Reuters logo
Fitch: Mexico Fintech Law Could Mitigate Operational Risks
April 10, 2017 / 7:31 PM / in 7 months

Fitch: Mexico Fintech Law Could Mitigate Operational Risks

(The following statement was released by the rating agency) NEW YORK/MONTERREY, April 10 (Fitch) Mexico's draft financial technology (fintech) regulation law, if passed, has the potential to reduce operational risk, enhance transparency and improve security for borrowers and lenders over time, according to Fitch Ratings. The fintech law, which was distributed by the regulator to select industry participants for discussion in March 2017, could mark a step forward in developing a comprehensive regulatory framework for the sector. Furthermore, it has the potential to alter the competitive landscape and broad market dynamics over the medium-term qualitative aspects that Fitch uses when assigning ratings based on the banks' intrinsic profile. These changes would have implications for banks and nonbank financial institutions (NBFIs) that have been increasing their exposure to fintech firms through equity investments, joint ventures and participation in start-ups. Fitch believes Mexico has significant growth opportunities for fintech considering the country's large size, high rate of penetration of mobile phones and internet and substantial unbanked population. The proliferation of fintech firms reflects this. Mexico has among the largest fintech sectors in Latin America, including around 150-180 start-ups that focus on a wide range of services including payments and remittances, crowdfunding, marketplace lending and financial management. Traditional banks and NBFIs have also recognized the potential growth opportunities through fintech and have been increasing their participation in the sector. Several Fitch-rated financial groups and NBFIs have made investments in start-ups and/or have been developing their own fintech businesses. Fitch believes this trend will continue over the long term. Investment in technology can be positive for financial institutions' credit profiles to the extent that it grows the business and profitability. However, the benefits usually accrue only over the medium and long term. Additionally, the impact will only be positive if accompanied by commensurate robust risk control frameworks and levels of transparency and security as existing business models. Also key is that NBFIs maintain underwriting standards and ensure that new lines of business through fintech subsidiaries or joint ventures do not negatively affect asset quality. The draft legislation would place the supervision of fintech firms under the National Banking and Securities Commission (CNBV) and the Commission for the Protection and Defense of Financial Services Consumers (CONDUSEF). Fitch understands that the proposed regulations are broad-based but include targeted rules for crowdfunding, virtual assets (such as Bitcoin) and payment technology. Crowdfunding companies' assessments of users' creditworthiness could fall under regulation according to media reports about the proposed law. They could also be asked to consult and submit credit information from a credit bureau and communicate their methodology for borrowers' risk to the CNBV, among other nonconfirmed requirements. All fintech companies could be required to list on a registry of companies offering financial services through online platforms and be required to establish controls and have adequate infrastructure to prevent money laundering and protect against cybersecurity risks. Fitch would view these changes, if confirmed and approved, as a credit positive. Rules concerning risk measures could improve asset quality and the performance of fintech companies, as well as making competitive conditions fair for all financial market participants and improving financial inclusion in Mexico. Contact: Alba Zavala Associate Director, Financial Institutions +52 81 8399 9100 Fitch Mexico S.A. de C.V. Prol. Alfonso Reyes No. 2612 Edificio Connexity, Piso 8 Col. Del Paseo Residencial Monterrey, N.L. Bertha Perez Associate Director, Financial Institutions +52 81 83 99 9161 Justin Patrie Senior Analyst, Fitch Wire +1 646 382-4964 33 Whitehall Street New York, NY Media Relations: Alyssa Castelli, New York, Tel: +1 (212) 908 0540, Email: alyssa.castelli@fitchratings.com; Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below