Haris Ashley
Mexico operates a public insurance scheme called IPAB to protect depositors' funds, but not all firms and investment types qualify for cover. The Institute for the Protection of Bank Savings (IPAB) was created 15 years ago and is responsible for establishing the necessary mechanisms for savers to quickly recover their money in the unlikely event that a Mexican bank becomes insolvent. In such a scenario, IPAB and CNBV would transfer the assets of the failing bank to another banking institution appointed by IPAB. The National Commission for the Protection and Defense of Users of Financial Services (Condusef) states that the equivalent of 400,000 UDIs, or approximately 3.1 million pesos, per individual or company, and bank can be covered. Mexico's banks are generally well-capitalized and were among the first in the world to fully implement the stricter capital standards set by international financial regulators (Basel III).
| Characteristics | Values |
|---|---|
| Insurance scheme | IPAB |
| Insurance amount | 400,000 UDIs (Unit of Investment) or approximately 3.1 million pesos or two million 58 thousand pesos |
| Insurance coverage | Deposit accounts, government bonds, pension products, auto, home, health, travel, and life insurance |
| Foreign-owned banks | BBVA Bancomer (Spain), HSBC (England), Scotiabank (Canada), Banamex (US) |
| Mexican-owned banks | Banorte, Banco Inbursa, CI-Banco, Intercam |
| Safety | Well-capitalized, solid liquidity coverage ratio, no client or credit concentration in large depositors, government-backed insurance |
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What You'll Learn
Foreign-owned banks in Mexico
Mexico has a range of foreign-owned banks, including BBVA Bancomer, Banamex, Citibank, Banco Santander (formerly Banco Santander Serfin), Banco Volkswagen Mexico, Banco Wal-Mart de Mexico, Adelante, HSBC Mexico, Mitsubishi Bank, Scotiabank Inverlat, ING Bank, and UBS Bank. Some of these banks have been acquired or merged with local banks, such as Citibank acquiring Banca Confia and Banco Santander acquiring Banco Mexicano.
Mexico operates a public insurance scheme called the Institute for the Protection of Bank Savings (IPAB) to protect depositors' funds in the event of financial problems. IPAB provides deposit insurance of up to 400,000 UDIs (inflation-indexed currency units), which is equivalent to approximately 2 million 58 thousand pesos per individual or company per bank. The value of one UDI is currently worth around 7.90 pesos and is updated daily on the Bank of Mexico's website.
It is important to note that not all financial institutions and investment types qualify for IPAB coverage. The National Commission for the Protection and Defense of Users of Financial Services (Condusef) emphasizes that banks must inform their clients about the type and amount of operations guaranteed by IPAB. To ensure their savings are protected, depositors should cross-check with IPAB or their independent financial adviser for a list of covered banks and investments.
Mexico's banks are generally considered well-capitalized and financially healthy. They have strong liquidity coverage ratios, exceeding an average of 238%, and are subject to Basil III solvency and capitalization rules. The Mexican government has also taken steps to strengthen banking regulations, government supervision, and solvency rules following financial crises in the past.
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IPAB insurance scheme
Mexico operates a public insurance scheme known as the Institute for the Protection of Bank Savings (IPAB) to protect depositors' funds. The IPAB was created 15 years ago to establish the necessary mechanisms for savers to quickly recover their money in the event of a bank becoming insolvent. The IPAB insurance scheme covers accounts in banking institutions, but not investments or transactions in other non-banking institutions, such as funds, insurance companies, and brokerage firms.
The IPAB replaced the original bank deposit protection fund, Fobaproa, following the 1994 financial crisis. It insures bank deposits in qualifying institutions for up to 400,000 UDIs (inflation-indexed currency units), which is updated and published daily on the Bank of Mexico's website. One UDI is currently worth about 7.90 pesos, so the total amount of money insured by IPAB is just over 3.1 million pesos.
The National Commission for the Protection and Defense of Users of Financial Services (Condusef) stresses that all banks must inform their clients about the type and amount of operations guaranteed by the IPAB, which will appear in account statements and product contracts. In the unlikely event that a Mexican bank becomes insolvent, IPAB and CNBV would transfer the assets of the failing bank to another banking institution appointed by IPAB, following an orderly procedure of dissolution and liquidation under banking laws. Savers and investors covered by the IPAB would be directly paid up to the limit allowed by the insurance deposit, without the need to file a claim.
It is important to note that not all firms and investment types qualify for IPAB cover. Depositors should cross-check with IPAB or an independent financial advisor to ensure that their deposits and investments are protected under the scheme.
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Mexico's banks and financial crises
Mexico has experienced several financial crises since 1976 and has received financial assistance from the US to help deal with these crises and other difficulties. Mexico's last major financial crisis before 1994 was in 1982 when the country was unable to meet its obligations to service $80 billion in mainly dollar-denominated debt to US and foreign banks. The origins of the 1994 crisis can be traced back to a combination of factors, including Mexico's substantial foreign currency reserve levels, the Mexican government's pledge to maintain a stable peso exchange rate, and the expectation that foreign capital inflows would continue at high levels.
