When you are living and working in Mexico, running a business or investing in Mexican real estate, you will need to engage with Mexico’s banks. We have published this guide to help you understand the Mexican banking system, credit and interest charges and the services Mexico’s banks provide, as well as profile of Mexico’s principal banking institutions.
El Buro — Mexico’s National Credit Agency
Interest and Bank Charges in Mexico
Services Provided by Mexican Banks
Profile of Mexico’s Banks
Useful Contacts and Links
To understand Mexico’s banks today, it’s useful to have some knowledge about how the country’s modern banking system came into being.
In recent history, Mexico has suffered two severe financial crises: the first was in 1982 and the second was in 1994. Both made a significant impact on the banking system and shaped the country’s economic outcome in future years.
Mexico’s 1982 Financial Crisis
In 1982, then president Jose Lopez Portillo nationalized all of the banks following a financial crisis brought-on after the oil-boom of the 70’s. As part of the nationalization program, banks were forced to lend most of their reserves to government projects. For a nearly a decade, the banks enjoyed rich pickings from a closed market with no independent regulation. High fees and unattractive (or non- existent) products were the political love-child born from a dearth of competition which left the banks idle to open-market processes and credit systems which might have helped Mexico’s economy to re-develop after the crisis.
1991-1992: Re-Privatization of Mexico’s Banks
In 1991, the technocratic (mostly Harvard-educated) cabinet led by President Carlos Salinas began to open up Mexico’s banking system and by the end of 1992, Mexican banks were back in private ownership, although majority ownership of a bank by foreigners was still prohibited. Nonetheless, foreign banks began to purchase very significant, albeit minority, stakes in Mexican banks.
Privatization of the banks began to improve the country’s banking infrastructure; however, the new private owners still had little experience of modern retail banking and so credit services failed to materialize in any substantial form. Real estate mortgages began to appear on the market, but in very limited numbers and carrying high fees and relatively high rates of interest.
1994: Financial Crisis Hits Mexico, aka “Tequila Crisis”
Following some relatively good years with lively economic growth, underpinned by a series of structural reforms in the financial and industrial landscapes, the Salinas administration ended after six years on a sour economic note after capital flight and low dollar reserves threw Mexico’s economy into a tail-spin.
The country’s reins were handed-over to another Harvard-educated technocrat, President Ernesto Zedillo, who was left with the task of sorting out Mexico’s macro economic affairs. As part of his economic re-structuring, Zedillo devalued the Mexican peso early in 1995.
The financial crisis of 1994-1995 caused interest rates to peak at around 110% for a time, causing widespread defaults on loans, credit cards and mortgages and this forced Mexico’s banks to impose a massive credit-crunch.
The new administration’s first priority was to restructure the banking system in order to bring the crisis under some control and also tame the rampant inflation which was a by-product of the financial crisis and peso devaluation.
1995-1998 The Banking Floodgates are Opened
In the spring of 1995, the Mexican Congress approved majority ownership of Mexican banks by foreigners, but with some limitations.
It was not until late in 1998 that the banking system was fully-opened up; a move which, quite literally, opened the floodgates and set the scene for colossal foreign investment in Mexico’s banks and banking system.
The events which led up to the full opening of Mexico’s banking system in December 1998, shaped the banking system in Mexico today.
Foreign banks that hitherto had bought significant minority stakes in Mexican banks moved swiftly to increase those stakes until they gained full control of the Mexican banking institutions of which they were already stakeholders. By 2002, every major bank in Mexico, with the exception of Banorte, was owned and controlled by foreign banking interests.
The foreign banks were attracted to Mexico because of the huge potential which the banking sector represented, the under-valuation of assets, and fact that Mexico’s economy was becoming increasingly integrated with that of the United States and Canada. All those attractions—and others—have proven to be very fruitful indeed.
All Change – No Change?
Mexican banks have been infamously known for three things: excessively high charges and commissions which are also intensely complex, high borrowing rates coupled with low deposit rates, and poor levels of customer service.
