- The Washington Times - Thursday, March 19, 2009

MEXICO CITY (AP) - Mexico’s Treasury Department confirmed Thursday that Mexican law bans foreign governments from holding stakes in local banks, but said it would ask the nation’s congress to amend the law to permit participation in cases of emergency.

Such a measure would allow troubled Citigroup Inc., in which the U.S. government now holds a 36 percent stake, to keep its profitable Mexican subsidiary, Grupo Financiero Banamex. Citigroup bought Banamex, Mexico’s second-largest bank, in 2001.

A statement from the Treasury Department said it will ask lawmakers to change a current law that bans foreign state participation in local banks in order to permit government bailouts in cases of economic crisis. It gave no timeline for the plan.

“These measures aren’t a deliberate attempt to participate in the banking industry or intervene in the Mexican financial system,” but rather to support troubled banks, the Treasury statement said, referring to recent moves by U.S. and European governments to acquire bank shares and inject cash into the global banking system.

A spokeswoman for Citigroup in New York declined to comment on the plan, and spokespeople at Banamex in Mexico City were not available for comment.

Most Mexican banks were bought by foreign multinationals including Citigroup, HSBC Holdings Plc and Spain’s BBVA Bancomer, after the nation’s 1995 banking crisis.

Governments have assumed minority stakes in some of those banks too, in a bid to boost lending since credit markets dried up last year. Mexico’s National Banking and Securities commission said it is analyzing the legal implications of those moves.

Citigroup has faced criticism in Mexico since the U.S. government acquired its share in the bank in February, with leftist opposition lawmakers demanding that Mexico’s government force Citi to sell Banamex to nongovernment investors.

Citi has repeatedly denied plans to sell the unit, one of its most profitable.

Banamex’s net worth, defined as the difference between assets and liabilities, was 140 billion pesos ($10.3 billion) at the end of 2008. CEO Enrique Zorrilla last month said the bank has 30 billion pesos ($2.1 billion) in reserves that will ensure it keeps lending despite Mexico’s slowing economy.

(This version CORRECTS that Treasury will seek to change law, sted law now permits. UPDATES with details, background. ADDS byline.)

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