Circular 1/2024 — Permanent Liquidity Facility

Monday, February 12, 2024 OFFICIAL GAZETTE 1
BANCO DE MEXICO
CIRCULAR 1/2024 addressed to Multiple Banking Institutions, regarding the permanent liquidity facility.
A logo appears at the margin, stating: Banco de México.- "2024, Year of Felipe Carrillo Puerto, Meritorious of the Proletariat, Revolutionary and Defender of the Mayab".
CIRCULAR 1/2024
TO MULTIPLE BANKING INSTITUTIONS:
SUBJECT: PERMANENT LIQUIDITY FACILITY
The Banco de México, with the purpose of continuing to promote the sound development of the financial system, as well as to foster the proper functioning of payment systems and the protection of the public's interests, has resolved to issue new rules applicable to the exercise of financing that may be granted to multiple banking institutions that present liquidity needs and meet the established requirements, under terms that reflect the new operational circumstances of multiple banking institutions, given technological advances, the speed at which information is exchanged, and, as a consequence, the high degree of coordination of the reactions of financial agents. Therefore, the new terms must expedite the granting of resources; consider a broad set of guarantees; flex the terms to cover various liquidity needs, and at the same time, foster an adequate risk management scheme and keep the risk for the Banco de México contained. For the above, based on Article 28, paragraphs sixth and seventh, of the Political Constitution of the United Mexican States; 2°, 7°, fractions I, II and X, 8°, 14, 15, 16, 24 and 36 of the Banco de México Law; 96 Bis of the Credit Institutions Law; 22 of the Law for Transparency and Ordering of Financial Services; 4°, first paragraph, 8°, paragraphs fourth and eighth, 10°, 12, in relation with 19 Bis 1, fraction XI, 14, in relation with 25, fraction VII, 14 Bis 1, in relation with 25 Bis 1, fraction IV, 17, fraction I, and 30, in relation with 20 Bis, fraction XII, of the Internal Regulations of the Banco de México, which grant it the authority to issue provisions through the General Directorate of Central Banking Operations, the General Directorate of Financial Stability, the General Directorate of Financial System Affairs, the Central Banking Provisions Directorate and the General Directorate of Control and Risk Management, respectively, as well as Second, fractions I, II, IV, VI and X, of the Agreement on the Assignment of Administrative Units of the Banco de México, it issues these Rules, in accordance with the following provisions:
RULES APPLICABLE TO THE PERMANENT FACILITY FOR THE EXERCISE OF FINANCING GRANTED BY THE BANCO DE MÉXICO TO COVER LIQUIDITY NEEDS

1. Definitions.
   For the purposes of these Rules, the terms used in them, in singular or plural, shall have the meanings indicated below:
   BONDES: Bonds for Development issued by the Federal Government of the United Mexican States in the national market, denominated in national currency or in UDIS, both at fixed interest rate and at variable interest rate.
   BONOS UMS: Debt instruments denominated in foreign currency issued by the Federal Government of the United Mexican States in international markets.

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BPAS: Savings Protection Bonds issued by the Institute for the Protection of Bank Savings regarding which the Banco de México acts as financial agent for their placement in the national market.
BREMS: Monetary Regulation Bonds issued by the Banco de México in the national market.
CETES: Certificates of the Treasury of the Federation issued by the Federal Government of the United Mexican States in the national market, excluding those issued under programs for restructuring credits in UDIS (Special CETES).
Global Scale Credit Quality Criterion:
a one applicable to titles offered for repurchase under these Rules, in accordance with which they must have, at least, two ratings granted by Securities Rating Agencies, equal to or higher than those corresponding to level N10, included in Annex 1 (Long-Term Credit Ratings Table on Global Scale) of Circular 39/2020, published by the Banco de México in the Official Gazette of the Federation on October 12, 2020, regarding long-term titles, or those corresponding to level Nii included in Annex 3 (Short-Term Credit Ratings Table on Global Scale) of said Circular, regarding short-term titles. National Scale Credit Quality Criterion:
a one applicable to titles offered for repurchase under these Rules, in accordance with which they must have, at least, two ratings granted by Securities Rating Agencies, equal to or higher than those corresponding to level N3mx, included in Annex 2 (Long-Term Credit Ratings Table on Local Scale) of Circular 39/2020, published by the Banco de México in the Official Gazette of the Federation on October 12, 2020, regarding long-term titles, or those corresponding to level Nimx included in Annex 4 (Short-Term Credit Ratings Table on Local Scale) of said Circular, regarding short-term titles. In the case of titles issued by fiduciary institutions of trusts referred to in item 2.3, "Titles Subject to Repurchase", subclauses "h" and "i" of these Rules, they must have, at least, two ratings granted by Securities Rating Agencies, equal to those corresponding to level N1mx, included in Annex 2 (Long-Term Credit Ratings Table on Local Scale) of Circular 39/2020, published by the Banco de México in the Official Gazette of the Federation on October 12, 2020. Single Account: the national currency demand deposit bank account that the Banco de México maintains for each of the Institutions in accordance with what is provided in the Operational Provisions. Deposits: the following money deposits constituted at the Banco de México by the Institutions as depositors: i) monetary regulation deposits referred to in Article 28 of the Banco de México Law; ii) term deposits constituted as a result of the assignments of the auctions that the Banco de México carries out for that purpose; iii) term deposits celebrated in accordance with the procedure for determining the TIIE for terms greater than one Banking Business Day provided in the Operational Provisions, and iv) deposits in U.S. dollars, constituted at the Banco de México in accordance with the Operational Provisions. Banking Business Days: the days on which Institutions are not obliged to close their doors or suspend their operations, in terms of the general provisions issued for such effect by the National Banking and Securities Commission.

