Official Letter Revoking Authorization for Union de Crédito del Sur de Jalisco, S.A. de C.V. — SHCP — MX

DOF: 17/05/2016

OFFICIAL LETTER revoking the authorization granted to Union de Crédito del Sur de Jalisco, S.A. de C.V. to operate as a credit union.

At the margin, a seal with the National Coat of Arms, which reads: United Mexican States.- Ministry of Finance and Public Credit.- National Banking and Securities Commission.- Legal Vice Presidency.- General Litigation Directorate.- Official Letter No. P-027/2016.

UNION DE CRÉDITO DEL SUR DE JALISCO, S.A. DE C.V.

Efraín Buenrostro No. 42. Col. San Pedro,

C.P. 49080, Ciudad Guzmán, Jalisco.

Attention: Ing. Ramón Rafael Moreno Vizcarra

Legal Representative and President of the
Board of Directors.

This National Banking and Securities Commission, based on the provisions of articles 97, fractions II, III, and VI, of the Credit Unions Law and 12, fraction V, of the National Banking and Securities Commission Law; as well as in accordance with the Twelfth 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 granted to operate as a credit union, which was at the time granted to that Union de Crédito del Sur de Jalisco, S.A. de C.V., according to the following:

BACKGROUND

By official letter 601-II-DA-b-5317, dated February 22, 1994, authorization was granted to operate as a Credit Union to the entity named Union de Crédito del Sur de Jalisco, S.A. DE C.V., (hereinafter UCSJ, Entity, Company, or Union, interchangeably) whose last registered address with this Commission is located at Efraín Buenrostro street number 42, San Pedro Neighborhood, Postal Code 49080, in Ciudad Guzmán, Jalisco.

EXTRA SITUATION OBSERVATION

By official letter 132-A/101421/2014 dated August 18, 2014, an observation was made to that Union that from the review carried out on the regulatory report "R21-A-2111 Capital Requirements for Credit Risk" with figures as of June 30, 2014, this Commission determined that the UCSJ presented a net capital that is lower than the sum of the capital requirements for each type of risk, granting it a term of 20 business days, counted from the next business day after which its notification took effect, to manifest what it deemed convenient regarding said observation, and to send the documentation and information it deemed convenient.

By writing dated September 25, 2014, presented before this Commission on October 3, 2014, in exercise of its right to be heard, that Union responded to official letter 132-A/101421/2014, stating to that effect that "necessary measures are being taken to improve the position...".

By official letter 132-A/101464/2014 dated October 17, 2014, this Commission determined the corrective actions and measures deemed appropriate, under which it required that Entity to prepare a capital restoration plan that had to be presented to this Decentralized Body within the term indicated therein. This was due to the fact that with the response given by that Union through writing dated September 25, 2014, it did not refute the observation made to it in official letter 132-A/101421/2014.

By writing dated November 19, 2014, received by this Commission on the 25th of the same month and year, that Union exhibited a copy of the minutes of session 09/2014 of the Board of Directors of said Entity in which "the CAPITAL RESTORATION PLAN was authorized, this with the purpose of improving the capitalization index", attaching separately to said writing the approved Capital Restoration Plan. This, in order to comply with what was required by this Decentralized Body in official letter 132-A/101464/2014.

By writing dated May 18, 2015, received by this Commission on the 29th of the same month and year, that Union sent additional information and documentation regarding the Capital Restoration Plan, requested by official letter 132-A/101464/2014 of October 17, 2014.

By official letter 311-12288/2015 dated August 28, 2015, it was communicated to that Union that once its request, background, information, and documentation sent by that Entity were analyzed, and considering its financial situation, the Capital Restoration Plan proposed by that Union was not approved.

ORDINARY INSPECTION 2014.

By official letter 132-A/101462/2014 dated October 7, 2014, that Union was notified that starting October 27, 2014, an ordinary inspection visit would be conducted on figures as of September 30, 2014.

By official letter 132-A/101646/2014 dated December 17, 2014, the observations and recommendations derived from the ordinary inspection visit conducted on that Entity were communicated to it, granting the UCSJ a term of 20 business days, counted from the next business day after which the notification took effect, to manifest what it deemed convenient, and to send the documentation and information it deemed convenient.

10.

By writings dated January 30, 2015, received by this Commission on February 3 of the same year, that Union, in exercise of its right to be heard, responded to the aforementioned official letter 132-A/101646/2014.

11.

By official letter 132-A/1239/2015 dated March 5, 2015, this Commission issued the corrective actions and measures deemed appropriate, given that it was determined that that Union did not refute various observations made to it through official letter 132-A/101646/2014.

12.

By three writings dated April 13, 2015, presented before this Commission on the 20th of the same month and year, the UCSJ, in exercise of its right to be heard, responded to official letter 132-A/1239/ 2015.

13.

By official letter 212/165364/2016 dated January 20, 2016, this Commission summoned the UCSJ to revoke its authorization to operate as a Credit Union, for the reasons stated therein, given that it was allegedly located in the grounds for revocation provided in fractions II, III, and VI of article 97 of the Credit Unions Law.

Likewise, through the same official letter 212/165364/2016, this Commission granted that Union a term of ten business days counted from the next business day after which the notification of said official letter took effect, which was duly carried out on February 4, 2016 (it ran from February 9 to 22, 2016), to use its guarantee of hearing provided in article 97 of the Credit Unions Law, in relation to what is established in fraction I, of article 110 of the same legal instrument and in article 62 of the Supervision Regulations of the National Banking and Securities Commission, to manifest what it deemed convenient, offer evidence, and formulate allegations, regarding the grounds for revocation of its authorization to operate as a Credit Union, in which it was allegedly found located.

14.

On March 2, 2016, the UCSJ presented at the Common Clerk's Office of this Decentralized Body a writing dated February 19, 2016, by virtue of which it made various statements regarding the content of the summons official letter 212/165364/2016, without accompanying any document with said writing.

15.

The Board of Directors of the National Banking and Securities Commission, analyzing all and each of the backgrounds referred to in this chapter, in its extraordinary session held on April 29, 2016, unanimously agreed to revoke the authorization granted to operate as a credit union to the society named Union de Crédito del Sur de Jalisco, S.A. de C.V.

As a result of the above, the 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 Credit Union, which was at the time granted to that society named Union de Crédito del Sur de Jalisco, S.A. de C.V., according to the following:

CONSIDERATIONS

FIRST. Based on the provisions of articles 14 and 97, fractions II, III, and VI, of the Credit Unions Law, in relation to what is established in article 12, fraction V, of the National Banking and Securities Commission Law, this Decentralized Body is authorized to authorize the constitution and operation of Credit Unions and, if applicable, to agree on the revocation of said authorizations.

SECOND. That the second transitional article of the Decree by which the Credit Unions Law is issued and the General Law of Titles and Credit Operations is added and reformed, published in the Official Gazette of the Federation on August 20, 2008, provides:

"Second.- Chapter III of Title Second of the General Law of Organizations and Auxiliary Credit Activities, published in the Official Gazette of the Federation on January 14, 1985, is repealed, as well as any reference in said Law to credit unions.

Credit unions authorized to operate as such in accordance with the provisions that are repealed, shall be deemed authorized to operate under the terms of this Decree.

..."

THIRD. That in terms of what is provided in article 97 of the Credit Unions Law, 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 credit unions, in the cases referred to therein, among which are those established in fractions II, III, and VI, which for prompt reference are transcribed below:

"Article 97.- The 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 the unions, in the following cases:

...

II. If the union does not comply with the capitalization requirements established in accordance with what is provided by article 48 of this Law and the provisions to which said provision refers;

III. If the union in question does not comply with any of the minimum corrective measures referred to in article 80 of this Law; does not comply with more than one additional special corrective measure referred to in said article or, well, repeatedly fails to comply with an additional special corrective measure;

...

VI. When due to causes attributable to the union, the same day on which acts or contracts that signify a variation in the assets or liabilities of the union, or imply a direct or contingent obligation, are not registered in the accounting;

..."

FOURTH. That this Decentralized Body strictly complied with what is provided in articles 97 and 110, fraction I, of the Credit Unions Law, as well as in article 62 of the Supervision Regulations of the National Banking and Securities Commission, since through official letter 212/165364/2016 of January 20, 2016, cited in paragraph 13 of the background section of this resolution, it granted that Society a term of ten business days counted from the next business day after which the notification of the same took effect, to exercise its right to be heard to manifest what it deemed convenient, offer evidence, and formulate allegations, regarding the grounds for revocation of its authorization to operate as a Credit Union in which it was found located and which are provided for in fractions II, III, and VI, of the aforementioned legal provision.

FIFTH. From the integral and exhaustive analysis of the content of the documents referred to in the background section of this resolution, especially the summons official letter cited in paragraph 13 of said section, as well as the writing of February 19, 2016, presented by that Society before this Decentralized Body on March 2 of the current year, by virtue of which it exposed the arguments it deemed appropriate regarding the grounds for revocation for which it was summoned, this Commission determines that the facts and circumstances that motivated said summons persist, since the arguments raised by that Entity do not refute them.

This is so, since from the analysis of official letter 212/165364/2016 of January 20, 2016, it emerges that this Commission summoned that Union for being located in the grounds for revocation provided in fractions II, III, and VI of article 97 of the Credit Unions Law, in the following terms:

"I) "NET CAPITAL LOWER THAN CAPITAL REQUIREMENTS BY RISK TYPE"

This Commission in Observation 1 of the Annex of Official Letter No. 132-A/101421/2014 of date August 18, 2014, made known to that Union that derived from the review carried out on Regulatory Report R21-A-2111 Capital Requirements for Credit Risk with figures as of June 30, 2014, it was noted that that UCSJ presents a Net Capital that is lower than the sum of the capital requirements for each type of risk, as derived from the following box:

Figures in pesos as of June 30, 2014

Net Capital
A
Capital Requirement for
Credit Risk
B
Capital Requirement for
Market Risk
C
Sum of the capital requirements for each type of risk D=B+C Shortfall (A-D) 20,305,504 18,729,463 2,584,578 21,314,041 -1,008,537

From this it is derived that that Union has failed to comply with what is established in article 77 of the Provisions, in relation to the first and second paragraphs of article 48 of the LUC, in force at the time of the facts, which state as follows:

"Article 77.- Credit unions must maintain a net capital in relation to the credit and market risks they incur in their operation, which cannot be lower than the amount resulting from summing the capital requirements for each type of risk established in this Chapter. For these purposes, the operations must be valued according to the accounting criteria for credit unions that correspond to them to apply in accordance with what is provided by the First Section of Chapter I of Title Second."

