Background on Key Players and Context
The Mexican financial system, encompassing both private and governmental sectors, is currently navigating one of its most challenging periods in history. This situation stems from accusations and sanctions imposed by the US Department of Treasury against two Mexican banks, Intercam, CI Banco, and a stockbroker, Vector. These entities are alleged to have ties with drug cartels.
Who are the Key Players?
- Intercam: A Mexican financial institution specializing in brokerage services.
- CI Banco: A Mexican commercial bank.
- Vector: A Mexican stockbroker.
- US Department of Treasury: The US government agency responsible for formulating and implementing financial and tax policy.
- Claudia Sheinbaum: The current president of Mexico City, whose administration has made significant strides against narco activities.
- Donald Trump: The former US president, whose administration heightened accusations against Mexico regarding drug cartels.
Why are they relevant?
These accusations have intensified scrutiny on the bilateral relationship between Mexico and the United States, especially as drug cartels are increasingly viewed as terrorist organizations in the US. Despite Mexico’s progress under President Sheinbaum, US officials and influential legislators have escalated their criticisms.
Immediate Impact and Response
The accusations have immediately affected the reputation of Mexico’s financial sector, causing uncertainty. Credit rating agency HR Ratings downgraded the credit ratings of the accused institutions and placed them on a negative outlook.
Government’s Protective Measures
In response, the Mexican government, through the Secretariat of Finance, clarified that no evidence has been provided by the US Treasury. Nevertheless, they are willing to collaborate and coordinate without subordination.
Intervention and Reassurance
Less than 24 hours later, financial authorities announced the intervention of the two affected banks: CI Banco and Intercam. Later that evening, the National Banking and Securities Commission (CNBV) announced the intervention of stockbroker Vector.
The Association of Mexican Brokerage Institutions (AMIB), led by Alvaro García Pimentel, emphasized that clients’ assets are secure and not at risk due to deposits in S. D. Indeval.
Assessing the Risk
The priority of financial authorities has been to safeguard clients’ savings and investments in the involved banks. Deposits are protected by a bank insurance scheme of 400,000 Udis (approximately 3.4 million pesos).
Systemic Risk Evaluation
The Association of Mexican Banks, under Emilio Romano’s presidency, highlighted that the two Mexican banks targeted by the US Department of Treasury do not pose a systemic risk. This implies that even if these institutions face difficulties, they cannot trigger a full-scale financial system crisis.
According to Carlos López Jones, Director of Trends, the combined assets of Intercam and CI Banco amount to around 87.6 billion pesos, which constitutes only 1% of the total banking sector capture. Thus, these amounts do not pose a systemic risk.
Key Questions and Answers
- Q: What has the US Department of Treasury accused Mexican institutions of? A: The US Department of Treasury has accused Intercam, CI Banco, and Vector of having ties with drug cartels.
- Q: How has the Mexican government responded to these accusations? A: The Mexican government has stated that it has not received any proven evidence from the US Department of Treasury. They have, however, taken preventive measures to protect depositors and are willing to collaborate with US authorities.
- Q: What is the extent of the risk posed by these institutions? A: The combined assets of the affected banks represent only 1% of the total banking sector capture, and thus do not pose a significant systemic risk.
Additional Context: Inflation and Monetary Policy
Brief Mention: Despite persistent inflation exceeding the target at 4.51%, Banxico has reduced its reference interest rate for the fourth consecutive time by 50 basis points, placing it at 8%. The central bank is likely to pause or reduce future rate cuts, signaling a more cautious approach moving forward.
