March 27, 2009

Committees in Mexico's Senate approved a proposal to curb high interest rates and fees that banks charge customers, possibly setting up the proposal for a final vote before July's midterm elections.Senators from Mexico's three main parties voted late on Wednesday in favor of more government controls on bank charges.The full Senate is expected to vote on the bill soon. If passed, the measure would be sent to the lower house for final approval.Under the proposal, the central bank would have the right to regulate commissions and interest rates and to ban fees charged for some services, like checking one's account balance.

Mexico's central bank, while often critical of banks' fees and interest rates, has warned that imposing artificial controls would lead banks to lend less and encourage some consumers to borrow from loan sharks.Analysts think that taking on Mexico's mostly foreign-owned banks is seen as politically useful ahead of July's elections, when the entire lower house will be up for grabs, but lawmakers may also be wary of measures that interfere in the market.Mexico's banking industry is dominated by Spain's BBVA (BBVA.MC) and Santander (SAN.MC), along with Citigroup (C.N), HSBC (HSBA.L) and Scotiabank (BNS.TO).