Resolution No. JB-2015-3350 of the Banking Board of Ecuador

Banking Board of Ecuador

RESOLUTION No. JB-2015-3350

THE BANKING BOARD

CONSIDERING:

That according to the last paragraph of the Second Transitional Provision of the Organic Monetary and Financial Code, published in the Official Register Second Supplement No. 332, of September 12, 2014, the Banking Board will continue to act until it resolves all appeals it was hearing as of the date of entry into force of this Code, for a period of one hundred and eighty days;

That by letter No. 13000900-15865, received by the Regional Intendancy of Guayaquil on May 28, 2013, the economist Agustín Ortiz Costa, Coactive Judge and Provincial Director of the Ecuadorian Social Security Institute (IESS) of Guayas, brought to the knowledge of the Regional Intendancy of Guayaquil the ruling of May 22, 2013, which was forwarded to Banco Pichincha C.A. through letter No. DAyEU-ISFP-REQ-2013-1213, of October 4, 2013, which in its pertinent part stated:

"(...) It is ordered that through the Bailiff, the aforementioned Entity be notified again in order to arrange a supervision or audit of the banking system regarding compliance with the withholdings mandated by the IESS for the recovery of employer arrears pertinent to the present process and, expressly, that a report be requested from Banco Pichincha regarding the omission of withholdings denounced by the workers of Parkside International Ltd.";

That by letter No. AUD-C-R-077-2013, of October 16, 2013, Mr. Víctor Ojeda, Internal Auditor of Banco Pichincha C.A., in response to the request from the control body, stated the following:

"(...) With respect to the coactive lawsuit No. 31366451/JGCH, brought against the company Parkside International Ltd., with RUC No. 0992603941001 and jointly Hinojosa Figueroa Rafael Silverio, with ID No. 0902676584, for an amount of USD 136,426.67, which was informed to all financial system institutions via circular letter No. IDG-2012-5241 of August 30, 2012, we inform you that as of the date, the total of USD 2,341.94 corresponding to 47 successive withholdings from the bank accounts belonging to the aforementioned company No. 3476233004 and No. 2200637803 is being withheld; likewise, the value of USD 33,327.85 has been seized by the Coactive Court of the IESS from November 2012 to June 2013.";

That by credential No. IRG-DAYEU-2013-024, of October 23, 2013, the Regional Intendancy of Guayaquil obtained information related to the request made by the Secretary of the Coactive Court of the Ecuadorian Social Security Institute, regarding compliance with the withholding of funds ordered within the coactive process No. 31366451/JGCH from the checking account No. 3476233004 in the name of the company Parkside International Ltd., from whose report the following is highlighted: That on December 21, 2012, USD 90.00 were withheld, despite receiving in favor of the checking account

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mentioned, a transfer of USD 60,510.00 on that same day; and, that from September 18, 2012 to March 20, 2013, debits were made from the aforementioned checking account under the concept "Retention by judicial order.";

That by letter No. IRG-DAYEU-V-R-2014-017, of January 10, 2014, the lawyer Humberto Moya González, then Regional Intendant of Guayaquil, accepted the claim of the Coactive Court of the Ecuadorian Social Security Institute; and, sanctioned Mr. Antonio Acosta Espinosa, Adjunct President of Banco Pichincha, with a fine of US$ 4,000.00;

That by communication s/n received by the control body on January 22, 2014, Banco Pichincha C.A. filed an appeal for reconsideration against the content of letter No. IRG-DAYEU-V-R-2014-017, of January 10, 2014;

That by letter No. IRG-DAYEU-V-R-2014-236, of March 28, 2014, the lawyer Humberto Moya González, then Regional Intendant of Guayaquil, confirmed the administrative act contained in letter No. IRG-DAYEU-V-R-2014-017, of January 10, 2014, since the appellant did not provide documentary evidence or new information regarding the merits of the administrative claim that would change the circumstances under which the sanction letter was issued;

That on April 9, 2014, Mr. Antonio Acosta Espinosa, Adjunct President of Banco Pichincha C.A., filed an appeal for review before the Banking Board against the content of letter No. IRG-DAYEU-V-R-2014-236, of March 28, 2014;

That by letter No. JB-2014-904, of April 17, 2014, the lawyer Pablo Cobo Luna, Secretary of the Banking Board, accepted the aforementioned appeal for review for processing; and, through letter No. JB-2014-905, of the same date, brought the matter to the knowledge of the lawyer Jorge García Chávez, Secretary of the Coactive Court of the Ecuadorian Social Security Institute, and extended the term to resolve the filed appeal by an additional sixty days;

That article 142 and letters j), k) and l) of article 180 of the General Law of Financial System Institutions provide as follows:

"Art. 142.- When a financial system institution fails to comply with the resolutions of the Banking Board, the provisions of the Superintendence of Banks, and other applicable norms, particularly those referring to the required technical equity levels, the Superintendent will obligatorily demand and approve the regularization programs that are necessary and verify their compliance; it will order all those preventive and corrective measures that are necessary and impose the pertinent sanctions, without prejudice to the civil and criminal actions that may arise.

