Exclusive: Mexico bank reform would ease legal hurdles to boost credit

Mon Apr 22, 2013 9:57am EDT
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By Alexandra Alper

MEXICO CITY (Reuters) - Mexico's government wants to boost lending by making it easier for banks to collect on guarantees for bad loans and by giving regulators new powers to punish firms that do not lend enough, according to a draft of a new banking reform.

The proposal, a copy of which was seen by Reuters, is due to be announced next week and is part of a raft of measures designed to ramp up growth in Latin America's second largest economy.

The financial reform proposal, thrashed out within a pact between President Enrique Peña Nieto and the leaders of the country's main opposition parties, targets Mexico's conservative banks, which boast high capital levels but lend much less than their foreign peers.

"Granting more loans, under more favorable conditions in terms of interest rates, duration and amounts, is a crucial element to efficiently allocating financial resources to boost national economic growth," the draft says.

The wide-ranging reform proposal, which amends nearly 40 laws, impacts Mexico's financial system from large banks such as Bancomer (BBVA.MC: Quote), with some $101 billion in assets, down to the smallest credit unions. At more than 800 pages, it cover issues ranging from money laundering to competition.

To create more legal certainty, the proposal aims to ease the process for banks to take possession of a loan guarantor's assets in case of default. It would also streamline the bankruptcy process, which can drag on in Mexico, in part by creating new courts.

Banks would also be subject to periodic lending reviews under the plan, which must be passed by both houses of Congress.

Under the proposed reforms, the banking regulator would get new powers to punish those lenders that fail to channel enough resources into credit - even limiting banks' securities trading on their own account if lending falls below the required levels.   Continued...