Legal Formalism and Financial Myopia: The Judicial Misreading of Accredited Solvency

The Mexican banking system, like every other around the world, is built on the principle that banks do not operate with their own money. They intermediate resources, channeling public savings toward productive activity.

In Mexico, the law acknowledges this reality in Article 86 of the Ley de Instituciones de Crédito (“LIC” — the law that regulates private banks), which clearly states: as long as a bank is not in liquidation or bankruptcy, it is presumed to be solvent and is therefore exempt from posting bonds or legal guarantees, including those required to obtain injunctions in amparo proceedings (the constitutional challenge of acts of authority). This principle is recognized across other jurisdictions as well.

The intent behind provisions like Mexico’s Article 86 of the Credit Institutions Law — which deems banks financially solvent and relieves them from posting legal guarantees — is partly to avoid impeding the financial intermediary function with procedural hurdles. In essence, if a bank is known to be sound, requiring it to set aside cash in court is seen as an unjustified obstacle that “freezes” money meant to circulate. From a theoretical standpoint, the critique is clear: capital that is static is not performing its economic function. Money tied up as a legal safeguard is analogous to money hoarded under a mattress — during that time, it finances no productive activity.

Yet in courtrooms across Mexico, judges routinely ignore this article. Banks are stripped of the very legal presumptions meant to facilitate their operation. The result is not just doctrinal inconsistency — it is economic dysfunction. A legal system that hampers the circulation of money, stifles liquidity, and contradicts the very policy goals the law seeks to uphold.

What is troubling is not only the frequency of this judicial misreading, but its justification. Some courts argue that Article 86 must yield to Article 132 of the Ley de Amparo, which outlines general rules for granting suspensions and requiring guarantees. But this reading ignores the nature of Article 86 as a specific financial norm — one embedded in a regulatory framework that presumes bank solvency as a matter of public interest. It is not merely a procedural exception; it is a recognition of the systemic role of banks.

This dissonance reveals a deeper problem in legal interpretation. When judges treat banks like any other party, they fail to see the function of the financial system as a whole. They elevate the symmetry of litigation over the asymmetry of economic roles. Banks, unlike ordinary parties, are vessels of liquidity. Requiring them to immobilize capital in the form of bonds or deposits is not just unnecessary — it is counterproductive. The money is not theirs to hold; it is theirs to circulate.

Some may argue that this exemption gives banks an unfair advantage. But the rationale behind Article 86 is not institutional favoritism — it is system preservation. Solvent banks are presumed to be reliable precisely so they can continue performing their role in the economy. If courts undermine this presumption, they inadvertently weaken the safeguards built into the law. And in doing so, they confuse equality before the law with blindness to institutional purpose.

There is also a striking irony in how courts handle risk. While the financial system operates with fine-tuned models of systemic risk, judges approach Article 86 with a kind of abstract suspicion. They demand guarantees not because there is a credible threat to the public interest, but because they view legal uniformity as a higher value than functional solvency. The result is a regime where legal formality eclipses financial logic.

This judicial posture betrays a failure of interpretation. Legal norms must be read in context — not only in their doctrinal setting, but in their institutional and economic purpose. Article 86 is not a procedural footnote; it is a financial norm designed to keep the wheels of credit turning. If judges do not apply it accordingly, they risk turning legal instruments into dead letters — norms that say one thing but mean nothing in practice.

What is most concerning is not merely that courts have failed to apply the law in light of banks’ role in the economy — it is that not a single judicial opinion has examined the actual purpose of the norm. None has asked why Article 86 exists, or how its underlying rationale connects to financial function. This absence of analysis reveals a troubling gap: a lack of financial understanding not only among judges, but also among litigants, who have failed to frame the issue accordingly. If lawyers do not argue the economic logic behind the norm — and courts do not inquire into it — the legal system ends up applying banking law without grasping banking reality. The result is interpretation in a vacuum, where formal process is preserved, but substantive coherence is lost.

To restore coherence, courts must shift their lens. They must understand that when banks are required to post guarantees, the cost is not borne by the institution — the economy bears it. The capital that should be fueling investment is diverted into procedural limbo. And the courts, far from protecting justice, become unwitting obstacles to financial flow.

In a country where liquidity is precious and the rule of law is fragile, the judicial system cannot afford to misread the function of the norms it applies. Article 86 is not ambiguous. Its meaning is clear. What remains is for judges to read it not just legally, but economically.

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