Circular 33/2020 — Modifies Circular 20/2020

Friday, September 11, 2020 OFFICIAL GAZETTE BANK OF MEXICO CIRCULAR 33/2020 addressed to Multiple Banking and Development Banking Institutions, regarding modifications to the Rules applicable to the provision of resources to credit institutions to channel credit to micro, small, and medium-sized enterprises, as well as to natural persons.

At the margin, a logo that says: Bank of Mexico.- "2020, Year of Leona Vicario, Meritorious Mother of the Fatherland". CIRCULAR 33/2020 TO MULTIPLE BANKING AND DEVELOPMENT BANKING INSTITUTIONS: SUBJECT: MODIFICATIONS TO THE RULES APPLICABLE TO THE PROVISION OF RESOURCES TO CREDIT INSTITUTIONS TO CHANNEL CREDIT TO MICRO, SMALL, AND MEDIUM-SIZED ENTERPRISES, AS WELL AS TO NATURAL PERSONS.

The Bank of Mexico has considered it convenient to make adjustments to the operations that can be carried out with credit institutions, as part of the facility to provide resources to said institutions for the financing of micro, small, and medium-sized enterprises, as well as natural persons, which has been implemented considering the effects that the COVID-19 pandemic has had on the global economy and on the behavior of the financial markets in our country, as well as on the channels of granting credit, with the purpose of contributing to the existence of conditions that facilitate credit institutions to fulfill their priority function of providing financing to the economy. In particular, this Central Institute, considering market practices and the conditions of economic and financial stress that persist, has decided to adjust the conditions foreseen for repo operations that credit institutions enter into in accordance with the referred facility, specifically regarding the methodology for calculating the obligations on their part for the concept of the premium corresponding to them, which must be covered with titles that guarantee said obligations, in order to facilitate a more efficient provision of resources to said banking institutions so that they can continue with the granting of credit to the referred enterprises and persons. The modifications to 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 financing objectives and limitations established in the Bank of Mexico Law.

For the above, based on articles 25, second paragraph, 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, 28 and 36 of the Bank of Mexico Law, 54 and 96 Bis of the Credit Institutions Law, 22 of the Law for Transparency and Ordering of Financial Services, 4, first paragraph, 8, fourth and eighth paragraphs, 10, 12 Bis, first paragraph, in relation to 20 Ter, fraction II, and 20 Quáter, fractions II and IV, 14 Bis, first paragraph, in relation to 17, fraction I, 14 Bis 1, first paragraph, in relation to 25 Bis 1, fraction IV, 19 Bis 1, fraction XI, and 25, fraction VII, of the Internal Regulations of the Bank of Mexico, which grant the authority to issue provisions through the General Directorate of Payment Systems and Market Infrastructures, the Directorate of Financial Stability, the General Legal Directorate, the General Directorate of Affairs of the Financial System and the Directorate of Support for Operations respectively, as well as Second, fractions I, IV, VI, X and XVII, of the Agreement on the Assignment of Administrative Units of the Bank of Mexico, has resolved the following:

Paragraphs first, second, third and fourth of section "Valuation of the titles subject to the repo" of numeral 2.3 of the "Rules applicable to the provision of resources to credit institutions to channel credit to micro, small, and medium-sized enterprises, as well as to natural persons", issued by the Bank of Mexico through Circular 20/2020, are modified, to remain as follows:

OFFICIAL GAZETTE Friday, September 11, 2020 RULES APPLICABLE TO THE PROVISION OF RESOURCES TO CREDIT INSTITUTIONS TO CHANNEL CREDIT TO MICRO, SMALL, AND MEDIUM-SIZED ENTERPRISES, AS WELL AS TO NATURAL PERSONS

"2.3 Repo operations. ... Valuation of the titles subject to the repo. The reporting institution must deliver to the Bank of Mexico, by virtue of the repo in question, titles whose adjusted valuation by the discount factors must be equal to or greater, each Banking Business Day during the term of the repo, to the Price of the repo plus the Estimated Premium for the repo operation and any other agreed expenses. For these purposes, the value of the titles will be determined in accordance with the prices and the corresponding discount factors that the Bank of Mexico makes known to the Institutions, through the internet portal located at the address: << http://webdgobc >>.

For the scenario provided in the previous paragraph, the Estimated Premium will be calculated as follows, on each Banking Business Day that passes during the term of the repo in question, from and including the day of its perfection until, but excluding, the day of its settlement: The Estimated Premium corresponding to each Banking Business Day on which the respective calculation is carried out will be that resulting from applying the formula indicated above in the present numeral 2.3, according to the following: (a) the number of days to be used in said calculation will be equal to the sum of all those that pass from the day on which the repo is perfected until the other day on which the term of ninety days counted from the Banking Business Day referred to in which the calculation of the Estimated Premium is carried out expires, or, if the term comprised between the Banking Business Day on which the referred calculation is carried out and the day on which the repo must be settled is less than ninety days, only the days up to the one corresponding to said settlement will be added, and (b) as Interest Rate, the target rate for monetary policy purposes that is made known on the internet electronic page of the Bank of Mexico and is in effect on each of the days comprised from the date of perfection until the Banking Business Day on which the calculation of the Estimated Premium is carried out will be taken, assuming, for the purposes of this calculation, that said rate will remain constant during the remaining term of the period for the calculation of the Estimated Premium of the repo provided in subsection (a) above. Additionally, in the event that, during the term in which the calculation of the Estimated Premium is carried out in accordance with this paragraph, the referred target interest rate is modified by decision of the Board of Directors of the Bank of Mexico, the current value of said rate will be taken as the applicable one for each of the days that pass from the day on which it takes effect until the date of the term of the calculation of the Estimated Premium indicated in subsection (a) above. Without prejudice to the foregoing, the Premium that the reporting institution must pay to the Bank of Mexico will be that resulting from the calculation carried out, at the expiration of the repo term, in accordance with what is indicated in the heading "Premium" of the present numeral.

The value of the titles subject to the repo will be determined on each Banking Business Day, until such time as the repo is settled, in accordance with the valuation carried out by the Bank of Mexico and, derived from said determination, the following will be proceeded with: ... "TRANSITORY PROVISIONS FIRST. The modifications to these Rules will enter into force on the day of their publication in the Official Gazette of the Federation. SECOND. Institutions that, on the date of entry into force of this Circular, have requested to carry out repo operations in accordance with the Rules modified by this Circular or have entered into any of said repos that remain in effect, may subject said repo to the terms and conditions established in this same Circular.

Friday, September 11, 2020 OFFICIAL GAZETTE Mexico City, September 7, 2020.- The General Director of Payment Systems and Market Infrastructures, Manuel Miguel Ángel Díaz Díaz.- Signature.- The General Legal Director, Luis Urrutia Corral.- Signature.- The General Director of Affairs of the Financial System, José Luis Negrín Muñoz.- Signature.- The Director of Support for Operations, Joaquín Rodrigo Cano Jauregui Segura Millan.- Signature.- The Director of Financial Stability, Jorge Luis García Ramírez.- Signature.

For any inquiries regarding the content of this Circular, the Bank of Mexico is at your disposal through the Directorate of Authorizations and Sanctions of Central Banking at telephone (55) 5237-2000 extension 3200.