Presentacion LMK Turquia IPAB 070809

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    Table of Contents

    I. Overview DIS in MexicoII. Regular activities

    III. Pre-closing

    IV. Paying insured depositorsV. Automation in paying insured deposits

    VI. Customer communication

    VII.Addressing uninsured depositors andgeneral creditors

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    I. Overview DIS in Mexico

    The Mexican Deposit Insurance Systems (DIS) legislation has

    undergone a series of key improvements in order tostrengthen its regulatory framework (2004-until now), which

    include:

    Prompt Corrective Actions - on December 2004, the

    supervisor issued rules to classify commercial banks incategories based on their Capital Adequacy Ratio

    (Spanish acronym ICAP), in order to perform early

    detection, intervention and resolution of troubled banks.

    Resolution methods - on July 2006, the legislation was

    enhanced to include other resolution methods in order to

    improve the DIS resolution framework.

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    Resolution methods

    Resolution methods for bank liquidation:

    Deposit payoff.

    Purchase and assumption transaction (P&A).

    Bridge bank.

    Open Bank Assistance - when the Financial Stability

    Committee determines that a commercial bank represents a

    systemic risk.

    Banking Resolutions Law - currently the Financial Safety Netis working on a regulatory reform in order to develop a specific

    and more efficient bank-bankruptcy resolution mechanism.

    DIS determines the least cost resolution method by evaluating allpossible resolution alternatives based on a technical analysis.

    I. Overview DIS in Mexico

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    As of June 30, 2009, the Mexican banking sector was made up of 42commercial banks.

    The Institute for the Protection of Banking Savings (IPAB) is the agency

    in charge of the DIS in Mexico, responsible for protecting bank deposits

    and providing an explicit and limited coverage.

    IPAB is also responsible for bank resolution methodsimplementation.

    Coverage protects insured depositors (i.e. a person or entity that

    deposit funds) of commercial banking institutions (institutions).

    I. Overview DIS in Mexico

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    Covered financial products (insured deposits)1_/ include:

    Savings accounts;

    Sight deposits, such as checking accounts;

    Time deposits or with advanced notice of withdrawal,

    such as certificates of deposit;

    Deposits that could be withdrawn on established dates,and

    Balances on debit cards.

    Since January 1st, 2005, deposits are covered up to 400

    thousand investment units (UDIS)2_/ equivalent to approx. USD

    $128,900 per natural or legal person per bank.

    1_/As mentioned on Article 46, Items I and II of the Law of Credit Institutions (Spanish acronym LIC).2_/UDIS are inflation adjusted units of account. As of June 30, 2009, one UDI is equivalent to 4.249858

    Mexican Pesos.

    I. Overview DIS in Mexico

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    Bank operations1_/ payable to the following persons are excludedfrom the coverage scheme:

    Domestic or foreign financial entities.

    Corporations owned by the same financial group as the bank.

    Shareholders, board members, and officers at the two highest levelsin the banks organization.

    Also, IPAB does not guarantee the following operations:

    Operations that have not fulfilled the applicable legal andadministrative provisions.

    Operations that deviate from sound banking practices.

    Liabilities documented in negotiable instruments, as well as bearersecurities.

    IPAB does not guarantee investments made through the followinginstitutions:

    Thrift Institutions

    Savings and Loans

    Insurers

    Brokerage Firms

    Development Banks

    1_/As mentioned on Article 10 of LPAB.

    I. Overview DIS in Mexico

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    As of June 30th, the balance of fully insured deposits by

    IPAB was USD $84,072 millions, which represent 25.55% of

    the commercial banking sectors total liabilities and 10% of

    the nominal GDP as of 2009Q2.

    IPAB covers, approximately, 99.84% of the 72,061,713

    insured accounts, which represent USD $139,228

    millions.

    Only 0.16% are accounts that exceed the coverage limit.

    96.57% of the insured accounts are sight deposit accounts,while 3.43% are time deposits.

    I. Overview DIS in Mexico

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    Insured deposits (deposits covered): Savings, checking and other deposits as mentioned on

    Article 46 of the LIC.

    Fully insured deposits (deposit fully covered): Insured deposits covered up to IPABs insurancecoverage limit (400,000 UDIS).

    Insured accounts (number of accounts covered): Savings, checking and other deposit accountsas mentioned on Article 46 of the LIC.

    Fully insured accounts (number of accounts fully covered): Insured accounts that are

    covered up to IPABs insurance coverage limit.

    Partially insured accounts (number of account partially covered):

    Accounts that exceed IPABs insurance coverage limit.

