The Mexican banking industry is one of the most developed in Latin America. Its strict capital controls and relatively low interest rates have contributed to its strong performance. An influx of foreign investment has further contributed to its resiliency.
Mexico’s financial system consists of all types of banks, including commercial banks, development banks, savings institutions, cooperative credit societies, and others.
These banks are regulated by the Ministry for Finance (Secretaría de Hacienda y Crédito Público) through a series of regulatory agencies: Banco de México (the central bank), Comisión Nacional Bancaria y de Valores (the securities commission), and the Instituto para la Protección al Ahorro Bancario (an independent entity).
The government also has various programs designed to stimulate banking activity in rural areas through microcredit loans. These loans are for small business owners or individuals who want to start businesses but do not qualify for normal financing options.
The Central Bank
Banco de México, or the Central Bank, is a constitutionally-created institution responsible for managing the country’s fiscal policy. It’s also responsible for supervising all banking transactions, ensuring the bankers and financial institutions adhere to the law.
The National Banking and Securities Commission (CNBV) under the Ministry of Economy (SE) regulates the securities market. The institution works to protect companies and their shareholders by closely controlling the activities of investment markets.
Commercial banking
Commercial banks are the backbone of the banking system and are responsible for a large portion of lending activity. They offer various services, including accepting deposits, providing loans, and selling financial instruments such as money market mutual funds or certificates of deposit.
The commercial banks also provide individuals and corporations with access to foreign currency through the foreign exchange market, which is regulated by Banco de México. Commercial banks are supervised by Banco de México and are subject to minimum capital requirements.
There are currently 48 chartered banks in Mexico. Seven of these together have a 78% industry market share by total assets. These seven are:
- BBVA Bancomer
- Santander
- HSBC
- Scotia
- Inbursa
- CitiBanamex
- Banorte
The commercial banking sector is heavily influenced by foreign investment. All of these major banks (except for Banorte) are under the control of foreign entities.
Investment Banking
Investment banks work with companies to help them raise capital or finance by issuing debt and equity securities. These banks rarely provide traditional services such as checking accounts, savings accounts, advice on mortgages and loans, or other consumer-facing deliverables.
Mexican investment banks can provide specialist advice to companies involved in mergers and acquisitions, restructuring, initial public offerings, or secondary offerings for companies based in the nation.
Other Financial Institutions
Besides the commercial and investment banks, Mexico has other financial institutions that perform similar functions. These include:
Development Banks
These banks are government-owned and lend money for projects like building power plants or expanding roads. An example is the Banco de Ahorro Nacional y Servicios Públicos.
Investment Funds
Private companies across Mexico raise money from investors to invest in stocks, bonds, real estate, or other assets — like hedge funds and mutual funds in the United States.
Savings and Loans (S&Ls)
Also called thrifts, these financial institutions offer savings accounts and home mortgage loans at low interest rates but do not issue credit cards or provide personal banking services beyond basic checking accounts.
Securitization
Securitization is a process that involves the creation of credit and debt products by transforming a pool of receivables into securities to be sold on financial markets.
In Mexico, securitization has been used as an alternative funding source for home mortgages. This process involves the transformation of mortgage loans into tradable bonds (securities) that can be traded on financial markets.
This process allows banks and other lenders to obtain funds from investors instead of traditional sources such as depositors or other lenders.
One example of Mexican securitizations includes credit card receivables, which banks use as collateral for obtaining loans from institutional investors (mostly pension funds).
Another example is asset-backed securities based on mortgages granted by commercial banks and mortgage companies. Such mortgages include residential properties bought with long-term mortgages issued by financial institutions or real estate developers.
Debt Capital Markets
The Mexican debt capital market is considered one of the most developed in Latin America.
The country’s large and well-developed financial sector offers investors a wide range of options for investing in Mexican sovereign and corporate debt securities (e.g., government bonds, corporate notes, and municipal offerings).
Mexico has also been increasingly active in providing liquidity to its securities issuers through repurchase agreements (repos) and other financing instruments, including derivatives contracts.
An Overview
Mexico’s banking system is stratified, with large commercial banks taking a considerable market share. Banco de México is the primary regulator for the industry, ensuring all participants adhere to the set fiscal policies.
Development banks, investment funds, and debt capital markets also provide alternative financing options for locals and foreign investors. Consulting a tax and finance legal team can help you navigate the complex financial environment in Mexico.
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