Circular 10/2014 — Rules for Auctions of Limited Negotiability Monetary Regulation Bonds (BREMS L) Conducted by the Bank of Mexico

(First Section) OFFICIAL GAZETTE Monday, June 9, 2014 BANK OF MEXICO CIRCULAR 10/2014, addressed to Credit Institutions, regarding the Rules for the Auctions of Limited Negotiability Monetary Regulation Bonds (BREMS L) conducted by the Bank of Mexico. At the margin, a logo stating: Bank of Mexico. CIRCULAR 10/2014 TO CREDIT INSTITUTIONS: SUBJECT: RULES FOR THE AUCTIONS OF LIMITED NEGOTIABILITY MONETARY REGULATION BONDS (BREMS L) CONDUCTED BY THE BANK OF MEXICO The Bank of Mexico, with the objective of continuing to promote the sound development of the financial system and making the implementation of monetary policy more efficient, has considered it convenient to provide an alternative to credit institutions to comply with the obligation to maintain monetary regulation deposits at the Bank itself. To this end, the Bank of Mexico will conduct auctions of Limited Negotiability Monetary Regulation Bonds (BREMS L) which will be settled with resources from said deposits. For the above, the Bank of Mexico, based on articles 28, paragraphs sixth and seventh, of the Political Constitution of the United Mexican States, 7, fraction I, 8, 14, 24 and 28, of the Bank of Mexico Law, 9 of the Organic Law of National Financiera, 6 of the Organic Law of Federal Mortgage Society, 9 of the Organic Law of the National Savings Bank and Financial Services, 9 of the Organic Law of the National Bank of Foreign Trade, 10 of the Organic Law of the National Bank of Public Works and Services, 8 of the Organic Law of the National Bank of the Army, Air Force and Navy, 22 of the Law for the Transparency and Ordering of Financial Services, as well as 4, first paragraph, 8, paragraphs first, fourth and seventh, 10, first paragraph, 12, first paragraph, in relation to 19 Bis, fractions I and V, 19 Bis 1, fractions I and XI, as well as 14 Bis, first paragraph, in relation to 17, fraction I, of the Internal Regulations of the Bank of Mexico, which grant it the authority to issue provisions through the General Directorate of Central Banking Operations and the General Legal Directorate, respectively, as well as Second, fractions VI and X, of the Agreement on the Affiliation of the Administrative Units of the Bank of Mexico, has resolved to issue the following:

RULES FOR THE AUCTIONS OF LIMITED NEGOTIABILITY MONETARY REGULATION BONDS (BREMS L) CONDUCTED BY THE BANK OF MEXICO

CHAPTER I PRELIMINARY PROVISIONS Definitions Article 1.- For the purposes of these Rules, the following shall be understood, in singular or plural: Bank: the Bank of Mexico. BREMS L: the Limited Negotiability Monetary Regulation Bonds issued by the Bank. Single Account: the national currency deposit account that each Credit Institution maintains at the Bank, in terms of article 113 of Circular 3/2012, issued by the Bank.

Monday, June 9, 2014 OFFICIAL GAZETTE (First Section) DALÍ: the System for the Deposit, Administration and Settlement of Securities administered by INDEVAL. Banking Business Days: the days on which Credit Institutions are not obliged to close their doors or suspend operations, in terms of the general provisions issued for such effect by the National Banking and Securities Commission. Monetary Regulation Deposit: the deposit that Credit Institutions have constituted in accordance with what is provided in Circular 9/2014, published in the Official Gazette of the Federation on June 9, 2014. INDEVAL: S.D. INDEVAL Institution for the Deposit of Securities, S.A. de C.V. Development Banking Institutions: the National Bank of Foreign Trade, S.N.C., Development Banking Institution; the National Bank of the Army, Air Force and Navy, S.N.C., Development Banking Institution; the National Savings Bank and Financial Services, S.N.C., Development Banking Institution; Nacional Financiera, S.N.C., Development Banking Institution; the Federal Mortgage Society, S.N.C., Development Banking Institution, and the National Bank of Public Works and Services, S.N.C., Development Banking Institution. Multiple Banking Institutions: legal entities authorized to act with such status in terms of what is provided by the Law of Credit Institutions. Credit Institutions: the Multiple Banking Institutions and the Development Banking Institutions. SIAC-BANXICO: the System for Attention to Account Holders of the Bank. Auctions: the BREMS L auctions conducted by the Bank in terms of these Rules.

Bidders Article 2.- Only Credit Institutions that have constituted a Monetary Regulation Deposit at the Bank may submit bids in the Auctions in question. The Bank will not accept bids when, in its judgment, they fail to comply with applicable provisions.

