Mexico Financial Sector Assessment Program : Development Banks
Several state owned financial institutions operating under different licenses provide credit as well as other financial services to virtually all market segments. State owned financial institutions (SOFIs) that provide credit in Mexico operate unde...
| Main Authors: | , |
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| Format: | Report |
| Language: | English |
| Published: |
World Bank, Washington, DC
2017
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/902511507896510387/Mexico-Financial-sector-assessment-program-technical-note-development-banks http://hdl.handle.net/10986/28603 |
| Summary: | Several state owned financial
institutions operating under different licenses provide
credit as well as other financial services to virtually all
market segments. State owned financial institutions (SOFIs)
that provide credit in Mexico operate under different
licenses including development banks, development agencies
and development trusts. The 2013-2018 National Financing
Plan (PRONAFIDE) stablishes ambitious lendingtargets for
SOFIs with a view to foster financial deepening, resulting
in a pro-cyclical creditbehavior.The Financial Reform of
early 2014 sought to facilitate risk taking by DBs
andimprove their operation to support the achievement of the
PRONAFIDE targets.Currently, DBs support a third of all
credit granted to the private sector, of whichabout 12
percent is first tier lending. DBs provide 19 percent of
credit to the private sector bothdirectly in first-tier (12
percent) and through intermediaries (7 percent). In
addition, DBs guarantee 12.6 percent of the credit provided
by the banking system.Despite rapid credit growth, DBs have
consistently shown sound asset quality and adequate levels
of provisions.Profitability has recently declined as DBs
have lowered loan rates to meet credit targets.Recent growth
portfolio and declined profitability has put pressures in
capitalizationratios in some of the largest DBs, however
management of the capital with a groupperspective has
resulted in capital reallocations among DBs to preserve
ratios above 12percent.Currently, DB operations do not
appear to pose mayor fiscal or financial stabilityrisks, but
there are important concerns regarding the distortions and
inefficiencies that thecurrent expansion of their operations
could create. In addition to showing overall robustfinancial
sector indicators, stress test conducted on the three
largest DBs (Banobras, NAFIN andBancomext) showed their
resilience to a variety of shocks. Mexican DBs aim at
crowding-inprivate sector participation and thus they have
substantial tier-II operations as well as guarantees.
However, rapid expansion of their first tier lending poses
concerns about crowding out while the introduction of
several (albeit small in volume) programs with rate well
below market levels raises concerns about financial
additionally of their operations as well as sustainability
of its financial inclusion efforts. |
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