|KEY COUNTRY FACTS|
|System of government:||republic (Estados Unidos Mexicanos)|
|Population:||121.7 million (July 2015 est)|
|Currency:||Mexican peso (MXN)|
|FX regime:||free floating|
|GDP:||$2,143bn adjusted by purchasing-power-parity (2014 est.)|
|Other professional financial/banking associations:||Asociación de Bancos de México|
- 1 Financial regulatory framework
- 2 Taxation framework
- 3 Banking service provision
- 4 Clearing and payment systems
- 5 Cash and bank account management
- 6 Liquidity management
- 7 Corporate finance
- 8 Websites
Financial regulatory framework
Bank regulation and supervision
The Mexican financial system is regulated and supervised basically by several entities:
- Central bank, Banco de México (Banxico) – supervises independently the financial system and watches monetary and price stability. It also regulates derivative markets as well as foreign exchange liquidity positions for banks.
- Ministry of Finance, Secretaría de Hacienda y Crédito Público (SHCP) –proposes changes to financial laws, and controls the following commissions:
- -National Banking and Securities Commission (CNBV): regulates and supervises banks, broker-dealers, and securities markets
- -National Pensions Commission (CONSAR): regulates pension funds
- -National Insurance Commission (CNSF): regulates the insurance sector
Additionally, the Banking Savings Insurance Institute, Instituto para la Protección al Ahorro Bancario (IPAB), is controlled by SHCP and is the deposit insurance fund.
Mexican currency floats freely; however Banco de México, in conjunction with SHCP, can intervene in the FX market in order to provide financial liquidity and guarantee monetary stability.
The maximum corporate tax rate is 30%. The flat tax (IETU) which operated as an alternative minimum tax was abolished from 1 January 2014.
- Capital gains – Taxed as income.
- Value added tax (IVA) – The standard rate is 16%. Food and medicines are exempt.
- Tax on dividends – Dividends are not taxed additionally to its taxation as income.
- Tax on interest – Withholding tax applies at between 4.9% and 35%, subject to tax treaties for foreign investors. A 40% rate applies where interest payments are made to a related party located in a low-tax country.
- Revenue protection – Mexico has legislation covering transfer pricing and thin capitalisation.
Banking service provision
A very competitive financial sector exists composed of 45 multiple banking institutions with total assets of $482bn (data as of May 2015, $1=15.38 MXP). Mexico has one of the most solvent banking systems in the world. In January 2013 the Basel 3 capital regime was introduced (without the transition period) and all banks in the system comply with it.
Major commercial banking players
Financial reforms and foreign acquisitions have helped to stabilise the banking sector, which nearly collapsed after the 1995 crisis. However, banking penetration is low, with bank credit to the private sector being at levels of around 31.4% of GDP. A sound financial system, with higher growth rates for the economy should lead to higher credit growth. Currently the five largest banks – by asset size – (four of these foreign owned) control approximately 73% of the market:
- Bancomer (Grupo BBVA);
- Banamex (Citigroup);
- Santander Serfin (Grupo Santander);
- Banorte (Local owners), and
- HSBC (HSBC Group).
Clearing and payment systems
Main payment types
Electronic funds transfers and payments with bank cards (debit and credit) at Point of Sales terminals (EFTPOS) are the most popular means of payment. In the last few years EFTs (Wires), ATMs and EFTPOS have grown significantly. Mexico has a very advanced payments system. Transfer can be done between banks accounts in different banks within seconds for free.
Payment clearing houses
Three systemically important payment systems:
- SPEI (Sistema de pagos electrónicos interbancarios) is a funds transfer system developed and operated by Banco de México. It has replaced SPEUA (Sistema de pagos electrónicos de uso ampliado) to allow faster and safer payment services. This is the main payment system.
- Sistema de Depósito, Administración y Liquidación de Valores (DALI) is the account electronic registry system for securities. It is operated by S.D. INDEVAL and replaced the previous Sistema Interactivo para el Depósito de Valores (SIDV) on November 2008.
