September 1, 2013
In 1988, then state-owned lender Banamex needed capital. Sourcing it cheaply was not easy. So the Mexican bank structured a new type of bond that swapped $200 million of interbank deposits into a 20-year subordinated liability. The depositors were already somewhat resigned to leaving their cash in the bank, having had it already rolled over at three-year intervals since the sovereign defaulted in 1982. Banamex paid just 75 basis points over Libor, sweetening the deal for creditors by backing the notes with zero-coupon US Treasury bonds.
The transaction was an early example of a Latin bank looking creatively at a problem. While the financing squeezes for the region’s largest banks have, by
Regulatory and economic uncertainty has forced Latin banks to innovate to raise funding and capital. Yet despite today’s expanding balance sheets, simplicity still reigns over most market activity. By Katie Llanos-Small