Regulatory Alerts2016-04-22 | DOF 5434247Added
Resolution modifying general provisions applicable to popular savings and credit entities, integration organisms, community financial societies and rural financial integration organisms under the Popular Savings and Credit Law
The National Banking and Securities Commission modifies general provisions to establish a regulatory capital framework and corrective measures for Popular Financial Societies. It defines net capital composition, classifies societies into four categories based on capitalization levels (131%, 100-131%, 56-100%, and below 56%), and mandates minimum corrective actions for categories 2 through 4, including capital conservation plans and restrictions on dividend payments and executive remuneration.
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DOF: 22/04/2016
RESOLUTION modifying the general provisions applicable to popular savings and credit entities, integration organisms, community financial societies and rural financial integration organisms, referred to in the Popular Savings and Credit Law.
At the margin a seal with the National Coat of Arms, which says: United Mexican States.- Ministry of Finance and Public Credit.- National Banking and Securities Commission.
The National Banking and Securities Commission, with the agreement of its Board of Directors, based on
what is provided in articles 46 Bis, first and fifth paragraphs, 73, first and second paragraphs, 116, fraction VI
of the Popular Savings and Credit Law; 4, fractions XI, XXXVI and XXXVIII, 16, fraction I and 19 of the Law of the
National Banking and Securities Commission, and
CONSIDERING
That it is indispensable to adjust the definition of regulatory capital currently applicable to popular
financial societies to strengthen their solvency and in consistency with what is established in the framework of
Basel
II, providing for the way in which their net capital will be integrated, and
That it is also convenient
to incorporate a regime of corrective measures applicable to the
popular financial societies, correlated with the level of capitalization they have, in order to
detect
in a timely manner shortfalls in their capital and dictate the measures that allow them to restore said capital and
thus continue promoting the strengthening of such financial entities, has resolved to issue the following:
RESOLUTION MODIFYING THE GENERAL PROVISIONS APPLICABLE TO THE
POPULAR SAVINGS AND CREDIT ENTITIES, INTEGRATION ORGANISMS, COMMUNITY
FINANCIAL SOCIETIES AND RURAL FINANCIAL INTEGRATION ORGANISMS, TO WHICH THE
POPULAR SAVINGS AND CREDIT LAW REFERS
SINGLE.- Articles 23, fraction I, subsection q) and 24, fraction XI; are REFORMED; Article
1, with fractions XLVIII to L, with the remaining fractions being shifted in their order and as appropriate; articles
67, fraction I, subsection b) with a second paragraph; 102, fraction I, subsection b) with a second paragraph;
151, fraction I, subsection b) with a second paragraph; to Title Four, a Chapter III Bis to be called "On the
integration of net capital" which comprises articles 205 Bis and 205 Bis 1 and
a Chapter III Bis 1 to
be called "On corrective measures" which is integrated with Sections First to be called
"Categories according to the Capitalization Level of Popular Financial Societies", Second to
be called "On Corrective Measures", Third to be called "On Minimum Corrective Measures" and
Fourth to be called "On Additional Special Corrective Measures" and which comprise articles
205 Bis 2 to 205 Bis 14; 335 with fractions IX and X, with the remaining fractions being shifted in their order and
as appropriate, and Annexes V, W and X, and Articles 23, fraction IV, subsection e), 47, 69, 104
and 153, of the "General provisions applicable to popular savings and credit entities,
integration organisms, community financial societies and rural financial integration organisms,
to which the Popular Savings and Credit Law refers", published in the Official Gazette of the Federation on December 18
of 2006, updated with the modifications published in said dissemination organ on January 18
and August 11, 2008, December 16, 2010, December 18, 2012 and January 12, February 6, April 2,
September 22 and October 29, 2015, January 7 and February 2, 2016, to read as follows:
"TITLES FIRST TO THIRD
...
TITLE FOUR
...
Chapters I to III
...
Chapter III Bis
On the integration of net capital
Chapter III Bis 1
On corrective measures
First Section
Categories according to the Capitalization Level of Popular Financial Societies
Second Section
On Corrective Measures
Third Section
On Minimum Corrective Measures
Fourth Section
On Additional Special Corrective Measures
Chapters IV to IX
...
TITLES FIFTH TO NINTH
...
ANNEXES A to U
...
ANNEX V
Requirements for subordinated obligations that form part of basic capital.
ANNEX W
Requirements that investments in auxiliary, complementary or real estate service companies
must meet to be exempt from deduction from net capital.
ANNEX X
Requirements for subordinated obligations that form part of
complementary capital. "
" Article 1.- ...
I. to XLVII.
...
XLVIII.
Corrective Measures, to Minimum Corrective Measures and to Additional Special Corrective Measures, jointly.
XLIX.
Additional Special Corrective Measures, to the measures that the Commission is empowered to
order Popular Financial Societies in terms of what is provided in articles
73 and 74 of the Law, as well as by these provisions.
L.
Minimum Corrective Measures, to the measures that the Commission must apply in accordance with what is
provided in articles 73 and 74 of the Law, as well as by these provisions.
LI. to LXXXII.
... "
" Article 23.- ...
I.
...
a) to p)
...
q)
Make investments in the share capital of the Federation to which they are affiliated.
r) to v) ...
II. and III. ...
IV. ...
a) to d)
...
e) Repealed.
f) to j)
...
Article 24.- ...
I. to X.
...
XI.
Receipt of loans and credits from national or foreign credit institutions, public trusts and organisms and international financial institutions, from their national and foreign suppliers, guarantors, insurers and pension fund administrators, as well as from foreign financial institutions. "
" Article 47.- Repealed. "
" Article 67.- ...
I.
...
...
a)
...
b)
...
Without prejudice to what is established in the previous paragraph, operations subject to credit risk
with or on behalf of development banking institutions in which, in accordance with their respective
organic laws, the Federal Government responds at all times for said operations, will have
a credit risk weighting of zero percent.
c)
...
...
II. and III.
...