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Operational Provisions:
to the Provisions applicable to the Operations of Credit Institutions, Regulated Multiple-Object Financial Companies that Maintain Patrimonial Links with Credit Institutions and the National Financial Company for Agricultural, Rural, Forestry and Fisheries Development, issued by the Banco de México through Circular 3/2012, published in the Official Gazette of the Federation on March 2, 2012, as they have been modified by subsequent resolutions.
Eligible Currency: the Australian Commonwealth dollar, Canadian dollar, United States of America dollar, New Zealand dollar, Euro of the European Union, Pound Sterling of the United Kingdom of Great Britain and Northern Ireland and Yen of Japan.
State Productive Enterprises:
to Petróleos Mexicanos and the Federal Electricity Commission, as well as their respective subsidiary productive enterprises.
FIRA: Trusts Established in Relation to Agriculture, in which the Banco de México acts as fiduciary institution and which correspond to the following: Guarantee and Promotion Fund for Agriculture, Livestock and Poultry, Special Fund for Agricultural Financing, Special Fund for Technical Assistance and Guarantee for Agricultural Credits and Guarantee and Promotion Fund for Fishing Activities.
Indeval: Indeval S.D., Securities Deposit Institution, S.A. de C.V.
Institutions: multiple banking institutions.
Securities Rating Agency:
to any of the anonymous societies authorized by the National Banking and Securities Commission to act with such character, in terms of what is provided by the Securities Market Law, as well as their foreign subsidiaries that grant credit ratings to the titles subject to repurchase in accordance with these Rules.
Development Banking Institutions:
to those credit institutions constituted with such character in accordance with the Credit Institutions Law and the organic laws relative to each of them.
Manual: the Operation Manual of the Permanent Liquidity Facility that the Banco de México makes known to the Institutions through the internet portal located at the address: <http://webdgobc>.
Electronic Attention Module:
to the system referred to in the respective rules issued by the Banco de México through Circular 13/2012, published in the Official Gazette of the Federation on September 17, 2012.
Financial Network: the financial information network integrated by various public and private institutions of the Mexican financial system and of the Federal Public Administration, whose operation, maintenance and update is in charge of the Banco de México.
UDIS: the investment units referred to in the Decree by which the obligations that may be denominated in Investment Units are established and Reform and Adds various provisions of the Federal Tax Code and of the Income Tax Law published in the Official Gazette of the Federation on April 1, 1995.
Government Securities:
to CETES and BONDES, including the segregated coupons of BONDES with fixed interest rate in pesos or in UDIS referred to in the "Rules for the Segregation and Reconstitution of Titles" issued by the Secretariat of Finance and Public Credit, BONOS UMS, as well as BPAS and BREMS.
2. General terms and conditions.

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2.1 Conditions for the granting of financing.
The Institution interested in obtaining the financing from the Banco de México referred to in these Rules must submit a request within the hours indicated in the Manual for these purposes, in terms of the format attached to these Rules as Annex 1, no later than the Banking Business Day on which it intends to carry out the disbursement of the corresponding resources, subject to the perfection of the respective guarantees or the repurchase that corresponds, as the case may be, through the transfer of resources from the Deposits subject to such guarantees or from the titles subject to the repurchase in the respective bank deposit accounts or securities accounts that result applicable. Such request must be submitted through any of the following forms:
a) Through the Electronic Attention Module, as well as through the email address facilidadesdeliquidez@banxico.org.mx. The request must have the advanced electronic signature of a legal representative of the Institution, who has powers to perform acts of administration and dominion, or b) Through a written document presented at the domicile of the Banco de México containing the autograph signature of a legal representative of the Institution, who has powers to perform acts of administration and dominion, as well as through the email address facilidadesdeliquidez@banxico.org.mx. The exercise of the financing object of these Rules may be carried out, at the choice of the Institution, through any of the following operations or combination of these: (i) granting of simple credit secured with the resources object of the Deposits that the accredited Institution maintains at the Banco de México, or (ii) repurchases on eligible titles, subject to what is provided in items 2.2 and 2.3, respectively. Only those Institutions that meet the requirements established for each type of financing provided in these Rules may use the temporary financing referred to in these Rules. In the event that an Institution, once it has disposed of the resources object of the financing granted in accordance with these Rules, requires obtaining additional resources, it must submit a new request to the Banco de México subject to what is provided in this item.
2.2 Secured credits with Deposits.
For the Institution in question to be able to obtain the financing object of these Rules through the secured credit indicated in clause (i) of the penultimate paragraph of item 2.1 above, it must previously celebrate with the Banco de México a contract for the opening of simple credit with guarantee, which shall have, at least, the following characteristics:
Grantor: The Banco de México.
Grantee: The Institution that meets the requirements to obtain financing from the Banco de México in accordance with these Rules.
Term for the disbursement of the credit amount: From the Banking Business Day on which the Institution in question has indicated in the request submitted to the Banco de México in accordance with item 2.1, in the hours provided by the Manual for these purposes, and until the next Banking Business Day, subject to the guarantees having been perfected when this is subsequent to the date of the request, as indicated in the heading "Proof of resources" of this item 2.2.
Term of the operation and payment of the amount disbursed by the Grantee: The term of the operation shall be thirty natural days subsequent to that on which the credit amount has been disbursed, with automatic renewal for terms of thirty natural days. The credit disbursed by the Institution may be renewed up to three times automatically. Once the automatic renewals are exhausted, in the event that the Institution requires access to financing for an additional period, it must submit a new request in terms of what is established in item 2.1.

