Resolution modifying prudential, accounting and information request provisions applicable to the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development

DOF: 04/01/2018

RESOLUTION that modifies the general provisions in prudential, accounting, and information request matters applicable to the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development.

At the margin a seal with the National Coat of Arms, which says: United Mexican States.- Ministry of Finance and Public Credit.- National Banking and Securities Commission.

The National Banking and Securities Commission, based on what is provided by articles 52, first paragraph of the Organic Law of the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development, 4, sections III, IV, XXXVI and XXXVIII, and 16, section I of the Law of the National Banking and Securities Commission, 12, 15, first paragraph, 22, section I, subsection c), 42, section I and 58 of the Internal Regulations of the National Banking and Securities Commission, as well as 14, section VIII, subsection 1) and 38, sections I, subsections 2), 3) and 11), XIV, subsection 2) of the Agreement by which the President of the National Banking and Securities Commission delegates powers to the Vice Presidents, General Directors and Assistant General Directors of the own Commission, and

CONSIDERING

That it is convenient to adjust the accounting criteria applicable to the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development so that it can cancel, in the period in which they occur, the excesses in the balance of preventive estimates for credit risks, as well as to recognize the recovery of previously written-off credits against the item preventive estimates for credit risks, in order to make them consistent with international standards established in the International Financial Reporting Standards, and

That additionally it is important to incorporate certain Financial Information Standards issued by the Mexican Council of Financial Reporting Standards, A.C., in order that they become applicable to the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development at the time of determining the deadline for their application, with the object that this financial entity is able to comply with them, has resolved to issue the following:

RESOLUTION THAT MODIFIES THE GENERAL PROVISIONS IN PRUDENTIAL, ACCOUNTING AND INFORMATION REQUEST MATTERS APPLICABLE TO THE NATIONAL FINANCIAL INSTITUTION FOR AGRICULTURAL, RURAL, FORESTRY AND FISHERIES DEVELOPMENT

UNIQUE.- The Annex 10, Criteria A-2 "Application of particular rules" and B-4 "Credit Portfolio" of the "General provisions in prudential, accounting and information request matters applicable to the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development", published in the Official Journal of the Federation on June 19, 2006 and modified through resolutions published in the cited Official Journal on November 22, 2013, January 9, 2015 and January 7, 2016, to read as follows:

TITLES FIRST to SIXTH . . .

Annexes 1 to 9 . . .

Annex 10

Accounting Criteria for the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development.

Annexes 11 to 14 . . .

TRANSITIONAL PROVISIONS

FIRST.- The National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development must adjust to what is provided in Criterion B-4 "Credit Portfolio" of Annex 10, which is modified by means of this Resolution from January 1, 2019.

Notwithstanding the foregoing, the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development may opt to apply Criterion B-4 "Credit Portfolio" of Annex 10, which is reformed by this instrument, from the day following its publication, being required to give notice that it exercised such option to the National Banking and Securities Commission no later than 10 business days following the date on which it will initiate the early application of said criterion.

SECOND.- The Financial Information Standards B-17 "Determination of fair value", C-3 "Accounts receivable", C-9 "Provisions, contingencies and commitments", C-16 "Impairment of financial instruments receivable", C-19 "Financial instruments payable" and C-20 "Financial instruments to collect principal and interest", D-1 "Revenue from contracts with customers" and D-2 "Costs from contracts with customers" issued by the Mexican Council of Financial Reporting Standards, A.C., and referred to in paragraph 4 of Criterion A-2 "Application of particular standards" of Annex 10 which is modified by means of the present instrument will enter into force on January 1, 2019.

Respectfully

Mexico City, December 21, 2017.- National Banking and Securities Commission:
The Vice President of Normativity, Arcelia Olea Leyva.- Initials.- The Vice President of Supervision of Development Banking and Popular Finance, Cecilia Teresa Mondragón Lora.- Initials.

A-2 APPLICATION OF PARTICULAR RULES

Objective and scope

This criterion aims to clarify the application of the particular rules of the IMCP, as well as the establishment of particular rules of general application to which the entity must be subject.

Matters covered by this criterion are:

a)

the application of some of the particular rules made known in the bulletins of Series B, C and D of the GAAP issued by the IMCP, which the entity must comply with;

b)

clarifications to the particular rules contained in the aforementioned bulletins, and

c)

particular rules of general application for the entity.

