Monday , October 25 2021

Rating Fitch Ratings predicts negative consequences for commission reduction


Fitch Ratings said the profitability of Mexican banks could be reduced if the legislative initiative was approved

Fitch Ratings warned that the proposal to limit the collection of certain bank commissions may have negative effects on the banking outlook in Mexico.

In a short statement, the credit rating agency noted that, although the proposal is only a legislative initiative at the moment and without certainty of approval or conditions in its environment, the profitability of Mexican banks can be reduced if it is approved.

He explained that fee income is a significant source of profits for Mexican banks, whose concept represented an average of 18.00 percent of total operating income of industry over the past five years, and net income as a percentage still accounts for a significant majority of total income.

He pointed out that commissions for their importance for banks ensure a healthy diversification of their income sources.

"Commissions support the continued generation of bank profits, even in times of economic disadvantage and in the past, in low-interest environments, which is why they represent one of the biggest credit advantages over other banking systems, emerging countries," he said.

He explained that the share of fee income in Mexico does not differ significantly from other banking systems in Latin America, because in some markets the share of fee income is lower, as is the case in the industry in Colombia. and Peru.

The Fitch Ratings agency said that if such a proposal were to materialize, it could have medium to long-term negative effects on efforts to increase financial intermediation and integration in Mexico, discouraging current and new bank participants.

In addition, its implementation may also adversely affect the offer and terms of financial products.

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