LatinFinance - March/April 2013 - 56

Mexico banking

US customers,” says Soto. Around 5% of Multiva’s client base is
higher minimum capital ratios required under Basel III rules,
even though the country is fast tracking the rules. Since January, US citizens, and the bank expects to spend around $5 million this
year complying with the new tax rules. “However, FATCA must
the country has required that banks hold total capital equal to
be met, so all our US customers that fall under its requirements
10.5% of risk weighted assets, and core tier one capital of 7%.
Those are capital ratios that, under the global agreement, banks will have to be reported.”
Banco Interacciones’s Moreno says he hopes US citizens will
are not required to hold until the phase-in period is complete in
realize that higher interest rates in Mexico will compensate for
2019.
paying higher taxes under FATCA.
Banco Multiva says Basel III will not dent its bottom line
“Mexican interest rates are higher than in the US, so
or lending ability. It strengthened its capital by selling a 2022
American investors can make around 3% to 4% more through
subordinated bond in September.
different investments,” Moreno says. “Exchange rate volatility is
“It won’t affect us,” Carlos Ignacio Soto, general manager at
also low.”
Banco Multiva, tells LatinFinance. “We have a capital index or
Ernst & Young has been
of 15.2% after raising 1 billion
working with a large Mexican
pesos ($80 million) in a bond
multinational bank for over
offering last year.”
Strong buffers
a year to help it comply. “So
Multiva could sell another
Mexican banks’ regulatory capital, % risk weighted assets
far, they have spent around $4
bond next year to raise more
20%
million, including Ernst’s fees, for
capital if necessary, Soto says.
Tier two
Tier one
18%
Mexico,” Quirós says.
Similarly, Banco
16%
Estimating that each of
Interacciones is ready to meet
Mexico’s 20 large and medium
Basel III, Fernando Moreno,
14%
sized lenders will spend around
executive director for financial
12%
$5 million getting ready for
institutions at the bank, says.
10%
FATCA, the new rules could cost
Mexico’s decision to implement
8%
the country around $150 million
the legislation before other
6%
to implement, Quirós forecasts,
countries will further improve
4%
adding that such a figure is
confidence in the sector, he
conservative.
says.
2%
“International investors
0%
Raising the reputation
know how strong and solid
May-2010 Nov-2010 May-2011 Nov-2011 May-2012 Nov-2012
Nevertheless, the high costs will
Mexico’s banking system
Source: Bank of Mexico, Moody’s
be manageable, says Ricardo
is,” Moreno says. “They also
Rodríguez, senior manager for tax
know that the sector is heavily
and legal services at Deloitte in Mexico City. And they will have
regulated, not just by the CNBV but also by the tax authority,
benefits, improving the view of the country’s banks, which was
ministry of finance and central bank.”
tainted when HSBC agreed to pay a $1.92 billion settlement with
the US government over money laundering allegations last year.
FATCA scrutiny
“The process to identify US citizen accounts will be very
Meanwhile, Mexico has negotiated a six month extension – to
burdensome,” says Rodríguez. But Mexican banks have already
January 2014 – for when banks need to begin reporting US
been toughening up their know your customer processes and
customers under FATCA. Despite the push-back, lenders must
stepping up their anti-laundering controls so fulfilling FATCA will
start preparing.
become a natural extension to this process, he says. “All of these
Mexican banks have to review and report US customers
activities are interlinked and can only benefit the industry,” he
with balances above $50,000, with extra requirements for those
adds.
above $1 million. That means they will need to invest heavily
The agreement will also help Mexico’s tax authority nab
to modernize their IT systems and strengthen their know-yourwealthy citizens holding taxable accounts in the US.
customer procedures.
For the US, the Mexican agreement is a big gain in its battle
“Depending on the banks’ size and technological levels,
to convince other countries, including Latin American ones, to
implementation costs could be significant,” Ernst & Young tax
implement the legislation.
manager Pedro Quirós in Mexico City says.
Mexico is the third country to sign a FATCA agreement with
Many banks are creating new divisions to deal with FATCA,
the United States after the United Kingdom and Denmark did so
Quirós says. Special units will be important for banks eager to
in September and November 2012 respectively.
be tactful with wealthy clients. “They must be very precise and
“The US can now say: ‘if Mexico signed it, why can’t you?’”
careful with how they handle everything to not annoy these
Quirós says. “It will be interesting to see, however, whether other
customers,” Quirós says.
countries [with cooler US political relations] like Venezuela,
Losing some US customers is a concern.
Ecuador, Argentina and Bolivia will sign this.” LF
“It’s a reality, and not just for us, that banks could lose some

