Banking Board of Ecuador

RESOLUTION No. JB-2015-3523

THE BANKING BOARD

CONSIDERING:

THAT by Resolution No. JB-2015-3514 of July 9, 2015, the Banking Board resolved: “TO ABSTAIN from ruling on the reconsideration appeal filed by Dr. Marcelo Andrade Cordero, representing Mr. Alfonso Andrade Peñaherrera, against the administrative act contained in Office No. SELC-2014-438, dated June 26, 2014, since, in accordance with the prevailing legal regulations, the claims subject to the appeal fall under the jurisdiction of the Public Law Management and Execution Unit of the AGD CFN NO MAS IMPUNIDAD Commercial Trust, UGEDEP.”, fundamentally for the following considerations:

“(...)

THAT by communication dated March 25, 2014, Mr. Alfonso Andrade Peñaherrera, through his attorney Dr. Marcelo Andrade Cordero, requested that the Superintendency of Banks notify the Public Law Management and Execution Unit, UGD-CFN No Más Impunidad, UGEDEP, of the results of the values reviewed and determined by the control body regarding the equity gap of SOLBANCO S.A.; that he further requested the appointment of an expert from the control body to determine the real value of the property seized at Km 1.5 on Carlos Julio Arosemena Avenue in Guayaquil; and that a certified copy of the reports and minutes of the interinstitutional commission formed by UGEDEP-Bank Central of Ecuador for the analysis of receivables to be collected from former shareholders and administrators of the defunct FINAGRO and SOLBANCO banks be granted;

THAT through Office No. SELC-2014-250, dated April 29, 2014, the Deputy Director of Entities in Liquidation and Coactive Proceedings responded to Dr. Marcelo Andrade’s request; regarding the first request, a copy of Office No. SBS-2014-019, dated January 14, 2014, was sent to the interested party, through which it was communicated to the UGEDEP representative that from that date onward the Bank Superintendency’s delegate’s participation in the aforementioned interinstitutional commission became subsistent, since it was the responsibility of said unit to exercise the corresponding collection actions; that a copy of Office No. SBS-2014-054, dated January 30, 2014, was also delivered, through which the Superintendent of Banks indicated to the legal representative of UGEDEP that there was no modification regarding what was stated in Office No. SBS-IG-INJ-2012-417, dated April 23, 2013, concerning the values of the equity loss of FINAGRO and SOLBANCO; and finally, a copy of Memorandum No. SRM-UTA-2014-003, dated January 14, 2014, which contains the analysis of the appraisal conducted by Architect Alamiro González Roca on the property seized by AGD, which had not been validated by the control body;

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THAT on May 13, 2014, in response to Office No. SELC-2014-250, the appellant questioned the Superintendency’s response regarding SOLBANCO S.A.’s equity gap, stating that it had not changed, as indicated, since a Commission was formed to evaluate the real equity gap, three subsequent events were determined to be necessary to consider: the values paid by SOLBANCO’s debtors to the Bank Central of Ecuador, beyond which it was determined that operations conducted during the stabilization period, such as the acceptance of a dation in payment with certificates called MARRAQUESH and the granting of a loan to Banco del Progreso (also during stabilization, carried out by the common administrator of both institutions and currently provisioned), do not hold any responsibility for SOLBANCO’s administrators and shareholders; he also stated that those responsible for the equity gap are the administrators and shareholders who were in office at the time of the bank’s final liquidation, which does not correspond to Mr. Alfonso Andrade Peñaherrera’s case; that likewise, the appraisal was conducted by an expert qualified by the control body and is subject to review by any professional determined by the Superintendency; that on January 14, 2013, Mr. Alfonso Peñaherrera requested the review of four accounting matters aimed at readjusting SOLBANCO’s equity gap; and that the interinstitutional commission determined, through report AUD-SELC-2013-006 dated May 21, 2013, adjustments to the equity gap, for which he requested that the control body notify UGEDEP of these results;

THAT through Office No. SELC-2014-366, dated June 6, 2014, Engineer César Dávalos Arellano, then Deputy Director of Entities in Liquidation and Coactive Proceedings, Acting Substitute, denied Mr. Alfonso Andrade Peñaherrera’s request and ratified the content of Office No. SELC-2014-250, dated April 29, 2014, emphasizing that any requests should be directed to UGEDEP, as it is responsible for exercising the collection actions regarding the equity gap within its competence;

