Stanbic Bank Kenya is in talks with South Sudanese regulators to resolve a dispute between the parties that has threatened its Juba operations.
The Bank of South Sudan (BOSS) has threatened to revoke the licence of Stanbic Bank Limited South Sudan in a move that could deny the lender a piece of the market that was once the most profitable among regional subsidiaries of local banks.
The regulator also wants the business to be operated as a subsidiary in South Sudan rather than a branch owned and reporting directly to Nairobi-based Stanbic Bank.
BOSS says it is aggrieved because it was sued by Stanbic in Nairobi after the South Sudan branch cancelled a $7.2 million payment to a contractor of the government of South Sudan.
The bank says the government did not have funds in its accounts and failure to reverse the payment would have exposed it to losses.
The Nairobi-based bank said last week it has initiated talks with the regulators in South Sudan where it made a net profit of Sh254 million last year to resolve the stalemate.
“Our purpose and commitment to South Sudan continue unabated,” Stanbic Bank Kenya Chief Finance and Value Officer Dennis Musau told the Business Daily last week.
“Now as with any other operating environment, there will be bumps on the road like this, what we are committed to doing and what we have already done is met the regulator. We continue to explore options and they share their part of the story and we share our aspiration in order to meet mutually.”
A BOSS letter dated June 2 revealed the fallout between the Kenyan bank and the regulator, which arises from a dispute involving the government of South Sudan, Stanbic (Sudan), and passenger and cargo carrier Air Afrika.
The carrier, which had a contract with South Sudan, is seeking compensation from the bank which credited its account with $7.2 million and later reversed the transaction.
Amid the legal battle, BOSS has refused to approve the appointment of Fred Ouko as the new head of Stanbic’s South Sudan business.
The regulator says its role is not a passive one of being updated on executive changes but an active one of vetting and approving nominees.
“Stanbic Bank South branch took Bank of South Sudan to court in Nairobi—Kenya in a legal dispute with its client which is not acceptable,” the regulator wrote in the letter.
“Therefore, Bank of South Sudan would like to appreciate the role played by Stanbic Bank as a branch of Stanbic Bank Kenya, and now is a time for Stanbic Bank South Sudan to be subsidiary or quit.”
Stanbic Bank became among the lenders to open shop in South Sudan in a race for a piece of the once lucrative market now hit by hyperinflation and political instability.
