By Erika Torres
Editor's Note: Erika Torres is one of our expert speakers during an 8-day Focus on Mexico Educational Program. She talks about her company, MultiVa, and the Mexican Economy.
Many times we get asked about the banking system in Mexico. Are deposits insured? Are Banks regulated like they are in the U.S and Canada? The following article will shed light on how the banking system works in Mexico.
On this current program, one of our participants commented, "Erika's presentation alone was worth the price we paid for the program!" Wow! Now that's a great endorsement. We think our speakers are excellent, but it's always wonderful to hear that confirmed by someone in the group.
Confidence in visiting Mexico is still high as demonstrated by the recent increase in the number 
of foreigners flying into Mexico. In January 2009, the number of visitors increased by 17% when compared to the same month in 2008.
Now regarding the security of an investment in Mexico; is it safe to bring your assets with you to Mexico?
The Mexican economy is suffering the effects of this global economic crisis but different from the other crisis’s that this country has experienced; this crisis was not caused by Mexican economic errors.
Since the mid-1990’s, Mexico has placed economists in the government administration and because of the last economic crisis in this country, these administrators have made corrections in policy and established many modifications that have strengthened the economic and financial institutions of the country. As a result of these changes, our Mexican economic and financial institutions are healthy and strong enough handle and ultimately survive this new global crisis. In this case, Mexico’s experience in handling their previous economic crisis has positioned Mexico to come out even stronger.
The autonomy of Banco de Mexico (BANXICO), the Mexican central bank, in both function and administration, has allowed Mexico to have healthier and more transparent financial system. The objective of the central bank is to protect the value of the Mexican currency, thereby providing liquidity to the economy.
Also the financial system authorities in Mexico have created the CNBV, (National Banking and Securities Commission). This commission strictly regulates the activities of financial institutions, making sure they are operating according to the law and protecting the concerns of their investors. This system has at times been criticized for being over regulated however, now in the light of what has happened to the US financial system, it seems that regulation is the best way to conserve and protect the savings and investments of the investors whether large or small.
The CNBV classifies the banks in five different categories according to their Capital Ratio (CR). All banks have to meet the minimum CR before the CNBV will notify the bank of the least number of corrective measures to prevent a solvency problem. Should the bank continue to fall below the predetermined minimum CR, the CNBV will intervene and force the corrective measures are taken.
The financial institutions provide the people various options or vehicles to invest their savings and help those investments grow for the future. Also with this capital, the financial institutions facilitate the payment of other operations done in the economy.
Concentrating the saving deposits, the banks are able to provide loans to those who need it for productive activities. Credit is the motor of every economy however; this same credit makes the banks vulnerable to the insolvency of those who received credit.
To protect the savings of investors in Mexico, the Institute of Protection of Bank Savings (IPAB) was created. Its objective is to protect, warranty and pay the bank deposits made by small and medium investors and to further help resolve at the lowest cost, the problems of those banks with solvency difficulties. This institute contributes to the stability of the banking system. The IPAB protects the savings done in bank deposits up to 400,000 UDIS (Units of Inflation), that up to March 23rd 2009 is equivalent to $1’690,372.40 pesos
Bank deposits are understood to be following instruments: Checking accounts, savings accounts, term deposits, certificates of deposit (cd’s), current accounts, etc..
IPAB does not warrantee or protect savings in investment firms, insurers, savings funds, savings and loan companies or brokerage firms. These financial institutions act as intermediaries, so the security of the instrument is the issuer itself.
For example, in the case of instruments issued by the Mexican government, such as CETES, bonds and others, the payments are warranted by the government itself and they are rated AAA. Some other instruments like corporate bonds, private issues, etc are great options as well with ratings of AAA, AA and higher returns.
Most importantly is to have a good financial advisor that understands the Mexican financial markets and will work with you to define the most suitable portfolio according to your needs and objectives of investment.
So in conclusion besides being a beautiful country, with a wonderful climate and warm people YES Mexico, it is a great option to build your investments, whether in real state or financial vehicles.