Banking Board of Ecuador

RESOLUTION No. JB-2015-3514

THE BANKING BOARD

CONSIDERING:

THAT through a communication dated March 25, 2014, Mr. Alfonso Andrade Peñaherrera, through his attorney Dr. Marcelo Andrade Cordero, requested that the Superintendence of Banks notify the Public Management and Execution Unit of the Mercantile Trust AGD CFN NO MORE IMPUNITY, UGEDEP, of the results of the values that the control body had reviewed and determined regarding the patrimonial shortfall of SOLBANCO S.A.; that he also requested that an expert from the control body be appointed to determine the real value of the property seized at Km 1.5 of Av. Carlos Julio Arosemena in Guayaquil; and, that a certified copy of reports and minutes of the inter-institutional commission formed by UGEDEP-Bank of Ecuador for the analysis of receivables to be collected from the former shareholders and administrators of the defunct banks FINAGRO and SOLBANCO be granted;

THAT through Official Letter No. SELC-2014-250, dated April 29, 2014, the Deputy Director of Entities in Liquidation and Coercive Actions, responded to the requirement of Dr. Marcelo Andrade; that regarding the first request, a copy of Official Letter No. SBS-2014-019, dated January 14, 2014, was sent to the interested party, in which it was communicated to the representative of UGEDEP that from that date the participation of the Superintendent's delegate in the aforementioned inter-institutional commission was no longer valid, since it was the competence of said unit to exercise the collection actions that correspond; that a copy of Official Letter No. SBS-2014-054, dated January 30, 2014, was also delivered, with which the Superintendent of Banks indicated to the legal representative of UGEDEP the non-existence of any modification to what was expressed in Official Letter No. SBS-IG-INJ-2012-417, dated April 23, 2013, regarding the values of the patrimonial loss of FINAGRO and SOLBANCO; and, finally, a copy of Memorandum No. SRM-UTA-2014-003, dated January 14, 2014, in which the analysis of the appraisal carried out by Architect Alamiro González Roca is recorded, regarding the property seized by the AGD, which was not validated by the control body;

THAT on May 13, 2014, in response to Official Letter No. SELC-2014-250, the appellant questioned the response of the Superintendence regarding the patrimonial shortfall of SOLBANCO S.A., stating that it had not varied, since, as he indicated, having formed a Commission to evaluate the real patrimonial shortfall, it was determined that there were three supervening events that needed to be taken into account, such as the values paid by the debtors of SOLBANCO to the Bank of Ecuador, beyond the fact that it was determined that in the operations carried out during the stabilization period, such as the acceptance of a dation in payment with certificates called MARRAQUESH and the granting of a credit to the Banco del Progreso also during stabilization, which was carried out by the common administrator of both institutions and which are provisioned, the administrators and shareholders of SOLBANCO have no responsibility; that he also stated that those responsible for the patrimonial shortfall are the administrators and shareholders who were in office at the time of the final liquidation of the bank, which does not correspond to the case of Alfonso Andrade Peñaherrera; that likewise the appraisal

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has been carried out by an expert qualified by the control body and is subject to examination by any professional determined by the Superintendence; that on January 14, 2013, Mr. Alfonso Peñaherrera requested that four accounting issues be reviewed aimed at readjusting the patrimonial shortfall of SOLBANCO; and, that the inter-institutional commission determined through report AUD-SELC-2013-006, dated May 21, 2013, adjustments to the patrimonial shortfall, for which he requested that the control body notify UGEDEP of these results;

THAT with Official Letter No. SELC-2014-366, dated June 6, 2014, Engineer César Dávalos Arellano, then Deputy Director of Entities in Liquidation and Coercive Actions, Acting, denied the request of Mr. Alfonso Andrade Peñaherrera and ratified the content of Official Letter No. SELC-2014-250, dated April 29, 2014, emphasizing that any request should be directed to UGEDEP, since it corresponds to said institution, within the scope of its competence, to exercise the collection actions of the patrimonial shortfall;

