CREDIT RISK

Credit Institutions

Guide for the authorization request for:

a) The use of internal methodologies to calculate the capital requirement for credit risk and

b) Classify the credit portfolio and determine their respective reserves.

Development Entities and Organizations

c) The use of internal methodologies to calculate requirements for unexpected losses and

d) Classify their credit portfolios and determine their respective reserves.

Version 1.0

July 26, 2018

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INDEX

• Objective of the Guide
• Definitions
• SECTION I Request letter
• SECTION II Legal requirements Section A. Credit Institutions Section B. Development Entities and Organizations
• SECTION III Technical and operational requirements Section A. Credit Institutions Section B. Development Entities and Organizations
• SECTION IV a) Annex 15 of the CUB b) Annex 27 of the CUOEF c) Text of articles 2 Bis 65 and 124 of the CUB, and articles 135 and 188 of the CUOEF. d) Appendix 1

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Objective of the Guide

This Guide constitutes a support tool for Credit Institutions to request authorization for:

a) The use of internal methodologies to calculate the capital requirement for credit risk, in terms of what is provided in Article 2 Bis 65 and Annex 15 of the General Provisions applicable to credit institutions.

b) Classify their credit portfolio and determine their respective reserves in terms of what is provided in Article 124 and Annex 15 of the General Provisions applicable to credit institutions.

Additionally, it constitutes a support tool for development entities and organizations, to request authorization for:

a) Classify their credit portfolios and determine their respective reserves, in terms of what is provided in Article 135 and Annex 27 of the General Provisions applicable to development entities and organizations.

b) The use of internal methodologies to calculate requirements for unexpected losses, in terms of what is provided in Article 188 and Annex 27 of the General Provisions applicable to development entities and organizations.

This document has been prepared solely for practical purposes and incorporates complementary information that is considered necessary to attach to the request, with the understanding that the requirements for complementary information are only enumerative, since the National Banking and Securities Commission, in exercise of the attribution conferred upon it by Articles 19 of the National Banking and Securities Commission Law and 97 of the Credit Institutions Law, may at any time request additional data, reports, and documents that are equally related to the request.

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Definitions

For the purposes of this Guide, the following shall be understood:

Annex 15: Annex 15 "Minimum Requirements for the Authorization of Internal Methodologies", of the General Provisions applicable to credit institutions.

Annex 27: Annex 27 "Minimum Requirements for the Authorization of Internal Methodologies", of the General Provisions applicable to development entities and organizations.

CNBV: National Banking and Securities Commission.

CUB: General Provisions applicable to credit institutions.

CUOEF: General Provisions applicable to development entities and organizations.

EI: Exposure to Default.

LIC: Credit Institutions Law.

PD: Probability of Default.

LGD: Loss Given Default.

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SECTION I

Request letter

Section A. Credit Institutions

The request letter for authorization for:

a) The use of internal methodologies to calculate the capital requirement for credit risk, in terms of what is provided in Article 2 Bis 65 of CUB and Annex 15 of CUB

b) Classify their credit portfolio and determine their respective reserves in terms of what is provided in Article 124 of CUB and Annex 15 of CUB.

Shall be a free-form letter and for its preparation, the requirements established in Annex 15 of CUB must be considered. The structure of said Annex 15 already contemplates the indications that must be followed to obtain the authorization. Likewise, it indicates the documentation that must accompany the request letter, so, for the purposes of this Guide, it is necessary to follow the content of said Annex to the letter.

Section B. Development Entities and Organizations

The request letter for authorization for:

b) Classify their credit portfolios and determine their respective reserves, in terms of what is provided in Article 135 and Annex 27 of CUOEF.

c) The use of internal methodologies to calculate requirements for unexpected losses, in terms of what is provided in Article 188 and Annex 27 of CUOEF

Shall be a free-form letter and for its preparation, the requirements established in Annex 27 of CUOEF must be considered. The structure of said Annex 27 already contemplates the indications that must be followed to obtain the authorization. Likewise, it indicates the documentation that must accompany the request letter, so, for the purposes of this Guide, it is necessary to follow the content of said Annex to the letter.

