Mexico:Financial Sector Assessment Program-Financial System Stability Assessment

Mexico has had a robust financial system for many years. Banks have maintained high capital and liquidity buffers. However, the system provides less finance to the real economy than in peers. Mexico has experienced significant real GDP fluctuations since the Peso crisis but no major credit boom-bust cycles, given strong policy frameworks that have been further enhanced since the 2016 FSAP. The economy has strong external trade and financial linkages. These have been an important channel for transmitting global shocks. The financial system has been resilient to the COVID-19 pandemic, reflecting a mix of resumption in mobility and support from domestic and global policies. Buffers in the financial system have increased further during the pandemic. The key risk confronting Mexico is the first sustained and ongoing tightening of global liquidity conditions since the Global Financial Crisis.