THAT on June 12, 2014, Dr. Marcelo Andrade, on behalf of Mr. Alfonso Andrade Peñaherrera, filed an appeal for reconsideration against the administrative act contained in Official Letter No. SELC-2014-366, dated June 6, 2014, reiterating his request to notify UGEDEP of the adjustments to the patrimonial shortfall produced in SOLBANCO S.A. and to appoint any expert to carry out a new appraisal of the property seized by the AGD; and, that through Official Letter No. SELC-2014-438, dated June 26, 2014, Engineer César Dávalos Arellano, then Deputy Director of Entities in Liquidation and Coercive Actions, Acting, denied the challenge made against the administrative act contained in Official Letter No. SELC-2014-366, dated June 6, 2014, which was confirmed, in the sense that any request should be directed to UGEDEP, since it corresponds to said institution, within the scope of its competence, to exercise the collection actions in the aforementioned patrimonial shortfall;

THAT through a document dated July 8, 2014, Dr. Marcelo Andrade Cordero, on behalf of Mr. Alfonso Andrade Peñaherrera, filed before the Banking Board an appeal for review against the administrative act contained in Official Letter No. SELC-2014-438, dated June 26, 2014; and, that with a document dated July 31, 2014, presented on August 1, 2014, the appellant submitted additional information related to the appeal for review, which has been considered in the preparation of this report;

THAT the grounds presented by the appellant are as follows: that he reiterates the request for the Superintendence of Banks to order the notification to UGEDEP of the adjustments to the patrimonial shortfall produced in SOLBANCO S.A., since as a result of the fact that the aforementioned institution requested the formation of a commission, which was integrated by this Superintendence, UGEDEP, and the Bank of Ecuador, with the objective of evaluating the real patrimonial shortfall of that entity, it was thus determined that there were three supervening events such as the values paid by the bank's debtors, that the operations were carried out during the stabilization period of SOLBANCO such as the acceptance of a dation in payment with fiduciary certificates called MARRAQUESH and the granting of a credit to the Banco del Progreso also in stabilization at that time, carried out by the common administrator of both

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institutions and currently provisioned, over which the administrators and shareholders of the bank have no responsibility; that according to the current legal provisions, those responsible for the patrimonial shortfall are the administrators and shareholders who acted at the time of the final liquidation of the bank or the declaration of stabilization, which is not the case of Mr. Alfonso Andrade, since at the time the bank was declared in stabilization, he was not its administrator, nor did he have a percentage greater than 6% of the shares of the bank's capital when such decision was made, prerequisites indispensable for the existence of pecuniary responsibility on their part; that regarding the observations made to the appraisal carried out by architect Alamiro González Roca, expert qualified by the Superintendence, who was nominated by the Inter-institutional Commission and appointed by the Superintendent, the report presented meets the standards determined by the control body, however, it is subject to examinations of any category, which can be carried out by any professional determined by the control body; that on May 21, 2014, he reiterated his request to appoint any expert to carry out a new appraisal of the property located at Km. 1 ½ of Av. Carlos Julio Arosemena in Guayaquil, seized by the AGD, to determine the real value of the seized property; and, that for the reasons stated, he requests to admit the appeal for review and declare null and void the entire content of Official Letter No. SELC-2014-438, dated June 26, 2014, and to order notifying UGEDEP of the adjustments to the patrimonial shortfall of SOLBANCO S.A. and at the appropriate time communicate the results of the appraisal of the seized property, in virtue of the fact that the Superintendence of Banks is competent to determine the value of the eventual patrimonial shortfall, if any, as well as, to determine the non-responsibility of that eventual shortfall to Alfonso Andrade Peñaherrera;

THAT in relation to the grounds presented by the appellant, it is necessary to point out Article 127 of the General Law of Institutions of the Financial System applicable to the case under study, which established that if the fraudulent act or omission of directors, administrators, officials, or employees of a financial system institution causes damage to the financial institution or to third parties, they will be responsible for any losses caused, with their own assets, for which the Superintendence of Banks will use the coercive faculty;

THAT the Banking Board issued the regulations for the application of Article 127 of the aforementioned law, which is incorporated as Chapter XVI, Title XVIII, Book I of the Codification of Resolutions of the Superintendence of Banks and Insurance and of the Banking Board, which regulates the collection of patrimonial losses of financial institutions whose liquidation processes have concluded, according to the coercive jurisdiction provided for in the Law on Reorganization in Economic Matters in the tax-financial area; that according to Article 7 of the Banking Board's regulations, the Superintendence of Banks will refrain from initiating coercive procedures regarding main shareholders, administrators, and legal representatives of financial institutions in which the former Deposit Guarantee Agency or the Public Management and Execution Unit of the Mercantile Trust AGD CFN NO MORE IMPUNITY, UGEDEP has carried out seizure processes or exercised collection actions; that consequently, UGEDEP has been warned of the competence, based on the principle of legality and coordination provided for in Article 226 of the Constitution of the Republic; and, that it is competent for the

