Bank Liquidation in Mexico: Some Considerations on its Legal Regulation
By Víctor Manuel Peña Briseño, PhD
OVERVIEW.
In Mexico, liquidation of credit institutions is not regulated by the Mexican Insolvency Law of May 2000. The applicable legislation is the Law of Credit Institutions( LIC 1) of July 1990, which was last amended in January 2024. As judicial liquidation of commercial banks under Articles 225 to 269 is performed, Mexican banking legislation does not use the words“ insolvency” or“ bankruptcy”, with the ostensible purpose of the legislator not to create panic among bank users.
Judicial liquidation of banks is also governed by the provisions of the Bank Savings Protection Law of January 1999( LIPAB 2), which was last amended in May 2022, and the Payment Systems 38 Law of December 2002.
Declaration of judicial liquidation of a multiple banking institution whose authorization to organize and operate as such has been reversed and falls under capital extinction is appropriate, and it will be understood that an institution is under this situation when its assets are not sufficient to cover its liabilities in accordance with an opinion of the financial information provided by the banking institution when such event occurs, and which is issued in the basis of criteria for accounting records established by the National Banking and Securities Commission, the regulatory and supervisory banking body in Mexico( Article 226, LIC).
1
LIC- By its acronym in Spanish
2
LIPAB – By its acronym in Spanish
Judicial liquidation will be heard by the District Judge( Federal Judge) of the registered address of the banking institution in question. The request to have a judicial liquidation of a multiple banking institution declared is the exclusive power of the Institute for the Protection of Bank Savings( IPAB 3). This same Institute will act as the judicial liquidator and may perform this role through its personnel or by means of attorneys-in-fact appointed and retained thereby at the expense of the assets of the bank in liquidation.
LIMITED PROTECTION TO SAVING CLI- ENTS.
In terms of Article 11 of the LIPAB, deposits that are not in excess of 400,000 Investment Units( UDIS 4) per person, individual or legal entity, which is equivalent to $ 8.428416 as established by the Bank of Mexico as of April 9, 2025, amounting to MXN3,371,366.40 Mexican pesos and converted to US dollars, which as of the same date and according to the peso-US dollar exchange rate, are equivalent to US $ 162,972.65 according to the exchange rate as of the same date.
When the IPAB pays these guaranteed obligations, it is subject to collection rights within the liquidation procedure, with preference over the collection rights related to the uncovered balance because it has exceeded the limit described above, to the detriment of the senior savers, a condition which will be discussed later.
For the purposes of this study, it is important to clarify that in terms of Chapter III of the LIPAB, every banking institution is compelled to pay ordinary and extraordinary fees to the
3
IPAB – By its acronym in Spanish
4
UDIS – By its acronym in Spanish
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