... "
" Article 69.- Repealed. "
" Article 102.- ...
I.
...
...
a)
...
b)
...
Without prejudice to what is established in the previous paragraph, operations subject to credit risk
with or on behalf of development banking institutions in which, in accordance with their respective
organic laws, the Federal Government responds at all times for said operations, will have
a credit risk weighting of zero percent.
c)
...
...
II. and III.
...
... "
" Article 104.- Repealed. "
" Article 151.- ...
I.
...
...
a)
...
b)
...
Without prejudice to what is established in the previous paragraph, operations subject to credit risk
with or on behalf of development banking institutions in which, in accordance with their respective
organic laws, the Federal Government responds at all times for said operations, will have
a credit risk weighting of zero percent.
c)
...
...
II. and III.
...
... "
" Article 153.- Repealed. "
" Chapter III Bis
On the integration of net capital
Article 205 Bis.- The net capital of Popular Financial Societies will be composed of a
basic part and a complementary part, as provided in this chapter. The basic part will be
integrated as follows:
I.
Accounting capital.
Regarding Popular Financial Societies with Operations Level IV, additionally
they may consider as part of the basic capital the subordinated obligations of mandatory conversion that meet the requirements established in Annex V of these
provisions.
LESS:
II.
If applicable, investments in any debt instrument whose payment by the issuer or
debtor, as the case may be, having agreed to do so, can only be made after covering
other liabilities, among which are included subordinated obligations issued by
other financial entities.
III.
If applicable, investments in securities referenced to indices of securities that in turn include
investments in the capital of Popular Financial Societies, as well as in the capital of the entities
referred to in the following fraction IV, in the proportion that the shares issued by the
respective society or entity represent in the indices themselves. In all cases, long positions may be
considered net of short positions, provided that they refer to the same underlying exposure.
IV.
Investments in the capital of retirement fund administrators and investment fund operating societies,
provided that these are made in accordance with article 23 of these
provisions.
V.
If applicable, investments, including valuation effects by the method that corresponds, in
companies that provide them with auxiliary, complementary or real estate services, that do not
meet the requirements provided for in Annex W of these provisions.
VI.
If applicable, investments, including valuation effects by the method that corresponds, in
the capital of companies related to the Popular Financial Society in terms of the
articles 35, 35 Bis and 35 Bis 1 of the Law.
VII.
If applicable, investments in investment fund shares that do not correspond to fixed capital,
will be disaggregated into their various individual positions, considering the participation that the
Popular Financial Society has in said investment funds. The part of the investment fund invested
in debt instruments will count, as appropriate, in accordance with the risk capitalization framework
of credit risk. The share positions that individually are subject to deduction from
capital, will be subtracted from capital and the remaining ones, even though they are not subject to credit risk,
will have a credit risk weighting of 250%.
VIII.
Preventive reserves pending to be constituted, as well as those constituted charged to
accounting accounts that do not form part of the results or accounting capital items.
IX.
Financing and any type of contribution on an onerous basis, including their accessories, whose
resources are destined for the acquisition of shares of the controlling society of the financial group,
of the other financial entities that are part of the group to which, if applicable, the Popular Financial
Society belongs.
X.
Financing and any type of contribution on an onerous basis, including their accessories, whose
resources, directly or indirectly, are destined for the acquisition of partnership shares or titles
representative of the capital of the Popular Financial Society itself that provides the resources.
XI.
Operations carried out in contravention of applicable regulations.
XII.
Items that are accounted for in the assets of the Popular Financial Society as intangibles or
that, if applicable, imply the deferral of expenses or costs in the capital of the Popular Financial
Society, such as:
a)
Intangibles of any type including goodwill, and
b)
Any item except for fixed assets and prepayments of less than one year,
that represent expenditures or expenses whose recognition in accounting capital is deferred in
time.
All these concepts will be subtracted net of their corresponding amortizations.
XIII.
Liquidity loans granted to other Popular Financial Societies based on what is
established in article 36, fraction I, subsection h), of the Law.
XIV.
Deferred active taxes corresponding to the profit tax and the participation of
workers in deferred profits.
XV.
Investments that in contravention of applicable laws they make in the share capital of
societies other than the Federations, retirement fund administrators, societies
of
investment specialized in retirement funds, investment fund operating societies,
auxiliary, complementary or real estate service companies or multiple-object financial societies.
In all cases, the basic part referred to in this article cannot be less than 50 percent
of net capital.
Article 205 Bis 1.- The complementary part of the net capital of Popular Financial Societies will be
integrated by:
I.
General preventive reserves constituted for credits with zero days of delinquency and that have not
been considered as problematic, up to an amount that does not exceed 1.25 percent
of risk-weighted assets.
II.
Regarding Popular Financial Societies with Operations Level IV, subordinated obligations
non-convertible or of voluntary conversion, provided that they comply with what is
established in Annex X of these provisions and adhere to the following:
a)
Minimum term of 10 years, in case they are not of mandatory conversion;
b)
The nominal value will be paid at maturity of the instruments;
c)
Not having specific guarantees by the issuer, and
d)
In the instrument's issuance deed, it is provided to defer or cancel the payment of interest and, if applicable, of principal.
Chapter III Bis 1
On corrective measures
First Section
Categories according to the Capitalization Level of Popular Financial Societies
Article 205 Bis 2.- The Auxiliary Supervision Committee will classify Popular Financial Societies
into any of the categories referred to in article 205 Bis 3 of these provisions, based on
the Capitalization Level that these societies maintain, in accordance with the information that
they send monthly with figures at the close of each calendar month, in the terms that the committee
itself establishes.
Article 205 Bis 3.- The classification of Popular Financial Societies into categories will be carried
out in accordance with the following:
I.
Popular Financial Societies presenting a Capitalization Level equal to or greater than 131 percent
will be classified in category 1.
II.
Popular Financial Societies presenting a Capitalization Level equal to or greater than
100 percent and less than 131 percent will be classified in category 2.
III.