56 LatinFinance

March/April 2013



LatinFinance - March/April 2013

Table of Contents for the Digital Edition of LatinFinance - March/April 2013

Latin Finance - March/April 2013
Contents
A moment in time
Cry of battle
Top of the crop
Comeback club
Dollar pain
Africa: Commodities in common
China: Funding the frenzy
Russia: Beyond energy
Highs and lows
Back-up plans
Infrastructure: Upping the ante
Real estate funds: Reaching overseas
Brazil Stars Index: Managing best
Sub-sovereign debt: Short-term troubles
Banking: Basel high ground
Real estate funds: Fibra advance
Infrastructure: Counting the cost
Casualties of war
LatinFinance - March/April 2013 - Latin Finance - March/April 2013
LatinFinance - March/April 2013 - Cover2
LatinFinance - March/April 2013 - Contents
LatinFinance - March/April 2013 - 2
LatinFinance - March/April 2013 - 3
LatinFinance - March/April 2013 - 4
LatinFinance - March/April 2013 - 5
LatinFinance - March/April 2013 - 6
LatinFinance - March/April 2013 - 7
LatinFinance - March/April 2013 - 8
LatinFinance - March/April 2013 - 9
LatinFinance - March/April 2013 - 10
LatinFinance - March/April 2013 - 11
LatinFinance - March/April 2013 - A moment in time
LatinFinance - March/April 2013 - 13
LatinFinance - March/April 2013 - 14
LatinFinance - March/April 2013 - 15
LatinFinance - March/April 2013 - 16
LatinFinance - March/April 2013 - 17
LatinFinance - March/April 2013 - 18
LatinFinance - March/April 2013 - 19
LatinFinance - March/April 2013 - Cry of battle
LatinFinance - March/April 2013 - 21
LatinFinance - March/April 2013 - Top of the crop
LatinFinance - March/April 2013 - 23
LatinFinance - March/April 2013 - 24
LatinFinance - March/April 2013 - 25
LatinFinance - March/April 2013 - 26
LatinFinance - March/April 2013 - Comeback club
LatinFinance - March/April 2013 - 28
LatinFinance - March/April 2013 - 29
LatinFinance - March/April 2013 - Dollar pain
LatinFinance - March/April 2013 - 31
LatinFinance - March/April 2013 - Africa: Commodities in common
LatinFinance - March/April 2013 - 33
LatinFinance - March/April 2013 - China: Funding the frenzy
LatinFinance - March/April 2013 - 35
LatinFinance - March/April 2013 - Russia: Beyond energy
LatinFinance - March/April 2013 - Highs and lows
LatinFinance - March/April 2013 - 38
LatinFinance - March/April 2013 - 39
LatinFinance - March/April 2013 - Back-up plans
LatinFinance - March/April 2013 - 41
LatinFinance - March/April 2013 - 42
LatinFinance - March/April 2013 - Infrastructure: Upping the ante
LatinFinance - March/April 2013 - 44
LatinFinance - March/April 2013 - 45
LatinFinance - March/April 2013 - Real estate funds: Reaching overseas
LatinFinance - March/April 2013 - 47
LatinFinance - March/April 2013 - 48
LatinFinance - March/April 2013 - 49
LatinFinance - March/April 2013 - Brazil Stars Index: Managing best
LatinFinance - March/April 2013 - Sub-sovereign debt: Short-term troubles
LatinFinance - March/April 2013 - 52
LatinFinance - March/April 2013 - 53
LatinFinance - March/April 2013 - 54
LatinFinance - March/April 2013 - Banking: Basel high ground
LatinFinance - March/April 2013 - 56
LatinFinance - March/April 2013 - Real estate funds: Fibra advance
LatinFinance - March/April 2013 - 58
LatinFinance - March/April 2013 - Infrastructure: Counting the cost
LatinFinance - March/April 2013 - 60
LatinFinance - March/April 2013 - 61
LatinFinance - March/April 2013 - 62
LatinFinance - March/April 2013 - 63
LatinFinance - March/April 2013 - Casualties of war
LatinFinance - March/April 2013 - Cover3
LatinFinance - March/April 2013 - Cover4
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