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SECTION II

Legal requirements

Section A. Credit Institutions

Institutions, when requesting authorization for the calculation of the capital requirement for credit risk in accordance with Chapter III of Title First Bis of CUB, must at the same time present the request for authorization to classify their credit portfolio and establish the corresponding preventive reserves in accordance with Section Fourth of Chapter V of Title Second of the aforementioned CUB.

When Institutions first request authorization to calculate and establish reserves in accordance with Section Fourth of Chapter V of Title Second of CUB, they must, in turn, deliver to the Commission an implementation plan to calculate the capital requirement for credit risk of the same portfolio within a period not exceeding one year, subject to what is established in Articles 2 Bis 66 and 124 of CUB.

For the purposes of obtaining the aforementioned authorizations, Institutions must present to the Commission their request letter attaching the documentation described in Section XII of Annex 15 of CUB.

Institutions that request authorization for the use of the Internal Methodology with a basic approach, or that do not satisfy the requirements mentioned in Annex 15 to use their own estimates for LGD and PD, must adhere to what is established in Articles 2 Bis 74, 2 Bis 79, and 2 Bis 80 of CUB.

In general, the authorization of the results of the Internal Methodology has a validity of use of one year, with the understanding that the entity must deliver no later than three months before the end of said validity, the calibration of the authorized risk parameters, incorporating the most recent information available.

Section B. Development Entities and Organizations

Development Entities and Organizations, when requesting the authorization referred to in Article 135 CUOEF, must indicate the date on which the request for authorization to calculate the Requirements for Unexpected Losses based on the Internal Methodology applicable to them will be presented to the Commission.

The request for authorization for Internal Methodologies regarding the Unexpected Loss Requirement must be presented within a period not exceeding 12 months, counted from when the request to classify the portfolio applying an Internal Methodology has been authorized. If this request is not presented within the referred period and the Commission has granted authorization to classify credit portfolios with the Internal Methodology referred to in Article 135 of CUOEF, said authorization will be automatically revoked.

Development Entities and Organizations that are authorized to classify their portfolio using any of the Internal Methodologies referred to in the aforementioned Article 135 of CUOEF, must also use the Internal Methodology applicable to them, in accordance with Section Third, Chapter II, Title Third of CUOEF.

For the purposes of presenting the request provided for in Article 135 of CUOEF, Development Entities and Organizations must adhere to the minimum requirements for each of the methodologies indicated, which are described in Section Fifth, of Chapter Fifth of Title Second, as well as in Section Third of Chapter II of Title Third and in Annex 27 of CUOEF.

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SECTION III

Technical and operational requirements

In this section, the documentation and information that must accompany the request letter for authorization for the use of internal methodologies to calculate the capital requirement for credit risk and classify their credit portfolio, as well as determine their respective reserves, for the accreditation of compliance with the technical requirements referred to in:

Section A. Credit Institutions

Prior to the request for authorization for the use of an Internal Methodology, Institutions must demonstrate to the Commission that they have used an internal classification system consistent with the minimum requirements established in this Annex (Section I, last paragraph of Annex 15 page 3).

When the Institution presents the request for authorization of the Internal Methodology for the first time, it must be guided by Section XII "Request for Authorization for the use of the Internal Methodology" of Annex 15 for the delivery of its documentation.

Annex 15 Section XII Request for Authorization for the use of the Internal Methodology, of CUB
Standard
(i) General
a) Guide document detailing the relevant information of the Internal Methodology delivered. This document must allow review and tracking by a third party; likewise, it must contain a description of each of the aspects contained in the plan of the Internal Methodology referred to in fraction I of Article 2 Bis 66 of these provisions, indicating in which policies, guidelines, manuals, documents, or files the detail of this can be found

Annex 15 Section XII Request for Authorization for the use of the Internal Methodology, of CUB
Standard
information, specifying section, number, annexes, etc.
b) The description of the classification of exposures subject to credit risk to which the Internal Methodology will apply. Including its correspondence with the classification indicated in Articles 2 Bis 69 and 110 of these provisions and a complete map of the Institution's credit portfolio that reflects the amount and importance of the portfolio within the Institution.
c) The specification of the approach of the Internal Methodology, either with a basic or advanced approach adopted for each of the portfolios, as well as, indicate the use of the Internal Methodology either to calculate preventive reserves or capital requirements for credit risk, as appropriate.
d) Internal rating sheets with the description of the risk parameters assigned to each grade, level, or segment of rating, which will be applied from the authorization of the Internal Methodology.
e) The description of the weaknesses recognized in the Internal Methodology, as well as the work program established to correct them, which

