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Mexico's banks to adopt Basel III capital rules in September
August 21, 2012 / 9:43 PM / 5 years ago

Mexico's banks to adopt Basel III capital rules in September

* Mexican banks to be first in world to adopt Basel III

* Rules seek to boost capital buffers

* Mexico’s banks are well capitalized

MEXICO CITY, Aug 21 (Reuters) - Mexico’s banking association said on Tuesday the country’s banks will adopt stricter capital rules known as Basel III in September, sooner than previously expected.

Basel III is the cornerstone of efforts by international regulators following the 2007-2009 financial crisis to increase banks’ capital cushions and make sure the global banking system is more resilient.

Mexico’s banks, the first worldwide to adopt the rules, all have capital levels above the minimum required under Basel III, said Guillermo Babatz, head of Mexico’s banking and securities commission.

The Basel accord requires banks to maintain top-quality capital equivalent to 7 percent of their risk-bearing assets.

“The reason for adopting (the rules) ahead of schedule is that really the system is very strong,” Babatz said at a conference discussing the rules. The commission had previously slated adoption of the rules for the start of 2013.

Adopting the new rules will encourage Mexican banks to stay disciplined and not rely too much on subordinated debt and other types of capital “that are not so resistant in times of crisis,” he said.

Mexican banks avoided the worst of the bank lending boom that prompted government bailouts of banks in the United States and Europe due to conservative loan portfolios.

Bank lending is the equivalent of just 45.5 percent of Mexico’s $1.16 trillion economy, while in Brazil bank lending is 98.4 percent of the country’s $2.5 trillion economy, according to World Bank figures for 2011.

Mexico’s largest three banks are foreign owned: BBVA’s Bancomer, Citigroup’s Banamex and Santander’s Mexico unit.

Santander is currently preparing a global initial public offering of its Mexican unit.

Babatz said adopting Basel III may be an incentive for other banks to consider stock listings as a way to generate high-quality capital.

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