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UPDATE 1-Mexico to help banks with dollar placement in blow to new central bank law

·2 min read

(Adds details on credit plan, quote from central bank governor)

MEXICO CITY, Feb 8 (Reuters) - Mexico's central bank willbegin offering credit to banks that have trouble placing cashdollars, it said in a statement on Monday, in a move that mayspell the end of the controversial new central bank law.

The new mechanism by the central bank is nominally aimed athelping banks repatriate U.S. dollars from migrants andtourists, though it may also act as a compromise for the centralbank bill going through Congress.

The new bill approved by the Senate last year was met withstrong resistance from the central bank, which warned the rulingNational Regeneration Movement (MORENA) that it could force theBank of Mexico to absorb the proceeds of organized crime.

Since then, MORENA agreed to rework it in the lower house ofCongress and some lawmakers told Reuters the party will sidelinethe bill as a new solution is sought.

Mexico's finance ministry and Banxico, as the central bankis known, on Monday announced a series of measures to make iteasier and cheaper for Mexican migrants in the United States toremit money back to Mexico.

Under the new mechanism, financing would also be given tobanks having issues moving cash dollars back to the UnitedStates, with terms and conditions set by the central bank.

"(Facilities will be provided) to credit institutions thathave justified difficulties to repatriate dollars in cash,through guaranteed contingent financing," the central bankgovernor said in a video conference.

Mexican officials have said the new measures were a responseto the central bank law, which critics say is a threat to theautonomy of the central bank.

The bill, which analysts say would mainly benefit magnateRicardo Salinas' Banco Azteca, will now have to be discussed inthe lower house but is seen as unlikely to pass in its currentform.

(Reporting by Abraham Gonzalez, Writing by Drazen Jorgic;Editing by Lisa Shumaker)