Shield for Non-Bank Financial Institutions (IFNB)
In response to the need of IFNB on how to manage the financial risks to which they are exposed, we propose the implementation of Shield Project in order to establish Risk Management Rules on IFNB. Shield Project consists of two main elements:
(i) Methodological & Procedural Shield, in virtue of Directions, Policies and Guidelines for risk management are settled on the Entity,
(ii) Operational Shield which ensures that the operation is carried out according to Directions, Policies and Guidelines established in the IFNB.
Risk Management has gained importance in recent years in Financial Institutions, both bank and non-bank. Financial Institutions consider that it is necessary to promote a Culture of Risk Management and Implement internal controls that enable them to streamline operation and thus be prepared to overcome any contingency arising from the financial risks they are exposed.
The need to promote the Culture of Risk Management has accelerated in recent years due to several adverse economic events that took place in different countries and that due to globalization impacted worldwide. Consequently, International Economic Agencies began to develop Agreements aimed at promoting the culture of Risk Management, which have been gradually adopted by Regulators of financial activity.
Nowadays, Risk Management is a need for Financial Institutions because if it has been properly designed it is possible to identify, quantify, evaluate, prevent and reduce financial risks affecting the operation of the IFNB.
Risk Management includes goals, policies, procedures and actions that must follow by the the IFNB in order to identify, measure, gauge, monitor, limit, monitor, report and disclose the financial risks. Likewise Risk Management should foster a culture of risk prevention in and outside the IFNB.
See Fundamentals of Financial Risk Management:
According to the doctrine of Risk Management for Financial Institutions, financial risks can be classified according to their discretion. Consequently we have Discretionary Risks which are those resulting from taking a risk position by the Organization. And Non-Discretionary Risks, which are are those resulting from the proper operation of the Organization, but are not the result of taking a risk position. According to this classification has the following Financial Risks:
Credit Risk, is the potential loss of non-payment by a borrower or counterpart in transactions taking place, including real or personal guarantees, as well as any other mitigation mechanism used.
Liquidity risk, is the potential loss due to the impossibility or difficulty of renewing liabilities and / or contract liabilities in normal conditions as a result of early or forced sale of assets at unusual discounts to meet its obligations, or arising from a position that can not be promptly disposed, acquired or hedged through the establishment of a contrary equivalent position.
Market risk, is the potential loss due to changes in risk factors that affect the valuation or expected results of assets operations , financial liabilities or contingent liabilities arising from interest rates, exchange rates, price indexes, etc.
Operating risk, is the potential loss due to failures or deficiencies in internal controls, errors in processing and storage operations or transmission of information, as well as, adverse administrative and judicial decisions, fraud or theft. Operating risk also includes Technological risk and Legal risk.
Technological risk, is the potential loss due to damage, disruption, alteration and / or failures from the use of hardware, software, systems, applications, networks and any other distribution channel for information in providing services to customers.
Legal risk, is the potential loss for breach of laws and administrative provisions, the issuance of administrative and judicial decisions unfavorable and sanctions.
See Fundamentals of Financial Risk Management:
IFNB in Mexico
In accordance with the laws in force in Mexico, an Entity may operate as an IFNB under one of legal forms listed below.
- Sociedades Financieras Populares - De conformidad con LEY de Ahorro y Crédito Popular
- Sociedades Cooperativas de Ahorro y Préstamo -De conformidad con LEY para Regular las Actividades de las Sociedades Cooperativas de Ahorro y Préstamo
- Uniones de Crédito -De conformidad con LEY de Uniones de Crédito
- Sociedades Financieras de Objeto Múltiple (SOFOM)- De conformidad con LEY General de Organizaciones y Actividades Auxiliares del Crédito
- Sociedades Financieras de Objeto Limitado " en transición" (SOFOL) - De conformidad con LEY General de Organizaciones y Actividades Auxiliares del Crédito
- Entidades Dispersoras de Crédito - De conformidad con LEY General de Sociedades Mercantiles
- Entidades Parafinancieras - De conformidad con LEY General de Sociedades Mercantiles
- Arrendadoras Financieras - De conformidad con LEY General de Organizaciones y Actividades Auxiliares del Crédito
- Empresas de Factoraje - De conformidad con LEY General de Organizaciones y Actividades Auxiliares del Crédito
- Almacenes Generales de Depósito - De conformidad con LEY General de Organizaciones y Actividades Auxiliares del Crédito
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