Banking Board of Ecuador

RESOLUTION No. JB-2015-3503

THE BANKING BOARD

CONSIDERING:

THAT by Resolution No. JB-2015-3376 of April 22, 2015, the Banking Board resolved: "REJECT the claim contained in the review appeal filed; and, consequently, CONFIRM letter No. IRG-DAYEU-V-R-2014-901 of August 20, 2014.", fundamentally for the following considerations:

"(...)

THAT the second paragraph of the Third Transitional Provision of the Organic Monetary and Financial Code determines that the Banking Board will continue to act until it resolves all claims, appeals, and other administrative procedures it was handling on the date of entry into force of this Code, within a period of one hundred and eighty days, extendable at the discretion of the Monetary and Financial Policy and Regulation Board;

THAT through a communication received at the Superintendency of Banks on October 29, 2013, Mrs. Rosa Felicita Vera León filed a complaint against Banco Pichincha C.A., with the aim that the regulatory body order said institution to cancel the charge of the amount owed with Mastercard Credit Card No. 5189xxxxxxxx1819, related to a purchase at Buena Vista Social Club for the value of USD$ 380.14, in view of the fact that she did not authorize said expense;

THAT by letter No. IRG-DAYEU-V-R-2014-511 of May 27, 2014, lawyer Humberto Moya González, then Regional Intendant of Guayaquil, resolved the complaint of Mrs. Rosa Felicita Vera León favorably in the following terms: "(...) ORDER the controlled financial institution BANCO PICHINCHA C.A. to proceed to reverse from Mastercard Credit Card No. 5189230001731819, whose holder is Mrs. Rosa Felicita Vera León, the sum of US$ 381.14 (...)". In this line, through a document received at the regulatory body on June 10, 2014, lawyer María Elena Franco San Lucas, in her capacity as Judicial Attorney of Banco Pichincha C.A., filed an appeal for reconsideration of letter No. IRG-DAYEU-V-R-2014-511 of May 27, 2014. The order to "reverse" the values subject to the complaint was ratified with letter No. IRG-DAYEU-V-R-2014-901 of August 20, 2014. It must be highlighted that through this letter, the Regional Intendancy of Guayaquil only ordered the reversal of USD$180.00;

THAT through a document received at the Superintendency of Banks on August 29, 2014, Mr. Antonio Acosta Espinosa, Adjunct President of Banco Pichincha C.A., filed a review appeal before the Banking Board against letter No. IRG-DAYEU-V-R-2014-901 of August 20, 2014;

THAT according to the First Transitional Provision of the Organic Monetary and Financial Code, the Codification of Resolutions of the Superintendency of Banks and Insurance and of the Banking Board will remain in force in all that does not oppose what is established in said Code until the Monetary and Financial Policy and Regulation Board resolves what corresponds;

THAT articles 2 and 3 of chapter I, of title X, of book I, of the Codification of Resolutions of the Superintendency of Banks and Insurance and of the Banking Board, provide as follows:

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"Article 2.- For the purposes of the application of this chapter, the following definitions are determined:

2.1 Risk.- It is the possibility that an event generating losses that affect the economic value of institutions occurs;

2.2 Risk Management.- It is the process through which institutions of the financial system identify, measure, control/mitigate, and monitor the risks inherent to the business, with the objective of defining the risk profile, the degree of exposure that the institution is willing to assume in the development of the business, and the hedging mechanisms, to protect own and third-party resources that are under its control and administration;

(...)

2.9 Operational Risk.- It is the possibility that losses occur due to events originating from failures or insufficiency of processes, people, internal systems, technology, and in the presence of external events provided for. It includes legal risk but excludes systemic and reputational risks.

It groups a variety of risks related to deficiencies in internal control; inadequate systems, processes, and procedures; human errors and frauds; failures in computer systems; occurrence of adverse external or internal events, that is, those that affect the institution's ability to respond to its commitments in a timely manner, or compromise its interests (...)."

"Article 3.- Institutions of the financial system have the responsibility to manage their risks, for which effect they must have formal comprehensive risk management processes that allow identifying, measuring, controlling/mitigating, and monitoring the risk exposures they are assuming.

(...);

THAT numeral 4.3., of article 4, of chapter V, of title X, of book I of the Codification of Resolutions of the Superintendency of Banks provides as follows:

"Article 4.- With the purpose that the probability of incurring financial losses attributable to operational risk is minimized, the following aspects, which are interrelated, must be adequately managed:

(...)

4.3. Information Technology.- Controlled institutions must have information technology that guarantees the capture, processing, storage, and transmission of information in a timely and reliable manner; avoid business interruptions and ensure that information, including that under the modality of services provided by third parties, is integral, confidential, and available for appropriate decision-making.

