UPDATE 3-Mexico central bank offers liquidity to banks

(Recasts, adds details)

By Lizbeth Salazar

MEXICO CITY Oct 16 (Reuters) - Mexico's central bank has offered to pump money into the banking system as the global crisis bites and shuts off loans to Mexican companies.

A sharp depreciation in the peso has caused big losses on currency derivatives from Mexican firms like Comerci and Cemex and frightened investors away from short-term lending in case other companies could be exposed.

The bank made the offer in a document sent to Mexican financial institutions this week and seen by Reuters on Thursday.

"In order to promote the healthy development of the financial system and to facilitate the functioning of the payments system (the bank) has resolved to offer financing to banks that have temporary liquidity requirements," the document said.

A central bank official confirmed the authenticity of the document, which offers short-term financing and repurchase loans secured on a wide range of peso-denominated debt.

The liquidity move comes after the global credit crunch hit Mexico hard in the last two weeks, intensifying a plunge in the stock market and peso currency.

The benchmark IPC stock index .MXX has tumbled by more than 30 percent since the start of September as several companies have been hit hard by wrong-way bets that the peso would continue to rise against the dollar.

Cement giant Cemex (CMXCPO.MX) (CX.N), which revealed a $600 million drop in the value of its derivatives earlier this month, announced on Thursday it would cut 10 percent of its workforce and slash capital spending to raise funds, after announcing a 74 percent drop in quarterly profits.

The peso has lost a quarter of its value since September despite the central bank selling $11.2 billion in reserves since Oct. 7. Central bank governor Guillermo Ortiz said in a television interview that further dollar auctions were possible but that the bank was likely to end these interventions soon.

PREEMPTIVE 'ATTACK'

"This is a good preemptive step to 'attack' a potential liquidity drought that could show up in the market, especially in these days of global market turmoil," UBS said in a research note.

At least 10 auctions of short-term commercial debt totaling 1.76 billion pesos ($135 million) failed to find bidders on Wednesday, while the few that were successful were only able to do so at substantially higher interest rates.

Mexico's financial system is dominated by foreign banks like Citigroup (C.N), BBVA (BBVA.MC), HSBC (HSBA.L) and Santander (SAN.MC). Their business has boomed in the past decade by handing out loans to credit-starved consumers and businesses, rather than dabbling in risky subprime mortgages or unpredictable derivatives.

Shares in Banorte (GFNORTEO.MX), the only large Mexican-owned bank, tumbled as much as 12 percent on Thursday, before partially recovering.