Popular Financial Societies presenting a Capitalization Level equal to or greater than
56 percent and less than 100 percent will be classified in category 3.
IV.
Popular Financial Societies presenting a Capitalization Level less than 56 percent will be classified
in category 4.
Article 205 Bis 4.- The Auxiliary Supervision Committee will make known the category in which Popular Financial
Societies have been classified, their modifications and the date to which the Capitalization Level used corresponds
to carry out the classification through its Internet page, within ten business days following the close of the month immediately following that to which the information corresponds. The Commission will publish on its Internet page, this same information once the Auxiliary Supervision Committee makes
it known to the public as provided in this article.
In the event that the Commission has carried out the verification of the Capitalization Level referred to in
these provisions, it must make known to the Auxiliary Supervision Committee the definitive computations,
adhering to the procedure provided in article 6 Bis, last paragraph of the Law of the National Banking
and Securities Commission.
Second Section
On Corrective Measures
Article 205 Bis 5.- The Commission must order the application of Minimum Corrective Measures
corresponding to the category in which each Popular Financial Society has been classified in accordance with what is provided in article 205 Bis 3 of these provisions.
The Commission may also order the application of Additional Special Corrective Measures.
The Auxiliary Supervision Committee and the Commission must verify that Popular Financial
Societies comply with the Corrective Measures that correspond to them.
Article 205 Bis 6.- The Commission must notify in writing to Popular Financial Societies
classified in categories 2 to 4, the category in which they have been classified by the Auxiliary Supervision
Committee, as well as the Minimum Corrective Measures and, if applicable, the Additional Special Corrective
Measures that they must observe and the terms and deadlines for their compliance provided in this chapter, as well as those Minimum Corrective Measures that by virtue of the modification in their classification cease to be applicable to them.
The notification writing referred to in the previous paragraph, must be sent by the Commission to the
Popular Financial Societies, within ten business days following the date on which the Auxiliary Supervision
Committee has disclosed the Capitalization Level in question. Said notification writing
must be made known to the Auxiliary Supervision Committee.
The Commission will not be obliged to notify a Popular Financial Society monthly its
classification, when it does not present variations with respect to the immediate previous period.
Article 205 Bis 7.- To Popular Financial Societies that have been classified in category
1, no Corrective Measure will be applicable.
Third Section
On Minimum Corrective Measures
Article 205 Bis 8.- To the Popular Financial Society that has been classified in category 2, the following Minimum Corrective Measures will be applicable:
I.
Inform its Board of Directors of the category in which it was classified within a period that should not
exceed 20 business days, counted from the date on which it receives the corresponding notification.
Likewise, it must inform its Board of Directors in a previously convened session, the
causes that motivated the deterioration in its Capitalization Level that led the Popular Financial Society
to be classified in that category, for which it must present a detailed report of
comprehensive evaluation of the causes of its financial situation, which it must also present to the
Commission, once presented to the board.
In the event that the Popular Financial Society in question is part of a financial group,
it must inform in writing its situation to the general manager and to the president of the board of
directors of the controlling society, within the previously stated deadline.
II.
Present to the Commission for its approval, a capital conservation plan, in which they must
indicate the measures to be implemented by the Popular Financial Society to conserve its capital,
in accordance with the following:
a)
The Popular Financial Society in question will calculate the difference between the level of
minimum capitalization required to be classified in category 1 and its capitalization level
as follows:
Difference in percentage points (pp): Max (0,131% - NICAP)
Where,
NICAP = Capitalization Level
Once the capital difference is obtained in accordance with the above, the Popular Financial Society
may only pay the concepts established in subsection b) below, until the sum of
said concepts does not exceed the amount resulting from applying to the balance of profits
of previous exercises to the date on which said difference is determined, the percentage that
corresponds according to the following table:
Capital conservation mechanism
Difference
Percentage to apply
More than 1.875 pp
0%
More than 1.25 pp and up to 1.875 pp
20%
More than 0.625 pp and up to 1.25 pp
40%
Up to 0.625 pp
60%
b)
Popular Financial Societies, in terms of the preceding subsection, may carry out the payment
of the following concepts:
Payment to shareholders of dividends from the Popular Financial Society, as well
as any mechanism or act that implies a transfer of patrimonial benefits
to them.
In the event that the Popular Financial Society in question belongs to a group
financial, the measure provided in this subsection will be applicable to the controlling society of the
financial group to which it belongs, as well as to financial entities or societies that
are part of said group.
What is stated in the previous paragraph will not be applicable regarding the payment of dividends that
financial entities or societies that are part of the group other than the
Popular Financial Society in question make, when said payment applies to
capitalization of the society itself.
Popular Financial Societies must provide in their bylaws what is
established in this subsection;
Share repurchase programs representative of the share capital of the Popular
Financial Society in question and, if belonging to a financial group, also
those of the controlling society of said group;
Payment of extraordinary remuneration to the general manager and to officials at the level
hierarchical below this.
This provision must be contained in the contracts and other documentation that regulate the
working conditions.
This measure is without prejudice to acquired labor rights in favor of persons
who may be affected. Likewise, this measure will not be applicable to
employees or personnel not contemplated in this subsection.
The capital conservation plan must result in an increase in its Capitalization Level,
so that the Popular Financial Society is located in category I. Said plan
must be presented within a period not greater than 20 business days counted from when the Popular
Financial Society receives the notification on the capitalization category that corresponds to it in
terms of article 205 Bis 6. The capital conservation plan must be approved by the
Board of Directors of the Popular Financial Society in question prior to its
presentation to the Commission.
In the event that the Commission resolves the feasibility of modifications to approve the capital
conservation plan, it must be presented again, for ratification, to the Board of
Directors of the Popular Financial Society in question, accrediting it thus to the
Commission.
The plan may contemplate a program of improvement in operational efficiency, rationalization of expenses and
increase in profitability, the making of contributions to share capital and limits to the
operations that the Popular Financial Society in question can carry out in compliance with
its corporate purpose, or to the risks derived from said operations.
