Bank of Mexico says financial system is solid, warns of geopolitical and climate risks

MEXICO CITY, June 10 (Reuters) - Mexico's financial system remains resilient and solid with the capacity to confront adverse scenarios, the central bank said on Wednesday, while highlighting geopolitical conflicts as issues to closely monitor.

It also noted that risks in the system marginally increased since the prior stability report published in December. The Bank of Mexico, known as Banxico, said the banking system has strong capital and liquidity levels and would be able to withstand shocks under stress scenarios. Looking at internal financial risks, it flagged deterioration in the country's economic growth outlook, followed by higher-than-expected inflation and a downgrade in the sovereign credit rating. On the non-financial side, it described geopolitical conflict, cyber issues and climate events as potential risks. Total financing of the non-financial sector of Mexico's economy reached 103.9% of GDP in the first quarter, with more than half concentrated in the public sector, the report showed. (Reporting by Daina Beth Solomon, Editing by I?igo Alexander)