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Countries’ Experience in the CCE: The Mexican Case

Countries’ Experience in the CCE: The Mexican Case Meeting for CCE Coordinators and Compilers Washington, D.C. May 30-31, 2007 1 2 3 4 Agenda FSIs Compilation Process Overview Mexican Supervisory Authorities Inter-agency Coordination Intra-agency Work Compiling Methodology

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Countries’ Experience in the CCE: The Mexican Case

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  1. Countries’ Experience in the CCE: The Mexican Case Meeting for CCE Coordinators and Compilers Washington, D.C. May 30-31, 2007

  2. 1 2 3 4 Agenda • FSIs Compilation Process Overview • Mexican Supervisory Authorities • Inter-agency Coordination • Intra-agency Work • Compiling Methodology • Consolidation Basis • IAS / Basel II as Reference Frameworks • Use of FSIs in Analytical Work • 2006 FSAP Review • FSIs Dissemination • Disclosure Process • Future Challenges

  3. 1 FSIs Compilation Process OverviewMexican Supervisory Authorities MINISTRY OF FINANCE CENTRAL BANK Financial Services Users Protection Commission Bank Deposit Insurance Institute Retirement Funds System Commission Insurance and Bonding Commission Banking and Securities Commission Retirement Funds • Insurance • Bonding Financial Group Holdings AUXILIARY CREDIT ORGANIZATIONS CAPITAL & DEBT MARKETS BANKING SYSTEM • Credit Unions • Factoring • Foreign Exchange Houses • Leasing • Non-Bank Banks (Sofoles) • Savings and Loan Assocs. • Warehouses • Issuers • Brokerage Houses • Mutual Funds • Stock Exchange • Commercial Banks • Development Banks April ‘07: 1,281 Financial Entities

  4. 1 FSIs Compilation Process OverviewInter-agency Coordination • Coordinating and Compiling functions on CNBV • Mandate from the Ministry of Finance • Active Cooperation with the Central Bank • Quasi-formal channels • Personal contact • Other Agencies • Other priorities • Insufficient resources

  5. 1 FSIs Compilation Process OverviewIntra-agency Work • Basic “Dream Team” • Financial Accountant • IT Systems Professional • Public Relations Executive • FSIs Domestic Definition • Facing Reality: Use of What is Already Available • Financial Statements Match-up vs. “Fill in the blanks” • Accounting Criteria Compatibility • In-house Lobbying for Support

  6. 1 FSIs Compilation Process OverviewIntra-agency Work • Development of FSIs Specific Data Systems • Internally-available Figures • Data provided by other agencies • Websites • Shared Data Systems • Legal Framework / National Views for Disclosure • Proper Documentation • Justify Importance of CCE • Face Changes in Staff Members

  7. 2 Compiling MethodologyConsolidation Basis • DEPOSIT-TAKERS: • “Domestic Consolitation” (DC) Consolidation Basis • OFC’s: • “Other” - “Mostly DC” Consolidation Basis • Exclusion of OFC Subsidiaries with Virtually Negligible Asset Shares • 99% Degree of Consistency: Theory vs. Practice • Cross-Country Comparability for analysis purposes

  8. 2 Compiling MethodologyConsolidation Basis • Need for a Measure of Consolidation Basis Consistency • General Measure (i.e., Total Assets) • Specific Measures according to each FSI (i.e., Total Loans) Deposit-takers Coverage: Consolidation Basis Dimension: 1 Nondeposit-taking entity included CROSS-SECTOR 1 Off-shores entity included CROSS-BORDER LESS than 1% of Assets • Cost-Benefit Analysis of SectoralConsolidation Adjustments • Concept of “Branch”: Office vs. Business Division (full set of accounts)

  9. 2 Compiling MethodologyIAS / Basel II as Reference Frameworks • Asset Valuation • Provisioning • Contingencies (Potential Costs) Accounting Criteria Comparisons: • Consolidation Coverage • Accrual Accounting • Asset Boundary IAS - IFRS Domestic Banking Regulation FSICompilation Guide Basel II Specific General

  10. 3 Use of FSIs in Analytical Work2007 FSAP Review • Financial Sector Assessment Program (IMF – WB) • Strengths and Vulnerabilities of a Financial System • Reports on Observance of Standards and Codes (ROSC) • Basis for Financial System Stability Assessments (IMF) • Evaluations for Mexico: • 2001 First Review • 2006 Update • Annual Time Series 2000-2005 and 1Q06 • FSIs for Deposit-Takers • FSIs for Commercial Banks

  11. 4 FSIs DisseminationDisclosure Process • The CNBV deems important to disseminate the work undertaken in the CCE • CCE Formats • Monthly Time Series (2000-2006) • Additional Material • Approval of CNBV’s Government Board • Consent of CCE organizers • Terminology-Homologation in Translations to Other Languages

  12. 4 FSIs DisseminationFuture Challenges Changes in Bank Accounting Principles and Regulation (2007): • Higher Homologation with IAS-IFRS • Enhanced Comparability among Reporting Institutions • Deeper Data Break-down • Implementation of Basel II and Improvement of Risk-sensitivity

  13. Countries’ Experience in the CCE: The Mexican Case Meeting for CCE Coordinators and Compilers Washington, D.C. May 30-31, 2007

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