Office revoking the authorization granted to Banco Espírito Santo S.A. to operate as a Joint Representation Office in Mexico — SHCP — MX

DOF: 17/05/2016

OFFICE through which the authorization granted to Banco Espírito Santo S.A. to operate as a Joint Representation Office in Mexico is revoked.

At the margin, a seal with the National Coat of Arms, which says: United Mexican States.- Ministry of Finance and Public Credit.- National Banking and Securities Commission.- Legal Vice Presidency.- General Litigation Directorate.- Office No. P-030/2016.

BANCO ESPÍRITO SANTO S.A.

Montes Urales 505, Floor 4, Col. Lomas de Chapultepec, 1st Section, Miguel Hidalgo Borough,

C.P. 11000, Mexico City, Mexico.

Attention:

Mr. Hugo Antonio Villalobos Velasco

Acting Representative.

This National Banking and Securities Commission, based on the provisions of Article 7 of the Credit Institutions Law, in relation to what is established in numeral 2 of fraction II of the Fifteenth Rule of Representation Offices of Foreign Financial Entities and in Article 12, Fraction V, of the Law of the National Banking and Securities Commission; as well as in accordance with the Nineteenth Agreement adopted by the Board of Directors of this Decentralized Body in its extraordinary session held on April 29, 2016, and with the object of complying with said legal regulations, issues this resolution revoking the authorization that was granted to Banco Espírito Santo, S.A. de C.V. to operate as a joint representation office in Mexico, according to the following:

BACKGROUND

By office 312-3/33150/2010 of August 31, 2010, this National Banking and Securities Commission granted authorization for the establishment of a joint representation office in Mexico to "Banco Espírito Santo S.A. and Banco Espírito Santo de Investimento, S.A.".

Through writings dated November 28, 2014 and April 17, 2015, received by this National Banking and Securities Commission on December 5, 2014 and April 20, 2015, respectively, that Representation Office stated the following:

" I. On August 3, 2014, the Bank of Portugal, the central bank of the Portuguese Republic, adopted measures by which:

(A) immediately there was a separation between:

(1) on the one hand, (a) those assets of Banco Espirito Santo, S.A. whose corresponding debtors were entities belonging to the Espírito Santo Group, and (b) the equity participation of Banco Espírito Santo, S.A. in Banco Espírito Santo Angola, S.A. and

(2) on the other hand, the remaining assets, liabilities and relationships of Banco Espírito Santo, S.A. (including the equity participation of Banco Espírito Santo, S.A. in Banco Espírito Santo de Investimento, S.A., the "Healthy Assets and Liabilities") and

(B) for the purposes of said separation, the Healthy Assets and Liabilities were housed in Novo Banco, S.A. ("Novo Banco"), a duly capitalized institution created for such purpose as a Portuguese bank supervised by the Bank of Portugal and subject to the laws of the Portuguese Republic, who from then on conducts the corresponding business in the ordinary course, without interruption of the services that in said ordinary course it had been providing to its clients Banco Espírito Santo, S.A.

II. The share capital of Novo Banco amounts to €4.9 billion and is owned by a certain fund created in accordance with the banking laws of the Portuguese Republic through contributions paid by the Portuguese banks members of said fund and income derived from Portuguese tax collection on the banking sector.

III. The measures adopted by the Bank of Portugal do not affect clients, collaborators and suppliers and ensure the continuity of operations.

...

In view of the foregoing, respectfully request that this Honorable Commission kindly:

...

THIRD: Authorize the change of name from 'Banco Espírito Santo, S.A. and Banco Espírito Santo de Investimento, S.A., Joint Representation Office in Mexico' to 'Novo Banco, S.A. and Banco Espírito Santo de Investimento, S.A., Joint Representation Office in Mexico'. "

" ... As promised, I am sending you the original legal opinion of Linklaters LLP in Portugal, regarding the transfer of assets, liabilities, off-balance sheet items and deposits of Banco Espírito Santo, S.A. to the 'good bank', Novo Banco, S.A., due to the bank rescue carried out by the Bank of Portugal in August 2014.