Foreign ownership of banks brought re-capitalization to Mexico’s banking system. The foreign banks also brought stability, new technologies, experience (know-how) and fresh management to Mexico’s banking industry. All of these have helped to propel a brisk—and very profitable—banking and credit market in Mexico.
However, despite increased investment and foreign ownership, high banking fees and commissions and the complexity of those charges, continues to exist here. Customer service has seen significant improvements, especially in comparison to the ‘old days’; Internet banking is widely available, although lines at banks can still be long, even with improved customer service technology.
See Also: Blog: Banks and Banking in Mexico
A by-product of the modernization of Mexico’s banking industry is the implementation of a formal credit rating system in Mexico.
Mexico’s sole Credit Rating Agency (known as “El Buro de Credito“) is a private organization collectively owned by Mexico’s banks. The agency has enabled credit markets—particularly credit to consumer markets and small and medium enterprises—to flourish in Mexico.
The central credit agency enables Mexico’s financial institutions to share information, price credit risk and keep long-term historical accounts of borrower’s financial transactions and behaviors. It is a foundation stone of Mexico’s modern credit system.
El Buro is an agency which is loved and feared by Mexicans and foreign immigrants living in Mexico. Loved because of the influence it has and the power it wields to grant a person a mortgage or a car loan. Feared because its remit also extends to denying that loan, or even denying other things like the rental of a house or an apartment. Some employers also check El Buro to vet potential employees; if El Buro says that you’re a poor credit risk, you may have to kiss goodbye to that job or promotion.
The amount of interest you pay at a Mexican bank will vary depending not just on the rate, but on the way in which the interest is applied. There are also a number of charges, commissions and taxes to take into account when working out the real cost of the credit.
Applying for Credit in Mexico
You do not need to be a Mexican national to avail yourself of credit facilities in Mexico. However, you do need to be legally resident (showing a Resident Visa visa) and be able to prove your income.
You will also need a bank or credit reference from your home country. Banks will sometimes open accounts without references, but in these cases, a significant deposit will usually be required to secure any credit line (e.g. credit card) the bank may afford you.
Credit may be applied for directly from a bank or, if you are buying durable goods, the credit application may be made through the company which is selling you the goods.
Whether you apply directly or via third party, you will need to provide references and the bank will make a credit enquiry via the National Credit Bureau (see El Buro, above).
If you have recently moved to Mexico, expect to be able to prove your income using bank statements, letters from a bank you already have a relationship with, a letter from your employer—or a combination of these.
Banks in Mexico appear to be somewhat expert at adding on ‘value-added’ services to agreements, such as insurance policies, when you take out a credit for a car or other durable good. This means that the added service(s) (e.g. insurance premium or service guarantee) is “spread out” over the term of loan (“easy terms”) but it also means that the additional services are being priced at their cost plus interest. It’s always better to keep these extras away from the loan account.
Sales Tax on Interest and Charges
All bank charges, aperture fees, commissions, and credit interest are subject to sales tax in Mexico. Mexican sales tax is known as IVA: Impuesto del Valor Agregado (Value Added Tax). In Mexico, your real rate of interest is the CAT (see below) plus sales tax.
Because sales tax is applied to loan interest, aperture charges and bank commissions, the cost of credit—whether it is on a credit card, car loan, personal loan or other any form of non-mortgage credit—is always higher than the percentage rate quoted on any marketing literature or examples of repayment schedules.
NB: Sales Tax is exempt on mortgage interest payments.
CAT – Costo Anual Total or ‘Real’ Cost of Credit in Mexico
Whenever you take out any form of credit in Mexico, there is always a plethora of charges, commissions, and fees to add to the total amount of the loan. For years, banks were quoting interest rates and interest charges while keeping the aperture fees, commissions and other charges tucked away in the small print of a contract.
So in May 1996, the Bank of Mexico, in an attempt to make consumers aware of the real cost of a loan, introduced a standard known as “CAT”, which stands for Costo Anual Total (Total Annual Cost). The CAT must now be shown on all marketing and sales literature related to a loan.
