Since the last major financial crisis in 1994-95, Mexico has seen the emergence of a banking sector characterised by robust regulation, with high levels of capitalisation and profitability. While economic growth has slowed over the past half-decade and monetary policy has tightened in more recent years (see Economy chapter), credit growth remains robust, leading to an improved credit-to-GDP ratio. Nevertheless, Mexico’s banking sector remains small for a country of its size and economic development, particularly compared to its Latin American peers.

Chastened by the experience of a credit boom and bust during the first half of the 1990s, the authorities have reformed, liberalised and privatised the banking sector while ensuring strong regulatory oversight and, in turn, relatively conservative lending practices. This explains, in part, the small size of the sector as well as the low levels of financial inclusion across the country. While the banking sector serves large corporations and the middle class relatively well, many smaller – and particularly informal – businesses struggle to access credit. On top of that, almost half of the 125.9m-strong population that lives in poverty have limited access to financial services. The authorities’ efforts to boost financial inclusion and improve financial literacy are slowly beginning to bear fruit, however, with bank accounts becoming more ubiquitous and consumer credit levels picking up (see analysis).


As banks were progressively privatised in the mid-to-late 1990s, many of the leading players were taken over by foreign banking groups. The seven largest banks operating in the country, which collectively account for just under 80% of commercial banking assets, are known locally as the G7. As of end-July 2019 BBVA México, formerly known as BBVA Bancomer, accounted for 21.25% of total banking assets alone, retaining the market-leading position that it has held for a number of years. In second place was Spain’s Banco Santander, with 14.11% of the market share, followed by Citibanamex (13.62%), Banorte (12.20%), HSBC (8.06%), Scotiabank (5.94%) and Inbursa (3.82%).

Beyond the G7, smaller banks operating in the country have undergone recent developments. In 2018 a number of smaller banks changed their names. For example, Investa Bank rebranded itself as Accendo Banco in April and Bank of Tokyo changed its name to MUFG Bank Mexico in the following month. In another move, Afirme Grupo Financiero acquired the Mexican assets of UBS Bank and began trading as Banco de Inversión Afirme in July 2018.

While a number of small banks have entered the market, the overall structure of the sector remains largely unaltered, dominated by a handful of mostly foreign banking institutions. More small banks are expected to arrive in the near future, as is further consolidation among small and medium-sized banks; however, the entry of larger and more disruptive banks is not likely, particularly given the broader economic uncertainty around the country’s investment climate and the government’s sectoral policies.

In total there were 51 commercial banks in operation in Mexico as of end-June 2019, including the latest additions of two new banks, South Korea’s KEB Hana Bank in February 2019 and Bank of China in June 2018, as well as the merger of two Mexican banks, Grupo Financiero Banorte and Grupo Financiero Interacciones in July 2018.

Bank Charges

Mexican banks have a long-standing reputation for providing high-cost financial services. These charges have been coming down in recent years, however, becoming a less important source of banks’ revenue. Having accounted for 45% of Mexican banks’ operating revenues in 2005, bank fees made up 17% of revenues in September 2018. This trend has been attributed to increased competition, government regulation and a higher adoption of technology. Nonetheless, foreign institutions operating in the Mexican market rely on fees and commissions for approximately one-third of their profits in Mexico compared to around one-fifth in their home markets, according to the National Commission for the Defence and Protection of Users of Financial Services (Comisión Nacional para la Defensa y Protección de Usuarios de Servicios Financieros, CONDUSEF).

There was significant industry consternation in late 2018 when senators from the party of the incoming President Andrés Manuel López Obrador, known by his acronym AMLO, tabled legislation that would have banned 15 separate bank fees altogether. This caused a sharp decline in the shares of Mexico’s listed banks. For example, Banorte shares fell by 11.9% in a single trading day in early November 2018. AMLO has since signalled that he would not support such legislation, although he called for an agreement between the banking sector and the government to bring down fees charged on remittances, an important source of income for many Mexican households. A more moderate version of the legislative proposal, which will focus on eliminating commissions on products aimed at low-income consumers and on ATM withdrawal transactions at competitor banks, is expected to be discussed in Congress in the autumn of 2019.

