Published and draft legislation - Mexico

Strengthening the Mexican financial system: the Ficrea Law

Law on retail savings and credit, 7th May 2015

The Ficrea Law, as it has become known, is an amendment of the Mexican Law on Savings and Credit, 5th June 2001. It is intended to protect the Mexican financial system from frauds such as the "Ficrea scam". Ficrea was a financial company (SOFIPO) supported and supervised by the National Banking & Securities Commission (CNBV) of Mexico, which managed to defraud over 6,000 Mexican savers in 2014.

The main purpose of the law is to set up a more efficient and more robust system to provide unsecured credit, strengthening the role of the supervisors and offering enhanced protection to users of the Mexican financial system.

It provides for the creation of a relief fund of MDP 1.6 billion from which 80% of Ficrea’s former depositors can recover their savings, and another fund to pay MDP 1,000 to other creditors of the entity.

The SOFINCOs, as Mexico’s rural microfinance institutions are currently called, now have until 31st July 2016 to apply to the CNBV authorized for licences to constitute and operate as SOFIPOs. Since SOFINCOs and SOFIPOs offer the same services to customers for all practical purposes, and the regulations governing the two are the same, it makes sense to unify their structures in order to facilitate their supervision and control by the CNBV.

Principal changes

  • Direct supervision of SOFIPOs now exclusively tasked to the CNBV, without involving intermediate bodies such as the Federaciones.
  • The maximum deposit that can be made in these entities by individual depositors is MDP 1m, while the ceiling for corporate depositors is MDP 5m.
  • The law encourages stronger corporate governance measures for these financial organizations:
    • At least 25% of seats on corporate boards must be for independent directors.
    • The requirements regarding the professional honour and suitability of directors are tougher. Directors will now have to demonstrate a satisfactory credit history and extensive experience in the financial sector.
    • Directors, managers or employees responsible for malpractices in the accounting and reporting of these companies are now liable for tougher fines and disciplinary proceedings.

Opposition and criticism

Although this reform is intended to strengthen the Mexican financial system, some aspects have incited criticism.

Representatives of the Sociedades Financieras Comunitarias and of the Sociedades Financieras Populares [Community Financial Companies and Popular Financial Companies] argue that the reform will limit the number of productive microloans granted to those who need them most. They fear that the law ignores the financial requirements of the most disadvantaged sectors of the population.

Corporate governance

The amendment of the 2001 People’s Savings & Loans Law responds to the need for rules on good corporate governance for these financial companies, whose reputation has been tarnished by the Ficrea scandal.

This reform focuses on the importance of independent directors, establishes tougher eligibility requirements for members of the board of directors and provides for more intensive supervision of their activities by the CNBV.

Current legal status

The reform has been approved by the Chamber of Deputies, but is now awaiting its passage through the Senate, as it was not approved in the last session of the upper chamber, held on 30th April 2015.