Circular 9/2019 — Modifies Circular 3/2012

Thursday, June 13, 2019 OFFICIAL GAZETTE 1 BANCO DE MEXICO CIRCULAR 9/2019 addressed to Credit Institutions, Regulated Multiple-Object Financial Societies that maintain equity links with credit institutions, as well as to the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development, regarding Modifications to Circular 3/2012 (repo operations with BREMS for overdrafts in the single account and risk mitigation in financing operations).

At the margin, a logo that says: Bank of Mexico.- “2019, Year of the Southern Leader, Emiliano Zapata”.

CIRCULAR 9/2019 TO CREDIT INSTITUTIONS, REGULATED MULTIPLE-OBJECT FINANCIAL SOCIETIES THAT MAINTAIN EQUITY LINKS WITH CREDIT INSTITUTIONS, AS WELL AS TO THE NATIONAL FINANCIAL INSTITUTION FOR AGRICULTURAL, RURAL, FORESTRY AND FISHERIES DEVELOPMENT: SUBJECT: MODIFICATIONS TO CIRCULAR 3/2012 (REPO OPERATIONS WITH BREMS FOR OVERDRAFTS IN THE SINGLE ACCOUNT AND RISK MITIGATION IN FINANCING OPERATIONS)

The Bank of Mexico, with the objective of continuing to promote the sound development of the financial system and establishing operational mechanisms between the Bank of Mexico and regulated entities in order to make the implementation of monetary policy more efficient, for which reason this Circular was not submitted to the public consultation procedure established in the “Policies for Public Consultation of General Provisions issued by the Bank of Mexico” issued on March 7, 2018, has resolved: a) That credit institutions holding Reportable Monetary Regulation Bonds (BREMS) issued by the Bank of Mexico may use these instruments to guarantee overdrafts in their single account, for which it has resolved to allow said institutions to enter into repo operations with said titles to constitute special deposits that can be used for the aforementioned purposes. b) To adapt the risk management scheme of financings related to the determination of the interbank equilibrium interest rate (TIIE) and liquidity auctions in open market operations, in order to complement the application of discount factors with the daily market-price update of the value of the financial assets backing said operations, and, if applicable, the constitution of special guarantees to cover at all times the amount of financing granted. This scheme will allow, in addition to better risk control in accordance with international best practices, a more efficient use of assets in the financial system.

Likewise, Article 19 of the aforementioned Circular 3/2012 is modified, in order to maintain the regulatory assumptions regarding debit cards in matters of foreign currency charges and protection of said cards, provided for in Circulars 8/2018 and 14/2018 issued by the Bank of Mexico.

For the above, based on Articles 28, paragraphs sixth and seventh, of the Political Constitution of the United Mexican States, 24 and 26, of the Bank of Mexico Law, 48 of the Credit Institutions Law, 87-D, paragraph fourth, of the General Law of Credit Auxiliary Organizations and Activities, 22 of the Law for Transparency and Ordering of Financial Services, 4, paragraph first, 8, paragraphs fourth and seventh, 10, paragraph first, 17, fraction I, 19 Bis 1, fraction XI, 20, fraction XI, 20 Bis, fraction IV, and 25 Bis 1, fraction IV, of the Internal Regulations of the Bank of Mexico, which grant it the authority to issue provisions through the Directorate of Central Banking Provisions, the Directorate of Support for Operations, the Directorate of Payment Systems, the Directorate of Risk Management and the Directorate of Regulation and Supervision, respectively, as well as second, fractions I, II, VI and X, of the Agreement on the Assignment of Administrative Units of the Bank of Mexico, has resolved to modify

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the first and second paragraphs of Article 176, fraction VI and its sub-paragraphs b) and d), fraction V and the second, third and fourth paragraphs of Article 188, the second paragraph of fraction IV and the third paragraph of Article 189, the first, second and third paragraphs of Article 192 and Annexes 5 and 10, add a fraction IV to Article 115, Articles 115 bis, 115 bis 1, 115 bis 2, 115 bis 3, 115 bis 4, 115 bis 5, a fraction VII and a second, third, fourth and fifth paragraph to Article 154, a fraction VII to Article 155, a fraction VII and a fifth paragraph to Article 188, a fraction VII to Article 189, a fourth paragraph to Article 192, a Chapter VIII to Title Three “Operations with the Bank of Mexico” and Annexes 5 Bis, 5 Bis 1, 5 Bis 2, 12 Bis, 12 Bis 1, 12 Bis 2, 12 Bis 3, 12 Bis 4 and 12 Bis 5, as well as repeal the second paragraph of Article 115, fraction II of Article 162 and fraction II of Article 176 of the “Provisions applicable to the operations of credit institutions, regulated multiple-object financial societies that maintain equity links with credit institutions and the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development”, contained in Circular 3/2012, to remain in the following terms:

PROVISIONS APPLICABLE TO THE OPERATIONS OF CREDIT INSTITUTIONS, REGULATED MULTIPLE-OBJECT FINANCIAL SOCIETIES THAT MAINTAIN EQUITY LINKS WITH CREDIT INSTITUTIONS AND THE NATIONAL FINANCIAL INSTITUTION FOR AGRICULTURAL, RURAL, FORESTRY AND FISHERIES DEVELOPMENT

“Article 19.- The Institution that administers a Checking Deposit Account must allow the respective Cardholder to use the corresponding debit Card to: I. Withdraw cash amounts in: a) the Institution’s branches, b) automated teller machines enabled for this purpose and to process the card in question, c) banking commissionaires available in accordance with agreements entered into for this purpose with the Institution itself or, if applicable, with other institutions or d) payment receiver establishments that provide said service, affiliated to the respective networks through the Institutions or other entities participating in said networks that provide them with the service of receiving and processing payments with cards, and II. Make payments of any kind, such as for acquisitions of goods or services, loan amortizations or tax payments, among others.

The operations referred to in the aforementioned fractions must be carried out through: i) a clearing chamber for card operations with whom the Institution has entered into a contract for this purpose, or ii) the Institution’s own infrastructure, in the case of those operations where the debit Card issuing Institution belongs to the same financial group or consortium as the Institution or entity providing card acceptance services to the payment receiver made with said card.

For the purposes of what is stated in the previous paragraph, consortium shall be understood as indicated in Article 22 Bis, fraction I, of the Credit Institutions Law.

Institutions must deliver to account holders all deactivated debit Cards and, for their activation, the latter must expressly request it through the mechanisms that the Institutions make available for this purpose, either in one of their branches or through a commissionaire, by comparing the autograph signature of the account holder himself with respect to any identification indicated in the General Provisions referred to in Article 115 of the Credit Institutions Law or through the in-person authentication schemes used by the Institution in question, such as biometric elements, through the use of automated teller machines, point of sale terminals, by telephone, remote authentication schemes used by the Institution itself, or through other secure electronic channels.”

Debit Cards may be for exclusive use in national territory, or for use in national and foreign territory.

Charges for payments or cash withdrawals made in foreign currency with the debit Card must be recorded in the respective Deposit Account, invariably, in national currency.

The charge that the debit Card issuing Institution makes in accordance with what is provided in the previous paragraph must be equivalent to the amount resulting from the corresponding foreign exchange operation to convert to national currency the amount of the respective payment or cash withdrawal made with the debit Card. In this case, to carry out the aforementioned foreign exchange operation, in the case of amounts denominated in Dollars, the amount in pesos that the issuing Institution may charge to the Deposit Account may not exceed the product of the multiplication of the following factors: a) the amount of the payment or disposition in said foreign currency, and b) the result of multiplying by 1.005 the applicable exchange rate.

For the purposes of the assumption indicated in the previous paragraph, the applicable exchange rate will be that determined by the Bank of Mexico, in accordance with Title Three, Chapter V, of these Provisions, which it makes known on the same day it determines it, through its internet page, as the “FIX exchange rate” which, in turn, is published in the Official Gazette of the Federation on the next Banking Business Day, and which corresponds to the last available on said internet page at the moment when the issuing Institution: i) has authorized the respective payment or disposition, or ii) must carry out the settlement of the amounts corresponding to said charge in accordance with the agreements entered into for this purpose with the acquirer, the clearing chamber or the payment receiver, as the case may be, in the case of operations where the Cardholder authorizes, preliminarily, an initial charge and subsequently, a final charge for the same operation that implies the update of the previously authorized preliminary amount.