Often, the CAT calculation can add between 10% and 50% per year to a headline interest rate. It has gone some way to helping consumers understand the true cost of credit, but omits the sales tax added to interest payments, so the “real” cost is actually higher that the CAT calculation.
Any missed payments on any loan agreement, whether it’s a credit card, loan or mortgage in Mexico, will be accompanied by hefty bank charges and a dent in your credit score. Additionally, if you are on a discounted rate of interest, this may be automatically revoked and the higher penalty rate of interest might be applied to the remainder of the loan. Check the small print of any loan agreement and, better still, don’t miss any payments on loan agreements you enter into.
The Need to Know Spanish
Some financial institutions provide English language translations of contracts (for example, for mortgage products) although the official version will always be the Spanish version. If you are entering into a credit agreement in Mexico, be sure you understand the terms being offered and know that, even if there is an English translation of your credit agreement, only the Spanish contract will have a basis in law in the event of a dispute with the credit institution.
See Also: Learn Spanish
Mexico’s Banks provide a range of modern banking services.
Mexican banks will open accounts in Mexican Pesos or US Dollars. Different products are available for different uses and the charges vary enormously. Check the bank’s web sites for the latest product details as well as their charges and rates of interest.
The principal services are listed below, along with some notes when considering use of the service.
Internet Access for Mexico Bank Accounts
All of Mexico’s principal banks offer Internet access so that their clients can manage their financial affairs online. Some of the banks have a long-winded process to open an internet access account but once the internet access is granted, it can make your banking chores much easier as there is no need to line up to pay bills and transfer funds from different accounts. Lines a banks in Mexico are, generally speaking, long—and very long on pay fortnights (every 15 days). Internet access enables you to pay all major bills (e.g. telephone, electric) as well as transfer funds between accounts held at Mexican banks. Internet access is usually given free to clients.
Every retail bank offers a checking account. In Mexico, these often require a minimum deposit to be made each month to keep charges low. Banks usually give a limited number of free ATM withdrawals per month (10 is about average); thereafter a commission, based on the amount withdrawn, is charged to the account.
Deposit Accounts – Sight Accounts
Deposit accounts where the money may be withdrawn ‘on sight’ (no notice required) are usually accompanied by a plastic debit card for use in ATMs and some retail outlets, usually world-wide. These accounts have an aperture fee, and require a minimum balance to be held on account (usually around $1000 pesos) and pay a paltry rate of interest. If the balance goes below the minimum, a fee is applied each month, usually about $100 pesos (plus sales tax), until the account balance is restored to the minimum.
Deposit Accounts – Notice Accounts
The second type of deposit account in Mexico are notice accounts: that is, you tie-up your cash for a pre-defined period of time: 30, 60, 90, 180 and 360 days are the most common. Interest rates on these accounts are better than ‘sight’ accounts, although there is no immediate access to your money. Some Notice Accounts will charge a penalty for early withdrawal, and others will simply not allow you access to the funds until the end of the term.
All major banks offer mortgage products. Mortgages come in all shapes and sizes in Mexico: some offer discount or “teaser” interest rates, with higher rates after an initial period; some offer lower aperture fees in return for higher interest payments and vice-versa. For detailed information about mortgages in Mexico, read the Mexperience Guide to Financing Mexican Real Estate.
In recent years, banks have created specific products for the financing of automobiles and commercial vehicles in Mexico. The loans are some of the most competitive in Mexico and are sold through dealerships or direct from the bank. Car loan agreements often package in the car insurance policy as well as other ‘extras’ you may purchase; is is best to pay these separately if you can afford to do so and if the terms of loan allow it.
The credit card market in Mexico began to take off significantly from around 2000. Mexicans and foreigners living in Mexico have willingly taken up the offers of widespread and abundant credit.
