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Mexico Banking Overhaul to Increase Lending and Boost Growth

21 March, 2014

Economic growth in Mexico is expected to rise this year and in the future thanks in part to recent fiscal reforms that will increase competition between banks and encourage them to provide greater access to credit and lower rates. Taking effect in 2014,the reforms aim to spur growth in the financial sector through support of development banks and increased competition.

“The reform package promotes a proper balance between measures to stimulate lending and those that foster a strong and stable financial system,” stated Jose Isabel Trejo Reyes,president of Mexico’s Commission of Finance.

The reforms will also give Mexico’s central bank,Banco de Mexico (Banxico),greater power to regulate fees and interest rates,as well as to offer additional guarantees and provide greater legal certainty for contract enforcement and the recovery of loans. In addition,the nation’s credit providers are set to receive better credit information from borrowers and a subsequent reduction in administration requirements,resulting in more affordable loans.

“From 2014,Mexico will count on a financial system that,in addition to being more solid and robust,will turn responsible lending into a growth engine,” shared Mexican President Enrique Peña Nieto. 

In addition,Barron’s reports that Mexico investment banking revenue reached a record high in 2013 – a growing trend that is showing no signs of slowing down any time in the foreseeable future. The growth was reportedly led by a rise in equity offerings last year,with total revenues soaring upwards of $556 million,which is more than 40 percent higher than in 2012.

“Consumer and retail tops the industry ranking,pulling in $142 million,nearly five times the amount in 2012,” writes Barron’s. “Real estate and financial institutions followed.”

Finally,Mexico’s Central Bank Governor Gustin Carstens has once again confirmed that Mexico is more than prepared to handle any financial shocks resulting from the global financial crisis,including the unlikely event that the U.S. should default on any debt.

“Mexico is well prepared to confront it,” Carstens stated according to Reuters,citing the nation’s more than $170 billion in reserves and considerable credit line from the International Monetary Fund. “We have taken due care in the management of international reserves and we are well provisioned.”

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