Circular 5/2016 — Modifications to Circular 3/2012 (Demand Accounts in Dollars)

(Fourth Section) OFFICIAL GAZETTE Friday, March 11, 2016 BANCO DE MEXICO CIRCULAR 5/2016, addressed to Credit Institutions and the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development, regarding Modifications to Circular 3/2012 (Demand Accounts in Dollars). At the margin a logo, which says: Bank of Mexico. CIRCULAR 5/2016 TO CREDIT INSTITUTIONS AND THE NATIONAL FINANCIAL INSTITUTION FOR AGRICULTURAL, RURAL, FORESTRY AND FISHERIES DEVELOPMENT: SUBJECT: MODIFICATIONS TO CIRCULAR 3/2012 (DEMAND ACCOUNTS IN DOLLARS) The Bank of Mexico, with the purpose of continuing to promote the sound development of the financial system and the proper functioning of the payment systems, has determined to establish the obligation for credit institutions, that offer to legal entities demand deposit accounts in United States dollars with or without checkbooks payable in the Mexican Republic, to allow these clients to perform, at least, the deposit and withdrawal of dollars through a national electronic dollar payment system. Additionally, with the objective of establishing the mechanisms that allow managing liquidity in the dollar interbank payment system (SPID), the Bank of Mexico developed the functionality for participants in the cited system to maintain an account in the SIAC-BANXICO exclusive for the operation of the system. Likewise, it has determined the schedules, conditions, as well as the entry and exit of resources through exclusive accounts for this purpose that they have at correspondents in the United States of America. For the above, based on articles 28, paragraphs sixth and seventh, of the Political Constitution of the United Mexican States, 24 and 31, of the Bank of Mexico Law, 22 of the Law for Transparency and Ordering of Financial Services, as well as 4, first paragraph, 8, paragraphs fourth and seventh, 10, first paragraph, 12, first paragraph, in relation to 19 Bis 1, fraction XI, 14 Bis, first paragraph, in relation to 17, fraction I, 14 Bis 1, first paragraph, in relation to 25 Bis 1, fraction IV, and 20, fraction XI, 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, the General Directorate of Financial System Affairs and the Payment Systems Directorate, respectively, as well as Second, fractions I, VI, VIII and X, of the Agreement on the Attachment of the Administrative Units of the Bank of Mexico, has resolved to modify the index, the definition of “Receipt of Dollars” of article 2°, as well as articles 49, first paragraph, 115, third paragraph, 119, first paragraph, 120, last paragraph, 121, 125, first paragraph, 126, 127, 128, first paragraph, 129, 130 and Annex 5, add the definitions of “SPID Account”, “Account in Dollars for SPID Funding” and “SPID” to article 2°, a second paragraph to article 120, articles 48 Bis, 129 Bis and 130 Bis, of the “Provisions applicable to the operations of credit institutions and the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development”, contained in Circular 3/2012 of the Bank of Mexico, to remain in the terms following: PROVISIONS APPLICABLE TO THE OPERATIONS OF CREDIT INSTITUTIONS AND OF THE NATIONAL FINANCIAL INSTITUTION FOR AGRICULTURAL, RURAL, FORESTRY AND FISHERIES DEVELOPMENT INDEX … SECOND TITLE OPERATIONS WITH THE PUBLIC CHAPTER I PASSIVE OPERATIONS Section III Passive Operations in Foreign Currency Section A General Provisions for Deposits … “Article 48 Bis.- Additional characteristics of Demand Deposits in Dollars with or without checkbook”

