Mexico - Banking SystemsMexico - Banking
Mexico's commercial banks offer a full spectrum of services ranging from deposit accounts, consumer and commercial lending, corporate finance, trusts and mutual funds to foreign exchange and money market trading. Currently, 48 banks are operating in Mexico; seven of which (Bancomer, Banamex, Santander, Banorte, HSBC, Inbursa, and Scotia Bank) control 78 percent of the market share by total assets.
Mexico's commercial banking sector has been opened to foreign competition. Almost all major banks, except for Banorte, are under the control of foreign banks.
Following the 1994-peso crisis, banks in Mexico have been very cautious in their lending, preferring to provide loans only to their most sound customers. However, banks are now beginning to implement programs for lending to a wider range of companies, although at relatively high rates. In general, small- and medium-enterprises (SMEs) have trouble accessing credit. According to a third quarter 2016 survey of established companies (where companies could select more than one option) by the Bank of Mexico (BANXICO), their main sources of financing were: suppliers 76.8 percent; commercial banks 38.5 percent; other companies and/or HQs 20.7 percent; foreign banks 5.9 percent; development banks 5.6 percent; and debt issuance 0.4 percent.
The Mexican Government has enacted several incentives to encourage more lending to SMEs, and banks have followed suit with new lending policies, but it remains to be seen whether the largest segment of the Mexican economy will gain better access to credit. On January 9, 2014, President Enrique Peña Nieto announced a set of financial reforms which aim to redefine the mission of development banks, promote private financing, and encourage financing with lower rates. These reforms have already started to reduce borrowing costs and to increase access to credit, albeit slowly.
The four goals of the financial reform are: 1) promote lending through the development banks; 2) expand credit from private financial institutions; 3) increase competition in the financial sector; and 4) ensure the security of the Mexican financial system.
Other important aspects of the reform are:
- Strengthening the role of the National Commission for the Protection of Users of Financial Services (CONDUSEF)
- Increasing the role of banking agents (“corresponsales bancarios”)
- Strengthening and modernizing the operation of credit unions
- Promoting the investment funds market
- Establishing a new legal framework for financial entities
- Maintaining the optimal levels of capitalization under Basel III
The Secretariat of Finance and Public Credit (SHCP), the National Banking and Securities Commission (CNBV), and the Bank of Mexico (BANXICO) are the principal regulators of the banking system. The Secretariat of Treasury and Public Finance is concerned with institutional issues, such as licensing, and sets credit and fiscal policies. The National Banking and Securities Commission, a semi-autonomous government agency, is responsible for supervision and vigilance. The Bank of Mexico (the Central Bank) implements these policies and operates inter-bank check clearing and compensation systems.
The Institute for the Protection of Bank Savings (IPAB, replacing the former institution FOBAPROA) acts as a deposit insurance institution. The Mexican Banking Association (ABM) represents the interests of Mexico's banks.
The mission of development banks is to fill financing shortfalls in the commercial banking sector. Mexico has seven government-owned development banks that provide services to specific areas of the economy. The dominant institutions are Nacional Financiera (Nafinsa) and the National Bank for International Trade (Bancomext). These institutions have become primarily second-tier banks that lend through commercial banks and other financial intermediaries such as credit unions, savings and loans, and leasing and factoring companies. Nafinsa's primary program funds SMEs and micro businesses. Nafinsa also undertakes strategic equity investments and contributes equity to joint ventures. Bancomext provides financing to Mexican exports and to SMEs. It also offers working capital, project lending, and training to firms in several specific sectors that require support, such as textiles and footwear.
The other Mexican development banks are Banobras (National Development Bank for Public Works and Services), Financiera Rural (Rural Agriculture Bank), Bansefi (National Savings and Financial Services Bank), Banjercito (Mexican Army, Air Force and Navy Bank), and Hipotecaria Federal (which finances Mexican homeownership through financial intermediaries).
The non-traditional banking sector in Mexico is comprised of exchange houses, credit unions, leasing, factoring companies, and financial lending networks with multiple objectives (SOFOMs). SOFOMs are divided in two categories: Regulated Entities (SOFOM ER) and Non-Regulated Entities (SOFOM NR).
Due to the financial reform, regulation and supervision of SOFOMs has increased. SOFOMs have the obligation to maintain up-to-date information with the National Commission for the Protection of Users of Financial Services (CONDUSEF) and they are required to give information about their borrowers to at least one credit bureau.
SOFOMs may offer financial factoring, leasing, and loans and/or other credit services but they are not allowed to receive deposits from the public.
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