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HSBC blood fingers – Money Laundry Scandel a Mexican Perspective

In the most recent campaign by the United Nations Office on Drugs and Crime (UNODC, for its acronym in English), states that organized crime generates annual revenues of a whopping 870 billion dollars.

Translation of the original article in Spanish by Dossier Politico by Saul Arellano

The most lucrative for organized crime are drug trafficking, which generates about 320 billion dollars annually, and counterfeiting, with revenues of 250 billion dollars a year.

Moreover, through human trafficking offenders get 32 billion dollars over 7 billion for alien smuggling in addition to that traffic in elephant ivory, rhino horn and tiger parts generates about 75 billion dollars.

The human costs of these activities are huge, especially considering that each year, the UNODC estimates that 2.4 million human beings fall victims of human trafficking, perhaps the most infamous crime committed in our time.

Two things are to be noted:

the first and most obvious is that these activities have a global character and can not be explained but for the existence of powerful networks operating at regional and global levels.

 The second part of a question: if this is the amount of money generated by transnational organized crime, how and by whom move? I.e. who has the power, technology and legality to embed into the legal economy  over a 1 trillion USD  from the criminal illegal organizations  world?

The answer is obvious: there is a complex global financial system that can launder money and gives criminals the ability to remain unpunished because through these resources can carry out legal transactions such as buying property vehicles, and in certain contexts, to weapons.

Why did HSBC do this? It turns out that the “angels” of this global bank “made mistakes” in monitoring suspicious accounts or regarded as “high risk”. According to the note of BBC News, signed by my colleague Julio Brito, is stated:

“HSBC said it takes Mexico´s compliance law seriously compliance (…) ‘We apologize, we will recognize these errors, accounting of our actions and commit ourselves completely to repair what was done wrong’, said the bank”.

Is this apology enough? What about Mexico´s Police Investigation ? What about the Financial Intelligence Unit of the Ministry of Finance? Surprisingly, the scandal was discovered and unrevealed by the investigations of the Permanent Subcommittee on Investigations of the Senate of the United States, but in Mexico the results are and reactions are lukewarm..

I quote again Julio Brito’s note: “The subsidiary of banking giant HSBC Mexico sent seven billion dollars in cash to the bank’s unit in the U.S. between 2007 and 2008, a volume that could only reach that size if included illegal drug profits.” (http://www.cronica.com.mx/nota.php?id_nota=676540)

According to an expert I consulted, the money laundering operations in Mexico are very easy to perform because the financial system is full of holes. For example, operations that money exchange offices have with banks are extremely lax, compared with the regulations of other countries.

Add to this the ease with which managers can access customer accounts, which facilitates the actions of triangulation that due to the operation of electronic banking today can be done in minutes.

Anyway, HSBC faces one of the most embarrassing scandals in its history, which opens one more question: Is it the only bank with these weaknesses operating in our country? That is something the authorities should investigate and seriously, if you really want to win the fight against drug trafficking.

The war on organized crime in Mexico has killed more than 50 000 dead. Now HSBC is an accomplice, at least by default in their controls, as was recognized last Tuesday, so not a bad idea and that the customers of this institution to continue providing profits to reconsider a bank that has indirectly contributed significantly to the bloodshed in our country.

If sending 7 billion dollars is considered impossible for a single bank, not to include narco resources, another question arises, how is that in a country with 52 million poor (on or below poverty line),  transnational banks get their biggest gains and transfers? See if the financial reports of Citi Group, Santander, BBVA, Scotiabank and other global banking institutions operating in Mexico.

While it is true that the fees (banking, transaction and credit cards) charge by these banks are draconian and interest rates that are the worst practices of usury, HSBC scandal should lead policy makers to reconsider that the level of looting reached by foreign banks, to feed their unstable global operations.

Source: Dossier Politico 19.07.2012  by Saul Arellano sarellano@ceidas.org

Filed under: Banking, Mexico, Risk Management, , , , , , , ,

Latin America: Investors Newsletter 15 June 2012

Petrobras Is Worst Big Oil Investment on Deepwater Disappointments: Energy   Petroleo Brasileiro SA is the worst investment among the world’s biggest oil companies this year as Brazil’s state-controlled producer suffers delays and cost overruns developing the largest oil finds in more than a decade.

Iusacell, Telefonica to challenge Mexico’s Slim America Movil  – Iusacell and Spain’s Telefonica said on Wednesday they have reached a deal to share their infrastructure in Mexico as they seek to mount a

FX swings may stir debt investors in Mexico, Peru  Mexico, Peru debt mkts most vulnerable to outflows in Latam. * Peru acting to curb FX, Mexico avoiding intervention.

