Bank Cleanup

The festering wound of Mexico's banking crisis, now well into its fifth year, has reopened following federal regulatory authorities' intervention to take over the nation's third-largest commercial bank, Banca Serfin, in July. With assets totaling around $18 billion, Serfin's transfer to the ownership of the new Institute for the Protection of Bank Depositors (IPAB) marks the most significant step yet in "the federal government's growing participation in the private financial system," writes Jaime Contreras Salcedo in the centrist Excelsior of Mexico City.

In contrast to the banking system nationalization of 1982, however, the latest federal move regarding Serfin and four other commercial banks in the process of restructuring is viewed as a temporary measure to keep the financial institutions afloat while preparing them for sell-off to domestic or foreign bidders. M. David Paramo, in the financial daily El Economista of Mexico City, asserts that IPAB has sought "a therapy for the banking system that permits recovery to the point where it can assume a normal life." Paramo believes the banks have "moved out of intensive therapy."

But the vast and steadily escalating cost of the banking system cleanup since the crisis erupted in 1995-estimated at 15-17 percent of Mexico's gross domestic product-will only be exacerbated by IPAB's initial commitment of more than $1.3 billion to cover Serfin outstanding losses. That sum is likely to mushroom as IPAB restructures Serfin for auction, Contreras notes.

Paramo writes that Mexican bankers are demanding congressional action on pending administration proposals to rewrite the bankruptcy code and strengthen legal guarantees for creditors. National bankers, he says, fear that the rules will change when it is too late-that is, when the banking industry has been taken over by foreign companies.