Likewise, I attach the original of a communication from the Bank of Portugal certifying that the representation office of Banco Espírito Santo, S.A. in Mexico has been transferred to Novo Banco, S.A.

I hope the above is useful for the process of changing the name of the representation office. ... "

In view of the above, on July 3, 2015, this Decentralized Body notified the Representation Office in Mexico of Banco Espírito Santo S.A., through the legal representative of the Joint Representation Office, office 131/9868/2015 of June 30, 2015, by virtue of which it was summoned to revoke its authorization to operate as a Representation Office in Mexico.

To this effect, in strict observance and respect for the hearing guarantee established in Article 7 of the Credit Institutions Law and in the Fifteenth of the Rules of Representation Offices of Foreign Financial Entities, this Decentralized Body granted the Representation Office in Mexico of Banco Espírito Santo S.A. a term of ten business days counted from the next business day after the corresponding notification took effect, to manifest what was convenient to its right, offer evidence and formulate arguments, in relation to the cause for revocation in which it was found located.

Notwithstanding that the term granted for the exercise of the hearing guarantee established in favor of the aforementioned Entity exceeded, this Commission did not receive any communication from the Representation Office in Mexico of Banco Espírito Santo S.A., nor any document by virtue of which it could disprove the cause for revocation in which it was found located.

The Board of Directors of the National Banking and Securities Commission, analyzing all and each of the background referred to in this chapter, in its extraordinary session held on April 29, 2016, unanimously agreed to revoke the authorization granted to Banco Espírito Santo S.A. for the establishment of a representation office in Mexico, jointly with Banco Espírito Santo de Investimento.

Derived from the above, the following legal provisions that support said agreement are referred to below, as well as the motives and reasons by virtue of which it was resolved to revoke the authorization to operate as a Joint Representation Office in Mexico, which was granted to Banco Espírito Santo, S.A., according to the following:

CONSIDERATIONS

FIRST. Based on the provisions of Article 7 of the Credit Institutions Law, in relation to what is established in Article 12, fraction V, of the Law of the National Banking and Securities Commission, and in the Fourth and Fifteenth of the Rules of Representation Offices of Foreign Financial Entities, published in the Official Gazette of the Federation on December 31, 2014, this Decentralized Body is empowered to authorize the constitution and operation of Representation Offices and, if applicable, to agree on the revocation of said authorizations.

SECOND. That in terms of what is established in Article 7 of the Credit Institutions Law and in the Fifteenth of the Rules of Representation Offices of Foreign Financial Entities, this Commission, with the agreement of its Board of Directors and prior hearing of the interested society, may declare the revocation of the authorization granted to Representation Offices, in the cases referred to therein.

Thus, among the revocation scenarios established for this purpose is that established in numeral 2 of fraction II of the Fifteenth Rule of Representation Offices of Foreign Financial Entities, which literally states:

" FIFTEENTH.- The Commission, prior to hearing the interested party, may revoke the authorization granted for the establishment of Offices, when:

...

II. Any of the following scenarios occur:

...

The government authority or self-regulated body that has jurisdiction, either over the Foreign Financial Entity represented or its assets, in the country in which it was constituted or has its main offices (i) initiates an insolvency process with respect to the Foreign Financial Entity represented or its assets, or (ii) takes any action in accordance with bankruptcy, insolvency or other similar law that regulates the operations of the Foreign Financial Entity represented.

... "

THIRD. That this Decentralized Body complied with what is established in Articles 7 and 107 Bis of the Credit Institutions Law and what is established in the Fifteenth of the Rules of Representation Offices of Foreign Financial Entities, since in strict observance and respect for the hearing guarantee of the aforementioned Entity, it granted said Representation Office a term of ten business days, counted from the next business day after the corresponding notification took effect, in the terms referred to in the second paragraph of numeral 3 of the background chapter of this resolution, to the effect that it manifest what was convenient to its right, offer evidence and formulate arguments, in relation to the cause for revocation of its authorization to operate as a representation office in which it was found located and which is provided for in numeral 2 of fraction II of the Fifteenth Rule of Representation Offices of Foreign Financial Entities.