"Article 48.- Unions must maintain a net capital in relation to the market, credit, and other risks they incur in their operation, which cannot be lower than the amount resulting from summing the capital requirements for each type of risk, in terms of the general provisions established by the Commission with the approval of its Board of Directors.

The net capital, in its basic and complementary part, will be determined in accordance with what the Commission itself establishes in the aforementioned provisions that seek to safeguard the solvency and financial stability of the unions.

...".

In virtue of this and in exercise of its right to be heard, by writing dated September 25, 2014, that Union in relation to Observation 1, of the Annex of the aforementioned official letter, stated:

"...

I allow myself to inform You that necessary measures are being taken to improve the position, such as:
Restructuring of credits when financially justified, Lawsuits and in some cases reaching Judicial Agreements and sale of assets awarded, etc. It should be noted that the delinquent portfolio is being estimated at 100%, by commitment signed with the National Financial Institution for Agricultural Development, a situation that negatively affects our numbers. We estimate that with these measures we can increase the level of solvency and be able to comply with the Capital requirements in the terms established by the General Provisions. We hope that in the quarter we are closing, our position will improve and it is estimated that at the close of the current exercise, we will be within the requirements marked by the General Provisions."

However, in said writing the UCSJ only stated that it was taking the necessary measures, without having sent documentary support, so it did not refute or regularize what was observed, which is why Official Letter No. 132-A/101464/2014 mentioned in section II, paragraph 3, of the background chapter of this was issued, through which it was informed that this situation (Net Capital lower than the sum of capital requirements for each type of risk) prevailed in the months of July and August 2014, as derived from the following table:

Period
Net Capital
A
Capital Requirement for
Credit Risk B
Capital Requirement for
Market Risk
C
Sum of the capital requirements for each type of risk D=B+C Shortfall (A-D) June 20,305,504 18,729,463 2,584,578 21,314,041

1,008,537
July
18,826,466
18,550,031
2,525,603
21,075,634
2,249,168
August
17,753,157
18,166,887
2,514,265
20,681,151
2,927,994

Given the above, through the same Official Letter No. 132-A/101464/2014, the actions and corrective measures that it had to carry out were dictated to that Union as indicated below:

"..., this Commission instructs it, based on article 80 of the LUC, to carry out the following actions and corrective measures:

a)
Inform its board of directors of the causes that motivated the situation of non-compliance with the net capital requirement, for which they must present a detailed report of comprehensive evaluation on their financial situation, which indicates compliance with the regulatory framework and include the expression of the main indicators that reflect the degree of stability and solvency of the union, as well as the observations that, in its case, the Commission, within its competence, has directed to it.

b)
Within a term not greater than twenty days, it must present to the Commission at the attention of the Specialized Authorizations Directorate, for its approval, a capital restoration plan that has as a result an increase in its capitalization index, which may contemplate a program of improvement in operational efficiency, rationalization of expenses and increase in profitability, the realization of contributions to share capital and limits to the operations that the Union can carry out in fulfillment of its social object, or to the risks derived from said operations. The plan of capital restoration must be approved by the board of directors of the Union before being presented to the Commission itself. The Credit Union must determine in the mentioned capital restoration plan, periodic goals, as well as the term in which the capital of said union will obtain the level of capitalization required in accordance with the Applicable Provisions.

c)
Suspend the payment to shareholders of dividends from the union, as well as any mechanism or act that implies a transfer of patrimonial benefits.

d)
Suspend the payment of compensations and extraordinary bonuses in addition to the general director's salary, as well as not granting new compensations in the future for the general director and officials, until as long as the union complies with the capitalization levels required by the Commission in terms of the provisions referred to in article 48 of the LUC. This provision must be contained in the contracts and other documentation that regulate the working conditions.

The above will also be applicable regarding payments made to legal entities other than the Credit Union, when said legal entities make payments to the officials of the Union.

e)
Refrain from agreeing to increases in the amounts currently in the credits given to the persons considered as related in terms of
article 61 of the LUC."

Regarding this, that Union, by writing dated November 19, 2014, referred to in
section II, paragraph 4, of the background chapter of this Official Letter, informed the
following:

" The past day 14 of the present, in a Board meeting, the content of the official letter No. 132-A/101464/2014 of date October 17, 2014 was made known to the members of the same.

In follow-up to the official letter in question, I am attaching a copy of the board minutes, where in addition to knowing the official letter, the CAPITAL RESTORATION PLAN was authorized ", this with the purpose of improving the Capitalization Index.

Attached separately is the CAPITAL RESTORATION PLAN, with amounts and times to achieve the required capitalization level in accordance with the Applicable Provisions.

...

No.

CAPITAL RESTORATION PLAN (Thousands of Pesos)

Month
Month
Month
Month
Month
Month
Total
1
2
3
4
5
6
1
Capital Contributions
Sale of shares and Contributions for future capital increases 100 150 200 250 300 500 1,500 2 Direct recovery of delinquent portfolio We are carrying out intensive collection work, amounts are being (sic) recovered important amounts (sic) 5,000 1,500 500 500 500 500 8,500 3 Recovery of delinquent portfolio through lawsuits and carrying out (sic) judicial agreements Subject to interest payment and carrying out a minimum payment of 25% of the Capital. 0 0 0 1,875 2,317 5,623 9,815 4 Promise of purchase and sale of agricultural land awarded on June 26, 2013 in $2 ' 780,000.00 possible sale of the land in November 2014 in the amount of $6 ' 500,000.00 3,700 0 0 0 0 0 3,700 5 House awarded on $1 ' 266,004.17 on December 23, 2013 Located in Zapotitlán, Jalisco House for sale is being (sic) asking $1 ' 400,000.00 0 0 0 130 0 0 130 6 It was requested from the National Financial Institution for Agricultural, Rural, Forestry and Fishery Development. (FND) to carry out a Modification Agreement to contract No. 117700000110000 regarding clause TWENTIETH paragraph 25 which says: The Union in a term not greater than 12 months from the present authorization must create the necessary preventive reserves to cover at least 100% of its delinquent portfolio. Are (sic) agreed to send us an official letter within the scope of the contract, where we must qualify according to the CNBV Provisions. 18,000 18,000 7 TOTALS 26,800 1,650 700 2,755 3,117 6,623 41,645 8 Projected Capitalization Index 13,19 12,68 13,02 13,19 12,94 13,94 ..."

By writing dated May 18, 2015, referred to in paragraph 5, section II, of the background chapter of this, the Union sent additional information and documentation regarding its capital restoration plan, stating the following:

"CAPITAL RESTORATION PLAN

1.
We commit to limiting our expenses to the strictly indispensable, without hindering the normal operation of the Union.

2.
In the past assembly, one of the agreements was that the supports received from the Rural finance company, today FND, will be delivered. In the years from 2004 to 2009 which to date are $7,029,380.00 and it was conditioned to deliver the supports in shares and at the same time to the shareholders would make a contribution

additional, which according to our estimate would result in an increase

in Social Capital of approx. $1 ' 500,000.00 it should be noted that the support mentioned above

is already in the Capital accounts.

Authorization for new credit lines has been stopped; we are only

operating with previously authorized lines.

In the original plan we sent you, the goals appear from month 1 to

month 6. Of which we estimate that with respect to:

Capital Contributions.

This will not vary, as we will shortly begin with capital contributions

for the purchase of shares. We will send you proof

of the same.

Direct Recovery of Overdue Portfolio.

Although we have recovered some items from the overdue portfolio,

unfortunately other members have fallen into default, which has led us to

increase it. We hope to improve this situation shortly, as we are being more aggressive with collections.

Recovery of overdue portfolio through lawsuits and executing

judicial agreements.

Lawsuits have been filed and we are in the process of judicial agreements, in addition to payment promises from some members who have fallen into overdue portfolio. As payments and agreements are made, we will keep you informed.

Promise to purchase agricultural land adjudicated on June 26,

2013 for $2 ' 780,000.00

There are several interested parties in the purchase of the land, but given the

economic situation we are going through, it has prevented us from carrying

out the operation under the conditions we are proposing. It is

estimated that we will carry out the sale at any moment.

Residential property adjudicated for $1 ' 266 ' 004.17 on Dec. 23, 2013,

located in Zapotiltic, Jalisco.

We have a purchase promise for it for the month of Sep/15; we have not signed the purchase agreement on the advice

our lawyers, as that would lead us, in case of non-compliance by

the buyer, to having to wait for the type of lawsuit or allegation

that might be manifested.

The commitment is reaffirmed to carry out within 180 days the actions

necessary, for the restoration of capital, once the plan is approved by

You.

As mentioned in item "e", on the recommendation of the lawyers, we are

not signing a purchase agreement.

Clarification of the objective of the request made to the F.N.D. to celebrate

a modifying agreement to contract 117700000110000.

We are waiting for the response from the FND. To carry out in the quarter

of June the qualification as marked by the CNBV. Which would lead us to lower

the estimates considerably and therefore improve our financial statements.

We attach a copy of the minutes of the Board of Directors meeting where

what is exposed here was approved.

A certified copy of the power of attorney of Mr. Carlos Manuel Torres

Castrejón, Attorney-in-fact and General Director, is attached."

In view of the foregoing, through Notice No. 311-12288/2015, dated August 28, 2015,

referenced in numeral 6, section II, of the background chapter of this Notice, it was

communicated to the Union that based on what is provided in Article 80, fraction I, subsection

b) of the LUC, the approval of the proposed Capital Restoration Plan is not granted

derived from the fact that:

It does not consider periodic goals to obtain the level of capitalization

that it requires in accordance with what is provided by Article 48 of the Law

of Credit Unions.

There are not sufficient elements of evidence to prove the

update, consistency and legal viability of the measures that the Union

mentions in its submitted writings and that their implementation is

sufficient to cover the shortfall in net capital that was observed.

This derived from the fact that they do not present objective and real commitments on the part of the Councilors or Shareholders with the purpose of complying with the

measures referred to in the Credit Unions Law, ordered in

our Notice No. 132-A/101464/2014 and thereby solving the level of capital required.

