Fines for Mexican Afores seen bringing potential reputational risk
Fines for Mexican pension fund managers seen bringing potential reputational risk
The fallout from recent fines levied by Mexican regulator Cofece against Afore pension fund managers may be more damaging to the firms' reputations than it is to their immediate financial health, according to Fitch Ratings.
On May 4, competition watchdog handed 1.1bn pesos (US$58mn) in fines to Grupo Financiero Banorte (controller of Afore XXI Banorte), Grupo Profuturo (Profuturo GNP Afore), Sura Asset Management (Afore Sura) and Principal Afore for monopolistic practices following a years-long investigation into collusion between the competing firms designed to limit the number of clients transferring from one manager to another.
Fitch, however, described the potential effects of the fines on the parents of the managers it rates - the first three listed above - as "not significant, since these fines are unlikely to materially weaken the parents' relatively strong financial profiles."
XXI Banorte has been the only one of the four to disclose their amount of its fine - initially 429mn pesos but later reduced to 300mn for cooperating with Cofece, and the firm has said it will attempt to further reduce the fine through legal remedies.
Even if the final payouts are roughly unchanged, Fitch does not see particular harm to the firms.
"Fitch does not foresee a significant negative effect on the three rated entities' financial performance from the sanctions, given their sound financial profile, relatively diversified income sources and their well-proven track record in the Mexican pension fund management business," the ratings agency said.
Fitch, however, suggested the firms might still face damage to their public standing.
"Although the financial effects could be absorbed with relative ease, Fitch believes that some reputational risks could arise from the investor and other market participants' side, but not from a business volume perspective."
Mario Di Costanzo, president of Mexican financial services consumer protection agency (Condusef), said in an interview with local paper El Economista that the initial details of the investigation do not suggest the collusive practices had actual impacts on individual savings accounts.
"We still cannot assume that there was any effect on the savings of workers, because the practices penalized were commercial [in nature], where XXI Banorte, Principal, Sura and Profuturo made agreements on delaying transfers," he said.
Di Costanzo added that he is awaiting the complete Cofece report to make a final determination on impacts. Should Condusef find that workers' savings were affected by the practices, he said the agency would approach pension regulator Consar to look into possible compensation.
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