FOURTH. That from the integral and exhaustive analysis of the content of the documents referred to in the background chapter of this resolution, especially the writings of November 28, 2014 and April 17, 2015, sent by that representation office, as well as the summons office 131/9868/ 2015, and given that the Representation Office in Mexico of Banco Espírito Santo, S.A. did not exercise its hearing guarantee, despite having been duly summoned in observance of what is established in Article 7 of the Credit Institutions Law and in the Fifteenth Rule of Representation Offices of Foreign Financial Entities, it is determined that the cause for revocation for which said Entity was summoned is met.

In effect, from the analysis of the content of office 131/ 9868/2015 of June 30, 2015, cited in numeral 3 of the background chapter of this resolution, it emerges that this Commission summoned the aforementioned Representation Office because:

" From the analysis of what was expressed by that Joint Representation Office, as well as the documentation they attached to the aforementioned writings, it is concluded that:

The Bank of Portugal, Central Bank of the Portuguese Republic, undertook a series of actions to safeguard the interests of depositors of Banco Espírito Santo, S.A., which consisted of immediately transferring all the activities carried out by Banco Espírito Santo, S.A., as well as a set of healthy assets and liabilities, off-balance sheet items and assets in administration to Novo Banco, S.A., an entity created ex professo by the Bank of Portugal.
As a consequence of the actions carried out by the Bank of Portugal, Banco Espírito Santo, S.A. would be in an insolvency process, with which that entity would be located in the revocation scenario referred to in numeral 2, of fraction II of the Fifteenth of the Rules of Representation Offices of foreign financial entities, published in the Official Gazette of the Federation on December 31, 2014 (the Rules).
According to what is stated by the Fourth of the Rules, the authorizations that are granted to a foreign financial entity to establish a Representation Office, by their own legal nature are intransmissible, so that since Banco Espírito Santo, S.A. is the holder of the authorization granted to establish the Joint Representation Office, it is not feasible to suppose that by reason of the actions of the Bank of Portugal now the holder of the authorization is Novo Banco, S.A.
It is considered that Novo Banco, S.A. is a new financial entity, whose creation does not derive from a merger process, so it must comply with the requirements established in the Rules to obtain the authorization for the establishment of a representation office, and once it obtains authorization, for the case that it wishes to occupy the one opened by Banco Espírito Santo, S.A. jointly with Banco Espírito Santo de Investimento, S.A., it must modify the name of said joint office. "

To this effect, as has been referred to, despite having been duly notified to the legal representative of the Joint Representation Office the summons office 131/ 9868/2015 of June 30, 2015 and the term of ten business days granted for the exercise of the hearing guarantee established in favor of the aforementioned Entity having exceeded, in terms of what is established in Article 7 of the Credit Institutions Law, in relation to the Fifteenth of the Rules of Representation Offices of Foreign Financial Entities, this Decentralized Body did not receive any communication from said Representation Office and much less any document by virtue of which it could disprove the cause for revocation in which it is located.

FIFTH.- In attention to the content of the documents referred to in the background chapter of this resolution, especially the writings of November 28, 2014 and April 17, 2015 sent by said Representation Office, as well as the summons office 131/9868/2015, of June 30, 2015, it is resolved as follows:

Based on the provisions of Articles 197, 129 and 130 of the Federal Code of Civil Procedures, of supplementary application to the matter, in terms of what is established in the last paragraph of Article 109 Bis of the Credit Institutions Law, full probative value is granted to the documentation consisting of the summons office 131/ 9868/2015, of June 30, 2015, given its nature as public documentation and from which it emerges that:

