In what many have called a “ Black Thursday ,” Mexico’s banking stocks plummeted yesterday after a senator from the president-elect’s party unexpectedly presented a proposal to stop banks from charging certain commissions , deepening fears about the leftist government elect’s economic policy.

Mexico’s S&P/BMV IPC stock index fell 5.8 percent

, its biggest one-day loss in more than seven years . Shares in Grupo Financiero Banorte tumbled nearly 12 percent , and Santander’s local unit dropped 8 percent .

12 out of all 21 private institutions consulted this week by CitiBanamex agree that the depreciation of the exchange rate increases the possibility that the Bank of Mexico might raise the benchmark interest rate by 25 basis points on November 15 .

Inbursa

, which is controlled by the family of billionaire Carlos Slim , and the bank Gentera , both fell about 10 percent after the news that President-elect Andrés Manuel López Obrador ’s party was unveiling the bill. His Morena party, along with leftist allies, have a solid majority in both houses of Congress.

It was the second shock to Mexican market in less than two weeks. Stocks and the peso were hammered earlier this month after López Obrador, who takes office on Dec. 1 , announced he would scrap a partially built $13 billion new airport for the capital .

“All of this is by the book of what every other leftist government has done in Latin America: governing by referendum, then going after the financial conglomerates,” said Santiago Arias, a portfolio manager at Credicorp Capital Asset Management in Santiago, Chile .

“There was hope that López Obrador would be a little more conscious about how he would approach the private sector,” he said.

Following the steep market declines, the party sent a more conciliatory message. Ricardo Monreal, Senate leader for López Obrador’s Morena party , stressed that legislators would take the financial institutions’ concerns into account.

“We are not going to pass (the law) in an abrupt, fast, hasty way,” he told reporters. “We are going to listen and we will take enough time to be able to listen to all sectors.”

Carlos Urzua, López Obrador’s incoming finance minister

, also moved to calm markets, saying his team had contacted lawmakers to “organize a coordinated effort.”

“While we recognize the aim (of these initiatives) is to try to improve the living conditions of Mexicans, this objective will not necessarily be achieved unless impacts on public finances and stability in the financial sector are taken into account,” he told reporters.

López Obrador did not comment on the bill in a video posted Friday where, sitting in the back of an army truck, he detailed plans to add more runways to a military airport. The banking initiative, submitted by Monreal, argues that banks in Mexico earn more in commissions than in other countries .

Mexico’s banking sector, which is dominated by foreign-owned banks such as Citigroup’s Citibanamex and Spain’s BBVA Bancomer , has been a frequent target of leftist politicians in the country.

López Obrador won a landslide victory in July. Mexico’s last leftist administration mounted a disastrous privatization of the banking sector in 1982 .

The bill referenced a study by Mexico’s financial products watchdog Condusef that said 30 percent of Mexican banks’ revenue on average comes from commissions.

It would prohibit financial entities from charging clients for checking a balance, withdrawing cash and requesting past bank statements, among other things. The plan would also require the Bank of Mexico and Mexico’s banking regulator to create a plan to annually lower commissions on bank transfers.

Several bankers told Reuters on condition of anonymity that the proposal caught them by surprise.

Banking association ABM said in a statement that it would analyze the bill and work with lawmakers and regulators to “strengthen transparency” around financial products.

Condusef said BBVA Bancomer made 36 percent of its revenue in Mexico from commissions , while Citibanamex and HSBC earned one third. Banorte was the next highest, with 31 percent of its revenue from commissions.

Banking experts said the bill’s backers should have laid the groundwork by meeting with financial groups and presenting public studies rather than unexpectedly proposing the bill.

“They were taken by surprise,” said Renata Herrerias, a finance professor at Mexico’s ITAM university . “I think the public in general agrees that there is abuse in the charging of commissions.”

“What scares people ... is the way they do it,” she said.

Citibanamex declined to comment, while BBVA Bancomer and HSBC did not immediately respond to requests for comment. Banorte said in a filing to the Mexican stock exchange that the fluctuation in its share price on Thursday reflected “natural market movements.”

López Obrador appeases the financial market

However, during the Black Thursday that caused Mexico’s financial markets to plummet, President-elect Andrés Manuel López Obrador asked the Congress for a detailed report on the operational and technical feasibility of the proposal , as well as an assessment on the marcoeconomic impact of the financial initiative that was presented.

It is worth noting that Morena's proposal was based on the calculations of the National Commission for the Protection and Defense of Financial Service Users (CONDUSEF) . Last July , the government body informed that banking commissions in Mexico represented 30% of the private banks’ total income. In 2017 alone, Mexican banks earned a total of MXN$108 billion from said commissions .

The document also pointed out that commissions charged by Mexican banks for user operations were way higher than those charged in other countries. While said commissions account for 36% of BBVA Bancomer’s total income in Mexico, in Spain, it only represents 19% of their profit .

The text states that both the Bank of Mexico and the National Banking and Securities Commission should establish policies to lower banking commissions gradually .

Mexico’s Banking Association informed that they would analyze the content of the initiative to assess its potential impact and establish a dialogue with the institutions involved.

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