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The payment of the amount must be covered by the Grantee to the Banco de México at the maturity of the operation, either: (i) on the early payment date that the Institution notifies the Banco de México in terms of item 3.2, (ii) on the early cancellation date that the Banco de México notifies the Institution or (iii) at the end of the thirty natural days term of the operation or at the expiration of the renewal terms, as the case may be. This term may be substituted by the immediately preceding Banking Business Day in case the term of the operation term is on non-banking business days, as indicated in the previous paragraph. The Banco de México may cancel the credit in advance or refrain from renewing the corresponding credit when the accredited Institution does not comply with the conditions provided in these Rules or with what is stipulated in the contract referred to in this item, without prejudice to the inspection and surveillance powers that the Banco de México may exercise to verify compliance with the provisions applicable to the operation carried out by the accredited Institution. The Banco de México will notify the Institution in question about the early cancellation of the credit or the conclusion of the credit renewal at least the Banking Business Day prior to that on which it will cancel the credit in advance or terminate the automatic renewal. Likewise, the Institution may cancel the corresponding credit in advance, in terms of item 3.2, or request that the automatic renewal of the same not be carried out, through the respective notification that it presents to the Banco de México one Banking Business Day in advance of the date on which it wishes to cancel or the date on which the automatic renewal should take place. The Banco de México will carry out the cancellation of the financing on the Banking Business Day immediately following the date of receipt of said request. Amount: that one, in national currency, that the Institution in question requests, up to an amount that, added to the agreed interests and, if applicable, corresponding accessories, may not exceed the sum of the balances of the Deposits and their peso equivalent of those Deposits in U.S. dollars, adjusted in accordance with what is indicated in the heading "Guarantee" of this item, which said Institution must maintain at the Banco de México during the validity of the credit and which will be subject to the guarantee granted on the credit. Payment of interests: The payment of interests must be made at the maturity of the operation, through a charge that the Banco de México makes in the Single Account it maintains for the Grantee, either: (i) on the early payment date that the Institution notifies the Banco de México in terms of item 3.2, (ii) on the early cancellation date that the Banco de México notifies the Institution or (iii) at the end of the thirty natural days term of the operation and, if applicable, of each renewal. This term may be substituted by the
immediately preceding Banking Business Day in case the term of the operation term is on non-banking business days. To calculate the payment of interests, the following formula will be applied:
Where,
= Term of the credit in Banking Business Days, either considering: (i) the early payment date that the Institution notifies the Banco de México in terms of item 3.2, (ii) the early cancellation date that the Banco de México notifies the Institution or (iii) at the end of the thirty natural days term of the operation, which may be substituted by the immediately preceding Banking Business Day in case the term of the operation term is on non-banking business days, regardless of whether this is automatically renewed. = Amount of the credit that is in force on Banking Business Day .

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= The interest rate that the Board of Directors of the Bank of Mexico has determined as the target rate for monetary policy purposes, expressed annually and in percent with rounding to two decimal places, made known on the Bank's own internet website, applicable for the Banking Business Day.
= Number of calendar days applicable to calculated as the number of natural days that elapse between Banking Business Day i (including that day), and the Banking Business Day following i (excluding that day).

The Institution, at all times, must maintain Deposits in the special guarantee account held by the Bank of Mexico, whose valuation in national currency, adjusted by discount factors, must be equal to or greater than, at all times, the sum of the credit amount, estimated interest, and any other expenses.

For the case provided in the preceding paragraph, the estimated interest will be calculated as follows:
On the day the credit is perfected, the estimated interest will be that resulting from applying the formula indicated above, for which the interest rate that the Board of Directors of the Bank of Mexico has determined as the target rate for monetary policy purposes, expressed annually and in percent with rounding to two decimal places, which is made known on the Bank of Mexico's internet website, from the date of perfection until the valuation date, assuming, for the purposes of this calculation, that said rate will remain constant during the remaining term of the credit. Additionally, in the event that, from the date of perfection of the credit until the agreed expiration date of the credit term, the aforementioned interest rate determined by the Board of Directors of the Bank of Mexico as the target rate for monetary policy purposes, is modified by decision of the Board of Directors of the Bank of Mexico, the value of said rate will be taken as applicable for each of the days from the date it was made known until the agreed expiration date of the credit term. Without prejudice to the foregoing, the interest that the accredited Institution must pay to the Bank of Mexico will be that resulting from the calculation performed, upon expiration of the credit, in accordance with the indications in this section.

