A new board of regulators has been set up in Mexico to identify future dangers to the country’s financial system and head off crises like the global market meltdown of 2008.
The Financial Stability Board will coordinate the response of government agencies to systemic dangers to the financial system, President Felipe Calderon and Finance Minister Ernesto Cordero said.
‘This board will have the authority to supervise institutions in an integrated way and consider the viability of individual financial entities and the system as a whole,’ Calderon told banking executives.
The board ‘will allow for the early identification of situations that could endanger the stability and solvency of the Mexican financial system,’ Cordero added.
Banks in Mexico and other emerging market powerhouses like Brazil weathered the financial crisis fairly well because they had no exposure to subprime housing loans, but their credit card businesses and consumer loan portfolios were hit by defaults as unemployment increased.
After having suffered homegrown financial crises in the 1990s, regulators and bankers had learnt lessons that helped them ride the 2008 meltdown that began in the United States.
‘Because of the measures we adopted starting in 1995 until the beginning of this decade, the quality of capital in the Mexican central bank is much better than that of most other countries,’ said Central Bank Governor Agustin Carstens.
As the European Union struggles to keep Greece’s financial crisis from contaminating other economies, regulators in Mexico already hold banks to strict standards compared to many developed countries. According to Guillermo Babatz, head of Mexico’s National Bank and Securities Commission, the more pressing challenge for the country is the creation of better rules to ensure bank liquidity.
The Financial Stability Board’s members will include officials from the central bank, the finance ministry, the IPAB deposit insurance agency and the National Banking and Securities Commission.
Cordero also highlighted rules enacted last year to increase banks’ reserves against losses in their credit card portfolios. In 2011, similar rules will be applied to increase reserves against consumer credit and mortgages.
Mexico will also unveil regulations reducing the amount of money banks can lend to their controlling shareholders, Cordero added.
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