Mexico Financial Sector Assessment Program : Development Banks

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...

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Bibliographic Details
Main Authors: World Bank Group, International Monetary Fund
Format: Report
Language:English
Published: World Bank, Washington, DC 2017
Subjects:
DEVELOPMENT BANKS
INSTITUTIONAL MANDATE
REGULATION
ACCESS TO FINANCE
Online Access:http://documents.worldbank.org/curated/en/902511507896510387/Mexico-Financial-sector-assessment-program-technical-note-development-banks
http://hdl.handle.net/10986/28603
id okr-10986-28603
recordtype oai_dc
spelling okr-10986-286032021-05-25T09:04:55Z Mexico Financial Sector Assessment Program : Development Banks World Bank Group International Monetary Fund DEVELOPMENT BANKS INSTITUTIONAL MANDATE REGULATION ACCESS TO FINANCE 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. 2017-10-30T16:18:34Z 2017-10-30T16:18:34Z 2016-07 Report http://documents.worldbank.org/curated/en/902511507896510387/Mexico-Financial-sector-assessment-program-technical-note-development-banks http://hdl.handle.net/10986/28603 English Financial Sector Assessment Program (FSAP); CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Economic & Sector Work :: Financial Sector Assessment Program Economic & Sector Work Latin America & Caribbean Mexico
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic DEVELOPMENT BANKS
INSTITUTIONAL MANDATE
REGULATION
ACCESS TO FINANCE
spellingShingle DEVELOPMENT BANKS
INSTITUTIONAL MANDATE
REGULATION
ACCESS TO FINANCE
World Bank Group
International Monetary Fund
Mexico Financial Sector Assessment Program : Development Banks
geographic_facet Latin America & Caribbean
Mexico
relation Financial Sector Assessment Program (FSAP);
description 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.
format Report
author World Bank Group
International Monetary Fund
author_facet World Bank Group
International Monetary Fund
author_sort World Bank Group
title Mexico Financial Sector Assessment Program : Development Banks
title_short Mexico Financial Sector Assessment Program : Development Banks
title_full Mexico Financial Sector Assessment Program : Development Banks
title_fullStr Mexico Financial Sector Assessment Program : Development Banks
title_full_unstemmed Mexico Financial Sector Assessment Program : Development Banks
title_sort mexico financial sector assessment program : development banks
publisher World Bank, Washington, DC
publishDate 2017
url http://documents.worldbank.org/curated/en/902511507896510387/Mexico-Financial-sector-assessment-program-technical-note-development-banks
http://hdl.handle.net/10986/28603
_version_ 1764467259136278528

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