The value of the Deposits guaranteeing the credit will be determined daily, until the credit is settled, according to the valuation performed by the Bank of Mexico, and as a result of such determination, the following will be done:
a) In the event that the amount corresponding to the national currency valuation of the Deposits, applying the corresponding discount factor, results in less than the sum of the credit amount, estimated interest, and any other expenses, the Bank of Mexico will notify the Institution concerned, which must send a communication within the timeframes and terms established for this purpose in the Manual, indicating how it will guarantee the missing amount of the credit, estimated interest, and any other expenses. The Institution must guarantee the missing amount of the credit, estimated interest, and any other expenses, on the same Banking Business Day that the Bank of Mexico notifies that the shortfall is applicable. b) In the event that the amount corresponding to the national currency valuation of the Deposits, applying the corresponding discount factor, results in greater than the sum of the credit amount, estimated interest, and any other expenses, the Institution may request the Bank of Mexico to return the excess guarantee, through a communication sent to the Bank of Mexico in accordance with the Manual.

In the event that the Institution does not guarantee the missing amount of the credit, estimated interest, and any other expenses, as referred to in the preceding subsection a), on the following Banking Business Day, the credit will be considered terminated early, in which case the Institution must make a payment for the uncovered amount derived from the difference between the sum of the credit amount, estimated interest, and any other agreed expenses, and the national currency valuation of the Deposits, applying the corresponding discount factor. Notwithstanding the foregoing, without prejudice to the corresponding conventional penalty for the uncovered amount, the Institution and the Bank of Mexico may enter into a new credit with the remaining Deposits that the Institution had previously indicated to this entity for a term equal to the remaining term of the original operation.

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Guarantee: Pledge over the resources subject to the specific Deposits that the accredited Institution indicates for such purposes, among those it maintains at the Bank, provided that such indicated Deposits have, individually or jointly, as the case may be, a sufficient balance to cover the principal and estimated interest of the respective credit, and, if applicable, corresponding accessories and adjusted according to the applicable discount factors, in accordance with the "Amount" section of this section. The constitution of the aforementioned pledge will be without prejudice to what is established in Article 16 of the Bank of Mexico Law.

Regarding guarantees constituted over the resources subject to the Deposits, the Institution must request that, for such purposes, the respective amounts be segregated into a special guarantee account held by the Bank of Mexico, in accordance with what is provided in the Manual. Such segregation will not affect the object and purpose of the Deposits constituted by the Institution, until such time as the respective guarantee must, if applicable, be executed in accordance with what is stipulated by the Institution and the Bank of Mexico.

Regarding Deposits in US Dollars, the value of this guarantee for the credits of this facility will be determined by applying the exchange rate published by the Bank of Mexico in the Official Gazette of the Federation on the date of perfection of said guarantee, adjusted, if applicable, by the discount factor that the Bank of Mexico makes known to Institutions through the internet site located at the address <http://webdgobc> and, for each Banking Business Day that elapses after that date, the value of the guarantee will be adjusted according to the aforementioned exchange rate published on that day multiplied by the mentioned discount factor, in accordance with what is established in the Manual.

Credit of Resources: Once the contract is signed and the request is presented in accordance with what is established in section 2.1, the Bank of Mexico will carry out, during the schedule established in the Manual on the Banking Business Day that the Institution indicates for this purpose, within the term for the disbursement of the credit amount indicated above, the crediting of the respective amount to the Single Account of said Institution for the lesser amount between what was requested or guaranteed.

2.3 Repo Operations.
For the Institution concerned to obtain the financing object of these Rules through repos indicated in subsection (ii) of the penultimate paragraph of section 2.1, it must previously celebrate the respective contract with the Bank of Mexico, which will have, at least, the following characteristics:
Repo Provider: The Bank of Mexico.
Repo Taker: The Institution that meets the requirements to obtain financing from the Bank of Mexico in accordance with these Rules.
Term for the start of the operation: From the Banking Business Day that the Institution concerned has indicated in the request presented to the Bank of Mexico in accordance with section 2.1, within the schedules provided by the Manual for these purposes, and up to the second Banking Business Day following the one that the Institution concerned has indicated in the request presented to the Bank of Mexico in accordance with section 2.1, subject to the transfer of the securities subject to the repo, as indicated in the "Credit of Resources" section of this section 2.3. Term of the operation and payment of the amount disbursed by the Repo Taker: The term of the operation will be thirty natural days subsequent to the day on which the repo is perfected or, in the event that the securities subject to the repo have an earlier maturity than the referred term, the term of the repo operation will be until one Banking Business Day prior to the maturity of the referred securities, with automatic renewal for terms of thirty natural days. Repo operations may be renewed up to three times automatically. Once the automatic renewals are exhausted, in the event that the Institution requires access to financing through repo for an additional period, it must present a new request in accordance with what is established in section 2.1. The payment of the amount must be covered by the Repo Taker to the Bank of Mexico upon expiration of the operation, either: (i) on the early payment date that the Institution notifies the Bank of Mexico in accordance with section 3.2, (ii) on the early cancellation date that the Bank of Mexico notifies the Institution or (iii) at the end of the thirty natural day term of the operation or at the expiration of the renewal terms, as the case may be. This term may be substituted by the immediately preceding Banking Business Day in case

