Mexico’s Senate approved a bill that seeks to boost bank lending as part of a government effort to revive economic growth in Latin America’s second-biggest economy.
The proposal will give banks more incentives to make loans by facilitating the recovery of collateral on non-performing loans. It also increases the role of development banks, spurs competition between commercial lenders and streamlines the bankruptcy process.
Senators are still debating details on the bill, and it may have to go back to the lower house for final approval if changes are made.
Mexico is seeking to revive risk taking in a banking industry that lends less as a percentage of gross domestic product than before the financial crisis of 1995, according to Grupo Financiero BBVA Bancomer SA.
Commercial bank lending last year was equivalent to 17 percent of GDP, less than half the rate of Brazil and the lowest of any Latin American nation, according to the International Monetary Fund.
“To the extent that banks get more guarantees, there’s encouragement to increase lending, and some of the red tape and bottlenecks potentially disappear, there’s the expectation that credit could flow more,” Benito Berber, a strategist at Nomura Holdings Inc. in New York, said in an interview before today’s vote.“It’s good, something that could have an impact in the next two years or so.”
Government Agenda
President Enrique Pena Nieto, who took office Dec. 1, has spent his first year pushing a pro-growth agenda, including opening the state-controlled energy industry to more private investment.
Through the Pact for Mexico, an alliance with the biggest opposition parties, he passed an education bill to make teachers more accountable for performance and a law to spur increased competition in telecommunications.
Lawmakers in October also approved a tax overhaul to reduce the government’s dependence on oil revenue and this month authorized the widest budget deficit in four years as they seek to boost an economy growing the least since the 2009 recession.
The 2014 budget forecasts a deficit of 1.5 percent of GDP, compared with a 0.4 percent deficit planned by the government for this year. The economic changes could boost potential growth to more than 5 percent within two or three years, central bank Governor Agustin Carstens said in an August interview.
The banking overhaul alone may add 0.5 percentage point to annual GDP growth within three years, he said in May.
‘We’re looking to facilitate the access to credit, to have more clear rules, and give guarantees and certainty to everyone involved in the financial sector,’’ Jorge Luis Lavalle, a senator from the National Action Party, said in an interview yesterday.
bloomberg.com
The proposal will give banks more incentives to make loans by facilitating the recovery of collateral on non-performing loans. It also increases the role of development banks, spurs competition between commercial lenders and streamlines the bankruptcy process.
Senators are still debating details on the bill, and it may have to go back to the lower house for final approval if changes are made.
Mexico is seeking to revive risk taking in a banking industry that lends less as a percentage of gross domestic product than before the financial crisis of 1995, according to Grupo Financiero BBVA Bancomer SA.
Commercial bank lending last year was equivalent to 17 percent of GDP, less than half the rate of Brazil and the lowest of any Latin American nation, according to the International Monetary Fund.
“To the extent that banks get more guarantees, there’s encouragement to increase lending, and some of the red tape and bottlenecks potentially disappear, there’s the expectation that credit could flow more,” Benito Berber, a strategist at Nomura Holdings Inc. in New York, said in an interview before today’s vote.“It’s good, something that could have an impact in the next two years or so.”
Government Agenda
President Enrique Pena Nieto, who took office Dec. 1, has spent his first year pushing a pro-growth agenda, including opening the state-controlled energy industry to more private investment.
Through the Pact for Mexico, an alliance with the biggest opposition parties, he passed an education bill to make teachers more accountable for performance and a law to spur increased competition in telecommunications.
Lawmakers in October also approved a tax overhaul to reduce the government’s dependence on oil revenue and this month authorized the widest budget deficit in four years as they seek to boost an economy growing the least since the 2009 recession.
The 2014 budget forecasts a deficit of 1.5 percent of GDP, compared with a 0.4 percent deficit planned by the government for this year. The economic changes could boost potential growth to more than 5 percent within two or three years, central bank Governor Agustin Carstens said in an August interview.
The banking overhaul alone may add 0.5 percentage point to annual GDP growth within three years, he said in May.
‘We’re looking to facilitate the access to credit, to have more clear rules, and give guarantees and certainty to everyone involved in the financial sector,’’ Jorge Luis Lavalle, a senator from the National Action Party, said in an interview yesterday.
bloomberg.com
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