Development Banks 

In addition to the 51 commercial banks operating in Mexico, there are also six publicly owned development banks that are specialised in a range of areas, including small and medium-sized enterprises (SMEs), public infrastructure, trade promotion, housing, and savings and lending to for people in the military. According to the National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores, CNBV), lending by development banks has slowed in recent years, with the development banks’ collective assets increasing by only 1.7% in real terms in the first quarter of 2019. In its latest Article IV consultation for Mexico in November 2018, the IMF suggested that development banks should concentrate their lending activity in segments that are underserved by the commercial banking sector. According to the article, the new AMLO administration had indicated that it would consider consolidating development banks with a view to boosting efficiency.

Under the National Development Plan (Plan Nacional de Desarrollo, PND) 2019-24, the administration of President López Obrador transformed the National Savings and Financial Services Bank, a Mexican development bank, into the Welfare Bank, giving it a mandate to provide banking services to the beneficiaries of social programmes and to promote a cashless society. The government is planning to extend the network by at least 500 branches to reach 7000 over the five-year period. More generally, the PND 2019-24 is committed to facilitating access to credit for small businesses and to restructuring 194,000 loans issued to low-income households by the Institute of the National Workers’ Housing Fund Institute in 2019 alone.


Mexico has a comprehensive institutional apparatus for the oversight and regulation of the banking sector, and for ensuring financial stability more generally. The Ministry of Finance (Secretaría de Hacienda y Crédito Público, SHCP) is the main mover in banking regulation, operating through its semi-autonomous agency, the CNBV. The SHCP is charged with planning policy, and coordinating and monitoring the banking system, which includes the regulation of the representative offices of foreign banks and domestic development banks. For its part, the CNBV is responsible for issuing operating licences to banks and other financial services firms. It also issues prudential regulations to limit excessive risk-taking by financial intermediaries.

Deposits are protected by the Bank Savings Protection Institute (Instituto para la Protección al Ahorro Bancario, IPAB), which guarantees reimbursement for bank depositors up to a certain threshold, thereby underpinning consumer confidence in the banking system. The IPAB can also grant financial support to banks facing solvency issues to ensure that they can meet their minimum regulatory capital requirements. Meanwhile, CONDUSEF is charged with promoting financial education and financial consumer protection, resolving disputes between banks and their clients, for example.

Banco de México (Banxico), the country’s independent central bank, has an important role in promoting the healthy development of the financial system, ensuring that the payments system functions properly, and monitoring the performance of financial firms. It also has the regulatory power with respect to interest rates and bank charges. Banxico oversees financial stability across the broader economy, prepares annual financial stability reports, and participates in the Financial System Stability Council (Consejo de Estabilidad del Sistema Financiero, CESF). In addition to Banxico, the CESF brings together all of the main regulatory players, including the SHCP, the CNBV, the IPAB, the Insurance and Surety National Commission, and the National Commission for the Pension System. One weakness of the Mexican banking system highlighted by the IMF’s 2018 Article IV consultation is the extent to which the prudential supervision functions are fragmented across various bodies. The organisation recommends bringing them under the auspices of a single prudential authority, which should have its remit extended to cover financial holding companies. The IMF further recommends that the authorities develop a formal contingency plan for dealing with a systemic crisis and carry out a simulation exercise involving foreign stakeholders to test the framework. The IMF also suggests that the CNBV’s operational independence, budgetary autonomy and legal protections be bolstered.


Mexico was one of the first countries in the world to successfully transition to the Basel III regulatory framework, and the nation’s leading banks are now compliant with the more stringent liquidity and capital requirements. While the framework is relatively robust, however, the IMF suggests it could be further strengthened in ancillary areas, notably by improving collateral registry and introducing specialised bankruptcy courts. By expediting the insolvency resolution process, these measures could in turn boost commercial bank lending.

In March 2019 the newly elected government signalled that it was open to a differentiated regulatory regime for banks depending on their size or the nature of their activities, drawing inspiration from community banks in the US. This is seen as one means to stimulate financial inclusion and promote access to credit for SMEs. Banks have long complained that having to comply with the full gamut of regulations – irrespective of their size and whether they participate in all relevant banking activities – generates high costs. As of mid-September 2019 the Mexican Banking Association was working on reform proposals in this direction, although it was not clear when or the extent to which the authorities would take these proposals on board.