The capital conservation plan must comprise, at least, the elements provided in the
present subsection.
The Commission shall resolve what corresponds regarding the capital conservation plan submitted to it, within a maximum period of 60 natural days counted from the date of its submission.
The foregoing, without prejudice to the fact that within the 50 natural days, the Commission may request the Popular Financial Society to make modifications it deems appropriate regarding the capital conservation plan project, with approval requiring the ratification of its Board of Directors.
III.
Refrain from carrying out operations whose execution would cause its Capitalization Level to fall below the required level in accordance with these provisions.
Article 205 Bis 9.- To the Popular Financial Society that has been classified in category 3, in addition to the Minimum Corrective Measures provided for in article 205 Bis 8 of these provisions, the following Minimum Corrective Measures shall apply:
I.
Submit to the Commission a capital restoration plan, under the terms provided for in fraction III of article 74 of the Savings and Credit Institutions Law.
II.
Suspend the payment to shareholders of dividends from the Popular Financial Society, as well as any mechanism or act that implies a transfer of patrimonial benefits to them. In the event that the Popular Financial Society in question belongs to a financial group, the measure provided for in this fraction shall apply to the controlling society of the group to which it belongs, as well as to the financial entities or societies that are part of said group.
The foregoing shall not apply regarding the payment of dividends made by financial entities or societies that are part of the group other than the Popular Financial Society in question, when such payment is applied to the capitalization of the Popular Financial Society.
Additionally, Popular Financial Societies must provide in their bylaws what is established in this fraction.
III.
Suspend share repurchase programs representing the social capital of the Popular Financial Society in question and, in the event of belonging to a financial group, also those of the controlling society of said group.
IV.
Defer or cancel, totally or partially, the payment of interest, and defer or cancel, totally or partially, the payment of principal or convert into shares in advance the subordinated obligations that are in circulation, up to the amount necessary to cover the capital shortfall.
This Minimum Corrective Measure shall apply to those subordinated obligations that, in terms of what is provided in the provisions, count as part of the net capital of Popular Financial Societies with Level IV Operations.
Likewise, Popular Financial Societies that issue the aforementioned subordinated obligations must include in the corresponding credit instruments, in the act of issuance, in the information prospectus, as well as in any other instrument that documents the issuance, that in the event that such society is classified in category 3, the measure determined by the Commission in accordance with the preceding paragraph shall apply, without such measure being a cause of default by the issuing society.
V.
Suspend the payment of compensations and additional extraordinary bonuses to the salary of the general director and officials of the two hierarchical levels below this, as well as not granting new compensations in the future for the general director and officials, until such time as the Popular Financial Society complies with the required capitalization levels. This last provision must be contained in the contracts and other documentation regulating working conditions.
The foregoing shall also apply regarding payments made to legal entities other than the Popular Financial Society in question, when such legal entities make payments to the officials of the Popular Financial Society.
These measures are without prejudice to the acquired labor rights in favor of persons who may be affected in accordance with the same.
VI.
Refrain from agreeing to increases in the amounts currently in effect in credits granted to persons considered as related in terms of article 35 of the Law.
VII.
Request authorization from the Commission to carry out new investments in non-financial assets or open branches.
Article 205 Bis 10.- The capital restoration plan must comprise, at least, the following elements:
I.
Clearly identify the sources of resources to increase its capital or reduce its assets subject to risk.
II.
Indicate the period in which the Popular Financial Society intends to reach a Capitalization Level equal to or greater than 100 percent, as well as equal to or greater than 131 percent.
III.
Present a calendar with the objectives that the Popular Financial Society would reach in each period. The calendar must contain the dates or stages in which the Popular Financial Society intends to carry out each of the necessary actions to restore capital.
IV.
Present a detailed list of the information that the Popular Financial Society must send periodically to the Auxiliary Supervision Committee that allows it to follow up on the compliance with the restoration plan.
Fourth Section
On Additional Special Corrective Measures
Article 205 Bis 11.- The Commission, through one or more written notifications, may order at any time the application of Additional Special Corrective Measures, taking into account the particular situation of the Popular Financial Society in question.
For the application of Additional Special Corrective Measures, the Commission will take into account the category in which the Popular Financial Society in question has been classified and may additionally consider the following elements:
I.
Its overall financial situation.
II.
Compliance with the regulatory framework.
III.
The trend of the Capitalization Level of the Popular Financial Society and the main indicators that reflect the degree of stability and solvency.
IV.
The quality of the accounting and financial information presented by the Popular Financial Society to the Commission, as well as compliance in the delivery of said information.
Article 205 Bis 12.- To Popular Financial Societies that have been classified in category 2, in addition to the Minimum Corrective Measures established in article 205 Bis 8 of these provisions, the Commission may order them to adopt one or more of the following Additional Special Corrective Measures:
I.
Define the concrete actions that must be carried out, in order to avoid deterioration in its Capitalization Level, for which the Popular Financial Society must prepare a detailed report containing a description of the manner and terms in which it will carry out the administration of total assets subject to risk, as well as, if applicable, the strategy it will follow to strengthen and stabilize its Capitalization Level at the level deemed adequate for the Society in accordance with its objectives and business strategy. The report referred to in this paragraph must be submitted to the Board of Directors of the Popular Financial Society, as well as to the Commission, no later than 20 business days following the notification of the Commission's letter requesting the preparation of the report referred to in this paragraph.
Popular Financial Societies must inform the Commission, at its request and with the frequency determined by the Commission itself, on the progress of the aforementioned actions.
II.
Hire the services of external auditors or other specialized third parties for the performance of special audits on specific issues. For this purpose, the Commission will determine the areas in which such audits must be carried out and their scope, as well as the deadlines for their execution. The result reports of these audits must be sent to the Commission within 10 business days following the expiration of the deadline determined by the Commission for such audits to be carried out.
In the procedures for the hiring of audit services referred to in this fraction, Popular Financial Societies must observe, at all times, what is provided for in Chapter VI of Title Fourth of these provisions, insofar as applicable. The services of external auditors that Popular Financial Societies hire in accordance with what is provided for in this fraction must have the favorable opinion of the Commission prior to the celebration of the service provision contract.
