client alert 22 financial reform initiative
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7/28/2019 Client Alert 22 Financial Reform Initiative
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Banking and FinanceMexico
Legal Alert
May 2013Number 22
Visit our site:www.bakermckenzie.com/mexico
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TijuanaBlvd. Agua Caliente 10611, Piso 122420 Tijuana, B.C., MxicoP.O. Box 1205 Chula Vista,CA 91912Tel +52 664 633 4300Fax +52 664 633 4399
Financial Reform Initiative
Recent Developments
Submission of Reform: On May 8, 2013, as part of the activitiesof the Pact for Mexico (Pacto por Mxico), the President of theRepublic, Enrique Pea Nieto, submitted the Financial Reform
initiative, which intends to increase credit penetration in Mexico vialegal reforms.
What is sought: The reason for the reform initiative is, throughincreasing the quality and quantity of credit in the country, to allowthe financial sector to contribute to Mexico's economic growth. It isimportant to mention that Mexico's potential market is quite big,and its currently not well-served, since the credit penetration inMexico is around 15% of the GDP, whereas in other countries,such as Colombia and Brazil, it is over 40%.
Contents in a Nutshell
Increase competition among financial institutions and makeit more efficient.
Give greater legal certainty to financial institutions in credittransactions.
Re-characterize the role of development banks in order forthe same to operate in a complementary manner withprivate financial institutions.
Having banks maintain the optimal levels of capitalizationunder Basel III.
The creation of financial incentives aimed at increasing theplacement of credit.
Changes in the Development Banks: The initiative proposes togive more regulatory and financial flexibility to the developmentbanks so that their goal is the expansion of credit with an emphasison the areas considered by the President as a priority for nationaldevelopment.
More competition among banks: The initiative contemplatesmeasures that promote more competition in the financial system inorder to expand the credit offer and improve credit conditions (i.e.,
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reduce interest rates). To do this, the Federal CompetitionCommission will evaluate the competition conditions and will issuerecommendations in this respect.
Strengthening of the capital markets: The initiative intends tostrengthen the capital markets by making it easier for middle-sizedcompanies to have access to and remain listed in the MexicanStock Exchange.
More rights for users: The Financial Reform intends to strengthenthe powers of the financial authorities to evaluate the performanceof banks and of the National Commission for the Defense of Usersof Financial Institutions to grant more freedom of choice to users offinancial products.
Increasing legal certainty for lenders: The initiative also includesmajor changes to various legal provisions that might affect themanner to conduct many judicial and administrative proceedings. Itintends to reinforce the creditor's position, simplify procedures,renovate the regulation to adapt it to international trends, provide
the authorities with better powers that help preserve the nation'sfinancial health, and protect users of financial services.
Improvements in the insolvency procedure: The reform intendsto clarify various relevant aspects relating to insolvencyproceedings that have occurred in recent cases, like subordinatedebt or inter-company debt. The reform also includes the creationof a special judicial procedure to determine a bank's insolvencyand process its liquidation, facilitating banks' bankruptcyproceedings and protecting the rights of savings account holders.
Basel III: The initiative intends to elevate to the status of law therules for capital formation and capital quality set forth in the Basel
III accord.
Current Status
It is under review by the House of Deputies, and it might beapproved by the end of the year.
We will keep you informed on the development of the initiative andits possible approval.
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Contacts
Gaspar Gutirrez-Centeno Mexico [email protected]
Andrs Ochoa-Bnsow [email protected]
Mara Casas-Lpez Mexico [email protected]
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