In the event that the payment or cash withdrawal with the debit Card is made in any foreign currency other than the Dollar, the charge that the issuing Institution makes in national currency in the respective Deposit Account may not exceed the amount resulting from the following calculation: in the first place, the equivalent of the amount of the payment or withdrawal in the respective foreign currency to Dollars will be calculated in accordance with the last exchange rate available at the time that corresponds in accordance with what is provided in sub-paragraphs i) or ii) of the previous paragraph, which has been made known by any price provider authorized to organize and operate with such character by the National Banking and Securities Commission in accordance with what is provided for this purpose by the Securities Market Law, as it has been published on the respective internet page of said provider, and in the second place, the amount equivalent to pesos of said amount in Dollars will be calculated, in accordance with what is indicated in the previous paragraph.

In the event that the price provider contracted by the Institution in question does not make known the applicable exchange rate for the foreign currency in which a payment or cash withdrawal with a debit Card is made, said Institution may use the market exchange rate made known by any company that does not have the character of a related person, in terms of Article 73, fractions I, V and VII, of the Credit Institutions Law. In this case, the Institution must keep a record of the source from which it obtained the exchange rate referred to in this paragraph.

Institutions may request authorization from the Bank of Mexico, through the Central Banking Authorizations and Consultations Management, through computer systems or by any other means, including electronic ones determined for this purpose by the Bank of Mexico itself, to carry out the foreign exchange operation referred to in this article by applying: a) the corresponding exchange rate at a time different from those provided for in sub-paragraphs i) and ii) of the eighth paragraph of this same article, or b) an exchange rate of the foreign currency in question, other than the Dollar, that is not made known by any price provider provided for in this article.

The Institution that presents the request referred to in the previous paragraph must attach to it sufficient evidence of the operational reasons that justify said request, as well as the elements that support its convenience for users. Likewise, the issuing Institution that obtains the indicated authorization must make known to its account holders, in accordance with the procedure referred to in said authorization, the application of the corresponding exchange rate, as well as carry out the modifications to the contracts under which it issues the debit Cards in question. For these purposes, the issuing Institution must include in its authorization request its proposal for the aforementioned procedure.”

Guaranteed Overdrafts Article 115.-... “I. Monetary regulation deposits, constituted by cash and securities, in accordance with what is provided in Circulars 9/2014 and 10/2014, and in both cases in accordance with what is provided in Article 115 Bis of these Provisions; II. Time deposits derived from Deposit Auctions; III. Deposits in the Dollar Account referred to in Article 120 of these Provisions that have been granted as collateral to the Bank of Mexico for this purpose, and

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IV. Time deposits constituted in accordance with the procedure for the determination of the TIIE. All of the above shall only be applicable in the case of Multiple Banking Institutions. “Repealed.”

In the case of the pledge constituted with the deposits in the Dollar Account 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 guarantee deposit account 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 medium authorized for this purpose by the Central Bank itself, or, when these are not available, in requests that they prepare in terms of Annex 5 of these Provisions, which must show signature knowledge, for which said signatures must be previously registered at the Bank of Mexico.

Institutions may withdraw the Dollar deposits given in pledge, when they are not guaranteeing any obligation on their part and in favor of the Bank of Mexico. For this purpose, Institutions must request the respective withdrawal, through the SIAC-BANXICO or any other electronic, computing or telecommunications medium, authorized for this purpose by the Bank of Mexico, during the hours of 08:30:00 to 16:30:00, or, when these are not available, in requests that they prepare in terms of Annex 5 Bis of these Provisions, which must show signature knowledge, for which said signatures must be previously registered at the Bank of Mexico. The released Dollars will be credited to the Dollar Account of the Institution in question on the same Banking Business Day of the request.

The value of the Dollar deposit granted in pledge will be determined by applying the exchange rate published by the Bank of Mexico in the Official Gazette of the Federation on the date of its constitution applying the discount factor that will be made known by the Bank of Mexico through the SAGAPL.”

Characteristics of overdrafts in the Single Account guaranteed with the deposit of monetary regulation “Article 115 Bis.- Institutions that intend to guarantee overdrafts in their Single Accounts in terms of Article 115 of these Provisions with monetary regulation deposits must: I. In the case of cash: Send a request to the Bank of Mexico through the SAGAPL or the authorized electronic, computing or telecommunications medium for this purpose by the Bank of Mexico itself or, when the SAGAPL or said means are not available, the Institution must present a request prepared in terms of Annex 5 Bis 1 of these Provisions, which must show signature knowledge, for which said signatures must be previously registered at the Bank of Mexico, in the hours established in the SAGAPL manual, on the Banking Business Day on which they intend to constitute the pledge, in which they indicate the amount of said guarantee. In this case, the Bank of Mexico will verify the availability of the deposits to be granted as collateral. II. In the case of securities: Constitute the pledge with the resources of a special deposit derived from the celebration of repo operations with the Bank of Mexico, in the terms, with the characteristics described in this Chapter, and under the conditions provided for in the contract that they have entered into for this purpose in accordance with Article 115 Bis 1 of these Provisions.”

Contract for the celebration of repos to guarantee the overdraft of the Single Account “Article 115 Bis 1.- Institutions must enter into a contract with the Bank of Mexico that documents the repo operations with BREMS, as well as for the constitution of deposits in national currency that will be granted as collateral to guarantee the overdraft of the Single Account, in accordance with what is provided in Article 115 Bis of these Provisions, for which they must present to the Operations Instrumentation Management, certified and simple copies of the deeds in which the powers to exercise acts of domain of the person who intends to sign it are recorded, as well as a simple copy of their official identification.

The presentation of the documentation referred to in the previous paragraph must be made at least fifteen Banking Business Days in advance of the date on which they intend for the aforementioned contract to enter into force. In any case, the Institution in question must sign the corresponding contract with at least five Banking Business Days in advance of said date.”

Characteristics of Repos

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“Article 115 Bis 2.- The reports referred to in Article 115 Bis of these Provisions shall have the following characteristics:

I. Reporter: The Bank of Mexico; II. Reported Entity: The Institution in question; III. Term: i) One Banking Business Day in the event that the reports are formalized through the SAGAPL or any other electronic, computing, or telecommunications medium authorized for such purpose by the Central Bank itself, or ii) The term determined by the Bank of Mexico at the time of formalizing the operation, when the SAGAPL or the means referred to in the preceding subsection i) are not available and the Institutions submit a request prepared in accordance with Annex 5 Bis 2 of these Provisions, which must show knowledge of signatures, for which said signatures must be previously registered with the Bank of Mexico.

The one-day reports shall consider the number of natural days that elapse from, and including, the Banking Business Day corresponding to the date of formalization of the operation or that corresponding to, if applicable, the renewal in question, and up to, but excluding, the immediate next Banking Business Day;

IV. Titles subject to the report: The BREMS that make up the monetary regulation deposit in accordance with the provisions of Circulars 9/2014 and 10/2014 of the Bank of Mexico; V. Price: The nominal value of the BREMS subject to the report; VI. Rate: The one-day interbank interest rate that the Board of Governors of the Bank of Mexico has determined as the target rate for monetary policy purposes, made known by the Bank of Mexico on the Banking Business Day prior to the formalization of the report, through its internet website identified by the domain name: www.banxico.org.mx or through any other electronic, computing, or telecommunications medium authorized for this purpose by the Bank of Mexico itself, and

VII. Premium: The amount of money resulting from: a) multiplying the Rate by the Price; b) multiplying the result of a) by the number of days effectively elapsed between the date of agreement of the repo operation and the termination date, and c) dividing the result of b) by three hundred sixty.

The validity of the titles subject to the report must be greater than the term of the repo operations formalized.

Likewise, the value of the titles subject to the report determined in accordance with the provisions of the following paragraph, must be equal to the amount intended to be constituted in the deposit referred to in Article 115 Bis 4 of these Provisions.

The value of the titles subject to the report shall be the nominal value of said titles.

The Bank of Mexico will formalize repo operations with each of the Institutions that request it and will be for the total of the titles requested by each Institution.”

Formalization of reports

“Article 115 Bis 3.- To formalize the repo operations referred to in Article 115 Bis 2 of these Provisions, the Institutions must:

I. Submit requests to enter into repo operations with the Bank of Mexico with the values referred to in subsection IV of Article 115 Bis 2 of these Provisions: a) through the SAGAPL, adhering to the schedules, terms, and conditions established in the manual of the SAGAPL itself or through any other electronic, computing, or telecommunications medium authorized for such purpose by the Central Bank itself, or b) when the SAGAPL or the means referred to in the preceding subsection a) are not available, by means of a request prepared in accordance with Annex 5 Bis 2 of these Provisions, which must show knowledge of signatures, for which said signatures must be previously registered with the Bank of Mexico, during the schedules established in the SAGAPL manual, on the Banking Business Day on which the Institution in question intends to enter into the report, indicating the number and characteristics of the titles it is interested in reporting.