Article 205 Bis 13.- To Popular Financial Societies that have been classified in category 3, in addition to the Minimum Corrective Measures established in article 205 Bis 9 of these provisions, the Commission may order them to adopt one or more of the following Additional Special Corrective Measures:
I.
Refrain from agreeing to increases in salaries and benefits of officials and employees in general, excepting agreed salary reviews and respecting at all times acquired labor rights.
This provision must be contained in the contracts and other documentation regulating working conditions.
II.
Refrain from granting bonuses or additional or extraordinary compensations to the salary of its officials other than the general director and officials of the two hierarchical levels below this, whose granting is discretionary for the Popular Financial Society, respecting at all times acquired labor rights.
III.
Limit the celebration of new operations that, in the judgment of the Commission, could cause an increase in total assets subject to risk or provoke greater deterioration in its Capitalization Level.
IV.
Carry out the actions that prove necessary to counteract or minimize the effects of operations that the Popular Financial Society has carried out with persons who are part of the same Business Group to which, if applicable, it belongs, or with any third party, that imply a transfer of patrimonial benefits or resources that cause it financial detriment and that the Commission has detected in the exercise of its inspection and surveillance functions.
V.
Refrain from carrying out operations that the Commission determines with persons who are part of the same Business Group to which, if applicable, the Popular Financial Society belongs.
VI.
Reduce administrative and promotional expenses, as well as other expenses.
VII.
Invest at least 50% of the capture of new liabilities in government securities.
VIII.
Replace officials, board members, commissioners, or external auditors, for which the Popular Financial Society itself may appoint the persons who will occupy the respective positions. The foregoing is without prejudice to the powers of the Commission provided for in article 122 of the Law to determine the removal or suspension of board members, general directors, commissioners, directors, and managers and other officials who may obligate the Popular Financial Society with their signature.
The Commission will notify the Popular Financial Society in writing of the adoption of the Additional Special Corrective Measure, indicating the period in which it must inform in writing the names of the officials, board members, commissioners, or external auditors, who will replace the removed officials, board members, commissioners, or external auditors.
IX.
Carry out the necessary actions to reduce exposure to risks derived from the celebration of operations that significantly deviate from the usual policies and operation of the Popular Financial Society and that, in the judgment of the Commission, generate a high market risk.
Additionally, the Commission may order the Popular Financial Society to refrain from carrying out new operations that generate a high market risk.
X.
Modify the policies that the Popular Financial Society has established regarding interest rates to be paid on those deposits and liabilities whose yield is above the risk level that the Popular Financial Society usually assumes in such operations and that the Commission, in its inspection and surveillance functions, has detected. The foregoing, without prejudice to the sanctions that proceed in accordance with what is provided in the Law and other applicable provisions.
In the employment contracts that the societies celebrate, what is established in fractions I and II above must be expressly provided.
The measures referred to in fractions I and II above shall apply regarding payments made to legal entities other than the Society in question, when such legal entities make payments to the employees of the Popular Financial Society and shall be without prejudice to the acquired labor rights in favor of persons who may be affected in accordance with said fractions.
Article 205 Bis 14.- The application of this chapter as well as the Minimum Corrective Measures and Additional Special Corrective Measures is without prejudice to the powers attributed to the Commission and the Auxiliary Supervision Committee in the Law, including in an enunciative but not limiting manner, those indicated in articles 78, 120, and 122 of said Law.
The Auxiliary Supervision Committee will inform in writing to the Commission and the Savings Protection Committee within the first ten business days of each month, the name and circumstances of the Popular Financial Societies that have been classified in categories 3 and 4, as well as, if applicable, regarding the compliance that the Popular Financial Societies themselves are giving to the Minimum Corrective Measures and Additional Special Corrective Measures.
The foregoing, without prejudice to the fact that in accordance with what is provided for in article 126 of the Law, the non-compliance with the Corrective Measures referred to in these provisions, will be sanctioned in terms of what is provided for in said article.
" Article 335.- . . .
I. to VIII. . . .
IX.
Chapter III Bis of Title Fourth of these provisions.
X.
Chapter III Bis 1 of Title Fourth of these provisions.
XI. to XIX.
. . .
. . . "
TRANSITORY PROVISIONS
FIRST.- This Resolution will enter into force twelve months following its publication in the Official Journal of the Federation.
SECOND.- Popular financial societies and community financial societies within the period referred to in the First Transitory Article above must carry out the necessary corporate acts to provide in their bylaws and in the instruments representing their social capital what is established in articles 205 Bis 8, fraction II, subsection b), numeral 1 and 205 Bis 9, fraction II of this Resolution.
THIRD.- Popular financial societies and community financial societies must provide in the contracts they celebrate from the entry into force of this Resolution, as well as in the other related documentation, the restrictions indicated in article 205 Bis 9, fraction VI and 205 Bis 13, fraction I, as applicable.
FOURTH.- For the purposes of what is provided in article 205 Bis 9, fraction IV, the issuance of subordinated obligations that popular financial societies have issued prior to the entry into force of this Resolution, will be governed by the provisions in force at the time of their issuance.
Respectfully,
Mexico City, April 7, 2016. - The President of the National Banking and Securities Commission, Jaime González Aguadé. - Rubric.
ANNEX V
REQUIREMENTS OF SUBORDINATED OBLIGATIONS THAT FORM PART OF BASIC CAPITAL
Popular Financial Societies with Level IV Operations that have issued subordinated obligations and intend to consider them in basic capital must request authorization from the Commission.
For such purposes, such societies must prove that they meet the conditions contained in this annex.
I.
The subordinated obligations must be issued by the Popular Financial Society and their amount covered by the holder.
II.
Their payment must be subordinated to the prior payment of deposits and debts, including the preferred subordinated debt of the Popular Financial Society.
III.
