Banking Board of Ecuador

RESOLUTION No. JB-2015-3381

THE BANKING BOARD

CONSIDERING:

THAT by Resolution No. JB-2015-3263 of February 11, 2015, the Banking Board resolved: (...) "REJECT the claim contained in the review appeal filed by Mr. Fernando Pozo Crespo, General Manager of Banco Pichincha C.A.; and, consequently CONFIRM the administrative act contained in letter No. DNAE-SAU-2014-02779, of April 30, 2014, which ratifies letter No. DNAU-SAU-2014-0699, of January 30, 2014, by which lawyer María Verónica Cevallos, then Subdirector of User Attention, ordered Banco Pichincha C.A. to proceed with the refund of the payment of check No. 2613 belonging to Mr. Segundo Pila Cayancela, for a total value of USD $ 2,251.00. (...)", fundamentally for the following considerations:

(...)

"THAT by communication entered into the Superintendence of Banks and Insurance on October 31, 2013, Mr. Segundo Ángel Pila Cayancela brought to the knowledge of this control body that his checkbook had been stolen, including check No. 2613 drawn against current account No. 3016939804, which the client maintains at Banco Pichincha C.A., a check that was paid with an unauthorized overdraft by said financial institution. Attached to the aforementioned communication, the claimant sent the control body a copy of the complaint filed on August 20, 2012, at the National Directorate of Judicial Police of the Attorney General's Office;

THAT by letters Nos. DNAE-SAU-2013-06787 and DNAE-SAU-2013-06788, both of November 21, 2013, the then Subdirector of User Attention admitted the claim mentioned in the preceding paragraph to proceedings, requested from the referred financial institution substantiated and documented information with the respective physical backups regarding the aforementioned claim, and informed the claimant about the matter;

THAT through letter No. BP-ACEC-2013-1019, of December 27, 2013, entered into the control body on January 2, 2014, Mrs. Catalina Salazar Mejía, Authorized Signatory of Banco Pichincha C.A., provided a response to the control body's letter, and attached several documents related to the claim;

THAT by letter No. DNAU-SAU-2014-0699, of January 30, 2014, lawyer María Verónica Cevallos, then Subdirector of Customer Attention, resolved the claim in question, in the following terms:

"(...)

...It is evident that Banco de Pichincha C.A. acted negligently and irresponsibly by proceeding to pay a forged check, in which it is evident that the signature is notably different from the one registered at the bank.

...Of the checks attached by the bank, paid on dates prior to the claimed one, it is evident that the amounts are lower than the forged check, thus falling outside the common pattern of check issuance by Mr. Segundo Pila Cayancela, for which reason the overdraft should not have been carried out even without a balance in his current account.

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(...)

For all the above..., this Superintendence resolves:

1. That its represented party, within a period of seventy-two (72) hours, proceed with the refund of the payment of check No. 2613 of Mr. Segundo Pila Cayancela, for a total value of USD $ 2,251.00...

2. That evidence of the actions taken within the Superintendence of Banks and Insurance be sent within a period of twenty-four (24) hours.

3. Notify the claimant of this resolution." (sic);

THAT by communication entered into the Superintendence of Banks and Insurance on February 19, 2014, Mr. Antonio Acosta Espinosa, Adjunct President and Legal Representative of Banco Pichincha C.A., filed a request for reconsideration against the administrative act contained in letter No. DNAU-SAU-2014-0699, of January 30, 2014, a request that was rejected by letter No. DNAE-SAU-2014-02779, of April 30 of the current year, in which Dr. Mirian Muñoz Solano, Acting Subdirector of User Attention, ratified the appealed administrative act;

THAT by writing received in the Superintendence of Banks and Insurance on May 13, 2014, Mr. Fernando Pozo Crespo, General Manager of Banco Pichincha C.A., with the professional sponsorship of Dr. Pablo Cadena Merlo, filed a review appeal against letter No. DNAE-SAU-2014-02779, of April 30 of the current year;

THAT the arguments raised by the appellant are limited to stating that the client has the obligation to safeguard his checkbook and notify the bank of any irregularities regarding it, which, according to the Bank, did not occur; that the signature on the check subject of the claim does not show notable non-conformity with the client's signature; that the forgery of a check signature must be determined by a competent judge and not by the control body; and, that the bank has not incurred in any incorrect procedure in the present case;

THAT by letter No. JB-2014-1246, of May 16, 2014, the Secretary of the Banking Board accepted the aforementioned review appeal to proceedings.

