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Mexican Banks Must Meet Stringent Requirements for Governance and Risk Management

Mexico City, Mexico - In a bid to ensure stability and transparency in the banking sector, the Mexican government has implemented a set of stringent requirements for banks operating in the country. The new regulations aim to prevent money laundering, protect depositors’ interests, and promote good corporate governance.

Independent Directors

According to the new rules, independent members of a bank’s board of directors must be appointed by shareholders’ meetings and meet specific requirements:

  • Possess expertise in finance and administration
  • Reside in Mexico
  • Have no professional, familial or commercial relationship with stakeholders, shareholders or directors of the bank

Remuneration System

Banks are required to establish a remuneration system that is consistent with effective risk management. The system must take into account:

  • Risks faced by the bank and its internal units
  • Employees subject to the system
  • Identifying responsibilities for each role
  • Establishing policies and procedures
  • Considering a reasonable timeframe for extraordinary compensations

Anti-Money Laundering (AML) and Know Your Customer (KYC)

Banks are required to establish measures and procedures to prevent and detect operations related to money laundering and terrorist financing, including:

  • Implementing KYC policies
  • Corporate governance obligations
  • Book and record-keeping rules
  • Reporting requirements
  • Identifying the ultimate beneficiary of each transaction
  • Verifying information against public databases

Depositor Protection

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:

  • Bank liabilities up to 400,000 investment units (UDIs) per person’s receivable covered assets per bank
  • Operations not covered by the regime include obligations payable to national or foreign financial entities

The new regulations are designed to promote good corporate governance, protect depositors’ interests, and prevent money laundering in Mexico’s banking sector.