(...)"

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

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attributions:

(...)

j) Impose administrative sanctions on the institutions it controls, when they violate the provisions that govern them, as well as their directors, administrators, and officials, and credit subjects who infringe the provisions of this Law, in the cases indicated therein;

k) Execute, by resolution, the decisions adopted by the Banking Board;

l) Initiate, when appropriate, legal actions against the directors or administrators of institutions subject to the control of the Superintendence;

(...)";

That in accordance with the transcribed provisions, it is appropriate to indicate that Banco Pichincha C.A. has failed to comply with the provisions issued by the Superintendence of Banks, since through circular letter No. IRG-2013-4323, the lawyer Katherine Merino Espinoza, Secretary of the Regional Intendancy of Guayaquil, forwarded, among others, letter No. 13000900-15865, in order for the controlled entities to comply with the ruling issued by the Special Coactive Court of the Ecuadorian Social Security Institute, which is why the sanction imposed on the Adjunct President of Banco Pichincha C.A. is legal and appropriate;

That since the Superintendence of Banks is a technical entity for surveillance, auditing, intervention, and control of economic activities, and of the services provided by private entities, with the purpose that these activities and services are subject to the legal framework and attend to the general interest, in accordance with what is provided in article 213 of the Constitution of the Republic of Ecuador, it is appropriate for this control body to observe Banco Pichincha C.A. for the lack of compliance with judicial rulings, which are mandatory for banking entities;

That it is necessary to emphasize that the way the Batch process operates for judicial withholdings cannot be the argument of the appellant to justify the fact that they are only performed at the end of the day, which determines that in the present case the blocked values are minimal; therefore, Banco Pichincha C.A. must have active alerts that allow compliance with the judicial order sent by the Secretary of the Coactive Court of the Ecuadorian Social Security Institute and block the funds, a situation that also demonstrates internal control failures in the banking entity. As stated, the sanction imposed by the Regional Intendant of Guayaquil on the Adjunct President of Banco Pichincha C.A., under the provisions of article 134 of the General Law of Financial System Institutions, which is transcribed below, is appropriate and valid:

"Art. 134.- When a financial system institution, its directors, administrators, officials, or employees infringe laws or

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regulations that govern their operation and said laws or regulations do not establish a special sanction, or in cases where they violate instructions issued by the Superintendence, it will impose the sanction according to the gravity of the infringement, which will not be less than 50 UVCs and will not exceed 3,000 UVCs.

Recidivism of the infringement, of violating instructions issued by the Superintendence, will be the responsibility of the entity.

The same sanction will be imposed on any person or institution that, without having the qualities indicated in the preceding paragraph, commits infringements to this Law, its regulations, or instructions issued by the Superintendence, when such infringements do not have a specific sanction.";

That the National Legal Intendancy, through memorandum INJ-DNJ-SAL-2015-0209 of March 13, 2015, recommended to the Banking Board to reject the claim contained in the appeal for review filed;

And,

In exercise of its legal powers,

RESOLVES:

ARTICLE ONE.- REJECT the claim contained in the appeal for review filed by Mr. Antonio Acosta Espinosa, Adjunct President of Banco Pichincha C.A.; and, consequently, CONFIRM letter No. IRG-DAYEU-V-R-2014-236, of March 28, 2014, through which the lawyer Humberto Moya González, then Regional Intendant of Guayaquil, confirmed the administrative act contained in letter No. IRG-DAYEU-V-R-2014-017, of January 10, 2014, since the appellant did not provide documentary evidence or new information regarding the merits of the administrative claim that would change the circumstances under which the sanction letter was issued.

NOTIFY.- Given at the Superintendence of Banks, in Quito, Metropolitan District, on the fifteenth of April of two thousand fifteen.

[Signature] Econ. Rodrigo Landeta Parra GENERAL INTENDANT, S PRESIDENT OF THE BANKING BOARD, E

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

[Signature] Lcdo. Pablo Cobo Luna SECRETARY OF THE BANKING BOARD