(...);"

THAT articles 5, 6, and 18 of chapter III, of title XIV, of book I of the Codification of Resolutions of the Superintendency of Banks provide as follows:

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"Article 5.- The rights of the user of the financial system regarding the financial products and services offered by institutions of the financial system, in accordance with the law and sound practices, will be protected, in the first instance, by the client defender of financial institutions, and by the Superintendency of Banks and Insurance, and for this purpose it may act ex officio or at the request of a party according to what is expressly mandated by the Constitution and applicable laws, without prejudice to the competencies that other authorities exercise according to the law.

Nevertheless, any public authority in the application of its competencies and in accordance with the law, will protect the rights of the user of the financial system.

Article 6.- Users of financial products and services will exercise their rights within the framework of the universal principle of good faith."

"Article 18.- The Superintendency of Banks and Insurance in the exercise of its constitutional and legal functions of regulation and supervision, preventive and corrective, will have as a fundamental principle the protection of the rights of the user of the financial system."

THAT article 5, of chapter IV, of title XX, of book I of the Codification of Resolutions of the Superintendency of Banks provides as follows:

"Article 5.- If the result of the analysis carried out by the Superintendency determines the need for the controlled institution to introduce corrective measures to regularize the situation that motivated the complaint, the Superintendent of Banks and Insurance or the official who has the delegation of said authority, will issue the corresponding disposition.

If the situation that motivated the complaint referred to in the previous paragraph originated in an incorrect procedure of the controlled institution, which has caused damage to the complainant, the Superintendency of Banks and Insurance may order the return of the claimed values, in the exercise of the functions and attributes contemplated in letters b) and o) of article 180 of the General Law of Financial System Institutions, granting the legal representative of the entity a period that cannot exceed fifteen (15) days from the notification to send, under the legal warnings, the proof of compliance with the order issued (...);"

THAT in attention to letter No. IRG-DAYEU-2014-376 of November 26, 2014, it is inferred that in the case at hand, it is not evidenced that Mrs. Rosa Felicita Vera León has compromised the custody of her credit card at any time; nor did Banco Pichincha C.A. justify that the financial user was effectively the person who contracted the services provided by Buena Vista Social Club and Megahoteles Cía. Ltda., since the respective magnetic tape recordings requested by the Superintendency of Banks were not sent;

THAT through letter No. BP-ACEC-2013-1024 of December 23, 2013, the authorized firm of Banco Pichincha C.A. presented before the Regional Intendancy of Guayaquil its defenses against the administrative complaint filed by Mrs. Rosa Felicita Vera León. On that occasion, the representative of the Bank stated: "(...) Once the corresponding review of the expenses made by Mrs. Vera León is carried out, they are not within her usual consumption (...)". In virtue of this, the financial institution was aware of the risk inherent to the disputed transactions, but did not adopt the necessary security measures to prevent said expenses or alert the user in a timely manner, with which the premise described in article 5, of chapter IV, of

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title XX, of book I of the Codification of Resolutions of the Superintendency of Banks, necessary to order the restitution of the claimed values, is configured;"

THAT through communication of May 26, 2015, received by the Superintendency of Banks on the 28th of the same month and year, Mr. Antonio Acosta Espinosa, Adjunct President of Banco Pichincha C.A., with the professional sponsorship of doctor Pablo Cadena Merlo, filed an appeal for reconsideration against the administrative act contained in resolution No. JB-2015-3376 of April 22, 2015;

THAT the Banking Board, in the session held on June 24, 2015, as established in the second paragraph of article 3, chapter II, title XVI, book I of the Codification of Resolutions of the Superintendency of Banks and Insurance and of the Banking Board, heard the appeal referred to in the preceding paragraph and determined that it does not comply with what is provided in the first paragraph thereof, that is, that there are no new elements of fact or law that motivate the preparation of corresponding reports, so it decided to deny it outright; and,

IN exercise of its legal attributions,

RESOLVES:

SINGLE ARTICLE.- DENY the appeal for reconsideration filed by Mr. Antonio Acosta Espinosa, Adjunct President of Banco Pichincha C.A., against the administrative act contained in resolution No. JB-2015-3376 of April 22, 2015; and, consequently, CONFIRM said resolution.

NOTIFY.- Given at the Superintendency of Banks, in Quito, Metropolitan District, on the twenty-fourth of June of two thousand fifteen.

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

I CERTIFY.- Quito, Metropolitan District, on the twenty-fourth of June of two thousand fifteen.

Lcdo. Pablo Cobo Luna
SECRETARY OF THE BANKING BOARD