| | |  Business News | May 2009 
Mexico's Congress Could Revive Bill To Regulate Bank Charges
 Ken Parks - Dow Jones Newswires
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 |  | Rates should be set by the market and trying to regulate them through the Bank of Mexico or through a law isn't beneficial for the market.
- Antonio del Valle |  | | |
Mexico City - Mexico's lower house of Congress could breathe life back into a bill that would give the central bank greater authority to regulate the financial sector after the legislation failed to be put to a vote in April.
Legislation left over from the ordinary legislative session that ended April 30 could come up for review this summer if lawmakers approve a special session, or in the next ordinary session starting in September.
Banks have been in Congress's cross-hairs for several years due to public outrage over fees and a surge in defaults on credit-card loans in recent quarters.
Congressional elections in July, in which all 500 lower house seats are in play, have also given added momentum to legislation aimed at curbing bank fees and interest rates.
Lenders are an easy political target given the dominant position of foreign investors in the banking industry. Banco Bilbao Vizcaya Argentaria SA (BBV) and Banco Santander SA (STD) of Spain, Citigroup Inc. (C), HSBC Holdings PLC (HBC) of the U.K., and Canada's Bank of Nova Scotia (BNS) control nearly 70% of loans and deposits.
Although the lower house in April approved legislation that strengthens the consumer protection agency responsible for policing the financial sector, a bill that would have expanded the Bank of Mexico's regulation of banks and finance companies never made it to the house floor owing to a heavy legislative backlog.
Measures in the bill included giving the Bank of Mexico the power to establish the interest rates banks pay on deposits and charge on loans, banning some types of fees altogether.
Threats by some lawmakers in both houses of Congress to impose specific interest rate caps were left out of the final version, much to the relief of lenders who argued that artificial rate limits would restrict credit to a large segment of the population.
"Rates should be set by the market and trying to regulate them through the Bank of Mexico or through a law isn't beneficial for the market," said Antonio del Valle, chief executive of niche bank Banco Ve Por Mas, at a recent press conference.
The bill also sought to increase competition in Mexico's electronic payment system, especially in credit card transaction processing, which is controlled by two networks, Prosa and e-Global. Both networks are owned by banks.
All payment networks would have to obtain operating approval from the Bank of Mexico and connect with each other free of charge. The central bank would also be tasked with lowering entrance barriers to investors who want to open new processing networks.
Marcos Martinez, chief executive of Mexico's No.3 bank, Grupo Financiero Santander SAB (SANMEX.MX), said in an interview that a provision in the bill that would require the central bank to periodically inform Congress about the state of the banking industry could work in banks' favor.
"I think a large part of Congress is going to be surprised by the efforts of banks in two areas; competition and offering credit under much more favorable conditions to people who need it. Today, the man on the street thinks interest rates are very high and that there isn't much competition," he said.
ken.parks(at)dowjones.com |
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