The Bank of Mexico may abstain from entering into the repo operations requested in accordance with this subsection, when such requests do not comply with what is stated in these Provisions, or are incomplete or incorrect in any way.

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II. When the repo operation is agreed upon through the SAGAPL, the Bank of Mexico will instruct the transfer of the titles subject to the report to the securities account that a securities depository institution maintains for the Bank of Mexico. In the event that the SAGAPL is not available, the respective Institution must instruct directly the securities depository institution that maintains an account for both the Bank of Mexico and the Institution itself, to carry out the transfer of the corresponding titles, to the account it maintains for the Bank of Mexico.

Once the titles subject to the report are credited in the account that a securities depository institution maintains for the Bank of Mexico, it will make the corresponding credit of the resources for an amount equivalent to the nominal value of the titles mentioned in the preceding subsection II in the Institution's Single Account.

Subsequently, the Bank of Mexico will make a charge in the Single Account for the aforementioned amount and credit the resources derived from said charge to the special deposit account of the respective Institution, referred to in Article 115 Bis 4 of these Provisions, in order for the movements related to these operations to be reflected in the overdraft capacity of the Single Account of said Institution, in accordance with Article 115 of these Provisions.

The aforementioned reports that have been formalized through the SAGAPL or by any other electronic, computing, or telecommunications medium authorized for such purpose by the Central Bank itself, will be renewed automatically, with the same characteristics initially determined by the Bank of Mexico, except in the case where the Institution requests, on the Banking Business Day prior to the date on which it wants the report to mature, through the SAGAPL, in the terms and deadlines provided in these Provisions and in the manual of the SAGAPL itself, that the titles subject to the report be returned. In the event that the SAGAPL is not available, the request will be made through any other electronic, computing, or telecommunications medium authorized for such purpose by the Central Bank itself. In both cases, the report on those titles that the Institution has requested will mature, which will be returned to the securities account that the securities depository institution maintains for the respective Institution, prior to the closing of operations of said securities depository institution.

On the maturity date of the report referred to in the previous paragraph, the Bank of Mexico will charge the amount of the special deposit referred to in Article 115 Bis 4 that it holds for the reported Institution and credit the amount of the special deposit and the corresponding interest on the said deposit to the Single Account of the Institution requesting the return of the respective titles, in accordance with the provisions of the previous paragraph.

Subsequently, with the resources coming from the settlement of the special deposit, the Bank of Mexico will settle the corresponding repo operation with a charge to the Single Account of the respective Institution for the amount of the principal plus the Premium.

The interest that, if any, the titles subject to the report pay during the validity of the operations, will be credited by the Bank of Mexico to the Single Account it holds for the reported entity, on the Banking Business Day on which they are paid by the issuer.”

Determination of deposits in the special deposit account for overdraft of the Single Account

“Article 115 Bis 4.- As a consequence of the repo operation, in accordance with the provisions of Articles 115 Bis 2 and 115 Bis 3 of these Provisions, the Bank of Mexico will constitute a special deposit in the special deposit account for overdraft of the Single Account of the reported Institution with the characteristics provided in Article 115 Bis 5 of these Provisions.”

Characteristics of special deposits

“Article 115 Bis 5.- The special deposits referred to in the preceding Article 115 Bis 4 shall have the following characteristics:

I. Depository: The Bank of Mexico; II. Depositor: The Institution that requests and formalizes it in accordance with the provisions of Article 115 Bis 3 of these Provisions; III. Term: One Banking Business Day or the corresponding to the term of the report referred to in Article 115 Bis 2 of these Provisions.

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The one-day deposits shall consider the number of natural days that elapse from and including, the Banking Business Day corresponding to the date of formalization of the operation or that corresponding to the renewal in question, and up to, but excluding, the immediate next Banking Business Day;

IV. Amount: The amount of the deposit will be equal to the nominal value of the titles subject to the report referred to in Article 115 Bis 2 of these Provisions; V. Rate: The one-day interbank interest rate that the Board of Governors of the Bank of Mexico has determined as the target rate for monetary policy purposes, made known by the Bank of Mexico on the Banking Business Day prior to the formalization of the deposit, through its internet website identified by the domain name: www.banxico.org.mx or through any other electronic, computing, or telecommunications medium authorized for this purpose by the Bank of Mexico itself, and

VI. Interest: The amount resulting from a) multiplying the Rate by the Amount; b) multiplying the result of a), by the number of days effectively elapsed between the date of agreement of the deposit operation and the termination date, and c) dividing the result of b) by three hundred sixty.

The interest that, if any, the special deposits pay during their validity, will be credited by the Bank of Mexico to the Single Account it holds for the depositor, on the Banking Business Day corresponding to the termination of said special deposit.”

Characteristics of credit operations

Article 154.-...

I. to IV....

V. “Interest Rate: The interest rate quoted by the Multiple Banking Institution, minus the differential that the Bank of Mexico itself has made known;

VI. Guarantee: The pledge constituted on: a) the monetary regulation deposits that the accredited party maintains with the Bank of Mexico; b) the deposits constituted in accordance with the procedure described in Article 159 of these Provisions; c) the deposits made in accordance with the Deposit Auctions, according to what is established in Article 192 of these Provisions and d) the Dollar deposits that the accredited party maintains with the Central Institute. The aforementioned deposits must be previously designated for this purpose by the accredited Multiple Banking Institution. The amount of the deposits must cover both the principal and the interest that the credit will accrue, and its maturity term must be greater than the term of the credit they guarantee, and

VII. Special Guarantee: The titles granted in stock pledge and deposits granted in pledge to cover the shortfalls of Dollar deposits in accordance with what is provided in Chapter VIII, Title Third, of these Provisions.

Regarding the pledge constituted with the Dollar deposits referred to in subsection d) of the preceding subsection VI, Multiple Banking Institutions must request that for such purposes they be segregated in the guarantee deposit account it holds for the Bank of Mexico, through the SIAC-BANXICO during the hours of 08:30:00 to 16:30:00 hours or any other electronic, computing, or telecommunications medium authorized for such purpose by the Bank of Mexico, or, when these are not available, in requests they prepare in accordance with Annex 5 of these Provisions, which must show knowledge of signatures, for which said signatures must be previously registered with the Bank of Mexico.

Multiple Banking Institutions may withdraw the Dollar deposits given in pledge when they are not guaranteeing any obligation on their part and in favor of the Bank of Mexico. For this purpose, Multiple Banking Institutions must request the respective withdrawal through the SIAC-BANXICO or any other electronic, computing, or telecommunications medium, authorized for such purpose by the Bank of Mexico, during the hours of 08:30:00 to 16:30:00 hours. When the SIAC-BANXICO or the aforementioned means are not available, Institutions must submit a request prepared in accordance with Annex 5 Bis of these Provisions, which must show knowledge of signatures, for which said signatures must be previously registered with the Bank of Mexico. The released Dollars will be credited to their Dollar Account on the same Banking Business Day of the request.

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The value of the Dollar deposit granted in pledge will be determined by applying the exchange rate published by the Bank of Mexico in the Official Gazette of the Federation each Banking Business Day from the date of its constitution applying the discount factor that will be made known through the SAGAPL.

In the event that the SAGAPL is not available, Multiple Banking Institutions wishing to formalize financing operations through credit operations, must send a request to the Bank of Mexico in a format substantially equal to the format attached to these Provisions as Annex 12 Bis, no later than 14:00:00 hours on the Banking Business Day on which they intend to formalize the guarantee, in which they indicate the types of deposits with which they intend to constitute said guarantee, as well as the amount of each of them. In this case, the Bank of Mexico will verify the availability of the deposits to constitute the guarantee. The document referred to in this paragraph must show knowledge of signatures, for which said signatures must be previously registered with the Bank of Mexico.”

Characteristics of repo operations

Article 155.-...

I. to III....

IV. ...

“To determine the national currency amount of the UDIBONOS and their Segregated Coupons, as well as to carry out the charges related to operations carried out with said titles, the prices of the vector calculated based on information from price providers will be used daily.”

... ...

V. and VI....

VII. “Special Guarantee: The titles granted in stock pledge and deposits granted in pledge to cover the shortfalls of the titles granted in the repo operations in accordance with what is provided in Chapter VIII, Title Third, of these Provisions.”

...

