Citigroup eyes growing bad debt in Mexico

MEXICO CITY (Reuters) - Growing bad debt could threaten Mexico's banks unless they change criteria for lending, Citigroup's head of Latin American operations said in an interview published on Monday.

Lax rules and insufficient studies on giving out credit cards are behind increasing low-quality debt in Mexico's banking system, Manuel Medina Mora told the Reforma newspaper.

"We are at a very good time to correct it," Medina Mora said in the interview.

"It is everyone's responsibility to look after the banking system or we will be taking a step -- not right now but in the future -- toward a system that is not so stable," Medina Mora said.

Global credit markets have tightened and banks have had to write off billions of dollars as a result of investments in U.S. subprime mortgages and the collapse of the U.S. housing market.

Mexico does not have a subprime mortgage lending industry, but banks, anxious to maintain fast growth, in recent years have increased offers of pre-approved credit cards and consumer loans.

"Some financial players relaxed their credit requirements," Medina Mora said in the interview. "There were some banks and financial institutions that would give you a credit card if you already had one, without further study or analysis."

According to studies by Citigroup's Banamex unit, Mexico's second-largest bank, non-performing credit card debt among the country's top six players was 16.2 percent, more than double the official central bank figure of 6.6 percent.

The difference is because the official figures discount the non-performing debt that is covered by bank provisions.