Circular 1/2020 — Modifies Circular 3/2012

164 DIARIO OFICIAL Wednesday, January 15, 2020 BANCO DE MEXICO CIRCULAR 1/2020 TO CREDIT INSTITUTIONS, MULTIPLE-OBJECT FINANCIAL SOCIETIES REGULATED THAT MAINTAIN EQUITY LINKS WITH CREDIT INSTITUTIONS AND THE NATIONAL FINANCIAL INSTITUTION FOR AGRICULTURAL, RURAL, FORESTRY AND FISHERY DEVELOPMENT: SUBJECT: MODIFICATIONS TO CIRCULAR 3/2012 (REFERENCE RATES)

The Bank of Mexico, with the purpose of continuing to promote the sound development and stability of the financial system and taking into consideration the recommendations put forward by the so-called Financial Stability Board (FSB, in English) of the Bank for International Settlements (BIS, in English) and by the International Organization of Securities Commissions (IOSCO, in English), regarding the characteristics that reference rates must have, the Bank of Mexico has decided to begin publishing a new reference rate that complies with all the characteristics recommended by IOSCO and that reflects interbank and broker-dealer funding conditions in repo operations with government securities, as well as those issued by the Bank of Mexico and the Institute for the Protection of Bank Savings (IPAB), for a term of one day in Mexico. This new rate will be called the One-Business-Day Funding Interbank Equilibrium Rate (TIIE de Fondeo). Additionally, and with the objective of maintaining stability in the money market, the Bank of Mexico has decided to keep unchanged the calculation methodology for TIIEs for terms greater than one business day. However, some aspects of corporate governance, accountability, and quality of TIIEs for terms greater than one business day are strengthened so that they comply with the majority of the aforementioned IOSCO principles.

For the foregoing, based on Articles 28, paragraphs sixth and seventh, of the Political Constitution of the United Mexican States, 24 and 26, of the Bank of Mexico Law, 48, of the Credit Institutions Law, 87-D, paragraph fourth, of the General Law of Credit Auxiliary Organizations and Activities, 22, of the Law for Transparency and Ordering of Financial Services, 4, paragraph first, 8, paragraphs fourth and eighth, 10, paragraph first, 12 Bis, paragraph first, in relation to 20 Quáter, fraction IV, 17, fraction I, 19 Bis 1, fraction XI, and 25 Bis 1, fraction IV, of the Internal Regulations of the Bank of Mexico, which grant it the authority to issue provisions through the General Directorate of Payment Systems and Market Infrastructures, the Directorate of Central Bank Provisions, the Directorate of Support for Operations, and the Directorate of Regulation and Supervision, respectively, as well as Second, fractions I, VI, X and XVII, of the Agreement on the Affiliation of the Administrative Units of the Bank of Mexico, it has resolved to modify the definition of “TIIE” in Article 2, the title of Section I “Procedure for the determination of the TIIE”, of Section II, “Financing or deposits related to the determination of the TIIE”, and of Section III “General provisions”, of Chapter IV, of Title Third “Operations with the Bank of Mexico”, Articles 115, fraction IV, 116, fraction I, 146, 150, 154, fraction III, 155, fraction III, 158, first paragraph, 160, first paragraph, 162, fourth paragraph, 165, first paragraph, 166, second paragraph, 167, second paragraph, 168, 171, 173, 192, third paragraph, 195 Bis 3, and Annexes 5, 5 Bis 1, 10, 11, 12, 12 Bis, 12 Bis 1, 12 Bis 2, 12 Bis 3, 12 Bis 4, 12 Bis 5 and 13, as well as add the definition of “TIIE de Fondeo” to Article 2, a last paragraph to Article 149, an Article 160 Bis, a Section IV “Procedure for the determination of the TIIE de Fondeo”, to Chapter IV, of Title Third “Operations with the Bank of Mexico”, Articles 163 Bis, 163 Bis 1, 163 Bis 2, 163 Bis 3, 163 Bis 4, 163 Bis 5, and Annexes 12 Bis 6 and 12 Bis 7, of the “Provisions applicable to the operations of credit institutions, multiple-object financial societies regulated that maintain equity links with credit institutions and the National Financial Institution for Agricultural, Rural, Forestry and Fishery Development”, contained in Circular 3/2012, to remain in the following terms:

PROVISIONS APPLICABLE TO THE OPERATIONS OF CREDIT INSTITUTIONS, MULTIPLE-OBJECT FINANCIAL SOCIETIES REGULATED THAT MAINTAIN EQUITY LINKS WITH CREDIT INSTITUTIONS AND THE NATIONAL FINANCIAL INSTITUTION FOR AGRICULTURAL, RURAL, FORESTRY AND FISHERY DEVELOPMENT

Wednesday, January 15, 2020 DIARIO OFICIAL 165

INDEX ... TITLE THIRD OPERATIONS WITH THE BANK OF MEXICO ... CHAPTER IV DETERMINATION OF THE INTERBANK EQUILIBRIUM INTEREST RATE IN NATIONAL CURRENCY

