Mexico Bank Failure Shows ‘Huge Risk’ After Regulator Gutted (1)

The collapse of a Mexican lender is spurring concern about risks for the banking system just as the country sinks into its deepest recession in almost a century under the watch of a financial regulator that’s been hobbled by austerity.

Banco Famsa will need a bailout of almost $1 billion to make depositors whole. Its failure is fueling worries among former officials that the watchdog known as the CNBV could miss warning signs at other lenders after a wave of resignations followed President Andres Manuel Lopez Obrador’s drive to cut costs.

The threat to banks has grown amid Mexico’s ...