" The Bank of Portugal, Central Bank of the Portuguese Republic, undertook a series of actions to safeguard the interests of depositors of Banco Espírito Santo, S.A., which consisted of immediately transferring all the activities carried out by Banco Espírito Santo, S.A., as well as a set of healthy assets and liabilities, off-balance sheet items and assets in administration to Novo Banco, S.A., an entity created ex professo by the Bank of Portugal.
As a consequence of the actions carried out by the Bank of Portugal, Banco Espírito Santo, S.A. would be in an insolvency process, with which that entity would be located in the revocation scenario referred to in numeral 2, of fraction II of the Fifteenth of the Rules of Representation Offices of foreign financial entities, published in the Official Gazette of the Federation on December 31, 2014 (the Rules).
According to what is stated by the Fourth of the Rules, the authorizations that are granted to a foreign financial entity to establish a Representation Office, by their own legal nature are intransmissible, so that since Banco Espírito Santo, S.A. is the holder of the authorization granted to establish the Joint Representation Office, it is not feasible to suppose that by reason of the actions of the Bank of Portugal now the holder of the authorization is Novo Banco, S.A. "

Likewise, in terms of what is established in Articles 93, fraction II, 129 and 130 of the Federal Code of Civil Procedures, of supplementary application to the matter, in terms of what is established in the last paragraph of Article 109 Bis, last paragraph, of the Credit Institutions Law, full probative value is granted to the public documentation consisting of the summons for revocation identified with number 131/ 9868/2015 of June 30, 2015, from which it emerges that this National Banking and Securities Commission carried out the legal summons of said Entity to the revocation procedure of the authorization to operate with the character of Joint Representation Office in Mexico which was granted to it at the time, in compliance with what is established in the Fifteenth Rule of Representation Offices of Foreign Financial Entities.

On the other hand, probative value is granted to the documents consisting of the writings of November 28, 2014 and April 17, 2015, sent to this Commission by the legal representative of the Joint Representation Office, in terms of what is established in Article 197, in relation to what is established in Articles 93, fraction III, 133, 203 and 204, all of them of the Federal Code of Civil Procedures, of supplementary application to the matter, in accordance with what is provided in Article 109 Bis, last paragraph, of the Credit Institutions Law, which analyzed in their particularity and valued as a whole serve to accredit that said Representation Office made known to this Commission the following facts:

" I. On August 3, 2014, the Bank of Portugal, the central bank of the Portuguese Republic, adopted measures by which:

(A) immediately there was a separation between:

III. The measures adopted by the Bank of Portugal do not affect clients, collaborators and suppliers and ensure the continuity of operations.

...

In view of the foregoing, respectfully request that this Honorable Commission kindly:

...

" ...

As promised, I am sending you the original legal opinion of Linklaters LLP in Portugal, regarding the transfer of assets, liabilities, off-balance sheet items and deposits of Banco Espírito Santo, S.A. to the 'good bank', Novo Banco, S.A., due to the bank rescue carried out by the Bank of Portugal in August 2014.

I hope the above is useful for the process of changing the name of the representation office. ... "

Now, despite the term granted for the exercise of the hearing guarantee established in favor of the Representation Office in Mexico of Banco Espírito Santo S.A. having exceeded, which ran from July 7, 2015 to the 20th of the same month and year, this Commission did not receive any communication from the same, and much less any document by virtue of which it could disprove the cause for revocation in which it is located, for which reason what is established in Article 109 Bis of the Credit Institutions Law applies, which literally states:

" Article 109 Bis.- In the administrative procedures provided for in this Law, relevant evidence will be admitted with the acts subject to the procedure as long as they are offered within the term for the discharge of the hearing guarantee. In the case of confession attributable to authorities, this must be discharged in writing.

Once the right to hearing referred to in Article 107 Bis of this Law has been discharged or, the written instrument through which the review appeal is filed, provided for in Article 110 of this legal instrument, has been presented, only supervening evidence will be admitted, as long as the corresponding resolution has not been issued. "

(Emphasis added)

If the foregoing is not sufficient, since in terms of what is established in the last paragraph of said Article 109 Bis of the Credit Institutions Law, the Federal Code of Civil Procedures is of supplementary application in evidentiary matters, it is necessary to attend to what is established in its Article 332, which is referred to below:

" ARTICLE 332.- When the term of summons has elapsed, without the lawsuit having been answered, the facts shall be deemed confessed, as long as the summons has been understood personally and directly with the defendant, his representative or attorney; leaving his rights to prove against. In any other case, it will be considered answered in the negative. "

(Emphasis added)

Seeing its content, subsuming said provision to the case at hand, it becomes indisputable to affirm that by having elapsed the term granted for the exercise of the right to hearing contained in the aforementioned summons office, as has been referred to on various occasions, without having received

any communication by virtue of which that Representative Office in Mexico of Banco Espírito Santo S.A. made any statement or allegation or offered information or documentation, by virtue of which it intended to disprove the cause for revocation for which it was summoned, this Decentralized Body considers the imputed facts confessed, and therefore the cause for revocation for which it was summoned is established.

