Article 12 of the Mexican financial reform proposed by Enrique Peña Nieto’s government and submitted to Congress for approval, seeks to amend the Act to Regulate Financial Groups, and includes changes that shall increase the influence of the executive, allow investments between financial institutions of different groups, strengthen corporate governance and improve administrative procedures, as well as increasing transparency, and allowing foreign governments to acquire shares as minority shareholders in Mexican financial institutions.
Thus, regarding the possibility of allowing investments among financial institutions of different groups, the proposal stipulates that those investments can be carried out through the different financial businesses within those groups; therefore, a bank may have an interest in an insurance company of another financial group without the obligation of having to merge or to buy it.
Currently, the only possibility provided is for the holding company to invest directly and with at least 51% of the capital of financial institutions and complementary or auxiliary services companies, which shall be held by the relevant Financial Group.
The legal system does not currently reflect the reality of the Mexican financial system, which is becoming more diversified and competitive each and every day. In this respect, the Mexican president, Enrique Peña Nieto, included six subsections within the section concerning Financial Groups, in order to “have a regulatory framework that suits the new economic and financial conditions within a globalized environment”.
The subsections refer to:
- Modernization of the Corporate Structure. Allowinvestments in financial institutions without having to merge or to integrate them into the group, as long as the holdings of the same do not exceed 50% of the capital of the institution, in which case there will be a merger.
- Substantial improvements in Corporate Governance. Strengthening the board of directors and general management by separating responsibilities and by providing the option of creating one or more committees consisting of independent directors.
- Improved administrative procedures. With the aim of strengthening the corporate functions that can be carried out within a financial group.
- Improvements to monitoring and sanctioning powers. In order to achieve effective consolidated supervision through diverse means of collaboration and the effective exchange of information among national and foreign authorities. Note that this section includes the possibility for foreign governments to participate in the share capital of financial group controlling companies in Mexico.
- Responsibilities and corrective measures. Seek to prevent, and where necessary, correct any problems that may arise and which could affect the financial stability or solvency of either the holding company or of the financial institutions that make up the financial group.
- Coordinating Committees of financial authorities.Whether temporary or permanent, they shall be chaired by whoever is chosen by the Mexican President; and they will seek to be a forum for the coordination of the measures and actions to be carried out or implement by the Ministry of Finance and Public Credit, the respective departments or agencies of the Federal Government and the Bank of Mexico, to ensure the safety of the financial system of the country.
You may view the full proposal in the following link.
Por Funds Society, México