Sunday, December 10, 2017 01.18PM / ILO Banking / Contributed by Hogan Lovells BSTL SC
March 23 2017 the Ministry of Finance and Public Credit (SHCP) distributed the
first draft of the Financial Technology Bill to several members of the banking
and financial industry.
September 19 2017 the ministry circulated a substantially amended draft of the
bill, which has been renamed the Financial Technology Institutions (FTIs) Law.
law is based on the principles of:
- developing financial inclusion and innovation;
- fostering economic competition;
- ensuring consumer protection;
- preserving financial stability; and
- preventing unlawful transactions.
law aims to regulate the financial services provided by FTIs – including those
which are bound to specific regulations and offered or rendered through
innovative means – as well as the organisation of such institutions and their
financial institutions devised strategies to innovate their practices in
anticipation of the law coming into force. For example, in March 2017 BBVA
Bancomer President Francisco González announced a new $1,500 million investment
in Mexico, which will focus on the development of software and digital
technology over the next four to five years. Further, Luis Robles Miaja,
outgoing president of the Banks of Mexico Association, observed that several
banks are testing biometric control systems in order to verify the identity of
clients that apply to open bank accounts or withdraw large sums of money.
Types of institution regulated by
law recognises two types of FTI:
- crowdfunding institutions, which connect people so that
investors can fund investment seekers through mobile applications,
interfaces, websites or any other means of electronic or digital
- electronic payment institutions, which offer issuance,
management, accounting and transfer of electronic payment services. Under
the law, the funds recorded in an electronic transaction accounting ledger
and kept by an electronic payment institution are considered electronic
the original version of the bill also regulated virtual asset management
institutions. However, due predominantly to comments from the Central Bank
(Banxico) regarding the complexity of regulating virtual assets or
cryptocurrencies (eg, bitcoin), this type of FTI was excluded from the law's
interested in performing the activities attributed to crowdfunding or
electronic payment institutions in Mexico must apply to the National Banking
and Securities Commission (CNBV) for authorisation to operate as a FTI. The
CNBV will grant such authorisation discretionally, subject to approval from the
that wish to operate as FTIs must be incorporated in Mexico.
the law establishes the possibility of operating on a temporary basis under an
innovative model designed for institutions that provide financial services
through different technological tools or means to those available in the
Virtual asset transactions
the law, 'virtual assets' are account units which:
- are electronically recorded and used by the public as a
payment method for all types of legal transaction; and
- can be transferred only through electronic means.
will determine, through general provisions, the virtual assets that FTIs can
use. Notwithstanding the foregoing, in order to carry out transactions using
such virtual assets, institutions must obtain prior authorisation from Banxico.
However, the issuance of regulations authorising virtual asset transactions may
be some way off, as regulators around the globe are still analysing and
understanding the rise of cryptocurrencies and it will be difficult to move
forward without first understanding how the more developed markets are
law establishes the SHCP, the CNBV and Banxico as the main authorities in the
financial technology field. With the agreement of the FTI committee, the CNBV
(with respect to crowdfunding institutions) and Banxico (with respect to
electronic payment institutions) will establish, through general provisions,
the limits of funds that the respective FTIs may maintain on behalf of clients
or which clients may have access to through said FTIs.
law also designates the following bodies as supervisory commissions, which must
operate within the scope of their powers:
- the CNBV;
- the National Commission for the Protection and Defence
of Users of Financial Services;
- the National Commission of the Savings System for
- the National Insurance and Bonding Commission.
law grants powers to each of the aforementioned authorities (although
predominantly to the CNBV), for the purposes of auditing, requesting
information and suspending or revoking authorisations previously granted to
FTIs that infringe on the minimum operation requirements provided for by the
law, among other things.
law also provides for the formation of the FTI committee, which will comprise
six proprietary members. The SHCP, the CNBV and Banxico will each designate two
of the six members.
committee and the CNBV will be responsible for, among other things,
discretionally granting the necessary authorisation in accordance with the law
to ensure that FTIs operate correctly within Mexico.
Authorisation to operate as FTIs
need a permit to operate within Mexico, which will be discretionally granted by
the FTI committee and the CNBV.
obtain authorisation, FTIs must prove to the CNBV that, among other things:
- the operations that they wish to carry out are
expressly provided for in their bylaws;
- they have the appropriate governing bodies and
corporate structure to carry out their operations; and
- they have the necessary infrastructure and internal
controls – such as offices and operating, accounting and security systems
– as well as the respective manuals.
cases where the CNBV, with the previous agreement of the FTI committee,
authorises a company, it must publish the authorisation in the Official
Federal Gazette and specify the type of FTI that it has authorised and the
activities that such FTI can perform in accordance with the law.
that are authorised to perform an operation provided for in the law and wish to
change their line of business or perform an additional activity must request a
new authorisation from the CNBV and submit the corresponding information.
October 2 2017 the SHCP received a report on the bill from the Federal
Commission for Regulatory Improvement (COFEMER).
report analysed the proposed law's cost benefits. Although the Federal
Commission of Economic Competition (FECC) had not sent COFEMER its opinion on
the bill, as requested, COFEMER considered that:
- the regulatory actions contained in the bill are duly
- the bill meets the objectives for regulatory
- the bill will stimulate market efficiency.
October 19 2017 the FECC issued a report on the bill, which proposed as
- The timeframes in which authorities must resolve
requests (90 or 180 days) are too broad and should be reduced.
- The authorities' discretional power to authorise the
implementation of innovative models should be removed. Instead, a set of
legal requirements should be developed, which – once met – should result
in authorisation being granted for the respective operation.
- The two-year authorisation limit to operate an
innovative model should be removed, as should the authorities' discretion
to determine the time limit corresponding to such authorisation.
- It should be expressly established that clients' data
may be transmitted to an FTI or financial entity only where the client has
authorised such transfer and the data's confidentiality is guaranteed.
- As the owners of transactional data are also the users,
financial entities, currency transmission service providers, credit risk
companies and clearing houses must abstain from charging FTIs higher fees
than the cost of the sole operation of making the information available.
Such considerations should be determined by the Supervising Commission or
- As the bill indicates that financial entities, currency
transmission service providers, credit risk companies, clearing houses and
FTIs must cease providing parties access to their clients' information
when there is a vulnerability putting the information at risk, the word
'vulnerability' should be defined.
- A provision obliging credit institutions to grant FTIs
banking services and access to account data that clients have with their
banks should be introduced, given that FTIs are necessary for the
provision and development of corresponding products.
- FTIs should not be limited to using specific
technologies and infrastructure.
- The activities of crowdfunding institutions and
electronic payment institutions should not be limited. Instead, the
prescribed list should state that other activities determined by the
authorities through general provisions are also allowed.
- Tariff regulation should not be stricter than that for
other financial entities.
- The bill should not establish requirements and
procedures that may grant advantages to the entities with which FTIs may
- The law should explicitly state that the actions of
groups or associations (formed by various FTIs to implement and develop
the conduct that their members must comply with) are subject to the limitations
imposed by other laws, especially the Federal Economic Competition Law.
Further, the actions should be overseen in such a way that does not
constitute a contact point that facilitates the exchange of information
and the coordination of strategies.
the suggested provisions, the FECC stated that, in general, the bill could
promote free competition, as it provides legal certainty to innovative
companies in the financial sector.
Senate approved the bill on December 6 2017.
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