The amount contemplated for contributions of resources by the members

is insufficient.

The recovery actions on litigious portfolio as well as the sale of

adjudicated real estate have uncertain timing.

The total time period in which the Union intends to fulfill the actions

that comprise the Restoration Plan exceeds the maximum legal

period of

270 days.

This derived from the fact that since that Credit Union was observed for insufficient

net capital in August 2014 and corrective actions and measures were dictated

consisting of the capital restoration plan in October 2014, more than

365 calendar days have passed without that Union showing any sign of having carried out any act or measure

tending to restore its capital, despite the immediacy it requires, independent

of the proposed Capital Restoration Plan, which is confirmed with the frank deterioration

of the financial situation of the Union until presenting a negative capital index to

the date. This, without losing sight of the fact that, in addition, that UCSJ did not carry out any of

the other corrective actions and measures ordered through Notice

No. 132-A/101464/ 2014 .

Under these pointed conditions, it is reasonable to conclude that that Union presents a Net Capital

that results in being lower than the sum of the capital requirements for each type of risk,

in addition to not complying with the minimum corrective measures that were

dictated in terms of what is provided in Article 80 of the LUC, which is confirmed with the

fact that their capital restoration plan was denied for the situations

pointed out in Notice No. 311-12288/2015 dated August 28, 2015,

reason why it is concluded that that Union falls under the grounds for revocation

provided in fractions II and III, of Article 97 of the LUC ...

...

II) " REGISTRATION OF DELINQUENT PORTFOLIO AS CURRENT "

Derived from the ordinary inspection visit carried out on that Union under Notice

No. 132-A/101462/2014, referenced in numeral 1, section III, of the chapter of

background of the present, as well as the review carried out on the Regulatory Report

R04- C-0411 Disaggregated Commercial Credit, to the accounting auxiliaries and to the sample

of credit files, it was identified that the UCSJ registers delinquent portfolio as

current, as shown below:

In view of the foregoing, it is estimated that said Society does not comply with what is established in

paragraph 45 of Criterion B-4 Credit Portfolio of Series B, Criteria relative to the

concepts that integrate the financial statements, of Annex 4, to which Article 6 of the

Dispositions refers, in relation to Article 65 of the LUC, precepts which for ready reference are detailed below:

" The outstanding balance according to the conditions established in the contract of the

credit, shall be registered as delinquent portfolio when:

...
their amortizations have not been settled in full in the terms

originally agreed, considering for this effect the following:

a) if the debts consist of credits with single payment of principal and interest at

maturity and present 30 or more calendar days of overdue;

b) if the debts refer to credits with single payment of principal at maturity

and with periodic interest payments and present 90 or more calendar days of

overdue the respective interest payment, or 30 or more calendar days

overdue the principal;

c) if the debts consist of credits with periodic partial payments of

principal and interest and present 90 or more calendar days of overdue;

d) if the debts consist of revolving credits and present two periods

of monthly billing overdue or, in case that the billing period

is different from monthly, the corresponding to 60 or more calendar days of

overdue, and

the immediate collection documents referred to in criterion B-1

" Availability " , shall be reported as delinquent portfolio at the moment in which

said event occurs. "

" Article 6.- Credit unions shall adjust to the accounting criteria

attached to these dispositions as Annex 4, which are

divided into series and criteria ... . "

" Article 65.- Any act or contract that signifies a variation in the asset or in the

liability of a union, or implies a direct or contingent obligation, shall be registered in the accounting on the same day it is effected. The accounting, the

books and corresponding documents and the term that must be preserved shall be governed by the provisions of a general nature dictated by the Commission,

tending to ensure the reliability, timeliness and transparency of the

accounting and financial information of the unions. " .

This situation was made known to them in observation 11, of Annex 1 of Notice

No. 132-A/101646/2014, being the case that said Union, through one of its writings

referenced in numeral 3, section III, of the background chapter of this Notice,

argued without submitting any documentation, which is indicated below:

" Note is taken of the observation, to avoid continuing to incur in this error, and I allow myself to comment the following:

...

Agroproductores los

Volcanes, SPR.

This credit is settled.

Covarrubias Jaramillo J.

Jesús

It is under lawsuit.

José Leal Chávez

We have a Judicial Agreement, it is in the process of executing the guarantees.

Sotelo Gómez Inosencio

It is under lawsuit and in process of Judicial Agreement.

Unión de Productores

Rancho Grande

It is under lawsuit.

Anaya Villalvazo J.

Guadalupe Isaías

We have a Judicial Agreement.

García Hernández Celia

We have a Judicial Agreement and has already made the first payment of

interest as agreed.

Milanez Gonzalez Daniel

We have a Judicial Agreement, it is in the process of executing the guarantees.

Rodríguez Elizondo

Ignacio

We have a Judicial Agreement.

Sotelo Gómez Rigoberto

We have a Judicial Agreement.

Arturo Gómez Zaragoza

We have a Judicial Agreement, it is in the process of executing the guarantees.

... "

Thus, through Notice No. 132-A/1239/2015 (numeral 4, section III, of the chapter

of background of the present Notice), it was requested from the Union to carry out the following

actions and corrective measures, in relation to observation 11 referred to:

" ...

With value date of December 31, 2014, it shall transfer from the item of current

credit portfolio to delinquent credit portfolio the amount of the financings subject

this observation that it reported improperly as current portfolio, and proceed to the

resending of the financial statements to that date and Regulatory Reports that reflect

this adjustment.

Submit the supporting documentation duly requisitioned and referenced with which

it proves having solved this observation.

Establish the necessary internal control measures so that in the future, strict

compliance is given to what is established in Criterion B-4 Credit Portfolio, of Series

B Criteria relative to the concepts that integrate the financial statements contained in

Annex 4 Accounting Criteria for Credit Unions, to which Article 6 of the Dispositions of General Character refers, in relation to the adequate

presentation in the financial statements, of the credit portfolio.

... " .

That Union, through the last of the writings referenced in numeral 5, section III, of the

section of background of the present Notice, answered as follows:

" To carry out the reclassifications of the observations with value date of December 31

of 2014, and modify the Financial Statements of the affected months, we require time.

We request authorization for the delivery of the same on May 31, 2015,

hoping to be benefited with this request, to not incur in a

more observation on the part of You. "

It is important to note that the request made by the Union per se, is inappropriate

in view of what is provided in the aforementioned Article 65 of the LUC, " Any

act or contract that signifies a variation in the asset or in the liability of a union, or implies

direct or contingent obligation, shall be registered in the accounting on the same day it

is effected ... " .

Notwithstanding the foregoing, one month after the Union requested to present the financial

statements with the required reclassifications, according to its Regulatory Report R04-C-0411

Disaggregated Commercial Credit to June 2015, the credits related to

continuation are presented as current with or without overdue payments, independent of

being under lawsuit or judicial agreement :

Num.

Identification

Credit

Social Name

Description of the

Situation of the

Credit in R04

180482

LEAL CHAVEZ JOSE

Current with Overdue Payments

367950

ANAYA VILLALVAZO JGUADALUPEISAIAS

Current without Overdue Payments

352610

ANAYA VILLALVAZO JGUADALUPEISAIAS

Current with Overdue Payments

345860

MILANES GONZALEZ DANIEL

Current without Overdue Payments

354640

MILANES GONZALEZ DANIEL

Current with Overdue Payments

346420

PROVIDENCIA INDUSTRIAL DE MADERAS SA DE CV

Current without Overdue Payments

34619

SOTELO GOMEZ RIGOBERTO

New current credit

Then it is reasonable to state that said Union, by not registering in its accounting

the outstanding balance of the above-related borrowers as delinquent portfolio, for not having

settled their amortizations in full according to the terms originally agreed,

in breach of what is established in the Dispositions, falls under the

ground for revocation provided in fraction VI, of Article 97 of the LUC ... "

Having seen the above, as a summary, it is reasonable to state that this Decentralized Body summoned to

revoke its authorization to operate as a Credit Union for that UCSJ for allegedly incurring in the

following facts:

Presenting a net capital that results in being lower than the sum of the capital requirements for each type

of risk.

Not complying with the minimum corrective measures that were dictated in terms of what is

provided in Article 80 of the Law of Credit Unions, in view that the plan of

capital restoration proposed by said Union was denied.

Not registering in its accounting the outstanding balance of the borrowers as delinquent portfolio, for not

having settled their amortizations in full according to the terms originally agreed.

Subsequently, through a writing of February 19, 2016, presented in the Common Registry Office

of this Decentralized Body on March 2, 2016, the UCSJ made various statements regarding

the content of the summons notice 212/165364/2016, without accompanying any document to said

writing.

To this effect, it is necessary to warn that the aforementioned writing of February 19, 2016, exhibited in this

Commission on March 2 of the current year, is untimely, that is, presented outside the deadline

granted for the exercise of its right to a hearing, which ran from February 9 to 22, 2016;

consequently, what is provided in Article 108 of the Law of Credit Unions applies, which

in letters says:

" In the administrative procedures provided in this Law, relevant proofs

shall be admitted with the acts subject to the procedure as long as the same are

offered within the term of the discharge of the guarantee of hearing ... " . (Emphasis added)

Additionally, in fraction II of Article 110 of the Law of Credit Unions it is established that in the

event that the Entity does not make use of its right to a hearing within the deadline granted for such

effect, the imputed infractions shall be considered proven and the imposition of the administrative sanction

corresponding shall proceed, a legal device which for ready reference is referred to below:

" Article 110 .- The Commission, in the imposition of sanctions of an administrative nature to which

this law refers, shall be subject to the following:

...

II. In case that the alleged infringer does not make use of the right to a hearing referred to in

the previous fraction, within the granted deadline or, having exercised it, fails to

dispel the imputations made against it, the

imputed infractions shall be considered proven and the imposition of the administrative sanction

corresponding shall proceed, and

...

" . (Emphasis added)

Thus, and since in the case at hand the circumstance provided in the cited

legal provisions is met, that is, that the UCSJ did not exercise its right to a hearing within the deadline

granted for such effect, what is provided in the aforementioned normative precepts applies.

Notwithstanding the foregoing, and in order to issue an exhaustive resolution in protection more extensive of its

rights, the writing of February 19, 2016, presented in the Common Registry Office of this

Decentralized Body on March 2 of the current year, in which said Union essentially indicated:

" ...

