Financial Crime World

Independent Board Members and Risk Management Remuneration Requirements Take Center Stage in Mexico’s Banking Sector

Mexico City, [Date] - As part of its efforts to strengthen the country’s banking sector, the government has introduced new regulations aimed at promoting independence among board members and risk management practices. These measures are designed to ensure that banks operate with transparency, accountability, and a focus on protecting depositors’ interests.

Independent Board Members

The new rules require independent members of the board of directors (BOD) to be appointed by the shareholders’ meeting. To qualify, these individuals must meet strict requirements:

  • Have no professional, familial, or commercial relationship with stakeholders, shareholders, or directors of the bank
  • Have at least five years’ experience in high-level positions that require financial and administrative knowledge
  • Be residents of Mexico

Risk Management Remuneration Requirements

Banks are now required to establish a remuneration system that is consistent with effective risk management practices. The system must consider:

  • Risks faced by the bank
  • Internal units
  • Employees
  • Ordinary and extraordinary compensations

The goal is to award specific remuneration mechanisms tailored to each risk profile. Banks must also establish policies and procedures for ordinary and extraordinary remunerations, including a reasonable timeframe for considering performance reviews.

AML/KYC Requirements

Mexico has strengthened its anti-money laundering (AML) and know-your-customer (KYC) regulations. Banks are now required to implement measures and procedures to prevent and detect operations related to money laundering and terrorist financing. This includes:

  • Implementation of KYC policies
  • Corporate governance obligations
  • Book and record-keeping rules
  • Reporting requirements

Depositor Protection Regime

The Bank Savings Protection Law regulates the depositor protection regime in Mexico, which is administered by the Institution for the Protection of Bank Savings (IPAB). The regime covers:

  • Clients’ demand, fixed term, withdrawable on predetermined days, and savings deposits
  • Bank liabilities up to 400,000 investment units (UDIs) per person’s receivable covered assets per bank

These new regulations are aimed at promoting a safer and more transparent banking sector in Mexico. By strengthening risk management practices, AML/KYC requirements, and depositor protection measures, the government is working to ensure that banks operate with integrity and protect depositors’ interests.