The application of particular rules will not proceed in the case of operations that by express legislation are not permitted or are prohibited, or are not expressly authorized by the legal and regulatory provisions applicable to the entity.

Bulletins issued by the IMCP

In accordance with what is established in criterion A-1 "Basic scheme of the set of accounting criteria applicable to the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development", the entity will observe, until there is an express pronouncement by the CNBV, the particular rules contained in the bulletins of Series B "Principles relating to financial statements in general", C "Principles applicable to items or specific concepts" and D "Special problems of determination of results" of the GAAP issued by the IMCP detailed below, or those that replace them:

Series B

Objectives of financial statements
............................................................................... B-1

Comprehensive income
....................................................................................................... B-4

Financial information at interim dates
....................................................................... B-9

Recognition of the effects of inflation in financial information (Integrated Document) ............................................................................................. B-10

Events after the date of the financial statements ....................................................... B-13

Determination of fair value ................................................................................ B-17

Series C

Accounts receivable
.................................................................................................. C-3

Prepayments
................................................................................................... C-5

Property, plant and equipment
.................................................................................... C-6

Intangible assets
................................................................................................... C-8

Provisions, contingencies and
Commitments
......................................................................................................... C-9

Equity
..................................................................................................... C-11

Impairment of long-lived assets and their disposal ........................................ C-15

Impairment of financial instruments receivable ................................................................ C-16

Financial instruments payable ............................................................................... C-19

Financial instruments to collect principal and interest ........................................................ C-20

Series D

Revenue from contracts with customers ................................................................................. D-1

Costs from contracts with customers .................................................................................. D-2

Labor obligations
.............................................................................................. D-3

The circulars issued by the IMCP regarding the concepts referred to in the previous bulletins shall be considered as an extension of the particular rules of Series B, C and D cited, since these clarify points of the bulletins or give interpretations thereof.

Clarifications to the particular rules issued by the IMCP

Taking into consideration that the entity carries out specialized operations, it is necessary to establish clarifications that adapt the particular rules of recording, valuation, presentation and, if applicable, disclosure, established by the IMCP. In virtue thereof, the entity, when observing what is established in paragraphs 4 and 5 above, must adjust to the following:

B-9 Financial information at interim dates

Disclosure rules

With respect to paragraph 5 of Bulletin B-9, for the determination of financial information at interim dates the "Accounting criteria for the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development" shall be followed, a situation that will be disclosed in note to the financial statements.

Regarding the periods referred to in paragraph 34 of Bulletin B-9, the entity, when presenting financial statements at interim dates, must include at least the information of the current period, comparative with the immediate preceding period and with the information corresponding to the same period of the immediate preceding fiscal year, as well as the accumulated information from the beginning of the fiscal year up to the date of presentation of the current period, comparative with the same accumulated period of the immediate preceding fiscal year. What is indicated, will be applicable only to the balance sheet and the statement of results, it not being necessary that its notes be presented in a comparative form.

The disclosure of financial statements at interim dates must meet the objectives mentioned below:

1.

Describe, and if applicable explain, the most important items and modifications in the financial position and in the operational performance of the entity since the last issuance of annual financial statements.

2.

Provide additional relevant information that complements the figures presented in the financial information.

B-10 Recognition of the effects of inflation in financial information (Integrated Document)

Determination of the monetary position

For purposes of calculating the monetary position, adjudicated goods shall be considered as monetary items, in addition to those indicated by the IMCP.

The determination of the net monetary position of each of the items that comprise it, will be made based on average daily balances.

The effect of net monetary position determined will be recorded in the item "Monetary position result" as part of earned equity.

Likewise, the entity must disclose the average balance of the main monetary assets and liabilities that were used for the determination of the monetary position of the period.

Transitory account
Once the adjustments for updating non-monetary items against the transitory account have been made, the balance of this account must be equivalent to the monetary position result of the entity, such that when registering this amount, said account is settled. If there is a remaining balance in the aforementioned transitory account account, it will be cancelled against the monetary position result of the fiscal year in question.

Update factor

For its determination, it will adhere to what is established in paragraph 37.

C-3

Accounts receivable

Scope

For the purposes of Bulletin C-3, accounts receivable derived from the operations referred to in criteria B-3 "Derivative financial instruments" and B-4 "Credit Portfolio", issued by the CNBV, shall not be included, since the rules of recording, valuation, presentation and disclosure applicable are contemplated in the aforementioned criteria.