IN THE FIRST PLACE.- The notice that occupies us, contained in number

212/165364/2016 dated January 20, 2016, is illegal, in virtue of which it lacks the

proper foundation and motivation to which Articles 14 and 16

Constitutional, as well as Article 38 Fractions IV and V of the Fiscal Code of the

Federation and Article 3 Fraction (sic) I and V of the Federal Administrative Procedure Law refer.

Articles 14 and 16 Constitutional indicate respectively, that no one may

be deprived of life, liberty or of their properties, possessions or rights, except through

trial followed before previously established tribunals, in which the

essential formalities of the procedure are fulfilled and in accordance with the laws issued with

prior to the fact, as well as that no one may be molested in their person, family,

papers or possessions, except by virtue of a written mandate from a competent authority that grounds

and motivates the legal cause of the procedure.

On the other hand, the aforementioned tax device indicates us:- ARTICLE 38.-The

administrative acts that must be notified shall have at least the following

requirements: ..................... FRACTION IV.- Be founded, motivated and express the resolution,

object or purpose of which it is about ............... .FRACTION V.- Bear the signature of the Competent Official and in its case the name or names to which it is directed ............... (sic) ......... ..

In the same way, the Article (sic) 3 Fraction (sic) I and V of the Federal Law of

Administrative Procedure indicates that:- Are elements and requirements of the act

administrative; ... Fraction I. Be issued by a competent body, through a public

servant, and in case that said body were collegiate, meet the formalities of the law or

decree to issue it; ... Fraction V. Be founded and motivated.

The above is so, since that H. Authority, in the notice that occupies us (212/165364/ 2016 dated January 20, 2016) on folio numbers 3 and 4 indicates to my attorney in the

part that interests us that:-

I) " NET CAPITAL LOWER THAN THE CAPITAL REQUIREMENTS BY TYPE

OF RISK "

" This Commission in Observation 1 of the Annex of Notice number 132-A/101421/2014 of

date August 18, 2014, made known to said Union that derived from the review carried out on Regulatory Report R21-A-2111 Capitalization Requirement by Credit

Risk with figures at June 30, 2014, it was noticed that said UCSJ presents a Net

Capital in the amount of $20,305,504.00 which results in being lower in the amount of $1 ' 008,537.00 to

the sum of the capital requirements for each type of risk, which amounts to

$21 ' 314,041.00. From which it is derived that said Union has failed to comply with what is established in

Article 77 of the Dispositions, in relation to the first and second paragraphs of Article

(sic) 48 of the LUC in force at the time of the facts.

However and notwithstanding that my attorney through a writing of date September 25

of 2014, made known to that H. Commission that my attorney was taking

the necessary measures to improve its situation through restructuring of

credits, lawsuits, judicial agreements and sale of adjudicated assets and that the portfolio

delinquent was being estimated at 100% by commitment signed with the National Financial Company

for Agricultural Development, situation that negatively impacted our

numbers, it is still to be sustained that both the notice that occupies us number (sic) 212/ 165364/2016 dated January 20, 2016 and the notice where the observation mentioned is communicated number 132-A/101421/2014 dated August 18, 2014, are

illegal and are not duly founded and motivated to the detriment of my

represented, since contrary to what is affirmed by said Commission, it is to be asserted that

at June 30, 2014, our represented in the information contained in the Report

Regulatory R21-A/2111 Capitalization Requirement by Credit Risk presents a Net

Capital in the amount of $20 ' 325,122.00 (Twenty Million Three Hundred Twenty-Five Thousand

One Hundred Twenty-Two Pesos 00/100 M.N.) and not the amount of $20 ' 305,504.00 that that H.

Authority determines in the notices of reference, reason why it shall be left without

effect notice number 132-A/101421/2014 dated August 18, 2014, as well as everything

that supports or is conditioned by the same, as in the present case it is the notice

212/165364/2016 dated January 20, 2016, for having its support in an act vitiated from

origin, which results in violation of what is provided by Articles 14 and 16 Constitutional,

as well as Article 38 Fractions IV and V of the Fiscal Code of the Federation and Article 3

Fraction I and V of the Federal Administrative Procedure Law.

... .

The aforementioned criterion is totally applicable to the case that occupies us, since

contrary to what is affirmed by that H. Commission in the notices numbers 212/165364/2016 of

date January 20, 2016 and 132-A/101421/2014 of date August 18, 2014, who determines to my attorney a Net Capital lower in the amount of $20 ´305,504.00, is the

own Commission, which can be verified from the Regulatory Report R21-A-2111

Capitalization Requirement by Credit Risk at June 30, 2014 same that

works in the power of that H. Authority and from which it is derived that the Net Capital ascends

to an amount greater than that observed and determined in a lower form by that

Commission.

It is not an obstacle to assert the above, the fact that that H. Commission affirms in the notice

number (sic) 2012/165364/2016 dated January 20, 2016 that my represented has not

remit any supporting documentation, so that it did not disprove or regularize what was observed,

since contrary to that, it is to be asserted that said Authority has the Report

Regulatory R21-A2111 Capitalization Requirement by Credit Risk at June 30

of 2014, from which, repeating it, it is derived that the Net Capital ascends to

an amount greater than that observed and determined in a lower form by that H. Commission,

Therefore, it is appropriate to conclude that the one who has failed to comply with the provisions established in Articles 14 and 16 of the Constitution, as well as in Article 38, Sections IV and V of the Federal Tax Code and Article 3, Section I and V (sic) of the Federal Administrative Procedure Law, is that Honorable Authority, as has been demonstrated.

Finally, and based on the provisions of Article 68 of the Federal Tax Code and Articles 81 and 82 of the Federal Code of Civil Procedures applied suppletorily, my represented party flatly denies that its Net Capital as of June 30, 2014, amounts to the sum of $20,305,504.00, as the issuing authorities of official letters number 212/165364/2016 dated January 20, 2016, and 132-A/101421/2014 dated August 18, 2014, illegally affirm. Likewise, relying on the aforementioned legal provisions, my represented party flatly denies that official letters number 212/165364/2016 dated January 20, 2016, and 132-A/101421/2014 dated August 18, 2014, are duly founded and motivated with respect to the figures determined therein.

...

IN THE SECOND PLACE.- The official letter in question, contained in number 212/165364/2016 dated January 20, 2016, is illegal, in that it lacks the due foundation and motivation referred to in Articles 14 and 16 of the Constitution, as well as in Article 38, Sections IV and V of the Federal Tax Code and Article 3, Section I and V (sic) of the Federal Administrative Procedure Law.

I mention the above, in that the official letter in question is not duly founded and motivated to the detriment of my represented party, since in issuing it, to the detriment of my represented party, it omits to summon its General Director and the Supervisory Body, which violates what is provided in Article 62, Section IV of the Supervision Regulation of the National Banking and Securities Commission, the same Article which reads as follows:

"Article 62.- When the information and documentation that the Commission has obtained in the exercise of its inspection and supervision functions reveals facts, acts, or omissions that, in its opinion, may imply the infringement of the laws or applicable administrative provisions to the Supervised Entities or Persons and that, in terms of the same, warrant the imposition of a sanction, the Commission must previously summon the Supervised Entity or Person, so that within a period of 10 business days counted from the next business day following receipt of the notification, it manifests in writing what it deems convenient for its rights, offers evidence, and formulates arguments.

The summoning referred to in the preceding paragraph shall be effected through an official letter duly founded and motivated, which shall contain the following requirements:

IV. Name and position of the Legal Representative or Attorney-in-fact of the Supervised Entity or Person to whom the summons is addressed, a copy of which must be sent to the general director of the Supervised Entity or Person in question, as well as to the President of its Board of Directors or equivalent body and to the supervisory body."

From the aforementioned Article, it is evident that when said organism, in the exercise of its inspection and supervision functions, detects facts, acts, or omissions that, in its opinion, constitute an infringement of the applicable administrative provisions to the supervised entities or persons carrying out activities foreseen in the laws relative to the financial system, which warrant the imposition of some sanction, it must summon them via official letter, which, to be considered duly founded and motivated, must satisfy the requirements expressly indicated in the aforementioned numeral, among which, in the referred official letter as a requirement, is to indicate the name and position of the Legal Representative or Attorney-in-fact of the Supervised Entity or person to whom the summons is addressed, sending a copy to the general director of the Supervised Entity or Person in question, as well as to the President of its Board of Directors or equivalent body and to the supervisory body; this last situation did not occur in the case in question, as it was omitted to the detriment of my represented party to send a copy to its General Director and to the supervisory body of my principal, for which reason the official letter in question, contained in number 212/1653642016 dated January 20, 2016, must be rendered void, since the conduct of that Honorable Commission violates to my detriment what is provided in Articles 14 and 16 of the Constitution, as well as in Article 38, Sections IV and V of the Federal Tax Code and Article 3, Section I and V of the Federal Administrative Procedure Law and Article 62, Section IV of the Supervision Regulation of the National Banking and Securities Commission, a cause more than sufficient for the official letter in question to be rendered void, as has been accredited.

...

For the foregoing, with the capacity I hold and based on the provisions of Article 68 of the Federal Tax Code and Articles 81 and 82 of the Federal Code of Civil Procedures applied suppletorily, my principal flatly denies that that Honorable National Banking and Securities Commission summoned or made known in due time and form to the General Director and to the Supervisory Body of my represented party the official letter number 212/165364/2016 dated January 20, 2016.

...

It is not an obstacle to assert the foregoing the fact that that Honorable Commission in official letter number 212/165364/2016 dated January 20, 2016, indicated that in order for those responsible for the administration and supervision of that Union to be duly informed of the content of the present official letter, they must make it known by sending to the Contenciosa General Direction, within a period of ten business days, counted from the next business day following the date it takes effect, the corresponding receipt of this official letter, signed by the President of the Board of Directors and the Commissioner of that Union. Such conduct of that Honorable Commission is illegal and is not duly founded and motivated to the detriment of my represented party, which is violative of what is provided in Articles 14 and 16 of the Constitution, as well as in Article 38, Sections IV and V of the Federal Tax Code and Article 3, Section I and V of the Federal Administrative Procedure Law and Article 62, Section IV of the Supervision Regulation of the National Banking and Securities Commission, for which reason the official letter in question must be rendered void, as has been accredited.