    Concept June 09 1_/

    Insured Accounts 72,061,713

    Fully Insured Accounts 71,946,133

    % of Insured Accounts 99.84%Partially Insurance Accounts 115,580

    % of Insured Accounts 0.16%

    Balances of Insurance Deposits (ID) 2_/ 139,229

    Balances of Fully Insurance Deposits (FID) 2_/ 84,072

    Balances of Deposits not Covered 2_/ 55,156

    Balance of Total Liabilities 329,012

    FID as % of ID 60.38%

    FID as % of Total Liabilities 25.55%

    FID as % of GDP 10.00%

    Nominal GDP 3_/ 841,140

    Current Coverage Level (in USD) 4_/ 128,6411_/ Preliminary f igures. Sources:CNBV and Banxico.2_/ Figures in millions of USD

    4_/ Considering the UDI value as of June 30, 2009 of $4.245898 Mexican pesos.

    3_/ Estimated current GDP of MXP $11,104.979 millions as of second quarter 2009,

    according to The Ministry of Finance and Public Credit (SHCP).

    I. Overview DIS in Mexico

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    II. Regular activities

    IPAB conducts regular activities for monitoring insured deposits in order tobe prepared to pay depositors when a bank face financial problems.

    While the National Banking and Securities Commission (Spanish acronym,CNBV) is responsible of supervising banks, IPAB monitors the financialstatus and performance of institutions and oversees insured depositsperformance for determining its risk exposure as deposit insurer.

    The mechanisms used by IPAB to carry out the monitoring are:

    1. Insured Deposits Quarterly Report

    IPAB generates an Insured Deposits Quarterly Report (Report), whichaims at monitoring the covered depositsperformance of institutions inMexico, providing data for analysis in case an insured institution fails.

    The Reports financial information is obtained primarily from two sources:

    Data regarding insured deposits - from the Financial Information Office ofBanco de Mexico (Mexican central bank), and

    Data regarding total liabilities of institutions retrieved from the CNBV.

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    2. Inspection Visits1_/

    On 2008, IPAB established insured depositsclassification rulesin order to identify information regarding depositors, insureddeposits, as well as joint accounts.

    IPAB performs inspection visits to verify information regarding

    insured deposits to improve the informations quality in theinstitutionssystems, as well as to gather relevant data in casean institution fails.

    In order to accomplish such visits and to comply with theclassification rules, IPAB has developed the DepositInsurance Monitoring System (Spanish acronym, MOG)

    that allows the DIS to identify relevant information regardinginsured depositors of institutions.

    1_/

    Inspection visits are conducted by the supervisor authority based on a Memorandum of Understanding(MOU) among IPAB and CNBV.

    II. Regular activities

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    MOG - Deposit Insurance Monitoring SystemOverview (1/2)

    System developed by IPAB in order to verify (validate)institutions compliance regarding the classification ofinsured deposits.

    During ordinary times, such validation is carried outconsidering a representative sample of insured accounts

    and insured deposits of a certain institution. MOG allows IPAB to verify the informations consistency, as

    well as to validate:

    Complete information regarding depositors.

    If an insured depositor has more than one account within thesame institution, the MOG matches accounts with depositors

    in order to reimburse up to the coverage limit.

    Uninsured deposits or deposits that are excluded from thescope of coverage of the DIS.

    Accrued interests of accounts as of a specific date.

    II. Regular activities

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    MOG - Deposit Insurance Monitoring SystemOverview (2/2)

    MOG generates a report about informations

    inconsistencies.

    If inspection visits are performed on a regular basis,

    inconsistencies regarding insured accounts data arereduced.

    Therefore, this information becomes more reliable in

    the event of a deposit payoff.

    IPAB makes a follow up of the improvements regardingthe quality of the information.

    II. Regular activities

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    III. Pre-closing activities

    When IPAB determines the deposit payoff as resolution

    method, it uses the total number of accounts included inthe MOG (universe) instead of a single sample, in order toinitiate the depositorsreimbursement process.

    Additionally, IPAB has a system to manage the depositorsreimbursement process for each client using, as input, the

    information generated by the MOG.

    During this process stage, IPAB develops thereimbursement process that will be published.

    In order to carry out the depositors reimbursementprocess, IPAB determines critical resources, such ashuman, financial and technical.

    IPAB determines the funding mechanisms.

    IPAB determines the customer communication strategy.

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    IPAB carries out the insured depositors reimbursement

    process as liquidator or receiver, once the banking supervisorhas revoked1_/ the institutions operating license and the

    IPABs Governing Board has determined the resolution

    method, based on the least cost rule.

    IPABs resolution methods for bank liquidations are:

    Deposit Payoff.

    Purchase and Assumption Transactions (P&A).

    Bridge Bank.

    The Deposit Payoff corresponds to the insured deposits

    reimbursement up to 400,000 UDIS2_/ as stated in Law.

    1_/As mentioned on Article 28, Items I, II or III of the LIC.