Friday, March 11, 2016 OFFICIAL GAZETTE (Fourth Section) "Article 49.- Additional characteristics of Demand Deposits in Foreign Currency with checkbook" … THIRD TITLE OPERATIONS WITH THE BANK OF MEXICO CHAPTER I DEPOSITS AT THE BANK OF MEXICO “Section II In Dollars (Account in Dollars and Account in Dollars for SPID Funding)” … CHAPTER II OPERATIONS IN ACCOUNTS AT THE BANK OF MEXICO Section II Operations in Dollars … “Article 129 Bis.- Transfers between SIAC-BANXICO and SPID” … “Article 130 Bis.- Limit on the balance of the Account in Dollars and of the Account in Dollars for SPID Funding” … “Definitions Article 2o.- … … SPID Account: that which is denominated in Dollars that each Institution opens and maintains at the Bank of Mexico, in its capacity as administrator of the SPID, in terms of what is provided by the “Rules of the Dollar Interbank Payment System”, contained in Circular 4/2016 of the Bank of Mexico. Account in Dollars for SPID Funding: the deposit account in Dollars that Institutions acting as participants in the SPID must open and maintain at the Bank of Mexico to provide liquidity to the SPID Account. … Receipt of Dollars: the transaction by which the Bank of Mexico receives Dollars at foreign correspondents for credit to the Account in Dollars or to the Account in Dollars for SPID Funding, as applicable, of an Institution. … SPID: the dollar interbank payment system that allows the sending, processing and settlement of interbank transfer orders denominated in Dollars through electronic means between accounts of demand deposits in Dollars with or without checkbooks payable in the Mexican Republic corresponding to legal entities that have their domicile in national territory.

(Fourth Section) OFFICIAL GAZETTE Friday, March 11, 2016 …” “Additional characteristics of Demand Deposits in Dollars with or without checkbook Article 48 Bis.- Regarding Demand Deposits in Dollars with or without checkbook payable in the Mexican Republic that Institutions offer to account holders referred to in subsection b) of fraction I of article 46 of these Provisions, they must offer, at least, the deposit and withdrawal of Dollars through interbank electronic fund transfers through a national electronic dollar payment system whose internal rules are authorized by the Bank of Mexico, or, be administered by the Bank of Mexico in accordance with the Payment Systems Law.” “Additional characteristics of Demand Deposits in Foreign Currency with checkbook Article 49.- Regarding Demand Foreign Currency Deposits with checkbook, Institutions must adhere to the following: …” “Guaranteed overdrafts Article 115.- … … Regarding guarantees that are constituted with the deposits in the Account in Dollars referred to in fraction III of the first paragraph of this article, Institutions must request that, for such purposes, on the same value date, they be segregated in the deposit account for guarantees that the Bank of Mexico holds for them, through the SIAC-BANXICO during the hours of 08:30:00 to 16:30:00 or by any other electronic, computing or telecommunications means authorized for such purpose by the Central Bank itself or well, in requests they prepare in terms of Annex 5 of these Provisions duly signed by representatives of the Institution who have the authority to perform acts of dominion. …” “Account statements Article 119.- The Bank of Mexico will make available daily to Institutions through the electronic, computing or telecommunications means authorized for such purpose by the Central Bank itself, and given notice through the financial network the account statements of the Deposits referred to in this Section and in the following Section. …” “Applicable regime Article 120.- … In addition to the Account in Dollars referred to in the previous paragraph, each Institution that acts as a participant in the SPID must open and maintain at the Bank of Mexico an Account in Dollars for SPID Funding, which may be credited and debited as follows: I. Credits may be made through: a) Receipts of Dollars through electronic transfers, and b) Transfers received from the SPID. II. Debits may be made through: a) Transfers of Dollars ordered by the Institution itself, and