Mexico’s Slim family (Grupo Carso) takes stake in Argentina YPF nationalized enegy company Mexican tycoon Carlos Slim and his family have taken a stake in Argentina’s recently renationalized energy company YPF in lieu of a loan guarantee, ..

Filed under: Argentina, Brazil, Energy & Environment, Latin America, Mexico, News, Risk Management, Venezuela, , , , , , , , , , , , , , , , , , , , , , ,

Mexico:Banorte cagy on rumors of IXE acquisition

In a release to the Mexican stock exchange (BMV), Grupo Financiero Banorte was noncommittal on a rumor published by a prominent business columnist that the bank was in talks to acquire IXE Grupo Financiero.

The release said Banorte is “analyzing different strategic alternatives to continue consolidating its leadership position as one of the most important institutions in the Mexican financial system.”

IXE released a similarly vague statement through the BMV, saying it was “exploring options to increase its competitive capacity in the Mexican financial market.”

RUMOR RILES MARKETS

The acquisition rumor that sparked a more than 2% jump in IXE’s stock price on Friday (Oct 1) started with Alberto Aguilar, a financial columnist with daily newspaper El Universal, who published an article that afternoon saying that Banorte “is in very advanced talks to acquire IXE.”

Aguilar’s un-sourced columns have frequently been accurate this year as the rumors have swirled over a possible acquisition of non-bank mortgage lender Hipotecaria Su Casita.

Curiously, this is the second time in recent days that Banorte and IXE have appeared in the same headlines in Mexican papers. Earlier, both banks said they would like to be involved as investors in the restructuring of troubled Mexican airline Mexicana: Banorte by possibly converting a loan to the company into an equity stake and IXE by rounding up a group of investors to purchase the company.

Banorte general manager Alejandro Valenzuela had told the Mexican media that he was “very happy” that IXE was interested in getting involved in the Mexicana restructuring.

IXE PROFITS LAGGING

IXE Grupo Financiero has not been very profitable as of late and has had some trouble picking up the pace following the financial crisis of 2009.

The financial group – which includes an insurer and a securities broker, as well as the 11th largest bank in the Mexican market – earned 28mn pesos (US$2.2mn) in the first half, down 83% from its 1H09 earnings.

As a consequence, the group had a 12-month ROE of 0.89%, the lowest of the 25 financial groups tracked by Mexican banking and securities commission CNBV and far below the industry average of 14.9%.

The group also had to close an ill-timed middle-class consumer banking venture called Banco Deuno that it launched in 2008, rolling it up into its flagship bank in August.

Should Banorte complete a full acquisition of Grupo Financiero IXE, the financial group would overtake Santander Mexico to become the third largest financial group in the Mexican market by assets, behind Banamex and BBVA Bancomer.

Grupo Financiero Banorte is the only top-five financial group in Mexico that is controlled by Mexican capital.

Source: Business News America, 02.10.2010

Filed under: Banking, BMV - Mexico, Latin America, Mexico, Risk Management, , , , , , , , , , , ,

Mexico Central Bank prohibit some Lender/Credit/Banking Fees

July 21 (Bloomberg) — Mexico’s central bank said it will prohibit commercial banks from applying some fees in a bid to make charges more transparent and bolster competition.

Starting Aug. 21, banks won’t be able to charge fees for depositing checks that are returned, for exceeding debit card limits or for canceling deposit accounts, credit cards, debit cards or online banking services, the central bank said today in an e-mailed statement.

FiNETIK recommends

The measures may force Mexican banks to issue more loans to compensate for revenue they currently get from fees, which may open up credit channels that seized up amid the global financial crisis, said Gabriel Casillas at UBS AG in Mexico City. Fees and commissions accounted for 20 percent of the Mexican banking industry’s operating revenue in 2008, Standard & Poor’s says.

“This is an important blow to one of the biggest sources of revenue for Mexican banks,” said Casillas, who is chief economist for Mexico and Chile. “This should give them an incentive to increase credit and obtain revenue from there.”

Banco Bilbao Vizcaya Argentaria SA, which controls Mexico’s largest lender BBVA Bancomer SA, fell 1.4 percent to 9.675 euros at 12:15 p.m. New York time from 9.81 euros at 10 a.m., when the measures were announced.

Banks will also be unable to charge customers for opening or managing accounts that were opened in order to receive a loan, the bank said.

Antitrust Chief

Mexican antitrust chief Eduardo Perez Motta said in a July 17 interview that authorities needed to make it easier for customers to switch banks so they could more easily shop for low-cost services, which would in turn boost competition.

