LIC Article 28

The Ministry of Finance and Public Credit, after hearing the opinion of the Central Bank and the National Banking and Securities Commission, may order revocation of the authorization granted to organize and operate as a full service bank in the following cases:

The provisions of this item will not apply when the bank in question proves to the Ministry of Finance and Public Credit that it has at its disposal the liquid funds necessary to meet the payment obligations in question or when the relevant payment obligation is subject to a judicial dispute, arbitration proceedings, or conciliatory proceedings before a competent authority.

Compensation chambers, central counterparties, securities deposit institutions, the National Banking and Securities Commission, the Central Bank, and any of the bank’s creditors may inform the Ministry of Finance and Public Credit when the bank falls under any of the hypotheses mentioned in this point.

The revocation order will be published in the Official Gazette of the Federation and in two wide-circulation newspapers in Mexico and will be entered in the office of the Public Registry of Commerce corresponding to the corporate domicile of the bank in question and the bank will be placed in a state of dissolution and liquidation, without the need for a resolution by the shareholders’ meeting, in accordance with the provisions of Title Six, Chapter II, Section Two, of this Law. The Ministry of Finance and Public Credit must notify the Institute for the Protection of Banking Savings of the revocation order.

LIC Article 28, Item V

The Ministry of Finance and Public Credit, after hearing the opinion of the Central Bank and the National Banking and Securities Commission, may order revocation of the authorization granted to organize and operate as a full service bank in the following cases:

Irrevocable Trust

Article 29 Bis 4.- The trust which, under the terms of Article 29 Bis 2, Item I, of this Law, the shareholders’ meeting of a full service bank resolves to create will be created in a credit institution different from the affected bank that is not a member of the same financial group to which it belongs, as applicable, for which the corresponding contract must stipulate:

I. That, to protect the interests of the saving public, the trust will have as its purpose fiduciary encumbrance of shares representing at least seventy-five percent of the full service bank’s capital, to allow it to stay in operation under the Conditional Operation regime to which this Section refers and that in any of the cases contemplated in Item V of the present Article, the Institute for the Protection of Banking Savings will exercise the equity and corporate rights pertaining to the shares conveyed to the trust;

II. The conveyance to the trust of the shares mentioned in the preceding item, through the bank’s president or duly designated attorney-in-fact, in executing the resolution of the shareholders’ meeting mentioned in Article 29 Bis 2 of this Law;

III. Mention of the meeting’s order, as mentioned in Article 29 Bis 2, to the bank’s president or duly designated attorney-in-fact, to request that the securities deposit institution in which the shares representing the capital stock of the bank in question, in name and on behalf of the shareholders, transfer the shares conveyed to the trust to an account opened in the name of the trustee to which this Article refers. To protect the public interest and the interests of persons who engage in any operations that create guaranteed obligations under the terms of the Law of Banking Savings Protection with the credit institution in question, in the event that the bank’s president or duly designated attorney-in-fact fails to effect the transfer mentioned in the preceding paragraph, the securities deposit institution in question must effect the transfer, for which it will require only a written request from the trustee, to execute the orders issued by the shareholders’ meeting;

IV. The designation of the shareholders as first beneficiaries, who may exercise the corporate and equity rights pertaining to the shares conveyed to the trust, until the requisites established in the following item are met;

V. The designation of the Institute for the Protection of Banking Savings as second beneficiary, with the obligation to instruct the trustee with regard to the exercise of corporate and equity rights pertaining to the shares in the full service bank in question conveyed to the trust, in any of the following cases:

a) If the Governing Board of the National Banking and Securities Commission does not approve the capital restoration plan that the full service bank in question presents under the terms of Article 134 Bis 1, Item I, paragraph b), of this Law, or the same Governing Board determines that the bank has not complied with said plan;

b) Although the full service bank in question has recurred to the Conditional Operation regime mentioned in this Section, the National Banking and Securities Commission informs the trustee that it presents a capital ratio equal to or exceeding fifty percent of that required in accordance with the provisions of Article 50 of this Law; or

c) The full service bank in question incurs in any of the situations contemplated in Article 28, Items IV and VI, of this Law, in which case the Ministry of Finance and Public Credit, in accordance with the provisions of Article 29 Bis of this Law, will proceed to allow the bank to declare as best suits its interests under the law and present the evidence which, in its opinion, proves that the acts or omissions identified in the relevant notification have been remedied;

VI. The resolution of the full service bank’s shareholders’ meeting in accordance with the provisions of Article 29 Bis 2 containing the order to the trustee to sell the shares conveyed to the trust in the case and under the conditions mentioned in Article 122 Bis 5 of this Law;

VII. The causes for extinction of the trust listed below:

a) The full service bank restores and maintains for three consecutive months its capital ratio at or above the minimum required under the terms of Article 50 of this Law, as a consequence of the implementation of the capital restoration plan it has presented for the purpose.

