MEXICO CITY (MNI) - Mexico's banking system is so sound that even under stress it would maintain acceptable levels of capitalization, Mexico's Financial Stability Board said in its first annual report released Monday.
The board ran a number of "stress tests" on Mexico's financial system that found the biggest risks to stability are: an abrupt reversal in capital flows, European fiscal problems affecting local banks and an abrupt deceleration in economic activity.
"In none of the cases did we detect that this could mean a systemic risk for the country," said Finance Minister Ernesto Cordero at an event presenting the report.
The report explains that even if credit portfolios deteriorate due to a bad economy the capitalization index would only drop to 12.4% from 15.8%, and if poor interest rate and currency performance is added, they would only reduce the index to 10.6% by December 2012.
President Felipe Calderon said the report showed that Mexico's financial system "has unprecedented capitalization levels, almost 17%, compared to the 8% international standard."
"Today our banking system is not only well capitalized, but well regulated, well supervised," Calderon said.
Nevertheless, the report also noted that consumer and producer confidence have not fully recovered:
"A worse performance than anticipated in economic activity in the country could affect the stability of the financial system by presenting a significant deterioration in the financial situation of different economic sectors," the report said.
Founded in July 2010 to keep closer watch of the financial system following the economic crisis, the board comprises members of the Bank of Mexico, the Finance Ministry, the National Banking and Securities Commission and the IPAB deposit insurance agency.
Source: http://imarketnews.com
The board ran a number of "stress tests" on Mexico's financial system that found the biggest risks to stability are: an abrupt reversal in capital flows, European fiscal problems affecting local banks and an abrupt deceleration in economic activity.
"In none of the cases did we detect that this could mean a systemic risk for the country," said Finance Minister Ernesto Cordero at an event presenting the report.
The report explains that even if credit portfolios deteriorate due to a bad economy the capitalization index would only drop to 12.4% from 15.8%, and if poor interest rate and currency performance is added, they would only reduce the index to 10.6% by December 2012.
President Felipe Calderon said the report showed that Mexico's financial system "has unprecedented capitalization levels, almost 17%, compared to the 8% international standard."
"Today our banking system is not only well capitalized, but well regulated, well supervised," Calderon said.
Nevertheless, the report also noted that consumer and producer confidence have not fully recovered:
"A worse performance than anticipated in economic activity in the country could affect the stability of the financial system by presenting a significant deterioration in the financial situation of different economic sectors," the report said.
Founded in July 2010 to keep closer watch of the financial system following the economic crisis, the board comprises members of the Bank of Mexico, the Finance Ministry, the National Banking and Securities Commission and the IPAB deposit insurance agency.
Source: http://imarketnews.com
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