THAT paragraph 5.12 of Article 5 and paragraph 23.5 of Article 23, of Chapter III.- General Regulation to the Check Law, Title XXIV.- General Provisions, Book I.- General Norms for the application of the General Law of Institutions of the Financial System, of the Codification of Resolutions of the Superintendence of Banks and Insurance and of the Banking Board, state the following:

"ARTICLE 5.- The current account contract must contain as a minimum, the following:

(...)

5.12 The obligation of the account holder to maintain sufficient provision of available funds for the payment of checks; and the obligation of the drawee to

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pay them, if they meet the legal requirements, verifying at a glance that there are no signs of alteration;

(...)

"ARTICLE 23.- The drawee financial institution, upon presentation of the check for payment, must examine:

(...)

23.5 That the signature of the drawer or drawers does not show notable non-conformity with the one registered in the financial institution, which must be similar to that recorded in the identity card or citizenship identity card or in the passport;

(...);

THAT in the present case, Mr. Segundo Ángel Pila Cayancela is recorded as the holder of current account No. 3016939804 at Banco Pichincha C.A., by the overdraft granted to said account, it is evidenced that check No. 002613, endorsed, was deposited in account No. 3086819104, in favor of Mrs. Marisela Olmedo Valdiviezo for the value of US $ 2,251.00, at the San Rafael Agency in the city of Quito on July 18, 2012. The holder of the current account states that his checkbook was stolen and that this particular was not communicated to the bank; however, despite said negligence of the client, it is important to note that this Office shares the criterion of the Subdirector of User Attention in the sense that between the client's signature registered at the Bank compared with the signature on the check subject of the present case, there is indeed a notable non-conformity at a glance, so that when the check was presented at the counter, the teller of said financial institution should have observed said notable non-conformity and requested authorization from his line of supervision;

THAT therefore, the drawee Bank, prior to the payment of a check, has the obligation to verify, among other aspects, that the signature on the check does not show notable non-conformity with the registered signature of the holder of the current account, an aspect that in the present case Banco del Pichincha C.A. did not comply with and therefore did not apply all the necessary mechanisms, securities, and controls to prudently and diligently safeguard the money deposited by its users;

THAT to reinforce the issue, it is important to transcribe part of the technical report contained in memorandum No. DNAE-SAU-2014-00720, of June 16, 2014, by which the Subdirector of User Attention stated the following:

"(...)

Regarding the check paid by clearing house, according to the Manual of Policies and Procedures, which refers to the Subprocess: Current Accounts, which is part of the file, point 11.4 mentions the Specific Policies for Check Payment, indicating: "From 1 dollar up to 10,000.00 dollars, a teller pays with own responsibility, must review meticulously the following: (...) Signature, which must be consistent between the check and the Web Teller system (In exceptional cases of doubt, the Universal teller must request authorization from his Line of Supervision)".

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Additionally, in the referred Clearing House Manual, in point 4.3 of the Review Policies, it establishes: "It will be the responsibility of the operators of the Form and Signature Review area to guarantee that all checks greater than $ 100 USD that are paid, are correctly drawn, with complete fields, and the signatures do not present non-conformity with the Bank's signature registration."

(...);

THAT on the other hand, Article 52 of the Constitution of the Republic; Article 1 and literals b) and o) of Article 180 of the General Law of Institutions of the Financial System; and, Article 5, Chapter IV.- Procedure for the attention of claims against institutions of the financial system, Title XX.- Of the Superintendence of Banks and Insurance, Book I.- General Norms for the application of the General Law of Institutions of the Financial System, of the Codification of Resolutions of the Superintendence of Banks and Insurance and of the Banking Board, establish:

Constitution of the Republic:

"Art. 52.- Persons have the right to dispose of goods and services of optimal quality and to choose them freely, as well as to precise and non-misleading information about their content and characteristics.

The law will establish the mechanisms for quality control and the procedures for the defense of consumers; and the sanctions for violation of these rights, the repair and indemnification for deficiencies, damages or poor quality of goods and services....".

General Law of Institutions of the Financial System:

"Art. 1.- This Law regulates the creation, organization, activities, functioning and extinction of private financial system institutions, as well as the organization and functions of the Superintendence of Banks, entity in charge of the supervision and control of the financial system, in all of which the protection of the interests of the public is taken into account....".