THAT on June 12, 2014, Dr. Marcelo Andrade, representing Mr. Alfonso Andrade Peñaherrera, filed a reconsideration appeal against the administrative act contained in Office No. SELC-2014-366, dated June 6, 2014, reiterating his request to notify UGEDEP of the adjustments to SOLBANCO S.A.’s equity gap and to appoint any expert to conduct a new appraisal of the property seized by AGD; and that through Office No. SELC-2014-438, dated June 26, 2014, Engineer César Dávalos Arellano, then Deputy Director of Entities in Liquidation and Coactive Proceedings, Acting Substitute, denied the challenge to the administrative act contained in Office No. SELC-2014-366, dated June 6, 2014, which was confirmed in the sense that any requests should be directed to UGEDEP, since it is responsible for exercising collection actions regarding the aforementioned equity gap;

THAT by written submission dated July 8, 2014, Dr. Marcelo Andrade

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Cordero, representing Mr. Alfonso Andrade Peñaherrera, filed before the Banking Board a reconsideration appeal against the administrative act contained in Office No. SELC-2014-438, dated June 26, 2014; and that by written submission dated July 31, 2014, presented on August 1, 2014, the appellant submitted additional information related to the reconsideration appeal, which has been considered in preparing this report;

THAT the grounds presented by the appellant are as follows: he reiterates his request for the Superintendency of Banks to order notification to UGEDEP of the adjustments to SOLBANCO S.A.’s equity gap, since as a result of said institution’s request to form a commission, integrated by this Superintendency, UGEDEP, and the Bank Central of Ecuador, whose objective is to evaluate the real equity gap of that entity, it was determined that three subsequent events exist: values paid by the bank’s debtors; operations conducted during SOLBANCO’s stabilization period, such as the acceptance of a dation in payment with fiduciary certificates called MARRAQUESH and the granting of a loan to Banco del Progreso (also during stabilization at that time, carried out by the common administrator of both institutions and currently provisioned), regarding which SOLBANCO’s administrators and shareholders bear no responsibility; that according to prevailing legal provisions, those responsible for the equity gap are the administrators and shareholders who acted at the time of the bank’s final liquidation or stabilization declaration, which is not Mr. Alfonso Andrade’s case, since at the time the bank was declared stabilized, he was not its administrator and did not hold more than 6% of the bank’s capital shares when such decision occurred, prerequisites essential for their financial responsibility; that regarding observations made to the appraisal conducted by Architect Alamiro González Roca, an expert qualified by the Superintendency, nominated by the Interinstitutional Commission and appointed by the Superintendent, the submitted report meets the standards determined by the control body; however, it is subject to review by any category of professional that the control body may determine; that on May 21, 2014, he reiterated his request to appoint any expert to conduct a new appraisal of the property located at Km. 1 ½ on Carlos Julio Arosemena Avenue in Guayaquil, seized by AGD, to determine the real value of the seized property; and that based on the foregoing, he requests admission of the reconsideration appeal and rendering subsistent the full content of Office No. SELC-2014-438, dated June 26, 2014, and that notification be ordered to UGEDEP of the adjustments to SOLBANCO S.A.’s equity gap and, in due course, communication of the appraisal results for the seized asset, since the Superintendency of Banks is competent to determine the value of any eventual equity gap and to determine the non-responsibility of that eventual gap for Alfonso Andrade Peñaherrera;

THAT regarding the grounds presented by the appellant, it is necessary to point out that Article 127 of the General Law of Financial System Institutions applicable to this case established that if the fraudulent act or omission of directors, administrators, officials, or employees of a financial system institution causes harm to the financial institution or third parties, they shall be liable for any losses incurred with their own assets, for which the Superintendency of Banks will exercise its coactive authority;

THAT the Banking Board issued the regulatory framework for applying Article 127 of the aforementioned law, incorporated as Chapter XVI, Title XVIII, Book I of the Codification of Resolutions of the Superintendency of Banks and Insurance and the Banking Board, which regulates the collection of equity losses of financial institutions whose liquidation processes have concluded, in accordance with the coactive jurisdiction provided by the Law on Economic Area Reordering in the tax-financial field; that according to Article 7 of the Banking Board’s regulations, the Superintendency of Banks shall refrain from initiating coactive proceedings regarding principal shareholders, administrators, and legal representatives of financial institutions in which the former Deposit Guarantee Agency or the Public Law Management and Execution Unit of the AGD CFN NO MAS IMPUNIDAD Commercial Trust, UGEDEP, has conducted seizure processes or exercised collection actions; that consequently, UGEDEP has assumed jurisdiction based on the principles of legality and coordination provided in Article 226 of the Republic’s Constitution; and that it is competent to collect obligations based on the authority originally assumed by the Deposit Guarantee Agency, under the Law on Economic Area Reordering in the Tax-Financial Field;

