A number of U.S. banks are considering acquiring Mexican banks following a change in investment laws south of the border, according to a senior international analyst at the Federal Reserve Bank of Dallas.
The analyst, Skip Edmonds, said several banks have been consulting with the Fed about buying Mexican banks.
Mr. Edmonds declined to identify either the U.S. banks interested in expanding across the border or the Mexican banks which are being targeted. "There may be some announcements in a month or two, if they decide to go forward," he said.
The Dallas Fed has supervisory responsibility for Mexican banks operating in the United States or seeking to enter the U.S. market. A U.S. bank seeking to acquire a Mexican bank would therefore have to obtain approval from both the Dallas Fed and the Federal Reserve Board in Washington.
"(Mexico) being so close to the U.S. border, any bank with global interests would have to consider it and whether the time is now or later," Mr. Edmonds observed.
Earlier this week, Spain's Banco Bilbao Vizcaya became the first foreign bank to take advantage of the change in Mexican law by agreeing to increase its stake in Probursa to 70% from 20%. Probursa is the $4.5 billion-asset parent company of Banco Mercantile Probursa.
Spokesmen for several U.S. banks declined to comment on whether their companies were interested in acquiring a Mexican bank.
The almost 50% depreciation of the Mexican peso against the dollar since last December would make buying a Mexican bank extremely inexpensive, although any bank thinking of doing that would have look closely at the risks of taking over a high amount of nonperforming assets.
Mr. Edmonds, however, pointed out that acquiring a Mexican banking network would save considerable time and money for a U.S. bank interested in expanding into that country.
"By acquiring an existing bank, they would have an immediate market share, they don't have to go through the expenses setting up their own subsidiary, getting licenses and leases, telephone lines, computer equipment, and conforming to requirements of the regulatory authority," Mr. Edmonds said.
U.S. banks were authorized to enter the Mexican market under the North American Free Trade Agreement, which took effect a year and a half ago. But the act only allowed the U.S. banks to set up subsidiaries restricted to a limited market share.
Mexico, however, changed its investment laws in February and allowed foreign banks to buy local banks. The move came after a sharp depreciation of the peso that triggered liquidity shortages at many financial institutions.
The law stipulates that U.S. and Canadian financial institutions can acquire only those banks at which capital does not exceed 6% of the total capital of all commercial banks in Mexico. This effectively shields the country's three biggest banks, Banco Nacional de Mexico, Bancomer, and Banca Serfin, from being taken over. But it makes the next three largest banks, Banco Mexicano, Multibanco Comermex, and Banco Internacional, targets for acquistion.
Mexico's action, a recent Dallas Fed report noted, "is similar to the one taken by the state of Texas during its severe economic recession in 1986 which significantly contributed to the recovery of the region's financial sector."
"The quicker you get capital in the country, the quicker the banks can recover, which bodes well for economy," Mr. Edmonds said.
"The longer it takes, the more you extend the macroeonomic problems out over time."