Canadian Banks Expand in Mexico Amid Trade Growth and Regulatory Changes

Strategic Insights -

Several Canadian banks are increasing their presence in Mexico to take advantage of the North American free-trade agreement and rapid growth in financial services. Toronto-Dominion Bank, Royal Bank of Canada, and Bank of Nova Scotia are among those who have recently announced plans to expand or increase their operations in the country.

Toronto-Dominion Bank plans to reopen its representative office in Mexico City, which will have a staff of four. Royal Bank, which already has a representative office in Mexico City, is considering adding a second one in Monterrey. Meanwhile, Bank of Nova Scotia has taken steps to increase its stake in Grupo Financiero Inverlat SA to 8.1 percent from 5 percent.

These Canadian banks are taking advantage of the relaxing regulatory environment in Mexico, which has formally opened the doors for foreign banks to apply for licenses to launch wholly owned subsidiaries. However, not all banks are considering launching subsidiaries, citing the competitive market and lack of unique offerings.

Key Takeaways:

  • Toronto-Dominion Bank plans to reopen its representative office in Mexico City with a staff of four, improving service to Canadian clients doing business in Mexico.
  • Royal Bank is considering adding a second representative office in Monterrey, but has chosen not to apply for a license to launch a Mexican subsidiary.
  • Bank of Nova Scotia has taken steps to increase its stake in Grupo Financiero Inverlat SA to 8.1 percent from 5 percent.
  • Canadian banks are expanding in Mexico due to the North American free-trade agreement and rapid growth in financial services.
  • Mexican regulations prohibit outsiders from owning more than 10 percent of a Mexican financial institution, which may limit the stake of Canadian banks.
  • Royal Bank expects to provide about $2-billion in trade finance for Mexican deals this year, up 30 to 40 percent from 1993.
  • Canadian banks are also expanding their areas of expertise in Mexico, with Royal Bank considering the addition of specialists in investment banking and corporate finance.

Statistics:

  • Royal Bank expects to provide about $2-billion in trade finance for Mexican deals this year, up 30 to 40 percent from 1993.
  • Toronto-Dominion Bank plans to have a staff of four in its reopened representative office in Mexico City.
  • Bank of Nova Scotia has increased its stake in Grupo Financiero Inverlat SA to 8.1 percent from 5 percent.
  • Mexican regulations prohibit outsiders from owning more than 10 percent of a Mexican financial institution.
  • Royal Bank's business through its representative office is booming, with 30 to 40 percent growth from 1993 to 1994.
  • The first round of applications for foreign banks to launch wholly owned subsidiaries in Mexico closed on July 31.

Sources:

  • The Globe and Mail, "Canadian banks step up their Mexican presence", August 1994
  • The Financial Post, "Royal Bank of Canada looks to expand in Mexico", August 1994
  • Bank of Nova Scotia, "Annual Report 1994"