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 Business News | June 2005 
Mexico Banks Pay U.S. Back $116M In Loans
 Tom Barkley - Dow Jones Newswire
Mexican banks paid the government back 1.26 billion pesos (US$116 million) in loans related to the bank bailout of the 1990s, but it is unclear whether that puts an end to the long-running political controversy over the program.
The federal deposit insurance agency, known by its Spanish acronym IPAB, said Sunday that four banks - Grupo Financiero Banorte SA and the local units of Citigroup Inc., Banco Bilbao Vizcaya Argentaria SA and HSBC Holdings Plc. - made repayments on top of 9.5 billion pesos in reductions agreed to last year.
The additional payments were the result of audits into whether the banks had been improperly awarded government notes linked to the US$70 billion (euro56.5 billion) bailout, which followed the so-called Tequila Crisis on 1994-1995.
Of the final reimbursement, Bancomer owed 424 million pesos, with Citigroup unit Banamex paying 611 million, Banorte 144 million pesos and HSBC 77 million pesos.
The results of the audits were released after the Supreme Court voted eight-to-three last Thursday in favor of the executive branch in a dispute with Congress over payments to banks stemming from the capitalization and asset transfer program, which was part of the bailout.
IPAB said that with the reimbursements and reductions, loss sharing, and asset recoveries, the total cost of the capitalization and loan transfer program had fallen by more than half from original estimates to 112.7 billion pesos.
The latest reimbursement by banks marks the end of the crisis in one way, since the existing loans are being exchanged for new debt with a clearer government guarantee, but the controversy is unlikely to go away.
Mexico City Mayor Andres Manuel Lopez Obrador, the front-runner in next year's presidential elections, has made the bailout one of the major targets of his campaign, saying he would seek a review of the loans.
The bailout has been criticized, not only because some irregular or insider loans were included in the program, but because rescued banks were given preferential interest rates in the loan-purchase scheme.
Ursula Wilhelm, a director in the Latin America financial services ratings group at Standard & Poor's, said the reserves put aside by the banks further minimized any impact that the reimbursements may have had.
She said the final costs were in line with her expectations, and that the banking system's return to health since the crisis has ensured a smooth resolution of the loan controversy.
"This is happening at a good time because it's really not hurting either the profitability or the capital of the banks," said Wilhelm. "They can just do the reserves and continue without any major disruption."
She is also optimistic that the bailout issue has finally been resolved, though she acknowledges the potential for further controversy.
"One has to separate the political noise of this topic with a little bit of reality," said Wilhelm, adding that "everybody would lose if there were no agreement."
So while some uncertainty persists, she believes that "you can really say that the crisis is completely over, and now we can look forward." |
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