Annex 15 Section XII Request for Authorization for the use of the Internal Methodology, of CUB
Standard
must include activities, responsible parties, and remediation dates.
(ii) Internal rating system
f) Evidence that the internal rating system complies with what is established in this Annex, for which the manuals supporting it must be delivered, and as a reference, the information referred to in Appendix 2, ensuring that this documentation allows accrediting compliance with what is established in Sections II, III, and IX of this Annex.
g) In the event that the Institution presents a high concentration of debtors in a particular rating segment, present the analysis referred to in fraction (i) of Section II of this Annex.
h) In the case of using rating systems based on expert criteria, provide documentation in accordance with what is established in fractions (ii) and (iii) of Section III of this Annex.
i) The justification for the existence of un-rated exposures, including the criteria for determining when a position will not be rated, and determining the risk parameters that will be assigned to those positions, to accredit compliance with what is established in fraction (iv) of Section III of this Annex.
(iii) Calculation of risk parameters.
j) Evidence that the estimation of PD, LGD, and EI complies with what is established in

Annex 15 Section XII Request for Authorization for the use of the Internal Methodology, of CUB
Standard
the provisions and in this Annex, for which the manuals supporting it must be delivered, and as a reference, the information referred to in Appendix 3, ensuring that this documentation allows accrediting compliance with what is established in Article 2 bis 72 and Article 2 bis 73 of these provisions for the calculation of capital requirements and, in the case of the calculation of reserves for credit risks, with Article 124 of these provisions, as appropriate for an Internal Methodology with a basic or advanced approach, as well as in Sections IV, V, and IX of this Annex.
k) Evidence of adherence to the definition of Default, established in Article 2 Bis 68 of these provisions and in accordance with what is stated in fraction (ii) of Section IV of this Annex.
l) Evidence that the estimates of PD and LGD consider, among other factors, credit granting practices or the recovery process thereof, as indicated in Section IV of this Annex.
m) Evidence of policies and definitions to identify adverse dependencies between default rates and recovery rates, in accordance with what is established in number 2, item b), of fraction (vii) of Section IV of this Annex.
n) The results of the stress tests applied to the parameters, indicating, the

Annex 15 Section XII Request for Authorization for the use of the Internal Methodology, of CUB
Standard
characteristics and assumptions used.
o) The results of performing sensitivity tests on the estimated parameters, considering the factors considered in their estimation.
(iv) Infrastructure.
p) Documents including evidence with the approval of the Board of the Internal Methodology project and the approval of the construction and implementation process of the Internal Methodology by the collegiate body designated by the Board, as well as that the General Management knows the design and operation of the internal rating system, allowing accreditation of compliance with what is established in Sections I and VIII of this Annex.
q) Indicate the reports regarding the Internal Methodology that are sent to management and deliver evidence of the preparation of these, in accordance with what is established in Section VIII of this Annex.
r) The description of the process to compare observed LGD and EI against estimated ones, for each risk grade, as well as the results of said process, demonstrating that both figures resemble significantly and that the observations are

Annex 15 Section XII Request for Authorization for the use of the Internal Methodology, of CUB
Standard
behave within the thresholds established by the Institution.
s) The description of the process that the Institution will use to perform, at least once a year, the stress tests that will be applied to the parameters, indicating, among other aspects, the characteristics, assumptions, and frequency of said tests, in accordance with what is established in Section XI of this Annex.
t) The description of the human and material resources that will be used in the preparation, implementation, and tracking of the Internal Methodology, including the technical administrative units, risk, and business units participating.
u) Training programs for personnel related to the application of the Internal Methodology in question.
v) List and briefly describe all reports generated from the development and implementation information of the Internal Methodology.
w) The description of the systems and other technological infrastructure that guarantee the proper functioning of the Internal Methodology, to ensure compliance with what is established in Section X of this Annex.
(v) Internal Audit, Internal Validation and Internal Controls.
x) The self-evaluation on the functioning and compliance with what is established in this Annex regarding the Internal Methodology, in accordance with what is established in fraction II of Article 2 Bis 66 of these

