Circular 4/2011 — Modifies Circular 2019/95

CIRCULAR 4/2011 Mexico, D.F., February 4, 2011. TO MULTIPLE BANKING INSTITUTIONS: SUBJECT: MODIFICATIONS TO CIRCULAR 2019/95

The Bank of Mexico, in order to promote the sound development of the financial system and to protect the interests of the public, considers it appropriate to add the Bank Funding Weighted Rate and the Government Funding Weighted Rate as reference rates for national currency passive operations conducted by these institutions, as well as to suppress the reference rates that are no longer used and to make certain clarifications to the applicable regulation.

For the above, based on Article 28 of the Political Constitution of the United Mexican States, sixth and seventh paragraphs; Articles 24 and 26 of the Bank of Mexico Law; Article 48 of the Credit Institutions Law; Articles 4 and 22 of the Law for Transparency and Ordering of Financial Services; Article 4, first paragraph, Articles 8, fourth and seventh paragraphs, Article 10, first paragraph, Article 14 Bis in relation with Article 17, fraction I, and Article 14 Bis 1, first paragraph, in relation with Article 25 Bis 1, fraction IV, all of the Internal Regulations of the Bank of Mexico, which grant it the authority to participate in the issuance of provisions through the General Legal Direction and the General Direction of Financial System Affairs, respectively, as well as Article 1 of the Agreement on the Assignment of Administrative Units of the Bank of Mexico, fractions III and XII,

It has resolved to add a fourth paragraph to section M.11.7 and to modify section M.11.82.2, both of Circular 2019/95, to read as follows:

M.1 PASSIVE OPERATIONS M.11. CHARACTERISTICS OF OPERATIONS IN NATIONAL CURRENCY

“M.11.7 PASSIVE OPERATIONS DENOMINATED IN INVESTMENT UNITS (UDIS) ... In the passive operations denominated in UDIS mentioned in the first paragraph of this section, institutions may use as a reference the yields on primary placement of Federal Government Development Bonds denominated in investment units (UDIBONOS). In this case, institutions must indicate the term to which the rate of the operations refers.”

M.11.8 GENERAL PROVISIONS M.11.82. YIELDS

“M.11.82.2 Reference Rates In the passive operations provided for in M.11., only the following may be used as reference: a) the Interbank Equilibrium Interest Rate (TIIE) provided for in Annex 1 of this Circular; b) the yields on primary placement of Certificates of the Treasury of the Federation denominated in national currency (CETES) and Federal Government Development Bonds denominated in national currency (BONDES); c) the Weighted Cost of Capture of liabilities denominated in national currency that the Bank of Mexico considers representative of the set of multiple banking institutions and that it publishes in the Official Gazette of the Federation (CCP); d) the Bank Funding Weighted Rate calculated and made known by the Bank of Mexico; and e) the Government Funding Weighted Rate calculated and made known by the Bank of Mexico.

Regarding the reference rates provided for in items a) and b) of the previous paragraph, the term of the TIIE, CETES, and BONDES, as applicable, to which the rate of the operations refers, must be indicated.

When a reference rate is agreed upon, one or more substitute reference rates must be agreed upon in the event that the originally agreed reference rate ceases to exist, and the order in which such substitute reference rates would replace the originally agreed rate, if necessary, must be established.

Once the reference that serves as the basis for determining the rate of the corresponding operation has been agreed upon, its modification will not be permitted; therefore, it will remain in effect for the entire duration of the instrument, except in those instruments where institutions reserve the right to modify the rate periodically, in accordance with applicable provisions.”

TRANSITIONAL PROVISION SINGLE. This Circular shall enter into force on February 14, 2011.