A growing banking scandal in Mexico is unlikely to disrupt the country's financial system or slow down the development of business, but it will tighten regulatory scrutiny of the country's financial institutions, bankers and analysts said Wednesday.

"I think this is the sort of thing that happens when you go back to a private sector economy," said a senior U.S. banker actively involved in business with Mexico. "There are going m be hiccups along the way."

Confidence in the Mexican economy and banking system among foreign investors was rattled earlier this year by the kidnapping of Alfredo Harp Helu, chairman of Banco Nacional de Mexico. by a revolt in the southern province of Chiapas, and by the government's seizure of Grupo Hayre, another financial group.

Earlier this week, the Mexican finance ministry asked banker Carlos Cabal Peniche, head of Grupo Financier Cremi-Union SA, to explain how he obtained large-scale financing to support a recent fast expansion of his banking and other business interests.

Mr. Cabal had been the target of rumors he was acting as a front for funds for other individuals since Banca Cremi acquired Banca Union last year.

His group subsequently acquired Fresh Del Monte Produce NV and other units of Del Monte Foods Corp.

According to reports from Mexico, regulators suspect Mr. Cabal may actually have used loans made by his bank, Mexico's eighth largest, to finance his personal business empire.

The scandals have erupted just when about a dozen U.S. banks are poised to expand into the Mexican marketplace.

However, sources said the Mexico's banking system remained far stronger. more profitable, and better capitalized than the Venezuelan banking system, which collapsed earlier this year after a similar investigation.

But the scandal will not be without consequences, the experts said.

"This will force people to take a harder look at the people who run some of these banks and their business practices," said Christopher Whalen, a Washingtonbased consultant active in Mexico.

The analysts also speculated that mounting problem assets at some of Mexico's smaller financial institutions could force the government to step in to help capitalize banks in difficulty.

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