“Section I Procedure for the determination of the TIIE for Terms Greater Than One Business Day” ... “Article 150.- Determination and dissemination of the TIIE for Terms Greater Than One Business Day” “Section II Financing or deposits related to the determination of the TIIE for Terms Greater Than One Business Day” ... “Section III General provisions for the TIIE for Terms Greater Than One Business Day” ... “Article 160 Bis.- Cessation of publication of the TIIE for Terms Greater Than One Business Day” ... “Section IV Procedure for the determination of the TIIE de Fondeo” “Article 163 Bis.- Determination of the TIIE de Fondeo” “Article 163 Bis 1.- Daily publication of the TIIE de Fondeo” “Article 163 Bis 2.- Calculation procedure for the TIIE de Fondeo” “Article 163 Bis 3.- Obtaining the base sample through societies that administer systems to facilitate operations with securities” “Article 163 Bis 4.- Obtaining the base sample through quotations” “Article 163 Bis 5.- Cessation of publication of the TIIE de Fondeo” ... ANNEXES ... “Annex 5 Bis 1 Model of request to guarantee overdrafts in the Single Account, in accordance with what is provided in fraction I, of Article 115 Bis of the Provisions applicable to the Operations of Credit Institutions, Multiple-Object Financial Societies Regulated that maintain equity links with Credit Institutions and of the National Financial Institution for Agricultural, Rural, Forestry and Fishery Development, issued by the Bank of Mexico through Circular 3/2012” ... “Annex 11 Procedure for the calculation of the TIIE for Terms Greater Than One Business Day” “Annex 12 Format to participate in the determination of the TIIE for Terms Greater Than One Business Day” ... “Annex 12 Bis 6 Commitment Declaration to the Code of Conduct in the Determination of Interbank Equilibrium Interest Rates (TIIE) for terms greater than One Business Day”

166 DIARIO OFICIAL Wednesday, January 15, 2020 “Annex 12 Bis 7 Code of Conduct in the Determination of Interbank Equilibrium Interest Rates (TIIE) for terms greater than One Business Day” ... Definitions Article 2º.- ... ... “TIIE for Terms Greater Than One Business Day: The Interbank Equilibrium Interest Rate in national currency, for terms greater than One Business Day, which the Bank of Mexico publishes in accordance with what is provided in Sections I, II and III of Chapter IV of Title Third of these Provisions.” “TIIE de Fondeo: The Interbank Equilibrium Interest Rate in national currency, for a term of One Business Day, which the Bank of Mexico publishes in accordance with what is provided in Section IV of Chapter IV of Title Third of these Provisions.” ... Guaranteed Overdrafts “Article 115.- ... I. to III. ... IV.- Time deposits constituted in accordance with the procedure for the determination of the TIIE for Terms Greater Than One Business Day. The foregoing shall only be applicable in the case of Multiple Banking Institutions. ... ... ... …” Unsecured Overdrafts “Article 116.- ... I. The amounts that must be deposited in terms of the procedure for the determination of the TIIE for Terms Greater Than One Business Day in the case of Multiple Banking Institutions or of Deposit Auctions, and II. …” “Section I Procedure for the determination of the TIIE for Terms Greater Than One Business Day” Application for participation “Article 146.- Any Multiple Banking Institution interested in participating in the determination of the TIIE for Terms Greater Than One Business Day, must manifest this through a written request addressed to the National Operations Management of the Bank of Mexico, in which it indicates the names and positions of the persons authorized to receive information regarding the respective procedure. Said written request must show the signature authorization granted by the Bank of Mexico. Likewise, the Multiple Banking Institution referred to in the previous paragraph must accompany the written request referred to in said paragraph, the commitment declaration by which it formalizes its determination to carry out its activities in terms of the guidelines established in the Code of Conduct in the Determination of Interbank Equilibrium Interest Rates (TIIE) for Terms Greater Than One Business Day, included in Annex 12 Bis 7 of these Provisions. The aforementioned communication must be drafted in a format substantially identical to that provided in Annex 12 Bis 6 of these Provisions. The Bank of Mexico may require the Multiple Banking Institution referred to in this article, at any time, to ratify its determination to adopt the Code of Conduct in the Determination of Interbank Equilibrium Interest Rates (TIIE) for Terms Greater Than One Business Day. Any Multiple Banking Institution that does not ratify the aforementioned determination, within a period of ten Business Days counted from when the notification of the Bank of Mexico's request takes effect, may cease to be considered in the determination of the TIIE for Terms Greater Than One Business Day. The submission of the written request referred to in the first paragraph of this article implies the acceptance by the Multiple Banking Institution in question to submit to all and each of the provisions contained in Sections I, II and III, of this Chapter. The Bank of Mexico will publish in the Official Journal of the Federation the denomination of the Multiple Banking Institutions that participate in the determination of the TIIE for Terms Greater Than One Business Day in accordance with this Chapter.” Means for the presentation of quotations “Article 149.-… … … … Without prejudice to the foregoing, the Bank of Mexico may reject quotations that, in its consideration, do not adequately represent market conditions or that could produce inconvenient effects in the same.” “Determination and dissemination of the TIIE for Terms Greater Than One Business Day Article 150.- The TIIE for Terms Greater Than One Business Day, for each of the terms and amounts that the Bank of Mexico has informed to Multiple Banking Institutions in terms of what is stated in the first paragraph of Article 147 of these Provisions, will be the one resulting from the following procedure: I. … a) Obtain quotations from at least six Multiple Banking Institutions, it will proceed to calculate the corresponding TIIE for Terms Greater Than One Business Day using the procedure referred to in Annex 11 of these Provisions. b) … … … II. In the event that the Bank of Mexico has not been able to determine the TIIE for Terms Greater Than One Business Day, it will determine said interest rate considering the prevailing conditions in the money market. III. … …” “Section II Financing or deposits related to the determination of the TIIE for Terms Greater Than One Business Day” Characteristics of credit operations “Article 154.- … I. and II. … III. Term: The corresponding to that of the TIIE for Terms Greater Than One Business Day for which the Multiple Banking Institution has presented the respective quotation; IV. to VII. … … … … …” Characteristics of repo operations “Article 155.- …