They may not be covered by any specific guarantee of the issuer nor backed by any of the related persons referred to in article 35 of the Law, nor must they contain any other agreement that legally or economically improves the payment priority in relation to the creditors of the Popular Financial Society.
IV.
They will not have a maturity date or may be of mandatory conversion into ordinary shares.
Likewise, they will not have characteristics that increase their yield rate nor will they have other incentives for them to be paid in advance.
Notwithstanding the foregoing, an early payment option may be provided only at the initiative of the issuer, after five years have elapsed, when all the following conditions are met:
a)
To exercise the early payment option, the Popular Financial Society must specify it in its authorization request;
b)
The Popular Financial Society must not have previously granted, recognized, or generated an expectation of right to early payment, or offered its possible exercise, and
c)
The Popular Financial Society may not exercise the early payment option unless:
It demonstrates that once the payment is made, it will have a Capitalization Level equal to or greater than 131 percent, or
It replaces the instrument with subordinated obligations that at least meet the conditions provided for in this annex, without such replacement causing harm to the financial situation of the Popular Financial Society.
Without prejudice to the foregoing, Popular Financial Societies may provide that subordinated obligations have an early payment option at any time due to changes in fiscal treatment, or regulatory, as far as the computation of these in the net capital of Popular Financial Societies is concerned, provided that at the time of issuance of the instrument, they have no knowledge that such change will occur. In any case, Popular Financial Societies must adhere to what is established in subsections a) and b) of this fraction.
V.
The Popular Financial Society must not create expectations in the markets that the authorization to exercise early payment will be obtained.
VI.
Regarding payment:
a)
Popular Financial Societies must have the possibility to cancel the payment of yields, extinguishing the obligation on their part for said concept, when they are located in any of categories 2 to 4 in accordance with the classification provided in these provisions or when as a consequence of carrying out such payments, the Popular Financial Society comes to be located in any of the mentioned categories. Such cancellation will not be considered an event of default.
b)
The investor must not have the right to demand future payments in advance.
c)
It must have been previously stipulated in the act of issuance and in the corresponding instruments, as well as in the information prospectus and in any other instrument that documents the issuance that:
Such instruments will convert into ordinary shares of the Popular Financial Society itself.
Regarding such instruments, the remission or forgiveness of the debt and its accessories in favor of the Popular Financial Society will operate to extinguish its obligation and the correlative right of the holder of the instrument to obtain its amount.
In the event that the causes for conversion and remission or forgiveness provided for in fraction XI of this annex occur, the corresponding measures will apply, in the first place, to instruments that form part of basic capital and, if necessary, subsequently to those that form part of complementary capital.
The conversion and remission or forgiveness described will operate as the causes for conversion or extinction or devaluation of the instruments occur, in accordance with what is provided for in the following fraction XI.
In any case, the cancellation of yields regarding the instruments referred to in this annex implies, in turn, the restriction on the payment of dividends for common share holders, so that Popular Financial Societies will not be subject to additional restrictions for carrying out the cancellation referred to in this fraction.
The conversion, as well as the remission or forgiveness indicated in this subsection, must be carried out pro rata with respect to all instruments of the same nature that count in basic capital, and the Popular Financial Society must, at the time of making the respective issuance, provide in the document referred to in subsection c) of this fraction the order in which the cited measures will be applied for each type of instrument.
VII.
In addition to what is provided for in the preceding fraction, the payment of yields, as the case may be, will be subject to the following:
a)
It must be carried out exclusively from accumulated net profits.
b)
It must not be determined based on the credit quality of the Popular Financial Society.
VIII.
The amount of the issuance must not be paid with direct or indirect financing by the Popular Financial Society.
IX.
They may not be acquired by the Popular Financial Society itself, even if the law so allows, or by any person in whom the Popular Financial Society exercises control or has significant influence.
X.
They will not have clauses that require the issuer to compensate investors, in the event that the general assembly of shareholders approves the issuance of a new instrument with better conditions for the investor.
XI.
Popular Financial Societies must include in their bylaws, in the act of issuance and in the corresponding instruments, as well as in the information prospectus and in any other instrument that documents the issuance, a clause that establishes, any of the options contained in subsections a) and b) below, for each of the instruments according to their nature:
a)
The conversion of such instruments or instruments into ordinary shares of the Popular Financial Society itself, without this fact being considered as an event of default, when
the Commission notifies the Popular Financial Society that it has incurred any of the causes referred to in fractions V, IX, or XII of Article 37 of the Law and within the period established by the Commission itself, said Society does not remedy the facts or does not repay the capital.
For the purposes of the provisions of this subsection, Popular Financial Societies shall proceed with the conversion, on the next business day after the period determined by the Commission has concluded.
In any case, the conversion into shares referred to in this subsection shall be definitive, so clauses providing for restitution or granting any premium to holders of said titles or instruments may not be included.
Likewise, the bylaws, the issuance deed, and the corresponding titles, as well as the information prospectus and any other instrument documenting the issuance, must provide for the conversion mechanism.
b)
The remission or total forgiveness of the debt and its accessories, or partial forgiveness in a determined or determinable proportion according to the last paragraph of this subsection, without this fact being considered as an event of default, when the Commission notifies the Popular Financial Society that it has incurred any of the causes referred to in fractions V, IX, or XII of Article 37 of the Law and within the period established by the Commission itself, said Popular Financial Society does not remedy the facts or does not repay the capital.
For the purposes of the provisions of this subsection, Popular Financial Societies shall proceed with the execution of the remission or forgiveness clause, on the next business day after the period determined by the Commission has concluded.
Regarding this, it may be agreed that such remission or forgiveness will take effect on the principal and interest, totally or partially, from the moment the assumed condition occurs, or from some prior moment. The foregoing, with the aim that such remission or forgiveness is applied to amounts that are not yet liquid or due, or to those that have been liquid and due but have not been paid by the Popular Financial Society.
