Circular 1/2017 — Modifies Circular 3/2012

CIRCULAR 01/2017 directed to Credit Institutions and the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development, regarding Modifications to Circular 3/2012 (Participation in Clearing Houses).

At the margin a logo, which says: Bank of Mexico.

CIRCULAR 01/2017

TO CREDIT INSTITUTIONS AND THE NATIONAL FINANCIAL INSTITUTION FOR AGRICULTURAL, RURAL, FORESTRY AND FISHERIES DEVELOPMENT:

SUBJECT: MODIFICATIONS TO CIRCULAR 3/2012 (PARTICIPATION IN CLEARING HOUSES)

The Bank of Mexico, with the purpose of continuing the promotion of the sound development of the financial system and to foster the proper functioning of payment systems, considers it important to simplify the requirements to access the services provided by document clearing houses, as well as to maintain competitive conditions and equity in the charging of fees for these services.

For the above, based on articles 28, sixth and seventh paragraphs, of the Political Constitution of the United Mexican States, 24, 26 and 31, of the Bank of Mexico Law, 16 and 22, of the Law for Transparency and Ordering of Financial Services, 48 and 57, of the Credit Institutions Law, 4, first paragraph, 8, fourth and seventh paragraphs, 10, first paragraph, 14 Bis, in relation to 17, section I, 15, first paragraph, in relation to 20, section XI, 19 Bis, section V and 25 Bis 1, section IV, of the Internal Regulations of the Bank of Mexico, which grant it the authority to issue provisions through the General Legal Directorate, General Directorate of Payment Systems and Corporate Services, National Operations Directorate and Regulation and Supervision Directorate, respectively, as well as Second, sections I, VI, VIII and X, of the Agreement on the Assignment of Administrative Units of the Bank of Mexico, has resolved to modify articles 197, first paragraph, 198, first paragraph, 199, first paragraph, section III, first paragraph, section IV, first paragraph, section VI, items a), f) and g) and section VII, 202 and 206, first and third paragraphs, add two paragraphs to article 197, a second paragraph to section III, a second paragraph to section IV and an item h), to section VI, of article 199, as well as repeal the last paragraph of article 200 and the second paragraph of article 206, of the “Provisions applicable to the operations of credit institutions and the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development”, contained in Circular 3/2012, to remain in the following terms:

PROVISIONS APPLICABLE TO THE OPERATIONS OF CREDIT INSTITUTIONS AND OF THE NATIONAL FINANCIAL INSTITUTION FOR AGRICULTURAL, RURAL, FORESTRY AND FISHERIES DEVELOPMENT

Prohibition of entry barriers

“Article 197.- Institutions that participate in a Clearing House through the subscription of shares representing their social capital must ensure that it allows access to all the services it offers to all Institutions, on equal conditions, provided they meet the respective requirements, through one of the following participation schemes, at the choice of these latter Institutions: a) directly, through the subscription of a service provision contract with the Clearing House, the terms of which must correspond to those authorized by the Bank of Mexico in terms of section VI, item h), of article 199 of these Provisions, or b) indirectly, through the subscription of a service provision contract with an Institution that, in turn, participates directly with the Clearing House.

Institutions that participate in a Clearing House through the subscription of shares representing their social capital must ensure that it offers all Institutions the separate contracting of the National Currency Check Clearing service, the Receipt Domiciliation Service, the Cash Exchange and Clearing Service and the Electronic Funds Transfer Service, as well as any other service directly linked to said Clearing service as part of the object of the Clearing House itself, without conditioning in any case the provision of any of said services to the contracting of one or more of them. Without prejudice to what is provided in this paragraph, the Clearing House may offer to Institutions that participate in it in accordance with what is contemplated in this Section I the provision of a set of two or more of the aforementioned services in accordance with the tariffs it establishes for this purpose, provided that it specifies the respective tariffs it charges for each of said services provided individually and that the total tariff for the set of services is not less than the sum of the tariffs of the services if contracted individually.

The Institution that participates directly in the Clearing House, in terms of item a) of the first paragraph of this article, and that, in turn, contracts the provision of the services of said Clearing House with another Institution that participates indirectly, in accordance with item b) of said first paragraph, shall be obliged to present and/or accept on behalf of said latter Institution the Documents presented to it on behalf of that same Institution that participates indirectly.”

Authorization to operate as a Clearing House

“Article 198.- Institutions wishing to establish a Clearing House must submit their application for authorization to the Bank of Mexico and attach a draft multilateral contract that will regulate the operational modalities adopted to carry out the Clearing.”

…

Characteristics of the multilateral contract

“Article 199.- Institutions that enter into the multilateral contract to constitute a Clearing House must stipulate in it an association regime according to which decisions regarding the following topics can only be taken by those Institutions that are holders of the shares representing the social capital, in their corresponding sessions, with the favorable vote of the number of said Institutions that represent, at least, half of the subscribers to the aforementioned contract:

a) the duration or early termination of the corresponding arrangement; b) the increase or reduction of social capital; c) the appointment and removal of persons in charge of administration and oversight; d) the approval of their management, and e), in general, any modification to the legal act that gives rise to it.

