Bank accusations: limited impact?

Mexican President Claudia Sheinbaum declared yesterday, July 2, that there is no major impact on the Mexican financial system from the United States accusations against two Mexican banks and a brokerage firm.

The Chief Executive said that the Mexican financial sector has not been affected by the accusations made by the U.S. Treasury Department against the three Mexican financial institutions.

He insisted that the three entities mentioned represent a very small percentage of the entire system.

And he asserted that the strength of the peso shows that there is confidence in Mexico's economy.

Hours earlier, following a meeting of the Associate Committee of the Mexican Banking Association (ABM), headed by Emilio Romano, which included the participation of the Ministry of Finance, the National Banking and Securities Commission, the Bank of Mexico, and the Federal Tax Attorney's Office, it was revealed that the Financial Crimes Enforcement Network (FinCen), an agency of the Department of the Treasury, does not involve other Mexican banks.

The ABM statement literally states that "Mexican authorities have reiterated that FinCen's action is limited exclusively to the two banks (CI Banco and Intercam), and under the existing binational coordination framework, no additional measures or measures have been proposed for other banking institutions."

Thus, indirectly, that is, through bankers who held talks with the highest regulatory authorities in the financial sector, it was made public that the US is not involving other banks in its accusations.

President Sheimbaum, without saying so, hinted at it.

So far, no one in the government has said this publicly and openly.

It is understood that the financial authorities did reveal this to the bankers at that meeting.

It is unlikely that bankers would issue a statement referring to such sensitive information without proper substantiation.

The question is whether the Mexican government has already been officially informed by the Treasury Department that they are only accusing the three financial institutions publicly named so far.

And if so, why haven't they come out and said it openly?

Since the U.S. Treasury Department issued orders through FinCEN on June 25 identifying the three Mexican institutions as being of "primary concern for money laundering" related to opioid trafficking, particularly fentanyl, the Mexican government's position has been that it has no conclusive evidence to support such allegations.

The Mexican president has said that her government will not protect anyone and that if evidence is presented to her, she will even take legal action.

As of yesterday, July 2, that position had not changed. What it did do was intervene in the management of the banks and the brokerage firm to protect investors' money and interests.

Eight days is a long time for a problem as serious as the one this group, albeit a small one of Mexican financial institutions, is experiencing.

The consequences these institutions are experiencing are creating a very difficult situation for them, even though all three had been recording positive operating and capitalization figures.

It's clear that both the Chief Executive and the bankers' organization stepped up to counter the growing wave of speculation that pointed to the possibility of imminent charges against other Mexican banks.

Furthermore, under the legal framework under which the United States government is operating, it may not provide the evidence the Mexican government is requesting.

Mexico is facing an unprecedented chapter in its relationship with the United States.

The case could be part of the political context in that country.

Mexico faces a major challenge that most likely goes beyond the financial sphere.

For now, Finance Secretary Edgar Amador's handling of the situation has been prudent and eminently technical.

Mexico urgently needs to implement a strategy to strengthen the supervision and oversight of the financial system and coordinate with U.S. financial authorities to overcome this difficult situation.

Glimpses

Good news! The Mexican government has reduced its external debt repayments scheduled for 2026 by 85%.

Prepaid two sovereign bonds, one denominated in US dollars and the other in euros, for a total amount of 3.593 billion dollars

With the remaining balance from Banxico's operations of 17.995 billion pesos (corresponding to the end of 2024), the Mexican government paid the bond in dollars.

These operations allow us to minimize the external debt repayments planned for next year. Good.