168 DIARIO OFICIAL Wednesday, January 15, 2020 I. and II. … III. Term: The corresponding to that of the TIIE for Terms Greater Than One Business Day for which the Multiple Banking Institution has presented the respective quotation. IV. to VII. … …” Procedure in case of non-compliance in the formalization of operations “Article 158.- In the event that a Multiple Banking Institution does not have sufficient deposits or securities to guarantee credit operations or carry out repo operations for the total amount of financing communicated to it, the Bank of Mexico will deposit the amount regarding which credit or repo operations could not be formalized until the corresponding guarantees for credit operations are constituted or the titles subject to the repo are delivered. The aforementioned Multiple Banking Institution may settle pending credit or repo operations on any subsequent Business Day after notification. …” “Section III General provisions for the TIIE for Terms Greater Than One Business Day” Information on quotations “Article 160.- The Bank of Mexico will make available to all interested parties information on the quotations presented on the same Business Day on which the TIIE for Terms Greater Than One Business Day is determined through its Internet page via SIAC-BANXICO or any other electronic, computing or telecommunications medium that the Bank of Mexico itself authorizes for such effect. …” “Cessation of publication of the TIIE for Terms Greater Than One Business Day Article 160 Bis.- In the event that the Bank of Mexico decides to terminate the determination and publication of the TIIE for Terms Greater Than One Business Day for any of said terms, it will notify the participating Institutions in the determination of said rate and will inform them in a timely manner through the communication means it determines. In this case, the Bank of Mexico will indicate the rate that will replace the aforementioned TIIE for Terms Greater Than One Business Day, for the corresponding effects.” Contract to carry out credit or repo operations “Article 162.- … I. to III. … … … The submission of the aforementioned documentation must be made at least ten Business Days in advance of the date on which they intend to begin participating in the determination process of the TIIE for Terms Greater Than One Business Day provided for in this Chapter. The Multiple Banking Institution in question must have signed the corresponding contract at least five Business Days in advance of said date. …” “Section IV Procedure for the determination of the TIIE de Fondeo” “Determination of the TIIE de Fondeo Article 163 Bis.- The Bank of Mexico will calculate, for each Business Day, the TIIE de Fondeo that can be used as a reference rate that reflects the conditions of the secured funding market in Mexico. The calculation methodology of the TIIE de Fondeo will be based on one-business-day repo operations carried out by Institutions and broker-dealers with CETES, BONDES, BREMS and IPAB Securities.” “Daily publication of the TIIE de Fondeo

Wednesday, January 15, 2020 DIARIO OFICIAL 169 Article 163 Bis 1.- The Bank of Mexico, through SIAC-BANXICO or the electronic, computing or telecommunications medium that authorizes it for such effect, will publish the TIIE de Fondeo starting at 17:00:00 hours of the same Business Day on which it determines it in accordance with these Provisions. Likewise, the Bank of Mexico will publish the TIIE de Fondeo in the Official Journal of the Federation no later than two Business Days after the one on which it has determined it.” “Calculation procedure for the TIIE de Fondeo Article 163 Bis 2.- The TIIE de Fondeo will be calculated in accordance with the following procedure: I. All funding operations carried out by Institutions and broker-dealers through repo operations that they celebrate during the Business Day in question, as reporters or reportees, with other Institutions or broker-dealers, for a term of one Business Day with CETES, BONDES, BREMS and IPAB Securities will be considered. For these purposes, only those operations settled in the institution for the deposit of securities in which the securities subject to such operations are deposited will be considered. II. From the set of operations indicated in the previous fraction I, operations celebrated between Institutions and broker-dealers belonging to the same financial group will be excluded. III. Once the operations mentioned in fraction II are excluded, the remaining set of operations will constitute the base sample on which the methodology to calculate the TIIE de Fondeo will be applied. Regarding said set, the total sum of the amounts of the operations that integrate it will be called total aggregated volume. IV. The operations that integrate the set corresponding to the base sample will be ordered in ascending order based on the interest rate, such that the first operation will be the one associated with the lowest interest rate of the entire sample, while the last operation will be the one associated with the highest interest rate of the sample. In the event that two or more operations have the same interest rate, the operation with the lower amount will be ordered first. V. For each operation of the base sample defined in fraction III and ordered according to fraction IV, the accumulated operation volume will be calculated, adding the amount of each previous operation to the operation in question, including the amount of the operation for which the accumulated operation volume is being calculated. VI. The accumulated operation volume for each operation according to fraction V will be expressed as a percentage of the total aggregated volume defined in fraction III. VII. The TIIE de Fondeo will be equal to the rate corresponding to the first operation of the base sample, ordered according to fraction IV, whose accumulated operation volume expressed as a percentage in accordance with what is provided in the previous fraction VI, is equal to or greater than fifty percent. This rate will be expressed in annual percentage terms to two decimal places. VIII. Without prejudice to what is provided above, the Bank of Mexico may eliminate from the calculation contemplated in this article those operations that, in its consideration, do not adequately represent market conditions or that could produce inconvenient effects in the same.” “Obtaining the base sample through societies that administer systems to facilitate operations with securities Article 163 Bis 3.- When the Bank of Mexico cannot obtain information on operations settled in the institution for the deposit of securities in which the securities subject to the repo operations are deposited, in accordance with what is stated in Article 163 Bis 2, fraction I, it will carry out the corresponding calculation based on the information it obtains from societies that administer systems to facilitate operations with securities authorized by the National Banking and Securities Commission. The information obtained in accordance with this article will constitute the base sample referred to in Article 163 Bis 2, fraction III, so for the determination of the TIIE de Fondeo, the methodology provided in Article 163 Bis 2 will be used, except for what is provided in fraction I, of said Article 163 Bis 2.” “Obtaining the base sample through quotations Article 163 Bis 4.- In the event that the Bank of Mexico cannot obtain a set of operations in accordance with what is stated in Article 163 Bis 2, fraction I, nor in accordance with what is established in Article 163 Bis 3 above, the determination of the TIIE de Fondeo will be carried out based on interest rate quotations that are representative of the set of one-business-day repo operations that Multiple Banking Institutions and broker-dealers carry out with CETES, BONDES, BREMS and IPAB Securities, and that are provided to the Bank of Mexico by Multiple Banking Institutions in accordance with the following:

170 OFFICIAL GAZETTE Wednesday, January 15, 2020

I. The Bank of Mexico will inform Multiple Banking Institutions through the SIAC-Banxico or any other electronic, computing, or telecommunications medium authorized for this purpose by the Bank of Mexico, that for the obtaining of the base sample for the determination of the Interbank Equilibrium Funding Interest Rate (TIIE de Fondeo), it will take into account the quotes that interested Multiple Banking Institutions present to it in accordance with the provisions of the following subsections;

II. The Bank of Mexico will request from the Multiple Banking Institutions interested in participating in the determination of the TIIE de Fondeo referred to in this present article, quotes for an amount that, in its judgment, reflects the predominant practice in the market of the mentioned repo operations in the first paragraph of this article; the aforementioned quotes must be confirmed on the same Banking Business Day to the National Operations Department of the Bank of Mexico through a written document, electronic means, or through any other medium that leaves a record of the confirmation, and

III. The quotes presented in accordance with the provisions of the preceding subsection II, shall have the character of binding and irrevocable and shall produce the broadest effects corresponding in law. The Bank of Mexico may invalidate quotes that do not comply with the provisions of this present article.

The quotes received based on the foregoing provisions shall constitute the base sample referred to in Article 163 Bis 2, subsection III, so for the determination of the TIIE de Fondeo, the methodology established in Article 163 Bis 2 shall be used, except for what is provided in subsection I, of the aforementioned Article 163 Bis 2.”

“Cessation of publication of the TIIE de Fondeo Article 163 Bis 5.- In the event that the Bank of Mexico decides to terminate the determination and publication of the TIIE de Fondeo, it will inform thereof in a timely manner through the communication media it determines. In this case, the Bank of Mexico will indicate the rate that will replace the aforementioned TIIE de Fondeo, for the corresponding effects.”

Quotes obtained through electronic means

“Article 165.- The Bank of Mexico, on each Banking Business Day, will obtain, from one of the currency trading platforms, quotes of the buying and selling exchange rate of the Dollar for operations settleable on the second Banking Business Day following the date of the quote. In the event that it is not possible to obtain the aforementioned information from the aforementioned platforms, the Bank of Mexico will obtain such quotes from another similar electronic medium that, in its judgment, reflects the predominant conditions in the wholesale foreign exchange market. Such quotes will be obtained during the following three periods: from 9:00:00 to 9:59:00 hours; from 10:00:00 to 10:59:00 hours, and from 11:00:00 to 12:00:00 hours. …”

Calculation of the exchange rate obtained from electronic means

“Article 166.- … In the event that the Central Institute cannot calculate the equilibrium exchange rate in one or some of the aforementioned periods, it will determine the aforementioned exchange rate with the information it has obtained in accordance with the procedure described above in the corresponding period or periods, or, if it deems it convenient, with the information it has obtained in terms of the following Article 167.”

Quotes requested from Institutions

“Article 167.- … The Bank of Mexico will obtain on the Banking Business Day in question, quotes of the buying and selling exchange rate of the Dollar for operations settleable on the second Banking Business Day following the date of the quote, from Institutions whose operations, in its judgment, reflect the predominant conditions in the wholesale foreign exchange market. Such quotes will be requested, by telephone, or through the medium that the Bank of Mexico considers convenient, during the following three periods: from 9:00:00 to 9:59:00 hours; from 10:00:00 to 10:59:00 hours, and from 11:00:00 to 12:00:00 hours. Each Institution may only submit quotes in one period per Day. … …”

Wednesday, January 15, 2020 OFFICIAL GAZETTE 171

Confirmation of the quotes

“Article 168.- The quotes must be confirmed no later than 17:00:00 hours of the same Banking Business Day through a written document presented in a closed envelope accompanied by a cover letter. Both documents must show the signature knowledge granted by the Bank of Mexico, so the signatures must be registered prior to the presentation of the aforementioned letter. In the event that the Central Institute deems it appropriate, it may request the confirmation of said quotes through electronic means or through any other medium that leaves a record of the confirmation.”

Publication of the exchange rate

“Article 171.- The Bank of Mexico will publish in the Official Gazette of the Federation the exchange rate that results in accordance with the procedures provided for in Articles 166 or 170 of these Provisions, as applicable, on the Banking Business Day immediately following that on which it determines it.”

Information to the public

“Article 173.- The Library Services Office of the Bank of Mexico will make available to interested parties the name of the Institutions participating in the determination of the exchange rate, as well as the information regarding the quotes referred to in the preceding articles, from the third Banking Business Day following the date on which the Bank of Mexico has calculated the corresponding exchange rate, indicating the denomination of the currency trading platforms, the electronic means, or the Institutions from which such quotes were obtained, as applicable.”

