Bad experiences in home countries prompt distrust.

Put yourself in the shoes of a recent immigrant from Mexico who works as a day laborer and sends half his income back across the border to family members.

Chances are, you have never set foot in a bank in this country - or in Mexico, where the village you came from could be miles from the nearest financial institution.

That helps explain why so many Latinos in Los Angeles remain hesitant to establish checking or savings accounts with a traditional U.S. bank. It also captures the dilemma that the U.S. banking industry faces in trying to reach this increasingly important group.

There are many differences between banking here and in Latin America.

The bigger banks there typically have a single location in each city, rather than a number of branches in neighborhoods. And those banks are seen as elite institutions, especially by the poor. "Employees who work for banks weren't

even expected to deal with the lower classes," says Lilia Mojica, president of the California Hispanic Bankers Association and a vice president at the San Diego office of Union Bank of California.

Most Mexican consumers use banks only for savings deposits. Few have checking accounts because most business in Mexico - especially in remote areas - is done with cash or by barter. There are only a limited number of automated teller machines and no supermarket bank branches.

Then there's the issue of trust, or lack of it. Banks in Latin America aren't considered secure places to keep money because so many go bankrupt, said George Ramirez, Union Bank's senior vice president for emerging markets.

"The United States is the exception to the rule about the trust it has built in its banking system," Ramirez said. "In most other countries, banks are rarely (considered) safe."

That distrust has grown worse in recent years as Mexico faces one of its worst-ever financial crises. The banking system has been in turmoil since 1994 when the newly elected government of President Ernesto Zedillo let the peso float freely against the dollar.

Within a year, the peso had lost nearly half its value and official interest rates increased four-fold, surpassing 60 percent. The Mexican banking system went into free fall, which prompted a bailout that could dwarf the U.S. savings-and-loan debacle in its impact on the economy.

Now in its fourth year, the bailout is expected to cost Mexican taxpayers at least $70 billion, a figure equal to about 20 percent of the country's gross domestic product.

Yet the bailout has done little to restore consumer or investor confidence in the banking system. A June report by Moody's Investors Service said that the system still needs $13.4 billion in new capital to stay afloat. But few private investors are ponying up; instead, the government is relying on infusions of cash from lenders like the International Monetary Fund.

Nor are banks willing or able to boost their investment in the general economy. Over the 12-month period ended May 31, Banco de Mexico, the nation's central bank, reported that private-sector lending by commercial banks tell 15.1 percent.

To make matters worse, the government seized the 135-year-old Serfin Bank, the country's oldest and third-largest financial institution, in July after it became insolvent. Its 15 or 20 biggest shareholders lost a total of about $2 billion as a result of the seizure.

The bailout stemmed from the peso devaluation and Mexico's 1990 move to re-privatize banks that: had been seized by the government nearly a decade earlier. It turned out that owners of the country's newly private banks had excellent connections with the government, but little experience in banking.

Legislators in Mexico hired Michael Mackay, a Canadian accountant with Deloitte & Touche, to conduct an audit of the privatization. The report, released in July, concluded that the program was designed to maximize government income rather than put banks in the hands of sound managers.

It also found that about 10 percent of the loans absorbed by the government rescue fund since the bailout began were poorly documented or even illegal - many of them going to friends or relatives of bank directors. Even so, the audit blamed incompetence more than corruption for the shaky state of the bailout.

The problems have taken their toll. Of the 18 banks that were privatized in 1990, only four are still operated by the original shareholders. The rest have been seized by the government and then sold or closed.

In the wake of the financial mess, Mexicans have turned to more creative, informal ways to save and invest that don't involve traditional banks. Among them:

* Informal pooling arrangements like Autofin, a company that finances car and home purchases. Instead of making down payments, would-be buyers make monthly payments for a year or longer. Only then are they allowed to take possession of their car or home. From that point, they make payments as if they had a traditional loan until the obligation is repaid.

* Neighborhood "social banks" that pool savings from local residents to purchase fanning equipment, vehicles and other items for the community. In one instance, a savings club in a town called Doctor Arroyo purchased the local branch of Bancrecer that the parent bank was about to close.

* Slightly more formal "micro-lending" enterprises that leverage money from organizations such as the U.S. Agency for International Development or nonprofit, non-governmental relief groups to make loans to cash-strapped entrepreneurs.

* "Venture capital" loans from friends, relatives and even wealthy families that aid the expansion of local businesses.

Some of that patchwork system has been transplanted to L.A., where Latinos often rely on loans from friends and family members to help their fledgling businesses grow after they move here.

While it's impossible to track how much money flows through these informal networks, they have been "quite successful for the Latino community, and quite reliable," says Sebastian Edwards, an international banking expert at UCLA's Anderson School and former chief economist for the Latin American region at the World Bank.