Formalization of reports

Article 156.- “To formalize the reports entered into in accordance with this Chapter, Multiple Banking Institutions must transfer the titles subject to the report to the securities deposit account that the securities depository institution holds for the Bank of Mexico in its own position. Such transfer must be instructed through the SAGAPL or through any other electronic computing or telecommunications medium authorized for this purpose by the Bank itself, to the Bank of Mexico's account that, for such purposes, it has opened in a securities depository institution. If the SAGAPL or the aforementioned electronic means are not available, Institutions must send a request to the Bank of Mexico in a format substantially equal to the format attached to these Provisions as Annex 12 Bis 4, no later than 16:00:00 hours on the Banking Business Day on which they intend to transfer the titles subject to the report, in which they indicate the types of securities to be transferred, as well as the amount of each of them. The document referred to in this paragraph must show knowledge of signatures, for which said signatures must be previously registered with the Bank of Mexico.”

...

“Multiple Banking Institutions may recover at any time the values they have transferred to the Bank of Mexico's account in the securities depository institution and that have not been used to formalize the reports. For this purpose, they must request it through the SAGAPL in the terms and deadlines provided in this Chapter and in the SAGAPL manual or through any other electronic, computing, or telecommunications medium, authorized for such purpose by the Bank of Mexico. In any case, at the end of the Banking Business Day, such titles will be returned to the securities accounts of the respective Multiple Banking Institutions in the securities depository institution itself.”

... ...

“In the event that the Reported Entity does not have sufficient resources in its Single Account to settle the reports in full, the Bank of Mexico will carry out new repo operations on behalf of the institution through the SAGAPL, which will mature at the close of operations of the Banking Business Day and whose other characteristics will be the same as those of the previous repo operations.

Likewise, the Bank of Mexico will charge the Single Account of the Reported Entity, at the opening of the Banking Business Day following the date of celebration of the new repo operations, the amount resulting from multiplying the base amount by twice the Weighted Bank Funding Rate made known by the Bank of Mexico on the Banking Business Day on which the new repo operations were celebrated, dividing the obtained result by 360.”

...

Deposits at the Bank of Mexico

Article 159.-...

...

“The deposits made by Multiple Banking Institutions will be affected at the moment of their constitution as guarantee of the overdrafts in the Single Account of the depositing Multiple Banking Institution.

During the validity of the aforementioned deposits, the Multiple Banking Institution may instruct through the SAGAPL that the deposit or the part of it that is not guaranteeing an overdraft of those mentioned in the previous paragraph, be granted in pledge to guarantee the financing provided for in this section, or the credits with which the assignments of the Liquidity Auctions are formalized, provided for in these Provisions. When the SAGAPL is not available, the Multiple Banking Institution must send a request to the Bank of Mexico in a format substantially equal to the format attached to these Provisions as Annex 12 Bis. The document referred to in this paragraph must show knowledge of signatures, for which said signatures must be previously registered with the Bank of Mexico.

On the maturity date of each of the deposits, the Bank of Mexico will make the credit for the principal amount and interest of the corresponding deposit in the Single Account of the Multiple Banking Institution that made said deposit, which will cease to guarantee overdrafts in the Single Account of the Institution.”

Contract to carry out credit or repo operations

Article 162.- “To carry out the credit and repo operations referred to in this Chapter, interested Multiple Banking Institutions must previously enter into a contract with the Bank of Mexico in which, on the one hand, they agree to be subject to the terms and conditions applicable to the credit or repo operations they enter into in accordance with this Chapter and, on the other hand, establish the constitution of guarantees in accordance with the process provided for in Chapter VIII, of Title Third of these Provisions. For the purposes of the foregoing, Institutions must present to the Operations Instrumentation Management, certified and simple copies of the deeds in which the following powers are stated:”

I. ...

II. “Repealed.”

III. ...

... ... ... ... ...

Instrumentation of Liquidity Auctions

Article 176.- “To be able to participate in the Liquidity Auctions, Institutions must previously enter into a contract with the Bank of Mexico in which, on the one hand, they agree to be subject to the terms and conditions applicable to the Liquidity Auctions they enter into in accordance with these Provisions and, on the other hand, establish the constitution of guarantees in accordance with the process provided for in Chapter VIII, of Title Third of these Provisions. For the purposes of the foregoing, Institutions must present to the Operations Instrumentation Management, a certified and simple copy of the deeds in which the following powers are stated:”

I. ...

10 OFFICIAL GAZETTE Thursday, June 13, 2019 II. “It is repealed.” III. ... “Additionally, Institutions must present to said Management a simple copy of the official identification of the person intending to sign the referred contract. Likewise, they must present to the Operations Management a mandate in favor of the Bank of Mexico in terms of Annex 10 of these Provisions, signed by the person with the aforementioned powers, from which a copy must be sent to the institution for the deposit of securities.” ... Characteristics of credits Article 188.-... I. to IV.... V. “Interest Rate: The rate corresponding to the assigned bid; VI. Guarantee: The pledge constituted on: a)... b) “The deposits constituted in accordance with the procedure described in article 159 of these Provisions;” c) ... d) “The Dollar deposits that the accredited Institution maintains in the respective account at the Bank of Mexico, and” VII. “Special Guarantee: The titles granted in stock pledge and deposits granted in pledge to cover the shortfalls of the Dollar Deposits, in accordance with what is provided in Chapter VIII, Third Title, of these Provisions. The deposits mentioned in fraction VI must be previously designated for this purpose by the accredited Institution. In all cases, the amount of the deposits must cover both the principal and the interest that the credit will accrue, and its maturity date must be greater than the maturity date of the credit they guarantee. Regarding the pledge constituted with the Dollar deposits referred to in subsection d) of the previous fraction VI, Institutions must request that for such purposes they be segregated in the guarantee deposit account held by the Bank of Mexico, through the SIAC-BANXICO, or any other electronic, computing, or telecommunications medium authorized for such purpose by the Bank of Mexico, or, if these are not available, in requests prepared in terms of Annex 5 of these Provisions, which must show knowledge of signatures, therefore these signatures must be previously registered at the Bank of Mexico. The value of the guarantee will be determined by applying the exchange rate published by the Bank of Mexico in the Official Gazette of the Federation each Banking Business Day from the date of its constitution, applying the discount factor to be made known through SAGAPL. Institutions may withdraw the Dollar deposits given in pledge, when they are not guaranteeing any obligation on their part and in favor of the Bank of Mexico. For this effect, Institutions must request the respective withdrawal through the SIAC-BANXICO or any other electronic, computing, or telecommunications medium authorized for such purpose by the Bank of Mexico, during the hours of 08:30:00 to 16:30:00, or, if these are not available, in requests prepared in terms of Annex 5 Bis of these Provisions, which must show knowledge of signatures, therefore these signatures must be previously registered at the Bank of Mexico. The released Dollars will be credited to their Dollar Account on the same Banking Business Day of the request. In the event that SAGAPL is not available, Institutions wishing to formalize the assignments through credit operations must send a request to the Bank of Mexico in a format substantially equal to the format attached to these Provisions as Annex 12 Bis, no later than 14:00:00 hours on the Banking Business Day on which they intend to formalize the guarantee, in which they indicate the types of deposits with which they intend to constitute the said guarantee, as well as the amount of each of them. In this case, the Bank of Mexico will verify the availability of the deposits to constitute the guarantee. The document referred to in this paragraph must show knowledge of signatures, therefore these signatures must be previously registered at the Bank of Mexico.”

Thursday, June 13, 2019 OFFICIAL GAZETTE 11 Characteristics of repurchase agreements Article 189.-... I. to III.... IV. ... “To determine the national currency amount of the UDIBONOS and their Segregated Coupons, as well as to carry out the charges related to operations carried out with said titles, the prices of the vector calculated based on the information of price providers will be used daily.” ... ... ... V. and VI.... VII. “Special Guarantee: The titles granted in stock pledge and deposits granted in pledge to cover the shortfalls of the titles granted in the repurchase operations, in accordance with Chapter VIII, Third Title, of these Provisions.” ... “To formalize the repurchases, Institutions must transfer the titles subject to the repurchase to the securities deposit account that the institution for the deposit of securities holds at the Bank of Mexico. This transfer must be instructed through the SAGAPL or through any other electronic computing or telecommunications medium authorized for this effect by the Bank itself, in the Bank of Mexico account that, for such purposes, it has opened in some institution for the deposit of securities. If the SAGAPL or the aforementioned electronic means are not available, Institutions must send a request to the Bank of Mexico in a format substantially equal to the format attached to these Provisions as Annex 12 Bis 4, no later than 16:00:00 hours on the Banking Business Day on which they intend to transfer the titles subject to the repurchase, in which they indicate the types of securities to be transferred, as well as the amount of each of them. The document referred to in this paragraph must show knowledge of signatures, therefore these signatures must be previously registered at the Bank of Mexico.” Formalization of assignments in Deposit Auctions Article 192.- “Institutions that receive assignments in the Deposit Auctions must formalize them through the constitution of a deposit. In the event that the Institution does not have sufficient resources, what is established in article 116, fraction I, of these Provisions will apply. The deposits made by Institutions will, at the moment of their constitution, be granted in pledge to guarantee overdrafts in the Unique Account of the depositing Institution. During the validity of the deposits, the Institution may instruct through the SAGAPL that the deposit or the part of it that is not guaranteeing an overdraft of those mentioned in the previous paragraph, be used to guarantee the credits provided for in the procedure for the determination of the TIIE referred to in Chapter IV of the Third Title of these Provisions as well as the Liquidity Auctions provided for in Chapter VI of the Third Title of these Provisions. When the SAGAPL is not available, Institutions must send a request to the Bank of Mexico in a format substantially equal to the format attached to these Provisions as Annex 12 Bis. The document referred to in this paragraph must show knowledge of signatures, therefore these signatures must be previously registered at the Bank of Mexico. On the maturity date of each of the deposits, the Bank of Mexico will make the credit for the amount of the principal and interest of the corresponding deposit in the Unique Account of the Institution that had made the referred deposit, which will cease to guarantee overdrafts in the Unique Account of the Institution.” “CHAPTER VIII CONSTITUTION OF SPECIAL GUARANTEES FOR OPERATIONS WITH THE BANK OF MEXICO” Obligation to constitute Special Guarantees

