Merida Yucatan. The banking situation in the United States, as well as what happened in the European markets, reminds us that the financial authorities must remain alert and use the necessary selective tools, according to the case, indicated Victoria Rodríguez Ceja, governor of the Bank of Mexico (Banxico).
“Authorities must remain alert and act using, selectively, the tools that may be necessary, depending on the case,” said the governor in front of the bankers and representatives of the federal government, during the inauguration of the 86th Banking Convention.
Rodríguez Ceja indicated that the situation of Silicon Valley Bank, which collapsed last weekend, as well as the financial turbulence that was generated from this event, will not have a negative effect on Mexican banks.
“Even with severe scenarios, banks remain solvent and liquid (…) We do not expect recent events in the United States banking system or in international markets to have negative effects on Mexican banks,” said the governor during her second term. Banking Convention.
In the US case, the governor explained that the collapse of Silicon Valley Bank could be categorized as a “typical episode of bank runs”, which could have been explained by three factors: inadequate management of interest rate risk; an excessive concentration of exposure in one sector of the economy or, due to the proportion of depositors with balances above the deposit insurance coverage that was very high.
(What happened was due to) the combination of these factors, and not due to the distrust of depositors who came to withdraw their resources for fear of facing losses.
In the case of international markets, mainly European ones, Rodríguez Ceja explained that this responded to a high environment of uncertainty where “negative news about a global systemically important bank” was released, which generated increases in various assets, as well as a risk aversion of investors.
“These episodes remind us that depositor confidence is essential for banks to be able to carry out their essential tasks of transformation, terms and risks, so it is essential to constantly reinforce confidence. For this, prudent risk management is important without underestimating the risk of concentration, promoting an environment of healthy competition, maintaining high standards of customer service and scrupulous, complete and punctual compliance with the regulatory framework and its modifications”, he asserted.
The remarks come after reports of the collapse of Silicon Valley Bank over the weekend, raising concerns that it could lead to a global financial crisis like the one that occurred in 2008.
Price stability, collective good
Regarding the high levels of inflation, Victoria Rodríguez Ceja recalled that the central bank’s mandate is price stability, which is important not only for economic development, but also for the welfare of society.
Noting that the current inflationary period has had a speed not seen in decades, the governor said that “experience shows that persistent inflation above the target undermines the foundations of economic growth and deteriorates the quality of life of the population. It affects every society, to a greater extent lower-income sectors,” said the governor.
In this sense, although general consumer inflation has slowed globally, core inflation –which is what central banks look at for their decision-making– continues to show resistance to slowing down.
“Price stability is an invaluable collective good,” said the governor, and reiterated that the central bank will continue to closely monitor the behavior of prices, taking the necessary actions for their stability.