Loans to officials and employees

Interest derived from loans to officials and employees will be presented in the statement of results within the item of other products.

Loans to former employees

Loans to former employees will receive the same treatment as loans to officials and employees.

Estimation for uncollectibility or difficult collection

The estimation for uncollectibility or difficult collection corresponding to items directly related to the credit portfolio such as litigation expenses, will be determined by applying the same risk percentage assigned for the associated credit, in accordance with what is established in criterion B-4 "Credit Portfolio".

For the loans that the entity grants to its officials and employees, it must create, if applicable, an estimation that reflects their degree of uncollectibility.

The estimation of accounts receivable that are not included in the two previous paragraphs, must be constituted by the total amount of the debt according to the following deadlines:

a)

at 60 natural days following their initial registration, when they correspond to unidentified debtors, and

b)

at 90 natural days following their initial registration, when they correspond to identified debtors.

No estimation for uncollectibility or difficult collection will be created in the following cases:

a)

tax refunds;

b)

creditable value added tax, and

c)

liquidating accounts.

The concepts resulting from operations between parent company and branches will be cleared at least at the close of each month, so they should not have a balance on that date.

C-9 Liability, provisions, contingent assets and liabilities and commitments

Scope

For the purposes of Bulletin C-9, liabilities related to the operations referred to in criteria B-3 "Derivative financial instruments" and B-6 "Leases" are not included, since these are contemplated in said criteria.

Likewise, what is established in this Bulletin will not apply for the determination of the estimation of the credit portfolio, other accounts receivable, on discount of documents or guarantees granted, in which case it will be governed by what is indicated in criterion B-4 "Credit Portfolio" or in paragraphs 19 to 23 above and in criterion B-7 "Guarantees", respectively.

C-11 Equity

For the purposes of this Bulletin, equity shall be understood as patrimony, which is divided into: a) contributed equity which is represented by the contributions made by the Federal Government in accordance with applicable legislation, and b) earned equity which corresponds to reserves, results of previous fiscal years and items that form part of comprehensive income. Patrimony, both contributed and earned, includes its inflationary effect.

At the balancing of the balance sheet, it must disclose the historical amount of the contributions referred to in the previous paragraph.

Particular rules of general application

Goods promised for sale or with reservation of ownership

In cases where a promise of sale contract or a purchase-sale contract with reservation of ownership is entered into, the good must remain in the balance sheet at the same book value as on the date of signing said contract, even if a selling price higher than the same has been agreed upon, reclassifying it as restricted.

Payments received on account of the good must be registered in the liability as an advance payment.

On the date on which the conditions are met to consider the operation as a transfer of ownership, profit or loss generated must be recognized in results as other products or other expenses.

In the event that the contract is rescinded, the good will cease to be considered as restricted and those advance payments on which the entity may dispose of in accordance with the conditions of the contract, will be recognized as other products.

Guarantees

In operations where the entity delivers assets as collateral, it must reclassify them as a restricted asset, while those it receives will register them in off-balance sheet accounts. In both cases, such assets will follow the rules of valuation, presentation and disclosure in accordance with the criterion that corresponds to the type of good in question.

Liquidating accounts

Regarding operations carried out by the entity in matters of investments in securities and derivative financial instruments, once these reach their maturity and while the corresponding settlement is not perceived, as agreed in the respective contract, the amount of the matured operations to be collected or paid must be registered in liquidating accounts.

Likewise, for foreign exchange purchase-sale operations in which immediate settlement is not agreed upon, or spot date, they must register in liquidating accounts the amount to be collected or paid, until the settlement of the same is effected.

For purposes of presentation of financial statements, the balance of debtor and creditor liquidating accounts resulting from foreign exchange purchase-sale operations and investments in securities may be offset provided that in accordance with what is established in paragraph 43, the operations that generated said balances have been concluded with the same counterparty, on concepts with similar characteristics in terms of species and terms, as well as that a description of the procedure carried out in the offsetting of the aforementioned liquidating accounts is disclosed.

Various estimations and provisions

Estimations or provisions with undefined and/or unquantifiable purposes shall not be created, increased or decreased against the results of the fiscal year, as established in paragraph 120 of Bulletin C-9 issued by the IMCP.

