Circular 9/2024 — Modifications to Circular 7/2023 (Exceptions for Swaps with 28-Day TIIE)

258 OFFICIAL GAZETTE Friday, June 7, 2024

BANK OF MEXICO

CIRCULAR 9/2024 addressed to credit institutions, brokerage houses, investment funds, multipurpose financial societies that have equity links with a multiple banking institution, general warehouse deposits, insurance institutions, and to the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development, regarding the Modifications to Circular 7/2023 (exceptions for Swaps with 28-day TIIE).

A logo appears at the margin, stating: Bank of Mexico.- "2024, Year of Felipe Carrillo Puerto, Meritorious of the Proletariat, Revolutionary and Defender of the Mayab".

CIRCULAR 9/2024

TO CREDIT INSTITUTIONS, BROKERAGE HOUSES, INVESTMENT FUNDS, MULTIPURPOSE FINANCIAL SOCIETIES THAT HAVE EQUITY LINKS WITH A MULTIPLE BANKING INSTITUTION, GENERAL WAREHOUSE DEPOSITS, INSURANCE INSTITUTIONS AND TO THE NATIONAL FINANCIAL INSTITUTION FOR AGRICULTURAL, RURAL, FORESTRY AND FISHERIES DEVELOPMENT:

SUBJECT: MODIFICATIONS TO CIRCULAR 7/2023 (EXCEPTIONS FOR SWAPS WITH 28-DAY TIIE)

The Bank of Mexico, with the purpose of continuing to promote the sound development of the financial system; considering the recommendations of the association that groups financial authorities from various countries, called the Financial Stability Board (FSB, by its acronym in English); as well as that of the group of banking supervisory authorities, called the Basel Committee on Banking Supervision, and of the International Organization of Securities Commissions (IOSCO, by its acronym in English), regarding the characteristics that reference rates used in financial markets must have, and with the object of facilitating the orderly transition to the use of reference rates determined based on actual transactions, has resolved to establish exceptions to the restrictions on the use of the National Interbank Equilibrium Interest Rate in national currency (TIIE) for a term of 28 days, as the underlying asset for specific new derivative operations that are entered into during 2025.

For the above, based on articles 28, paragraphs sixth and seventh, of the Political Constitution of the United Mexican States, 2, 3, fraction I, 24, 26 and 36 of the Bank of Mexico Law, 46, fraction XXV, and 48 of the Credit Institutions Law, 176, first paragraph, of the Securities Market Law, 15, second paragraph, of the Investment Funds Law, 11 Bis 2, fraction XII, and 87-D, fourth paragraph, of the General Law of Organizations and Auxiliary Credit Activities, 133 of the Insurance and Surety Institutions Law, 9, second paragraph, of the National Financiera Organic Law, 6, second paragraph, of the Federal Mortgage Society Organic Law, 9, second paragraph, of the Bienestar Bank Organic Law, 9, second paragraph, of the National Foreign Trade Bank Organic Law, 10, second paragraph, of the National Public Works and Services Bank Organic Law, 8, second paragraph, of the National Bank of the Army, Air Force and Navy Organic Law, 22 of the Law for the Transparency and Ordering of Financial Services, 1, 4, first paragraph, 8, paragraphs fourth and eighth, 10, first paragraph, 12, first paragraph, in relation with 19 Bis 1, fraction XI, and 17, fraction I, of the Internal Regulations of the Bank of Mexico, which grant it the authority to issue provisions through the General Directorate of Central Banking Operations and the Directorate of Central Banking Provisions, respectively, as well as Second, fractions VI and X, of the Agreement on the Assignment of Administrative Units of the Bank of Mexico, has resolved to modify the

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TRANSITIONAL PROVISIONS

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THIRD.- Effective January 1, 2025, Entities, Investment Funds, General Warehouse Deposits, Insurance Institutions and Multipurpose Financial Societies (Sofomes) that enter into new Derivative Operations or Standardized Derivative Operations, as applicable, must refrain from using the National Interbank Equilibrium Interest Rate in national currency for a term of 28 days as the Underlying asset in such operations. However, Entities, Investment Funds, General Warehouse Deposits, Insurance Institutions and Multipurpose Financial Societies may continue to use, as the Underlying asset in such operations, the National Interbank Equilibrium Interest Rate in national currency for a term of 28 days that the Bank of Mexico publishes in accordance with Chapter IV of Title Three of the "Provisions applicable to the operations of credit institutions, multipurpose financial societies regulated that maintain equity links with credit institutions and the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development" issued by the Bank of Mexico through Circular 3/2012, published in the Official Gazette of the Federation on March 2, 2012, as it has been modified by subsequent resolutions, only in the following cases:

I. Derivative Operations or Standardized Derivative Operations entered into before January 1, 2025. In these cases, Entities, Investment Funds, General Warehouse Deposits, Insurance Institutions and Multipurpose Financial Societies may use the aforementioned reference rate until the maturity of the referenced operations.

II. Swap Operations or Standardized Derivative Operations that Entities, Investment Funds, General Warehouse Deposits, Insurance Institutions and Multipurpose Financial Societies enter into before January 1, 2026, with a maturity date less than or equal to December 31, 2025.

III. Swap Operations in accordance with which the parties obligate themselves to exchange between themselves, in future dates or during a determined time, cash flows calculated based on the level of the National Interbank Equilibrium Interest Rate in national currency for a term of 28 days, on one side of the operation, and the National Interbank Equilibrium Interest Rate for a term of one banking business day, known as TIIE de Fondeo, on the other, that Entities, Investment Funds, General Warehouse Deposits, Insurance Institutions and Multipurpose Financial Societies enter into before January 1, 2026, with any maturity date.

TRANSITIONAL PROVISION

SINGLE.- This Circular shall enter into force on the next banking business day following its publication in the Official Gazette of the Federation.

Mexico City, June 4, 2024.- BANK OF MEXICO: General Director of Central Banking Operations, Gerardo Israel García López.- Signature.- Director of Central Banking Provisions, María Teresa Muñoz Arámburu.- Signature.

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