Shadow Banking 

Financial institutions engaged in banking activities – but which, due to their nature, lie outside the scope of the traditional banking sector and its relatively robust regulation – are often known colloquially as shadow banks. This opaque segment of the financial sector, which includes hedge funds, crowdfunding and peer-to-peer platforms, has been growing rapidly in recent years, both globally and in Mexico. According to credit ratings agency Fitch Ratings, the shadow banking sector in Mexico grew by a compound annual growth rate of 9.4% over the 2010-17 period, surpassing other emerging market economies such as Chile (8.9%) and Saudi Arabia (7.8%), while lagging far behind China (58.1%) and regional peer Brazil (16.9%). While shadow banking can herald financial stability risks, in Mexico it should be considered against a relatively small and well-regulated formal banking sector.

Financial Inclusion & Access

Despite progress in recent years, there is much room to boost financial inclusion. In 2018, 47% of the adult population had a bank account, while 31% had access to credit. Pervasive informality in the labour market and in business registration creates challenges in terms of financial inclusion, and in part explains the relatively low level of banking penetration. Individuals struggle to provide proof of their income, while many SMEs do not have formal accounts nor registered collateral (see analysis).

Increasing the ubiquity of financial services infrastructure is helping boost financial inclusion, as people are making greater use of all modes of access to such services, both traditional and technological. According to the 2018 National Financial Inclusion Survey by the CNBV, ATMs remain the most common mode of access to financial services, used by 45% of the adult population, up from 43% in 2015. The share of the population using bank branches also increased, from 39% to 43% over the same period, while the percentage of those using commercial establishments, or correspondent banking, rose from 34% in 2015 to 40% in 2018. Meanwhile, mobile banking is also on the rise. Of the 62.2m adults that had mobile phones in 2018, 51% had an account at a bank or other financial institution. This is compared to 57.1m adults who had a mobile phone in 2015, of which 49% had a savings account. Of those with a formal account in 2018, 22% made use of mobile banking. Of the remaining 78%, the majority cite a preference for other modes of access as the main reason for not using mobile banking.


In another boost to financial access via mobile phones, the central bank developed a digital payment platform known as Cobro Digital (CoDi), which allows users to make payments from their bank accounts on their handheld devices. The system is being piloted in 2019 with the expectation that it will be rolled out nationwide by 2020. To initiate a transaction, the seller generates a digital payment request using a quick response or near field communication code, which the buyer enters in their mobile device and then accepts to send the transfer instruction to their bank, validating the transaction and transferring the amount to the seller.

“CoDi can spur financial inclusion and is a big business opportunity for the banks,” Gustavo Méndez, partner and financial services leader at Deloitte México, told OBG. “But, since the system will be linked to individuals’ bank accounts, a big challenge will be to extend the service to people who do not already have a bank account.”

Interest Rates & Monetary Policy

Given the sluggish economic activity, with GDP growth flatlining in the second quarter of 2019 compared to the previous three months, and an easing bias that emerged among leading global central banks, there is a consensus among analysts that Mexico will embark on a sustained easing cycle in the second half of 2019 through to 2020, with Banxico already having moderated its benchmark lending rate by 25 basis points at a meeting in August 2019 (see Economy chapter). Just as high interest rates have been a boon to banks’ net interest margins and profitability in recent years, it is expected that the lower interest rates will squeeze both in the years ahead. The impact will differ depending on the banks’ respective business models. Those that rely almost exclusively on wholesale market funding, such as local bank Gentera, may even see a net boost to margins as their funding costs fall faster than market lending rates. For larger banks, the negative impact may be relatively moderate, while smaller to mid-sized banks may be particularly exposed. Analysts at Banco del Bajío, the country’s eighth-largest bank by assets, have estimated that a reduction of 100 basis points in policy interest rates would feed through to a 45-basis-point decline in net interest margins, for example. Conversely, looser monetary policy is expected to support economic activity and a re-acceleration in credit growth. Therefore, even if margins decline, net incomes could tick up in real terms for some banks, while increases in non-performing loans (NPLs) should be contained.