Auction Calls Article 3.- The Bank will make the calls for the Auctions available to bidders starting at 11:30:00 hours on the last Banking Business Day of the week immediately preceding that in which the Auction in question will be held, through its internet website identified by the domain name: www.banxico.org.mx, from the SIAC-BANXICO or any other electronic, computing or telecommunications medium authorized for such effect by the Bank. In the calls referred to in the preceding paragraph, the Bank will disclose the necessary characteristics for the conduct of the Auctions.

CHAPTER II TYPES OF AUCTIONS Characteristics

(First Section) OFFICIAL GAZETTE Monday, June 9, 2014 Article 4.- The Auctions will be at a fixed price of $100.00 (ONE HUNDRED PESOS 00/100 M.N.), so all bids that result in an allocation will be attended to at said price.

CHAPTER III PRICE Article 5.- The references to price contained in these Rules correspond to clean price, that is, that which does not include accrued but unpaid interest, rounded to cents.

CHAPTER IV BIDS Type of Bid Article 6.- Bids must indicate the issuance key and the amount that the bidder is willing to receive in BREMS L. Amounts at nominal value must be expressed in thousands of pesos.

Bid Limits Article 7.- The bid submitted by each bidder, for each Auction, must not exceed the total amount of the Monetary Regulation Deposit that they have constituted at the Bank, truncated to thousands of pesos, nor the maximum amount announced by the Bank in the corresponding call.

Submission of Bids Article 8.- For the submission of bids, the following must be observed: I. Each bid must be submitted through the SIAC-BANXICO on the date, time, form, terms and conditions indicated in the respective calls and in the operation manual of the SIAC-BANXICO. II. Each bidder may submit only one bid in relation to the same Auction, which must refer exclusively to the BREMS L issuance indicated in the call in question. III. In the event that bids cannot be submitted through the SIAC-BANXICO, bidders may submit them, exceptionally and within the time established for the Auction, through any electronic, computing or telecommunications medium authorized for such effect by the Bank, in which case they must confirm them by written notice addressed to the National Operations Management of the Bank presented in a closed envelope no later than 17:00:00 hours on the same Banking Business Day of the Auction, which must adhere to the model attached to these Rules as Annex 1 and be accompanied by a cover letter. The documents mentioned in the preceding paragraph must be signed by the same representatives duly authorized by the bidder to submit the bids in question. Additionally, the letter must show the knowledge of signatures granted by the Bank, so said signatures must be previously registered at the Bank itself.

Effects of Bids

Monday, June 9, 2014 OFFICIAL GAZETTE (First Section) Article 9.- Bids submitted to the Bank will produce the broadest effects corresponding in law and will imply the bidder's acceptance of these Rules, as well as the terms and conditions established in the call in question. Every bid will be binding for the bidder who submits it and will be irrevocable. The Bank may cancel the request or bids received if they do not comply with these Rules or what is stated in the corresponding call; are not clearly legible; have erasures or corrections, or are incomplete or, in any way, incorrect.

CHAPTER V ALLOCATION Criteria for Allocation Article 10.- Bids will be attended to without exceeding the maximum amount indicated in the call. The amount of BREMS L that each bidder with an allocated bid must receive will be at closed nominal value to thousands of pesos. In the event that demand for BREMS L exceeds the amount offered in the Auction, bids will receive allocation pro rata of the requested amounts.

CHAPTER VI RESULTS Report on the Results of the Auctions Article 11.- The Bank will make the general results of the Auctions available to bidders through its aforementioned internet website or through any other electronic, computing or telecommunications medium authorized for such effect by the Bank, no later than thirty minutes after the deadline for the submission of bids. The information corresponding to the general results of an Auction will remain available to bidders through the mentioned medium, until the results of a new Auction are incorporated. The Bank will inform each bidder individually through the SIAC-BANXICO, no later than sixty minutes after the deadline for the submission of bids for the Auction in question, of the amount of BREMS L assigned to them.

CHAPTER VII SETTLEMENT OF THE AUCTIONS Reservation of Ownership Article 12.- The Bank, by virtue of what is provided by article 2312 of the Federal Civil Code, reserves ownership of the assigned BREMS L, until the Bank makes the charge, in the special deposit account where the bidder in question maintains their Monetary Regulation Deposit, for the amount necessary to settle the respective purchase-sale operation.