In effect, it is necessary to instruct that Honorable National Banking and Securities Commission, on the one hand, that the one obligated to summon the General Director and the Supervisory Body of my represented party is that Honorable National Commission, as required by Article 62, Section IV of the Supervision Regulation of the National Banking and Securities Commission, and on the other hand, that the one obligated to found and motivate its acts of annoyance is that Honorable National Commission, issuer of official letter number 212/165364/2016 dated January 20, 2016, as required by Articles 14 and 16 of the Constitution, as well as in Article 38, Sections IV and V of the Federal Tax Code and Article 3, Section I and V of the Federal Administrative Procedure Law and Article 62 of the Supervision Regulation of the National Banking and Securities Commission.

...

For the foregoing, with the capacity I hold and based on the provisions of Article 68 of the Federal Tax Code and Articles 81 and 82 of the Federal Code of Civil Procedures applied suppletorily, my principal flatly denies that the National Banking and Securities Commission indicates the legal basis by which my represented party is obligated to summon its General Director and its Supervisory Body regarding official letter number 212/165364/2016 dated January 20, 2016.

IN THE THIRD PLACE.- The official letter in question, contained in number 212/165364/2016 dated January 20, 2016, is illegal, in that it lacks the due foundation and motivation referred to in Articles 14 and 16 of the Constitution, as well as in Article 38, Sections IV and V of the Federal Tax Code and Article 3, Section I and V of the Federal Administrative Procedure Law.

I mention the above, in that that Honorable Commission in the official letter in question (212/165364/2016 dated January 20, 2016) on pages 5, 6, 7, and 8 indicates to my principal that through official letter number 132-A/101464/2014, the actions and corrective measures that the Union I represent should carry out were dictated, and despite the fact that my represented party, through writings dated November 19, 2014, and May 18, 2015, complied with said actions and corrective measures through its CAPITAL RESTORATION PLAN, that Honorable Commission through official letter number 311-12288/2015 dated August 28, 2015, lightly and illegally communicated to the Union I represent that, based on the provisions of Article 80, Section I, Subsection b) of the Credit Unions Law (LUC), it did not approve the proposed Capital Restoration Plan due to the reasons indicated in official letter 311-12288/2015 dated August 28, 2015, and under such conditions concluded that the Union presents a Net Capital that is lower for each type of risk, in addition to not complying with the minimum corrective measures required as dictated in terms of the provisions of Article 80 of the LUC, which confirmed with the fact that the capital restoration plans they presented were denied due to the situations indicated in official letter number 311-12288/2015 dated August 20, 2015, for which reason it concluded that the Union I represent falls under the grounds for revocation provided in Sections II and III of Article 97 of the LUC.

However, contrary to what is affirmed by that much-cited Honorable Commission, my represented party continues to maintain that the arguments made known by that Honorable Commission in official letter number 311-12288/2015 dated August 28, 2015, to not approve the Capital Restoration Plan proposed by the Credit Union I represent, are not duly founded and motivated to the detriment of my represented party, since those arguments are cited lightly, which obliges the Credit Union I represent to combat those arguments globally, thereby diminishing its capacity for defense and preventing it from defending itself in accordance with the law, all of which is illegal and violative of what is provided in Articles 14 and 16 of the Constitution, as well as in Article 38, Sections IV and V of the Federal Tax Code and Article 3, Section I and V of the Federal Administrative Procedure Law, for which reason official letter number 311-12288/2015 dated August 28, 2015, must be rendered void, as well as everything that supports or is conditioned by it, as in the present case is official letter number 212/165364/2016 dated January 20, 2016, as has been accredited.

In effect, that Honorable Commission does not legally found and motivate each and every one of its arguments made known on page 8 of official letter 212/165364/2016 dated January 20, 2016, and which derived from official letter number 311-12288/2015 dated August 28, 2015, to not approve the Capital Restoration Plan proposed by my principal, since, repeating it, it only limits itself illegally and lightly to affirm that the Union I represent a) Does not consider periodic goals to obtain the capitalization level required, ... ..b).- There are not sufficient elements of judgment to accredit the update, consistency, and legal viability of the measures the Union mentions in its writings presented and that their implementation is sufficient to cover the shortfall of net capital observed. c).- The amount of contributions contemplated by the partners is insufficient. d).- The actions to recover the portfolio in litigation as well as the sale of adjudicated real estate have uncertain timing and e) The total time period in which the Union intends to fulfill the actions comprising the Restoration Plan exceeds the maximum legal term of 270 days, all of which is illegal and is not duly founded and motivated to the detriment of my principal and which violates to the detriment of my represented party what is provided in Articles 14 and 16 of the Constitution, as well as in Article 38, Sections IV and V of the Federal Tax Code and Article 3, Section I and V of the Federal Administrative Procedure Law, for which reason official letter number 311-12288/2015 dated August 28, 2015, must be rendered void, as well as everything that supports or is conditioned by it, as in the present case is official letter number 212/165364/2016 dated January 20, 2016.

To further elaborate and to accredit that my represented party did comply with each and every one of the observations intended to deny approval of its proposed Capital Restoration Plan and which are indicated in official letter number 311-12288/2015 dated August 28, 2015, it is to allege and assert that a) my represented party did consider periodic goals to obtain the capitalization level since it is sufficient to read the writing of the Union I represent dated November 19, 2014, and which that Honorable Commission transcribes on page 6 of official letter 212/165364/2016 dated January 20, 2016, and from it it is evident that its periodic goals were monthly, that is, at 1, 2, 3, 4, 5, and 6 months. b).- Likewise, it is to be asserted that contrary to what is affirmed by that Honorable Commission, from the writings dated November 19, 2014, and May 18, 2015, transcribed by that Honorable Commission on pages 6 and 7 of official letter number (sic) 212/165364/2016 dated January 20, 2016, there are sufficient elements of judgment to accredit the update, consistency, and legal viability of the measures my represented party indicates in said writings, since their implementation is sufficient to cover the shortfall of net capital observed, since if the observed missing net capital is in the amount of $1,008,537.00 and only the capital contribution of the partners is $1,500,000.00, this without considering the other concepts cited in the said Restoration Plan and which are indicated on page 6 of the official letter in question, of course, there are objective and real commitments on the part of the Councilors and Shareholders of the Union I represent, since to accredit the above, through a writing dated May 18, 2015, a copy of the minutes of the Board of Directors session was attached where what is exposed in this point was approved. c) The amount of the partners' contributions in the amount of $1,500,000.00 is sufficient to cover the missing net capital observed, since if the observed missing net capital is in the amount of $1,008,537.00 and only the capital contribution of partners is $1,500,000.00, this without considering the other concepts cited in the said Restoration Plan and which are indicated on page 6 of the official letter in question, of course, said contribution of resources is sufficient. d) The recovery of the portfolio in litigation as well as the sale of adjudicated real estate and which are presented in the Capital Restoration Plan do not have uncertain timing, since on the one hand, within the six-month period indicated in the Capital Restoration Plan, the projected goals were exceeded, and on the other hand, the real estate mentioned have a value that at the time were reflected in the financial statements of my principal. e) It is Fallacious and not in accordance with the law that the time in which the Union intended to fulfill the actions comprising the Capital Restoration Plan had exceeded the term of 270 days, since again it is
sufficient to read page 6 of official letter number (sic) 212/165364/2016 dated January 20, 2016, and from it it is evident that its periodic goals were monthly, that is, at 1, 2, 3, 4, 5, and 6 months, i.e., at 180 days and not 270 days as that Honorable Commission refers. In conclusion and to accredit that the Union I represent did comply with the other actions and corrective measures ordered through Official Letter Number (sic) 132-A/101464/2014, I request that that Honorable Commission have here reproduced as if literally inserted all and each of the arguments raised by my represented party in its writings dated November 19, 2014, and May 18, 2015, which, in obvious avoidance of repetition, are not transcribed, for which reason I continue to maintain that the arguments made known by that Honorable Commission in official letter 311-12288/2015 dated August 28, 2015, to not approve the Capital Restoration Plan proposed by the Credit Union I represent, are not duly founded and motivated to the detriment of my represented party, since those arguments are cited lightly, which obliges the Credit Union I represent to combat those arguments globally, thereby diminishing its capacity for defense and preventing it from defending itself in accordance with the law, all of which is illegal and violative of what is provided in Articles 14 and 16 of the Constitution, as well as in Article 38, Sections IV and V of the Federal Tax Code and Article 3, Section I and V of the Federal Administrative Procedure Law, for which reason official letter number 311-12288/2015 dated August 28, 2015, must be rendered void, as well as everything that supports or is conditioned by it, as in the present case is official letter number 212/165364/2016 dated January 20, 2016, as has been accredited.

... .

IN THE FOURTH PLACE.- The official letter in question, contained in number 212/165364/2016 dated January 20, 2016, is illegal, in that it lacks the due foundation and motivation referred to in Articles 14 and 16 of the Constitution, as well as in Article 38, Sections IV and V of the Federal Tax Code and Article 3, Section I and V of the Federal Administrative Procedure Law.

I mention the above, in that that Honorable Commission in the official letter in question (212/165364/2016 dated January 20, 2016) on pages 9, 10, and 11 indicates to my principal that as a result of the ordinary inspection visit carried out on that Union under official letter number 132-A/101462/2014, as well as the review carried out on the regulatory report R04-C-0411 Disaggregated Commercial Credits, the accounting auxiliaries, and the sample of credit files, it was identified that the UCSJ registers delinquent portfolio as current, so it is estimated that said Society does not comply with what is established in Paragraph 45 of Criterion B-4 Credit Portfolio of Series B, Criteria relative to the concepts that integrate the financial statements of Annex 4, to which Article 6 of the Provisions refers, in relation to Article 65 of the LUC. And that through official letter number 132-A/1239/2015, the Union was requested to carry out the actions and corrective measures cited in said official letter, and that Honorable Commission transcribes on page 10 of official letter 212/165364/2016 dated January 20, 2016, denying for this purpose the authorization request made by my principal for the delivery of the Financial Statements as of December 31, 2014, so that by not registering in its accounting the outstanding balance of the aforementioned accredited parties as delinquent portfolio, by not having liquidated their amortizations in full according to the originally agreed terms, in non-compliance with what is established in the Provisions, it falls under the ground for revocation provided in Section VI of Article 97 of the LUC.