In the case to which this point refers, the National Banking and Securities Commission must inform the trustee so that it may in turn inform the corresponding securities deposit institution, so that the proper transfers are made to the respective accounts of the shareholders in question;

b) In cases where, after executing the resolution method that the IPAB Governing Board orders for the full service bank in question, in accordance with the pertinent provisions of this Law, the shares conveyed to the trust are cancelled or the proceeds from their sale or the remainder of the corporate equity, if any, is distributed among the shareholders;

c) The full service bank in question restores its capital ratio to at or above the minimum required under the terms of Article 50 of this Law, as a consequence of the implementation of the capital restoration plan it has presented to such effect, and, before the term mentioned in paragraph a) above expires, requests the revocation of its authorization to organize and operate as a full service bank under the terms of Article 28, Item II, of this Law, provided it does not incur in any of the causes mentioned in Article 28, Items IV or VI.

VIII. The instruction to the fiduciary institution, if given, to deliver the remainder of the corporate equity to the shareholders under the terms of point b) above. The institution acting as trustee in any of the trusts regulated in this article must adhere, as applicable, to the general rules issued by the National Banking and Securities Commission.

For the benefit of the public interest, the bylaws and the stock certificates representing the capital stock of full service banks must expressly indicate the powers of the shareholders’ meeting held under the terms of Article 29 Bis 1 of this Law to resolve to create the trust to which this Article refers; convey shares representing the capital stock on behalf of the shareholders; resolve, from the date of the meeting, to instruct the trustee to sell the shares in accordance with the provisions of Item VI above; and take all other actions mentioned in this article.

Capital Restoration Plan

When full service banks fail to satisfy the capitalization requirements established in Article 50 of this Law and in the regulations derived from it, the National Banking and Securities Commission must order the application of certain minimum corrective measures, among them the following:

Submit to the National Banking and Securities Commission for approval a capital restoration plan designed to raise the bank’s capital ratio, which may include a program to raise operative efficiency; rationalize expenditures; and increase profitability, make contributions to the capital stock, and impose limits on operations that the full service bank in question may execute in pursuit of its corporate purpose or to the risks such operations entail. The capital restoration plan must be approved by the bank’s board of directors before it is submitted to the National Banking and Securities Commission.

In the capital restoration plan submitted, the full service bank in question must define periodic targets and the term in which its capital will reach the capitalization level required by law.

The National Banking and Securities Commission, through its Governing Board, must rule on the capital restoration plan submitted to it in a maximum term of sixty calendar days after it is submitted.

The full service bank must comply with the capital restoration plan within the term established by the National Banking and Securities Commission, which under no circumstances may exceed 270 calendar days from the day after the full service bank is notified of its approval. To determine the term for implementation of the restoration plan, the Commission will consider the bank’s category and financial position and general conditions prevailing in financial markets.

The National Banking and Securities Commission, by resolution of its Governing Board, may extend this term, one time only, for a period not exceeding 90 calendar days. The National Banking and Securities Commission will monitor and verify the implementation of the capital restoration plan, without prejudice to the application of other corrective measures, depending on the category in which the full service bank in question is classified.

The provisions of this item will not apply when the bank in question proves to the Ministry of Finance and Public Credit that it has at its disposal the liquid funds necessary to meet the payment obligations in question or when the relevant payment obligation is subject to a judicial dispute, arbitration proceedings, or conciliatory proceedings before a competent authority.

Compensation chambers, central counterparties, securities deposit institutions, the National Banking and Securities Commission, the Central Bank, and any of the bank’s creditors may inform the Ministry of Finance and Public Credit when the bank falls under any of the hypotheses mentioned in this point.

The provisional administrator designated by IPAB must prepare an opinion on the overall standing of the full service bank in question.

