Senior Mexican lawmaker hints at review of divisive cenbank law

A senior lawmaker in Mexico's leftist ruling party on Sunday suggested that Congress might review a controversial bill that has infuriated the central bank, which regards it as a danger to the financial system and a threat to its independence.

In a video address, Ricardo Monreal, Senate leader of the National Regeneration Movement (MORENA), acknowledged that the law he pushed that would make the Bank of Mexico (Banxico) buy up foreign cash which banks cannot repatriate, had caused alarm. On Wednesday, the Senate backed the law, causing a wobble in the peso currency and prompting a stern rebuke from Banxico, business groups and economists who said it could allow money from drug cartels to enter the bank's reserves.

The legislation is now with the lower house. Monreal defended the bill, saying it would help people with poor access to the financial system, such as migrants and hospitality workers paid in dollars, to offload their cash.

But he said it was important to dispel doubts that it could encourage illicit behavior or impair the bank's autonomy. "We legislators must act in the interests of the country, and this includes responsibly dealing with any inconformity and complaint generated ... as on this occasion," Monreal said, speaking after meeting central bank officials.

Banxico later issued a statement saying it would work with Mexican banks trying to strengthen ties with correspondent banks abroad so as to ease repatriation of foreign cash holdings. The central bank added that it supported the objective of the bill, and was committed to cooperating with Congress to explore alternatives to the current proposal.

Mexico's ABM banking lobby also weighed in, saying the law jeopardized financial stability and increased the risk of laundered money and "terrorist financing" entering the system. At the same time, the ABM pledged to help find solutions for people who struggle to exchange their legally earned dollars.

Congress sits on Monday and Tuesday before entering winter recess, and legislators concerned about the Banxico bill, including some inside MORENA itself, have urged at least delaying debate on the measure until they return in February. Monreal said the lower house would decide what happens next, while noting that Congress had two years ago agreed to postpone another MORENA bill that alarmed the financial sector.

A version of Monday's lower house order of the day issued on Sunday did not include the Banxico bill.

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