Formalization of assignments in Deposit Auctions

“Article 192.- … … During the validity of the deposits, the Institution may instruct through the SAGAPL that the deposit or the part of it that is not guaranteeing an overdraft of those mentioned in the preceding paragraph, be used to guarantee the credits provided for in the procedure for the determination of the TIIE for Terms Longer Than One Banking Business Day to which Chapter IV of Title Third of these Provisions refers, as well as the Liquidity Auctions provided for in Chapter VI of Title Third of these present Provisions. When the SAGAPL is not available, Institutions must send a request to the Bank of Mexico in a format substantially equal to the one attached to these present Provisions as Annex 12 Bis. The writing referred to in this paragraph must show signature knowledge, so these signatures must be previously registered at the Bank of Mexico. …”

Obligation to constitute Special Guarantees

“Article 195 Bis 3.- Institutions that participate in the Determination of the TIIE for Terms Longer Than One Banking Business Day, provided for in Chapter IV, as well as in the Liquidity Auctions, provided for in Chapter VI, of Title Third of these present Provisions, must constitute Special Guarantees. … a) and b) … … … … … a) The first, which will guarantee the credit and repo operations that Institutions have celebrated with the Bank of Mexico in the procedure for the Determination of the TIIE for Terms Longer Than One Banking Business Day, in terms of Articles 154 and 155, and …”

172 OFFICIAL GAZETTE Wednesday, January 15, 2020

“ANNEX 5 Model of request for segregation of Dollar deposits to the deposit account for guarantees or special guarantees … … BANK OF MEXICO Operations Management Department Av. 5 de Mayo, number 6 Colonia Centro, Cuauhtémoc Mexico City, C.P. 06000 Present. ... … __ To guarantee the credit operations celebrated in the procedure for the determination of the TIIE for Terms Longer Than One Banking Business Day, in terms of what is provided in subsection d) of subsection VI of article 154, of Circular 3/2012. … __ To constitute Special Guarantees for the credit or repo operations celebrated in the procedure for the determination of the TIIE for Terms Longer Than One Banking Business Day, in accordance with what is established in article 195 Bis 5 of Circular 3/2012. …”

“ANNEX 5 BIS 1 Model of request to guarantee overdrafts in the Single Account, in accordance with what is provided in subsection I, of article 115 Bis of the Provisions applicable to the Operations of Credit Institutions, Multiple-Object Financial Societies Regulated that maintain patrimonial links with Credit Institutions and of the National Financial Development Company for Agricultural, Rural, Forestry and Fisheries Development, issued by the Bank of Mexico through Circular 3/2012 … … BANK OF MEXICO Operations Management Department Av. 5 de Mayo, number 6 Colonia Centro, Cuauhtémoc Mexico City, C.P. 06000 P r e s e n t. By this conduct, I allow myself to request to the Bank of Mexico on behalf of (Full denomination of the credit institution including, if applicable, the financial group to which it belongs), that from the amount in cash that at the date of presentation of this request my represented entity has as part of the monetary regulation deposit constituted in cash in terms of what is provided by Circular 9/2014 of the Bank of Mexico, segregate the amount of [] that is available in [ ] (OMA / TIIE for Terms Longer Than One Banking Business Day) to guarantee the overdrafts of my represented entity in its Single Account. …”

Wednesday, January 15, 2020 OFFICIAL GAZETTE 173

“ANNEX 10 Model of mandate in favor of the Bank of Mexico to make charges and credits in the accounts that any institution carries for the deposit of securities … … BANK OF MEXICO Operations Management Department. Avenida 5 de Mayo, number 6 Colonia Centro, Cuauhtémoc Mexico City, C.P. 06000 P r e s e n t. (Full denomination of the credit institution including, if applicable, the financial group to which it belongs) hereby grants a special and irrevocable power to the Bank of Mexico so that, on its behalf, it instructs (Full denomination of the institution for the deposit of securities), to effectuate all charges and credits in the accounts that said institution for the deposit of securities carries for my represented entity, by reason of the repo operations that are celebrated: a) for the determination of the Interbank Equilibrium Interest Rate for Terms Longer Than One Banking Business Day in national currency; b) in the Liquidity Auctions; c) in the procedure to be followed in case of insufficiency of resources to settle the amount of government securities, d) to constitute the special deposits to guarantee the overdrafts in the Single Account of my represented entity and e) to constitute special guarantees. … … … … … Direction of Operation and Continuity of Payment Systems and Market Infrastructures”

“ANNEX 11 Procedure for the calculation of the TIIE for Terms Longer Than One Banking Business Day

1. to 4. …
2. The TIIE for Terms Longer Than One Banking Business Day is calculated as the arithmetic average of the interest rates r1 and r2, where: …”

“ANNEX 12 Format to participate in the determination of the TIIE for Terms Longer Than One Banking Business Day Mexico City, on __ of _____. BANK OF MEXICO National Operations Department, Avenida 5 de Mayo No. 6 Colonia Centro, Cuauhtémoc, Mexico City, C.P. 06000 P r e s e n t. …”