“When you tell your bank you want to leave, they make your life difficult,” Perez Motta said.

Still, Angelica Bala, an S&P credit and banking analyst in Mexico City, said increased regulations won’t improve competition or transparency.

“The central bank is doing this because there has been a big political push against banks charging so much for fees and commissions,” Bala said in a telephone interview. “But putting a cap on fees and commissions is not a good thing. It has to be driven by competition.”

Source: Bloomberg, 21.07.2009 by : Jens Erik Gould in Mexico City at jgould9@bloomberg.net.

Filed under: Banking, Latin America, Mexico, News, Services, , , , , , , , , , , , , ,

Mexican Senate to limit Excessive Credit Card charges by foreign banks, observed by U.S. Senate

[16.04.2009] Mexico’s Senate banking committe approved changes to the financial services law. The Central Bank will be allowed to set limits on the rates that commercial banks can charge on loans.

Banco de Mexico will not set of specific limits to rates; instead, the central bank will set references as to how much banks should be charging for the loans and also have the ability to highlight to the public which banks are charging more than others. “Banco de Mexico will ensure that institutions give loans or credit in accessible and reasonable conditions, and it will take corrective measures so that operations are offered under those terms,” the bill says.

The initiative will now move to the floor of the Senate. The bill doesn’t specify a maximum interest rate. Instead, it calls for policy makers to cap interest rates if they are deemed to be too high or if they prevent low-income Mexicans from obtaining credit.      The legislation would prohibit banks from charging fees that “distort healthy banking practices,” according to the initiative. Banks wouldn’t be able to charge fees for consulting account balances under the measure.

Source: IXE 16.04.2009

[26.03.2009] Two Mexican Senate committees approved proposals to overhaul financial sector regulations that if passed into law would give authorities greater scope to limit the interest rates and commissions that banks charge their customers.

Mexico is not alone. The U.S. Senate Banking Committee will meet on March 31 to consider pro-consumer credit card legislation.

The current credit cards comissions and interest rates in Mexico, charged by foreign banks are the higest in the World and cause to great concern for social instability, for example:

HSBC                 charges 72% p.a. in Mexico  vs.  16%  in the UK

ScotiaBank     charges 61% p.a. in Mexico vs.  18%  in Canada

BBVA                 charges 80% p.a. in Mexico vs. 25% in Spain

Citi/Banamex charges 77% p.a. in Mexico vs.   9% in the US

According to Mexico Bankers Association (ABM) in 2008 there where  26.2 milion credit card holding individuals, which spend  478 Bn pesos ( 33.7 bn US$).

Credit cards might as well be the next bubble to burst, see the Reuters special on consumer credit concerns.

The Finance Commission and the Legislative Studies Commission approved the bill late Wednesday with the backing of senators from the three largest political parties. The commissions said they hope to submit a final draft to the full Senate as soon as possible, according to a Senate press release.

The measure would then be sent to the lower house. The plan would give the Bank of Mexico greater power to regulate commissions and interest rates, ban fees for checking balances at bank branches and require lenders to offer a basic credit card product without “excessive charges.”

Fees and commissions of close to 56.3 bn pesos (3.97 bn US$) last year accounted for about 27% of banks’ operating income, according to National Banking and Securities Commission data.

Five of Mexico’s top seven banks are owned by foreigners. Banco Bilbao Vizcaya Argentaria SA (BBV) and Banco Santander SA (STD) of Spain, Citigroup Inc. (C) of the U.S., HSBC Holdings PLC  ( HBC) of the U.K., and Canada’s Bank of Nova Scotia (BNS) control 68% of bank loans and 69% of deposits.

Source: El Financiero, El Economista,Dow Jones,Reuters,AFP  26.03.2009

Filed under: Banking, Mexico, News, Risk Management, , , , , , , , , , , , , , , ,

Mexico: Foreign banks highest charges, lowest services

According to a survey by “La Expansion/CNN” the service quality of the 8 biggest banks in Mexico (Banamex, BBVA-Bancomer, HSBC, Santander, Scotiabank, Banorte, Ixe and Inbursa) scored an average of 6 out of 10 in service quality.

IXE Bank led with 8.6 score as the best and most customer friendly service provider, while CitiBanamex and HSBC where below average.  The 8 banks cover 80% of the Mexican market.

According to the survey the bank clients rated woerse the commisions the banks are charging for the value added (or the abscence of it) by the financial service providers.

See the rating chart below: 10 = excellent, 9 = very good, 8 = good, 7= average, 6 = sufficent, below 6 = failed.