In the event that the Popular Financial Society stipulates mechanisms to grant any premium to holders whose titles have been extinguished totally or partially, subsequent to the respective remission or forgiveness, they must specify that such mechanisms can only be implemented when the issuing Popular Financial Society is classified at least in category 2. In this case, the issuance deed and the corresponding titles, as well as the information prospectus and any other instrument documenting the issuance, must provide for the mechanism to grant the premium and the deadline for doing so.
This is understood to mean that the premium can only consist in the delivery of ordinary shares of the Popular Financial Society itself.
Likewise, the issuance deed and the corresponding titles, as well as the information prospectus and any other instrument documenting the issuance, must provide that the holder will proceed with the total remission or forgiveness of the debt and its accessories, or partial, in the latter case, in a determined or determinable proportion. Each time the described assumption occurs, the partial remission or forgiveness of the debt and its accessories will operate again, under the terms described in this same subsection.
XII.
The Societies must conspicuously record in the relevant issuance deed, in the information prospectus, and in any type of advertising, as well as in the titles themselves that are issued, the classification of the Society in any of the categories and the application of the Corrective Measures that, if applicable, correspond to it in accordance with the provisions of these regulations, as an exception to an event of default.
ANNEX W
REQUIREMENTS THAT INVESTMENTS IN AUXILIARY, COMPLEMENTARY, OR REAL ESTATE SERVICE COMPANIES MUST MEET TO BE EXEMPT FROM DEDUCTION OF NET CAPITAL
A. Requirements for the authorization request
Popular Financial Societies, in order to be exempt from deductions to their net capital for investments they make in securities representing the share capital of auxiliary, complementary, or real estate service societies, must present the following information and documentation to the Commission:
I.
Request, in free format, signed by its legal representative, accompanied by documents accrediting its personality;
II.
Certified copy of the bylaws of the auxiliary, complementary, or real estate service society in which the investment has been made. In the case of auxiliary, complementary, or real estate service societies that have not yet been constituted, the draft bylaws must be presented;
III.
List of shareholders of the auxiliary, complementary, or real estate service society in question and the shareholding percentage of each;
IV.
Data of the general manager or equivalent, as well as of the executives of the two immediate lower hierarchies from this position in the auxiliary, complementary, or real estate service society in which it intends to invest;
V.
General operating plan of the auxiliary, complementary, or real estate service society. In the case of auxiliary or complementary service societies, the security and confidentiality mechanisms required must be included, depending on the type of services they will provide to Popular Financial Societies.
In any case, the general operating plan must provide for a contingency plan so that, in the event of operational problems, the correct functioning of the Popular Financial Societies investing in its share capital is not affected;
VI.
Certified copy by the secretary of the board of directors of the Popular Financial Society, of the agreement adopted by the corresponding governing body, in which the approval regarding the investment in the auxiliary, complementary, or real estate service society in question is recorded;
VII.
Amount of the investment and the percentage that its participation in the share capital of the auxiliary, complementary, or real estate service society in question represents, specifying, if applicable, the series, class, and nominal value of the shares;
VIII.
Location where the main seat of administration of the auxiliary, complementary, or real estate service society is located and, if applicable, the other offices, and
IX.
Draft contracts in which the rights and obligations of the Popular Financial Society, as well as of the auxiliary, complementary, or real estate service society in question, are stipulated.
B. Regarding the granting of the authorization
The Commission will only authorize the exemption referred to in this annex to Popular Financial Societies whose investment is in auxiliary or complementary service societies in their administration or in the realization of their object, or real estate societies that are owners or administrators of properties destined exclusively to their offices, constituted under Mexican laws, provided that these limit the liability of their partners or shareholders to the payment of their contributions or shares and that at all times:
I.
The Popular Financial Society notifies the Commission in the event that the aforementioned auxiliary, complementary, or real estate service companies intend to merge or spin off, for which they must indicate, if applicable, the terms and conditions under which they will transfer their assets, liabilities, and capital, and must present the draft minutes of the assembly in which the approval of their governing body is recorded, regarding the corporate act in question, in addition to the legal instruments documenting them and the financial statements approved by the competent bodies.
Popular Financial Societies must also indicate the effects that the merger or spin-off would have on the general operating plan of the aforementioned auxiliary, complementary, or real estate service societies, and on the Popular Financial Societies themselves participating in their capital;
II.
The Popular Financial Society demonstrates to the Commission that:
a)
The auxiliary, complementary, or real estate service societies do not invest in securities representing the share capital of Popular Financial Societies;
b)
The amount of the liabilities of the auxiliary, complementary, or real estate service society with the Popular Financial Societies participating in its capital is not higher than its book capital.
c)
In the case of real estate societies, they do not maintain credits for the acquisition of real estate;
C. Regarding the revocation of the authorization
The Commission may revoke the exemption referred to in this annex, when any of the following circumstances occur:
I.
Repeated failure to comply with the provisions of this annex;
II.
The operational or financial stability of the Popular Financial Society is seriously endangered by the relationship with said auxiliary, complementary, or real estate service societies.
III.
In the case of real estate societies, they acquire, administer, or take in financial lease real estate not destined to offices of the Popular Financial Societies or do not begin construction works on their owned land, within a period not exceeding one year from the date of acquisition of the land.
ANNEX X
REQUIREMENTS OF SUBORDINATED OBLIGATIONS THAT FORM PART OF COMPLEMENTARY CAPITAL
Popular Financial Societies with Level IV Operations that have issued subordinate obligations and intend to consider them in the complementary part of the capital must request authorization from the Commission. For such purposes, they must prove that they meet the conditions contained in this annex.
I.
The subordinate obligations must be issued by the Popular Financial Society and their amount covered by the holder.
II.
Their payment must be subordinated to the prior payment of deposits and debts in general.
III.
They may not be covered by any specific guarantee of the issuer nor backed by any of the related persons referred to in Article 35 of the Law, nor must they contain any other agreement that legally or economically improves the payment precedence in relation to the depositors and creditors in general of the Popular Financial Society.
IV.
Their original term must be at least 5 years and they must not grant an increase in their yield rate or have other incentives to be paid early.
