Background on the Mexican Banking Sector
The Mexican banking sector is dominated by a powerful oligopoly, with BBVA, Santander, Banorte, and HSBC controlling 85% of all banking commissions in the country. These four banks hold between 60% and 70% of the Mexican banking market, according to private consultancy Tendencias, led by Carlos Lopez Jones.
Government’s Plan to Reduce Bank Commissions
The Mexican government, inspired by the now-defunct Federal Competition Commission’s arguments, is proposing to limit bank commissions. This move targets the powerful banking oligopoly, particularly affecting BBVA, Santander, Banorte, and HSBC.
The proposed reduction in commissions for credit card transactions aims to increase business access and promote the use of plastic money over cash. This initiative is supported by the Association of Banks of Mexico (ABM) president, Emilio Romano, who emphasizes the need for equitable implementation across the entire chain.
Details of the Proposed Regulations
Last week, the Secretariat of Finance, Banco de México, and the National Banking and Securities Commission released “General Provisions Applicable to Payment Networks.” These regulations aim to encourage the increased use of credit and debit cards.
Article 57 proposes a 0.3% charge for debit card transactions and a 0.6% charge for credit card transactions. Romano confirms that authorities have committed to dialogue with banks regarding these changes.
Potential Impact on Banks and Customers
Private analysts predict that capping commissions will significantly reduce banks’ operating margins. In the short term, larger banks may offset this by not reducing credit interest rates, despite the declining reference rate from Banxico.
This situation implies that a substantial portion of the population may not benefit from interest rate reductions implemented by Banxico.
The real impact will likely fall on bank customers rather than the institutions themselves, as larger banks function like an oligopoly setting prices that smaller entities follow.
Banks Strengthen Controls Against Money Laundering
Following the Financial Crimes Enforcement Network’s (FCEN) ruling against three Mexican financial institutions, banks in Mexico have decided to implement additional self-regulatory measures against money laundering and illicit financing. They propose legally binding these measures for non-bank financial intermediaries to avoid similar fates as CI Banco, Intercam, and Vector Casa de Bolsa.
Additional Insights
- Citi’s Tax Payment in Mexico: Citi is expected to pay taxes in Mexico following the sale of Banamex, with Fernando Chico Pardo’s proposal gaining traction due to the involvement of influential businesspeople.
- Intercam’s Post-Intervention Status: Intercam is the first bank in Mexican history to emerge from government intervention, with its license still valid and evaluating its path forward.
- ABM’s PR Advisor: Ideal PR, led by Daniel Karam, will serve as the external public relations advisor for the Association of Bancos de México.
