Circular 37/2010 — Amending Securities Lending Rules

CIRCULAR 37/2010 Mexico, D.F., November 22, 2010 TO CREDIT INSTITUTIONS; BROKERAGE HOUSES; INVESTMENT COMPANIES; SPECIALIZED INVESTMENT COMPANIES FOR RETIREMENT FUNDS, AND THE RURAL FINANCIAL COMPANY: SUBJECT: MODIFICATIONS TO THE RULES FOR SECURITIES LENDING

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 definitions of foreign securities, as well as to the qualification requirement for the aforementioned foreign securities that are the subject of securities lending operations.

For the above reason, 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, fraction II, and 81 of the Credit Institutions Law; 176 of the Securities Market Law; 15, second paragraph, of the Investment Companies Law; 48, fraction VI, of the Savings for Retirement Law; 19 and 49 of the Organic Law of the Rural Financial Company; 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, fraction VII, 14 Bis in relation to 17, fraction I, as well as 14 Bis 1, first paragraph in relation to 25 Bis 1, fraction IV, and 25 Bis 2, fraction 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 Affiliation of the Administrative Units of the Bank of Mexico, fractions III, VII, and XII, it has resolved to modify the definitions of “Securities” and “Foreign Securities” in numeral 1 and Annex 1, as well as to repeal numeral 10.6 and Annexes 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 Company must adhere in their securities lending operations”, to read as follows:

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

“1. DEFINITIONS ... Securities: any debt security with a secondary market, except subordinate obligations, other subordinate securities, and Structured Securities, that is registered in the RNV, that is not included in any of the other definitions of these Rules, and that has at least the minimum qualifications indicated in the Annex, from at least two rating agencies. ... Foreign Securities: debt securities with a secondary market, except subordinate obligations, other subordinate securities, and Structured Securities, 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, as well as debt securities listed in the SIC. Such securities must have at least the minimum qualifications indicated in the Annex, from at least two rating agencies, and be registered, authorized, or regulated for sale to the general public by the securities commissions or equivalent bodies of the Reference Countries. ... ”

10. PROHIBITIONS "10.6 Repealed."

3 "ANNEX 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)"

“ANNEX 2 REPEALED”

“ANNEX 3 REPEALED”

TRANSITORY SINGLE. This Circular shall enter into force on November 23, 2010.