Circular 21/2011 — Modifies Circular 2019/95

CIRCULAR 21/2011 Mexico, D.F., November 17, 2011. TO THE MULTIPLE BANKING INSTITUTIONS: SUBJECT: MODIFICATIONS TO CIRCULAR 2019/95

The Bank of Mexico considers it convenient to adapt the liquidation procedure and celebration of repo operations generated from auctions to provide liquidity to the banking system. Therefore, based on Article 28 of the Political Constitution of the United Mexican States, sixth and seventh paragraphs; Articles 7, fractions I and II, 14, 16, 24, and 26 of the Bank of Mexico Law; Articles 48 and 54 of the Credit Institutions Law; Article 22 of the Law for Transparency and Ordering of Financial Services; and Articles 4, first paragraph, 8, fourth and seventh paragraphs, 10, first paragraph, 14 Bis in relation with Article 17, fraction I, and Article 19, fraction VII of the Internal Regulations of the Bank of Mexico, which grant the authority to issue provisions through the General Legal Directorate and the Operations Directorate, respectively; as well as Article 2 of the Agreement on the Assignment of Administrative Units of the Bank of Mexico, fractions VII and XI, it has resolved to modify paragraphs 3, 1, 3, 5, 4, 2 and 7, and 7, 1, as well as add a new eighth paragraph to paragraph 5.4, shifting in order the current eighth paragraph, of Annex 5 of Circular 2019/95, to read as follows:

ANNEX 5 LIQUIDITY AUCTIONS CONDUCTED BY THE BANK OF MEXICO

3. SUBMISSION OF BIDS.

“3.1 . . . Both documents must be signed by the same representatives duly authorized by the bidder, and the letter must show the knowledge of signatures granted by the Bank of Mexico, so that said signatures must be previously registered in the Central Institute.”

5. FORMALIZATION OF ASSIGNMENTS.

“5.4 . . . The Bank of Mexico will formalize an independent repo operation for each type of Repo Object Title that it acquires as a Repo Lender. . . . On the maturity date of the repos, no later than 17:55 hours, the Bank of Mexico will charge in the Single Account it holds for the Reporting Institution the amount of the Price and the Premium corresponding. In the event that the Reporting Institution does not have sufficient resources in its Single Account to settle the repos in full, the Bank of Mexico will carry out new repo operations on behalf of the institution through SAGAPL, which will mature at the close of operations of the next banking day, and whose other characteristics will be the same as those of the previous repo operations. Likewise, the Bank of Mexico will charge in the Single Account of the Reporting Institution, at the opening of the next banking day following the date of celebration of the new repo operations, the amount resulting from multiplying the base amount by two times the Banked Funding Weighted Rate made known by the Bank of Mexico on the banking day on which the new repo operations were celebrated, dividing the obtained result by 360.

The base amount will be that resulting from subtracting the positive balance of the Single Account at close from the amount of the new operations. If the result is zero or negative, the charge provided herein will not apply. In the event that the balance in the Single Account at the close of operations is negative, the base amount will be the amount of the new repos. . . .”

“7. GENERAL PROVISIONS. To carry out the operations referred to in this Annex, institutions must enter into a contract with the Bank of Mexico, for which they must present to the Operations Instrumentation Management a certified and simple copy of the deed in which the following powers are stated: i) to exercise acts of dominion; ii) for the granting of mandates in favor of the Bank of Mexico in terms of the provisions issued by the Bank itself; and iii) expressly to designate those who will act as operators in the payment systems administered by the Bank of Mexico.

Additionally, they must present to said Management a simple copy of the official identification(s) of the person(s) who intend(s) to sign the referred contract, as well as an irrevocable mandate in favor of the Bank of Mexico in terms of Annex 19 of Circular 2019/95, signed by the person(s) with the powers referred to above.

. . .”

TRANSITORY SINGLE. This Circular will enter into force on November 18, 2011.