Update factor

For the determination of the update factor, the value of the Investment Unit (UDI) must be used instead of the National Consumer Price Index.

Accrued interest

Accrued interest for the different asset items must be presented in the balance sheet together with their corresponding principal.

Foreign currency operations

In the formulation of financial statements, the exchange rate to be used to establish the equivalence of the national currency with the United States dollar (US$), will be that of the valuation date, which is published by the Bank of Mexico in the Official Journal of the Federation (DOF) on the next banking business day following the same, applicable for the settlement of operations two business days after the aforementioned valuation date.

In the case of currencies other than the US dollar, the respective currency must be converted to US dollars. To carry out such conversion, they will consider the quotation that applies for the corresponding currency in relation to the aforementioned dollar in international markets, as established by the Bank of Mexico in the applicable regulation.

Likewise, the amount of operations denominated in foreign currency by the most relevant currencies for the entity must be disclosed, as well as the exchange rate used and its equivalent in national currency, in accordance with what is stated in the two previous paragraphs.

Recognition or cancellation of assets and/or liabilities

The recognition or cancellation in the financial statements of assets and/or liabilities arising from foreign exchange purchase-sale operations, investments in securities and derivative financial instruments, will be carried out on the date on which the operation is concluded, regardless of the settlement or delivery date of the good.

Offsetting rules

Assets and liabilities must be offset and the net amount presented in the balance sheet, when:

a)

there is a contractual right to offset the amounts registered, at the same time that there is the intention to settle them on a net basis or, alternatively, to realize the asset and settle the liability simultaneously, or

b)

the financial assets and liabilities are of the same nature i.e., arise from the same contract, have the same maturity term and will be settled simultaneously.

The foregoing does not apply to those operations in which the corresponding accounting criteria establish the method of offsetting them.

Value of global exposure to risk

The value of global exposure to risk (VAR) must be disclosed, broken down by type of risk (credit, legal, liquidity, market and operational).

Fair value

The fair value referred to in criteria B-2 "Investments in securities" and B-3 "Derivative financial instruments" will be provided by third parties without conflict of interest.

Valuation of the UDI

The value to be used will be that made known by the Bank of Mexico in the DOF, applicable on the date of the valuation.

B-4 CREDIT PORTFOLIO

Objective and scope

This criterion aims to define the particular rules of application of accounting principles relating to the recording, valuation, presentation and disclosure in the financial statements, of the credit portfolio of the entity.

This criterion also includes the accounting guidelines relating to the preventive estimation for credit risks.

The following are not objects of this criterion:

a)

The establishment of the methodology for the determination of the preventive estimation for credit risks.

b)

The accounting rules relating to values issued in series or in mass, that are quoted in recognized markets and that the entity maintains in proprietary position, even if they are linked with credit operations, being matter of criterion B-2 "Investments in securities".

Definitions

Grantee.- The natural or legal person, or trust to whom a credit is granted.

Portfolio rating.- Methodology used by the entity to recognize the credit risk associated with the credits granted by itself.

Payment Capacity.- For the purposes of this criterion, payment capacity shall be understood to exist when the conditions established for that effect in the General Provisions on prudential, accounting, and information requirements applicable to the entity are met.

Non-performing Portfolio.- Those commercial credits for which it is determined, based on current information and facts as well as the credit review process, that there is a considerable probability that they will not be fully recovered, both their principal and interest components, in accordance with what is established in the contract. Both current and past-due portfolios are susceptible to being identified as non-performing.

Past-due Portfolio.- Composed of credits whose borrowers have been declared in commercial bankruptcy, or whose principal, interest, or both, have not been settled in the originally agreed terms, considering for this effect what is established in paragraphs 37 to 50 of this criterion.

Performing Portfolio.- Integrated by credits that are current in their payments of both principal and interest, as well as by those credits with past-due principal or interest payments that have not been located in the scenarios provided for in this criterion to consider them as past-due, and those that having been classified as past-due portfolio are restructured or renewed and have evidence of sustained payment in accordance with what is established in this criterion.

Write-off.- Is the cancellation of the credit when there is evidence that formal collection efforts have been exhausted or the practical impossibility of recovering the credit has been determined.

Credit Consolidation.- Is the integration into a single credit of two or more credits granted by the entity to the same borrower.

