Fitch Affirms IPAB's L-T IDR at 'A-'; National-Scale at 'AAA(mex)'.

MONTERREY, Mexico -- Fitch Ratings has affirmed Mexico's deposit insurance fund, Instituto para la Proteccion al Ahorro Bancario (IPAB), as follows:

--Local currency long-term Issuer Default Rating (IDR) at 'A-';

--National-scale long-term rating at 'AAA(mex)';

--National-scale short-term rating at 'F1+(mex)'.

The Rating Outlook is Stable.

The ratings assigned to IPAB are in line with the long-term local currency rating of the United Mexican States and reflects the legal framework for the fulfillment of its financial obligations as well as its systemic importance to the Mexican financial sector in its character of deposit insurance fund. IPAB's ratings could be negatively affected by changes in its legal framework or a reduction in the transfers of budgetary resources from the sovereign (its primary source of funding, the others being banks' contributions and assets sales) that could alter its financial flexibility.

In addition to federal transfers and potential liquidity support, IPAB's bond issuances since 2000 (Bonos de Proteccion al Ahorro, also rated 'AAA(mex)') benefit from a contingent payment mechanism. In accordance with the Revenues Law for 2008, Mexico's Central bank, IPAB's financial agent, can temporarily debit the accounts from the Treasury to honor these bonds. While this mechanism has to be renewed annually, it has been included in every single Annual Revenues Law since 2000 and is applicable for all Bonos de Proteccion al Ahorro (BPAs) already placed until their maturity. BPAs amounted to MXP666 billion or 90% of IPAB's liabilities at end-September 2007. Fitch considers that this mechanism further strengthens IPAB's ability to honor these liabilities. IPAB's asset-liability management strategy has steadily improved the maturity schedule and average costs of its sizeable debt, consolidating itself as a major issuer of local bonds in Mexico's capital markets. This, coupled with ample credit facilities at its disposal, positively affects IPAB's liquidity position. Net liabilities have declined to 7.46% of GDP as of September 2007, from 13.7% at end-1999, when IPAB was created.

IPAB, in operations since May 1999, assumed FOBAPROA (former deposit insurer Fondo Bancario para la Proteccion al Ahorro)'s assets and liabilities. While IPAB's debt does not have a specific government guarantee, its Organic Law contemplates that if IPAB is not in a condition to face its financial obligations, the Mexican Congress will dictate the measures for the payment of the guaranteed obligations and financing of supported financial institutions. It also states that Congress will provide, in a specific item of the Expenditures Decree, the corresponding budgetary resources required by IPAB to face its financial obligations.

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