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Anexo 15 Section XII Authorization Request for the use of the Internal Methodology, of the CUB
Norm
present provisions and in Section VI of this Annex.
y) The description of the historical performance measurement processes and the internal validation report prepared by an area independent from that which developed the Internal Methodologies, attending to what is established in Section V of this Annex.
z) The evidence demonstrating that the Institution has systems that validate the precision and consistency of the processes and the rating system, as well as the estimation of relevant risk components.
aa) Internal control manuals that provide for audit, comptroller, and results monitoring processes, as well as the verification and consistency of the latter with market conditions.
ab) The description of internal controls used to guarantee consistency in the granting of operations, the reliability of data used to analyze the operation, etc. Indicate the responsible units and their location in the Institution's structure.
(vi) Parallel calculations.
ac) The capital requirement calculations for credit risk using the Standard Method and, in parallel, using the Internal Methodology for which authorization is requested

Anexo 15 Section XII Authorization Request for the use of the Internal Methodology, of the CUB
Norm
authorization, presenting both results to the Commission regarding a period of at least the year prior to the date on which the authorization for the use of said Internal Methodology is requested, in accordance with Appendix 4 and what is stated in fraction V of Article 2 bis 67 and 128 of the provisions.
(vii) Use test.
ad) Indication of the degree of integration of the Internal Methodology, with the policies and procedures related to Comprehensive Risk Management and approval and management, inherent to the credit portfolio of the Institution in question.
ae) Present information on the processes in which the rating system, PD, LGD, EAD, and Maturity are used, as applicable, in accordance with Appendix 5, as well as the manuals supporting said processes. Additionally, indicate the internal processes in which information related to PD, LGD, and EAD is used, as applicable, different from that resulting from the calculation of the Internal Methodology for which authorization is requested.
af) The detailed Plan for the integration of the use of estimated parameters with the Internal Methodology into the Institution's management, which must be fully implemented upon completion of the parallel calculation period.

For subsequent authorizations of the Internal Methodology, the Institution must conduct a thorough review of the performance of the Internal Methodology and its use in its portfolios, for which it must be guided by Section XIV "Monitoring of the use of the Internal Methodology" of Annex 15 for the delivery of its documentation.

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Likewise, the Institution must also comply at all times with what is established in Articles 2 bis 65 to 2 bis 70, Articles 2 bis 72 to 2 bis 90, Article 2 bis 92, Article 2 bis 95, Article 2 bis 97, Article 2 bis 98, Article 88, Articles 116 to 118 and Articles 124 to 128 of the CUB regarding Internal Methodologies.

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Section B. Development Organizations and Entities

Anexo 27 Number 12.- Authorization Request for the use of the Internal Methodology, of the CUOEF
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(i) The Development Organization or Development Entity must deliver the following documentation to the Commission:
a) The Internal Methodology project referred to in fraction I of article 240 of the provisions.
b) Description of the classification of exposures subject to credit risk to which the Internal Methodology will apply. Including its correspondence with the classification indicated in articles 243 and 121 of these provisions, including a complete map of the credit portfolio of the Development Organization or Development Entity that reflects the amount and importance of the portfolio within it.
c) The specification of the Internal Methodology approach, either basic or advanced, adopted for each of the portfolios.
d) The framework of reference for the philosophy and construction of the rating system and the methodologies for the estimations of PD, LGD, EAD, and Maturity, if applicable, including the assumptions or basis thereof, indicating the specific parameters applicable to the portfolio, as well as the data sources used in the estimation of risk parameters.
e) Evidence of adherence to the definition of Default, established in article 242 of these provisions

Anexo 27 Number 12.- Authorization Request for the use of the Internal Methodology, of the CUOEF
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(i) The Development Organization or Development Entity must deliver the following documentation to the Commission:
f) The description of the process and techniques for estimation, if applicable: • The different PDs. • The LGD. • The EAD. • The Maturity.
g) Evidence that the estimation of PD complies with what is established in this Annex, in article 246 of these provisions for the calculation of the Unexpected Loss Requirement and, in the case of the calculation of reserves for credit risks, with article 135 of these provisions, depending on whether it is an Internal Methodology with a basic or advanced approach.
h) Evidence that the estimations of LGD in case of Default comply with what is established in this Annex, in article 247 of these provisions for the purposes of calculating the Unexpected Loss Requirements and, in the case of the calculation of reserves for credit risks, with article 135 of these provisions, depending on whether it is an Internal Methodology with a basic or advanced approach.
i) Evidence that the estimations of PD and LGD consider, among other factors, credit granting practices or the recovery process thereof as indicated in this Annex.

