Foreign banks are under attack in Mexico for charging high fees although the criticisms have been rejected by the Mexican Association of Banks. In September, Oscar Levin, head of the Mexican government’s banking consumer protection agency, sided with those taking a bleak view of Mexico’s banking system by delivering a report that slammed the institutions for charging high financial service fees.
Mr Levin’s comments came after his consumer protection agency, known as Condusef (The National Commission for the Protection and Defence of Financial Services Users), wrapped up a study of the local banking system. Although the report includes a broad view of the sector, it takes shots at Banamex, owned by US-based Citigroup, and Bancomer, the Mexican unit of Spain’s Banco Bilbao Vizcaya Argentaria (BBVA), Mexico’s two largest banks. The study maintains that Banamex and Bancomer charge the highest fees of any Mexican bank for services such as credit cards, checking accounts and withdrawals from third-party cash machines. Regulators must step in and investigate their practices, says Condusef.
In recent years foreign players, including HSBC (UK) and Spain’s Banco Santander, have rushed into Mexico. Indeed, the country is a banking paradise, given its relatively stable economy, a large unbanked population and the $14bn in remittances sent to Mexico from relatives working abroad, which drum up attractive cross-border banking opportunities. Outsiders are also lured to the country’s maturing insurance and mortgage markets, the most recent example being BBVA’s $350m takeover of Mexico’s largest specialised mortgage lender, Hipotecaria Nacional.
However, Condusef argues that as banks increase their presence in Mexico, their income still depends on the disproportionately high fees they charge consumers, especially for credit card use. The report notes that such fees made up half of the banks’ profits in June, up from less than one-third in 2000. It also claims that foreign banks in Mexico charge more for consumer services than they do elsewhere (ie, in countries where banking regulations are stricter). All of this, Condusef claims, lowers banks’ incentive to lend more, since they can profit without doing so.
Jorge Hierro, director of communications and marketing at the Mexican Association of Banks, was quick to reject the Condusef study. He said he strongly disagrees with the conclusions, the methodology and the data used in the report. Mr Hierro said that his association would present a more detailed critique by late September.
However, Mr Hierro and his colleagues may have trouble polishing the increasingly tarnished image many have of the heavily concentrated and foreign-run banking system. Mr Levin’s tongue-lashing bolsters widening concerns among consumer watchdogs – some have even started asking Mexicans to stop using credit cards altogether in protest at the high fees – and government officials, including Central Bank President Guillermo Ortiz.
