Mexico competition watchdog weighs in on bank fee proposal

Mexico's federal competition watchdog (Cofece) weighed in on the debate over a proposal to eliminate many bank fees, saying that it is not opposed to such a law, but called for studies to see how it would impact users.

The agency also warned that the proposed legislation could result in additional market concentration in the banking sector and drive institutions to raise fees for other services not affected by the legislation.

"The prohibition of fees without distinction could generate effects that are counterproductive to the goals intended within the initiative," said the agency. As such, Cofece recommended a regulatory analysis of all fees the proposal would modify.

In this way, said Cofece, it would be able to determine the best path forward from the users perspective, with possible recommendations including setting a new maximum on the fees, the outright prohibition of the fees or the determination that no regulatory or legal change was necessary.

The agency cited as an example a 2014 case where Cofece carried out an analysis on fees tied to ATMs and POS terminals, noting, "These recommendations made to [the central bank] remain valid, and the fees are included in the initiative."

Cofece said that "unjustified" prohibition of some of the fees in the initiative could lead to effects that are "contrary to competition and efficiency," including the following:

• Higher charges for other items, as banks would try to recover the banned fees in other ways, increasing other charges.
• Increase in market concentration: if fees related to the use of infrastructure such as branches or ATMs are eliminated, this would favor the banks that have the largest distribution networks.
• Additionally, not being able to charge for the use of the infrastructure would hinder the expansion of new entrants.
• Impact on incentives for innovation and technological development, since, if the regulation prevents recovering investments, the appearance of new products or innovative business models would be affected.

The proposal, coming from senate majority coordinator Ricardo Monreal (pictured) of the leftist Morena party, was unveiled November 8 and caught the financial sector by complete surprise, sending bank stocks and the peso tumbling.

One day later, president-elect Andrés Manuel López Obrador (AMLO), distanced himself from the proposal, saying his administration would not seek major changes affecting the industry for at least three years. AMLO takes office Saturday.

Morena and Monreal have, nevertheless, defended their right to propose the legislation, which would not come to a vote before February.

In a sign of rapprochement, Mexican banking association (ABM) president Marcos Martínez said in a statement that the sector's leadership held on Friday a "cordial and constructive" meeting with senators, including Monreal, as well as incoming finance minister Carlos Urzúa.

"ABM will continue working with the senate of the republic to seek to build a common agenda on banking services, with the user and their benefits at its center," read the statement.