Credit.- Asset resulting from the financing granted by the entity based on what is established in article 11 of the Organic Law of the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development.

Credits to Financial Entities.- Those granted to rural financial intermediaries so that they, in turn, grant financing to promote agricultural, forestry, fisheries, or any other economic activity linked to the rural environment that producers carry out.

Consumer Credits.- Credits of this type are considered those granted to producers, intended for the acquisition of durable consumer goods (ABCD), credit cards, liquidity credits, even if they have real estate collateral, and any other intended for the consumption of goods or services.

Commercial Credits.- Those granted to producers in order to finance agricultural, forestry, fisheries, or any other economic activity linked to the rural environment that they carry out, including discount operations and, where applicable, capitalizable leasing and factoring.

Preventive Estimate for Credit Risks.- An impact made against results that measures that portion of the credit estimated to have no viability of collection.

Rural Financial Intermediaries.- Savings and loan cooperatives, popular financial societies, community financial societies, credit unions, general warehouse receipts, and other financial intermediaries determined by current legislation, as well as those agreed by the Board of Directors of the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development (Board of Directors) and that contribute to the fulfillment of its purpose.

Credit Line.- Amount of money made available to the borrower by the entity.

Payment.- Real delivery of the thing or amount due or the provision of the service that had been agreed.

Write-offs, discounts, waivers, bonuses, and discounts made on a credit or group of credits are not considered payments.

Sustained Credit Payment.- Borrower's payment compliance without delay for the total amount due of principal and interest, for a minimum of three consecutive amortizations of the credit's payment scheme, or in the case of credits with amortizations covering periods greater than 60 natural days, the payment of one installment.

For credit restructurings with periodic payments of principal and interest whose amortizations are less than or equal to 60 days, in which the payment periodicity is modified to shorter periods, the number of amortizations equivalent to three consecutive amortizations of the original payment scheme of the credit must be considered. For credits that remain with a single payment scheme of principal at maturity, what is provided in the following paragraph 25 shall apply.

In the case of consolidated credits, if pursuant to paragraph 49 two or more credits had originated the transfer to past-due portfolio, to determine the required amortizations, the original payment scheme of the credit whose amortizations equate to the longest term must be attended to.

In all cases, in demonstrating that there is sustained payment, the entity must have available to the CNBV evidence justifying that the borrower has payment capacity at the time the restructuring or renewal takes place. The elements that must be taken into account for such effects are at least the following: the intrinsic probability of default of the borrower, the guarantees granted to the restructured or renewed credit, the payment priority vis-à-vis other creditors, and the borrower's liquidity vis-à-vis the new financial structure of the financing.

Regarding credits with a single payment of principal at maturity, regardless of whether interest payments are periodic or at maturity, it is considered that there is sustained credit payment when any of the following scenarios occur:

a)

the borrower has covered at least 20% of the original amount of the credit at the time of restructuring or renewal, or

b)

the amount of accrued interest has been covered in accordance with the payment scheme for the corresponding restructuring or renewal for a term of 90 days.

The early payment of amortizations of restructured or renewed credits, other than those with a single payment of principal at maturity, regardless of whether interest is paid periodically or at maturity, is not considered sustained payment. This is the case of amortizations of restructured or renewed credits that are paid without the natural days equivalent to the periods required pursuant to the previous paragraph 21 having elapsed.

Producers.- Are natural or legal persons, including those covered by the Agrarian and National Waters Laws, who dedicate themselves to agricultural, forestry, fisheries, or any other economic activity linked to the rural environment.

Restructuring.- Is that operation that derives from any of the following situations:

a)

expansion of guarantees covering the credit in question, or

b)

modifications to the original conditions of the credit or the payment scheme, among which are:

-

change of the interest rate established for the remaining term of the credit;

-

change of currency or unit of account;

-

granting of a grace period regarding the fulfillment of payment obligations in accordance with the original terms of the credit, or

-

extension of the credit term, with the exception of the grace period referred to in the following paragraph 38.

Renewal.-

Is that operation in which the balance of a credit is settled partially or totally, through an increase in the original amount of the credit, or with the proceeds from another credit contracted with the entity,

in which the same debtor is a party, a joint obligor of said debtor, or another person who due to their asset links constitutes common risks.

