Mexico will see bank reform impact in 2-3 years: Banorte's Ortiz

MEXICO CITY Mon May 20, 2013 11:42am EDT

Guillermo Ortiz, chairman of Mexico's largest locally-owned bank Grupo Financiero Banorte, talks to Reuters at his office during the Reuters Latin America Investment Summit in Mexico City May 17, 2013. REUTERS/Henry Romero

Guillermo Ortiz, chairman of Mexico's largest locally-owned bank Grupo Financiero Banorte, talks to Reuters at his office during the Reuters Latin America Investment Summit in Mexico City May 17, 2013.

Credit: Reuters/Henry Romero

MEXICO CITY (Reuters) - Mexico's banking reform will take two or three years to have an impact on credit and access to financial services, said the chairman of Mexico's largest locally-owned bank, Grupo Financiero Banorte.

The reforms, unveiled earlier this month, aim to increase lending in Latin America's second-largest economy to improve development of the small business sector and boost growth.

But Guillermo Ortiz, also a former finance minister and head of the central bank, said it would take time for the reform to seep through to the real economy, where many workers have jobs in the informal sector and don't have bank accounts.

"The banking reform will not have a notable impact in the short term," Ortiz said at the Reuters Latin America Investment Summit.

"If it is successful, we'll see an acceleration in financial penetration after two or three years."

Mexican banks, which include the local units of Spain's BBVA (BBVA.MC) and U.S. bank Citigroup (C.N), are well capitalized but conservative lending practices mean private sector financing stands at just 26 percent of gross domestic product - below Brazil, Argentina, Uruguay, Peru and Chile.

Ortiz declined to give a forecast on how much credit could increase as a result of the reform, but pointed to the success of reforms in Brazil. Private sector credit in Brazil jumped from less than 25 percent of GDP to 35 percent between 2004 and 2007 after changes in the 1990s and early 2000s.

"In Mexico we have one of the most solid and healthy financial systems in the world, but at the same time one of those which lend the least," President Enrique Pena Nieto said in launching the reform.

Ortiz said the large informal sector, which employs 60 percent of the workforce, made it impossible for banks to properly gauge credit risk.

Shrinking the informal sector is one of the objectives of fiscal reform that Finance Minister Luis Videgaray is preparing and aims to present later this year.

The finance ministry estimates small- and medium-sized companies generate nearly three-quarters of Mexican jobs but receive just 15 percent of credit.

Central bank governor Agustin Carstens has said the reform could add around 0.5 percentage point to growth in two or three years.

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(This story has been corrected to fix attribution of quote in 8th paragraph to Mexican President Enrique Pena Nieto, not Guillermo Ortiz)

(Writing by Krista Hughes; Editing by Kieran Murray and Chris Reese)

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