Mexican banking system has tools to withstand economic slump - authorities

MEXICO CITY (Reuters) - Mexico’s banking system has high capital levels and broad liquidity to withstand the present economic downturn triggered by the coronavirus pandemic, the country’s financial authorities said on Tuesday.

In its balance of risks update, the financial stability council said in a statement that challenges remain, including the operation of markets, credit flows and risk management.

While the economy has seen reduced risk premiums and interest rates, and a stronger peso currency since April, financial conditions will be closely tied to the evolution of the pandemic, the statement added.

The council called the country’s financial system “solid,” noting that the banking system has shown sufficient capital and liquidity while some non-bank institutions should diversify financing sources.

The council, which is headed by the finance ministry and includes the central bank governor, cited as a major external risk the global economy’s recovery, including “the risk that it will be less vigorous that expected.”

Higher levels of volatility in international financial markets was also flagged as a risk, as were “additional adjustments” to the credit ratings of the government and state oil company Petróleos Mexicanos, or Pemex.

Reporting by Sharay Angulo and David Alire Garcia; Editing by Daina Beth Solomon and Richard Chang