Attorneys
"Will Mexico's New Banking Sector Rules Have Their Intended Effect?"
Inter-American Dialogue - Latin America Advisor
August 12, 2010
Q. Mexico's central bank (Banxico) on July 26, 2010 imposed several new limits on bank fees and commissions. Among the new regulations are prohibitions against banks charging account holders fees on deposits and loan payments. Also, banks will be required to display the total cost of ATM transactions and allow customers to cancel them if they do not want to incur the charges. How will the new regulations affect Mexican banks? Will the new rules be good for customers? Will banks try to recover any lost revenues in other ways?
A. Carlos Gonzalez/Ricardo Ortiz
The new regulations will certainly impact banks' bottom line, but they will also spur these institutions to increase their offerings to the public. Specifically, the new regulations limit a bank's ability to charge fees to account holders based on amounts on deposit and loan payments. In a bid to increase transparency, banks will also be required to clearly disclose the total costs for specific transactions. These measures should translate into immediate benefits for the consumer in the form of actual savings. But the question is how long these savings will last. Fees and commissions represent an important part of a bank's total income. And while Mexico's banks may be forced to reduce their fees with respect to one set of services, consumers may be hit with new fees related to other products. For example, to offset the decline in commission income, banks may raise the interest rates charged for loans. This increase, coupled with a larger volume of loan activity, will certainly add to the banks' bottom line. But, it may also cut into consumer savings. The long-term impact of these regulations remains to be seen. Mexico's financial institutions are robust and have weathered the economic crisis. However, their success may yet be tempered by the government's desire to further clamp down on the high fees they charge for various services.