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CNBV Governing Board approved the revocation of the authorization to operate as a Popular Financial Society to Operadora de Recursos Reforma SA de CV
- After an orderly and coordinated review process by its Governing Board, the National Banking and Securities Commission (CNBV) notified Operadora de Recursos Reforma, SA de CV, SFP of the revocation of its authorization to operate as a Popular Financial Society , after the failure to comply with the capitalization requirements established in the Popular Savings and Credit Law (LACP).
- The deficiencies that originated this act of authority, such as recurrent breaches of capitalization levels, inappropriate risk management, and poor collection, have occurred since 2017 and were not resolved despite the insistence of the regulatory authority.
- The objective of this decision is to protect the savers of the Popular Financial Society with a balance in their savings accounts.
- Practically all of the society’s savers will be able to recover all of the resources deposited in the accounts, through the application of the Deposit Insurance of the Protection Fund, whose guaranteed amount covers up to 25,000 UDIs per saver (approximately 165,000 pesos).
- Starting today, it will be reported on the pages of the Protection Fund (http://www.prosofipo.mx/) and Operadora de Recursos Reforma the requirements for submitting applications.
- The revocation of this company is an isolated case and does not represent a risk for the stability of the popular finance sector. The practices detected and the situation of Operadora de Recursos Reforma do not correspond to the generality of the behavior in the sector.
- The financial authorities work in permanent coordination to reduce risks that compromise the stability, integrity and correct functioning of the financial system, especially in the current situation derived from the economic effects of COVID-19.
After an orderly and coordinated review process by the financial authorities, on November 18 the Governing Board of the National Banking and Securities Commission (CNBV) authorized the revocation to operate as a Popular Financial Company to Operadora de Recursos Reforma SA de CV, SFP, mainly due to recurring breaches of the capitalization levels derived from inappropriate risk management, operations with unauthorized Commissioners, poor collection, improper records to capitalize the Company, among other operations.
The CNBV has carried out the actions that correspond to it in accordance with its powers, in order to revoke the authorization to organize and operate as a Popular Financial Society to Operadora de Recursos Reforma, SA de CV, SFP, with which the process begins settlement. This process provides a financial protection mechanism that promotes transparency, provides certainty, and allows safeguarding the interests of the saving public and the stability and integrity of the financial system. In this sense, the authorities have acted in a coordinated, timely manner and in accordance with the procedure established by law, to generate security for the parties involved, especially the depositors of the Popular Financial Society.
The liquidation of Operadora de Recursos Reforma is the result of recurrent regulatory breaches of regulatory provisions. Since 2017, the entity has observed a deterioration in its loan portfolio, due to poor origination and poor administration, as well as its recovery through unauthorized commission agents who were reported to the Commission as branches.
Likewise, Operadora de Recursos Reforma, SA de CV, SFP, has presented a capitalization level that does not comply with the regulatory minimums established by the applicable regulations, from June 2017 to September 2020. These non-compliance levels were observed by this authority after reviewing the information contained in regulatory reports.
In December 2017, SOFIPO was placed in early warning category 3 (NICAP below 100%), for which it was instructed to present a capital restoration plan, which was approved until May 2018 due to delays caused by the entity. After an extension, the entity failed to comply with the restoration plan in July 2019, for which reason this Commission instructed the dismissal of the Board of Directors and the general director, at the same time that it requested the Protection Fund to prepare within a period no longer than 6 months an orderly exit opinion.
Derived from improper records of items with the purpose of showing a higher level of capitalization, the external auditor issued an unfavorable opinion on the financial statements for the 2018 financial year, a situation that shows that its financial information did not adequately disclose the financial position and operating results as of That date.
The CNBV carried out various supervisory and special inspection actions to Operadora de Recursos Reforma, SA de CVSFP, from which regulatory breaches were determined at their capitalization level, loans in excess of financing limits, microcredit operations without having Accreditation of the Federation that supervises in an auxiliary way, missing EPRC record, inadequate evaluation of the payment capacity, lack of documentation, does not recognize deterioration of advance payments for the acquisition of real estate, transfer of loan portfolio without complying with regulations, poor integration of the Board of Directors, non-compliance with the liquidity index and inconsistencies in regulatory reports, among other observations.
However, the shares to be capitalized by the company were insufficient to reestablish the solvency level of Operadora de Recursos Reforma, SA de CVSFP, in addition to the observations of the CNBV were not heeded, so the situation of the Company continued to deteriorate . Likewise, as a result of the surveillance acts initiated, in February 2020 additional special measures were issued in order to prevent deposits from continuing its upward trend, however, the General Assembly of Shareholders decided not to comply with the corrective measure. imposed by the CNBV.
Following up on these actions and in compliance with the applicable provisions, on October 2, 2020, Operadora de Recursos Reforma was summoned to the administrative revocation procedure and was granted the right to a hearing, since it was located in the grounds for revocation. in section V of article 37 of the LACP, for not complying with the capitalization requirements, in accordance with the provisions of article 116, section VI, of the LACP and the provisions to which said precept refers.
In order to protect the interests of the public, in October 2020, precautionary measures were issued for the suspension of operations, such as: increasing or giving new credits; receive deposits from current and new customers; make removals, penalties, losses or bonus; renew credits whose level of reserves corresponds to a percentage greater than 50% of EPRC; pay compensation without authorization from the CNBV, and it was ordered to keep the balance of the debtors account in repo invested.
As has been reported, these breaches and deficiencies occurred prior to the current financial and economic situation derived from the isolation measures adopted to prevent the spread of COVID-19.
The revocation of the authorization to operate as a Popular Financial Society to Operadora de Recursos Reforma, SA de CV, SFP, represents an isolated case and is not a risk for the stability of the country’s financial system. This act of authority is given with the objective of protecting the savers of the Popular Financial Society.
Derived from the SOFIPO liquidation status, savers are informed that their deposits are covered by the deposit insurance of the sector of 25,000 UDIS, approximately $ 165,000 pesos. Starting today, it will be reported on the pages of the Protection Fund (http://www.prosofipo.mx/) and Operadora de Recursos Reforma, the requirements for submitting applications.
The deposit insurance payment is made by the Protection Fund, which receives monthly installments from all the Companies that make up the Popular Financial Companies sector. The priority of the resolution of Operadora de Recursos Reforma is to pay savers the respective insurance and establish the mechanisms that generate the greatest benefit for savers. More than 99% of the society’s savers will be able to recover all the resources deposited in the accounts, through the application of deposit insurance.
The CNBV reaffirms its confidence in the Mexican financial system and informs that this type of practice does not correspond to the generality of behavior that characterizes the Popular Financial Companies sector.