Already highly profitable, improving margins amid tightening monetary policy have seen increases in both return on equity (ROE) and return on assets (ROA) in recent years. Sector-wide ROE has improved since 2015, increasing from 15.4% to 20.7% in 2018. ROA also rose, from 1.6% to 2.2% over the same timeframe. Likewise, capitalisation rates have increased. At the end of the first quarter of 2019 the core Tier-1 capital to risk-weighted assets ratio stood at 13.9%, a modest improvement on the 13.2% recorded in 2016. On the broader measure of regulatory capital to risk-weighted assets, the sector scored an aggregate 16% at the end of March 2019, an improvement on the 14.9% in 2016. Some of the larger, foreign-owned banks managed to operate with capital ratios closer to the regulatory minima. At the end of the second quarter of 2019, for example, BBVA México posted a core Tier-1 capital ratio of 11.9%, while Santander was operating at 11.3%, Scotiabank at 11.2% and HSBC at 10.8%. By comparison, one of the Mexican-owned G7 banks, Inbursa, was operating with an above average core Tier-1 ratio of 22.39%. Meanwhile, Citibanamex and Banorte had Tier-1 capital ratios of 14.1% and 13.81%, respectively.

Across the sector, credit quality remained strong and stable, with the NPL ratio steady at 2.1% at the end of May 2019. Provisioning for NPLs has remained relatively stable, at 1.5 times or greater between 2016 and 2018, while the ratio of liquid assets to short-term liabilities has remained relatively constant between 2016 and mid-2019, at around 42%.

The relatively robust capital position and high profitability of Mexican banks mean that they are, for the most part, resistant to financial shocks. Most of the leading banks are part of large global banking groups, which means that they can rely on balance sheet reinforcement from their parent groups in the event of idiosyncratic risks hitting Mexico. For the larger, systemically important banks operating in the country, their enhanced capital requirements under Basel III further bolsters their balance sheets in the face of potential risks.

Lending Growth

Although credit growth has decelerated across all segments since mid-2016 amid slowing economic activity and tightening monetary policy, it nonetheless remained in double digits on aggregate through the first months of 2019. In April 2019 annualised credit growth decreased from over 15% in April 2017 to 10.3% in nominal terms, or 5.6% in real terms. Consumer lending had also slowed, from double-digit nominal growth in 2017 to 5.9% by April 2019. Within consumer lending, the most notable deceleration was in personal lending, with nominal growth falling from over 20% in early 2016 to less than 5% by early 2019. Having experienced a drop of similar magnitude in the three years to early 2018, overdraft lending has begun to pick up again, representing the second-fastest growing consumer lending sub-segment. Although below the 23% level recorded in July 2017, growth in consumer lending for durable goods has held up relatively well, with nominal growth of around 13% in the year to April 2019. By contrast, nominal growth in mortgage lending has held up reasonably well, at 10.3% in April 2019, in line with total lending growth. The most striking trend in mortgage lending in recent years has been the contraction of subsidised social lending to low-income households since 2015. Having represented approximately half of all mortgage lending at the turn of the century, it has come to account for less than 14% of the total by 2019. Together, the consumer and mortgage segments account for approximately one-third of the lending portfolios of commercial banks.

Corporate lending has cemented its place as the dominant segment, accounting for the remaining two-thirds of total lending portfolios, having consistently been the fastest-growing of the three main lending segments over the past half-decade. Nominal lending to businesses rose by 12.1% in the year to April 2019, a little over half its cyclical peak rate of growth seen in mid-to-late 2016. Within the corporate segment, there has been a turnaround in the relative dynamism of its sub-segments. Construction grew at the slowest rate compared to the other sub-segments, at less than 10% in early 2018, before becoming the fastest-growing at a rate of around 20% by early 2019. Conversely, manufacturing, which recorded the fastest growth at 25% in mid-2018, slowed to a rate of around 10% by April 2019.

Having remained moribund in the late 1990s in the wake of Mexico’s financial crisis, bank credit as a share of GDP has grown steadily during the first two decades of the 21st century – with the exception of a modest reversal in 2009-10 following the global financial crisis – from around 5% to nearly 19% by the first quarter of 2019. Long-term credit growth in the consumer lending segment surpassed a peak in 2007 to amount to 4.1% of GDP in the first quarter of 2019, up from less than 1% of GDP at the turn of the century. There appears to be significant scope for further long-term growth in the household lending segment – which comprises mortgages and consumer credit – given that Mexico’s household credit-to-GDP ratio was at 16.1% as of mid-2018, according to the IMF, which is less than half of the 39.8% averaged by other emerging economies.

