MEXICO CITY, April 27 A probe by Mexico's
antitrust authority into alleged price manipulation in the
market for government bonds is "credit negative" for banks,
which are the biggest intermediaries of government paper,
Moody's Investors Service said on Thursday.
The Federal Economic Competition Commission (Cofece)
launched the investigation in late October into Mexico's nearly
100 billion peso-per-day ($5.3 billion) public debt market amid
suspected breaches of competition laws by intermediaries.
Cofece did not name what institutions were being
investigated, but said it was casting a wide net and could
scrutinize deals dating back up to 10 years.
Commercial banks and brokerage houses are the main
participants in auctions of government debt.
Mexico's financial sector is led by global players such as
U.S.-based Citigroup, Spain's BBVA and Santander
, Britian's HSBC, as well as local Banorte
. At least 30 brokerage houses as well as
investment and pension funds also take part in trades.
"Trading has been an important source of earnings for
Mexican banks, contributing, on average, about 10 percent of
their core earnings, pre-provision, pretax income, in the past
five years," Moody's said in a note to clients.
Following Mexico's 2013 economic reforms, which conferred
expanded powers on Cofece to fight market concentration, the
commission has sought to increase competition in a country that
has long been dominated by monopolies and oligopolies.
Any debt instrument issued by the federal government, states
or municipalities, the state IPAB bank protection agency,
development banks or state companies could come under review,
Carlos Mena, a Cofece official, said last week.
(Reporting by Anthony Esposito; Editing by Jonathan Oatis)