- SIAC (Sistema de Atención a Cuentahabientes) is used for transfers and settlements amongst holders of current accounts at Banco de México and also makes final settlements for obligations sent from SPEI, DALI, and Sistema de Cámara (SICAM). SICAM is the clearing house for cheques, electronic funds transfers (TEF) and direct debits (domiciliación). It is operated by CECOBAN.
|Table 1: Payment systems|
|Sistema de Atención a Cuentahabientes (SIAC)||Real time||Banco de México|
|Sistema de Pagos Electrónicos Interbancarios (SPEI) – payments of any value||Real time||Banco de México|
|Sistema de Depósito, Administración y Liquidación de Valores (DALI)-DVP system for securities||Settles and liquidates groups of opera-tions and links payments every two minutes||S.D. INDEVAL, Institución para el Depósito de Valores, S.A. de C.V. El para el Depósito de Valores (SIDV)|
|Sistema de Cámaras (SICAM) – Cheques, Transferencia Electrónica de Fondos (TEF) and Domiciliación de Recibos (direct debit).||Deferred||CECOBAN|
Cash and bank account management
In most cases, banks request domicile and incorporation in Mexico for account opening, particularly when credit is extended. Type of accounts held in Mexican banks are:
- Peso Denominated Cheque Accounts (regular and interest bearing accounts);
- US Dollar Cheque Accounts (regular cheque to interest bearing accounts); and
- Certificates of Deposit (instruments only offered in pesos).
Non-interest bearing accounts are the most widely used. Often, though, customers associate an investment contract (overnight or other short-term) for surplus funds. Other types of investments (funds or treasury instruments) are common as well. The market reference rate (tasa referencia de captación del mercado or TIIE) is around 3.313% (28 days term, July 2015).
Cash pooling is popular in Mexico because there are large conglomerates with a mix of cash rich and cash poor firms. There are also mechanisms for automated investment. Physical cash pooling is preferred to notional (some banks only offer the former).
Banking services remuneration practices
Due to a fall in interest rates over the last few years, payment for services via excess balances has become increasingly unviable; consequently, banks have turned to fee charging. Mexican banks generally charge fees for all services they provide to corporate customers.
Banco de México (BANXICO) intervenes in the market to fulfil its monetary policy goals, affecting rate levels and liquidity via:
- weekly federal government and IPAB issue auctions; open market operations with Bondes D (Bonos de Desarrollo del Gobierno Federal, previously known as BREMs) and securities repurchases;
- management of currency in circulation; and
- intervention in the peso-dollar market via international reserves and bid operations.
|Table 2: Money market instruments by issuer|
|Federal government||Banks local governments||Private and state-owned corporations|
|Federal Treasury Certificates (CETEs)||Zero Coupon IOUs (PRLVs)|
|Federal Government Development Bonds (BONDEs D)||Bank Issued Bonds (Bonos)||Stock Market Certificates|
|Federal Government Development Bonds denominated in UDIs (UDIBONOs)||Industrial Development Bank Bonds||Medium term IOUs|
|Bankers’ Acceptances (ABs)||Lien Bonds|
|Federal Treasury Bonds||Bank Guaranteed Paper||Certificates of Debt Participation, Ordinary or amortisable (CPOs deuda)|
|Federal Government instruments||Real Estate Participation Certificates (CPIs)|
|Government bonds denominated in foreign currency (BONOS UMS)|
|Highway indemnity IOUs with Federal Government Guarantee (PIC-FARAC)||Structured Bonds (Bono empresarial) Debentures|
|* Savings Protection Bonds (BPAs)|
Large treasuries can operate in government and banking paper directly through money market brokers, but they need to hire a settling bank and a custodian. Usual settlement in this market is t, t+1 and t+2. Used occasionally, t+3 and t+4 allow for holidays and special liquidity planning situations. There is no official public information vehicle for quotes of instruments in this market. Available instruments are shown in Table 2. A popular mechanism is the so-called “reporto”: The broker promises a specific yield in exchange for a defined amount and term (max 360 days). Brokers call them “fondeo” (funding), since it allows them to fund their purchases of bank and government paper.
Traded Instruments are:
- convertible debentures; and
- warrants; and
- financial derivative instruments on government fixed income securities, exchange rate and some stocks in the Mexican Derivatives Exchange (MEXDER).
The stock market is small compared with the economy. Mexico has only one stock exchange (BMV). Operations are through stockbrokers and settlement is t+2.
Secretaria de Hacienda
Comisión Nacional Bancaria y de Valores
Banco de Mexico (BANXICO)
Asociación de Bancos de México