Circular 30/2008 — Monetary Regulation Deposits

"2008, Year of Physical Education and Sport"
CIRCULAR 30/2008
Mexico, D.F., July 9, 2008.
TO CREDIT INSTITUTIONS:
SUBJECT: MONETARY REGULATION DEPOSITS.

The Bank of Mexico, based on Articles 28 of the Political Constitution of the United Mexican States, sixth and seventh paragraphs; 14, 24, and 28 of the Bank of Mexico Law; 22 of the Law for Transparency and Order of Financial Services; 8th paragraphs third and sixth, 10, 12 in relation to 19 sections I and IX, 17 section I, which provide for the powers of the Bank of Mexico through the General Directorate of Central Bank Operations to negotiate and formalize, among others, operations with national currency and participate in the issuance of provisions, as well as the Directorate of Central Bank Provisions to issue provisions, respectively, all of the Internal Regulations of the Bank of Mexico, Single Agreement on the Affiliation of the Administrative Units of the Bank of Mexico, sections I and IV, and with the object of regulating liquidity surpluses in the money market as well as ensuring that the distribution of monetary regulation deposits reflects the new conditions of the banking system, has resolved to issue the following provisions:

1. PROCEDURE FOR THE TERMINATION OF CURRENT MONETARY REGULATION DEPOSITS

The Bank of Mexico will terminate the monetary regulation deposits that credit institutions have established in accordance with the provisions of Circulars-Telefax 30/2002 of August 29, 2002, 10/2003 of March 28, 2003, 21/2004 of November 19, 2004, and 22/2005 of November 25, 2005. The aggregate balance of the principal of the aforementioned deposits currently amounts to $278,981,126,756.00 (TWO HUNDRED SEVENTY-EIGHT BILLION NINE HUNDRED EIGHTY-ONE MILLION ONE HUNDRED TWENTY-SIX THOUSION SEVEN HUNDRED FIFTY-SIX PESOS 00/100 M.N.).

To this effect, on August 21 and 28, as well as September 4 and 11, 2008, at the opening of operations of the Bank of Mexico Account Holder Service System (SIAC-BANXICO), the Bank of Mexico will make the necessary credits to the Single Account held for each credit institution, up to the amount of $69,745,281,689.00 (SIXTY-NINE BILLION, SEVEN HUNDRED FORTY-FIVE MILLION TWO HUNDRED EIGHTY-ONE THOUSION SIX HUNDRED EIGHTY-NINE PESOS 00/100 M.N.) each day; considering the portion of the aforementioned deposits corresponding to each credit institution with respect to the aggregate principal amount. On the same dates, the amount for interest accrued on the deposits maintained during the last interest period will also be credited, which will be counted from August 21, 2008, up to each of the aforementioned dates.

The interest accrued during this last period will be calculated by applying the rate resulting from the formula specified in the aforementioned Circulars-Telefax, using the weighted interbank funding rate that the Bank of Mexico obtains each banking business day, from the beginning of said interest period and up to the business day immediately preceding the payment dates mentioned in the previous paragraph.

Consequently, the deposits that are terminated: a) on August 28 will accrue interest for seven days, b) on September 4 will accrue interest for fourteen days, and c) on September 11 will accrue interest for twenty-one days.

2. PROCEDURE FOR THE ESTABLISHMENT OF MONETARY REGULATION DEPOSITS

Credit institutions are obligated to establish monetary regulation deposits for a total amount of $280,000,000,000.00 (TWO HUNDRED EIGHTY BILLION PESOS 00/100 M.N.). Of this sum, $70,000,000,000.00 (SEVENTY BILLION PESOS 00/100 M.N.) must be deposited weekly on August 21 and 28, as well as September 4 and 11, 2008.

The deposits that each credit institution must make will have the following characteristics:

2.1 Amount

The amount that each institution must deposit on the aforementioned dates will be the result obtained by distributing the indicated amounts pro rata based on the capture of resources in national currency and Investment Units (UDI's) of the credit institutions as of May 31, 2008. For this purpose, resource capture shall be understood as the sum of traditional capture, plus interbank and other organism loans, outstanding subordinate obligations, and creditor balances in repo operations, from the sub-report "R10 A 1011 Reclassifications in the Balance Sheet" (column: Bank Financial Statement without Consolidation) of the National Banking and Securities Commission, whose information was registered as of July 8, 2008, according to a query made by the Bank of Mexico itself on that same day in the Commission's systems.

