Mexico: Warning risk to competition, COFECE recommends detailed study for action on bank commissions

Mexico’s Federal Commission of Economic Competition (COFECE) has said that prohibiting the collection of some banking commissions could generate effects contrary to competition and efficiency, leading to higher costs for users or increasing the power of dominant institutions.

COFECE has recommended to the Senate of the Republic, whose majority group Morena presented an initiative to eliminate the collection of various commissions by the country’s banks, that they request from the Bank of Mexico (Banxico) a detailed study on each of the commissions being considered so that, if necessary, it can emit the appropriate regulatory measures to address any market failures.

“In this sense, the regulation of the concepts included in the initiative merits an analysis for each specific case, which allows for the identification – among the different possible regulatory measures – of the best for each case, whether to define that it is necessary to establish upper limits for commissions, prohibit them or, where appropriate, that it is not necessary to regulate or legislate” said the competition commission.

The main concern for COFECE is that prohibiting such charges could lead to an increase in market concentration, “for example, if banks are prohibited from charging commissions to their clients for the use of infrastructure, they could react by increasing their commissions over the same concept to non-customer users … Eliminating commissions without prior technical analysis could lead to greater market concentration, inhibit the entry of potential participants, and increase other charges that financial entities make to users” the commission concluded.