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CBN disagrees with FRC imposed sanction on Stanbic IBTC

04 Nov 2015
Financial Nigeria

Summary

The CBN accused the FRCN of not following due process as laid down in the FRC Act.

Sola David-Borha, Chief Executive, Stanbic IBTC Holdings

The request by the Financial Reporting Council of Nigeria (FRCN) asking the Central Bank of Nigeria (CBN) to take disciplinary action against Stanbic IBTC Holdings has been rejected by the CBN.

In a letter addressed to the Executive Secretary of the FRCN, Mr. Jim Obazee, the CBN stated that after examining past accounts of Stanbic IBTC, it did not find "material misrepresentation" in them. The apex bank hence did not find any reason to ask the company to restate its accounts as requested by FRCN.

Last week, FRCN sanctioned Stanbic IBTC over what it alleged as the misrepresentation of Stanbic IBTC’s operational expenses and concealment of important expenses in its 2013 and 2014 financial statements. The FRCN said the statements were not prepared in line with the International Financial Reporting Council, and therefore, ordered Stanbic IBTC directors to withdraw the company’s financial statements for the 2013 and 2014 financial years and restate them in accordance with the provisions of Section 64 (2) of the Financial Reporting Council of Nigeria Act No. 6, 2011 and Regulation 21 of the Financial Reporting Council of Nigeria – Guidelines/ Regulations for Inspection and Monitoring of Entities, 2014.

The FRCN is a federal government parastatal responsible for, among other things, developing and publishing accounting and financial reporting standards to be observed in the preparation of financial statements of public entities in Nigeria.

The FRCN numbers of Stanbic IBTC’s Chairman, Atedo Peterside, and the Chief Executive, Sola David-Borha, were suspended, alongside those of two other directors, Arthur Oginga and Dr. Daru Owei. The FRCN number of the Engagement Partner of KPMG, Ayodele H. Othihiwa, was also suspended until, according to the Council, the investigation to ascertain the extent of the negligence of KPMG Professional services is concluded.

Governor of the CBN, Godwin Emefiele, stated in the letter to the Executive Secretary of FRCN, "We agree with the FRC that SIBTC erred in the classification of some line items. However, the identified misclassification 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."

Emefiele further said, “Contrary to FCR’s conclusions, our review of the International Accounting Standards 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 the SBSA.”

The CBN accused the FRCN of not following due process as laid down in the FRC Act. The CBN said it does not see any reason to advise or compel Stanbic IBTC to obey the sanctions meted to it by the FRCN.

Stanbic IBTC has instituted a case at the High Court in Lagos challenging, among other things, the power of FRCN to impose such a N1 billion fine on it.


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