COUNTRY PROFILE
Total land area:.................... 1,923,040 sq. km.
Official language:...................Spanish
Administrative divisions:........31 states and 1 federal district
Legal system:....................... Mixture of U.S. constitutional
theory and civil law system;
judicial review of legislative acts; accepts compulsory ICJ
jurisdiction, with reservations.
Executive branch:................. President is chief of state and
head of government. The cabinet
is appointed by the president.
Legislative branch:.................Bicameral National Congress‹Senate
(128 seats, expanded
from 64 seats at the last election; members are elected by
popular vote to serve six-year terms) and Chamber of Deputies
(500 seats).
Judicial branch:..................... Supreme Court of Justice. Judges
appointed by the president
with the consent of the Senate.
ECONOMIC PROFILE
Currency: New peso (Mex$)
GDP: US$314.2 billion (1997)
Real GDP growth (at market prices): 7.0 (1997p)
GDP (average annual growth rate): 2.6 (1988-1997)
GDP per capita (1990 US$): 3,332.2 (1997)
Consumer price index (average annual growth rate): 20.6% (1997)
Nonfinancial public sector fiscal balance (% of current GDP): -0.7
(1997)
Money supply (M1) (% of current GDP): 6.8 (1997)
Interest rate (nominal average yield on one-month treasury bills, calculated
from the weighted
average rate of discount on daily transactions among dealers): 19.0
(1997)
Current account balance: -US$7.2 billion (1997)
Trade balance: US$0.6236 billion (1997)
Main exports: Manufactured goods, crude oil, oil products, coffee,
silver, engines,
motor vehicles, cotton.
Main imports: Metal-working machines, steel mill products, agricultural
machinery, electrical
equipment, car parts for assembly, repair parts for motor vehicles, aircraft
and aircraft parts.
Nominal exchange rate (Mex$/US$): 10.30 (September, 1998)
Real effective exchange rate (Index 1990=100) end of period: 91.2 (1997)
BANKING SYSTEM
Total number of banks in the system: 43
Types of banks: 38 commercial banks (universal institutions and affiliates),
5
development banks.
Total amount of assets: Mex$1,559.9 billion, or US$175.3 billion (June
1998)
Total amount of deposits in commercial banks: Mex$757.5 billion, or
US$85.1 billion
(June 1998)
Total amount of deposits in development banks: Mex$161.1 billion, or
US$18.1 billion.
Total amount of capital: Mex$118.6 billion, or US$13.3 billion.
BANKING INSTITUTIONS
I. Banking Supervision
1. The entity responsible
for banking supervision is the Comisión Nacional
Bancaria y de Valores (CNBV).
2. The CNBV is a decentralized
agency of the federal public administration, with
technical and budgetary autonomy.
3. The CNBV reports
directly to the Ministry of Finance and Public Credit, although
it exchanges information with the Central Bank (Banco de México).
4. Banks are examined
periodically, generally once a year; however, examiners have
discretion in frequency.
5. Safety and soundness
are categorized on a scale of one to five, with one being the
best grade and five the worst. This system is similar to that of the United
States.
6. Mexico uses a system
similar to CAMEL called MACROS, which stands for the
following: Manejo de Fondos (Liquidity), Adecuación de Capital (Capital
Adequacy), Calidad de Activos (Asset Quality), Rentabilidad (Earnings),
and
Organización y Sistemas (Management).
II. Consolidated Supervision
1. The CNBV supervises all institutions abroad which are affiliated with
Mexican banks.
2. An affiliate of a Mexican bank abroad needs the prior consent of the
Ministry of Finance and Public Credit to open, close or relocate an office
abroad. The opinions of the CNBV and the Banco de México are crucial
to the decision-making process.
3. Whether there is a consent requirement from the home country in opening
a banking office in Mexico depends upon treaties and agreements between
Mexico and the foreign country.
4. The CNBV can conduct on-site and off-site inspections of Mexican banks
in foreign countries. On-site inspections contemplate the presence of an
inspector in institutions that the CNBV believes may have some problems.
This type of visit allows for in-depth analysis of a bank¹s operations,
internal
controls and compliance with regulations.Off-site inspections allow
for
analyzing relevant financial information and market conditions. This type
of inspection is preventative in nature and is performed at the supervisory
authority's discretion.
