Fears of global banking spread by the collapse of three U.S. banks and the cancellation of government accounts in private banking mark the annual meeting of the country’s bankers.
March 16.- “The Mexican banking system is not contaminated,” said Daniel Becker, president of the Association of Banks of Mexico (ABM), less than a minute after taking the stage to inaugurate the 86th Banking Convention in Merida, “so they won’t ask me the question anymore”. At the event, which brings together top executives of national banks, there are two topics on everyone’s lips: the banking crisis of the last few days and the decision of Andrés Manuel López Obrador’s government to cancel the accounts of all government agencies in private banks.
The timing of the convention is accidentally perfect. On Friday, the collapse of a mid-sized bank in the United States sparked fears of a possible global financial crisis. After Silicon Valley Bank’s investment strategy failed, the bank was intervened by the authorities. Two other U.S. banks followed, while in Europe, Credit Suisse had to borrow $50 billion to strengthen its liquidity. Becker, who is also CEO of Grupo Financiero Mifel, said ad nauseam on Thursday that Mexico is safe, as the financial system’s capitalization ratio is almost 300% – well above international best practices, he said.
In response to the panic unleashed by the crisis in these banks, the European Central Bank said it is “prepared” to inject liquidity if necessary, while in the US, Treasurer Janet Yellen said in an appearance on Thursday that the “banking system remains sound”. The National Banking and Securities Commission (CNBV) assured on Wednesday that “banks operating in Mexico have solid levels of capitalization, liquidity and quality in their credit portfolio.” “None of the local systemically important banks have a significant concentration in larger depositors or in any particular sector of economic activity,” added the CNBV.
The convention is the only time of the year when the full Federal Government, including Mexico’s president, meets with the banking elite and, on this occasion, López Obrador set a confrontational tone before even landing in Mérida. On Wednesday, his Administration published in the Official Gazette of the Federation a decree requesting the agencies to cancel their accounts in private banks and move their resources to a government institution, such as the Banco del Bienestar, founded during this six-year term. On this issue, Becker assured that it is a “reordering” of accounts, without going into details on the implications this could have on commercial banks.
Outside of the scheduled press conferences, talks and panels, in the corridors of the Yucatan International Convention Center, these two topics dominated the conversations among the attendees, who are estimated to number 1,000 workers in the banking sector. When it comes to the feared contagion that a financial crisis could have on the country, attendees are calm. “I don’t think we have anything to worry about,” commented one manager at a stock exchange, but he warned, “for now.” Memories of bank runs in Latin America’s history have made banks learn their lesson and be well capitalized, agreed some attendees.
When it comes to the implications of government agencies taking their resources out of private banks and depositing them in government banks, the tone changes. “If you ask me which was worse for my business, the pandemic or López Obrador, I will tell you López Obrador,” said one businessman, a provider of technology for financial services. The president’s decisions to cancel the construction of a new Mexico City airport, as well as trade disputes with the US, have translated to a lack of investment, impacting business.
This is the first year that the convention is being held outside of Acapulco, Guerrero, its traditional venue. While some directors who are members of the ABM, the largest association of the sector in the country, assure that insecurity was not the reason for the change of venue, others confirm that it was. The decision was made after a series of assaults on the highway from Mexico City to Acapulco last year, they say.
The Secretary of Finance, Rogelio Ramirez de la O, the Governor of the Bank of Mexico, Victoria Rodriguez, and Lopez Obrador himself will speak at the event this afternoon. The program also includes a speech by former U.S. Secretary of State Hillary Clinton on Friday. In addition, Becker will hand over the presidency of the ABM to Julio Carranza, CEO of BanCoppel.