Friday, March 11, 2016 OFFICIAL GAZETTE (Fourth Section) b) Transfers that the Institution instructs in favor of its SPID Account. Overdrafts will not be accepted in the accounts referred to in this article.” “Interest Article 121.- The Bank of Mexico, except as provided in the following paragraph, will pay an interest rate of zero percent on the daily balance that Institutions maintain in the Account in Dollars and in the Account in Dollars for SPID Funding. The Bank of Mexico may at any time modify the interest rate provided in the previous paragraph, considering changes to the conditions of investments in international financial markets. In this case, the Bank of Mexico will inform Institutions of the modification to the rate with at least one Banking Business Day in advance of the date on which it will begin to apply the said rate. The Bank of Mexico will make at the start of operations of the SIAC-BANXICO on the first Banking Business Day of the immediate next month, the credit that, if applicable, corresponds in terms of this article in the Account in Dollars or in the Account in Dollars for SPID Funding of the Institution in question. Institutions may at all times consult through the SIAC-BANXICO the available balance of their Account in Dollars and of their Account in Dollars for SPID Funding.” “Request Article 125.- The operations that Institutions intend to perform against their Single Account, their Account in Dollars or their Account in Dollars for SPID Funding must be requested through the SIAC-BANXICO in the corresponding schedules, or through the means that the Bank of Mexico determines at the time for such effect. …” “Receipt of Dollars Article 126.- Institutions may request from the Bank of Mexico, on International Banking Business Days, the Receipt of Dollars with the same value date, through the SIAC-BANXICO in the following schedules: I. Regarding the Account in Dollars, from 07:45:00 to 14:30:00 hours, and II. Regarding the Account in Dollars for SPID Funding, from 07:45:00 to 13:30:00 hours. Institutions must instruct their correspondents to deposit the agreed Dollars, at the correspondents indicated by the Bank of Mexico, in accordance with the instructions that will be made known through the electronic, computing or telecommunications means authorized for such purpose by the Central Bank itself and given notice through the financial network. Once the Bank of Mexico has confirmation of having received the Dollars at the correspondent indicated in the previous paragraph and that said Dollars match those requested in terms of the first paragraph of this article, as well as that they meet the requirements established by the Bank of Mexico and that this makes known through the electronic, computing or telecommunications means authorized for such purpose by the Central Bank itself and given notice through the financial network, the Bank of Mexico will credit the amount of the operation to the Account in Dollars or to the Account in Dollars for SPID Funding of the Institution in question.” “Non-compliance with receipts Article 127.- When, as a result of a request for Receipt of Dollars: a) there is delay, error or omission in the information of the Institution or its financial agents, whose consequence is that the Dollars are not delivered, on the date and schedules established, in the accounts that correspondent banks hold at the Bank of Mexico, or b) that the information delivered to said correspondents, is not clear or complete, the Bank of Mexico will not make the corresponding credits in the Account in Dollars or in the Account in Dollars for SPID Funding that it holds for them, as applicable, and the request will be cancelled, without liability for the Bank of Mexico.

(Fourth Section) OFFICIAL GAZETTE Friday, March 11, 2016 In the event that what is established in subsection b) of the previous paragraph occurs, the Bank of Mexico will return, as soon as possible, the funds received to the original correspondent bank, without liability for the Bank of Mexico.” “Transfers Article 128.- Institutions, in cases of contingency and with prior authorization from the Bank of Mexico, may instruct with the same Banking Business Day value date the transfer of resources from their Account in Dollars to the Accounts in Dollars of other Institutions at the Bank of Mexico through the SIAC-BANXICO in the schedule of 08:00:00 to 13:30:00 hours. … Institutions may not instruct through the SIAC-BANXICO the transfer of resources from their Account in Dollars for SPID Funding to the Account in Dollars for SPID Funding of another Institution. Likewise, they may not instruct the transfer of resources from their Account in Dollars to the Account in Dollars for SPID Funding of their own Institution or of another Institution, nor from the latter to the former.” “Transfers Article 129.- Institutions may request from the Bank of Mexico, through the SIAC-BANXICO in the schedule of 08:00:00 and 14:30:00 hours corresponding to all International Banking Business Days, the sending of Dollars same value date, to the correspondents they have in foreign countries or to the correspondents that, for purposes exclusively of their operation with the SPID, they have in the United States of America, by debit in their Account in Dollars or in their Account in Dollars for SPID Funding as applicable. In the event that at the time of making the request for transfer of funds referred to in the previous paragraph, on any International Banking Business Day, there is insufficient balance in the Account in Dollars or in the Account in Dollars for SPID Funding, as applicable, to cover the operation, the Bank of Mexico will consider the request cancelled. The data of the accounts to make the Dollar transfers referred to in the first paragraph of this article must be given to the Operations Management Department of the Bank of Mexico, through written communication in accordance with what the Bank of Mexico establishes and makes known through the electronic, computing or telecommunications means authorized for such purpose by the Central Bank itself, and given notice through the financial network with at least three Banking Business Days in advance of the date on which they intend to request the transfer, indicating if it corresponds to the Account in Dollars or to the Account in Dollars for SPID Funding. In addition to what is provided in the previous paragraph, each Institution that acts as a participant in the SPID may make known to the Bank of Mexico an alternate account that, for purposes exclusively of its operation with the SPID, it maintains at a correspondent in the United States of America, which must be an entity distinct from that referred to in the previous paragraph.” “Transfers between SIAC-BANXICO and SPID Article 129 Bis.- The Institution that acts as a participant of the SPID may order transfers of resources between its Account in Dollars for SPID Funding and its SPID Account in the terms following: I. For the credit of resources to the Account in Dollars for SPID Funding from its SPID Account, the Institution must request a transfer order through the SPID in terms of the “Rules of the Dollar Interbank Payment System”, contained in Circular 4/2016 of the Bank of Mexico. Additionally, each Banking Business Day at 14:15:00 hours, the Bank of Mexico will credit to the Account in Dollars for SPID Funding of the Institution the total balance of its SPID Account, and II. For the debit to the Account in Dollars for SPID Funding and the respective credit to its SPID Account, the Institution must request a transfer order through the SIAC-BANXICO.