III. Interest Rates
1. Although subject to a strict policy of supervision, banks are generally
free to set
interest rates on loans as the market dictates.
2. Although subject to a strict policy of supervision, banks are generally
free to set
interest rates on deposits as the market dictates.
IV. Deposit Insurance
1. Deposits are insured by an institution similar to the FDIC in the United
States
called the Fondo Bancario de Protección al Ahorro (FOBAPROA).
2. Generally, depositors are guaranteed 100% of their deposits. Exceptions
are
subordinate obligations, obligations resulting from illicit acts and deposits
collateralized in favor of the Central Bank.
V. Trade Finance
1. Mexico has no official definition of trade finance. Trade operations
are subject
to the same laws as other financing operations in general.
2. Risk for trade finance operations can fall on one of two institutions.
When financial
products are designed and created for private transactions, the risk is
assumed by
the issuing bank. However, if the product is directly or indirectly designed
and
created by the Banco Nacional de Comercio Exterior S.N.C., the risk is
shared
by the bank and the government.
3. Trade finance vehicles receive the same treatment as other classes of
domestic
operations.
4. There are no special reserve requirements for trade finance obligations.
VI. Capital
Adequacy
1. The minimum capital needed to open a bank is 0.12% of the net capital
of the
entire banking system. In 1998, this percentage equalled roughly US$13.3
million.
The objective of this system is to guarantee that smaller institutions
remain
competitive and do not fall behind larger institutions.
2. The minimum net capital required to maintain a bank in operation is
6% of
total and contingent assets and liabilities. This amount should not be
less
than 50% of the capital that the market demands for reasons of credit and
market risk. For example, banks must establish reserves equivalent
to at
least 45% of the past-due loan portfolio.Banks should set aside a
reserve
fund containing at least 10% of earnings from the period up to an amount
equal to the paid capital. Banks should also establish a minimum capitalization
index equal to 8% of assets subject tomarket and credit risk.
3. Adequate capital is graded in the following manner:
Category
Rating
Well-capitalized
1
Adequately capitalized
2
Low capitalization
3
Significantly undercapitalized
4
Critically undercapitalized
5
VII. Asset Quality
1. Assets are classified according to the following categories:
A Mimimum risk There is
no doubt as to the total recovery of principal
and interest.
B Low risk
More risky than normal; not considered solid due
to possible lack of complete financial records
C Medium risk
Weak commitment on part of debtor to pay; possible
problems in debtor´s economic sector; inadequate and
incomplete financial statements.
D High risk
Serious problems in payment due to serious problems in
debtor's economic sector.
E Maximum risk Debtor in
Chapter 11 bankruptcy
2. Under Mexican law, banks must maintain reserves of at least 45% of the
past-due loan portfolio. Under certain circumstances, the CNBV can require
higher percentages, depending on the type of risk presented. For example,
it is
considered prudent for a bank to maintain 65% of mortgage loans with
collateral as reserves.
3. The legal lending limit to one customer is the lower of 10% of net capital
of
the bank or 0.5% of the net capital of the entire banking system.
4. Banks must classify portfolios depending on the nature of the asset.
5. The loan portfolio classification includes the following categories:
trade
investment portfolio, investment portfolio held to maturity and available-for-
sale portfolio.
6. The trade investment portfolio affects the bank's profit and loss statement.
The
available-for-sale portfolio, which is marked to market, affects the capital
account. The held-to-maturity portfolio is valuated by comparing the book
value with the market value at the end of each fiscal year.
VIII.
Liabilities
1. The minimum reserve requirements on bank liabilities can vary depending
on the institution, as it is determined as a function of the total liabilities
and the level of concentration of certain types of deposits.
2. Banks can offer demand deposits, time deposits, savings deposits
and deposits a plazo o con previo aviso. These deposits are
available to the public in local currency and, for natural persons,
foreign currency. Checking deposits in foreign currency are also
available to natural persons who reside in the northern border
region.
3. Under Mexican law, there is no limit as to the maximum level of
deposits that banking institutions can accept in local currency.
4. The level of concentration for liabilities operations is limited.