By Alexandra Alper MEXICO CITY, May 8 (Reuters) - Mexico on Wednesday presented wide-ranging financial reforms to jump-start lending in Latin America's No. 2 economy, making it easier for banks to collect on guarantees for bad loans and beefing up regulator powers over delinquent companies. The reforms target the financially conservative policies of Mexico's banks, which boast high capital levels but lend much less than their counterparts in other countries. The bill includes a new mandate for the development bank to help foster growth in the financial sector, increase competition in the banking and financial system to reduce costs, create new incentives to lend and strengthen the sector's regulation, Finance Minister Luis Videgaray said. The bill does not mandate specific lending levels or cap interest rates. "The reform initiative is integral. It does not seek to lower interest rates by decree. It proposes giving greater flexibility and incentives so the private sector and development banks together give more credit, which is cheaper," Videgaray said. Videgaray said the banking law overhaul removes the single biggest obstacle for small and medium businesses to obtain loans by making it easier for banks to seize assets put up as collateral in cases of nonpayment. "The first thing the bank says is how difficult it's going to be to get that piece of land ... in case the company does not pay the loan, to go to court and get the asset," he said in an interview with Reuters earlier. "Banks are not lending to them because they cannot reclaim their guarantees." WIDER REFORM AGENDA The financial reforms, included in a pact between President Enrique Pena Nieto's Institutional Revolutionary Party (PRI) and the country's main opposition parties, were in limbo for weeks due to a political dispute. The parties settled their differences and agreed on Tuesday to revive the pact. The pact, signed by the major parties in December when Pena Nieto took office, contains a number of reforms aimed at invigorating the economy, including overhauls of the tax system and state-owned oil giant Pemex. Reforms of the telecommunications sector, education system and labor laws have already been approved by Congress. Under the proposed financial reforms, the banking regulator would get new powers to punish those lenders that fail to channel enough resources into credit - even limiting banks' securities trading on their own account if lending falls below the required levels. The reform also proposes to require the banking regulator to name on its website those who have broken financial rules, and state what they did wrong. Mexico's banking sector is dominated by units of major global banks, such as Spain's BBVA and U.S. bank Citigroup. Analysts said it would take years to see much of an impact. Central Bank Governor Agustin Carstens estimated the reform could add around 0.5 percentage point to growth in two or three years. BOOSTING CREDIT, PROTECTING CONSUMERS Videgaray said that under banking reform, competition authorities would carry out a review of the financial industry and make recommendations to financial regulators for increasing competition. The reform would also give medium-size businesses another financing tool that would make it easier for them to list publicly, he said. Consumers would be able to transfer financial products from one bank to another. Another measure would ban banks from making consumers buy one product in order to get access to another and create a "financial entities" bureau to make it easier for them to access and compare key information about the financial institutions. Mexico's private sector financing stands at just 26 percent of gross domestic product, with private sector credit at 45 percent of bank assets - below Brazil, Argentina, Uruguay, Peru and Chile. Small- and medium-sized companies generate nearly three-quarters of Mexican jobs but struggle to get credit, receiving just 15 percent of credit, the finance ministry says. But analysts doubt the measures will spur rapid lending that could soon put Mexico in the position of other emerging markets, which have seen credit bubbles grow in recent years. "We believe there are many structural and cultural changes that have to take place. There is only going to be gradual progress," said Jose Perez, a banking analyst at Standard & Poor's in Mexico City.