Friday, March 11, 2016 OFFICIAL GAZETTE (Fourth Section) Institutions may request the transfer orders referred to in this article only between 08:00:00 and 14:14:59 hours of each Banking Business Day and the transfers derived from said orders will have the same value date.” “Commissions Article 130.- The Bank of Mexico will charge each Institution a monthly commission, both for the Account in Dollars and for the Account in Dollars for SPID Funding, equivalent to the sum of the amounts following: I. Fixed cost amount.- It will correspond to the amount resulting from dividing the total fixed cost for account opening and management that has been generated at the Bank of Mexico's correspondents, between, as applicable: a) regarding the Account in Dollars, the number of Institutions, or b) regarding the Account in Dollars for SPID Funding, the number of participants in the SPID; II. Variable cost amount.- It will correspond to the amount resulting from the following: dividing the total amount of commissions that have been generated at the Bank of Mexico's correspondents by the receipts of funds and by the sending of transfer orders, between the number of requests for receipt and transfer ordered during the corresponding month, multiplied by the number of operations instructed and received by the Institution or the participant in the SPID in question, and III. Additional charges.- It will correspond to the costs that correspondents charge the Bank of Mexico for concepts other than those indicated in subsections I and II of this article. In this case, the Bank of Mexico will inform Institutions about the amount of said costs through the electronic means, computing or telecommunications authorized by the Bank of Mexico itself for such purpose and given notice through the financial network. The Bank of Mexico will make, during the first ten Banking Business Days of each month, the charge that corresponds in terms of the aforementioned numerals in the Account in Dollars or in the Account in Dollars for SPID Funding, as applicable. In the event that an Institution does not maintain in its Account in Dollars or in the Account in Dollars for SPID Funding, as applicable, the sufficient balance to cover the total amount of the commissions applicable to said Institution in accordance with this article, the Bank of Mexico will charge the entirety of said commissions to the Institution's Single Account on the date referred to in the previous paragraph, at the exchange rate published by the Bank of Mexico in the Official Gazette of the Federation on the Banking Business Day immediately prior to said date multiplied by the factor of 1.002. Without prejudice to the foregoing, the Bank of Mexico will charge each Institution participating in the SPID the amount resulting from multiplying the number of transfer and Receipt of Dollars operations instructed in the SIAC-BANXICO of each Institution by the tariffs per operation that the Bank of Mexico gives to participants in the SPID.” “Limit on the balance of the Account in Dollars and of the Account in Dollars for SPID Funding Article 130 Bis.- The Bank of Mexico may establish, a limit on the balance that each Institution may maintain in its Account in Dollars and in its Account in Dollars for SPID Funding. In the event that the Bank of Mexico determines the limits, the excess balance that Institutions maintain, at 14:30:00 hours of any Banking Business Day, in its Account in Dollars and in its Account in Dollars for SPID Funding, the Bank of Mexico may transfer it to the account that, the Institution itself maintains at a correspondent in a foreign country and that it has registered with the Bank of Mexico in terms of article 129 of these Provisions. For the purposes of the foregoing, the Bank of Mexico will make known the limits through the electronic means, computing or telecommunications authorized for such purpose by the Central Bank itself, and given notice through the financial network.

