MEXICO Law and Practice Contributed by: Pablo Perezalonso Eguía, Isabel Ortiz-Monasterio Borbolla and Alejandro Mosqueda Pérez, Ritch, Mueller y Nicolau, S.C.
Mexico’s framework for the insolvency, recovery, and resolution of banks is primarily governed by the Banking Law and the Bank Savings Protec - tion Law ( Ley de Protección al Ahorro Bancario , the LPAB), under the supervision of the CNBV and the Instituto para la Protección al Ahorro Bancario (IPAB). These laws provide mecha - nisms to ensure financial stability and protect depositors during bank failures. Principal Means of Resolving a Failing Bank The resolution of a failing bank involves various stages under the Banking Law. 1. Intervention: • The CNBV may declare managerial inter - vention if a bank’s capital ratios fall below regulatory thresholds or if significant payment obligations are unmet. • If IPAB provides financial support, it appoints a “peremptory manager” with full authority to manage the bank during intervention. 2. Revocation of banking licence: • When a bank’s licence is revoked due to insolvency or other violations, the IPAB assumes responsibility for liquidation. This process involves transferring assets and liabilities to other banks, establishing a new temporary bank, or pursuing other measures to minimise depositor impact. 3. Liquidation process: • Liquidation follows the CNBV’s resolution, with the IPAB acting as liquidator. In cases of insolvency, liquidation is managed through court procedures tailored to the banking sec - tor, ensuring priority payments according to established rules.
When a bank faces insolvency or financial insta - bility, the following mechanisms are employed. 1. Recovery plans: • Banks are required to maintain recovery plans detailing measures to restore financial health during periods of distress. 2. Resolution process: The resolution process includes intervention by the CNBV and measures under the LPAB, such as the following. • Temporary management – appointment of an administrator to manage the bank and stabi - lise operations. • Asset transfers – transfer of assets and liabili - ties to another financial institution or a bridge bank. • Liquidation – as a last resort, liquidation may occur under CNBV and IPAB oversight to ensure an orderly process. 3. Deposit insurance and payouts: • The IPAB guarantees deposits up to a maximum of 400,000 UDIs (approximately USD135,000), ensuring that depositors are compensated promptly. Implementation of FSB Key Attributes of Effective Resolution Regimes Mexico has implemented key elements of the Financial Stability Board (FSB) Key Attributes of Effective Resolution Regimes, including the fol - lowing. • Legal authority – the CNBV and IPAB have broad legal powers to intervene in failing
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