8 OFFICIAL GAZETTE Monday, February 12, 2024 that the term of the operation's term is on non-banking business days, in accordance with what is indicated in the preceding paragraph.
The Bank of Mexico may cancel the repo early or refrain from renewing repo operations when the Repo Taker does not meet the conditions provided in these Rules or with what is stipulated in the contract referred to in this section, without prejudice to the inspection and surveillance powers that the Bank of Mexico may exercise to verify compliance with the applicable provisions for the operation carried out by the reported Institution. The Bank of Mexico will notify the Repo Taker about the early cancellation of the repo or the conclusion of the repo renewal at least one Banking Business Day prior to the day on which it cancels the repo early or terminates the automatic renewal.

Likewise, the Institution may early mature the corresponding repo operation, in accordance with section 3.2, or request that the automatic renewal of the same not take place, through the respective notification presented to the Bank of Mexico one Banking Business Day in advance of the date on which it wishes to early mature the repo or the date on which the automatic renewal should take place. The Bank of Mexico will carry out the cancellation of the financing on the Banking Business Day immediately following the date of receipt of said request. Securities Subject to the Repo:
i. Government Securities denominated in national currency, UDIS, or Eligible Currencies;
ii. Debt securities denominated in national currency or UDIS, deposited in Indeval, that meet the National Credit Quality Scale Criterion and have been issued by:
a. Entities of the Federal Public Administration, including Development Banking Institutions and FIRA; b. State-Owned Enterprises;
c. Multiple banking institutions, other than the Repo Taker and that are not part of the same financial group, business group, or consortium to which the latter belongs, only in the event that such securities have been issued six months in advance of the date on which the request to access the liquidity facility is presented;
d. Federal Entities; e. Municipalities; f. International financial entities and multilateral entities; g. Non-financial legal entities resident in Mexico that are not part of the same financial group, business group, or consortium to which the Repo Taker belongs; h. Fiduciary institutions of trusts that issue such debt securities in the form of fiduciary exchange certificates that represent: 1) rights over mortgage credit portfolios that are affected in such trusts or others linked to them and have been granted by the National Institute for the Housing Fund for Workers, by the Housing Fund of the Institute for Social Security and Services for State Workers, or by financial entities resident in Mexico, except for credits that have been granted by the Repo Taker or by financial entities of the same financial group, business group, or consortium to which it belongs, or 2) rights in favor of a State-Owned Enterprise; and
i. Fiduciary institutions of trusts through which the persons indicated in sub-subsections "a." to "g." of this subsection ii) issue such debt securities in the form of fiduciary exchange certificates that represent the right of their holders to receive the payment of capital and, if applicable, interest or returns.
iii. Debt securities denominated in Eligible Currencies that meet the Global Credit Quality Scale Criterion and have been issued by any of the following persons:

Monday, February 12, 2024 OFFICIAL GAZETTE 9 a. Foreign governments or central banks or foreign entities that perform similar functions. b. The persons indicated in sub-subsections "a." to "g." of the previous subsection ii).
The trusts referred to in sub-subsections "h." and "i." of the previous subsection ii) must be constituted in accordance with the Securities Market Law and must meet the following characteristics:
a. The trusts must be irrevocable. b. The trust must not include credit derivative products in its structure or, in any other way, contemplate the use of such products for the payment of the respective fiduciary exchange certificates.

Additionally, securities issued abroad through any legal figure that produces the effects of a special purpose vehicle, in accordance with the laws of the respective jurisdiction, through which the persons indicated in sub-subsections "a." to "g." of subsection ii), of this section 2.3, place such debt securities, may also be securities subject to the repos provided in these Rules, provided that they meet the previously established characteristics and, exceptionally, in the event that the special purpose vehicle is not subject to an express clause of irrevocability, the legal instrument of its constitution must expressly provide that any modification to said instrument or to the conditions of the vehicle or the issued securities will only be for the benefit of the holders of said securities.

In the event of an early liquidation of the securities referred to in sub-subsection "h." of subsection ii) of this section 2.3, the issuance instruments must expressly stipulate that the holders of said securities will have the right to receive full payment of the amounts covered by said securities.

