Reuters: Regulatory News: Mexico regulators back rule on foreign-owned banks

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Mexico regulators back rule on foreign-owned banks Oct 22nd 2012, 20:06 By Alexandra Alper and Tomas Sarmiento MEXICO CITY | Mon Oct 22, 2012 4:06pm EDT MEXICO CITY Oct 22 (Reuters) - Mexican financial authorities on Monday backed a new rule that cracks down on the ability of foreign banks to siphon funds from their Mexican subsidiaries to shore up capital shortfalls back home. The rule, released by the central bank earlier this month, requires banks to seek permission at least 20 banking days before making any transfers to an affiliate that total 25 percent or more of their own capital. Mexico's financial stability council, which includes the finance ministry and banking and securities regulators, said the new rules would help protect the Mexican financial system from crises that parent banks face in their home countries. The measure "strengthens the legal framework that regulates banking operations, which are faced with weaknesses that could affect some parent institutions," the council said in a statement posted on the central bank's website. The previous restriction on transfers to related parties was 50 percent, the council said. Mexico's banking sector is dominated by foreign banks, including Citigroup unit Banamex as well as subsidiaries of Spain's Santander and BBVA as well as the UK's HSBC and Royal Bank of Scotland. The measure was published in the country's daily gazette on October 10th and went into effect on October 11th. STRONG FUNDAMENTALS The Mexican financial system is seen as solid and has weathered both the financial crisis of 2008-2009 and the euro-zone upheaval without any major hiccups. But some analysts fear that European parent banks could seek to transfer resources from their profitable regional affiliates to bolster their own capital positions if faced with a deepening global economic slowdown. The European institutions have scrambled to raise enough capital to meet upcoming regulatory requirements and to fill holes in their balance sheets torn by the financial crisis. Mexican regulators have, however, welcomed share listings by foreign banks to increase the weighting of the financial sector in the local stock market. Spain's Banco Santander raised $4 billion last month by listing around 25 percent of its Mexican unit to bolster its finances back home. Link this Share this Digg this Email Reprints

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