Source: La Expansion, FiNETIK,  19.03.2009

Filed under: Banking, Mexico, News, Risk Management, , , , , , , , , , , ,

Citigroup-Banamex: Failed US Banks vs. Soild Mexican Institutions

Does the US government’s 36 per cent stake in Citi violate Mexican ownership laws? Have we got our countries confused? No. Citi owns Banamex, a Mexican bank with circa 1,200 branches and 2.6m checking accounts. And Latin American finance blog Inca Kola sees a fight brewing over the Southern subsidiary:

The nub of the issue revolves around Mexican law, which states in crystalline manner that foreign governments cannot own more than 10% of any bank that operates inside Mexico. It’s as clear as a bell and on the statute. So as Banamex is a wholly owned subsidiary of Citigroup (C paid $12.1Bn or so back in 2001 for the bank) if the US Gov’t takes its 36% stake in Citigroup then it will be a larger-than-10% shareholder of Banamex, something against Mexican law. Won’t it?

Mexico’s National Banking ans Securities Commission is therefore investigating, while Banamex is saying that the North American Free Trade Agreement will (somehow) protect it.

Selling Banamex would effectively mean an even worse deal for the US government. The unit’s been described by Citi as one of its “crown jewels”, managing to post an $896m net profit for 2008, making it one of the least toxic parts of the banking group. Banamex is accordingly part of Citicorp — the retail (read: non-toxic) part of the Citi empire. Full Article click here.

Source: FT Alphaville 02.03.2009, Inca Kola News 01.03.2009

Mexico Gov. Studying Effect on Banamex of U.S. Aid to Citi,

(Bloomberg) Mexico’s National Banking and Securities commission said it’s studying the legal impact of the U.S. government’s stake in Citigroup Inc., which owns Grupo Financiero Banamex SA.

The U.S. government announced today it plans to convert as much as $25 billion of preferred shares of Citigroup into common stock. The conversion would give the U.S. a 36 percent stake in the New York-based company. Mexico’s banking law prohibits foreign governments from owning or having a stake in banks that operate in Mexico, like Banamex. Citigroup purchased Banamex for $12.5 billion in 2001.

The commission has asked all banks operating in Mexico that have received help from governments to provide information on the aid, the statement said. The banking commission and other financial authorities will “soon” release information on the study, the body said in a statement.

“The Mexican financial authorities are analyzing the legal implications of the aid that foreign governments have granted foreign financial entities that have subsidiaries in Mexico,” the agency said.

Speculation has mounted in recent weeks that Citigroup may sell Banamex to raise cash and shore up capital amid the global financial crisis. Chief Executive Officer Vikram Pandit flew to Mexico Feb. 19 for two days of meetings with clients, Banamex officials and government officials, including Finance Minister Agustin Carstens and central bank Governor Guillermo Ortiz.

Citigroup fell 96 cents, or 39 percent, to $1.50 at 4 p.m. in New York Stock Exchange composite trading as a record 1.87 billion shares changed hands. The stock has plummeted 94 percent in the past year.

Source: Bloomberg 27.02.2009 Andres R. Martinez in Mexico City at amartinez28@bloomberg.net

Mexican Bank Asset Value

(IXE) According to local newspaper EL UNIVERSAL columnist Alberto Aguilar, ITAU is one of the government’s favorite candidates to acquire Citigroup’s BANAMEX if they have a minority stake in a group led by Mexican investors.Other candidates that have expressed interest are JP Morgan Chase and HSBC.

IXE understands that if Citibank sells Banamex, it will likely sell its BZ.Bradesco branch as well. Due to the fact that Banamex ranks in second in Mexico (assets) and first (equity), along with an important corporate loans book, while the BZ subsidiary present loans book smaller than the ones presented by mid-size banks, and with a lower ROE, which could be higher considering its BZ peers. Furthermore, Citibank BZ does not present important market share in any particular segment in Brazil.

Banamex instead, possess a significant Mexican banking market (see file attached). This would be a very important operation for Itau if it materializes. We believe foreign players could be potential acquirers of Banamex (including Itau) because local players could end up having problems to find funding to finance the operation in the future. If Itau buys Banamex, it will be coherent with Itau’s Roberto Setubal past speeches.

The following is a table of the size of Mexican Banks (Tot. Assets 2Q08 in billion US$)

US$ 53.4 bn BBVA Bancomer
US$ 38.9 bn Banamex
US$ 31.5 bn Santander
US$ 26.8 bn HSBC
US$ 21.0 bn Bannorte
US$ 12.7 bn Inbursa
US$ 10.0 bn Scotia

Source: IXE Casa de Bolsa, 28.01.2009

Filed under: Banking, Mexico, News, Risk Management, , , , , , , , , , , , , , , ,