In the event that it is intended to deliver securities issued by fiduciary institutions of trusts through which the persons indicated in sub-subsections "a." to "g." of subsection ii), of this section 2.3, issue such debt securities in the form of fiduciary exchange certificates that are not included in the list of eligible securities that the Bank of Mexico itself makes known through the internet portal located at the address: <http://webdgobc>, the Institution must inform the Bank of Mexico, at least five Banking Business Days in advance of the date on which such securities are intended to be delivered, in accordance with what is provided in the Manual. This is for the purpose that the Bank of Mexico is in a position to analyze the eligibility of said securities.

The holders of the securities subject to the repo must be placed in the first place of priority for the payment of the respective securities and no holder shall be subordinated to the payment of other holders.

For its part, the securities referred to in subsection ii) of this section 2.3, must not include structured bank securities provided for in Title Two, Chapter I, Section I, Subsection G, of the Operations Provisions, as well as other securities instrumented with similar characteristics.

The Institution that presents the securities for the realization of the repo provided for in this section must verify that they meet the previously established characteristics for each of them, without prejudice to the review that the Bank of Mexico must carry out.

The maturity of the securities subject to the repo must be subsequent to that corresponding to the term of the repo. Exceptionally, in the event of a repo that intends to be renewed automatically in accordance with what is stipulated for this purpose in these Rules in which the Institution concerned does not have securities with maturities subsequent to the terms derived from the automatic renewal, the Institution must celebrate successive repos no later than two Banking Business Days prior to the maturity of the securities with shorter terms that it has available for such operations, until completing the term of the repo renewal

10 OFFICIAL GAZETTE Monday, February 12, 2024 with the Bank of Mexico. The rate and other general terms of the successive repos celebrated in accordance with the above must have the same characteristics as those corresponding to the first repo celebrated. Likewise, the value of said securities, determined in accordance with what is provided in the following paragraph, must be equal to or greater than the sum of the price plus the estimated premium of the operation and any other agreed expenses. In the event that the corresponding Institution does not provide securities that meet the aforementioned characteristics to celebrate the subsequent repos, the agreement to celebrate the additional repos to reach the term derived from the automatic renewal will be considered terminated.

The Bank of Mexico will make known to the Institutions the reference valuation of the securities to be repoed and the corresponding discount factors, in the terms established by the Manual.

In any case, the Bank of Mexico, in view of the date of issuance and placement of the securities and the depth and conditions prevailing in the market in which said securities are traded, may not accept these securities in repo operations, as well as those that do not have an updated reference valuation, that have not been placed among several investors, or that have not been placed through a public offering. The Bank of Mexico may not accept those securities with which it is not in a position to carry out the corresponding operations within the term to perfect the respective repo.

Price: At the reference value of the securities subject to the repo made known by the Bank and on which the discount factors determined and made known by the Bank itself through the internet portal maintained at the address: <http://webdgobc> will be applied.

Premium: That resulting in accordance with the following formula:
Where:
= Term of the repo in Banking Business Days, either considering: (i) the early payment date that the Institution notifies the Bank of Mexico in accordance with section 3.2, (ii) the early cancellation date that the Bank of Mexico notifies the Institution or (iii) at the end of the thirty natural day term of the operation, which may be substituted by the immediately preceding Banking Business Day in case the term of the operation's term is on non-banking business days, regardless of whether it is renewed automatically. = Amount of the repo that is in effect on Banking Business Day . = The interest rate that the Board of Directors of the Bank of Mexico has determined as the target rate for monetary policy purposes, expressed annually and in percent with rounding to two decimal places, made known on the Bank's own internet website, applicable for Banking Business Day . = Number of calendar days applicable to calculated as the number of natural days that elapse between Banking Business Day i (including that day), and the Banking Business Day following i (excluding that day).

The payment of the Premium must be made on the maturity day, through the corresponding charge that the Bank of Mexico makes in the Single Account held for the Repo Taker, either: (i) on the early payment date that the Institution notifies the Bank of Mexico in accordance with section 3.2, (ii) on the early cancellation date that the Bank of Mexico notifies the Institution or (iii) at the end of the thirty natural day term of the operation and, if applicable, of each renewal. This term may be substituted by the immediately preceding Banking Business Day in case the term of the operation's term is on non-banking business days.

Acreditation of resources: Once the Institution in question has signed the contract and submitted the corresponding application to carry out this operation in accordance with paragraph 2.1 above, said Institution must transfer the securities subject to the repo agreement denominated in national currency or UDIS to the securities deposit account that Indeval maintains at the Bank of Mexico, which the latter indicates on the webpage of the Financial Network mentioned above, or, in the case of those securities denominated in Eligible Currencies, to the custodian accounts abroad that the Bank of Mexico makes known for these purposes, on the same webpage of the Financial Network. Once the delivery of said securities has been carried out through the aforementioned transfers, the Bank of Mexico, during the hours established in the Manual, will make the corresponding credit in the Single Account of the Reported Institution, for the lesser amount between what was requested or what is guaranteed, considering the reference value of the securities, adjusted by the discount factors. In the event that the respective securities are not transferred on the same day indicated in the aforementioned application, they may be transferred on the next Banking Business Day provided that the Institution has given notice thereof to the Bank of Mexico on the same day it submits the aforementioned application in paragraph 2.1, in which case, the funds will be credited until the Banking Business Day on which the delivery of the securities is effectively carried out, through the respective transfers and in accordance with the schedules set forth in the Manual.

