UPDATE 5-Mexico president elect rules out bank changes after plan sinks shares

(Recasts with Lopez Obrador saying he will not support plan, updates prices)

MEXICO CITY, Nov 9 (Reuters) - Mexican President-elect Andres Manuel Lopez Obrador signaled on Friday he would not support a bill proposed by his party to limit bank commissions, providing some reassurance to investors after stocks had sunk to their lowest level in over 2-1/2 years.

Mexico’s S&P/BMV IPC stock index had fallen 3 percent to its lowest since February 2016 on Friday morning, extending Thursday’s losses after senators in the National Regeneration Movement (MORENA) unexpectedly introduced the bill.

The stock index pared losses to claw its way back to modest gains by Friday’s close after Lopez Obrador told a news conference he had no plans to change banking laws in the first half of his administration, which will begin on Dec. 1.

“We won’t make any modification to the legal framework relating to economic, financial and fiscal matters in the first phase of this government,” Lopez Obrador said. “To be more precise, in the first three years, no modification.”

Incoming finance minister Carlos Urzua had also sought to calm nerves late on Thursday. Apparently surprised by the plan, Urzua said his team had contacted lawmakers to “organize a coordinated effort” before bills are presented to ensure financial stability.

After Lopez Obrador spoke, the peso erased earlier losses against the dollar to rise by more than 0.5 percent.

Mario Delgado, a senior MORENA lawmaker, pledged early on Friday morning that the incoming government would act with more prudence in the future.

“The objective now is to maintain stability in financial markets,” Delgado told Mexican radio. “We must maintain dialogue. There should be no surprises.”

But analysts said the flipflopping on policy was unnerving the market.

“They have lost confidence,” said Gerardo Sienra, head of equity sales at Mexican brokerage Intercam. “Investors do not know what is next. At any moment they could change the rules of the game.”

The volatility on Thursday and Friday was the second shock to Mexican markets in less than two weeks.

Stocks and the peso were hammered early last week after Lopez Obrador said he would scrap a partially built $13 billion new airport for the capital.

Then on Thursday, MORENA’s senate leader Ricardo Monreal introduced the bill seeking to limit the fees banks can charge clients, sending banking stocks tumbling. The IPC saw its biggest losses in more than seven years on Thursday.

Banking stocks fell early on Friday with Bank Grupo Financiero Banorte, the country’s No. 2 bank, shedding over 10 percent at one point.

Its shares rallied into positive territory after Lopez Obrador’s remarks, then slipped again. Shares in Banorte closed down 1.8 percent.

The Mexican unit of Spanish bank Santander dropped over 2 percent, before recovering to climb nearly 1.7 percent.

The MORENA bill also hit stocks of banks in other parts of the world with exposure to Mexico early on Friday.

Shares in Spanish bank BBVA fell nearly 6 percent in Madrid. Mexico is BBVA’s biggest market and accounts for 41 percent of the bank’s overall profits. (Reporting by Michael O’Boyle, Miguel Angel Gutierrez, Sheky Espejo, Diego Ore and Veronica Gomez Editing by Dave Graham and Rosalba O’Brien)