12 OFFICIAL GAZETTE Thursday, June 13, 2019 “Article 195 Bis 3.- Institutions that participate in the Determination of the National Currency Interbank Equilibrium Interest Rate, provided for in Chapter IV, as well as in the Liquidity Auctions, provided for in Chapter VI, of the Third Title of these Provisions, must constitute Special Guarantees. For the purposes of this Chapter, the term Special Guarantees, both in singular and plural, includes the titles granted by Institutions in stock pledge and the deposits granted in pledge, to cover, the shortfalls of: a) the Dollar deposits, in the case of credit operations regulated in articles 154 and 188, and b) the titles granted in the repurchase operations, in the case of repurchases regulated in articles 155 and 189. The aforementioned shortfalls will be calculated in accordance with what is provided in article 195 Bis 4. Institutions must grant Special Guarantees for all operations that present shortfalls, both those of credit guaranteed with Dollar deposits in terms of articles 154 and 188, as well as for the repurchase operations they enter into in terms of articles 155 or 189, as applicable. The amount of the Special Guarantees must cover the total of the obligations on their part for the celebration of such operations. The referred obligation to grant Special Guarantees will remain until the Institution in question settles the amounts of the referred credit or repurchase operations. The Special Guarantees must be deposited in one of the following two guarantee funds: a. The first, which will guarantee the credit and repurchase operations that Institutions have entered into with the Bank of Mexico in the procedure for the Determination of the TIIE, in terms of articles 154 and 155, and b. The second, which will guarantee the credit and repurchase operations that Institutions have entered into with the Bank of Mexico in the Liquidity Auctions, in terms of articles 188 and 189.” Determination of the value of the Special Guarantees that must be constituted by the Institutions “Article 195 Bis 4.- The Bank of Mexico will calculate, each Banking Business Day, the total value of the Special Guarantees that Institutions must constitute for each of the guarantee funds in order to cover, if applicable, the shortfalls of the Dollar Deposits granted in pledge or of the Titles granted in stock pledge based on the following: I. Regarding credits guaranteed with Dollar Deposits: The difference between (i) the value in Mexican pesos of the Dollar Deposits delivered in pledge in the credit operation celebrated by the Institution in question in terms of articles 154 or 188 of these Provisions, at the exchange rate published by the Bank of Mexico in the Official Gazette of the Federation on the day of the corresponding valuation, applying the discount factor to be made known through SAGAPL, taking as a basis the procedure described in the referred articles, and (ii) the sum of the principal of the referred credit plus the interest that the credit in question will accrue during its validity, including those already accrued. II. Regarding repurchases: The difference between (i) the value in Mexican pesos of the titles granted in stock pledge and the titles subject to the repurchase celebrated by the Institution in question in terms of articles 155 or 189 of these Provisions, taking as a basis the procedure described in Annex 7. The referred value will be calculated applying the prices and discount factors to be made known through SAGAPL on the day of the corresponding valuation, and (ii) the sum of the price plus the premium of the repurchase in question. When the result of the operations referred to in the previous fractions I and II results in less than zero, a shortfall will be presented and the Institution must grant Special Guarantees for the difference between zero and said result. To guarantee at all times the total of the differential resulting in accordance with the previous fractions I and II, it will be the responsibility of the Institution to ensure that it has

Thursday, June 13, 2019 OFFICIAL GAZETTE 13 constituted sufficient Special Guarantees, or, verify that there are already sufficient Special Guarantees to cover the requirements derived from the shortfalls referred to in this paragraph. The Special Guarantees constituted by the Institution must cover at all times, at least the added value of the shortfalls that all the dollar deposits and titles subject to repurchase constituted as objects of the credits and repurchase operations celebrated by said Institution with the Bank of Mexico, respectively, have had since the moment of their constitution, in each of the guarantee funds.” Constitution of the Special Guarantees “Article 195 Bis 5.- Each Banking Business Day, the Bank of Mexico will inform each of the Institutions, through the SAGAPL or through any other electronic, computing, or telecommunications medium authorized for this effect by the Bank of Mexico and made known to the Institutions, the total value of the Special Guarantees that they must have constituted, for each of the guarantee funds to cover the value that has resulted on charge of the Institution. In the constitution of the Special Guarantees, Institutions must adhere to the following: I. Regarding: a) BONDES; b) IPAB Securities; c) BREMS; d) CETES excluding the SPECIAL CETES, and e) Segregated Coupons, Institutions must constitute the Special Guarantee through stock pledge with transfer of ownership in the terms and under the conditions provided in the contract they have celebrated for this effect in accordance with articles 162 or 176 of these Provisions. Institutions must deposit the titles subject to said Special Guarantee, through transfer instructed by means of the SAGAPL or through any other electronic computing or telecommunications medium authorized for this effect by the Bank itself, in the Bank of Mexico account that, for such purposes, it has opened in some institution for the deposit of securities. For the foregoing, Institutions must present to the Operations Management, a mandate in favor of the Bank of Mexico in terms of Annex 10 of these Provisions, signed by the person with the powers referred to in article 162 or in 176, from which a copy must be sent to the corresponding institution for the deposit of securities. Institutions must make the deposits of titles, before the time established in the SAGAPL manual on the Banking Business Day on which the Bank of Mexico has made known to them the amount of the respective Special Guarantees. If the SAGAPL is not available, Institutions must send a request to the Bank of Mexico in a format substantially equal to the format attached to these Provisions as Annex 12 Bis 5, no later than 16:00:00 hours on the Banking Business Day on which they intend to constitute the Special Guarantee, in which they indicate the types of values with which they intend to constitute the said Special Guarantee, as well as the amount of each of them. The document referred to in this paragraph must show knowledge of signatures, therefore these signatures must be previously registered at the Bank of Mexico. II. Regarding any of the following deposits: a) monetary regulation that the accredited institution maintains at the Bank of Mexico; b) constituted in accordance with the procedure described in article 159 of these Provisions; c) constituted in accordance with the Deposit Auctions, in accordance with the procedure described in article 192, and d) in Dollars that the accredited Institution maintains at the Bank of Mexico, Institutions must adhere to what is established below: i) Regarding Special Guarantees that are intended to be constituted through pledge with the deposits referred to in this fraction, they must instruct by means of the SAGAPL system or through any other electronic, computing, or telecommunications medium authorized for this effect by the Bank of Mexico, the type of deposit with which the Special Guarantee is intended to be constituted, as well as the amount of each of them, before the time defined in the SAGAPL manual, or if this system is not available, Institutions must send a request to the Bank of Mexico in a format substantially equal to the format attached to these Provisions as Annex 12 Bis, no later than 16:00:00 hours on the Banking Business Day on which they intend to constitute the Special Guarantee, in which they indicate the types of deposits with which they intend to constitute the