Anexo 27 Number 12.- Authorization Request for the use of the Internal Methodology, of the CUOEF
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j) The specification of the stress tests to be applied to the parameters, indicating, among other aspects, the characteristics, assumptions, and frequency of said tests.
k) The documentation of the model validity validation process in the portfolio of the Development Organization or Development Entity and within the conditions of the economic environment, which demonstrates that the Development Organization or Development Entity has systems that validate the precision and consistency of the processes and rating systems, as well as the estimation of relevant risk components.
l) The description of the information used and the methodology that the Development Organization or Development Entity will follow at least annually, to compare effective default rates with the estimated Probabilities of Default for each rating and demonstrate that the former are within the expected ranges for that rating, as well as the observed LGD and EAD against the estimated, for each risk degree, demonstrating that both figures resemble each other significantly.

Anexo 27 Number 12.- Authorization Request for the use of the Internal Methodology, of the CUOEF
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m) The description of the computing systems used in the portfolio rating process.
n) Internal control manuals that provide for audit, comptroller, and results monitoring processes, as well as the verification and consistency of the latter with market conditions.
o) The description of the human and material resources that will be used in the elaboration, implementation, and monitoring of the methodology, including the participating technical, risk, and business administrative units.
p) A self-assessment on the state of compliance with what is established in this Annex. The self-assessment will be the responsibility of the General Director, who, for its elaboration, must rely on the internal audit area, which will be responsible for monitoring that the validation processes were performed correctly and that they meet the purposes for which they were designed. Both the General Director and internal audit may in turn rely on a risk evaluation area that is functionally independent of the areas involved in the development of the internal rating system. The General Director may also rely on external auditors or consultants, understanding that the General Director's responsibility before the Commission is non-delegable.

Anexo 27 Number 12.- Authorization Request for the use of the Internal Methodology, of the CUOEF
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q) The description of the historical performance measurement processes and the internal validation report.
r) The databases and information used in the construction of the statistical model, which must be sufficient for its replication.
s) Detailed Plan for the integration of the use of estimated parameters with the Internal Methodology into the management of the Development Organization or Development Entity, which must be fully implemented upon completion of the parallel calculation period.
t) Indication of the degree of integration of the Internal Methodology, with the policies and procedures related to Comprehensive Risk Management and approval and management, inherent to the credit portfolio of the Development Organization or Development Entity in question.
u) Broadly describe the recognized weaknesses in the Internal Methodology and specify the work program established to correct them.
v) The internal rating sheets with the description of the risk parameters assigned to each grade, level, or segment of rating, which will be applied from the authorization of the Internal Methodology.
w) The results of the comparison of observed effective default rates with the estimated PDs for each rating, demonstrating that the former are within the expected ranges for that rating, as well as

Anexo 27 Number 12.- Authorization Request for the use of the Internal Methodology, of the CUOEF
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as the observed LGD and EAD against the estimated, for each risk degree, demonstrating that both figures resemble each other significantly.
x) The Development Organization or Development Entity must demonstrate that the assignment of exposures to ratings or portfolio segments has been implemented as designed and discriminates risk consistently.
y) The Development Organization or Development Entity must demonstrate that the assignment of exposures to ratings or portfolio segments has been implemented as designed and discriminates risk consistently.
z) The Development Organization or Development Entity must demonstrate to the Commission that the PD, LGD, and EAD of each rating or segment are consistent with the estimated parameters.
aa) The results of the historical comparison of the risk parameter estimations with the Internal Methodology against the estimations using the Standard Method according to these provisions must be delivered. The Development Organization or Development Entity must prove that there is consistency between risk measurements with the Internal Methodology and with the Standard Method and the general methodologies mentioned.
ab) Present evidence of senior management involvement in the model. Include documents where the

