The recapitalization process took a painstakingly long time, requiring at the end the elimination of remaining restrictions on foreign direct investment in the banking system.4 Significant policy changes in the wake of the 1995 crisis suggest that recent bank lending growth to the private sector may be on a more sustainable path than in the past.
Mexico’s fiscal position has been strengthened and monetary policy under a flexible exchange-rate regime has been successful in putting a lid on inflation, which has remained relatively low during the last decade. Furthermore, banking regulation and supervision have improved considerably, including the strengthening of accounting, portfolio rating, reserves and capital requirements.