Deposit Growth 

While deposit growth has been stimulated by high interest rates encouraging people to save, it has eased more recently in line with slowing economic activity. In May 2019 deposit growth moderated to 7.3% in nominal terms, the slowest pace since the end of 2013. While term deposits by households and businesses grew at a nominal rate of 12.7%, total deposit growth was offset by a 0.4% contraction in real terms in individual deposits. Customer deposits as a share of loans dipped, from 91.4% in 2017 to 87.8% by mid-2018.

While its reliance on bank fees as a source of funding is gradually decreasing, banks operating in Mexico remain highly dependent on demand deposits. “Being almost entirely funded by deposits is a significant strength of Mexican banks,” Méndez told OBG. “This means they do not have to rely on wholesale money markets, which run the risk of drying up in times of financial stress.”

Financial Technology 

Mexico has staked out its position as a Latin American leader in financial technology (fintech), with the continent’s first dedicated fintech law, promulgated in March 2018, and a fintech system on a par with that of Brazil. According to a survey by Finnovista, a Latin American fintech accelerator, there were 394 fintech start-ups in Mexico as of May 2019, compared to 380 in Brazil. More than half of Mexico’s fintech start-ups are located in Mexico City, with another 15% in Monterrey and 11% in Guadalajara.

Perhaps of some concern, given that the aim of the Law to Regulate Fintech Institutions, also known as the Fintech Law is to stimulate financial inclusion through innovation, is that more than half of the fintech players surveyed cited the legislation as being a significant barrier to competition, while one-quarter of respondents said they were ready to fully comply with the relevant regulations upon its implementation in September 2019. Key elements of the Fintech Law include provisions that cover crowdfunding, electronic payments and digital assets such as cryptocurrencies. Allowing Mexican fintech companies to transact electronic payments with foreign firms will be a crucial benefit given the importance of remittances to Mexico; according to the central bank, remittances reached a record $3.2bn in May 2019. Moreover, the Finnovista survey found that the most important fintech sub-segment in the country is payments and remittances, which accounted for one-fifth of the total.

Barriers & Disruption 

Under the new law, some challenges facing fintech firms include meeting minimum capital requirements, and instituting formal governance and management arrangements such as a board of directors, a managing director and an audit committee. Other near-term barriers to fintech having a significant impact on financial inclusion include the pervasiveness of cash transactions, weak trust in financial institutions and procedural challenges in opening a formal bank account.

The larger banks, led by BBVA México, have been making significant investments in IT systems and developing fintech capacity more broadly. To date, however, these banks have been improving their offerings to existing clients rather than aggressively expanding towards the unbanked population. Smaller, more nimble fintech operators are likely to prove more disruptive, and may hold greater potential for boosting financial inclusion. Nevertheless, there is some scope for mutually beneficial cooperation rather than outright competition between big banks and smaller fintech players, allowing each to play to their comparative advantages.


Notwithstanding the fact that economic activity is projected to remain relatively weak and monetary policy relatively tight, it is expected that credit will continue to expand at a faster clip than GDP growth, as the credit-to-GDP ratio in Mexico continues to catch up with that of regional and emerging market peers. These macroeconomic headwinds may mean, however, that progress will be slower in the coming years than has been the case recently. Robust regulation and oversight suggest that credit quality will remain strong, although a prolonged economic slump could see a spike in NPLs from the current near-historic lows. With little significant structural change expected in the market, competitive pressures are likely to remain subdued and profitability consequently high.

While financial inclusion efforts represent an important business opportunity for Mexican banks, both large and small, the relatively higher investment and lower returns required for organic growth in this segment means that there is not enough incentive for leading players to aggressively pursue the underserved and unbanked. Nevertheless, Mexico is a policy innovator in the fintech space, recognising the scope for this segment to drive financial inclusion, and it is more likely that disruptive market participants will emerge from this segment or, at least, capitalise on the innovative consumer engagement channels inherent in it.