The banking system is regulated by four main governmental agencies: the Bank of Mexico (Banxico) as the Mexican central bank, the Ministry of Finance and Public Credit (SHCP) as the ministry within the executive branch in charge of regulating financial institutions, the National Banking and Securities Commission (CNBV) as an agency that directly depends on the SHCP and the Financial Consumer Protection Commission (Condusef).
As at December 2021, the Mexican banking market was composed of 50 retail banking institutions, the same number as the previous year – however, BNP Paribas México started operations in May 2021, and the banking licence granted to Accendo Banco was revoked in September 2021 – six development banks and 23 financial groups.2 The five largest retail banking institutions in the market, based on the amount of assets, resources collected from the public at large and participation in loan portfolios, were BBVA México, Santander, Citibanamex, Banorte and HSBC, respectively.3
In September 2021, Accendo Banco had its licence revoked for not having the required mandatory capitalisation reserves or liquidity coverage ratio, as well as due to capital accounting deficiencies in such regard; Accendo Banco is currently undergoing liquidation. In addition, in January 2022, Citibanamex announced its intention to sell and leave its consumer banking and corporate banking businesses in Mexico. Such sale process will begin in the coming months. The manner and terms under which the exit and sale of such businesses in Mexico will take place will be determined by Citibanamex, and will be aligned with the objective of maximising value for its shareholders and strengthening the businesses that Citibanamex will sell as well as those that it will retain. The exit process is subject to several legal conditions and approvals, including applicable regulatory approvals.4
In 2021 seven bank institutions were fined by the Federal Antitrust Commission following an investigation into monopolistic practices and the altering of prices in the brokerage market of government-issued debt securities. Those illegal practices were carried out between 2010 and 2013. The total fine amount was of US$7.7 million. Deutsche Bank and Barclays Bank received the largest fines of US$433,406 and US$316,336, respectively. The other bank institutions fined were Santander, Banamex, Bank of America, BBVA Bancomer, JP Morgan and 11 individuals and traders.5
At the end of December 2020, the President introduced a bill to amend the Bank of Mexico Law, which would force Banxico to purchase foreign currencies that banks cannot repatriate. However, this bill has been heavily criticised by the Mexican Banks' Association, as well as Banxico itself, stating that the Mexican economy could be adversely affected if it is approved. During 2021, this bill lost its priority status within the legislature: it was not discussed, modified or approved by the house of representatives within the 2021 parliamentary term.
The regulatory regime applicable to banks
Banxico is governed by the Bank of Mexico Law. Banxico's primary activities consist of:
- directing monetary policy and controlling inflation;
- financing the federal government;
- minting coins and issuing bills; and
- regulating intermediation and financial services.
Banxico accomplishes these tasks, in part, by establishing the required characteristics for financial transactions (e.g., mandatory rates, terms, interest and financial costs, among others).
Banxico issues general provisions and regulations that are applicable to financial institutions, issuers of securities, intermediaries and the public at large. It also has the authority to sanction entities and individuals that do not comply with those regulations. Banxico regulates certain aspects of banks as they relate to payment systems and derivatives, among others.
The SHCP is a ministry of the Federal Public Administration. It evaluates, surveys, promotes and organises financial services rendered by banking and non-banking agents. Through its separate agencies, including the CNBV and the Insurance and Bonds National Commission, the SHCP evaluates and surveys banks, bonding and insurance companies, brokerage houses and all other entities within the financial system.
The SHCP has the authority to issue rules to develop the provisions of the Credit Institutions Law (LIC), which is the main body of law governing banks and their transactions, including the general rules applicable to credit institutions issued by the CNBV. One of the main functions of the SHCP is to issue anti-money laundering rules.
The CNBV is in charge of granting authorisations, and inspecting and surveying all financial activities, transactions and entities; it also acts as an enforcement body for those entities under its surveillance. All financial activities, which nowadays also include fintechs, are mainly coordinated and regulated by the CNBV; as such, it can be considered the most important government agency for such matters.
Authorisations to undertake banking and other regulated financial activities will commonly have to be filed with, inter alia, the SHCP, Banxico and the CNBV, but the authorisation is ultimately issued by the CNBV.
In addition to the LIC as the main body of banking law, there are two additional regulations that are of importance for banking institutions: the general rules applicable to banks issued by the CNBV6 and Circular 3/2012 issued by Banxico (provisions applicable to transactions of credit institutions and rural financial institutions).
Condusef is another regulatory agency in charge of the surveillance and regulation of banks, but from a consumer protection standpoint. Condusef is in charge of regulating the marketing and offering of services by financial institutions to the public at large, and as the registry of adhesion form contracts. It also serves as a mediator of disputes between financial consumers and financial institutions.
Retail banking institutions must be incorporated as corporations under Mexican law,7 their by-laws must be approved beforehand by the CNBV and the authorisation for their incorporation must be published in the Federal Official Gazette. Mexican law provides the opportunity to incorporate fully fledged retail banks or niche retail banks, depending on the activities that they intend to perform; hence, the minimum capital stock and reserve requirements vary according to the kind of bank.
The capital structure of banks also varies based on whether a foreign financial institution owns 51 per cent or more of the capital stock. A bank whose capital stock is owned by a foreign financial institution is called an affiliate banking institution. To form one of these entities, a bilateral international treaty must exist between Mexico and the country where the holding entity resides.
Affiliate banking institutions' capital stock is composed of Series F and Series B shares. The former may be acquired only by a foreign bank or a foreign controlling entity, and shall not be lower than 51 per cent. Series B shares may be freely subscribed and grant limited voting rights.
The capital stock of retail banks that are not affiliate banking institutions is composed of Series O and Series L shares: Series O shares are common shares and may be freely subscribed; Series L shares, which may represent up to 40 per cent of the issued shares, may also be freely subscribed and have limited voting rights.
Finally, development banks are decentralised agencies of the federal government known as national credit companies, which may perform credit operations in the same way as retail banks. However, their purpose is to render services for the development of specific segments of the national economy, promoting, for instance, foreign commerce or the development of public works, and to offer financial services to promote innovation, boost environmental sustainability and promote the financial inclusion of micro, small and medium-sized enterprises and small rural producers.