Mexico’s Banks Must Pay 0.4% of Deposits to Insure Accounts

MEXICO CITY —  Mexico’s banks will have to pay 0.4% of their total deposits for coverage from Mexico’s new deposit insurance agency, known as IPAB, the agency announced Sunday.

The 0.4% required by IPAB is the minimum allowed by the Bank Savings’ Protection Law, which created IPAB to launch a new regulatory framework for Mexico’s banking system. The bill was approved by Congress in December.

“It is important the banks channel an important part of their income to building reserves and fortifying their financial position,” IPAB said in explaining why banks would have to pay the minimum possible fee for deposit insurance coverage.

IPAB, however, reserved the right to raise the fees to no more than 0.5% “in case conditions arise requiring an increase in quotas.”

IPAB said it will gradually reduce deposit insurance coverage to about $100,000. Previously, banks were given unlimited deposit insurance coverage.

IPAB is also expected to set rules for a new market for government paper issued a few years ago by the former deposit insurance agency, known as Fobaproa, in exchange for nonperforming loans held by local banks. IPAB will also be in charge of the divestiture of assets assumed by Fobaproa and will supervise pending capitalization programs of several local financial institutions.