Anexo 27 Number 12.- Authorization Request for the use of the Internal Methodology, of the CUOEF
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specific approval of the model for this type of portfolio by the appropriate hierarchical level appears.
ac) List and briefly describe all reports generated from data of the Internal Methodology.
ad) Indicate the reports that are sent to senior management and deliver evidence of their preparation.
ae) Describe the internal controls used to guarantee consistency in the granting of operations, the reliability of data used to analyze the operation, etc. Indicate the responsible units and their location in the structure of the Development Organization or Development Entity.
af) The other documentation and information that, in the judgment of the Commission, is required for such effect.

Likewise, the Institution must also comply at all times with what is established in Articles 127 to 139, Article 142, Article 144, Article 146, Article 147, Article 184, Article 188 and Articles 239 to 268 of the CUOEF regarding Internal Methodologies.

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SECTION IV

a) Annex 15 of the CUB Annex 15 CUB.pdf

b) Annex 27 of the CUOEF Annex 27 CUOEF.pdf

c) Text of articles 2 Bis 65 and 124 of the CUB, and articles 135 and 188 of the CUOEF.

CUB Articles

Article 2 Bis 65.- Institutions, for the purposes of calculating the capital requirement for credit risk, may use an Internal Methodology, choosing from the following approaches:

I. Basic. II. Advanced.

Institutions must request authorization from the Commission to employ one of the aforementioned methodologies. This is understood to mean that they must simultaneously use one of the Internal Methodologies indicated in Article 124 of these provisions, in accordance with the approach chosen for the Internal Methodology referred to in the fractions of this article.

Regarding Credit Risk Operations with the persons referred to in fraction IV of Article 2 Bis 69 of the CUB, Institutions may only use an Internal Methodology with an advanced approach.

Article 124.- Institutions, with prior authorization from the Commission, may use for rating their Credit Portfolios and determining their respective reserves of:

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I. Consumer, Housing Mortgage, and Commercial, the Internal Methodology with an advanced approach referred to in fraction II of Article 2 Bis 65 of these provisions, according to which Institutions will obtain preventive reserves using their own estimations of:

a) Probability of Default of the borrowers, observing what is established in fraction I of Article 2 Bis 88 of these provisions. b) Loss Severity, adjusting to what is disposed in fraction II of Article 2 Bis 88 of these provisions, without considering unfavorable economic conditions. c) Exposure at Default, subject to what is disposed in Article 2 Bis 90 of these provisions.

II. Regarding the Commercial Credit Portfolio, Institutions may use the Internal Methodology with a basic approach referred to in fraction I of article 2 Bis 65 of these provisions, according to which Institutions will obtain preventive reserves using their own estimation of Probability of Default for each borrower, as well as the parameters of Loss Severity and Exposure at Default established by this Commission in Articles 114 and 115 of these provisions.

In any case, Institutions that are authorized to rate their portfolio using any of the Internal Methodologies referred to in this article, must likewise use the Internal Methodology corresponding to them, according to Section Third, Chapter III, Title First Bis of these provisions.

For this, at the time of requesting the authorization referred to in the first paragraph of this article, Institutions must indicate the date on which they will present to the Commission the request for authorization to calculate capital requirements based on the Internal Methodology corresponding to them.

This is understood to mean that said request for authorization for Internal Methodologies regarding capital calculation must be presented within a period not exceeding 12 months, counted from when the request for authorization to rate the portfolio applying an Internal Methodology has been authorized. If this request is not presented within the referred period and the Commission has granted authorization to rate credit portfolios with the Internal Methodology referred to in this section, said authorization will be automatically revoked.

For the purposes of presenting the request provided for in this article, Institutions must adhere to the minimum requirements for each of the methodologies indicated in this provision, contained in this Fourth Section, as well as

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in Section Third of Chapter III of Title First Bis and in Annex 15 of these provisions.

The rating and constitution of preventive reserves corresponding to the Consumer and Housing Mortgage Credit Portfolio resulting from the application of Internal Methodologies, will be carried out at the close of each month.

