Banking Board of Ecuador

RESOLUTION No. JB-2015-3376

THE BANKING BOARD

CONSIDERING:

THAT the second paragraph of the Third Transitional Provision of the Organic Code of Monetary and Financial Law determines that the Banking Board will continue to act until it resolves all claims, appeals, and other administrative procedures it was handling on the date this Code entered into force, within a period of one hundred and eighty days, extendable at the discretion of the Monetary and Financial Policy and Regulation Board;

THAT through a communication received at the Superintendence of Banks on October 29, 2013, Mrs. Rosa Felicita Vera León filed a complaint against Banco Pichincha C.A., seeking that the regulatory body order said institution to cancel the charge of the outstanding amount on Mastercard Credit Card No. 5189xxxxxxxx1819, related to a purchase at Buena Vista Social Club for the value of USD $380.14, in view of the fact that she did not authorize said expense;

THAT by Official Letter No. IRG-DAYEU-V-R-2014-511 of May 27, 2014, Mr. Humberto Moya González, then Regional Intendant of Guayaquil, resolved favorably the complaint of Mrs. Rosa Felicita Vera León in the following terms: "(...) ORDER the controlled financial institution BANCO PICHINCHA C.A. to proceed to reverse on the Mastercard Credit Card No. 5189230001731819, owned by Mrs. Rosa Felicita Vera León, the sum of US$ 381.14 (...)". In this regard, through a document received at the regulatory body on June 10, 2014, Ms. María Elena Franco San Lucas, in her capacity as Judicial Attorney for Banco Pichincha C.A., filed an appeal for reconsideration against Official Letter No. IRG-DAYEU-V-R-2014-511 of May 27, 2014. The order to "reverse" the values subject to the complaint was ratified by Official Letter No. IRG-DAYEU-V-R-2014-901 of August 20, 2014. It must be highlighted that through this official letter, the Regional Intendancy of Guayaquil only ordered the reversal of USD $180.00;

THAT through a document received at the Superintendence of Banks on August 29, 2014, Mr. Antonio Acosta Espinosa, Adjunct President of Banco Pichincha C.A., filed before the Banking Board an appeal for review against Official Letter No. IRG-DAYEU-V-R-2014-901 of August 20, 2014;

THAT according to the First Transitional Provision of the Organic Code of Monetary and Financial Law, the Codification of Resolutions of the Superintendence of Banks and Insurance and the Banking Board will remain in force in all that does not oppose what is provided in said Code until the Monetary and Financial Policy and Regulation Board resolves what corresponds;

THAT Articles 2 and 3 of Chapter I, Title X, Book I, of the Codification of Resolutions of the Superintendence of Banks and Insurance and the Banking Board, provide as follows:

"Article 2.- For the purposes of the application of this chapter, the following definitions are determined:

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2.1 Risk.- It is the possibility that an event generating losses affecting the economic value of institutions occurs;

2.2 Risk Management.- It is the process by which institutions of the financial system identify, measure, control/mitigate, and monitor the risks inherent to the business, with the objective of defining the risk profile, the degree of exposure the institution is willing to assume in the development of the business, and the hedging mechanisms, to protect its own and third-party resources that are under its control and administration;

(...)

2.9 Operational Risk.- It is the possibility that losses occur due to events originating from failures or insufficiencies in processes, people, internal systems, technology, and in the presence of unforeseen external events. It includes legal risk but excludes systemic and reputation risks.

It groups a variety of risks related to deficiencies in internal control; inadequate systems, processes, and procedures; human errors and fraud; failures in computer systems; occurrence of adverse external or internal events, that is, those that affect the institution's ability to respond to its commitments in a timely manner, or compromise its interests (...)."

"Article 3.- Institutions of the financial system are responsible for managing their risks, for which purpose they must have formal comprehensive risk management processes that allow them to identify, measure, control/mitigate, and monitor the risk exposures they are assuming.

(...);"

THAT numeral 4.3 of Article 4, Chapter V, Title X, Book I of the Codification of Resolutions of the Superintendence of Banks provides as follows:

"Article 4.- With the purpose of minimizing the probability of incurring financial losses attributable to operational risk, the following aspects, which are interrelated, must be adequately managed:

(...)

4.3. Information Technology.- Controlled institutions must have information technology that guarantees the capture, processing, storage, and transmission of information in a timely and reliable manner; avoid business interruptions and ensure that information, including that under the modality of services provided by third parties, is integral, confidential, and available for appropriate decision-making.

(...);"

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THAT Articles 5, 6, and 18 of Chapter III, Title XIV, Book I of the Codification of Resolutions of the Superintendence of Banks provide as follows:

"Article 5.- The rights of the user of the financial system regarding the financial products and services offered by institutions of the financial system, in accordance with the law and sound practices, will be protected, in the first instance, by the client defender of the financial institutions, and by the Superintendence of Banks and Insurance, and for this purpose it may act ex officio or at the request of a party in accordance with what is expressly mandated by the Constitution and applicable laws, without prejudice to the competencies that other authorities exercise in accordance with the law.

Nevertheless, any public authority, in the application of its competencies and in accordance with the law, will protect the rights of the user of the financial system.

Article 6.- Users of financial products and services will exercise their rights within the framework of the universal principle of good faith."

"Article 18.- The Superintendence of Banks and Insurance, in the exercise of its constitutional and legal functions of regulation and supervision, preventive and corrective, will have as a fundamental principle the protection of the rights of the user of the financial system.";

THAT Article 5, Chapter IV, Title XX, Book I of the Codification of Resolutions of the Superintendence of Banks provides as follows:

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

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

THAT in attention to Official Letter No. IRG-DAYEU-2014-376 of November 26, 2014, it is inferred that in the case at hand, there is no evidence that Mrs. Rosa Felicita Vera León compromised the custody of her credit card at any time; nor did Banco Pichincha C.A. justify that the financial user was indeed the person who contracted the services provided by Buena Vista Social Club and Megahoteles Cia. Ltda., since the respective magnetic tape recordings requested by the Superintendence of Banks were not submitted;

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THAT through Official Letter No. BP-ACEC-2013-1024 of December 23, 2013, the authorized signature of Banco Pichincha C.A. presented its defenses before the Regional Intendancy of Guayaquil regarding the administrative complaint filed by Mrs. Rosa Felicita Vera León. On that occasion, the representative of the Bank stated: "(...) Once the corresponding review of the expenses made by Mrs. Vera León is carried out, they are not within her usual consumption (...)". In virtue of this, the financial institution was aware of the risk inherent in the challenged transactions, but did not adopt the appropriate security measures to prevent said expenses or alert the user in a timely manner, thereby configuring the premise described in Article 5, Chapter IV, Title XX, Book I of the Codification of Resolutions of the Superintendence of Banks, necessary to order the restitution of the claimed values;

THAT the National Legal Intendancy, through memorandum INJ-DNJ-SAL-2015-0232 of March 18, 2015, recommended to the Banking Board to reject the claim contained in the appeal filed by the Adjunct President of Banco Pichincha C.A.; and,

In exercise of its legal attributions,

RESOLVES:

SINGLE ARTICLE.- REJECT the claim contained in the appeal for review filed; and, consequently, CONFIRM Official Letter No. IRG-DAYEU-V-R-2014-901 of August 20, 2014.

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

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

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

Signature: Lcdo. Pablo Cobo Luna
SECRETARY OF THE BANKING BOARD