14 OFFICIAL GAZETTE Thursday, June 13, 2019 said Special Guarantee, as well as the amount of each of them. In this case, the Bank of Mexico will verify the availability of the deposits to constitute the Special Guarantee. The document referred to in this paragraph must show knowledge of signatures, therefore these signatures must be previously registered at the Bank of Mexico. ii) Additionally, regarding Special Guarantees that are intended to be constituted through pledge with the Dollar deposits referred to in subsection d) of this fraction, Institutions must request that for such purposes they be segregated in the guarantee deposit account held by the Bank of Mexico, through the SIAC-BANXICO during the hours of 08:30:00 to 16:30:00 or any other electronic, computing, or telecommunications medium authorized for such purpose by the Bank of Mexico or when these are not available, in requests they prepare in terms of Annex 5 of these Provisions, which must show knowledge of signatures, therefore these signatures must be previously registered at the Bank of Mexico.” Procedure for substitution of Special Guarantees “Article 195 Bis 6.- Institutions may substitute the deposits or titles they have granted in Special Guarantee in accordance with what is provided in the previous article, for which they must instruct by means of the SAGAPL or through any other electronic, computing, or telecommunications medium authorized for this effect by the Bank of Mexico, the substitution they intend to carry out before the time defined in the SAGAPL manual. When these means are not available, Institutions must send a request to the Bank of Mexico in terms of Annex 12 Bis 1 of these Provisions, no later than 16:00:00 hours on the Banking Business Day on which they intend to carry out the substitution of Special Guarantees, in which they indicate the deposits or titles to be substituted and the new deposits or titles they intend to deliver to the Bank of Mexico. The substitution will be carried out provided that the amounts resulting from the corresponding valuation of said new deposits or titles are sufficient to cover the amount of Special Guarantees that must be constituted, in accordance with what the Bank of Mexico has made known to them based on article 195 Bis 5. In this case, the Bank of Mexico reserves the right to reject or accept said request. The document referred to in this article must show knowledge of signatures, therefore these signatures must be previously registered at the Bank of Mexico.” Withdrawal of excess Special Guarantees “Article 195 Bis 7.- In the event that the amount corresponding to the valuation of the deposits and titles subject to the Special Guarantees constituted by an Institution in accordance with what is provided in article 195 Bis 5, is higher than the total value of the Special Guarantees that the Institution must constitute in accordance with what is provided in article 195 Bis 4, the Institution may request the Bank of Mexico for the return of the titles or the termination of the Special Guarantee constituted on the amounts of the deposits referred to in the cited article for the excess amount that corresponds, by means of the SAGAPL or through any other electronic, computing, or telecommunications medium authorized for this effect by the Bank of Mexico before the time defined in the SAGAPL manual or, in case these means are not available, through communication in a format substantially equal to the format included in Annex 12 Bis 2 or in Annex 12 Bis 3 of these Provisions, as applicable, presented no later than 16:00:00 hours on the Banking Business Day on which they request to receive said deposits and titles. In the event that the Bank of Mexico receives the aforementioned request after the time indicated in this paragraph, it will carry out the return of the amounts of the deposits and titles respectively on the immediate next Banking Business Day subject to the valuation of the referred amounts of the deposits and titles that is carried out on the next Banking Business Day in accordance with these Provisions. The document mentioned in the previous paragraph must show knowledge of signatures, therefore these signatures must be previously registered at the Bank of Mexico itself.” Credit of accessories “Article 195 Bis 8.- In case the Bank of Mexico obtains any payment corresponding to any accessory right, such as payment of coupons or interest, derived from the titles or from the amounts of the

Deposits given as Special Guarantee under the terms of Article 195 Bis 5 of these Provisions, the Bank of Mexico will credit the respective amount to the Single Account of the Institution that constituted the Special Guarantee in question. The Bank of Mexico will make the credit referred to in this paragraph on the same Banking Business Day that it received payment of the aforementioned accessory charges, provided that such receipt occurs no later than 16:00:00 hours on that day. In the event that the Bank of Mexico receives the aforementioned payment after the indicated time, it will make the credit to the Single Account of the corresponding Institution on the immediate next Banking Business Day.”

Procedure for non-compliance in delivery of Special Guarantees

“Article 195 Bis 9.- In the event that an Institution does not constitute the Special Guarantees under its responsibility, in accordance with the provisions of Article 195 Bis 5 within the deadline established in said article, the Bank of Mexico will charge, for each day of delay, on the following Banking Business Day, to the Single Account of the non-compliant Institution, the amount resulting from the lesser of: i) the equivalent in national currency to two hundred thousand UDIS calculated with the value of the UDI on the date the Institution should have constituted the Special Guarantee and ii) the equivalent to one percent of the unguaranteed amount.”

ANNEX 5 Model for request for segregation of deposits in Dollars into the deposit account for guarantees or special guarantees (INSTITUTION LETTERHEAD) Mexico City, ___ of _______, 20.

BANK OF MEXICO Operations Management Department Av. 5 de Mayo, number 6 Centro Neighborhood, Mexico City, C.P. 06000

Present.

Through this channel, I allow myself to request from the Bank of Mexico on behalf of (Full name of the credit institution including, if applicable, the financial group to which it belongs), that from this date it carry out the necessary actions to segregate in the deposit account for guarantees that this Institution holds at this Bank the amount of $______ (______U.S. Dollars), in order to constitute a pledge for:

___To guarantee overdrafts in its Single Account, in terms of what is provided in Article 115 of Circular 3/2012. ___To guarantee credit operations carried out in the procedure for the determination of the TIIE, in terms of what is provided in subsection d) of fraction VI of Article 154, of Circular 3/2012. ___To guarantee the credits with which the assignments in the Liquidity Auctions are formalized, in terms of what is provided in subsection d) of fraction VI of Article 188 of Circular 3/2012. ___To constitute Special Guarantees for credit or repo operations carried out in the procedure for the determination of the TIIE, in accordance with what is established in Article 195 Bis 5 of Circular 3/2012. ___To constitute Special Guarantees for credit or repo operations carried out in the assignment of Liquidity Auctions, in accordance with what is established in Article 195 Bis 5 of Circular 3/2012.

(Mark the cases requested)

Sincerely,

(Name and signature of persons with signatures previously registered at the Bank of Mexico)

C.c.p.: Operations Support Directorate National Operations Management Sub-management of Operations Management with Account Holders

This communication must be directed to the following email account: operacion-sagapl@banxico.org.mx

ANNEX 5 BIS Model for request for withdrawal of deposits in Dollars given as guarantee (INSTITUTION LETTERHEAD)

Mexico City, ___ of _______, 20.

BANK OF MEXICO Operations Management Department Av. 5 de Mayo number 6 Centro Neighborhood, Mexico City, C.P. 06000

Present.

Through this channel, I allow myself to request from the Bank of Mexico, on behalf of (Full name of the credit institution including, if applicable, the financial group to which it belongs), that on this date it carry out the necessary actions so that my represented party withdraws, in accordance with the provisions of Article 115 of the “Applicable Provisions of Credit Institutions and the National Financial Development Bank for Agriculture, Rural, Forest and Fisheries”, issued by that Bank of Mexico through Circular 3/2012, the deposits in Dollars given as guarantee that as of the date of this request are not guaranteeing any obligation on behalf of my represented party and in favor of the Bank of Mexico. The aforementioned deposits are for the amount of $______ (______U.S. Dollars).

Sincerely,

(Name and signature of persons with signatures previously registered at the Bank of Mexico)

C.c.p.: Operations Support Directorate National Operations Management Sub-management of Operations Management with Account Holders

This communication must be directed to the email account indicated below: Email account. operacion-sagapl@banxico.org.mx mercadodedinero@banxico.org.mx

Annex 5 Bis 1 Model for request to guarantee overdrafts in the Single Account, in accordance with the provisions of fraction I, of Article 115 Bis of the Applicable Provisions to the Operations of Credit Institutions and the National Financial Development Bank for Agriculture, Rural, Forest and Fisheries, issued by the Bank of Mexico through Circular 3/2012

(INSTITUTION LETTERHEAD)

Mexico City, ___ of _______, 20.

BANK OF MEXICO Operations Management Department Av. 5 de Mayo number 6 Centro Neighborhood, Mexico City, C.P. 06000

Present.

Through this channel, I allow myself to request from the Bank of Mexico on behalf of (Full name of the credit institution including, if applicable, the financial group to which it belongs), that from the cash amount with which my represented party has as of the date of presentation of this request as part of the monetary regulation deposit constituted in cash in terms of what is provided by Circular 9/2014 of the Bank of Mexico, segregate the amount of [] which is available in [ ] (OMA / TIIE) to guarantee the overdrafts of my represented party in its Single Account.

Sincerely,

(Name and signature of persons with signatures previously registered at the Bank of Mexico)

C.c.p.: Operations Support Directorate Sub-management of Operations Management with Account Holders

This communication must be directed to the email account indicated below: Email account. operacion-sagapl@banxico.org.mx

Annex 5 Bis 2 Model for request for the formalization of repo operations with the Bank of Mexico, in accordance with the provisions of fraction II of Article 115 Bis, in subsection ii), of fraction III, of Article 115 Bis 2 and in Article 115 Bis 3 of the Applicable Provisions to the Operations of Credit Institutions and the National Financial Development Bank for Agriculture, Rural, Forest and Fisheries, issued by the Bank of Mexico through Circular 3/2012

(INSTITUTION LETTERHEAD)

Mexico City, ___ of _______, 20.

