Mexico City.- Fitch Ratings said that the recent signaling of Cibanco, Interm and Vector Casa de Bolsa by the Treasury Department for money laundering suspicions represents a significant stress event for the country’s non-banking banks and institutions, given the latent risks of sanctions and contagion.
However, the agency added that the limited participation of these institutions and the rapid reaction of the authorities have avoided a threat of greater disruption in the market, but the potential risks due to money laundering suspicions will continue as a monitoring factor for the financial system of Mexico.
He considered that the risks related to the alleged money laundering and their application can quickly erode the viability and operational continuity of a financial entity, weakening their business profiles and, ultimately, their income, together with the confidence of consumers, investors and counterparts.
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He added that the business activities of the affected financial institutions could be distorted by the freezing of assets, transaction returns and legal uncertainty.
“The risk of contagion – if it is not contained – could undermine confidence in the financial system as a whole. This would press cross -border capital flows, raise compliance costs and could lead to the client’s fleeing,” he said in a statement.
He recalled that the three financial institutions continue as underway businesses and are not subject to automatic liquidation, but as of July 21, US financial institutions will be prohibited from carrying out transactions to or from Mexicans.
He said that the National Banking and Securities Commission (CNBV) temporarily assumed the control of the three entities after facing operational and liquidity problems, and that key counterparts, including American large banks, local banks and other market participants, have begun to cut relations and withdraw funds, pressing liquidity.
He added that important fibers already seek to replace Cibanco as a trustee, while the Ministry of Finance announced the temporary transfer of the fiduciary businesses of Cibanco and Intercam Banco to the Development Bank, with the aim of ensuring operational continuity.
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He indicated that the two banks, Cibanco and Intercam, represent about 1.5% of the total assets and less than 1% of the loans and deposits of the Mexican banking system last April.
“Its small market quotas in credit and deposits, its concentrated business models and its solid capital and liquidity limit the threat of a broader disruption,” he said.
He explained that banks with more concentrated business models and/or oriented to the wholesale segment face a higher downward risk.
And Cibanco and Intercam have strongly concentrated business models in the wholesale trade and services of derivatives and international payments.
He added that income from foreign exchange operations represent more than half of the operational income of the affected banks, while traditional loans are a secondary business.
Between 2021 and 2024, Interm Banco and Cibanco were among the 10 main players of the Mexican exchange market, with a joint participation of around 18% of the volume of exchange operations with the non -financial private sector.
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Fitch considered that other banks could absorb their exchange brokerage activities, since all banks can operate in this segment, although the risk appetite varies between the entities of the sector.
On the other hand, he pointed out that the market share of Vector Casa de Bolsa to last December was less than 1% of the total in number of investment accounts and about 2% of custody transactions.
He said that although the vector business model is relatively diversified, the current situation can negatively influence several business lines due to reputational risk and, consequently, could generate customer migration towards other competitors.
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