Many stores offer 6 or 12 month interest-free credit deals through credit card companies on certain goods and services. In these cases, the good or service is charged to your credit card by means of six or twelve monthly charges, equal to the purchase price. Beware that missed payments may incur penalty charges and may void any interest-free arrangements you have in place.
Interest rates on credit cards in Mexico are very high by US, Canadian and European standards. Rates of 50% (per year) are not uncommon. Credit cards (and store cards) are the most expensive means of borrowing money from banks in Mexico.
Personal loans for a specific or non-specific purpose are also available in Mexico. To avail yourself of these credit lines you will need to have an established credit history with the bank, a good credit record at El Buro and your salary payments must be deposited directly into your bank account. These loans are known as “Prestamos de Nomina” — the word Nomina refers to payroll payments made by your employer to your bank account, thus the loan refers to the ‘security’ of your regular pay check arriving at the bank.
Foreign Exchange Services
Although all banks offer foreign exchange services, they may not be the best place to change your currency. Read the Mexperience guide to Money in Mexico: Banks and ATMs for full details.
Private Banking in Mexico
For individuals with high salaries, or people known by the banks as “high net worth individuals”, Mexico’s banks offer a range of private banking services which include preferential rates for banking and credit services as well as asset and investment portfolio management services.
If you are living in Mexico and are earning a significant amount, or plan to move or retire to Mexico accompanied by significant assets, rest assured that Mexico’s banks have an entire infrastructure of staff and services ready to service your individual requirements. Check individual web sites for details under the sections entitled “Banca Privada“.
All Mexican banks sell and administer government-approved pension products known as AFOREs. AFOREs provide a tax-efficient savings vehicle, whereby an employer, an employee and the government each contribute to a tax-efficient savings pot which is then invested into equities and investment funds on a list of approved by the financial authorities. Note that the value of AFOREs will rise and fall depending on the performance of the Mexican Stock Market. Banks make an annual charge for managing an AFORE; people are free to move the AFORE from one fund manager (bank) to another within certain parameters and time-scales as set out by law. AFOREs are open to Mexican nationals and foreigners legally resident in Mexico.
Also See: AFORE (wiki)
If you plan to run a business in Mexico, Mexican banks offer a range of services specifically tailored to SMEs (Small and Medium Enterprises). Services include corporate credit cards, corporate payment and procurement cards, payroll services, and loans for commercial vehicles and commercial property. Business charges and rates are usually higher than charges and interest rates for personal customers.
Also See: Mexperience Guide to Self Employment in Mexico
This section contains a list of Mexico’s principal banks and a brief overview, based on current information we have about them.
Short for “Banco Nacional de Mexico”, Banamex is now owned by CitiBank, the US Banking giant. When the bank was bought by Citi, it underwent a slight re-brand with a mix of the old Banamex logo and current CitiBank colors. Lines are often very long at Banamex branches, despite their electronic ticket/rota system. In October 2007, CitiBank announced that it was selling US Dollar denominated mortgages for property in Mexico, using its subsidiary, Banamex, to administer the product. Banamex has one of the largest branch networks in the country and is also an agent for Western Union money transfers.
BBVA is short for Banco Bilbao Vizcaya Argentaria that, as the name suggests, is a Spanish bank. BBVA bought Bancomer and re-branded the name to BBVA Bancomer replacing the look to match the parent bank’s corporate theme and colors. BBVA has a huge branch network with branches and ATMs at every main town and city throughout Mexico and is one of the banks in Mexico which is often seen reaching out to foreign clients through magazines targeted at foreigners, e.g. glossy real estate and in-flight magazines.