174 OFFICIAL GAZETTE Wednesday, January 15, 2020

“ANNEX 12 Bis Communication to the Operations Management Department to request the constitution of guarantees or special guarantees through deposits … … BANK OF MEXICO Operations Management Department Avenida 5 de Mayo, number 6 Colonia Centro, Cuauhtémoc Mexico City, C.P. 06000 P r e s e n t . … __ To guarantee the credit operations celebrated in the procedure for the determination of the TIIE for Terms Longer Than One Banking Business Day, in terms of what is provided in subsection d) of subsection VI of article 154, of Circular 3/2012. … __ To constitute Special Guarantees for the credit or repo operations celebrated in the procedure for the determination of the TIIE for Terms Longer Than One Banking Business Day, in accordance with what is established in article 195 Bis 5 of Circular 3/2012, integrating into the fund of operations for the determination of the TIIE for Terms Longer Than One Banking Business Day. … TYPE OF DEPOSIT AMOUNT Monetary regulation deposits that my represented entity maintains at the Bank of Mexico: $___________________________ Deposits constituted in accordance with the procedure for the determination of the TIIE for Terms Longer Than One Banking Business Day: $___________________________ Deposits constituted in accordance with the Deposit Auctions: $___________________________ Dollar deposits that my represented entity maintains in its Dollar account: $___________________________ …”

“ANNEX 12 Bis 1 Communication to the Operations Management Department to request the substitution of deposits delivered in pledge or titles delivered in stock pledge that constitute the special guarantees … … BANK OF MEXICO Operations Management Department Avenida 5 de Mayo, number 6 Colonia Centro, Cuauhtémoc Mexico City, C.P. 06000 P r e s e n t . … … …

Wednesday, January 15, 2020 OFFICIAL GAZETTE 175

… TYPE OF DEPOSIT AMOUNT Monetary regulation deposits that my represented entity maintains at the Bank of Mexico: $___________________________ Deposits constituted in accordance with the procedure for the determination of the TIIE for Terms Longer Than One Banking Business Day: $___________________________ Deposits constituted in accordance with the Deposit Auctions: $___________________________ Dollar deposits that my represented entity maintains in its Dollar account: $___________________________ … TYPE OF DEPOSIT AMOUNT Monetary regulation deposits that my represented entity maintains at the Bank of Mexico: $___________________________ Deposits constituted in accordance with the procedure for the determination of the TIIE for Terms Longer Than One Banking Business Day: $___________________________ Deposits constituted in accordance with the Deposit Auctions: $___________________________ Dollar deposits that my represented entity maintains in its Dollar account: $___________________________ …”

“ANNEX 12 Bis 2 Communication to the Operations Management Department to request the return of excess special guarantees constituted with titles … … BANK OF MEXICO Operations Management Department Avenida 5 de Mayo, number 6 Colonia Centro, Cuauhtémoc Mexico City, C.P. 06000 P r e s e n t . …”

“ANNEX 12 Bis 3 Communication to the Operations Management Department to request the return of excess special guarantees constituted with deposits … … BANK OF MEXICO Operations Management Department Avenida 5 de Mayo, number 6 Colonia Centro, Cuauhtémoc Mexico City, C.P. 06000 P r e s e n t . …

176 OFFICIAL GAZETTE Wednesday, January 15, 2020

TYPE OF DEPOSIT AMOUNT Monetary regulation deposits that my represented entity maintains at the Bank of Mexico: $___________________________ Deposits constituted in accordance with the procedure for the determination of the TIIE for Terms Longer Than One Banking Business Day: $___________________________ Deposits constituted in accordance with the Deposit Auctions: $___________________________ Dollar deposits that my represented entity maintains in its Dollar account: $___________________________ …”

“ANNEX 12 Bis 4 Model of request to transfer the titles subject of the repos referred to in articles 156 and 189 of Circular 3/2012 to the securities deposit account that the institution for the deposit of securities carries at the Bank of Mexico … … BANK OF MEXICO Operations Management Department Avenida 5 de Mayo, number 6 Colonia Centro, Cuauhtémoc Mexico City, C.P. 06000 P r e s e n t . … The procedure for the determination of the TIIE for Terms Longer Than One Banking Business Day in accordance with what is established in article 156 of Circular 3/2012. The procedure for the assignment of Liquidity Auctions in accordance with what is established in article 189 of Circular 3/2012. …”

“ANNEX 12 Bis 5 Communication to the Operations Management Department to request the constitution of special guarantees with titles … … BANK OF MEXICO Operations Management Department Avenida 5 de Mayo, number 6 Colonia Centro, Cuauhtémoc Mexico City, C.P. 06000 P r e s e n t . … To constitute Special Guarantees for the credit or repo operations celebrated in the procedure for the determination of the TIIE for Terms Longer Than One Banking Business Day in accordance with what is established in article 195 Bis 5 of Circular 3/2012, integrating into the fund of operations for the determination of the TIIE for Terms Longer Than One Banking Business Day. To constitute Special Guarantees for the credit or repo operations celebrated in the procedure for the assignment of Liquidity Auctions in accordance with what is established in article 195 Bis 5 of Circular 3/2012 integrating into the fund of Liquidity Auctions. …”

Wednesday, January 15, 2020 OFFICIAL GAZETTE 177

“ANNEX 12 Bis 6 Declaration of commitment to the Code of Conduct in the determination of the Interbank Equilibrium Interest Rates (TIIE) for terms longer than One Banking Business Day [ENTITY LETTERHEAD] [Place of domicile], on _____ of ___________________ of _______. BANK OF MEXICO NATIONAL OPERATIONS DEPARTMENT Avenida 5 de mayo, No. 6 Col. Centro, Cuauhtémoc Mexico City, C. P. 06000. P r e s e n t [Full denomination of the Entity] has reviewed the content of the Code of Conduct in the Determination of the Interbank Equilibrium Interest Rates (TIIE) for terms longer than One Banking Business Day ("Code of Conduct") and recognizes that the Code of Conduct represents a set of principles generally recognized as good practices in the markets for the determination of reference rates. This Entity confirms that it participates in the determination of reference rates in a manner consistent with the guiding principles of the Code of Conduct. For this purpose, this Entity has adopted the appropriate measures to align related activities it performs with the principles of the Code of Conduct. Sincerely, (FULL DENOMINATION OF THE ENTITY)”

