Stress tests show Mexico's banking system has required capitalization levels

MEXICO CITY, Dec 2 (Reuters) - Mexico's central bank said on Wednesday that stress tests of the financial system reveal the Mexican banking system as a whole has the needed levels of capitalization to allow it to face different simulated scenarios for the economy.

At the individual level however some banking institutions, representing a low percentage of system's total assets, could have difficulty maintaining minimum levels of capitalization required in certain adverse scenarios, the Bank of Mexico's latest financial stability report showed.

"Mexico's economy and financial system continue to face a complex environment derived from shocks caused by the pandemic," said the report.

According to Banxico, as the Bank of Mexico is known, prior to the pandemic the financial system was in a solid position, with high capital levels, ample liquidity and low levels of delinquency.

But the pandemic has increased certain vulnerabilities and risks.

"Uncertainty persists regarding the effects of the pandemic on the credit portfolio of the most affected," the report said.

Though the financial system has shown resilience in the face of the challenges presented by the economic fallout of the pandemic, some risks could intensify in the coming months, Banxico warned.

Banxico has forecast that Mexico's economy will shrink between 8.7% and 9.3% in 2020, its deepest annual contraction since the Great Depression.