FinMin to Decide Citi-Banamex Fate

US government participation in Citi is unlikely to trigger an immediate sale of Banamex, but under Mexican law the finance ministry will decide, say local attorneys. Participation in the capital stock of a Mexican bank by a foreign government could force divestment, says Rodrigo Conesa Labastida, partner at Ritch Mueller in Mexico City. “The ministry of finance may order the sale of the shares owned by the government to the Mexican bank,” says Conesa. He adds that the price would be 50% of the lowest of either book value or market value of the shares. “Proceeds from the sale would be kept by the Mexican government as a fine,” says the lawyer. However, he adds that this will likely not happen. “In practice this is not possible because the participation of the US Treasury in the capital stock of Banamex is indirect, so the ministry of finance cannot order the sale of the shares,” says Conesa. “Revoking the banking license is a theoretical possibility, in practice this will never happen,” he adds. The government is therefore challenged with interpreting the banking law in the light of the current crisis. “I don’t think [the US government stake] will trigger, from a legal point of view, that Banamex should be sold,” says Rafael Robles, a partner at Galicia y Robles, noting that if the US government equity is only supporting the bank, it may not be found to violate the law. Even if there is no legal imperative, political pressure may become too great. Banamex is a sensitive case, as an iconic institution that has for many years been a leading domestic bank. It operates 19% of the Mexican system, according to Moody’s. Talk of local groups forming to buy Banamex continue to do the rounds. Itau is also mentioned as a potential bidder if Citi opts to sell.