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Mexico is considering using banks to obtain more tax to raise public finances.
Options on the table include restricting tax deductions, which could mean restricting the ability of banks to offset their contributions to Mexico’s deposit insurance scheme against tax, the Financial Times reported. Another option was imposing a windfall tax on profits, but this is less likely in the short term as it would require changes to the law.
The country is anticipating a fiscal deficit to be left by the outgoing President Andrés Manuel López Obrador, which is currently at the highest level since the 1980s.
Mexico’s banking system, which is dominated by foreign institutions, enjoyed record profits in 2023 boosted by high interest rates. The regulator Comisión Nacional Bancaria y de Valores stated the banks saw profits of 273bn pesos ($16.2bn) last year, and an average 18.5 per cent return on equity.
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Russia has ordered the seizure of assets from European banks due to a stalled energy project following the invasion of Ukraine. A St Petersburg court ordered assets and accounts of Deutsche Bank, Commerzbank and UniCredit be seized as part of a lawsuit brought by RusKhimAlians, after the banks withdrew as guarantors on the construction of a gas processing and liquefaction plant.
The court ruled in favour of seizing €239mn of securities, real estate and bank accounts from Deutsche Bank, €463mn worth of assets from UniCredit, and assets and securities worth €93.7mn from Commerzbank.
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The Federal Reserve is reconsidering plans to reduce a 20 per cent mandated increase in capital on the country’s biggest banks. After lobbying efforts from the likes of JPMorgan CEO Jamie Dimon, the Wall Street Journal reported regulators are considering a significant reduction to requirements that banks with more than $100bn in assets need 20 per cent buffers to absorb potential losses. The figure considered now is around half the original total.
The Fed, in collaboration with Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, are still in discussion and there is no guarantee an agreement to reduce the required buffers will be made.
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Japan’s benchmark government bond yield hit a 20 year high on May 20, boosted by speculation the central bank will raise interest rates.
The yield on 10-year government debt increased by 2.5 basis points to 0.975 per cent, the highest it has been since 2013.
As the number increases towards the target 1 per cent, it is believed the Bank of Japan will increase interest rates if salaries increase, reducing the impact of inflation.
The yields on 20 and 30 year debt have also increased, which has further raised expectations.
This is all impacting on the potential strength of the yen which is currently at a 34 year low against the US dollar.