Notwithstanding the foregoing, a credit will not be considered renewed by the provisions made during the validity of a pre-established credit line, provided that the borrower has settled the entirety of the payments due to them in accordance with the original conditions of the credit.

Credit Risk.- Refers to the possibility that debtors or counterparties to contracts do not fulfill the originally agreed obligation.

Recording and Valuation Rules

The amount to be recorded in the credit portfolio shall be the amount effectively granted to the borrower. To this amount, the interest that accrues in accordance with the credit's payment scheme will be added.

For document discount operations carried out by the entity, it will recognize in the asset the total value of the portfolio received, recording the cash outflow corresponding to it and recognizing the difference that arises as interest charged in advance, which will be amortized under the straight-line method throughout the life of the credit. Regarding the commission charged for the discount, it will be applied directly to results on the date of contracting.

In cases where interest collection is made in advance, these will be recognized as an advance charge in the deferred credits item. Said charge will be amortized during the life of the credit under the straight-line method against the results of the exercise, in the interest income item.

In the case of credit lines that the entity has granted, in which not all of the authorized amount is exercised, the unused portion of them must be kept in off-balance sheet accounts.

Charged commissions that represent a yield adjustment, that is, those that come from credits in which the interest rate is agreed below prevailing market rates, will be recorded as a deferred credit, which will be amortized against the results of the exercise, under the straight-line method during the life of the credit, while those arising from the initial granting of credits and credit lines will be recorded in results as other products on the date the charge is made.

Transfer to Past-due Portfolio

The outstanding balance in accordance with the payment conditions established in the credit contract will be registered as past-due portfolio when:

1.

it is known that the borrower has been declared in commercial bankruptcy, pursuant to the Commercial Bankruptcy Law, or

2.

their amortizations have not been settled in their entirety in the originally agreed terms, considering for this effect the following:

a)

if the debts consist of credits with a single payment of principal and interest at maturity and present 30 or more natural days past due;

b)

if the debts refer to credits with a single payment of principal at maturity and with periodic interest payments and present 90 or more days past due for the respective interest payment, or 30 or more natural days past due for the principal;

c)

if the debts consist of credits with periodic partial payments of principal and interest and present 90 or more natural days past due, and

d)

if the debts consist of revolving credits and present two monthly billing periods past due, or, in case the billing period is greater than monthly, the corresponding to 60 or more natural days past due.

A grace period with respect to the terms established in item 2 of the previous paragraph may be authorized, up to 90 days, in the case of the last or, where applicable, only amortization, provided that:

a)

the credit is classified as performing portfolio at the time of granting the grace period;

b)

it is documented that the granted grace period attends exclusively to the temporary lack of liquidity of the borrower, and

c)

express authorization is obtained from the minor credit committee of the National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development.

With respect to the maturity terms referred to in item 2 of the previous paragraph, monthly periods may be used, regardless of the number of days each calendar month has, in accordance with the following equivalences:

30 days one month

60 days two months

90 days three months

Likewise, in case the fixed term expires on a non-business day, said term shall be understood to conclude on the first following business day.

Restructurings and Renewals

Past-due credits that are restructured or renewed will remain within the past-due portfolio, as long as there is no evidence of sustained payment.

Credits with a single payment of principal at maturity, regardless of whether interest is paid periodically or at maturity, that are restructured during their term or renewed at any time, will be considered as past-due portfolio as long as there is no evidence of sustained payment, in accordance with what is established in paragraph 25 of this criterion.

Credits granted under a credit line, revolving or not, as well as unsecured credits that are restructured or renewed at any time, may remain in performing portfolio as long as there are elements that justify the debtor's payment capacity. Additionally, the borrower must have:

a)

settled the entirety of the due interest, and

b)

covered the entirety of the payments to which they are obligated in terms of the contract on the date of the restructuring or renewal.

Performing credits with characteristics different from those indicated in the two previous paragraphs that are restructured or renewed, without at least 80% of the original term of the credit having elapsed, will be considered to continue being performing, only when:

a)

the borrower has covered the entirety of the accrued interest on the date of the renewal or restructuring;

b)

the borrower has covered the principal of the original amount of the credit, which on the date of the renewal or restructuring should have been covered, and

c)

the grace period, if any, provided for in the original conditions of the credit has not been extended.

In case all the conditions described in the previous paragraph are not met, they will be considered as past-due from the moment they are restructured or renewed and until such time as there is evidence of sustained payment.