However, and as mentioned in my writings dated June 30, 2015, the fact that my principal registered the delinquent portfolio as current was due only to an accounting error, without this being applicable against the Credit Union I represent under Articles 65 and 97, Section VI of the Credit Unions Law, since contrary to this, the Delinquent Portfolio registered as Current Portfolio was registered in the accounting on the same day that the acts or contracts were carried out that meant a variation in the assets or liabilities of the union or that implied a direct or contingent obligation, for which reason what is argued by that Honorable Commission in official letters numbers 132-A/101462/2014 and 212/165364/2016 is not duly founded and motivated to the detriment of my represented party, since with such issue, what is provided in Articles 14 and 16 of the Constitution, as well as in Article 38, Sections IV and V of the Federal Tax Code and Article 3, Section I and V of the Federal Administrative Procedure Law, was violated to its detriment.

To further elaborate, it is clarified that the authorization request made by my principal through its writings dated June 30, 2015, consisted of delivering to that Honorable Commission the Financial Statements as of December 31, 2014, and not to register in a later date its accounting the acts or contracts that meant a variation in the assets or liabilities of the union or that implied a direct or contingent obligation, since, repeating it, the Delinquent Portfolio registered by error as Current Portfolio was registered in the accounting on the same day that the acts or contracts were carried out that meant a variation in the assets or liabilities of the union or that implied a direct or contingent obligation, for which reason what was observed by that Honorable Commission in official letters numbers 132-A/101462/2014 and 212/165364/2016 is illegal and is not duly founded and motivated to the detriment of my represented party, since with such issue, what is provided in Articles 14 and 16 of the Constitution, as well as in Article 38, Sections IV and V of the Federal Tax Code and Article 3, Section I and V of the Federal Administrative Procedure Law, was violated to its detriment, a cause more than sufficient for the official letter where the summons to revoke the authorization of my principal to operate as a credit union is issued to be rendered void, as has been demonstrated.

..."

Essentially, in said writing, that Union alleges the following:

That official letter 212/165364/2016 of January 20, 2016, is illegal for lacking due foundation and motivation and, consequently, is violative of Articles 14 and 16 of the Constitution, as well as of numeral 38, sections IV and V, of the Federal Tax Code

y 3, fracciones I y V, de la Ley Federal de Procedimiento Administrativo.

That the aforementioned office is the result of a flawed act, as is office 132-A/101421/2014 of August 18, 2014, through which it was observed that said UCSJ presented a net capital lower than the sum of the capital requirements for each type of risk, since it states that from the information contained in the "Regulatory Report R21-A-2111 Capitalization Requirement for Credit Risk" it is derived that the net capital of said Entity amounted to an amount greater than the observed one, that is, to the amount of $20,325,122.00 (TWENTY MILLION THREE HUNDRED TWENTY-FIVE THOUSAND ONE HUNDRED TWENTY-TWO PESOS 00/100 M.N.) and not the amount of $20,305,504.00 (TWENTY MILLION THREE HUNDRED FIVE THOUSAND FIVE HUNDRED FOUR PESOS 00/100 M.N.) that this Commission determined in the reference office, for which reason it alleges that the notice of charges office is illegal.

That the General Director and the Supervisory Body of the UCSJ were omitted from being served with notice, so according to them, what is provided in article 62, fraction IV, of the Regulation of Supervision of the National Banking and Securities Commission is violated.

That the arguments and considerations exposed in office 311-12288/2015 of August 28, 2015, by virtue of which the approval of the Capital Restoration Plan proposed by said Union is resolved not to be granted, are not duly founded and motivated, because in their understanding "these arguments are cited lightly, which obliges the Credit Union ... to combat said arguments globally, diminishing with them their defense capacity ...", which in their understanding prevents them from defending themselves in accordance with the law.

What is argued in offices 132-A/101462/2014 and 212/165364/2016 is not duly founded and motivated, since if the delinquent portfolio was registered as current it was only due to an accounting error, since contrary to that, the delinquent portfolio registered as current portfolio was registered in the accounting on the same day that the acts or contracts were carried out that meant a variation in the asset or liability or that implied a direct or contingent obligation.

In view of the foregoing, with respect to what is exposed in the allegation raised "IN THE FIRST PLACE" in the document submitted before this Commission on March 2, 2016, referred to in section a) posed and reproduced on various occasions throughout the body of the cited communication, it is convenient to point out that what is established in articles 38, fractions IV and V of the Fiscal Code of the Federation and 3, fractions I and V of the Federal Administrative Procedure Law to which reference is made, is not applicable to the revocation procedure that gives rise to the present resolution, given that the legal norm that regulates the substantiation of the present case is the Credit Unions Law, in the specific case, what is established in its articles 97, 110 and 111, in relation to what is established in articles 62 to 65 of the Regulation of Supervision of the National Banking and Securities Commission.

Furthermore, the provisions referred to by said Entity are also not applicable by suppletory nature to the matter at hand, this above all, given that in terms of what is established in fractions IV and V of article 8 of the Credit Unions Law, the Federal Administrative Procedure Law is suppletorily applicable only with respect to the processing of the resources referred to in said norm and the Fiscal Code of the Federation is applicable by suppletory nature only with respect to the updating of fines. For quick reference, the article in question is referred to below:

" Article 8.- In what is not provided for by this Law, the following will apply to unions in the following order:

I. Commercial laws;

II. Prevailing commercial usages among unions;

III. The Federal Civil Code;

IV. The Federal Administrative Procedure Law with respect to the processing of the resources to which this Law refers, and

V. The Fiscal Code of the Federation with respect to the updating of fines. " (Emphasis added)

If the foregoing were not sufficient, it is necessary to highlight that in terms of what is established in the third paragraph of article 1 of the Federal Administrative Procedure Law, the financial matter is excluded from its scope of application, except for the expressly mentioned case which in no way corresponds to the matter of the revocation procedure in which action is taken.

Notwithstanding the foregoing, it should be noted that office 212/165364/2016 of January 20, 2016, was issued by a competent authority, in this case the General Director of Contentious Affairs of this National Banking and Securities Commission, in addition to being duly founded and motivated, in compliance and strict observance of what is established in article 16 of our Magna Carta, which establishes that every act of molestation must be issued by a competent authority and duly founded and motivated.

Under the aforementioned conditions, it is indisputable that the notice of charges office 212/165364/2016 of January 20, 2016, in no way violates what is established in articles 38, fractions IV and V of the Fiscal Code of the Federation and 3, fractions I and V of the Federal Administrative Procedure Law, given that it is not governed by what is established therein and, therefore, they are not binding for purposes of the revocation procedure in which action is taken. Thus, the aforementioned notice of charges office causes no prejudice, damage or detriment to the fundamental rights of said Entity.

With respect to what is set forth in the allegation raised "IN THE FIRST PLACE" in the document submitted in this Commission on March 2, 2016, identified in section b) posed, from this moment it is evident that the same becomes unfounded, by virtue of the fact that said Union does not provide any means of proof to support its statement, that is, its assertion made in the sense that from the information contained in the "Regulatory Report R21-A-2111 Capitalization Requirement for Credit Risk", it is derived that the net capital amounts to an amount greater than the observed one, that is, to the amount of $20,325,122.00 (TWENTY MILLION THREE HUNDRED TWENTY-FIVE THOUSAND ONE HUNDRED TWENTY-TWO PESOS 00/100 M.N.) and not the amount of $20,305,504.00 (TWENTY MILLION THREE HUNDRED FIVE THOUSAND FIVE HUNDRED FOUR PESOS 00/100 M.N.) that this Commission determined. This above all, given that said Society limits itself to making a general statement without providing any element of conviction to support its statement, which is why its assertions become insufficient, since the offices to which it refers, as acts of authority, enjoy a presumption of legality, which derives precisely from what is established by article 16 of our Political Constitution.

Then, it does not correspond to the authorities the burden of proof with respect to their acts, since the referred procedural fatigue of accrediting the illegality or flaws that those may suffer, corresponds to the individual in whose legal sphere their effects unfold.

If the foregoing were not sufficient, it should be noted that if said Entity considered that the amount determined by this Commission with respect to its Net Capital was not correct, it was in the possibility of manifesting it when using the right to hearing that was granted to it (20 business days), in relation to the observations that were made to it through office 132-A/101421/2014 of August 18, 2014, or alternatively, having filed the defense mechanism that it deemed appropriate; however, the UCSJ in its writing of September 25, 2014, referred to in antecedent 3 of the present resolution, in exercising its right to hearing only manifested that "necessary measures are being taken to improve the position ...", without manifesting any disagreement with respect to the amount determined by this Commission.

Moreover, said Union by writing of November 19, 2014, received in this Commission on the 25th of the same month and year, informed of the efforts made in relation to the actions and corrective measures that were dictated to it through office 132-A/101464/2014 of October 17, 2014, referred to in antecedent 4 of the section relative to the present resolution, without it being observed from its content that said Entity has made any objection in relation to the amount determined by this Commission with respect to the Net Capital of said Society.

It should be noted that, in the hypothetical non-conceded case that this Commission had considered incorrectly the amount corresponding to the net capital of said Union, the cause for revocation subsists, since its net capital would still result lower than the sum of the capital requirements for each type of risk, as can be seen in the following table, which is elaborated solely for greater explanation:

In such conditions, it is patent that even in the hypothetical non-conceded case that the amount alleged by said Union corresponds to its net capital were accurate, it would still present a capital shortage with respect to the sum of the capital requirements for each type of risk, by the amount of $988,919 (NINE HUNDRED EIGHTY-EIGHT THOUSAND NINE HUNDRED NINETEEN PESOS 00/100 M.N.), which confirms that what is argued by said UCSJ is unfounded to disprove the cause for revocation for which it was served with notice.

In view of the foregoing, the fact is confirmed that said Union presents a net capital that results lower than the sum of the capital requirements for each type of risk, as was pointed out in the notice of charges office, in contravention of what is established in article 48 of the Credit Unions Law and, therefore, the cause for revocation provided in fraction II, of article 97 of said law is updated.