"Art. 180.- The Superintendent of Banks has the following functions and attributions:

(...)

b) To ensure the stability, solidity and correct functioning of the institutions subject to its control and, in general, that they comply with the norms governing their functioning, through permanent extra situ supervision and in situ inspection visits, in accordance with international best practices, without any restriction and that allow determining the economic and financial situation of the entity, the management of its business, evaluate the quality and control of risk management and verify the veracity of the information it generates;

(...)

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o) Require that controlled institutions present and adopt the corresponding corrective and remedial measures in cases that so require;

(...).

Codification of Resolutions of the Superintendence of Banks and Insurance and of the Banking Board:

"ARTICLE 5.- If the result of the analysis carried out by the Superintendence determines the need for the controlled institution to introduce corrections that regularize the situation that motivated the claim, the Superintendent of Banks and Insurance or the official who has the delegation of said authority, will issue the corresponding disposition.

If the situation that motivated the claim referred to in the previous paragraph originated in an incorrect procedure of the controlled institution, which caused harm to the claimant, the Superintendence of Banks and Insurance may order the return of the claimed values, in exercise of the functions and attributions contemplated in letters b) and o) of Article 180 of the General Law of Institutions of the Financial System, granting the legal representative of the entity a period that cannot exceed fifteen (15) days from the notification to send, under the warnings of Law, the proof of compliance with the order issued.

(...);

THAT from the transcribed norms it is inferred that the State guarantees citizens the ability to dispose of goods and services of optimal quality and that the Superintendence of Banks and Insurance, as the competent authority, has the function and attribution to ensure the stability, solidity and correct functioning of the institutions subject to its control; to monitor that they comply with the norms that govern them; and, to require that said institutions present and adopt the corresponding corrective measures when necessary, likewise, if the Superintendence of Banks and Insurance determines incorrect procedures on the part of the controlled financial institutions, which would have caused harm to a claimant, it must act as ordered for those effects;

THAT therefore, although it is true that the forgery of a check must be declared by a competent judge, it is no less true that in exercise of the attributions conferred by the current regulations, the Superintendence of Banks and Insurance when it is determined that there was an incorrect procedure by a bank regarding a client's claim, must order the restitution of the claimed value. In the present case, Banco Pichincha C.A. did not act in accordance with what is provided in paragraph 5.12 of Article 5 and in paragraph 23.5 of Article 23, of Chapter III, Title XXIV, Book I, of the Codification of Resolutions of the Superintendence of Banks and Insurance and of the Banking Board, for which reason it ordered the restitution of the value of the check in question;

THAT by virtue of the above, in the present case it has been evidenced that Banco Pichincha C.A. is subject to Article 5 of Chapter IV, Title XX, Book I of the Codification of Resolutions of the Superintendence of Banks and Insurance and of the Banking Board, since the situation that motivated the

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claim originated in incorrect procedures of the controlled institution detailed in the present memorandum;"

(...)

THAT through communication of March 5, 2015, Mr. Antonio Acosta Espinosa, Adjunct President of Banco Pichincha C.A., filed a request for reconsideration against the administrative act contained in Resolution No. JB-2015-3263 of February 11, 2015;

THAT the Banking Board, in the session held on April 22, 2015, in accordance with the second paragraph of Article 3, Chapter II, Title XVI, Book I of the Codification of Resolutions of the Superintendence of Banks and Insurance and of the Banking Board, knew the appeal referred to in the preceding paragraph and determined that it does not comply with what is provided in the first paragraph ibidem, that is, that there are no new elements of fact or law that motivate the elaboration of corresponding reports, for which it decided to deny it outright; and,

IN exercise of its legal attributions,

RESOLVES:

SINGLE ARTICLE.- DENY the request for reconsideration filed by Mr. Antonio Acosta Espinosa, Adjunct President of Banco Pichincha C.A. against the administrative act contained in Resolution No. JB-2015-3263 of February 11, 2015; and, consequently, CONFIRM said resolution.

NOTIFY.- Given at the Superintendence of Banks and Insurance, in Quito, Metropolitan District, on the twenty-second of April of two thousand fifteen.

Econ. Rodrigo Landeta Parra
GENERAL INTENDENT (S)
PRESIDENT OF THE BANKING BOARD SESSION (E)

I CERTIFY.- Quito, Metropolitan District, on the twenty-second of April of two thousand fifteen.

Lcdo. Pablo Cobo Luna
SECRETARY OF THE BANKING BOARD