Volume 2.1 - Crime and Punishment- Fall 1997

Title: The Mexican Banking Industry: Can Regulatory Incentives for High-Risk Lending Lead to White-Collar Crime?

Author: Luis Urrutia

Abstract: This article discusses how the regulatory structure may facilitate the commission of white-collar crime in the Mexican banking sector. It provides an overview of structural and institutional conditions and the impact of policies on opportunities for high-risk activities in the banking industry. Current problems - such as an all-encompassing liability protection mechanism, tolerance of weak prudential practices, and deficient accounting and reporting standards - maintain an environment propitious for reckless activities in Mexican banking management. The possible connection of highly risky transactions to unlawful activities is then discussed. Finally, the article argues that future policymaking, when considering changes in regulatory structure, must take into account the incentives produced by earlier policies.

About the Author: Luis Urrutia is an attorney admitted in Mexico. He is also a master's candidate at the Harris School of Public Policy.

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