…

I and II. …

III. Institutions that have not initially subscribed to the contract may request its adherence through the subscription of shares representing the social capital of the corresponding Clearing House, and the Clearing House must respond in writing to the respective request, within a period not exceeding twenty Days counted from the date of its presentation.

For the purposes of the provisions in the preceding paragraph, Institutions that participate in a Clearing House through the subscription of shares representing their social capital must allow Institutions that request it in terms of this section to adhere to the multilateral contract on equitable and transparent conditions, provided that the latter meet the respective requirements established in the multilateral contract.

IV. Institutions that participate in a Clearing House through the subscription of shares representing its social capital shall have the right to withdraw, without having to make any payment, by means of notice that must be given in a reliable manner and that will take effect until the end of the current fiscal year if the notification is made before the last quarter of said year, and until the end of the following year, if made after, unless the administration body approved a shorter period.

For the purposes of what is stated in this section, the multilateral contract must provide that the administration body may determine that the shares representing the social capital that are the subject of withdrawal (i) be cancelled or, in that case where it is appropriate in accordance with applicable provisions, (ii) remain in the treasury of the Clearing House to be put into circulation later, which must be done on equitable and transparent conditions.

V. …

VI. …

a) Applicable tariffs for the Clearing services of the respective Documents and to any other service directly linked to said Clearing services that, as part of the object of the Clearing House itself, it provides to participating Institutions, which cannot be differentiated among participating Institutions, whether by volume of operation, participation in social capital or any other reason, as well as the conventional penalties established as payments of determined amounts and other penalties that the Clearing House in question may impose on participating Institutions for non-compliance with the operating rules of the Clearing House itself;

b) to e) …

f) Appointment and removal of the general manager;

g) Reduction of the period for total or partial withdrawal of an Institution, indicated in section IV of this article, and

h) The terms of the service provision contracts that Institutions must subscribe in order to have access to the Clearing House in terms of item a) of the first paragraph of article 197 of these Provisions.

VII. Any modification made to the multilateral contract, as well as to the terms of the service provision contracts referred to in item h) of the previous section, must be submitted to the prior authorization of the Bank of Mexico. Likewise, when this modifies its provisions regarding Clearing and fund transfer and, by virtue of said modifications, there are contradictions between the provisions and the aforementioned multilateral contract, the necessary adjustments must be made to the aforementioned contract, in order to make it consistent with the respective provisions.”

Administration Body

Article 200.- …

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…

…

“Repealed.”

Obligation to participate in Clearing Houses

“Article 202.- Institutions shall be obliged to participate in at least one of the Clearing Houses that, as the case may be, authorize the Bank of Mexico, through one of the schemes indicated in items a) and b) of the first paragraph of article 197. Likewise, they shall be obliged to receive the Documents presented to them therein.

Institutions shall have the right to present Documents in the Clearing House in which they participate in accordance with what is mentioned in the preceding paragraph.”

Incorporation and withdrawal of Institutions in the Clearing House

“Article 206.- Each time an Institution participates or ceases to participate either through the subscription of shares representing the social capital of a Clearing House, or through the schemes provided in the first paragraph of article 197, this and the Institution in question must jointly communicate such situation in writing to the Business Operation and Continuity Management of the Payment Systems of the Bank of Mexico at least ten Banking Business Days in advance of the date on which the participation of the Institution begins or ends, as the case may be.

Repealed.

For such purpose, Institutions intending to participate in a Clearing House, directly or indirectly, in terms of the first paragraph of article 197 of these Provisions, must submit a copy of the contract subscribed for this purpose to the Business Operation and Continuity Management of the Payment Systems of the Bank of Mexico and, in case they participate under the scheme provided in item b) of the cited paragraph, to the corresponding Clearing House.”

TRANSITORY PROVISIONS

FIRST. This Circular shall enter into force on the Banking Business Day following its publication in the Official Gazette of the Federation.

SECOND. Institutions that, prior to the entry into force of this Circular, have constituted a Clearing House in accordance with what is provided in Title Four, Single Chapter, of Circular 3/2012 which is modified, must submit to the Bank of Mexico, within 120 Days after the entry into force of this Circular, for its authorization, the draft terms of the service provision contracts provided for in article 199, section VI, item h), of said Circular 3/2012. Additionally, the aforementioned Institutions must ensure that the administration body of the aforementioned Clearing Houses, within the period mentioned in this paragraph, approves the tariffs it deems appropriate to apply in accordance with what is provided in item a) of said section VI.

Likewise, those Institutions that have constituted Clearing Houses referred to in the preceding paragraph under any of the legal entity figures recognized by law, must submit to the Bank of Mexico, through said Clearing House, within the period indicated in said paragraph, for its authorization, the draft modification to their bylaws or equivalent document.

Mexico City, February 2, 2017.- The General Legal Director, Luis Urrutia Corral.- Initials.- Initials.- The General Director of Payment Systems and Corporate Services, Lorenza Martínez Trigueros.- Initials.- The Director of National Operations, Juan Rafael García Padilla.- The Director of Regulation and Supervision, Viviana Garza Salazar.- Initials.

For any queries regarding the content of this Circular, please contact the Authorizations, Queries and Legal Control Management, at the phones (55) 5237-2308, (55) 5237-2317 or (55) 5237-2000 Ext. 3200.