The British banking giant, HSBC (Hong-Kong Shanghai Bank of Commerce) bought the Mexican bank formerly known as Bital. Bital’s image and reputation was so dated that the bank immediately re-branded every branch to its HSBC (“The world’s local bank”) brand. Bital’s service levels were always perceived as below par, although recently it seems that the bank has raised its game, perhaps through additional training and management know-how. Lines at HSBC are usually shorter than those at Banamex and BBVA Bancomer — but longer than those at Banorte. HSBC claims to have the largest branch network of any bank in Mexico (inherited from Bital) and it was also the first bank in Mexico to open very extended hours (until 7pm at some branches) and was also the first to open its larger branches on Saturday mornings. Other banks have followed suit and extended opening hours are a world-away from Mexican bank’s opening hours in the 80’s and early 90’s, when they closed their doors by 1pm. Longer opening hours have also helped to ease the waiting time in lines at banks in Mexico: before, when all banks closed by lunchtime, extremely long lines were part-and-parcel of the banking experience in Mexico. Thankfully, those days have passed.
Previously known as Inverlat, the bank was bought out by the Canadian banking giant Scotiabank and promptly re-branded to the parent’s own image. Judging from reviews and internet bulletin boards, this seems to be a popular bank with foreigners. Scotiabank’s branches are well represented in all major towns and cities but the bank does not have the breadth and depth of branch network reach as Banamex, Bancomer and HSBC. Perhaps as a result of having fewer customers overall, the lines are not as long as those at Banamex and Bancomer.
This bank is partly owned by Santander, the Spanish banking giant, and Bank of America. Like Scotiabank, it does not have the branch network reach like that of the ‘big four’ although this can be an advantage if you live in a major town and don’t need frequent ATM access to your account in lots of different places. Smaller banks do tend also, to have shorter lines which makes day-to-day transactions less time consuming.
Banorte is a wholly-owned Mexican bank. It has a substantial branch network across the whole of Mexico and prides itself, through image and advertising, on being the only remaining bank that is wholly Mexican-owned. It does not appear to proactively advertise to the foreign / expatriate community as other banks do (especially BBVA and HSBC, who are often seen in magazines and newspapers aimed at foreigners). The lines at Banorte always seem shorter than other banks.
Banco Inbursa is owned by Grupo Carso, Mexican billionaire Carlos Slim’s principal investment vehicle. It has ATMs and branches at Sanborns and Sears stores and offers a wide range of of financial services including credit cards, car loans, insurance services, deposit accounts and AFOREs — all of which it promotes and sells through the retail outlets owned by the group.
Banco Azteca was Mexico’s first bank to be based in a retail setting, with branches at Elektra retail outlets. Its primary purpose is to offer credit to customers purchasing durable goods at its stores. Banco Azteca is also an agent for Western Union money transfer.
Wal-Mart de Mexico
Wal-Mart de Mexico received permission from the Mexican financial authorities to open its own bank in Mexico in October 2007. Wal Mart now has bank branches at its stores nation-wide and offers its clients credit to purchase goods at its stores.
Nacional Monte de Piedad
Not, strictly speaking, a bank, Monte de Piedad (translated it means “Mount of Pity”) is Mexico’s largest pawn broker. With operations nation-wide, Monte de Piedad offers ready-cash in exchange for almost anything with intrinsic value. Gold and silver jewelry is the most commonly-traded item. The organization is huge, and branch stores may be found in nearly every state in Mexico. With such a large informal economy, pawn broking is a sought-after service by people in need of cash, especially those who do not have access to mainstream banking and credit facilities. If the money is repaid within a certain time limit (plus the interest), customers may reclaim the goods; else the collateralized goods are sold-off at the branches which also act as shops. Loan amounts depend on the current value of the collaterized item(s) being pawned; interest charges are, not surprisingly, much higher than those offered in the mainstream credit markets.
Here is a list of useful contacts in relation to financial matters in Mexico:
Bank of Mexico – Mexico’s Central Bank; regulates all banking activity and also publishes weekly statistics related to credit, banking and other macro-economic indicators.
Buro de Credito – Mexico’s National Credit Bureau online.
Profeco – This is Mexico’s national consumer watchdog, which also polices financial products and services. Consumers who feel misled or who feel they have been defrauded may register a complaint with Profeco who will open a case on the consumer’s behalf. You do not have to be resident in Mexico to complain and you do not have to be physically present in Mexico to complain: although if you are not resident (or present) the process may take much longer.