UPDATE 2-Mexico investigates banks' risky derivatives sales

(Adds detail on Comercial Mexicana's derivatives)

By Noel Randewich and Luis Rojas Mena

MEXICO CITY, Dec 15 (Reuters) - Mexican authorities are investigating whether banks broke rules when they sold companies volatile derivatives that led to massive losses.

Supermarket operator Comercial Mexicana (COMEUBC.MX) defaulted on payments to creditors in October and other companies revealed steep losses in currency derivatives after the world credit crisis threw the peso MEX01MXN= into a tailspin.

Banks selling their clients derivatives that were unsuitable to their core business could face penalties if they did not adequately disclose risks involved, Guillermo Babatz, head of the National Banking and Securities Commission, told Reuters on Monday.

"Some banks applied standards that appear adequate, and there are others whose standards were far from what we would like to see," Babatz said in an interview.

Comercial Mexicana revealed in a filing on Monday it had made around 100 derivatives bets with JPMorgan Chase & Co (JPM.N), Citigroup Inc (C.N), Barclays Plc (BARC.L), Merrill Lynch & Co Inc MER.N and Goldman Sachs Group Inc (GS.N). It said it based its bets on the recommendations of bankers and government economic forecasts.

Two companies that trade on Mexico's stock exchange are under investigation for not adequately revealing their derivatives positions and another six will likely be investigated, Babatz said.

"We have detected at least eight where we could infer there were problems with disclosure," he said, adding those companies have since made their derivatives positions public.

News of catastrophic derivatives losses by companies wiped out liquidity in Mexico's commercial paper market in October as shocked investors feared more bad surprises were in the pipeline.

Aiming to reassure investors, the commission required publicly listed companies to make detailed reports of their derivatives positions by Dec. 15.

"We don't think there will be any surprises," he said.

Tortilla maker Gruma (GRUMAB.MX)(GMK.N) suffered a $788 million loss in foreign exchange derivatives in October.

Grupo Industrial Saltillo (GISSA.MX) said last week it disagrees with its counterparties about how much it owes on losing derivatives bets and has hired outside help to analyze the cost of the complex contracts.

Mexico's bank association has said banks act as intermediaries and are not to blame for companies' derivatives losses.

Mexico's banking industry is dominated by international players Citigroup, BBVA (BBVA.MC), Banco Santander SA (SAN.MC), HSBC Plc (HSBA.L) and Scotiabank (BNS.TO). (Editing by Phil Berlowitz and Andre Grenon)