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Mexican banking regulator revises capital buffer requirement for credit institutions

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Mexican banking regulator revises capital buffer requirement for credit institutions

Mexico'sbanking regulator CNBVhas raised capital requirements for Mexican credit institutions facing an adversesituation in financial markets in order to better protect the banking system, accordingto a resolution published in the OfficialGazette on April 7.

The newnorm establishes a formula to calculate the capital buffer these institutions musthold, which is known as the Contracyclical Capital Buffer, to mitigate the riskof their loan portfolios when the economy presents adverse conditions.

The buffermust be created gradually over a maximum period of four years with 25% created byDecember 2016, 50% by the same month of 2017, 75% by 2018 and 100% by the end of2019.

The normalso highlights the need to change the system used to determine which banks aresystemically important in order to only include those variables directly relatedto the banks' operations.

The newformula gives equal weighting to the bank's size, its integration with the financialsystem, the importance of the services and infrastructure it provides to the financialsystem and the complexity of is operations, the resolution noted.