On the other hand, with respect to what is exposed by said Union in the allegation raised "IN THE SECOND PLACE" in the document submitted in this Commission on March 2, 2016, identified in section c) of the present section, it is to be noted that the same becomes unfounded, by virtue of the fact that said Union intends to apply a legal provision that was not in force at the time the notice of charges office 212/165364/2016 was issued, namely fraction IV of article 62 of the Regulation of Supervision of this Commission, which was reformed by Decree published in the Official Journal of the Federation on April 23, 2012, to remain as follows:

" Article 62.- When from the information and documentation that the Commission has obtained in the exercise of its inspection and surveillance functions, facts, acts or omissions are derived that, in its opinion, may imply the infringement of the laws or administrative provisions applicable to the Supervised Entities or Persons and that, in terms of the same, merit the imposition of a sanction, the Commission, previously must serve notice to the Supervised Entity or Person, so that within a period of 10 business days counted from the next business day after receiving notification, manifests in writing what is convenient to its right, offers proofs and formulates allegations.

The notice referred to in the previous paragraph will be effected through an office duly founded and motivated, which will contain the following requirements:

[ ... ]

(1) IV. Name and position of the Legal Representative or Attorney-in-fact of the Supervised Entity or Person to whom the notice is directed;

[ ... ] "

-1) Reformed by Decree published in the Official Journal of the Federation on April 23, 2012.-

Thus, from the analysis carried out on the legal precept transcribed, it is evident that the obligation consigned in fraction IV of article 62 of the referred Regulation incumbent upon this Commission when issuing a notice of charges office, lies in that it must contain the name and position of the legal representative or attorney-in-fact of the supervised entity or person to whom the notice is directed, which was indeed fulfilled by this Decentralized Body as can be seen from the simple reading of the referred notice of charges office; however, this Commission is not obliged to send a copy of the notice to the President of its Board of Directors, to the General Director and to the Supervisory Body of said Credit Union, as it erroneously intends.

Therefore, it is concluded that it is not possible to apply to the procedure in which action is taken a norm that was reformed and, therefore, that at the date does not have any legal effect, in this case, what is established in fraction IV of article 62 of the Regulation of Supervision of the National Banking and Securities Commission until before April 23, 2012. Then, the assertion raised by said Entity in the sense that office 212/165364/2016 of January 20, 2016, violated to its detriment what is established in articles 14 and 16 constitutional is unfounded.

With respect to what is exposed by said Union in the allegation raised "IN THE THIRD PLACE" in the document submitted in this Commission on March 2, 2016, referred to in section d) posed, it should be noted that said Entity, in its case, had at its disposal the legal actions that it deemed appropriate before the instances that were competent, in order to disagree with the terms of office 132-A/101462/ 2014, without it being derived from the records held in this Commission any antecedent to that effect.

Notwithstanding the foregoing, it should be noted that it is unfounded given that the arguments exposed by this Commission in office 311-12288/2015 of August 28, 2015, by virtue of which the approval of the Capital Restoration Plan proposed by said Credit Union was determined not to be granted, are duly founded and motivated, as shown below:

The referred Capital Restoration Plan proposed by the UCSJ was set forth in the following terms:

No.

CAPITAL RESTORATION PLAN PROPOSED (Thousands of Pesos)

Month

Total

Capital Contributions

Sale of shares and Contributions for future increases in Capital

100

150

200

250

300

500

1,500

Direct recovery of delinquent portfolio

We are carrying out intensive collection work, amounts (sic) important quantities (sic) are being recovered

5,000

1,500

500

8,500

Recovery of delinquent portfolio through lawsuits and realizing (sic) judicial agreements

Subject to interest payment and realizing minimum payment of 25% of Capital.

1,875

2,317

5,623

9,815

Promise of purchase and sale of agricultural land adjudicated on June 26, 2013 in $2,780,000.00

possible sale of land in November 2014 in the amount of $6,500,000.00

3,700

House adjudicated in
$1,266,004.17 on December 23, 2013
Located in Zapotitlán, Jalisco

House for sale is asking (sic) $1,400,000.00

130

It was requested to the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development. (FND) to carry out a Modification Agreement to contract No. 117700000110000 regarding clause FORTIETH paragraph 25 which says: The Union in a period no longer than 12 months from the present authorization must create the necessary preventive reserves to cover at least the 100% of its delinquent portfolio. Are (sic) agreed to send us an office within reach of the contract, where we must qualify according to the CNBV Dispositions.

18,000

TOTALS

26,800

1,650

700

2,755

3,117

6,623

41,645

Projected Capitalization Index

13,19

12,68

13,02

13,19

12,94

13,94

Additionally, said Union presented the following additional information:

No.

ADDITIONAL INFORMATION AND DOCUMENTATION OF THE CAPITAL RESTORATION PLAN

We commit ourselves to limit our expenses to the strictly indispensable, without hindering normal operation of the Union.

In the past assembly in some of the agreements it was that the supports received by the rural finance company now FND. will be delivered. In the years from 2004 to 2009 which to date are $7,029,380.00 and it remained conditioned to deliver the supports in shares and at the same time to the shareholders would make an additional contribution, which according to our estimation we would have an increase of Social Capital of approx. $1,500,000.00 it should be noted that the aforementioned support is already in the Capital accounts.

New credit lines have been stopped authorizing, only operating with previously authorized lines.

In the original Plan that we sent you appear the goals from month 1 to month 6. Of which we estimate that in what refers to:

Capital Contributions.

This will not vary, since shortly we will begin with capital contributions for the purchase of shares. We will send you proof of the same.

Direct Recovery of Delinquent Portfolio.

Although we have recovered some items from the delinquent portfolio, unfortunately other members have fallen into delinquency, which has led us to increase it. We hope to improve this situation shortly, given that collection is being more aggressive.

Recovery of delinquent portfolio through lawsuits and realizing judicial agreements.

Lawsuits have been filed and we are in the process of judicial agreements, besides payment promises from some members who have fallen into delinquent portfolio. As payments and agreements are carried out we will keep you informed.

Promise of purchase of agricultural land adjudicated on June 26, 2013 in $2,780,000.00

There are several interested parties in the purchase of the land, only that given the economic situation we are going through, it has prevented us from carrying out the operation under the conditions we are proposing. It is estimated that at any moment we will carry out the sale.

House adjudicated in $1,266,004.17 on Dec. 23, 2013, located in Zapotiltic, Jalisco.

We have a promise of purchase of the same, for the month of Sep/15, we have not signed the purchase and sale contract on advice of our lawyers, since that would lead us in case of non-compliance by the buyer to have to wait for the type of lawsuit or allegation that could be manifested.

The commitment is ratified, that in 180 days carry out the necessary actions, for the restoration of the capital, once the plan is approved by You.

As commented in section "e" on recommendation of lawyers, we are not signing purchase and sale contract.

Clarification of the objective of the request made to the F.N.D. to celebrate modification agreement to contract 117700000110000.

We are waiting for the response of the FND. To carry out in the quarter of June the qualification as the marks the CNBV. What would lead us to lower the estimates considerably and therefore improve our financial statements.

We attach copy of the minutes of the Board of Directors session where what is exposed here was approved.

Certified copy of the power of Mr. Carlos Manuel Torres Castrejón, Attorney-in-fact and General Director. "

Thus, once analyzed in detail the Capital Restoration Plan proposed, as well as the complementary information delivered by said Union, in a founded and motivated manner, in office 311-12288/2015 of August 28, 2015, it was established that approval was not granted for the following reasons:

" ...

The Plan

Does not consider periodic goals to obtain the level of capitalization that it requires in accordance with what is established by article 48 of the Credit Unions Law.

Sufficient elements of judgment do not emerge to accredit the update, congruence and legal viability of the measures that the Union mentions in its writings presented and that their implementation is sufficient to cover the net capital shortage that was observed to it.

This derived from the fact that they do not present objective and real commitments on the part of the Councilors or Shareholders with the purpose of complying with the measures referred to by the Law of Credit Unions, ordered in our Office No. 132-A/101464/2014 and thereby solvent the required capital level.

The amount contemplated of contributions of resources by the partners is insufficient.

The actions of recovery of portfolio in litigation as well as the sale of adjudicated real estate have uncertain temporality.

The total time period in which the Union intends to fulfill the actions comprising the Restoration Plan exceeds the maximum legal term of 270 days.

... "

Now, such determination made in the sense of not granting approval of the Capital Restoration Plan proposed by said Union, was founded on what is established in article 80, fraction I, of the Credit Unions Law, as can be derived from the simple reading of office 311-12288/2015 of August 28, 2015, legal device which for quick reference is referred to below:

" Article 80.-

When unions do not comply with the capitalization requirements established in accordance with what is established in article 48 of this Law and in the provisions that emanate from that precept, the Commission must order the application of the following minimum corrective measures:

I. Minimum corrective measures:

[ ... ]

b) Within a period no longer than twenty days, submit to the Commission, for its approval, a plan of capital restoration that has as a result an increase in its capitalization index, which may contemplate a program of improvement in operational efficiency, rationalization of expenses and increase in profitability, the realization of contributions to social capital and limits to the operations that the union in question may carry out in fulfillment of its social object, or to the risks derived from said operations. The capital restoration plan must be approved by the board of directors of the union in question before being presented to the Commission itself.

The union in question must determine in the capital restoration plan that, in accordance with this subsection, it must present, periodic goals, as well as the term in which the capital of said union will obtain the required capitalization level in accordance with the applicable provisions. The Commission must resolve what corresponds on the capital restoration plan that, in its case, has been presented to it, within a maximum period of sixty days, counted from the date of presentation of the plan in question. The Commission must resolve what corresponds on the capital restoration plan that, in its case, has been presented to it, within a maximum period of sixty days, counted from the date of presentation of the plan in question.

Unions to which what is provided in this subsection applies, must comply with the capital restoration plan within the term established by the Commission, which in no case may exceed two hundred seventy days counted from the day following the one on which the union is notified of the respective approval. For the determination of the term for the"

compliance with the restoration plan, the Commission must take into consideration its

financial situation, as well as the conditions that generally prevail in the

financial markets. The Commission, by agreement of its Board of Directors, may extend this deadline only

once for a period not exceeding ninety days.

The Commission will monitor and verify compliance with the capital restoration plan,

without prejudice to the applicability of other corrective measures;

[ ... ] "

(Emphasis added)

In accordance with the above, it is clear that the reasons exposed by this Commission in its notice 311-12288/2015

of August 28, 2015, by virtue of which it was determined not to approve the Capital Restoration

Plan proposed by said Union, are duly founded and motivated, and it is also

evident that there are sufficient reasons why its approval is not viable, such as: (I) that there

are not sufficient elements of evidence to verify the update, consistency, and legal viability of the

measures proposed by said Union, (II) there are no real and objective commitments to fulfill them,

(II) the amount contemplated for contributions is insufficient, (IV) the actions for recovery of litigation portfolio

have uncertain timing, as was explained in the body of said notice.