“ANNEX 12 Bis 7 Code of Conduct in the Determination of Interbank Equilibrium Interest Rates (TIIE) for terms longer than One Banking Business Day INTRODUCTION This Code of Conduct in the determination of the Interbank Equilibrium Interest Rate (TIIE) for terms longer than One Banking Business Day (Code of Conduct) aims to promote integrity in the procedure for the determination of the Interbank Equilibrium Interest Rate for terms longer than One Banking Business Day (TIIE for Terms), by establishing good practices and principles that must be observed by institutions that participate in the aforementioned procedure (Participants), through the submission of the quotes referred to in Section I, of Chapter IV, of Title Third of Circular 3/2012 (Quotes) to the Bank of Mexico. This present Code of Conduct does not impose legal or regulatory obligations on Participants nor does it substitute the current regulations, but rather seeks to be a complement to the applicable regulations, through the establishment of good practices. The Code of Conduct will be reviewed periodically by the Bank of Mexico with the purpose that at all times it reflects the best practices and behaviors that result in the compliance with the principles contained in it. I. Corporate Governance With the objective of protecting the integrity of the determination of the TIIE for Terms, Participants must establish and maintain a solid and effective corporate governance framework that enables establishing clear responsibilities in the internal activities required for the determination and submission of Quotes to the Bank of Mexico so that it determines the TIIE for Terms. The corporate governance and organization guidelines referred to in the preceding paragraph must provide a structure that reflects the appropriate participation of senior management personnel in the process of determination and submission of the Quotes. Such guidelines must include, at least, the following: • Information structure and operational procedures; • Supervision and monitoring mechanisms; • Escalation and notification procedures, and • Business continuity agreements to submit TIIE for Terms Quotes. Participants must appoint, through their senior executives, a person as in charge of the determination of the Quotes they submit to the Bank of Mexico, who will be responsible for supervising and validating in the first instance the compliance with what is established in the manual referred to in section V of this present Code of Conduct, regarding the determination of the Quotes and will serve as the main point of contact with the Bank of Mexico. Additionally, said person must attend the meetings that, if any, are convened by the Bank of Mexico.

178 OFFICIAL GAZETTE Wednesday, January 15, 2020

The personnel directly involved in the procedure to determine the Quotation that will be submitted to the Bank of Mexico must be formally designated. Participants must maintain a record of such personnel that includes at least the person's name and position, as well as a detailed description of the functions they will perform in the procedure for determining Quotations. Directly involved personnel shall be understood to be those who perform the following functions:

• Person in charge of supervising the determination of the Quotations referred to in the first paragraph of this section and their substitute, and • Personnel in charge of determining the Quotations.

The Participant must create, implement, and enforce written policies and procedures designed to ensure that the Code of Conduct is systematically applied within it. In this way, it will ensure the integrity of the Quotations sent for the determination of the TIIE for Terms. The policies and procedures must be reviewed at least once a year and updated as necessary.

II. Specialization

The personnel involved in the process of determining the Quotations must have relevant experience in the TIIE for Terms market or in a comparable market. The level of experience required must depend on the degree and functions performed.

The person in charge of determining the Quotation must have sufficient authority to access resources and information that allow them to carry out their responsibility, in accordance with the applicable regulation, with this Code of Conduct, and with the manual referred to in section V of this Code of Conduct.

The personnel responsible for determining the Quotations must receive training on the responsibilities, processes, systems, and controls associated with the determination of the Quotations that will be submitted to the Bank of Mexico for the determination of the TIIE for Terms. Such personnel must receive training, at least, regarding the following:

• This Code of Conduct; • Guidelines, policies, and internal procedures related to the determination of the Quotation; • The inputs that must be taken into account when determining the Quotations; • The importance of the exclusive use of registered telephone and electronic communication systems for the process of providing Quotations for the determination of the TIIE for Terms; • Knowledge of the potential consequences for the Participant and its personnel in case of attempting to manipulate the Quotations and therefore the TIIE for Terms, as well as for violations of current regulatory provisions, and • Applicable regulation.

The personnel involved in the process of determining the Quotations must demonstrate compliance with the training. Likewise, the aforementioned personnel must have knowledge and be up to date on significant changes in the Code of Conduct, in the applicable regulations, or in the guidelines, policies, and internal procedures related to the determination and submission of the Quotation.

In the same way, the personnel involved in the submission of Quotations to the Bank of Mexico must receive training on the responsibilities of their position, on the processes, systems, and controls associated with the submission of Quotations to the Bank of Mexico for the determination of the TIIE for Terms, as well as on the content of the applicable regulation and this Code of Conduct.

Additionally, employees of Participants who trade products referenced to the TIIE for Terms must receive training to ensure knowledge of the responsibilities, systems, and controls associated with the TIIE for Terms determination process. The training must address at a minimum the following topics:

• Knowledge of the potential consequences for the Participant and its personnel in case of attempting to manipulate the TIIE for Terms or violating current regulation; • Policies and procedures related to communication with personnel involved in the TIIE for Terms determination process, and • The importance of the exclusive use of registered telephone and electronic communication systems within the Participant for the process of negotiating instruments referenced to the TIIE for Terms.

Wednesday, January 15, 2020 OFFICIAL GAZETTE 179

III. Conflict of Interest

The Participant must establish an organizational structure that allows identifying and handling any conflict of interest that may arise from the process of sending Quotations for the determination of the TIIE for Terms.