The IPAB Governing Board must establish, by means of general guidelines, the elements that the opinion mentioned in this article must contain, which will include, as minimum, a detailed description of the full service bank’s financial position, an inventory of assets and liabilities, and the identification of the bank’s outstanding payment obligations, default on which could cause it to fall under any of the hypotheses mentioned in Article 29 Bis 6 of this Law. The aforementioned opinion must include the legal and accounting opinion prepared for the purpose by the independent external auditors of the bank in question.

Provisional Administrator – Powers

LIC Article 140

The provisional administrator designated pursuant to Articles 138 or 139 of this Law will assume the position of sole administrator in the bank in question, substituting, in any event, the board of directors and the general shareholders’ meeting in cases in which the exercise of the corporate and equity rights of the bank’s shares do not pertain to IPAB.

The provisional administrator will have the following powers:

I. Representation and administration of the bank in question;

II. The powers corresponding to the bank’s board of directors and president, with broad general powers for acts of ownership and administration and for lawsuits and collections, with all powers requiring a special clause under the law, and power to subscribe credit instruments, execute credit operations, file claims and complaints and desist from the latter, grant pardon, and submit to arbitration;

III. Prepare and submit for approval to IPAB’s Executive Secretary the budget necessary to accomplish the objectives of the provisional administration;

IV. Submit to IPAB’s Executive Secretary periodic reports on the bank’s financial position and administrative operation and its possible resolution;

V. Authorize the contracting of liabilities, investments, expenses, acquisitions, alienations, and in general any expenditure made by the bank in question;

VI. Suspend operations that compromise the bank’s solvency, stability, or liquidity;

VII. Hire and remove bank employees and report on such movements to IPAB’s Executive Secretary;

VIII. Grant powers of attorney as deemed advisable, revoke the powers so granted, and – in accordance with the pertinent provisions of applicable laws in force – delegate his powers in duly designated attorneys-in-fact, to exercise them under the terms and conditions IPAB determines; and

IX. Any and all others established in applicable laws and regulations in force and those granted by the IPAB Governing Board.

The foregoing powers will be granted and exercised without prejudice to the powers of the National Banking and Securities Commission to order the measures deemed necessary to put in order any irregular operations executed by the full service bank in question, establishing deadlines for their performance, and to take the actions deemed appropriate under the terms of the present Law.

Article 141.- In addition to the provisions of Article 140 of this Law, the provisional administrator may grant the general and special powers of attorney he may deem advisable and revoke the powers so granted and appoint fiduciary delegates for the full service bank in question. The powers to which this article refers will be understood as conferred upon the attorneys-in-fact of the provisional administrator, who may be natural or legal persons, under the terms the provisional administrator sees fit to establish.

8. LIC Article 145

To exercise his functions, the provisional administrator may be assisted by an advisory board, which will be made up by at least three and at most five members, designated by the Institute for Protection of Banking Savings from among the persons entered in the register to which the following paragraph refers.

Industry associations representing full service banks recognized by the National Banking and Securities Commission must implement mechanisms to allow persons interested in serving as members of the advisory board to which the preceding paragraph refers to be entered in a register kept for the purpose.

To be entered in the aforementioned register, interested parties must file a written application with one of the industry associations mentioned in the preceding paragraph, with documents evidencing satisfaction of the requisites established in Article 23 of this Law and of applicable requisites established by the industry association in question.

The advisory board will meet on prior call by the provisional administrator to give its opinions on the matters submitted to its consideration. Itemized minutes will be taken of all its meetings, containing the most relevant matters discussed and the resolutions taken in the meeting in question.

The members of the advisory board may abstain from deliberating and giving their opinion on matters submitted to their consideration only when there is a conflict of interest, in which case they must advise the provisional administrator.

The fees of the advisory board members will be paid by the full service bank in question.The Institute for Protection of Banking Savings will establish, by means of general rules, the other terms and conditions that will govern the advisory board.

9. LIC Article 147

When IPAB orders the lifting of the provisional administration, the provisional administrator must prepare an itemized report justifying the actions taken in exercise of his functions and an inventory of the bank’s assets and liabilities and an opinion on its financial, accounting, legal, economic, and administrative affairs.

The aforementioned report must be submitted to the general shareholders’ meeting. When, the meeting having been duly convened, the necessary quorum is not met, the provisional administrator will publish a notice directed to the shareholders indicating that the report is available for consultation, indicating the place and time where they may consult it. Also, the provisional administrator must deliver a copy of the report in question to the National Banking and Securities Commission.