BANK OF MEXICO Operations Management Department Av. 5 de Mayo number 6 Centro Neighborhood, Mexico City, C.P. 06000

Present.

Through this channel, I allow myself to request from the Bank of Mexico on behalf of (Full name of the credit institution including, if applicable, the financial group to which it belongs), the celebration of repo operations in accordance with the provisions of Articles 115 Bis, fraction II, 115 Bis 2, fraction III, subsection ii) and 115 Bis 3, of the Applicable Provisions to the Operations of Credit Institutions and the National Financial Development Bank for Agriculture, Rural, Forest and Fisheries, issued by that Bank of Mexico through Circular 3/2012, and in accordance with the following characteristics:

Repo Term: ___________ day(s) Series: ___________ Number of Titles: ___________

Sincerely,

(Name and signature of persons with signatures previously registered at the Bank of Mexico)

C.c.p.: Operations Support Directorate Sub-management of Operations Management with Account Holders

This communication must be directed to the email account indicated below: Email account. operacion-sagapl@banxico.org.mx

ANNEX 10 Model for mandate in favor of the Bank of Mexico to carry out charges and credits in the accounts that any institution holds for the deposit of securities

(INSTITUTION LETTERHEAD)

Mexico City, ___ of _______, 20.

BANK OF MEXICO Operations Management Department. Avenida 5 de Mayo, number 6 Centro Neighborhood, Mexico City, C.P. 06000

Present.

(Full name of the credit institution including, if applicable, the financial group to which it belongs) hereby grants a special and irrevocable power to the Bank of Mexico so that, on its behalf, it instructs (Full name of the institution for the deposit of securities), to carry out all charges and credits in the accounts that said institution for the deposit of securities holds for my represented party, due to the repo operations that are celebrated: a) for the determination of the Interbank Equilibrium Interest Rate in national currency; b) in the Liquidity Auctions; c) in the procedure to be followed in case of insufficiency of resources to settle the amount of securities governmental, and d) to constitute the special deposits to guarantee the overdrafts in the Single Account of my represented party; as well as to constitute Special Guarantees.

For these purposes, the Bank of Mexico must send to the aforementioned institution for the deposit of securities the instructions referred to above.

This credit institution will be responsible for the charge and credit requests that the Bank of Mexico makes in compliance with the instructions that the Bank of Mexico sends to the aforementioned institution for the deposit of securities.

Sincerely,

(Name, signature and position of the official or officials of the institution with powers to exercise acts of dominion)

C.c.p.: (Full name of the corresponding institution for the deposit of securities).

For your information.

ANNEX 12 BIS Communication to the Operations Management Department to request the constitution of guarantees or special guarantees through deposits

(INSTITUTION LETTERHEAD)

Mexico City, ___ of _______, 20

BANK OF MEXICO Operations Management Department Avenida 5 de Mayo, number 6 Centro Neighborhood, Mexico City, C.P. 06000

Present.

Through this communication, for the purposes of what is established in Articles 152 and 185, as well as fraction II of Article 195 Bis 5 of the “Applicable Provisions to the Operations of Credit Institutions and the National Financial Development Bank for Agriculture, Rural, Forest and Fisheries” issued by that Bank of Mexico through Circular 3/2012, I request from the Bank of Mexico on behalf of (Full name of the credit institution including, if applicable, the financial group to which it belongs), that it carry out the necessary actions so that it segregates from the Deposits indicated below, the corresponding amounts to grant as pledge, in order to ___To guarantee the credit operations carried out in the procedure for the determination of the TIIE, in terms of what is provided in subsection d) of fraction VI of Article 154, of Circular 3/2012. ___To guarantee the credit operations with which the assignments in the Liquidity Auctions are formalized, in terms of what is provided in subsection d) of fraction VI of Article 188 of Circular 3/2012. ___To constitute Special Guarantees for credit or repo operations carried out in the procedure for the determination of the TIIE, in accordance with what is established in Article 195 Bis 5 of the Circular 3/2012, integrating into the fund of operations for the determination of the TIIE. ___To constitute Special Guarantees for credit or repo operations carried out in the assignment of Liquidity Auctions, in accordance with what is established in Article 195 Bis 5 of Circular 3/2012 integrating into the Liquidity Auctions fund.

TYPE OF DEPOSIT AMOUNT Monetary regulation deposits that my represented party maintains at the Bank of Mexico: $___________________________ Deposits constituted in accordance with the procedure for the determination of the TIIE: $___________________________ Deposits constituted in accordance with the Deposit Auctions: $___________________________ Dollars deposits that my represented party maintains in its Dollar account: $___________________________

Sincerely,

(Name of the Assigned Institution) (Name and signature of persons with signatures previously registered at the Bank of Mexico)

This communication must be directed to the following email account: operacion-sagapl@banxico.org.mx

ANNEX 12 BIS 1 Communication to the Operations Management Department to request the substitution of deposits delivered as pledge or titles delivered as stock market pledge that constitute the special guarantees

(INSTITUTION LETTERHEAD)

Mexico City, ___ of _______, 20

BANK OF MEXICO Operations Management Department Avenida 5 de Mayo, number 6 Centro Neighborhood, Mexico City, C.P. 06000

Present.

Through this communication, for the purposes of what is established in Article 195 Bis 6 of the “Applicable Provisions to the Operations of Credit Institutions and the National Financial Development Bank for Agriculture, Rural, Forest and Fisheries” issued by that Bank of Mexico through Circular 3/2012, on behalf and for the account of my represented party, (Full name of the credit institution, including, if applicable, the financial group to which it belongs), I communicate the request to carry out the substitution of the deposits or titles that this Institution gave as pledge or as stock market pledge with the object of constituting the Special Guarantees of the obligations under its responsibility under the guarantee of credits guaranteed with deposits and repos guaranteed with titles, celebrated as a result of the assignment of the bids presented by this same Institution in the auctions carried out in accordance with Chapters IV and VI of Title Third, of the Provisions cited.

To this effect, the titles delivered as stock market pledge that this Institution requests to be returned are the following: [For each of the titles considered indicate the following fields] ISIN NUMBER TITLES* NOMINAL VALUE* TYPE OF TITLE ISSUER SERIES* CURRENCY MATURITY DATE *Mandatory fields.

The titles that will be delivered as stock market pledge, in substitution, are the following: ISIN NUMBER TITLES* NOMINAL VALUE* TYPE TITLE ISSUER SERIES* CURRENCY MATURITY DATE CREDIT RATING LAST PRICE OR AVAILABLE VALUATION *Mandatory fields.

The deposits delivered as pledge that this Institution requests to be returned are the following: TYPE OF DEPOSIT AMOUNT Monetary regulation deposits that my represented party maintains at the Bank of Mexico: $___________________________ Deposits constituted in accordance with the procedure for the determination of the TIIE: $___________________________ Deposits constituted in accordance with the Deposit Auctions: $___________________________ Dollars deposits that my represented party maintains in its Dollar account: $___________________________

The deposits that will be delivered as pledge, in substitution, are the following: TYPE OF DEPOSIT AMOUNT Monetary regulation deposits that my represented party maintains at the Bank of Mexico: $___________________________ Deposits constituted in accordance with the procedure for the determination of the TIIE: $___________________________ Deposits constituted in accordance with the Deposit Auctions: $___________________________ Dollars deposits that my represented party maintains in its Dollar account: $___________________________

Sincerely,

(Name of the Assigned Institution) (Name and signature of persons with signatures previously registered at the Bank of Mexico)

This communication must be directed to the following email account: operacion-sagapl@banxico.org.mx

ANNEX 12 BIS 2 Communication to the Operations Management Department to request the return of excess special guarantees constituted with titles

(INSTITUTION LETTERHEAD)

Mexico City, ___ of _______, 20

BANK OF MEXICO Operations Management Department Avenida 5 de Mayo, number 6 Centro Neighborhood, Mexico City, C.P. 06000

Present.

Through this communication, for the purposes of what is established in Article 195 Bis 7 of the “Applicable Provisions to the Operations of Credit Institutions and the National Financial Development Bank for Agriculture, Rural, Forest and Fisheries” issued by that Bank of Mexico through Circular 3/2012, on behalf and for the account of my represented party, (Full name of the credit institution, including, if applicable, the financial group to which it belongs), I communicate the request so that it returns those titles that this Institution gave as stock market pledge to constitute the Special Guarantees of the obligations under its responsibility, celebrated as a result of the assignment of the bids presented by this same Institution in the auctions carried out in accordance with what is provided in Chapters IV and VI of Title Third of the Provisions cited and that correspond to the excess amount of that referred to the Special Guarantees, calculated in accordance with those same Provisions.

