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News Article

Mexican Banking Sector Remains Solid and Ready to Help: ABM

By Gabriela Mastache | Thu, 05/21/2020 - 13:19

According to analysts and experts, the Mexican banking sector is solid and has enough capabilities to brave the COVID-19 economic crisis, making it an asset in the current pandemic. Luis Niño de Rivera, President of ABM, said that unlike previous economic crisis, where the banking sector had been one of the catalysts of the crisis, now it will be a key element to brave out the storm. “The banking sector in this occasion is part of the solution, unlike during difficult times we have experienced in the past like in 2008, 1994, 1987, 1982 and 1976, where the banking sector was part of the problem,” said Niño de Rivera.

Though in the past the Mexican banking sector has been subject to governmental rescues (like with the Fobaproa experience), in the current scenario banks managed to create a program destined to protect consumers. In late March, almost all banks had announced measures that included postponing the payment of credits, house mortgages, individual revolving and non-revolving credits including auto loans, personal credits, payroll credits, credit cards and microcredits. The measure, while providing relief for clients, also generated a safety net for banks to avoid an increase in their overdue portfolio, which was bound to happen should the measure had not been put in place.

However, Niño de Rivera said that the role of the banking sector was far from over and mentioned in a videoconference reported by El Economista that banks would continue to provide support for businesses and clients. Eduardo Osuna, Vice President of ABM and Director General of BBVA in Mexico mentioned that unlike previous crisis, the Mexican banking sector does not have solvency, infrastructure, investment or portfolio problems. “Today, we comply with all the Basel III requirements, which were structured after the 2009 crisis, and we are among the very few countries that comply with all the regulation,” said Osuna. The Basel III requirements are an international regulatory framework for banks that touches upon regulation, supervision and risk management topics.

Osuna also mentioned that in the current juncture, the Mexican banking sector does not need any solvency programs from the government nor from their headquarters. “We want to continue providing support for our clients, which is what we have been working on in the past weeks,” Osuna said.

However, for the support the banking sector has been able to provide, the country’s central bank has been fundamental. In late April, Banxico announced support of MX$750 billion (US$30.14 billion) to the country’s financial system to eliminate the current bottleneck that exists for new credits, especially for companies that do not have access to financing in the current economic juncture. With this measure, Banxico contributed to strengthening the existing solidity of Mexico’s financial system.

Despite the measures, it does not mean that the country’s financial system is out of the woods yet. The US has registered almost 38 million unemployment applications as a result of the COVID-19 pandemic and COPARMEX has warned that without any governmental support for salary payments, by June unemployment could reach 1.3 million. This level is bound to impact banks’ overdue portfolios. Hence the need for them to continue strengthening their programs to protect consumers. 

 

The data used in this article was sourced from:  
El Economista, Mexico Business News, Bank for International Settlements
Gabriela Mastache Gabriela Mastache Senior Journalist and Industry Analyst