The Standard Bank Group has expressed its readiness for a fair resolution of the tussle between its Nigerian subsidiary, Stanbic IBTC and the Financial Reporting Council of Nigeria (FRCN).
In a statement issued yesterday, the Group reiterated that it fully complied with appropriate Nigerian laws and regulations, and with international financial reporting standards applicable in the country.
The Central Bank of Nigeria last week said after examining past financial statements 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 Financial Reporting Council (FRC) faulted the bank’s audited accounts for 2013 and 2014 and ordered a restatement of the accounts. FRC failed to follow due process, CBN said.
Speaking during a meeting with a delegation of the Nigeria-South Africa Chamber of Commerce in Johannesburg,Sim Tshabalala, CEO, Standard Bank Group, 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 percent of the total cost base of Stanbic IBTC.
Inter-company balance.
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, Tshabalala explained.
FRCN’s assertion that the absence of approval for the franchise fee and recent IT license 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, Tshabalala said. “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,” Tshabalala further stated.
The Standard Bank chief said the charges for services and IT licenses 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.”
In resolving the current dispute, Tshabalala said 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.”
Justice Ibrahim Buba of a Federal High Court in Lagos, who last week restrained FRCN from interfering in the operations of Stanbic IBTC Holdings Plc, will on November 12 begin hearing on the suit filed by Stanbic IBTC to challenge the sanctions imposed by FRCN.
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