Titles for which their return is requested: [For each of the titles considered indicate the following fields] ISIN NUMBER TITLES* NOMINAL VALUE* TYPE OF TITLE ISSUER SERIES* CURRENCY MATURITY DATE *Mandatory fields.

Sincerely,

(Name of the Assigned Institution) (Name and signature of persons with signatures previously registered at the Bank of Mexico)

This communication must be directed to the following email account: operacion-sagapl@banxico.org.mx

ANNEX 12 BIS 3 Communication to the Operations Management Department to request the return of excess special guarantees constituted with deposits

(INSTITUTION LETTERHEAD)

Mexico City, ___ of _______, 20

BANK OF MEXICO Operations Management Department Avenida 5 de Mayo, number 6 Centro Neighborhood, Mexico City, C.P. 06000

Present.

Through this communication, for the purposes of what is established in Article 195 Bis 7 of the “Applicable Provisions to the Operations of Credit Institutions and the National Financial Development Bank for Agriculture, Rural, Forest and Fisheries” issued by that Bank of Mexico through Circular 3/2012, I request from the Bank of Mexico on behalf of (Full name of the credit institution, including, if applicable, the financial group to which it belongs), that it carry out the necessary actions for the termination of the pledge constituted with the Deposits indicated below and that integrate the guarantee fund in terms of what is provided in Chapter VIII of Title Third of the cited Circular.

TYPE OF DEPOSIT AMOUNT Monetary regulation deposits that my represented party maintains at the Bank of Mexico: $___________________________ Deposits constituted in accordance with the procedure for the determination of the TIIE: $___________________________ Deposits constituted in accordance with the Deposit Auctions: $___________________________ Dollars deposits that my represented party maintains in its Dollar account: $___________________________

Sincerely,

(Name of the Assigned Institution) (Name and signature of persons with signatures previously registered at the Bank of Mexico)

This communication must be directed to the following email account: operacion-sagapl@banxico.org.mx

ANNEX 12 BIS 4 Model for request to transfer the titles subject to the repos referred to in Articles 156 and 189 of Circular 3/2012 to the deposit account of securities that the institution for the deposit of securities holds at the Bank of Mexico

(INSTITUTION LETTERHEAD)

Mexico City, ___ of _______, 20

BANK OF MEXICO Operations Management Department Avenida 5 de Mayo, number 6 Centro Neighborhood, Mexico City, C.P. 06000

Present.

Through this communication, for the purposes of what is established in Articles 156 and 189 of the “Applicable Provisions to the Operations of Credit Institutions and the National Financial Development Bank for Agriculture, Rural, Forest and Fisheries” issued by that Bank of Mexico through Circular 3/2012, I request from the Bank of Mexico on behalf of (Full name of the credit institution, including, if applicable, the financial group to which it belongs), that it carry out the necessary actions to carry out the formalization of the repo operations celebrated in The procedure for the determination of the TIIE in accordance with what is established in Article 156 of Circular 3/2012. The procedure for the assignment of Liquidity Auctions in accordance with what is established in Article 189 of Circular 3/2012. with the titles indicated below: [For each of the titles considered indicate the following fields] ISIN NUMBER TITLES* NOMINAL VALUE* TYPE OF TITLE ISSUER SERIES* CURRENCY MATURITY DATE

Sincerely,

(Name of the Assigned Institution) (Name and signature of persons with signatures previously registered at the Bank of Mexico)

This communication must be directed to the following email account: operacion-sagapl@banxico.org.mx

Thursday, June 13, 2019 OFFICIAL GAZETTE 27 ANNEX 12 BIS 5 Communication to the Operations Management Department to request the constitution of special guarantees with securities (ON LETTERHEAD OF THE CREDIT INSTITUTION) Mexico City, on __ of _________ of 20__ BANK OF MEXICO Operations Management Department 5 de Mayo Avenue, number 6 Centro Neighborhood, Mexico City, C.P. 06000 Present. By means of this communication, for the purposes of what is established in fraction I of article 195 Bis 5 of the "Provisions applicable to the Operations of Credit Institutions and the National Financial Development Bank for Agriculture, Rural, Forestry and Fisheries" issued by this Bank of Mexico through Circular 3/2012, I request that the Bank of Mexico, on behalf of (Full name of the credit institution, including, if applicable, the financial group to which it belongs), carry out the actions necessary to carry out the constitution of special guarantees with the securities indicated below to guarantee the obligations at its charge: [For each of the securities considered, indicate the following fields] ISIN NUMBER SECURITIES* NOMINAL VALUE* TYPE OF SECURITY ISSUER SERIES* CURRENCY MATURITY DATE [indicate the operation being guaranteed] Constitute Special Guarantees for credit or repurchase operations carried out in the procedure for the determination of the TIIE in accordance with what is established in article 195 Bis 5 of Circular 3/2012, integrating into the fund of operations for the determination of the TIIE. Constitute Special Guarantees for credit or repurchase operations carried out in the procedure for the assignment of Liquidity Auctions in accordance with what is established in article 195 Bis 5 of Circular 3/2012, integrating into the Liquidity Auctions fund. Sincerely, (Name of the Assigned Institution) (Name and signature of persons with signatures previously registered at the Bank of Mexico) This communication must be directed to the following email account: operacion-sagapl@banxico.org.mx

28 OFFICIAL GAZETTE Thursday, June 13, 2019 TRANSITORY PROVISIONS FIRST.- The provisions of this Circular shall enter into force on the next Banking Business Day following its publication in the Official Gazette of the Federation. SECOND.- Institutions interested in continuing to participate in the procedure for the determination of the Interbank Equilibrium Interest Rate in national currency or in the liquidity auctions, shall have a period of twenty Banking Business Days counted from the entry into force of this Circular to celebrate the contract or contracts referred to in articles 162 and 176, respectively. To this effect, during the first fifteen Banking Business Days of the aforementioned period, interested Institutions must deliver the documentation mentioned in articles 162 and 176. Institutions must deliver to the Bank of Mexico the contract or contracts duly signed by their representatives, at least two Banking Business Days in advance of the date on which the granted period ends. After the period of twenty Banking Business Days counted from the entry into force of this Circular has elapsed, Institutions may only carry out operations derived from liquidity auctions and the procedure for the determination of the Interbank Equilibrium Interest Rate in national currency, subject to what is provided in this Circular and what is stipulated in the contracts they celebrate with the Bank of Mexico in accordance with what is provided in this Transitory Article. THIRD.- Acts and operations derived from liquidity auctions and the procedure for the determination of the Interbank Equilibrium Interest Rate in national currency that are in force on the date of entry into force of this Circular, as well as those celebrated during the period provided in the first paragraph of the previous Transitory Article Second, shall be governed by the terms and conditions under which they were agreed. To this effect, the contracts that document the operations derived from liquidity auctions and the procedure for the determination of the Interbank Equilibrium Interest Rate in national currency celebrated by Institutions prior to the entry into force of this Circular, shall remain in force until the total fulfillment of the obligations derived from the operations celebrated under their protection. FOURTH.- Mandates that Institutions had granted on the date of entry into force of this Circular in accordance with Annex 10 of the "Provisions applicable to the Operations of Credit Institutions, Multiple-Object Financial Companies Regulated that maintain patrimonial links with Credit Institutions and the National Financial Development Bank for Agriculture, Rural, Forestry and Fisheries" issued by this Bank of Mexico through Circular 3/2012, shall remain in force under their terms. FIFTH.- Once the twenty Banking Business Days referred to in the Second Transitory Article of this Circular have elapsed, Institutions that wish to celebrate operations in accordance with what is provided in this Circular, must send to the Bank of Mexico, no later than five Banking Business Days prior to the Banking Business Day on which they intend to start with the operations described in articles 115 Bis and 195 Bis 5, the updated Annex 10, in accordance with the format provided in this Circular. Mexico City, on June 06, 2019.- The Director of Central Banking Provisions, Mario Ladislao Tamez López Negrete.- Rubric.- The Director of Operational Support, Joaquín Rodrigo Cano Jauregui Segura Millan.- Rubric.- The Director of Payment Systems, Manuel Miguel Ángel Díaz Díaz.- Rubric.- The Director of Risk Management, Francisco Chamú Morales.- Rubric.- The Director of Regulation and Supervision, Viviana Garza Salazar.- Rubric. For any queries regarding the content of this Circular, please contact the Central Banking Authorizations and Consultations Department, at the phones (55) 5237-2308, (55) 5237-2317 or (55) 5237-2000 Ext. 3200.