manuel sanchez : the shared task of financial inclusion remarks by mr manuel sanchez, deputy governor of the bank of mexico, at the sixth financial education summit, organised by banamex, mexico city, 19 november 2013. * * * it is an honor to participate in this meeting on financial education and economic citizenship. i am pleased that banamex has organized, once again, a forum for discussion and analysis that contributes to understanding the challenges posed by financial inclusion in our country, and to pondering viable options for promoting it. theory and international evidence show that financial intermediation and inclusion favor economic development and enhance living standards. among other benefits, access to banking services allows individuals and firms to make better savings decisions, carry out economic transactions efficiently, and finance consumption and investment. despite these advantages, mexico is under - banked relative to advanced countries, and also even relative to nations of similar or less development. the percentage of people with a bank account, the proportion of individuals and firms with credit, and the availability of distribution channels such as bank branches, automatic teller machines, and point - of - sale terminals for every 100, 000 inhabitants reveal that mexico is significantly behind, although the data also suggest a huge opportunity for improvement. 1 as is well known, many savers and seekers of credit meet their needs with ingenious methods running from investments in and trading of animals to rotating savings and credit associations ( tandas ). indeed, those with null or limited access to financial services have come up with other ways of saving, demanding loans, making financial decisions, and carrying out fairly complex operations in their own ways. in fact, the proportion of the population that uses informal financial services surpasses that using the formal system. 2 frequently, these schemes are effective. for example, contrary to commonly held prejudices, informal credit markets for people with low incomes tend to have a strong payment culture, partly because transactions occur in communities with strong binding ties. however, it is also true that informal vehicles hardly guarantee optimum scales and protect users from possible fraud, given that they lack adequate rules and supervision. low financial inclusion can obstruct or make more expensive the access to information and services indispensable to increasing people ’ s opportunities and improving social wellbeing. to the extent that this limitation may affect broad segments of the population, generally those with the lowest incomes, it can diminish the productive potential of social groups and entire regions, making marginalization more acute. obstacles to

the market can expect greater transparency in the conduct of monetary policy and this should reduce the gray areas in anchoring public expectation about inflation and enhance the functioning of the markets. strengthening the financial system in the financial sector, the main challenges emerged from the overhang of the asian financial crisis and the greater integration of the philippines into the global financial system. in response, we have addressed these challenges precisely by strengthening the financial sector. focus has been given to maintaining a sound and viable banking system and the development of the domestic capital market. efforts in this area have begun to show positive results. banks ’ balance sheets are gradually recovering from the large burden of bad loans while the local bond market has received the initial shot from the reforms that include the now operational fixed income exchange. we shall sustain the bangko sentral ’ s reform strategy on cleaning up banks ’ balance sheets, addressing remaining weaknesses in managing risks, and ensuring that our prudential regulatory standards are elevated to international benchmarks. we shall also continue to coordinate with other government agencies and the private sector in installing the remaining infrastructural requirements of a well - functioning capital market that would diversify our sources of funds and reduce our vulnerability to various shocks. but we need to enhance a few things even as we have started to launch them. we are moving into consolidated supervision and risk - based approach to bank examination that are aligned with international best practices. such innovations are necessary to allow regulators to effectively manage challenges posed by conglomerate structures and cross - border issues. we are improving corporate governance and market discipline. a crucial element for effective oversight of the banking system is for the regulator to have stronger supervisory and regulatory authority and this can only be done with the support of congress in amending the bsp charter. finally, we realize that the bsp can enhance its effectiveness by establishing teamwork with the other financial regulators. thus was born the financial sector forum ( fsf ) that has elevated the cooperation among the regulators to pioneering levels. the fsf will help harmonize supervisory and regulatory efforts, improve the exchange of information among regulators and promote better consumer protection. in the area of promoting the domestic capital market, the changes we would like to see are the fruits of the steps that have already been started in close collaboration with the private sector. we shall be pleased to see more robust trading of government and subsequently, private, debt securities at the fixed income exchange, improved market confidence from the use of independent custodians, migration by the banks from