Thus, having proven the cause for revocation imputed to the Representative Office in Mexico of Banco Espírito Santo, S.A., it is appropriate to revoke its authorization to operate as such, which was granted to it at the time. The following criterion applies:

Era: Ninth Era

Registry: 185049

Instance: Circuit Courts

Type of Thesis: Isolated

Source: Judicial Weekly of the Federation and its Gazette

Volume XVII, January 2003

Subject(s): Administrative

Thesis: XIV.2o.71 A

Page: 1868

ADMINISTRATIVE SANCTION. ONCE THE INFRACTION IS ESTABLISHED, THE AUTHORITY IS OBLIGED TO IMPOSE IT, AS IT DOES NOT HAVE DISCRETION IN THIS REGARD.

Discretion exists only when the law grants the authority a wide field of appreciation to decide when and how it must act, or even to freely determine the content of its possible action, from which it is concluded that the authority does not have discretionary powers regarding infractions of the law, since once established it is legally obliged to impose the corresponding sanction, because, if it acted otherwise, impunity would be generated by leaving it to its arbitrariness to determine whether the governed must comply or not with legal imperatives, which is legally inadmissible.

SECOND CIRCUIT COLLEGIATE TRIBUNAL.

Direct Amparo 191/2002. Joaquín Pacheco Medina. May 31, 2002. Unanimity of votes. Reporter: Alfonso Gabriel García Lanz, secretary of the tribunal authorized by the Judicial Career Commission of the Federal Judiciary Council to perform the functions of Magistrate. Secretary: Leticia Evelyn Córdova Ceballos.

For all the above, as referred to in the summons notice, this Decentralized Body is in a position to affirm that the Bank of Portugal, the Central Bank of the Portuguese Republic, undertook a series of actions to safeguard the interests of the depositors of Banco Espírito Santo, S.A., which consisted of immediately transferring all the activities carried out by Banco Espírito Santo, S.A., as well as a set of healthy assets and liabilities, off-balance sheet items and assets in administration to Novo Banco, S.A., an entity created specifically by the Bank of Portugal and as a consequence of the actions carried out by the Bank of Portugal, Banco Espírito Santo, S.A. found itself in a process of insolvency, in terms of what is provided in the second paragraph of numeral 4 of fraction II of the Fifteenth of the Rules for Representative Offices of Foreign Financial Entities, which, for quick reference, is referred to below:

"Fifteenth.- The Commission, prior to hearing the interested party, may revoke the authorization granted for the establishment of offices, when:

...

II. Any of the following circumstances occur:

...

For the purposes of the previous numerals 1 to 3, a process of insolvency shall be understood as any process by which it is sought (I) to reach a trial or transaction to make effective the insolvency, suspension of payments, bankruptcy, intervention, liquidation or any other similar resolution with respect to the Foreign Financial Entities or their debts or assets ... "

Thus, since in accordance with what is established in the Fourth of the Rules for Representative Offices of Foreign Financial Entities, the authorizations granted to a foreign financial entity to establish a representative office, by their very legal nature, are intransmissible, it is indisputable that since Banco Espírito Santo, S.A. is the holder of the authorization granted to establish the Joint Representative Office, it is not feasible to suppose that by reason of the actions of the Bank of Portugal the holder of the authorization is now Novo Banco, S.A., given that it is a new financial entity, whose creation does not derive from a merger process, so, in its case, said company must comply with the requirements established in the aforementioned Rules to obtain the authorization for the establishment of a representative office.