CUOEF Articles

Article 135.- Development Organizations and Development Entities, with prior authorization from the Commission, may use for rating their Credit Portfolios and determining their respective reserves of:

I. Consumer, Housing Mortgage, and Commercial, the Internal Methodology with an advanced approach referred to in fraction II of article 239 of these provisions, according to which Development Organizations and Development Entities will obtain preventive reserves using their own estimations of:

a) Probability of Default of the borrowers, observing what is established in fraction I of article 262 of these provisions.

b) Loss Severity, adjusting to what is disposed in fraction II of article 262 of these provisions, without considering unfavorable economic conditions. c) Exposure at Default, subject to what is disposed in article 264 of these provisions.

II. Regarding the Commercial Credit Portfolio, Development Organizations and Development Entities may use the Internal Methodology with a basic approach referred to in fraction I of article 239 of these provisions, according to which Development Organizations and Development Entities will obtain preventive reserves using their own estimation of Probability of Default for each borrower, as well as the parameters of Loss Severity and Exposure at Default established by this Commission in articles 125 and 126 of these provisions.

In any case, Development Organizations and Development Entities that are authorized to rate their portfolio using any of the Internal Methodologies corresponding to them, according to Section Third, Chapter II, Title Third of these provisions.

For this, at the time of requesting the authorization referred to in the first paragraph of this article, Development Organizations and Development Entities must indicate the date on which they will present to the Commission the request for authorization to calculate the Unexpected Loss Requirements based on the Internal Methodology corresponding to them.

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The foregoing, understanding that the application for authorization for the Internal Methodologies regarding the Unexpected Loss Requirement must be submitted within a period not exceeding 12 months, counted from the date the application to qualify the portfolio applying an Internal Methodology has been authorized. If this application is not submitted within the referred period and the Commission has granted authorization to qualify the credit portfolios with the Internal Methodology referred to in this section, such authorization will be automatically revoked.

For the purposes of presenting the application provided for in this article, Development Organizations and Development Entities must adhere to the minimum requirements for each of the methodologies indicated in this provision, contained in this Section, as well as in Third Section of Chapter II of Title Three and in Annex 27 of these provisions. The qualification and constitution of corresponding preventive reserves for the Consumer Credit Portfolio and Mortgage Housing Portfolio resulting from the application of the Internal Methodologies will be carried out at the close of each month.

Article 188.- Development Organizations and Development Entities, to calculate the Unexpected Loss Requirement for their exposure to credit risk of each of the Operations Subject to Credit Risk, must use:

I. The standard method indicated in the Second Section of this chapter.

II. Any of the methods based on internal ratings, basic or advanced, provided that they obtain prior authorization from the Commission for this purpose, which it may grant once the Development Organization or Development Entity has complied with the requirements referred to in the Third Section of this chapter.

In any case, once the use of the method based on internal ratings, basic or advanced, has been authorized for a particular type of portfolio, Development Organizations and Development Entities may not use another method, unless the Commission authorizes or determines so.

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d) Appendix 1

No.	Concept	Standard Method or general methodologies	Internal Methodology
1	Current Portfolio²/:
2	Overdue Portfolio²/:
3	EI/:
4	Total Risk-Weighted Assets²/:
5	Current Risk-Weighted Assets²/:
6	Overdue Risk-Weighted Assets²/:
7	Total Capital Requirement²/:
8	Current Capital Requirement²/:
9	Overdue Capital Requirement²/:
10	Total Expected Loss²/:
11	Current Expected Loss²/:
12	Overdue Expected Loss²/:
13	Total Weighted Average PI³/:
14	Current Weighted Average PI³/:
15	Overdue Weighted Average PI³/:
16	Total Weighted Average SP Reserves³/:
17	Current Weighted Average SP Reserves³/:
18	Overdue Weighted Average SP Reserves³/:
19	Total Weighted Average SP Capital³/:
20	Current Weighted Average SP Capital³/:
21	Overdue Weighted Average SP Capital³/:
21	Total Average Credit Conversion Factor:
22	Maturity

1/Monthly information for the period of at least the year prior to the date on which the authorization for the use of said Internal Methodology is requested. 2/Figures in pesos. 3/Figures in percentages.