Valuation of the securities subject to the repo agreement: The Institution must deliver to the Bank of Mexico, by virtue of the repo agreement, securities whose valuation adjusted by the discount factors must be equal to or greater at all times than the price of the repo agreement plus the estimated premium for the repo agreement operation and any other agreed expenses. For these purposes, the value of the securities will be determined in accordance with the prices and corresponding discount factors that the Bank of Mexico makes known to the Institutions, through the internet portal located at the address: <http://webdgobc>.

For the scenario provided in the previous paragraph, the estimated premium will be calculated as follows:
On the day of the perfection of the repo agreement, the estimated premium will be that resulting from applying the formula indicated above, for which the interest rate that the Governing Board of the Bank of Mexico has determined as the target rate for monetary policy purposes, expressed annually and in percentage with rounding to two decimal places, which is made known on the internet electronic page of the Bank of Mexico, from the date of perfection until the valuation date, assuming, for the purposes of this calculation, that said rate will remain constant during the remaining term of the repo agreement. Additionally, in the event that, from the day of the perfection of the repo agreement until the agreed date of expiration of the repo agreement term, the aforementioned interest rate that the Governing Board of the Bank of Mexico has determined as the target rate for monetary policy purposes, is modified by decision of the Governing Board of the Bank of Mexico, the value of said rate will be taken as applicable for each of the days from the date it was made known until the agreed date of expiration of the repo agreement term. Without prejudice to the foregoing, the Premium that the Reported Institution must pay to the Bank of Mexico will be that resulting from the calculation performed, at the expiration of the repo agreement, in accordance with what is indicated in the item “Premium” of this paragraph.

The value of the securities subject to the repo agreement will be determined daily, until such time as the repo agreement is liquidated, in accordance with the valuation performed by the Bank of Mexico, and as a result of such determination, the following will be done:
a) If the value of the securities, when applying the corresponding discount factor, results in less than the sum of the price of the repo agreement, the estimated premium, and any other agreed expenses, the Bank of Mexico will notify said situation to the Institution in question, which must send a communication within the timeframes and terms established for this purpose in the Manual, indicating how it will cover the amount of the corresponding difference. The Institution must cover, on the same Banking Business Day that the Bank of Mexico notifies that the shortfall is applicable, the amount of the corresponding difference. b) If the value of the securities, when applying the corresponding discount factor, results in greater than the sum of the price of the repo agreement, the estimated premium, and any other agreed expenses, the Institution may request the Bank of Mexico to return the excess guarantees, through a communication sent to the Bank of Mexico in the terms of the Manual.

In the event that the Institution does not cover the amount of the difference, as referred to in subsection a) above, on the next Banking Business Day, the repo agreement will be considered terminated in advance, in which case the Institution must make a payment for the uncovered amount derived from the corresponding difference between the sum of the price of the repo agreement, the estimated premium, and any other agreed expenses, and the value of the securities, when applying the corresponding discount factor. Notwithstanding the foregoing, without prejudice to the corresponding conventional penalty for the uncovered amount, the Institution and the Bank of Mexico may enter into a new repo agreement with the remainder of the securities that the Institution had previously delivered to this entity for a term equal to the remaining term of the original operation.

3. General Provisions.
   3.1 Celebration of Contracts. To celebrate the simple credit and repo agreement contracts subject to these Rules, the interested Institutions must present to the International and Special Legal Affairs Management of the Bank of Mexico certified copies of the deed in which the powers granted to the representative persons to exercise acts of dominion are recorded, as well as the official identifications of said representative persons who sign the aforementioned contracts and the other documents indicated therein.

3.2 Payment of Financing. With respect to simple credit operations, repo agreement operations, and the automatic renewal thereof contemplated in these Rules, the accredited or reported Institution may, prior to the agreed expiration date in accordance with these Rules, pay in full or in part the amount corresponding to the respective financing it has received in accordance with these Rules, for which it must inform the Bank of Mexico, through a communication prepared in accordance with the format attached as Annex 2 of these Rules, which said Institution presents in the same manner as contemplated in paragraph 2.1 for the financing application, on the Banking Business Day immediately prior to that on which it intends to make the payment, during the hours established in the Manual. Once each of the operations provided for in these Rules has been fully liquidated, they will be extinguished.

For the purpose of making payment for the financing operations subject to these Rules, as an exception to what is provided by article 116 of the Operations Provisions, Institutions that celebrate such operations may not incur overdrafts in their respective Single Accounts not covered by guarantees. By virtue of the foregoing, in the event that the respective charge cannot be made at the maturity of the credit operation in question, the payment obligation for the respective credit or repo agreement will be considered breached up to the amount not covered by the Institution in question.

The Bank of Mexico may abstain from celebrating a new operation with an Institution, as well as from renewing previously celebrated operations, when this Institution does not comply with the conditions provided for in these Rules, as stipulated in the respective contract, as well as when said Institution fails to comply with the conditions of other operations celebrated by it with the Bank of Mexico in accordance with the respective Rules issued by it to cover liquidity needs.

