The Central Bank of Nigeria (CBN) Thursday made good its threat to fine four banks that breached its capital importation policy of N5.87 billion.
The apex bank debited the account of Standard Chartered Bank with N2.4 billion, Stanbic IBTC N1.88 billion, Citibank Nigeria N1.2 billion and Diamond Bank N250 million for allegedly issuing irregular Certificates of Capital Importation (CCI) on behalf of some offshore investors of MTN Nigeria Communications Limited. MTN Nigeria was also directed by the CBN to refund $8.134 billion to its coffers.
In a letter to the Nigerian Stock Exchange (NSE), Stanbic IBTC Bank informed investors and stakeholders that CBN had “unilaterally deducted” N1.886 billion from its account with the regulator, despite protestations by the bank that it did not violate any regulation on money remittances.
The apex bank said its investigation was triggered by “allegations of remittance of foreign exchange with irregular Certificates of Capital Importation (CCI)” between 2007 and 2015, in “flagrant violation of extant laws and regulations of Nigeria, including the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, 1995 of the Federal Republic of Nigeria and the Foreign Exchange Manual, 2006”.
The letter, signed by the Group Company Secretary, Chidi Okezie, and Acting Head, Marketing and Communications, Bridget Oyefeso-Odusami, stated: “Following our earlier announcement to The Nigerian Stock Exchange (“NSE”) on 30 August 2018, in respect of the penalty of N1.886 billion imposed by the Central Bank of Nigeria (“CBN”) on our banking subsidiary – Stanbic IBTC Bank PLC (the “Bank”) in relation to the remittance of foreign exchange on the basis of certain capital importation certificates issued to MTN Nigeria Communications Limited, we write to update The NSE that the CBN has debited the account of our banking subsidiary with the CBN for the full amount of the above stated fine advised to the Bank.”
Stanbic IBTC reiterated its position that it breached no extant laws relating to Certificates of Capital Importation (CCI) executed on behalf of MTN. “Stanbic IBTC Holdings PLC as well as our banking subsidiary maintain our position on this matter, which is the fact that the Bank has done nothing illegal and accordingly the bank will continue to provide CBN with documents and details in support of our contention that our actions in relation to these transactions were not illegal,” it said.
The company reassured its stakeholders that the situation would not affect the seamless transactions with the bank, describing the conclusions reached by the regulator as based on “factually incorrect premises”.
Regarding the claim that the shareholders of MTN Nigeria invested $402,590,261.03 in the company from 2001 to 2006, the bank said: “The twenty certificates of capital importation CCIs transferred to our bank by Standard Chartered Bank and which were in the above quoted sum were re-issued from existing CCIs that had been issued by Standard Chartered Bank to the original investors in MTNN.” It added that “these CCIs were transferred to our Bank to facilitate the repatriation of the proceeds of MTN’s Private Placement which took place in February 2008.
A Standard Chartered Bank source said the bank’s account with the CBN was also debited. He said: “I can confirm to you that the CBN has debited all the four banks’ accounts with them today.”
In statement, Citibank Nigeria Limited said: “Citibank Nigeria Limited (Citi) recently received a letter from the Central Bank of Nigeria (CBN) imposing sanctions on Citi for alleged breaches of foreign exchange regulations in respect of foreign exchange remittances done on behalf of a customer, MTN Nigeria Communications Limited”.
“Citibank Nigeria Limited has sent a detailed response to the CBN addressing the serious allegations made in the CBN letter. Citibank Nigeria Limited remains committed to complying with all extant foreign exchange rules and regulations of the Federal Republic of Nigeria,” it said.
Standard Chartered Bank, in a statement, said: “As previously disclosed, we are committed to fully co-operating with the regulators on this matter. Whilst we cannot provide additional information due to ongoing engagement with the regulators, we look forward to a rapid resolution and satisfactory outcome of this matter.”
Financial pundits have continued to discuss the implications of the CBN’s action on the banks, especially for the three lenders with international franchise.
Head of Treasury at Ecobank Nigeria, Olakunle Ezun, said all the banks have account with the CBN, it is easier for the regulator to sanction them than MTN Nigeria. “What the CBN did was to debit the accounts of the banks directly and send them debit advice. The fine is going to affect the banks profit and loss accounts for the year but the impact will be different across the banks,” he said.
According to Ezun, all the four banks will report the fines in their 2018 financials while the quoted ones will also report to shareholders.
“Standard Chartered Bank will inform the London Stock Exchange about the fine while Citibank Nigeria will report the fine to the New York Stock Exchange and will appear in their parent body’s financials for the year. Overall, the fine will affect the banks’ profit for the year and what will be available for shareholders’ sharing will reduce,” he said.
Former Executive Director, Keystone Bank, Richard Obire, said for Citibank Nigeria, Standard Chartered Bank and Stanbic IBTC Bank, the parent companies will review what happened and if the management of the banks’ were culpable, will likely apply sanctions.
He said also that if after the review of the alleged breaches and the management acted within regulation, then the parent banks will see the regulatory environment as harsh.
“The foreign supervisors of the banks will review sanctions and the actions of the banks that led to them. Since they play in other markets, their findings will determine how they see regulation in Nigeria. But if the banks are found to be culpable, people will lose their jobs because they do not operate based on sentiments. They will see the affected staff as negligent and failing to carry out their duties with professional care.”
Obire said such foreign banks take issues like reputational damage very seriously and see monetary loss as small compared with reputational damage.
Another source said for Diamond Bank Plc, which is quoted, the NSE is yet to inform investors of its N250 million fine. It may also sanction the unit head that directly handled the transaction, he said, pleading not to be named.
Former President/Chairman of Council, Chartered Institute of Bankers of Nigeria (CIBN), Mazi Okechukwu Unegbu, said the management of the four affected banks are still in shock over what happened.
“The first thing that will happen to the management of the four banks is that they will get shock. This will be followed by finding out what really happened and what they did wrong to get such penalties. The banks’ legal departments will also review the development and advise management on options open to them because they did not budget for the fine. The fine will definitely mess up the banks’ budgets for this year,” he said.
According to Unegbu, it is likely that the management of the banks will be queried by the Board of Directors and where they believe the infractions were truly earned, there could be leadership changes.