    2_/UDIS are inflation adjusted units of account. As of June 30, 2009, one UDI is equivalent to 4.249858 Mexican Pesos.

    IV. Paying insured depositors

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    The Mexican legislation determines up to 95 days from the timethe bank supervisor revokes the institutions operating license, for

    executing the depositorsreimbursement process.

    1 year5 days

    IPABs role as Liquidator or Receiver

    0d 65d 95d5d5 days 65 days 95 days0 days

    Publication of the Reimbursement Process

    Submission of the Claims Reimbursement Form

    Payment of Insured Deposits

    Deadline for legal actions

    Automation

    IV. Paying insured depositors

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    1 year5 days

    IPABs role as Liquidator or Receiver

    0d 65d 95d5d5 days 65 days 95 days0 days

    Once the institutions operating license is revoked,IPABs Governing Board appoints IPAB as receiver.

    IPAB determines the depositors reimbursementprocess, which includes:

    Terms and requirements of the claims reimbursement form.

    Information requirements attached to the reimbursement form.

    Terms and places for distribution-reception of the claim's form.

    Claims reimbursement form validation.

    Means for clarification and consultation of the claim's status.

    Time schedule and places to reimburse depositors.

    IV. Paying insured depositors

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    1 year5 days

    0d 65d 95d5d5 days 65 days 95 days0 days

    Publication of the Reimbursement Process

    Depositors reimbursement process is publishedon:

    The Official Gazette;

    Two nationwide daily newspapers, and

    Other media that IPAB considers appropriate.

    The reimbursement process will be published

    within five business days after IPAB carries outthe institutions liquidation.

    Between 0 and 5 days

    IV. Paying insured depositors

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    1 year5 days

    0d 65d 95d5d5 days 65 days 95 days0 days

    Submission of the Claims Reimbursement Form

    Only insured depositors, individually, must submit theclaims reimbursement form, with the following:

    Copies of contracts. Account statements.

    Other documents that demonstrate the insured depositsownership.

    The claims reimbursement form must be submitted

    according to the terms mentioned in the Payment Processpublished by IPAB.

    Between 5 and 60 days

    IV. Paying insured depositors

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    1 year5 days

    0d 65d 95d5d5 days 65 days 95 days0 days

    Payment of Insured Deposits

    After the Payment Process publications date, IPAB

    will have 90 days to carry out the payment.

    IPAB will pay the balance of principal and accessories

    of insured deposits, up to 400,000 UDIS.1_/

    Payment of insured deposits will be made in Mexican

    currency. The amount denominated in UDIS will be

    adjusted using the present value of the UDI as of theday IPAB executes the payment.

    Between 5 and 90 days

    1_/ UDIS are inflation adjusted units of account. As of June 30, 2009, one UDI is equivalent to 4.249858

    Mexican Pesos.

    IV. Paying insured depositors

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    1 year5 days

    0d 65d 95d5d5 days 65 days 95 days0 days

    Deadline for legal actions

    No legal action may be exercised against resolutionsissued by IPAB regarding payment of insured

    deposits, unless the claims reimbursement form issubmitted within 12 months after the publication ofthe payments procedure.

    Depositors that have not submitted such form within

    the aforementioned term, will maintain all their rightsin relation with the institution, which they mayexercise through the appropriate judiciary channels.

    IV. Paying insured depositors

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    V. Automation in paying insureddeposits

    The reimbursement process main elements are describedbelow:

    Accountingand

    OperationalClosure

    Initial ETL1_/ClaimsReception

    PaymentsCertification

    Payment

    Publication of theReimbursement Process

    1_/ETL = Extract, Transform and Load institutions databases.

    ContingentActivities

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    Activities preceding the initial ETL are performed usinginformation generated by MOG.

    This information is uploaded to the Claims ManagementReimbursement Process System (Spanish acronym,SOG), in order to optimize depositors reimbursementprocess.

    This process is executed before the publication of thereimbursement process.

    Initial ETLClaims

    Reception

    Payments

    CertificationPayment

    V. Automation in paying insureddeposits

    Accountingand Operational

    Closure

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    Input: Banks information;

    Three main input files: Depositor, Accounts and Depositor-Account matching;

    Features:

    Accountsprojected balances on future dates;

    Uninsured deposits or special conditions marks.

    Report rejections and clarifications (warnings and errors).

    Files used as an input for the SOG.

    Deposit Insurance Monitoring Systems (MOG)Description

    Initial ETLClaims

    Reception

    Payments

    CertificationPayment

    V. Automation in paying insureddeposits

    Accountingand Operational

    Closure

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    Deposit Insurance Monitoring Systems (MOG)Description (Information flow)

    Layout 1.

    Personal info

    Layout 2.

