Circular 32/2020 — Modifies Circular 25/2020

134 OFFICIAL GAZETTE Thursday, August 27, 2020 BANK OF MEXICO CIRCULAR 32/2020 addressed to Multiple Banking and Development Banking Institutions regarding the modifications to the Rules applicable to Bank of Mexico financing guaranteed with qualified credit assets of the Banking Sector, for their channeling to micro, small, and medium-sized enterprises.

At the margin, a logo, which says: Bank of Mexico.- "2020, Year of Leona Vicario, Meritorious Mother of the Fatherland".

CIRCULAR 32/2020 TO MULTIPLE BANKING AND DEVELOPMENT BANKING INSTITUTIONS: SUBJECT: MODIFICATIONS TO THE RULES APPLICABLE TO BANK OF MEXICO FINANCING GUARANTEED WITH QUALIFIED CREDIT ASSETS OF THE BANKING SECTOR, FOR THEIR CHANNELING TO MICRO, SMALL, AND MEDIUM-SIZED ENTERPRISES.

The Bank of Mexico, considering the impacts that the COVID-19 pandemic has had on the global economy and on the behavior of our country's financial markets, as well as on credit granting channels, has deemed it necessary to make additional adjustments to the facility instrumented by this Central Institute to provide resources to banking institutions for the financing of micro, small, and medium-sized enterprises affected by the aforementioned pandemic, with the purpose of contributing to the existence of conditions that facilitate credit institutions in fulfilling their priority function of providing financing to the economy. As part of this, it is considered convenient to extend the aforementioned facility to those multiple banking institutions that have allocated part of their resources in financing mechanisms constituted with payment sources referred to to the federal participable revenue and that, in turn, can offer such financing as the object of guarantee for the operations that the Bank of Mexico could carry out under said facility, with the aim that the aforementioned institutions can obtain additional resources for the financing of the aforementioned enterprises. The modifications to the provisions regulating the operations subject to the present facility will be framed within the financing scenarios recognized by law, in accordance with the mandate and parameters that the Political Constitution of the United Mexican States imposes on the Central Bank, ensuring at all times that they fully comply with the objectives and financing limitations established in the Bank of Mexico Law. The facilities that, like this one, the Bank of Mexico has implemented in response to the prevailing economic and financial stress conditions have been designed with the purpose that the financial institutions that can access these facilities continue to fulfill their function as credit grantors to the people and companies of the country, without this extending to related parties of their respective corporate structures.

Therefore, based on articles 25, second paragraph, and 28, sixth and seventh paragraphs, of the Political Constitution of the United Mexican States; 7, fractions I, II, and X; 8; 14, first paragraph; 15; 16; 24; and 36, of the Bank of Mexico Law; 54 and 96 Bis, of the Credit Institutions Law; 22, of the Law for Transparency and Orderly Regulation of Financial Services; 4, first paragraph; 8, fourth and eighth paragraphs; 10; 14 Bis, in relation to 17, fraction I; 14 Bis 1, in relation to 25 Bis 1, fraction IV; 19 Bis 1, fraction XI; and 25 Bis, fraction VII, of the Internal Regulations of the Bank of Mexico, which grant the authority to issue provisions through the General Legal Directorate, the General Directorate of Financial System Affairs, the Operations Support Directorate, and the Financial System Information Directorate, respectively; as well as Second, fractions I, IV, VI, and X, of the Agreement on the Affiliation of the Administrative Units of the Bank of Mexico, it has resolved to modify section A, fractions I and II, subparagraphs a, i, and j, of Annex 1, as well as to add a fraction III and a subparagraph k to section A of Annex 1, of the "Rules applicable to Bank of Mexico financing guaranteed with qualified credit assets of the banking sector, for their channeling to micro, small, and medium-sized enterprises," issued by the Bank of Mexico through Circular 25/2020, to remain in the following terms:

RULES APPLICABLE TO BANK OF MEXICO FINANCING GUARANTEED WITH QUALIFIED CREDIT ASSETS OF THE BANKING SECTOR, FOR THEIR CHANNELING TO MICRO, SMALL, AND MEDIUM-SIZED ENTERPRISES

Thursday, August 27, 2020 OFFICIAL GAZETTE 135

"ANNEX 1 A. ... I. Credits granted by accredited Institutions to legal entities resident in Mexico, as well as public trusts, whether financial, distinct from the Institutions themselves, and non-financial, which are not Related Parties of the respective accredited Institution, and, in the case of credits granted to multiple banking institutions, these must have been concluded before April 21, 2020; II. Credits granted by accredited Institutions to natural and legal persons for the acquisition of real estate intended for housing, on which mortgages are constituted in first place to guarantee said credits during their validity, as well as for refinancing consisting of the granting of credits for the settlement of the same types of referred credits, and III. Credits granted to fiduciary institutions of irrevocable trusts that administer, as the payment source of said credits, duly constituted resources derived from the federal participable revenue referred to in the Fiscal Coordination Law.

For the effects indicated, the aforementioned credits must meet the following characteristics: a. The legal entities referred to in the previous fraction I, as well as the trusts indicated in fraction III, must meet the National Credit Quality Criterion according to the respective current ratings granted to them, or have issued stock debt titles that meet the National or Global Credit Quality Criterion, depending on the title in question. In the case of the referred titles, these must be in circulation on the date the Institution presented the request in accordance with numeral 2.1 of these Rules; b. to h. ... i. Each of the Eligible Assets affected as collateral must have, from the time it is contributed to the Guarantee Trust, a maturity term for its outstanding balance of at least two Banking Business Days subsequent to the conclusion of the financing operation in question; j. Regarding the credits indicated in this Annex, the Institution must affect as collateral, preferably in first place, those indicated in fraction I, and in second place, those indicated in fraction II. Regarding the credits indicated in the previous fraction II, these will be subject to a discount factor, for valuation purposes in accordance with numeral 3.7 of these Rules, no less than 51% of the respective appraisal value, and k. Regarding the credits indicated in the previous fraction III, these must be granted exclusively by multiple banking institutions that obtain the allocation of resources from the Bank of Mexico in accordance with these Rules.

Likewise, without prejudice to what is established in numeral 3.9 (Replacement Assets) of these Rules, the respective accredited Institution that contributes credits indicated in the previous fraction III to the Guarantee Trust constituted in accordance with these same Rules must contribute to said Guarantee Trust, in substitution of such credits, other Eligible Assets indicated only in the previous fractions I and II, which meet the characteristics established in these Rules, or Special Guarantee Values, for a value equivalent to the amount that, added to that of the other Eligible Assets contributed to the trust, allows covering the sum of the principal plus the estimated interest and other agreed expenses of the financing guaranteed by said Guarantee Trust, in the event that any of the following occurs: the terms and conditions under which the mechanism for which the trust was constituted has been instrumented are modified, including the terms and conditions applicable to said trust, and as a consequence thereof, the payment source is affected, or any of the parties that benefit from or intervene in the mechanism by which the referred trust was constituted initiates any legal procedure to suspend or extinguish the effects of said mechanism and its payment source."

136 OFFICIAL GAZETTE Thursday, August 27, 2020

TRANSITORY PROVISIONS SINGLE. This Circular will enter into force on the day of its publication in the Official Journal of the Federation. Mexico City, August 24, 2020.- BANK OF MEXICO: The General Legal Director, Luis Urrutia Corral.- Rubric.- The General Director of Financial System Affairs, José Luis Negrín Muñoz.- Rubric.- The Director of Operations Support, Joaquín Rodrigo Cano Jauregui Segura Millan.- Rubric.- The Director of Financial System Information, Juan Fernando Ávila Embriz.- Rubric. For any queries regarding the content of this Circular, the Bank of Mexico places itself at your disposal through the Central Bank Authorizations and Sanctions Directorate at telephone (55) 5237-2000 extension 3200.