Although Mexican banks compare favorably in terms of capitalization and solvency internationally, they still face the challenge of increasing penetration of credit in relation to Gross Domestic Product (GDP), to levels of similar economies, acknowledged Moisés Tiktin Nickin, general director of corporate banking at Grupo Financiero Monex, in an interview with Capital Mexico.
“If you see a Mexican bank capitalizing very well, index capitalization (ICAP) of the bank is about 15 percent which surpasses many countries — specific to us, we have very good capitalization, Monex brings 17 percent ICAP. In in terms of capitalization I see a solid bank without problems. However, where the issue is credit penetration, Mexico compared with other countries still provides little. Recent figures speak of little penetration against GDP, below 20 percent, about 17 percent if this is below other countries the challenge is how to grow more, niche banking niche and the new bank should fulfill part of that charge — but not just the small banks, but all banks,” said Tiktin Nickin.
“Local factors mentioned inhibit the growth of credit to levels above that of recent years expose the lack of financial literacy in the country, and the delay that exists to correct the legal framework for providers of funding can execute guarantees more quickly.”
-Moisés Tiktin Nickin. General director of corporate banking at Grupo Financiero Monex.
“It has a lot to do with the culture of payment and the question of execution of guarantees, we still have a certain legal fragility, there is still not a culture of payment, there is in some companies of a certain size with very honorable people, but in general if one company begins to grow disorderly the unsecured credit it’s not guaranteed that non-performing loans immediately begin to grow,” he said.
While the manager says Monex has greatly expanded the funding primarily to businesses, from levels of 8 billion to 12.5 billion pesos at the end of December 2015, implying a growth of 55 percent, he said to allocate a greater flow of credit from the banking industry is the power to know more customer activity by applying greater flexibility in the user information, additional to the credit history data, while in turn, the companies have to be more aware of providing greater transparency to financial intermediaries.
“I think the challenge of banking is how to go from a very rigorous credit examination that makes for great company to begin an assessment of parametric risk where you see certain variables companies that are not reflected in the financial statements, one is simply transactionality, the behavior of your checking or is understand the flows of companies not so much what the financial statements say, but rather for what they can understand of the companies on the basis of their activity. We have many years of analysis of business activity for a long time because they have operated with changes that understand why the information is valuable. You talk about the actual flow that brings the company to make import payments it receives or has exported, little by little the analysis should go perfecting this type information, the credit bureau is also very useful and most companies have it, the tax itself exposes an idea of a figure that is finally not inflated.
Further he recognized that the high cost is absorbing the industry to meet local and international regulatory requirements that will reach the same result in higher prices of services and products.
“Being a bank is expensive and complicated, many of the restrictions that are put for prevention of money laundering or index higher capitalization have their reason to be, no doubt, but the counterbalance is that they’re expensive. We must be very close, banking and authority is necessary to meet international standards and capitalization in Basilea III, but also understand that there are banks that are new or have not the scale to easily meet all requirements. It is difficult to make an asymmetric regulation, but could be evaluated, not the same as a huge bank with all the economic conditions to absorb any costs but that a small bank, on the other hand, financial reform seeks to grow credit the more restrictions have a cost, and the more restrictions there are in capitalization becomes more difficult,” Tiktin Nickin said.
So also he said the cuts to government spending is a good opportunity for banks because generally with or without adjustments, “Mexico tends to require more credit,” which the industry is willing to provide but under strict individual controls particular to each bank.