Settlement Article 13.- The Bank, for the settlement of the purchase-sale operations of BREMS L referred to in these Rules, will proceed as follows:

(First Section) OFFICIAL GAZETTE Monday, June 9, 2014 I. It will charge in the special deposit account of the Credit Institution in question, in which it maintains its Monetary Regulation Deposit, the amount equivalent to the total nominal value of the BREMS L assigned to it; II. It will credit in the Single Account of the respective Credit Institution, the equivalent amount of the accrued but unpaid interest corresponding to the amount of the Monetary Regulation Deposit used to settle the BREMS L assigned to it; III. It will charge in the Single Account of the Credit Institution in question, the amount equivalent to the accrued but unpaid interest corresponding to the total nominal value of the BREMS L to be delivered, from the date of its issuance or last interest payment until the settlement date of the Auction, calculated in terms provided by this article, and IV. It will deliver, through DALÍ, the BREMS L subject to the operation, in terms of what is established in the internal regulations of INDEVAL, on the date indicated in the corresponding call. To this end, on the day of settlement, the Bank will instruct INDEVAL to credit the total amount of BREMS L assigned to the Credit Institution in question, in the securities deposit account held by INDEVAL itself. For the purposes of what is provided in this article, before the closing of operations of DALÍ on the day of the settlement in question, Credit Institutions must take the necessary actions so that the Monetary Regulation Deposit they have constituted, in the special deposit account that the Bank holds for them, for the total nominal value of the BREMS L assigned to them, is free of encumbrances. The accrued but unpaid interest of the BREMS L subject to the operation, from the date of its issuance or last interest payment, as applicable, until the settlement date of the Auction referred to in the preceding fraction III, will be calculated according to the following formula: ri = At the one-day interbank interest rate that the Bank's Board of Governors has determined as the target rate for monetary policy purposes, expressed annually and in percent with rounding to two decimals, in effect on each of the days of the interest calculation period (each day “i”) according to the most recent monetary policy bulletin published by the Bank, through

Monday, June 9, 2014 OFFICIAL GAZETTE (First Section) its aforementioned internet website or through any other electronic, computing or telecommunications medium authorized for such effect by the Bank itself. In the latter case, the Bank will promptly inform the medium through which said rate will be disseminated. In the event that, for any reason, the publication of the monetary policy bulletin cannot be made, the target rate given in the monetary policy bulletin published on the date closest to the interest calculation period will be taken as reference for the interest calculation. In the event that this rate ceases to be made known permanently, the Bank will make known the rate that replaces it for the purposes of calculating the interest referred to in this Circular.

Non-Compliance Article 14.- In the event that a bidder, before the closing of DALÍ operations, does not have resources free of encumbrance in the special deposit account where the Bank holds their Monetary Regulation Deposit, for the amount equivalent to the total nominal value of the BREMS L assigned to them, the Bank may, without the need for a judicial declaration, rescind the sale for the missing amount. In addition to what is provided in the preceding paragraph, bidders must pay the Bank the amount resulting from applying one percent on the amount of the missing Monetary Regulation Deposit to settle the operation. For such purposes, the Bank will charge the corresponding amount in the Single Account of the Credit Institution in question, on the Banking Business Day immediately following the date on which the non-compliance occurred. Without prejudice to the above, the Bank may disqualify the bidder in question from participating in the Auctions.

CHAPTER VIII GENERAL PROVISIONS Publication of Auction Characteristics Article 15.- For market information, the Bank will make the characteristics of the Auctions known to the general public, through its aforementioned internet website or through any other electronic, computing or telecommunications medium authorized for such effect by the Bank. Time Zone Article 16.- The times mentioned in these Rules refer to the time zone of Mexico City. Force Majeure or Fortuitous Event Article 17.- In the event that, due to force majeure or fortuitous event, the Bank's internet website or the SIAC-BANXICO cannot be used to announce the calls, conduct the Auctions or inform the results thereof, the Bank will promptly communicate the procedure that will be followed for such purposes. Electronic Signature Article 18.- The access, identification and, if applicable, operation keys established for the use of the SIAC-BANXICO or any other electronic, computing or telecommunications medium, used for the purposes of these Rules, will substitute the autograph signature with an electronic one, so that documentary or technical records in which they appear will have full legal validity and produce the same effects that the laws grant to documents signed by the parties and, consequently, will have equal probative value. Payment of BREMS L Article 19.- Credit Institutions must authorize the Bank to instruct the credit in the securities deposit account held by INDEVAL for them, for the amount of BREMS L assigned to them. Likewise,

(First Section) OFFICIAL GAZETTE Monday, June 9, 2014 Credit Institutions must authorize the Bank to charge the amount of the Monetary Regulation Deposit corresponding to the settlement of the operation, in the special deposit account that the Bank holds for them. Additionally, Credit Institutions must authorize the Bank to make charges and credits in the Single Account held for them for the amount resulting in terms of what is provided by these Rules. For such purposes, Credit Institutions must grant a mandate in favor of the Bank, prepared in terms of the format included in Annex 2 of these Rules, a copy of which must be delivered to INDEVAL. The mandate to be delivered to the Bank must be signed by whoever has the authority to exercise acts of dominion in the name and representation of the Credit Institution, and be accompanied by certified and simple copies of the public instrument in which the granting of the aforementioned powers is recorded, as well as a simple copy of the official identification of the attorney(s). The documentation to be sent to the Bank in accordance with what is provided by this article must be delivered to the Bank's Operations Management Department with an advance of at least two Banking Business Days from the date on which they intend to begin participating in the Auctions.