The executive personnel of the Participant must constantly work on identifying potential conflicts of interest derived, for example, from changes in the structure and/or responsibilities in the Participant and in the development of new products. In order to identify and manage conflicts of interest, each Participant must:

• Establish policies that allow identifying the circumstances that constitute or may give rise to a conflict of interest derived from the Quotations sent for the determination of the TIIE for Terms or the process of collecting information to make Quotations for the determination of the TIIE for Terms; • Establish communication and conflict of interest management procedures between the areas responsible for sending TIIE for Terms Quotations and the areas that can negotiate instruments referenced to the TIIE for Terms; • Establish effective measures to prevent or limit the exercise of inappropriate influence on the Quotations in the determination of the TIIE for Terms, and • Establish measures to discourage communication with other Participants to quote the TIIE for Terms under certain pre-agreed criteria with them.

The internal controls and procedures developed and implemented to mitigate all identified real or potential conflicts of interest must be documented and monitored to demonstrate their effectiveness.

Participants must maintain a whistleblowing policy so that personnel have a means to raise their concerns regarding illegal or inappropriate practices related to the determination of the TIIE for Terms.

IV. Transparency

If a Participant has reasonable indications that any of the Quotations sent for the determination of the TIIE for Terms has been altered, it must inform the Bank of Mexico immediately. Likewise, the Participant must inform when it has reasonable indications that collusion has occurred in the Quotations sent for the determination of the TIIE for Terms.

For this purpose, Participants must have clear and efficient information processes that allow identifying activities that, in their judgment, do not correspond to the prevailing conditions in the market.

V. Execution

Participants must have manuals that clearly establish the internal procedure to be followed for the determination and submission of Quotations. In said manual, it must be specified:

• Policies that determine the methodology for selecting eligible inputs to determine the Quotations; • The validation process by specialized personnel of high hierarchical level in the institution that has experience in the analysis of the inputs intended to be used for the determination of the Quotations; • The second-instance validation process of the Quotation proposal by some high hierarchical level official of the institution; • The division of responsibilities in the determination and sending of said information, including among other aspects, which executive will be in charge of approving the Quotation that will be presented to the Bank of Mexico, the process to carry out said approval, as well as the criteria to be used to assign these responsibilities, and • The quality control process to verify the identity of employees participating in the determination and submission of Quotations, as well as the authorization they have to carry out said activities. Additionally, there must be a system control procedure to prevent unauthorized personnel from sending Quotations.

Participants must safeguard information relevant to the determination and sending of Quotations for a period of at least five years. Likewise, they must safeguard evidence of communications made between the personnel responsible for said procedures. Additionally, they must have truthful and timely information about the exposure these have to instruments referenced to reference rates.

180 OFFICIAL GAZETTE Wednesday, January 15, 2020

VI. Internal Control and Audit

Participants in the determination of the TIIE for Terms must have personnel responsible for verifying compliance with the practices established in the Code of Conduct. The officials in charge of said verification must be independent of the personnel in charge of the determination and sending of Quotations for the TIIE for Terms, and must not have responsibilities linked to the intermediation of assets referenced to these interest rates.

The personnel in charge of compliance with these rules must have sufficient experience and authority to have access to all relevant information, as well as to report any incorrect practice.

Additionally, Participants must carry out internal audits periodically. In said audits, it is expected that reasonable inquiries be made of the information sent for the determination of the TIIE for Terms, as well as the evidence supporting said Quotations. The foregoing, to verify the integrity and robustness of the process of determining and sending Quotations.

“ANNEX 13 Application to participate in the determination of the exchange rate to settle obligations denominated in Dollars payable in the Mexican Republic … Mexico City, on __ of ____ of __. BANK OF MEXICO National Operations Management, 5 de Mayo Avenue No. 6 Col. Centro, Cuauhtémoc Mexico City, C.P. 06000 Present. …” 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.- Multiple Banking Institutions that on the date of entry into force of this Circular participate in the determination of the Interbank Equilibrium Interest Rate referred to in Chapter IV, Third Title of the “Provisions applicable to the Operations of Credit Institutions, Multiple Object Financial Societies Regulated that maintain equity links with Credit Institutions and the National Agricultural, Rural, Forestry and Fisheries Development Financial Institution”, issued by the Bank of Mexico through Circular 3/2012, valid until before the entry into force of this Circular, in order to continue participating in the determination of the TIIE for Terms greater than one Banking Business Day in accordance with the new procedure provided for in this Circular must:

a) Send to the Bank of Mexico within ten Banking Business Days following the entry into force of this Circular the commitment declaration referred to in article 146 of this Circular, and b) Make the corresponding adjustments within ninety Days following the entry into force of this Circular, in order to adjust to the guidelines established in the Code of Conduct in the Determination of Interbank Equilibrium Interest Rates for Terms Greater than One Banking Business Day, contained in Annex 12 Bis 7 of this Circular.

Mexico City, on January 8, 2020.- The General Director of Payment Systems and Market Infrastructures, Manuel Miguel Ángel Díaz Díaz.- Rubric.- The Director of Support for Operations, Joaquín Rodrigo Cano Jauregui Segura Millan.- Rubric.- The Manager of Central Banking Provisions, Fabiola Andrea Tinoco Hernández.- Rubric.- The Director of Regulation and Supervision, Viviana Garza Salazar.- Rubric.

For any consultation regarding the content of this Circular, please contact the Central Banking Authorizations and Consultations Management, at phones 55 5237-2308, 55 5237-2317 or 55 5237-2000 Ext. 3200.