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The regulatory regime applicable to banks

Banxico is the central bank of the government, governed by the Bank of Mexico Law. The primary activities of Banxico consist of:

  1. directing monetary policy and controlling inflation;
  2. financing the federal government;
  3. minting coins and issuing bills; and
  4. regulating intermediation and financial services.

Banxico accomplishes these tasks in part by establishing the required characteristics for financial transactions (e.g., mandatory rates, terms and interest).

Banxico issues general provisions and regulations that are applicable to financial institutions, issuers of securities, intermediaries and the public at large. Banxico also has the authority to sanction entities and individuals that do not comply with those regulations. It 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. One of the main functions of the SHCP is to issue 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.

Besides 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 CNBV 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. 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, 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 requirement varies 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 specialised government agency as a deposit insurance institution (IPAB), which secures personal bank accounts up to a maximum of 400,000 investment units (UDIs)), 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.