BANKING

REGULATIONS.

 Definition:

The banking system is a means to channel the savings generated in

the economy towards the deficit agents: individuals, companies and
government. Individuals, to finance their consumption; companies,
their operation and investment, and the government, to cover part
of their deficit fiscal. The efficiency of the banking sector is crucial
for economic development, since a country without bank financing
or with very high intermediation margins it can hardly grow
sustainably. For a banking system to operate efficiently, three
conditions are necessary: ​a full respect for the property of
individuals, an economic stability that allows the planning of
spending and investment by individuals and a regulatory and
supervisory framework that promote the efficient allocation of
financial resources.
 What are they.

Bank regulation is a form of government regulation

that is subject to banks. to certain requirements,
restrictions and guidelines. This normative
structure creates transparency between banking
institutions and the individuals and corporations
with whom who do business, among other things.
Given the interconnectedness of the banking
industry and the dependence that the national (and
global) economy has on banks, is important for
regulatory agencies maintain control over the
standardized practices of these institutions.
 THE GOAL OF
REGULATION.

In this sense, regulation and supervision should have as their central mandate to prevent massive withdrawals of
deposits against banks that may lead them to default on their obligations, that is, not covering the deposits of its
clients. As the deposits in accounts checks the main means of transactions, regulatory institutions act as
guarantors of the payment system by avoiding banking practices that could lead to a general crisis of this system.
In the institutional design of regulation and supervision, entities must be added responsible for monitoring
banking activity, market mechanisms that stimulate banks to reduce their risks which will reduce the costs of
supervision. As regards the public entities in charge of supervision, the central bank acts as the lender of last
resort for the banks and, therefore, as the guarantor of the payment system.
For the healthy operation of the financial system and the macroeconomic stability of the country, the central bank
should prevent banking operations denominated in foreign currency foreign exchange jeopardize the financial
viability of the economy. A high exposure to the exchange risk of national banks together with abrupt
depreciations in the rate of exchange rates increase the probability that debtor banks will default on their
obligations. In virtue of the fact that the central bank does not have the capacity to issue foreign currency or to
solve bank liabilities with international reserves, a high exchange risk endangers not only banks, but also the
payment system.
Regulatory and
Supervisory Entities in
Mexico.

Currently, the regulation and supervision of the banking system rest mainly in five government entities: the
Ministry of Finance and Public Credit (SHCP), the Bank of Mexico (Banxico), the National Banking and Securities
Commission (CNBV), the Institute for the Protection of Bank Savings (IPAB) and the National Commission for the
Defense of Users of Financial Services (Condusef).
The SHCP establishes the main regulations to which the financial system is subject. By For its part, Banxico, whose
objective is to ensure price stability in the country, is the formal guardian of the payment system. Banxico has the
prerogative to grant credit to the banking institutions and to determine the reserve requirements that they should
keep. The CNBV is a decentralized body of the SHPC whose main functions are to monitor and supervising banking
activity, as well as issuing capitalization, accounting and operation to ensure the solvency and security of said
activity. The CNBV can intervene in an institution when there are irregularities in its operation.
The IPAB —decentralized body of the SHCP— is in charge of guaranteeing the payment of the resources of savers
deposited in banks that declare bankruptcy or settlement. For this, the Institute determines the ordinary and
extraordinary quotas that the banks must carry out to cover the payment of the guaranteed obligations in the
event of a the covered contingency. The IPAB also has the power to carry out an intervention caution when
considering that a bank is not being managed in accordance with the "sound banking practices" and compromises
their financial capacity to meet their obligations.