(Fourth Section) OFFICIAL GAZETTE Friday, March 11, 2016

Additionally, the Bank of Mexico may transfer, at any time, to the account that the institution in question maintains with a correspondent in the United States of America registered with the Bank of Mexico under Article 129 of these Provisions, for exclusive purposes of its operation with the SPID, the total or partial balance in its Dollar Account for SPID Funding.”

“ANNEX 5 Model for request for segregation of Dollars in the guarantee deposit account (INSTITUTION LETTERHEAD) Mexico City, ___ of _______, 20.

BANK OF MEXICO Operations Management Department Av. 5 de Mayo No. 6 Col. Centro, C.P. 06059, Mexico City Present.

By this means, I request the Bank of Mexico, on behalf of (Full name of the credit institution), to take the necessary actions from this date to segregate in the guarantee deposit account held by this Institution the amount of $______ (______ US dollars) in order to guarantee the overdrafts incurred in the Single Account.

Sincerely,

Name, signature and position of the official or officials of the Institution with authority to exercise acts of dominion 1

ccp: Direction of Support to Operations National Operations Department Subdepartment of Management of Operations with Account Holders

This communication may be directed to the email accounts indicated below: Email accounts. rcanojau@banxico.org.mx ncastro@banxico.org.mx jrgarcia@banxico.org.mx gtorresn@banxico.org.mx”

TRANSITORY PROVISIONS

FIRST. This Circular shall enter into force on the next Banking Business Day following its publication in the Official Gazette of the Federation.

SECOND. Institutions that on the date of entry into force of this Circular offer deposit accounts referred to in Article 48 Bis of these Provisions must obtain authorization to act as participants in a national electronic payment system in US dollars whose internal rules are authorized by the Bank of Mexico, or which are administered by the Bank of Mexico in accordance with the Law on Payment Systems, by April 1, 2016 at the latest. Those Institutions that do not have the aforementioned authorization are prohibited from opening new accounts referred to in the cited article. Likewise, the aforementioned Institutions that do not obtain the authorization to act as participants in a national electronic payment system in US dollars whose internal rules are authorized by the Bank of Mexico, or which are administered by the Bank of Mexico in accordance with the Law on Payment Systems, within a period of 12 months counted from the entry into force of this Circular, may not continue to maintain the aforementioned deposit accounts referred to in Article 48 Bis of these Provisions.

Mexico City, March 9, 2016.- The General Legal Director, Luis Urrutia Corral.- Rubric.- The General Director of Affairs of the Financial System, Jesús Alan Elizondo Flores.- Rubric.- The General Director of

1 A certified copy and simple copy of the deed in which the authority to exercise acts of dominion of the person who intends to sign this communication is recorded, as well as a simple copy of their official identification, must be sent at least two Banking Business Days in advance of the date on which this communication is intended to take effect to the Operations Management Department within the hours between 9:30 and 14:30.

Friday, March 11, 2016 OFFICIAL GAZETTE (Fourth Section) Central Banking Operations, Jaime José Cortina Morfín.- Rubric.- The Director of Payment Systems, Manuel Miguel Ángel Díaz Díaz.- Rubric.

For any queries regarding the content of this Circular, please contact the Department of Authorizations, Consultations and Legal Control, at the phones (55) 5237-2308, (55) 5237-2317 or (55) 5237-2000 Ext. 3200.