    Account info

    Layout 3.

    Relational data

    Data loading- Layouts loading into MOG database (applying layoutspecifications)

    - Validation Stage

    Date and filename

    Structure

    Data types

    Field length

    Catalogs

    Customer

    Data

    DepositData

    Banks

    systems

    Financial

    Statement

    per person, perinstitution

    Accountingand Operational

    Closure

    Initial ETLClaims

    Reception

    Payments

    Certification

    Payment

    Input for theClaims

    ManagementSystem (SOG)

    V. Automation in paying insureddeposits

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    Are fully automated under a WEB-based environment (Intranet

    / Internet). Consolidate all individual accounts held by a single client.

    Perform a pro-rata separation of joint accounts.

    Convert account balances to UDIS.

    Report rejections and clarifications.

    Perform automated checks issuance and wire transfers.

    Register comments made during file review in each step.

    Control of files sent and received in each processstep.

    Issue deviation reports.

    Publish claim status via Internet.

    Accountingand Operational

    Closure

    Initial ETLClaims

    Reception

    Payments

    Certification

    Payment

    Claims Managements Description (SOG)(Reimbursement Process)

    V. Automation in paying insureddeposits

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    Suspension of activities regarding institutions liabilities

    (accounting, operational and informative).

    Depositors financial statements are generated (SOG) as of the

    day IPAB publishes the reimbursement process. Based on institutions data, IPAB determines the amount of

    insured deposits payable to each depositor in UDIS.

    Accounting and Operational Closure

    IPAB, through the failed institution, distributes the claims

    reimbursement forms to depositors. Through the SOG, IPAB validates the information provided by

    each depositor.

    If the information provided is accurate and the insured deposits

    do not exceed the coverage limit, IPAB reimburses depositors.

    Claims Reception

    Accountingand Operational

    ClosureInitial ETL

    Claims

    Reception

    Payments

    CertificationPayment

    V. Automation in paying insureddeposits

    i i i i d

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    ContingentActivities

    Accountingand Operational

    Closure

    Initial ETLClaims

    Reception

    Payments

    certification

    Unregistered liabilitiesanalysis

    Exceptional cases where:Titular and/or account in the SOG do not exist.

    Balances in the SOG do not match.Depositor's name and ID do not match.

    Legal Review (external specialist's participation isexpected)

    Analysis of claims forms with discrepancies between the information andthe SOG

    Ownership.Depositor's identification

    Exceptions review based on the legislation or special requests analysis:Legal representation.More than one depositor for an identical account.Verification of the beneficiarys authenticity.Allocation percentage.

    Missing information.

    V. Automation in paying insureddeposits

    Payment

    i i i i d

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    Accountingand Operational

    Closure

    Initial ETLClaims

    Reception

    Payments

    certificationPayment

    The Bank's internal audit area validates payment's

    procedures compliance.

    IPAB executes the internal process and activities to make

    the corresponding payment. Execution of the payment via the method chosen by the

    depositor in the claims reimbursement form (checks, wire

    transfer, etc.).

    Payments Certification

    Payment

    V. Automation in paying insureddeposits

    C i i

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    VI. Customer communication

    The Financial Safety Net is currently developing a public

    awareness and financial education program.

    Institutions have also made efforts to inform customersabout the financial products covered by IPAB (flyers, radio-spots and information print on account statements).

    Through a wide range of communication mechanisms (i.e.press interviews, press releases, etc.), IPAB keeps mediaand depositors informed about insured institutions, insureddeposits and relevant information regarding the DIS.

    In the event of a bank failure, IPAB would keep depositors

    informed about their insured deposits, as well as the termsand general characteristics of the reimbursement process.

    VI C i i

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    The reimbursement process is published on:

    The Official Gazette;

    Two nationwide daily newspapers, and

    Other media that IPAB considers appropriate.

    Additionally, the reimbursement process will be published

    within five business days after IPAB carries out theinstitutions liquidation/bankruptcy.

    VI. Customer communication

    VII Add i i d

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    VII. Addressing uninsureddepositors and general creditors

    Uninsured banks liabilities include:

    Insured deposits that exceed the coverage limit.

    Banks liabilities such as uninsured deposits, suppliers,creditors, subordinated debt, etc.

    Difference of banks liabilities, when the Financial StabilityCommittee determines the payment of part of the insured

    deposits. Claims against failed institutions occur when bills sent to

    the institution remain unpaid at the time of failure. Suchclaims must be filed against the failed institution accordingto the priority of claims stated in the legislation1_/ once theresolution process is over.

    If there is any excess cash generated by the disposition ofassets and the obligations of the receivership, it must bedistributed among stockholders.

    1_/As mentioned on Article 122 Bis 24 of the LIC.