Therefore, this National Banking and Securities Commission concludes that the Representative Office in Mexico of Banco Espírito Santo, S.A. falls under the cause for revocation provided for in numeral 2 of fraction II of the Fifteenth of the Rules for Representative Offices of Foreign Financial Entities, in relation to what is provided in the second paragraph of numeral 4, of the same fraction and rule, which are transcribed below for greater reference:

"FIFTEENTH.- The Commission, prior to hearing the interested party, may revoke the authorization granted for the establishment of Offices, when:

...

II. Any of the following circumstances occur:

...

The government authority or self-regulated body that has jurisdiction, either over the Foreign Financial Entity represented or its assets, in the country in which it was incorporated or has its main offices (i) initiates a process of insolvency with respect to the Foreign Financial Entity represented or its assets, or (ii) takes any action in accordance with the bankruptcy, insolvency or other similar law that regulates the operations of the Foreign Financial Entity represented.

...

Based on the above, the National Banking and Securities Commission, prior to agreement of its Board of Directors in its extraordinary session held on April 29, 2016 and with the object of preserving the stability of the financial system as a whole, safeguarding the interests of the public:

RESOLVES

FIRST.- Based on what is provided in article 7 of the Credit Institutions Law, in relation to what is established in article 12, fraction V, of the Law of the National Banking and Securities Commission, as well as in the Fifteenth of the Rules for Representative Offices of Foreign Financial Entities; and in accordance with Agreement Nineteenth adopted by the Board of Directors of said Commission in its extraordinary session held on April 29, 2016, and the considerations that were exposed in this resolution, the authorization to function as a Joint Representative Office in Mexico, which was granted at the time to Banco Espírito Santo, S.A., through notice 312-3/33150/2010, of August 31, 2010, is revoked.

SECOND.- From the date of notification of this resolution, the Representative Office in Mexico of Banco Espírito Santo, S.A. is incapacitated to continue carrying out activities through any of the offices it has established in national territory, in accordance with what is provided in the last paragraph of the Fifteenth of the Rules for Representative Offices of Foreign Financial Entities.

THIRD.- This Resolution is notified to the Representative Office in Mexico of Banco Espírito Santo, S.A.

FOURTH.- Based on what is provided in the last paragraph of the Fifteenth of the Rules for Representative Offices of Foreign Financial Entities, this resolution is published in the Official Gazette of the Federation.

FIFTH.- Based on what is established in the penultimate paragraph, of article 16 of the Law of the National Banking and Securities Commission, in relation to what is provided in articles 4, 9 and 12 of the Internal Regulations of the National Banking and Securities Commission, published in the Official Gazette of the Federation on November 12, 2014; and in terms of what was ordered by the Board of Directors of said Commission in Agreement Twenty-First adopted in its extraordinary session held on April 29, 2016, it is delegated indistinctly to the public servants of this Commission, Karla Patricia Montoya Gutiérrez, María Isabel Almaráz Guzmán, Mariana Vázquez Bracho García, Ivonne Marcela López Franco, Ángel Jonathan García Romo, Juan Carlos Macías Luna, Selene Saucedo García, Tania Patricia Morales Reyes, Rosa Cristina Ávalos Gutiérrez, José Luis García González, Luis Antonio Rodríguez Rodríguez, Alfredo Omar Morlan Fernández, José Alberto Jiménez Rosales, Alberto Erick Mendez Medina, Francisco Godínez Ayala and Rogelio García Martínez, the charge of notifying, jointly or separately, this notice by which compliance is given to the agreement adopted by the Board of Directors of said Commission.

The foregoing is made known to you by the President of the National Banking and Securities Commission, in accordance with what is provided in articles 16, fraction VI, and penultimate paragraph, of the Law of the National Banking and Securities Commission and 12 of the Internal Regulations of the National Banking and Securities Commission, as well as in terms of Agreement Twentieth adopted by the Board of Directors of said Commission in its extraordinary session held on April 29, 2016.

Respectfully,

Mexico City, May 4, 2016.- The President, Jaime González Aguadé.- Rubric.

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