--Mexican regulator says banking system well-capitalized,
growing
--Regulator seeks ways to encourage more Mexicans to use
banks
--Foreign banks dominate Mexican banking sector
By Amy Guthrie
MEXICO CITY--The scope of Mexico's Banking and Securities
Commission, the CNBV, is expanding as the country attempts to
balance the need to safeguard individual savings with the
multi-faceted demands of a growing economy.
The commission, which has acted as regulator for both commercial
banks and capital markets since 1995, has been given the additional
responsibility of monitoring more than 300 foreign exchange houses
for potential money-laundering activity, while also being tasked
with seeking ways to encourage more Mexicans to use banking
services.
"Our responsibilities and capacities are growing, but the size
of the commission hasn't necessarily grown," CNBV President Jaime
Gonzalez Aguade said in an interview. Mr. Gonzalez, who in the past
served as head of Mexico's Federal Electricity Commission and the
government's community development bank, Bansefi, took charge of
the commission in December.
Despite the mountain of work, Mr. Gonzalez has assumed
responsibility for a booming and well-capitalized financial sector.
Last year, the 42 banks the CNBV monitors reported a combined
credit portfolio worth 2.75 trillion pesos ($216 billion), up 12%
on the year, while deposits increased 9% to MXN3.22 trillion. As of
Jan. 1, Mexican banks had all complied with the first stage of
Basil III minimum capital requirements, well ahead of most
international peers.
In capital markets, meanwhile, the pipeline of public offerings
is brimming as Mexican firms seek to leverage the country's darling
status among emerging-market investors to fund expansion. It is the
CNBV's task to authorize those securities sales. The Mexican
economy is expected to grow 3.6% in 2013, for a fourth-consecutive
year of robust expansion. That growth, coupled with rising levels
of employment, is broadening the Mexican middle class.
"This is a market that's growing in all respects, so we've got a
lot of work," Mr. Gonzalez said.
The regulator also looks out for suspicious activity that could
indicate insider trading, and is tightening oversight of sales
practices at small brokerage houses to ensure that risky issuances
aren't dumped on banks' retail clients. The CNBV hopes to implement
stiffer requirements this year to make sure that brokerages and
banks document their clients' appetite for investment risk, so that
authorities can better detect when customers acquire securities
that could put their savings in jeopardy.
The regulator has detected cases in which entire debt issuances
underwritten by a bank were sold to the bank's own clients, Mr.
Gonzalez said, adding that such sales tend to be of low-grade
credits, sometimes with maturities that are likely to outlast the
client's own lifespan.
Several brokerages have complained about the increased paperwork
and oversight.
"The banks can complain all they want, but there's evidence that
they aren't always transparent with their clients when they sell
some issuances," Mr. Gonzalez said, declining to offer specific
examples of missteps.
Last year, the CNBV fined Mexican brokerage Vector Casa de Bolsa
more than MXN7 million for infringements such as recommending that
investors buy structured notes that didn't fit those clients'
investment risk profiles, and for not having provided clients with
adequate information to make informed investment decisions.
The administration of Mexican President Enrique Pena Nieto, who
took office in December, is also looking to increase financial
inclusion while cutting costs for bank customers. According to
World Bank data, 27% of Mexicans over the age of 15 have a bank
account compared with 56% in Brazil and 88% in the U.S., while only
13% of Mexicans over 15 have a credit card. Many of the unbanked
cite high fees as a deterrent for opening accounts at financial
institutions.
Loosening credit, though, must be done carefully. Consumer
defaults on credit card debt, for instance, spiked after Mexican
banks made an effort to issue more credit cards between 2005 and
2008. "It's a complicated equilibrium," said Mr. Gonzalez, since
the regulator must ensure that banks have enough reserves to back
the credit they bestow, while public policy dictates that consumers
should have more access to credit.
The CNBV is studying its framework to see whether it has wiggle
room to encourage more services for the unbanked. "If the
regulation is preventing an expansion in credit, or impeding
competition that could allow for lower rates, maybe there is space
to change it," he said.
Authorities would also like to see the local units of
foreign-owned banks list shares on the Mexican Stock Exchange, as
Grupo Financiero Santander Mexico SAB (BSMX, SANMEX.MX) did last
year. As an incentive, the CNBV would count subordinated
convertible debt that the banks issue towards their capital ratios,
provided that those banks list shares on the local bourse.
So far the country's two-largest banks, Banco Bilbao Vizcaya
Argentaria SA (BBVA, BBVA.MC) unit BBVA Bancomer and Citigroup Inc.
(C) unit Banamex, have chosen to instead inject more capital
directly into their operations. Both units are major contributors
to their parent companies' bottom lines.
"If the shares were in Mexico, the dividends would stay in
Mexico, because you have to pay all your shareholders," said Mr.
Gonzalez. "As owners of their businesses, legitimately they can
take their dividends where they want."
Write to Amy Guthrie at amy.guthrie@dowjones.com
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