UPDATE 1-Mexico"s Senate passes banking bill in bid to boost lending

MEXICO CITY Nov 26 (Reuters) – Mexican lawmakers on Tuesday

approved a bill designed to boost lending in Latin America’s

second-largest economy by making it easier for banks to collect

on guarantees for bad loans and beefing up regulatory power over

financial firms.

The reform, which was presented by President Enrique Pena

Nieto in May, targets Mexico’s financially conservative banks,

which boast high capital levels but lend much less than their

counterparts in other countries.

The bill is part of Pena Nieto’s ambitious reform agenda,

which seeks to increase growth by overhauling the country’s

ailing energy sector and opening up a telecommunications sector

dominated by a handful of large firms.

Senators approved the far-reaching package of measures after

hours of debate, and the bill will now be sent to Pena Nieto to

be published.

Mexico’s main left-wing party sought to make dozens of

changes to the financial bill, but lawmakers from Pena Nieto’s

Institutional Revolutionary Party (PRI) and senators from

Mexico’s conservative party voted together to quash objections.

Pena Nieto is counting on similar support from the

conservative National Action Party (PAN) to pass legislation to

open up the state-controlled oil industry to private investors

but PAN lawmakers are demanding a deal on electoral legislation

first before moving on to the energy bill.

The banking reform, which was approved by the lower chamber

in September, does not mandate specific lending levels nor cap

interest rates.

It would, however, give the banking regulator 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.

It would also require the banking regulator to name on its

website those who have broken financial rules and state what

they did wrong. The reforms also make it easier for banks to

seize assets put up as collateral.

The World Bank’s ease of doing business survey ranks Mexico

as particularly weak on the enforcement of contracts, with the

average claim taking 415 days between filing and payment – more

than twice the time needed in best-ranked Singapore.

Mexico’s banking sector is dominated by units of major

global banks, such as Spain’s BBVA and U.S. bank

Citigroup Inc.

Its private sector financing stands at just 26 percent of

gross domestic product, with private sector credit at about 45

percent of bank assets – below Brazil, Argentina, Uruguay, Peru

and Chile.

Most analysts have said it would take years to see much of

an impact from the reform. Central Bank Governor Agustin

Carstens estimated the bill could add around 0.5 percentage

points to growth in two or three years.

UPDATE 1-Mexico"s Senate passes banking bill in bid to boost lending