Mexico: Ortiz condemns unethical bank behaviour
Central bank governor reveals the extent of intervention required by the FX losses of a Mexican retailer.
"If the markets do not stabilize, if credit does not defreeze, if confidence is not restored, all the other considerations are irrelevant"
In mid-October the Mexican central bank was forced to auction in excess of $8 billion of dollar debt, principally to cover the foreign exchange positions of supermarket chain Comercial Mexicana, which had filed for bankruptcy.
In an interview with Euromoney during the IMF meetings in Washington on October 12, central bank governor Guillermo Ortiz explained the intervention, spoke about how Mexico’s banks were surviving the crisis, and gave his opinion on the actions of global regulators to date.
What prompted the intervention in the currency markets in mid-October?
The problem was that a Mexican company – a chain of grocers – had started behaving like a hedge fund. It was engaging in structured product operations – effectively selling volatility protection.