Circular 33/2010 — Modifies the Repo Rules

CIRCULAR 33/2010 Mexico, D.F., November 10, 2010 TO CREDIT INSTITUTIONS; BROKERAGE HOUSES; INVESTMENT COMPANIES; SPECIALIZED INVESTMENT COMPANIES FOR RETIREMENT FUNDS, AND THE RURAL FINANCIAL INSTITUTION: SUBJECT: MODIFICATIONS TO THE REPO RULES

The Bank of Mexico, with the objective of continuing to promote the sound development of the financial system, considers it convenient to make modifications to the definition of foreign securities, as well as to the qualification requirement of the titles and of said foreign securities that are the subject of repo operations.

For the above, based on articles 28 of the Political Constitution of the United Mexican States, sixth and seventh paragraphs; 24 and 26 of the Bank of Mexico Law; 53 section II, 54 and 81 of the Credit Institutions Law; 176 of the Securities Market Law; 15 second paragraph of the Investment Companies Law; 48 section VI of the Savings for Retirement Systems Law; 19 and 49 of the Organic Law of the Rural Financial Institution; 22 of the Law for Transparency and Ordering of Financial Services, as well as 8th fourth and seventh paragraphs, 10, 12 in relation to 19 section VII, 14 Bis in relation to 17 section I, as well as 14 Bis 1 first paragraph in relation to 25 Bis 1 section IV and 25 Bis 2 section II, of the Internal Regulations of the Bank of Mexico, which grant it the authority to issue provisions through the General Directorate of Central Bank Operations, the General Legal Directorate, and the General Directorate of Financial System Affairs, respectively, as well as the Sole Agreement of the Adscription of the Administrative Units of the Bank of Mexico, sections III, VII and XII, has resolved to modify the definition of Foreign Securities in numeral 1 and numeral 2.1, as well as to repeal numeral 9.2 and Annexes 1, 2 and 3, all of them from the "Rules to which credit institutions; brokerage houses; investment companies; specialized investment companies for retirement funds, and the Rural Financial Institution must adhere in their repo operations", to remain as follows:

2 RULES TO WHICH CREDIT INSTITUTIONS; BROKERAGE HOUSES; INVESTMENT COMPANIES; SPECIALIZED INVESTMENT COMPANIES FOR RETIREMENT FUNDS, AND THE RURAL FINANCIAL INSTITUTION MUST ADHERE IN THEIR REPO OPERATIONS

1. DEFINITIONS

"... Foreign Securities: debt titles with a secondary market, except subordinate obligations, other subordinate titles and Structured Titles, that are issued, accepted, guaranteed or secured by international financial organizations, central banks and governments of Reference Countries other than Mexico and Foreign Financial Entities. Such titles must be registered, authorized or regulated, for sale to the general public, by the securities commissions or equivalent bodies of the Reference Countries. ..."

2. AUTHORIZED OPERATIONS AND COUNTERPARTIES

"2.1 Credit Institutions and Brokerage Houses may act as reported parties with any person. When acting as reported parties with other entities of the same financial group to which they belong, with Qualified Investors or with individuals regarding Titles or Foreign Securities, the securities subject to Repo, according to their term, must have a minimum rating of at least two rating agencies, as follows:

3 Standard & Poor’s Moody’s Fitch HR Ratings Short Term Local Mexico mxA-3 MX-3 F3 (mex) HR 3 Global A-3 3 F3 HR 3 (G) Long Term Local Mexico mxAA- Aa3.mx AA- (mex) HR AA- Global AA- Aa3 AA- HR AA- (G)

Titles that have a payment guarantee or guarantee from the Federal Mortgage Society, S.N.C., of at least 65% of their outstanding balance for principal and ordinary interest, may be the subject of Repos in which Credit Institutions and Brokerage Houses act as reported parties with other entities of the same financial group to which they belong, with Qualified Investors or with individuals, without being rated.

Additionally, Credit Institutions and Brokerage Houses may act as reporting parties exclusively with the Bank of Mexico, with other Credit Institutions and Brokerage Houses, as well as with Foreign Financial Entities.

Repo operations with Securities carried out by Credit Institutions may be effected without the intermediation of Brokerage Houses. Operations with Foreign Securities that are not registered in the National Securities Registry will be subject, in terms of intermediation, to the applicable provisions."

9. PROHIBITIONS

"9.2 Repealed."

"ANNEX 1 REPEALED"

4 "ANNEX 2 REPEALED"

"ANNEX 3 REPEALED"

TRANSITORY SINGLE. This Circular will enter into force on November 12, 2010.