(Updates closing stock price)
MEXICO CITY, Nov 8 (Reuters) - Mexico's banking stocks sank on Thursday after a senator from the president-elect's political party presented a proposal to stop banks from charging commissions for certain services like withdrawing cash from ATMs.
Mexico's S&P/BMV IPC stock index fell about 5.7 percent, its biggest one-day loss in more than seven years. Shares in Grupo Financiero Banorte tumbled nearly 12 percent
Santander's local unit dropped 8 percent, and Gentera dropped more than 10 percent after the unexpected news that President-elect Andres Manuel Lopez Obrador's party was unveiling a bill to prohibit some commissions.
It was the second recent shock to the market from the incoming government. Local stocks and the peso were hammered less than two weeks ago after Lopez Obrador announced he would scrap a partially built $13 billion airport project.
"All of this is by the book what every other leftist government has done in Latin America: governing by referendum, then going after the financial conglomerates," said Santiago Arias, a portfolio manager at Credicorp Capital Asset Management in Santiago, Chile.
"There was a hope that Lopez Obrador would be a little more conscious about how he would approach the private sector," he said.
The banking initiative, submitted by Ricardo Monreal, Senate leader for Lopez Obrador's Morena party, argues that banks in Mexico earn more in commissions than in other countries.
"We're convinced that this initiative is fundamental to make the relationship between the people and banks more fair," said Morena Senator Bertha Caraveo.
"Today we made another step in the promise to separate economic power and political power."
The bill referenced a study by Mexico's financial products watchdog Condusef that said 30 percent of Mexican banks' revenue on average comes from commissions.
It would prohibit financial entities from charging clients for checking a balance, withdrawing cash and requesting past bank statements, among other things. The plan would also require the Bank of Mexico and Mexico's banking regulator to create a plan to annually lower commissions on bank transfers.
Several bankers told Reuters on condition of anonymity that the proposal caught them by surprise.
Banking association ABM did not immediately respond to requests for comment. Regulator CNBV declined to comment.
Condusef said that Spanish bank BBVA Bancomer made 36 percent of its money in Mexico from commissions, while Citigroup's Citibanamex and HSBC made one third. Banorte was the next highest, with 31 percent of its income from commissions.
Renata Herrerias, a finance professor at Mexico's ITAM university, said the banking initiative was "excessive" and that the government should present more studies to back it up.
"A lot of the reaction is the surprise, I think the public in general agrees that there is abuse in the charging of commissions," she said. "What scares people ... always is the way they do it."
Shares in Banorte, one of the most liquid stocks on the exchange, were the worst performing on Thursday.
BBVA Bancomer and HSBC did not immediately respond to requests for comment. Banorte said in a filing to the Mexican stock exchange that the fluctuation in its share price on Thursday reflected "natural market movements." Citibanamex declined to comment. (Additional reporting by Sheky Espejo, Daina Beth Solomon, Christine Murray, Michael O'Boyle and Stefanie Eschenbacher; Editing by Bernard Orr and Tom Brown)