This is corroborated if we consider that from the moment that insufficiency of net capital was observed in said Union in August 2014 and corrective actions and measures were issued consisting of

the preparation of a capital restoration plan in October 2014, more than 365 natural days

have passed without said Union showing any sign of having performed any act or measure aimed at restoring its capital, despite the immediacy required, independent of the proposed Capital Restoration Plan,

which is confirmed by the frank deterioration of the Union's financial situation, to the point of presenting

a negative capital index to date, as derived from the financial information reported by

said Company with figures as of December 31, 2015, in the regulatory report " R21 A2111 Capitalization Requirements for Credit Risk " ,

presented by said same Entity through the Interinstitutional System for Information Transfer (SITI) on March 29, 2016, as shown in the

following table:

Figures in pesos as of December 31, 2015

Net Capital

Capital Requirement

for Credit Risk

Capital Requirement

for Market Risk

Sum of the

capital requirements

for each type of risk

D=B+C

Shortfall

(A-D)

4,132,673

12,803,215

1,756,839

14,560,054

18,692,727

In view of the above, it is confirmed that said Union did not comply with the corrective

measures imposed on it, as referred to in the summons notice, in contravention of what

is provided in article 80 of the Credit Unions Law and, therefore, the cause for revocation

provided for in fraction III, of article 97 of the aforementioned law is met.

Finally,

regarding what was stated by said Union in the allegation set forth " IN FOURTH PLACE " in the

writing presented before this Commission on March 2, 2016, referred to in subsection e) raised,

it should be noted that it is unfounded because said Union seeks to benefit from an irregular act

committed and admitted by the Entity itself, namely, having registered past-due portfolio as current, under the argument that " it was due only to an accounting error ".

In effect, said Union alleges that " the Past-Due Portfolio registered as Current Portfolio was

registered in the accounting on the same day that the acts or contracts were carried out that meant

variation in the assets or liabilities of the union ... " , however, attending to such consideration would lead to

the absurdity of validating to the benefit of said Company an act per se irregular, given that the same is

in contravention of what is provided in paragraph 45 of Criterion B-4 Credit Portfolio of Series B,

Criteria relating to the concepts that make up the financial statements, of Annex 4, to which article 6

of the Provisions refers, in relation to article 65 of the Credit Unions Law.

Thus, in view of the general principle of law that states " No one can benefit from their own infringement ",

this Decentralized Body concludes that the improper registration of past-due portfolio as current cannot

operate to the benefit of said Entity for the purposes of disproving the cause for revocation for which it was

summoned, because giving heed to what was proposed by said Company would lead this Commission to the absurdity of

validating and giving positive effects to an irregular registration of past-due portfolio as current, in

contravention of what is provided in paragraph 45 of Criterion B-4 Credit Portfolio of Series B, Criteria

relating to the concepts that make up the financial statements, of Annex 4, to which article 6

of the Provisions refers, in relation to article 65 of the Credit Unions Law.

In this sense, it should be noted that the obligation established in article 65 of the Credit Unions

Law incumbent on societies authorized to operate as Credit Unions,

consisting of the duty to register in their accounting any act or contract that signifies variation in their

assets or liabilities, can only be fulfilled when such registration is correctly recorded, that is,

in accordance with and in observance of the legal and accounting provisions that are applicable, because otherwise one would reach the absurdity of considering such obligation fulfilled based on irregular records, thus bypassing compliance with the corresponding regulatory framework, which undoubtedly could

mean a detriment to the stability of the financial system as a whole.

Thus, it is confirmed that said Union omitted to register in its accounting the outstanding balance of various

borrowers as past-due portfolio, because their amortizations had not been fully paid according to the

originally agreed terms, as referred to in the summons notice, in contravention of what is provided

in article 65 of the Credit Unions Law and, therefore, the cause for revocation

provided for in fraction VI, of article 97 of the aforementioned legal order is met.

For all the above, as a conclusion it is affirmed that notice 212/165364/2016 of January 20,

2016, in no way contravenes what is provided in articles 14 and 16 of the Political Constitution of the

United Mexican States, given that it was legally issued, stating the applicable legal grounds

for the revocation process that gives rise to the resolution and exposing the reasons by virtue of

which said summons was issued, as has been explained.

SIXTH.- In attention to the content of the documents referred to in the background section of the

present resolution, and especially to the summons notice referred to, as well as to the statements

expressed by said Company in the writing presented before this Commission on March 2, 2016, it is determined

that the causes for revocation for which said Entity was summoned persist, for the following reasons:

a) As referred to in the summons notice, UCSJ presented a net capital that is lower

than the sum of the capital requirements for each type of risk, as was verified in the review

carried out on the " Regulatory Report R21-A-2111 Capitalization Requirements for Credit Risk " with

figures as of June 30, 2014, presented by said Entity itself, failing to comply with what is provided in

article 77 of the General Provisions applicable to general warehouses, exchange houses,

credit unions and multiple-object financial societies regulated, in relation to what

is provided in the first and second paragraphs of article 48 of the Credit Unions Law.

b) As established in the summons notice, UCSJ did not comply with the minimum

corrective measures dictated to it, which is confirmed by the fact that through notice

311- 12288/2015 of August 28, 2015, it was communicated that the capital restoration plan

presented by said Union was not approved, based on what is provided in article 80, fraction I, subsection b), of the

Credit Unions Law and in view of the reasons exposed therein, so said Entity departs from what is

provided in article 80 of the Credit Unions Law.

c) As pointed out in the summons notice, UCSJ did not register in its accounting the outstanding

balance of borrowers as past-due portfolio, because their amortizations had not been fully paid

according to the originally agreed terms, but as current portfolio, in contravention of what is provided

in paragraph 45 of Criterion B-4 Credit Portfolio of Series B, Criteria relating to the concepts that

make up the financial statements, of Annex 4, to which article 6 of the Provisions of

general applicability to general warehouses, exchange houses, credit unions and

multiple-object financial societies regulated refers, in relation to article 65 of the Credit Unions

Law.

In addition to the above, it is evident that there is no evidence to be weighed, given that UCSJ did not

accompany any element of conviction by virtue of which it intended to support the statements and

considerations set forth in the writing of March 2, 2016, notwithstanding that, as has been referred to

previously, it was presented late, that is, outside the deadline granted for the

exercise of its right to be heard, in terms of what is provided in articles 97 and 110, fraction I, of the

Credit Unions Law, as well as 62 of the Regulation of Supervision of the National Banking and

Securities Commission.

For the above, said Decentralized Body concludes that the causes for revocation

provided for in fractions II, III and VI of article 97 of the Credit Unions Law are met, which are hereby transcribed:

" Article 97.- The 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 unions,

in the following cases:

[ ... ]

II . If the union does not comply with the capitalization requirements established in accordance with what

is provided by article 48 of this Law and the provisions to which said provision refers;

III . If the union in question does not comply with any of the minimum corrective measures

referred to in article 80 of this Law; does not comply with more than one additional special corrective measure

referred to in said article or, alternatively, repeatedly fails to comply with an

additional special corrective measure;

VI. When, for causes attributable to the union, the same day

in which acts or contracts are carried out that signify variation in the assets or liabilities

of the union, or imply direct or contingent obligation;

[ ... ] "

Based on the above, the National Banking and Securities Commission, prior 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 articles 97, fractions II, III and VI of the Credit Unions

Law and 12, fraction V, of the Law of the National Banking and Securities Commission; and in accordance with the

Twelfth Agreement adopted by the Board of Directors of said Commission in its extraordinary session

held on April 29, 2016, and the considerations that were expressed in the present

Resolution, the authorization to operate as a Credit Union granted to Union de Credito

del Sur de Jalisco, S.A. de C.V., through notice 601-II-DA-b-5317, of February 22, 1994, is revoked.

SECOND.- From the date of notification of this resolution, Union de Credito del Sur de Jalisco,

S.A. de C.V., is unable to carry out operations and will be placed in a state

dissolution and liquidation, without the need for the agreement of the shareholders' assembly of said Company, in

conformity with what is provided in article 99 of the Credit Unions Law.

THIRD.- Based on what is provided in articles 78 of the Credit Unions Law and 19 of the

Law of the National Banking and Securities Commission, Union de Credito del Sur de Jalisco, S.A. de C.V.

must demonstrate before this Commission, within a period of 60 business days following the publication of the

present resolution in the Official Gazette of the Federation, that the appointment of the corresponding liquidator

was carried out in accordance with what is established in article 100, fraction I, of the Law cited

first; in case of failure to do so, this Decentralized Body will promote before the competent judicial authority to appoint the liquidator and if it finds impossibility to carry out said liquidation, to order the cancellation of its registration in the corresponding Public Commerce Registry, in accordance with what is established

in articles 100, fraction II and 102, of the Credit Unions Law.

FOURTH.- This Resolution is notified to Union de Credito del Sur de Jalisco, S.A. de C.V.

FIFTH.- Based on what is provided in article 99 of the Credit Unions Law, it is registered

in the corresponding Public Commerce Registry and published in the Official Gazette of the Federation the

present Notice.

SIXTH.- 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 Regulation 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 the Sixteenth Agreement 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, Angel Jonathan

García Romo, José Luis García González, Luis Antonio Rodríguez Rodríguez, Juan Carlos Macías Luna,

Alfredo Omar Morlan Fernández, José Alberto Jiménez Rosales, Rogelio García Martínez, Saúl Hernández

Pérez, Alberto Erick Méndez Medina, Rosa Cristina Ávalos Gutiérrez, Selene Saucedo García and Tania Patricia

Morales Reyes, the charge to notify, jointly or separately, the present notice by which compliance is given to the agreement adopted by the Board of Directors of said Commission.

The foregoing is made known by the President of the National Banking and Securities Commission, in

conformity with what is provided in articles 16, fraction VI, and penultimate paragraph, of the Law of the Commission

National Banking and Securities Commission and 12 of the Internal Regulation of the National Banking and Securities Commission,

as well as in terms of the Fifteenth Agreement 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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