THAT in this case, through Office No. SBS-IG-INJ-2012-417, dated April 23, 2012, applying the regulations in force at that time, the Superintendency of Banks transferred to UGEDEP the list of ten closed financial institutions with specifications of equity losses, information on principal administrators, and details of shareholders holding 6% or more of the capital, for said entity to exercise all actions for effective recovery of equity loss, including the defunct SOLBANCO S.A., in liquidation with an equity loss of US$20,173,411.94; and that consequently, from that date onward, UGEDEP had jurisdiction and competence for the respective collection;

THAT upon Mr. Peñaherrera’s request, and prior to the corresponding audit report, the Superintendency of Banks ruled through Office No. SBS-2014-054, dated January 30, 2014, sent to UGEDEP regarding adjustments to SOLBANCO S.A.’s equity gap by stating that there is no modification to what was expressed in Office No. SBS-IG-INJ-2012-417, dated April 23, 2012, concerning SOLBANCO’s equity loss values, and also in the sense that it was not possible to validate the value proposed by expert Alamiro González Roca in the appraisal of the property located at Km ½ on Carlos Julio Arosemena Avenue in Guayaquil, which at the time would be State property, so its valuation corresponds to the Public Sector Real Estate Management Secretariat INMOBILIAR; and that, based on the foregoing, the determination of the equity gap is established by the control body;

THAT through Office SELC-2013-160 dated May 31, 2013, the Deputy Director of Entities in Liquidation and Coactive Proceedings communicated to the legal representative of the Public Law Management and Execution Unit of the AGD CFN NO MAS IMPUNIDAD Commercial Trust, UGEDEP, the report submitted by auditors of the Deputy Director of Entities in Liquidation and Coactive Proceedings, regarding Accounts Receivable; Realizable Assets Adjudicated by Payment; Total Recovered by the Bank Central of Ecuador; and Accounts Payable (seized property to SICOCAR company);

THAT in accordance with the Organic Law for the Closure of the Banking Crisis of 1999, the Superintendency of Banks and UGEDEP maintain their status as entities responsible for collecting equity deficits. Therefore, applying the provisions of Article 7 of Chapter XVI, Title XVIII, Book I of the Codification of Resolutions of the Superintendency of Banks and Insurance and the Banking Board, whose validity is maintained pursuant to First Transitory Provision of the Organic Monetary and Financial Code, it corresponds to UGEDEP to carry out the respective collection;

THAT applying the second paragraph of Third Transitory Provision of the Organic Monetary and Financial Code, the Banking Board will continue to act until resolving all claims, appeals, and other administrative procedures it was handling as of the effective date of said code, within one hundred eighty (180) days, extendable at the discretion of the Monetary and Financial Policy and Regulation Board; (...)

THAT through communication dated July 21, 2015, Dr. Marcelo Andrade Cordero, representing Mr. Alfonso Andrade Peñaherrera, filed a reconsideration appeal against the administrative act contained in Resolution No. JB-2015-3514 of July 9, 2015;

THAT the Banking Board, in a session held on July 29, 2015, pursuant to the second paragraph of Article 3, Chapter II, Title XVI, Book I of the Codification of Resolutions of the Superintendency of Banks and Insurance and the Banking Board, considered the appeal mentioned in the preceding paragraph and determined that it does not comply with the provisions of the first paragraph thereof, namely that there are no new factual or legal elements warranting the preparation of corresponding reports, and therefore decided to deny it outright; and,

IN exercise of its legal powers,

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RESOLVES:

ARTICLE 1. - DENY the reconsideration appeal filed by Dr. Marcelo Andrade Cordero against the administrative act contained in Resolution No. JB-2015-3514 of July 9, 2015; and, consequently, CONFIRM said resolution.

ARTICLE 2. - MAKE RECORD of the provisions set forth in Article 2 of Supreme Decree No. 705, published in Official Register No. 546 on July 7, 2015, whose text is transcribed:

“Article 2. - All attributes, functions, competencies, rights, obligations, and assets of the Public Law Management and Execution Unit of the AGD-CFN No Más Impunidad Trust are transferred to the Bank Central of Ecuador, including rights and obligations contained in agreements, contracts, or other legal instruments.”

BE IT NOTIFIED.- Given at the Superintendency of Banks, in Quito, Metropolitan District, on July twenty-nine, two thousand fifteen.

Econ. Rodrigo Landeta Parra
GENERAL SUPERINTENDENT, S
PRESIDENT OF THE BANKING BOARD, E

I HEREBY CERTIFY.- Quito, Metropolitan District, on July twenty-nine, two thousand fifteen.

Lcdo. Pablo Cobo Luna
SECRETARY OF THE BANKING BOARD