Background and Relevance
Intercam Banco, CIBanco, and Vector Casa de Bolsa are Mexican financial institutions that have recently experienced a significant downgrade in their credit ratings. This development comes after the U.S. Department of Treasury accused these banks of enabling money laundering activities related to fentanyl trafficking. Subsequently, the Mexican National Banking and Securities Commission (CNBV) temporarily intervened in these institutions.
Fitch’s Actions and Rationale
Credit rating agency Fitch Ratings lowered the long-term and short-term counterparty risk ratings for Intercam Banco, CIBanco, and Vector Casa de Bolsa. The new ratings are as follows:
- Intercam Banco: Long-term – “B” (down from “AA”), Short-term – “B” (down from “F1”)
- CIBanco: Long-term – “B” (down from “A”), Short-term – “B” (down from “F1”)
- Vector Casa de Bolsa: Long-term – “B” (down from “AA”), Short-term – “B” (down from “F1”)
All ratings are now placed on Negative Outlook, reflecting the significantly more vulnerable credit profiles of these institutions due to potential weaknesses in anti-money laundering practices and the impact on their ability to meet financial obligations.
Impact on Business and Financial Profiles
Fitch highlighted that the downgraded ratings reflect the imminent negative impact on the business and financial profiles of these institutions, given the U.S. Treasury Department’s allegations regarding potential weaknesses in anti-money laundering practices related to illicit fentanyl trafficking. Additionally, certain fund transfer restrictions have been imposed on these entities.
Regulatory Actions and Management Changes
Fitch mentioned that the negative outlook on ratings also accounts for potential regulatory actions and management changes announced by CNBV. These measures aim to address the implications of the U.S. Treasury Department’s announcements on these institutions.
Uncertainty and Future Implications
Fitch explained that the negative outlook on ratings signifies uncertainty about a more substantial negative impact on the credit profiles of these institutions and the possibility of further regulatory actions. There is also a risk associated with new events that could affect their business sustainability.
Fitch expects to resolve the negative outlook once there is greater clarity on regulatory actions and their implications for credit profiles and compliance capabilities.
Potential Rating Adjustments
Should the negative outlook be confirmed, there could be a downgrade of one or more rating notches if events negatively affect the business or revenue sources due to reputational damage or reduced operational capacity.
However, Fitch may remove the negative outlook, affirm ratings, and assign a Stable outlook if the operational event’s effect on business and financial profiles is less than anticipated.
Fitch noted that the upside potential for these ratings is limited in the short term, given their current Negative Outlook status.
Parallel Rating Actions by HR Ratings
Another credit rating agency, HR Ratings, also lowered the ratings for CIBanco and Intercam on the same day due to their ongoing situation.
FIBRA Response
Following these developments, some FIBRA entities have expressed their intention to remove CIBanco as their fiduciary amidst the challenges faced by the bank.