Modifications to the Auctions Article 20.- The Bank may modify the dates, times and deadlines mentioned in these Rules in the event that circumstances occur that prevent the strict observance of the procedure and other acts related to the Auction in question. In such an event, the Bank will inform of the modifications through its internet website or through any other electronic, computing or telecommunications medium authorized for such effect by the Bank.

ANNEX 1 MODEL OF REQUEST TO PARTICIPATE IN THE AUCTION OF LIMITED NEGOTIABILITY MONETARY REGULATION BONDS (BREMS L) CONDUCTED BY THE BANK OF MEXICO BANK OF MEXICO NATIONAL OPERATIONS MANAGEMENT 5 de Mayo Avenue, No. 6 Col. Centro, C.P. 06059, Mexico, D.F. Present “Mexico, D.F., on _____ of ___________________ of _________ . Bidder Name: ___________________________________________________ Bidder Key at the Bank of Mexico: ____________ Key of the BREM L issuance for which bids are submitted: ___________________ (XLAAMMDD) Term in days of the BREM L issuance for which bids are submitted: __________ days

BID: Total Amount ____________________ thousands of pesos The Fixed Allocation Price is $100.00 (ONE HUNDRED PESOS 00/100 M.N.) The cited bid is binding and irrevocable; it will produce the broadest effects corresponding in law, and implies our acceptance of the “Rules for the Auctions of Limited Negotiability Monetary Regulation Bonds (BREMS L) Conducted by the Bank of Mexico” in force, as well as the terms and conditions of the call dated ______ of ______________________ of ______. Sincerely, (NAME OF BIDDER) (NAME AND SIGNATURE OF AUTHORIZED OFFICIALS)

ANNEX 2 MODEL OF MANDATE IN FAVOR OF THE BANK OF MEXICO TO MAKE CHARGES AND CREDITS IN THE ACCOUNTS HELD FOR CREDIT INSTITUTIONS, AND TO INSTRUCT CHARGES AND CREDITS IN THE ACCOUNTS HELD FOR THEM BY S.D. INDEVAL INSTITUTION FOR THE DEPOSIT OF SECURITIES, S.A. DE C.V. (LETTERHEAD OF THE CREDIT INSTITUTION)” “Mexico, D.F., on _____ of ___________________ of _________ . BANK OF MEXICO OPERATIONS MANAGEMENT DEPARTMENT 5 de Mayo Avenue, No. 6 Col. Centro, C.P. 06059, Mexico, D.F. Present (Full Name of the Credit Institution) hereby grants a special and irrevocable power to the Bank of Mexico to process on our behalf the credits in the securities deposit account held by S.D. Indeval Institution for the Deposit of Securities, S.A. de C.V., for the amount of Limited Negotiability Monetary Regulation Bonds (BREMS L), issued by the Bank of Mexico, that this credit institution must receive as a result of the Auctions conducted under the “Rules for the Auctions of Limited Negotiability Monetary Regulation Bonds (BREMS L) Conducted by the Bank of Mexico”. For such purposes, that Central Bank will send the aforementioned instructions to the aforementioned institution for the deposit of securities so that the respective records are made. Likewise, it is authorized and instructed irrevocably to that Central Bank to make charges and credits in the special deposit account where this credit institution maintains its monetary regulation deposit, as well as in the national currency account called Single Account, up to the amount corresponding to the settlement of the BREMS L received by (Full Name of the Credit Institution) as a result of the Auctions conducted in accordance with the aforementioned “Rules for the Auctions of Limited Negotiability Monetary Regulation Bonds (BREMS L) Conducted by the Bank of Mexico”. Finally, we make known to you that the authorizations and instructions referred to in the present document can only be modified or revoked by written communication addressed to that Central Bank and presented with an advance of, at least, one banking business day from the date on which the respective modification or revocation is intended to take effect. Sincerely, (NAME, POSITION AND SIGNATURE OF PERSON(S) WITH AUTHORITY TO EXERCISE ACTS OF DOMINION)” ccp: S.D. Indeval Institution for the Deposit of Securities, S.A. de C.V. For information. TRANSITORY

SOLE TRANSITORY PROVISION.- These Rules will enter into force on the Banking Business Day following their publication in the Official Gazette of the Federation. Mexico, D.F. on June 5, 2014.- The General Director of Central Banking Operations, Jaime José Cortina Morfín.- Rubric.- The General Legal Director, Luis Urrutia Corral.- Rubric.