Circular 2/2002 — Modifies Circular 115/2002

CIRCULAR 2/2002 Mexico City, D.F., December 26, 2002. TO BROKERAGE HOUSES: SUBJECT: REPO OPERATIONS.

The Bank of Mexico, based on articles 24 and 26 of its Law, as well as on articles 22, section IV, and 97 of the Securities Market Law, considering the request of the Association of Mexican Bankers, A.C., which expressed its interest in using instruments known as bank certificates to obtain financing for the mortgage market, as well as to facilitate the development of a secondary mortgage market, and requesting that said securities be subject to repo operations, has resolved, effective December 27, 2002, to modify section CB.2.1 of Circular 115/2002 of October 31 of the current year, to read as follows:

“CB.2 REPO OPERATIONS. CB.2.1 Brokerage houses may enter into repo operations on: a) Bank acceptances, time deposit certificates, bank promissory notes with yield liquidated at maturity, and commercial paper with bank guarantee, all of these issued for a term not exceeding one year; b) Bank bonds, certificates issued by credit institutions acting on their own behalf (bank certificates), ordinary participation certificates, and certificates issued by financial entities in their capacity as trustees (fiduciary certificates), the latter two with bank guarantee; c) Securities subject to international arbitrages; and d) Securities issued or guaranteed by the Federal Government, including BONOS UMS, PIC-FARAC, and CBIC-FARAC.

Repo operations on CETES, as well as on BONDES, will continue to be governed, insofar as not modified by this Circular, by the provisions of Circulares 10-79 and 10-99, as applicable, jointly issued by the Bank of Mexico and the National Banking and Securities Commission.

Only those brokerage houses that have authorization to conduct Future, Option, or Swap operations on real or nominal interest rates may carry out repo operations with the character of reported positions on: i) the securities and values referred to in subsections b) and d) above, denominated in national currency and UDIS with a fixed yield rate, whose maturity term is greater than 360 days; and ii) the securities and values referred to in subsections b) and d) above, denominated in national currency and UDIS with a rate periodically revisable, whose term, between the dates on which the revision takes place, is greater than 360 days.

Brokerage houses may under no circumstances carry out repo operations on securities different from or under conditions different from those expressly mentioned in section CB.2.”