The Bank of Mexico will inform each credit institution in writing of the amount corresponding to it as a result of the proration, which will be sent electronically no later than July 11 of the current year. Each credit institution must collect the original copy corresponding to it no later than July 15 of the same year, at the Financial System Information Directorate of the Bank of Mexico located at Avenida Cinco de Mayo Number 1, second floor, Guardiola building, Centro Neighborhood, Mexico City, D.F., Postal Code 06059, telephone number 5237.25.40.

2.2 Term

The deposits established under this Circular will have an indefinite duration. The Bank of Mexico will inform in advance of the date and procedure for the withdrawal of the balance of said deposits.

2.3 Yields

The deposits will accrue interest at the rate resulting from applying the formula referred to in this section and for the interest periods specified in each case.

Interest on the deposits will begin to accrue from August 21, 2008. Regarding the first interest period, for deposits established: a) on August 21, interest will be paid for twenty-eight days, b) on August 28 for twenty-one days, for those established on September 4 for fourteen days, and for those established on September 11 for seven days. Interest will be paid to these institutions by credit to the Single Account held by the Bank of Mexico on September 18, 2008.

The following interest periods will be 28 days. In case of non-banking business days, the aforementioned term will be adjusted to the nearest preceding or succeeding banking business day, giving preference in case of equality to the preceding one.

For each interest period, the rate resulting from the following formula will be applied, expressed in percent with rounding to two decimal places:

(1 + (r/360))^N - 1 = (Product from i=1 to N of (1 + i/360))^(1/N) - 1

Where:
N = Number of natural days elapsed between the date of establishment of the deposit or the last interest payment and the payment date of the interest period. i = Each of the days from the date of establishment of the deposit or the last interest payment and up to the day immediately preceding the payment date of the interest period, taking values from 1 to N.
Product from i=1 to N = Operator meaning to perform the multiplication of the factors between parentheses. r = Annual interest rate, expressed in percent with rounding to two decimal places, at which credit institutions and brokerage houses carry out operations of purchase, sale, and repo for a term of one banking business day with bank securities, known in the market as "Weighted Interbank Funding Rate," calculated and made known on day i by the Bank of Mexico, through its electronic page www.banxico.org.mx, in terms of the publication in the Official Gazette of the Federation dated July 31, 2000, or through any other authorized electronic, computing, or telecommunications medium for this purpose by the Bank of Mexico itself. In the latter case, the medium through which said rate will be disseminated will be informed in due course.

In case of a non-banking business day, the rate made known on the immediately preceding banking business day will be used.

In the event that this rate cannot be determined or ceases to be made known, the Bank of Mexico will request in writing from two "brokerage houses" selected by the Money Market Committee of the Association of Mexican Banks, A.C. (ABM), the average of the purchase, sale, and repo operations for a term of one day with bank securities. The Bank of Mexico will calculate the average of the two rates obtained for its determination and will make the result known in the form and medium mentioned, as a substitute rate for the aforementioned one.

Interest will be calculated by multiplying the daily average balance of the deposit in each interest period by the rate resulting in accordance with this section, divided by three hundred sixty, and multiplying the obtained result by the number of days effectively elapsed during the interest period in question.

Such interest will be credited to the Single Account in national currency that the Bank of Mexico holds for credit institutions.

3. GENERAL PROVISIONS

The Bank of Mexico will make the necessary charges and credits to the Single Account held for those credit institutions, for the cancellation and establishment of the monetary regulation deposits provided for in this Circular, up to the net amount corresponding to each one in terms of the writing referred to in section 2.1. The charges and credits will be made at the opening of operations of SIAC-BANXICO, on the dates indicated in sections 1 and 2.

TRANSITORY
SINGLE. This Circular will enter into force on July 10, 2008.

From that date, Circulars-Telefax 30/2002 of August 29, 2002; 10/2003 of March 28, 2003; 21/2004 of November 19, 2004, and 22/2005 of November 25, 2005 are repealed. The monetary regulation deposits established under the authority of said Circulars-Telefax will be settled in accordance with the provisions of section 1 of this Circular.