3.3 Information to the Bank of Mexico. Institutions must provide to the General Directorate of Financial System Affairs, the General Directorate of Central Banking Operations, and the Financial System Information Directorate of the Bank of Mexico, the information that, within the scope of their competence, these administrative units require of them.

The aforementioned information must be sent in the form and terms made known to them by the aforementioned administrative units.

Annex 1
Format of application that multi-bank institutions must present to the Bank of Mexico Mexico City, ______________________.

Tuesday, February 12, 2024 OFFICIAL GAZETTE 13 Bank of Mexico Present.
Attention: General Directorate of Central Banking Operations Through this channel, the undersigned, [FULL NAME], in my capacity as [POSITION] of the multi-bank institution named [FULL DESIGNATION OF THE MULTI-BANK INSTITUTION, INCLUDING, IF APPLICABLE, THE FINANCIAL GROUP TO WHICH IT BELONGS], on behalf and for the account of said Institution, request that the Bank of Mexico grant my represented entity a temporary financing, in terms of what is provided in the “RULES APPLICABLE TO THE PERMANENT FACILITY FOR THE EXERCISE OF FINANCING GRANTED BY THE BANK OF MEXICO TO COVER LIQUIDITY NEEDS”, issued by that Central Institute through Circular 1/2024, published in the Official Gazette of the Federation on February 12, 2024.

The amount of the referred financing that my represented entity requests is $ __________________ (amount in letters), pesos, national currency, and the date required for the disposal of the resources by my represented entity is the day of [DAY] of [MONTH] of [YEAR]. For these purposes, my represented entity accepts to celebrate the financing operations in the form and terms provided in Circular 1/2024, as well as in the corresponding contracts.

Likewise, my represented entity manifests its agreement with the modifications that, if any, are made to Circular 1/2024, after the celebration of the contracts that document the granting of financing by the Bank of Mexico. Likewise, it recognizes that in case of discrepancy between the terms and conditions established in the referred contracts and those provided in Circular 1/2024 and its respective modifications, which are in force at the time of the present application, the terms and conditions provided in the latter will prevail.

Additionally, with the purpose of having agile communication for clarifications or requests for additional information, the Institution designates the following contacts:
Name Position Phone Email
I declare, under oath, that the statements contained in this communication are true and reliable, for all legal effects to which there may be occasion.
Sincerely,
[NAME AND SIGNATURE OF THE LEGAL REPRESENTATIVE PERSON WITH POWERS TO PERFORM ACTS OF ADMINISTRATION AND DOMINION]

Annex 2
Format of payment communication that Institutions must present to the Bank of Mexico Mexico City, ______________________.

14 OFFICIAL GAZETTE Tuesday, February 12, 2024 Bank of Mexico Present.
Attention: General Directorate of Central Banking Operations Through this channel, I inform you that the [day]_ of [month]_ of [year] (FULL DESIGNATION OF THE MULTI-BANK INSTITUTION, INCLUDING, IF APPLICABLE, THE FINANCIAL GROUP TO WHICH IT BELONGS):
will make the payment of the financing granted to it by the Bank of Mexico in terms of Circular 1/2024 for a principal amount of $ __________________ (amount in letters), pesos, national currency, plus the interests and, if applicable, corresponding accessories, or will make a partial payment for the amount of $ __________________ (amount in letters), pesos, national currency, plus the interests and, if applicable, corresponding accessories.
Therefore, I authorize and instruct that Central Institute to make the respective charge in the Single Account that it maintains for this Institution in terms of the contract.
Sincerely,
(NAME AND SIGNATURE OF PERSONS PREVIOUSLY REGISTERED AT BANK OF MEXICO)

TRANSITORY PROVISIONS
FIRST. These Rules will enter into force the day after their publication in the Official Gazette of the Federation.
On the date indicated in the previous paragraph, the Rules applicable to the exercise of Financing granted by the Bank of Mexico to cover Additional Ordinary Liquidity needs, provided for in Circular 10/2015, dated May 11, 2015, as well as its subsequent modifications, will be repealed.

SECOND. The Bank of Mexico will make known to the Institutions the contract clauses that document these operations no later than February 26, 2024.
The Institutions must have the new contracts signed no later than May 26, 2024.

THIRD. The contracts signed for the celebration of the operations of the Rules that are repealed through Transitory Rule First, will retain full validity and legal effect until May 26, 2024.

Mexico City, February 2, 2024.- BANK OF MEXICO: General Director of Central Banking Operations, Gerardo Israel García López.- Initials.- General Director of Financial Stability, Fabrizio López Gallo Dey.- Initials.- General Director of Financial System Affairs, José Luis Negrín Muñoz.- Initials.- Director of Central Banking Provisions, María Teresa Muñoz Arámburu.- Initials.- General Director of Internal Audit and Risk Management, Claudia Álvarez Toca.- Initials.

For any inquiries regarding the content of this Circular, the Bank of Mexico is at your disposal through the Directorate of Central Banking Authorizations and Sanctions at telephone (55) 5237-2000 extension 3200.