In response to the 1994 crisis, Mexico established limited deposit insurance, replacing the previous system of blanket coverage. The current bank savings protection institute, known as IPAB, insures bank deposits in qualifying institutions for up to 400,000 UDIs (inflation-indexed currency units), which is updated daily. The IPAB is a government-backed insurance scheme that protects depositors' funds in the event of bank failure. However, not all firms and investment types qualify for cover, and depositors may lose part or all of their deposits if the bank becomes insolvent.
Mexico has taken steps to strengthen its banking regulations, government supervision, and solvency rules following financial crises such as the "Tequila Effect" in 1995 and the global economic crisis in 2008. Mexican financial authorities have highlighted that Mexican banks are generally healthy and well-capitalized, with a solid liquidity coverage ratio exceeding 238% on average. They are subject to Basil III solvency and capitalization rules and have implemented stricter capital standards set by international financial regulators.
Despite Mexico's history of currency devaluations, financial blowouts, and periods of runaway inflation, the country's banks are well-capitalized and among the first to implement stricter international standards. The safest place to keep savings in Mexico is typically in larger, regulated banks, with government bills and bonds also offering secure investment options. Diversifying accounts across multiple banking institutions can also protect individuals' savings through deposit insurance.
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Mexican banks and government regulation
Mexico operates a public insurance scheme known as the Institute for the Protection of Bank Savings (IPAB) to protect depositors' funds. The IPAB was established 15 years ago and is responsible for setting up mechanisms for depositors to quickly recover their money in the event of bank failure. The IPAB insures bank deposits in qualifying institutions for up to 400,000 UDIs (inflation-indexed currency units), which is updated daily and quoted on some exchange sites. While the IPAB provides protection, not all firms and investment types qualify for cover.
The Mexican government provides rigorous regulation and oversight of all banks operating in the country. Mexican banks are well-capitalized, have solid liquidity coverage ratios, and are subject to Basel III solvency and capitalization rules. They do not have significant client or credit concentration in large depositors or particular sectors of the economy. The National Commission for the Protection and Defense of Users of Financial Services (Condusef) stresses that banks must inform their clients about the type and amount of operations guaranteed by the IPAB.
In the unlikely event of a Mexican bank becoming insolvent, the IPAB and CNBV would transfer the assets of the failing bank to another institution appointed by the IPAB. Depositors covered by the IPAB would be directly paid up to the insurance deposit limit, while those with amounts exceeding the limit could make a direct claim to the corresponding banking institution.
In addition to IPAB protection, the safety of Mexican banks is enhanced by the presence of foreign-owned institutions. Large foreign corporations, such as Citibank and Scotiabank, own the big banks in Mexico, providing international support and backing from their home countries.
To ensure the safety of their funds, depositors should verify that their financial institution and investment types are protected under the IPAB scheme. Diversifying accounts across multiple banking institutions can also provide added protection, as each investment is insured up to the IPAB limit per person.
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Mexican banks and international support
Mexico has a history of currency devaluations, financial crises, bank nationalizations, and periods of runaway inflation. In the face of such challenges, Mexico has strengthened its banking regulation, government supervision, and solvency rules. Notably, Mexican banks were among the first globally to fully implement the stricter capital standards set by international financial regulators, known as Basel III.
The country offers a range of banking options, including Mexican banks and international banks. Some Mexican banks cater specifically to foreigners with bilingual staff, international services, and foreign currency accounts. Examples include Santander México, a subsidiary of Banco Santander in Spain, and HSBC México. BBVA Bancomer Mexico, the largest financial institution in Mexico, also offers a variety of deposit account and credit card options for non-residents.
To open a bank account in Mexico as a foreigner, it is advisable to visit a branch in person. Some banks may ask for a Mexican tax ID number, but larger, more international banks are more likely to accommodate foreigners without these documents. Additionally, not all Mexican banks have English-speaking staff, and most websites and forms are in Spanish only.
In terms of specific financial protections, Mexico operates a public insurance scheme known as the Institute for the Protection of Bank Savings (IPAB) to protect depositors' funds. IPAB insures bank deposits in qualifying institutions for up to 400,000 UDIs (inflation-indexed currency units), which is updated daily and quoted on some exchange sites. In the unlikely event of a bank becoming insolvent, IPAB and the National Banking and Securities Commission (CNBV) would transfer the assets of the failing bank to another institution, ensuring that savers and investors covered by IPAB are directly paid up to the insurance limit.
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Frequently asked questions
Yes, Mexico operates a public insurance scheme called IPAB to protect depositors' funds. The Institute for the Protection of Bank Savings (IPAB) was created 15 years ago and is responsible for establishing the mechanisms for savers to quickly recover their money in the event of bank failure.
The limit of the IPAB insurance is 400,000 UDIs (Units of Investment), which is approximately 3.1 million pesos. One UDI is currently worth 7.90 pesos, and this value is updated and published daily on the Bank of Mexico's website.
The IPAB insurance only covers accounts in banking institutions. It does not secure investments or transactions in non-banking institutions such as funds, insurance companies, or brokerage firms.
Yes, government bills and bonds are considered a safe option. Several regulated banks offer funds that invest in these instruments, and the government also has a program where individuals can buy securities directly.
