Yours faithfully,

GODWIN I. EMEFIELE, CON
Governor

cc:
National Office for Technology Acquisition and Promotion
Securities and Exchange Commission
Chairman, Board of Directors, SIBTCH
Hon. Minister, Federal Ministry of Industry, Trade & Investment
Permanent Secretary, Fed. Ministry of Industry, Trade & Investment

http://thewillnigeria.com/news/cbn-overrules-frc-on-stanbic-ibtc/

hold on..

Ok nice one though long.

Watching…………………………………………

Wow. Nice response.
according to the people above me.
did I read it no.

Just curious. If Stanbic IBTC disposed of the software in 2012, why was it still paying for the same software from 2012 - 2015? To the extent that it was awaiting NOTAP approval in 2015 to enable it make the said payment?

Or are there two softwares under discussion here??

And at d end of d day, it shall be Story for d gods.

Before its body language but now its Nothing dey happen

laudate:
Just curious. If Stanbic IBTC disposed of the software in 2012, why was it still paying for the same software from 2012 - 2015? To the extent that it was awaiting NOTAP approval in 2015 to enable it make the said payment?

Or are there two softwares under discussion here??

They could hv bought the software on a payment plan just like mortgages. Even if they dispose of it they are bound 2 complete payment. CBN doesn't believe dat Stanbic mistatement was material enough to cause misrepresentation. Basically they r telling d FRC dat they r out of line and dat they acted with impunity. If they r right then d FRC has been taught a bitter leson

FRCN vs CBN ...

FRCN should be careful with financial matters in Nigeria .... sometimes ago, they lost a court case regarding one private company they were bullying to scrutinize her records....... The took the private firm to court over her refusal to allowed them into her records and lost the case.

Those with FRCN should developed competency and complete understanding of their legal framework .....

Proudly Accountant !!!

Emefiele responded brilliantly with facts.

Stanbic ibtc, always the best!!

Too long abeg I go come read am for lunch brake

totoisgud:


They could hv bought the software on a payment plan just like mortgages. Even if they dispose of it they are bound 2 complete payment. CBN doesn't believe dat Stanbic mistatement was material enough to cause misrepresentation. Basically they r telling d FRC dat they r out of line and dat they acted with impunity. If they r right then d FRC has been taught a bitter leson

Based on my experience with multinationals and NOTAP registration, I am definite that payments would have started a year before NOTAP approval was gotten.Most of the multinational companies and auditors obfuscate their audited accounts to ensure they do not pay the require taxes.

I think FIRS should be a party to this issue,if NOTAP approval were not gotten for the technical fee and Stanbic went ahead to back out the technical fee before charging tax,they should be made to add back those technical fee expense to profit and taxed appropriately.WITHOUT NOTAP APPROVAL,TECHNICAL FEE IS NOT AN ALLOWABLE EXPENSE WHEN COMPUTING TAX.

I'm good at reading everything, I dont know why I couldn't read this. I guess it doesn't concern me!

profosa:


Based on my experience with multinationals and NOTAP registration, I am definite that payments would have started a year before NOTAP approval was gotten.Most of the multinational companies and auditors obfuscate their audited accounts to ensure they do not pay the require taxes.

I think FIRS should be a party to this issue,if NOTAP approval were not gotten for the technical fee and Stanbic went ahead to back out the technical fee before charging tax,they should be made to add back those technical fee expense to profit and taxed appropriately.WITHOUT NOTAP APPROVAL,TECHNICAL FEE IS NOT AN ALLOWABLE EXPENSE WHEN COMPUTING TAX.

Of course. D FIRS is a party 2 every commercial endeavour. D taxman can close yr biz & even take u 2 prison if u don't pay yr tax. When nobody cud touch Al Capone, it was d taxman dat brought him down. But d issue here is not with d FIRS. D FRCN does not hv d same power as d FIRS does? Stanbic has already won a court case restraining d FRC 4rm removing their directors. D CBN has openly disowned d FRC. Stanbic might hv erred but did d FRC go abt it d right way? It seems they acted with impunity and this character is common with government agencies. Its time 4 them 2 start learning. Sometimes learning d hard way is d best way. Anywayz I'm still watching in 3D. Let d drama continue