Notwithstanding the foregoing, an early payment option may be provided only at the initiative of the issuer, after five years have elapsed, provided that all the following conditions are met:
a)
To exercise the early payment option, the Popular Financial Society must specify it in its authorization request;
b)
The Popular Financial Society must not have previously granted, recognized, or generated an expectation of right to early payment, or offered its possible exercise, and
c)
The Popular Financial Society may not exercise the early payment option unless:
It demonstrates that once the payment is made, it will have a Capitalization Level equal to or greater than 131 percent, or
It replaces the instrument with subordinate obligations that at least meet the conditions provided in this annex, without such replacement causing harm to the financial situation of the Popular Financial Society.
Without prejudice to the foregoing, Popular Financial Societies may provide that subordinate obligations have an early payment option at any time due to changes in fiscal treatment, or regulatory, as far as the computation of these in the Net Capital of Popular Financial Societies is concerned, provided that at the time of issuance of the instrument, they do not have knowledge that the cited change will take place. In any case, Popular Financial Societies must adhere to what is established in subsections a) and b) of this section.
V.
Regarding payment,
a)
The investor must not have the right to demand future payments in advance.
b)
It must have been previously stipulated in the issuance deed and in the corresponding titles, as well as in the information prospectus and in any other instrument documenting the issuance that:
Such titles will convert into ordinary shares of the Popular Financial Society itself.
Regarding such titles, the remission or forgiveness of the debt and its accessories will operate in favor of the Popular Financial Society to extinguish its obligation and the correlative right of the title holder to obtain its amount.
In the event that the causes for conversion and remission or forgiveness provided for in fraction IX of this annex occur, the corresponding measures will be applied, if necessary, after having carried out the conversion and forgiveness provided for in section XI of Annex T of these regulations, regarding the instruments that form part of basic capital.
The conversion as well as the remission or forgiveness indicated in this section must be carried out pro rata with respect to all titles of the same nature that count in the complementary capital, and the Popular Financial Society must, at the time of the respective issuance, provide in the documents referred to in item 2 of subsection a) and in item 2 of subsection b) of this section the order in which the cited measures will be applied for each type of title.
VI.
The payment of interest must not be determined based on the credit quality of the Popular Financial Society.
VII.
The amount of the issuance must not be paid with direct or indirect financing by the Popular Financial Society itself.
VIII.
They may not be acquired by the Popular Financial Society itself, even if the law so allows, or by any person in whom the Popular Financial Society exercises control or has significant influence.
IX.
Popular Financial Societies must include in their bylaws, in the issuance deed and in the corresponding titles, as well as in the information prospectus and in any other instrument documenting the issuance, a clause that establishes one of the options contained in subsections a) and b) below, for each of the titles according to their nature:
a)
The conversion of said titles or instruments into ordinary shares of the Popular Financial Society itself without this fact being considered as an event of default, when the Commission notifies the Popular Financial Society that it has incurred any of the causes referred to in fractions V, IX, or XII of Article 37 of the Law and within the period established by the Commission itself, said Popular Financial Society does not remedy the facts or does not repay the capital.
For the purposes of the provisions of this item, Popular Financial Societies shall proceed with the conversion, on the next business day after the period referred to determined by the Commission has concluded.
In any case, the conversion into shares referred to in this subsection shall be definitive, so clauses providing for restitution or granting any compensation to holders of said titles or instruments may not be included.
Likewise, the bylaws, the issuance deed, and the corresponding titles, as well as the information prospectus and any other instrument documenting the issuance, must provide for the conversion mechanism. Each time the described assumption occurs, the conversion into ordinary shares will operate again, under the terms described.
The conversion provided for in this subsection must be carried out observing at all times the shareholding limits per person or group of persons, provided for in the applicable laws. For the purposes of the foregoing, the Popular Financial Society must, from the moment of issuance, establish the necessary mechanisms to ensure compliance with said limits.
b)
The total remission or forgiveness of the debt and its accessories, or partial in a determined or determinable proportion, in terms of the last paragraph of this subsection, without this fact being considered as an event of default, when the Commission notifies the Popular Financial Society that it has incurred any of the causes referred to in fractions V or IX of Article 37 of the Law and within the period established by the Commission itself, said Popular Financial Society does not remedy the facts or does not repay the capital.
For the purposes of the provisions of this item, Popular Financial Societies shall proceed with the execution of the remission or forgiveness clause, on the next business day after the period determined by the Commission has concluded.
Regarding this, it may be agreed that such remission or forgiveness will take effect on the principal and interest, totally or partially, from the moment the assumed condition occurs according to the first paragraph of this subsection, or from some prior moment. The foregoing, with the aim that such remission or forgiveness is applied to amounts that are not yet liquid or due, or to those that have been liquid and due but have not been paid by the Society.
In the event that the Popular Financial Society stipulates mechanisms to grant any premium to holders whose titles have been extinguished totally or partially subsequent to the respective remission or forgiveness, they must specify that such mechanisms can only be implemented when the issuing Popular Financial Society is classified at least in category 2 referred to in these regulations. In this case, the issuance deed and the corresponding titles, as well as the information prospectus and any other instrument documenting the issuance, must provide for the mechanism to grant the premium and the deadline for doing so.
This is understood to mean that the premium can only consist in the delivery of ordinary shares of the Popular Financial Society itself.
Likewise, the issuance deed and the corresponding titles, as well as the information prospectus and any other instrument documenting the issuance, must provide that the holder will proceed with the total remission or forgiveness of the debt and its accessories, or partial. Each time the described assumption occurs, the partial remission or forgiveness of the debt and its accessories will operate again, under the terms described.
X.
The Societies must conspicuously record in the relevant issuance deed, in the information prospectus, and in any type of advertising, as well as in the titles themselves that are issued, the classification of the Popular Financial Society in any of the capitalization categories and the application of the corrective measures that, if applicable, correspond to it in accordance with the provisions of these regulations, as an exception to an event of default.
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