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collection of obligations by virtue of the faculty originally assumed by the Deposit Guarantee Agency, based on the Law on Economic Reorganization in the Tax-Financial Area;

THAT in the case at hand, through Official Letter No. SBS-IG-INJ-2012-417, dated April 23, 2012, in application of the regulations in force at that time, the Superintendence of Banks transferred to UGEDEP the list of ten closed financial institutions with the specification of patrimonial losses, information on main administrators, and detail of shareholders with 6% or more participation in the capital, for the purpose that said entity exercise all actions for the effective recovery of the patrimonial loss, among which was the defunct SOLBANCO S.A., in liquidation whose patrimonial loss was US$20,173,411.94; and, that consequently, from that date UGEDEP had the jurisdiction and competence for the respective collection;

THAT in response to the request presented by Mr. Peñaherrera, and prior to the corresponding audit report, the Superintendence of Banks pronounced itself through Official Letter No. SBS-2014-054, dated January 30, 2014, sent to UGEDEP regarding the adjustments to the patrimonial shortfall produced in SOLBANCO S.A. by stating that there is no modification to what was expressed in Official Letter No. SBS-IG-INJ-2012-417, dated April 23, 2012, regarding the values of the patrimonial loss of SOLBANCO and also in the sense that it was not possible to validate the value proposed by expert Alamiro González Roca, in the appraisal of the property located at Km ½ of Av. Carlos Julio Arosemena in the city of Guayaquil, which at the time would be state property, so its valuation corresponds to the Public Sector Real Estate Management Secretariat INMOBILIAR; and, that for the reasons stated, the determination of the patrimonial shortfall is established by the control body;

THAT through Official Letter SELC-2013-160 dated May 31, 2013, the Deputy Director of Entities in Liquidation and Coercive Actions communicated to the legal representative of the Public Management and Execution Unit of the Mercantile Trust AGD CFN NO MORE IMPUNITY, UGEDEP, the report presented by the auditors of the Subdirection of Entities in Liquidation and Coercive Actions, regarding Accounts Receivable; Assets Realizable Adjudicated by Payment; Total Recovered by the Bank of Ecuador; and, Accounts Payable (seized property to the company SICOCAR);

THAT in accordance with the Organic Law for the Closure of the Banking Crisis of 1999, the Superintendence of Banks and UGEDEP maintain their status as entities in charge of collecting the patrimonial deficit. By virtue of the same, in application of what is provided in Article 7 of Chapter XVI, Title XVIII, Book I of the Codification of Resolutions of the Superintendence of Banks and Insurance and of the Banking Board, whose validity is maintained by virtue of what is established in the First Transitional Provision of the Organic Monetary and Financial Code, it corresponds to UGEDEP to carry out the respective collection;

THAT in application of the second paragraph of the Third Transitional Provision of the Organic Monetary and Financial Code, the Banking Board will continue to act until resolving all claims, appeals, and other administrative procedures that it was hearing as of the date of entry into force of the aforementioned

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code, within a period of one hundred eighty (180) days, extendable at the discretion of the Monetary and Financial Policy and Regulation Board; and,

IN exercise of its legal attributes;

RESOLVES:

SINGLE ARTICLE.- ABSTAIN from resolving the appeal for review filed by Dr. Marcelo Andrade Cordero, on behalf of Mr. Alfonso Andrade Peñaherrera, against the administrative act contained in Official Letter No. SELC-2014-438, dated June 26, 2014, since, in conformity with the current legal regulations, the claims subject of the appeal fall under the competence of the Public Management and Execution Unit of the Mercantile Trust AGD CFN NO MORE IMPUNITY, UGEDEP.

NOTIFY.- Given at the Superintendence of Banks, in Quito, Metropolitan District, on the ninth day of July of two thousand fifteen.

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

I CERTIFY.- Quito, Metropolitan District, on the ninth day of July of two thousand fifteen.

Lcdo. Pablo Cobo Luna
SECRETARY OF THE BANKING BOARD