When it concerns performing credits with characteristics different from those indicated in paragraphs 42 and 43 above that are restructured or renewed during the course of the final 20% of the original term of the credit, these will be considered performing only when the borrower has:

a)

settled the entirety of the accrued interest on the date of the renewal or restructuring;

b)

covered the principal of the original amount of the credit, which on the date of the renewal or restructuring should have been covered, and

c)

covered 60% of the original amount of the credit.

In case all the conditions described in the previous paragraph are not met, they will be considered as past-due from the moment they are restructured or renewed and until such time as there is evidence of sustained payment.

Performing credits with periodic partial payments of principal and interest that are restructured or renewed on more than one occasion, may remain in performing portfolio if, in addition to having elements that justify the debtor's payment capacity, the borrower meets the conditions established in paragraphs 44 or 46 above, as applicable.

In the case where, through a restructuring or renewal, various credits granted by the entity to the same borrower are consolidated, each of the consolidated credits must be analyzed as if they were restructured or renewed separately, and if such analysis concludes that one or more of said credits would have been transferred to past-due portfolio as a result of said restructuring or renewal, then the total balance of the consolidated credit must be transferred to past-due portfolio.

What is provided in paragraphs 42 to 49 shall not apply to those restructurings that on the date of the operation present payment compliance for the total amount due of principal and interest and only modify one or several of the following original conditions of the credit:

• Guarantees: only when they imply the expansion or substitution of guarantees for others of better quality.

• Interest Rate: when the agreed interest rate is improved for the borrower.

• Currency: provided that the rate corresponding to the new currency is applied.

• Payment Date: only in the case that the change does not imply exceeding or modifying the periodicity of payments. In no case shall the change in the payment date allow the omission of payment in any period.

Suspension of Interest Accrual

The accrual of accrued interest on credit operations must be suspended at the moment the outstanding balance of the credit is considered past-due.

For those credits that contractually capitalize interest to the amount of the debt, the suspension of interest accrual established in the previous paragraph shall apply.

As long as the credit remains in past-due portfolio, the control of accrued interest will be kept in off-balance sheet accounts. In case such past-due interest is collected, it will be recognized directly in the results of the exercise as interest income.

Unpaid Accrued Interest

With respect to unpaid accrued interest corresponding to credits that are considered as past-due portfolio, an estimate must be created for an amount equivalent to the total of these, at the time of the transfer of the credit as past-due portfolio.

Preventive Estimate for Credit Risks

Regarding past-due credits in whose restructuring the capitalization of previously recorded unpaid accrued interest in off-balance sheet accounts is agreed, the entity must create an estimate for 100% of said interest. The estimate may be cancelled as the collection of said interest is made, and, where applicable, the remaining balance, when there is evidence of sustained payment.

According to the relevant provisions, the amount of the preventive estimate for credit risks will be calculated based on the rules issued by the Secretariat of Finance and Public Credit for the classification of the entity's credit portfolio.

Said estimate must be determined based on the different methodologies authorized by the CNBV for each type of credit and recognized in the results of the exercise, with the periodicity established in the aforementioned methodologies.

Write-offs, Eliminations, and Recoveries of Credit Portfolio

It must be periodically evaluated whether a past-due credit should remain in the balance sheet, or be written off. Such write-off or elimination will be carried out by canceling the outstanding balance of the credit against the preventive estimate for credit risks. When the credit to be written off exceeds the balance of its associated estimate, before carrying out the write-off, said estimate must be increased up to the amount of the difference.

In addition to what is established in the previous paragraph, the entity may opt to eliminate from its asset those past-due credits that are provisioned at 100% in accordance with what is established in paragraphs 56 and 57, even if they do not meet the conditions to be written off. For such effects, the entity must cancel the outstanding balance of the credit against the preventive estimate for credit risks.

Any recovery derived from credit operations previously written off or eliminated pursuant to paragraphs 58 and 59, must be recognized in the results of the exercise, within the item of preventive estimate for credit risks.

Discounts, Waivers, Bonuses, and Discounts on the Portfolio

Discounts, waivers, bonuses, and discounts will be recorded charged to the preventive estimate for credit risks. In case the amount of these exceeds the balance of the estimate associated with the credit, estimates must previously be constituted up to the amount of the difference.

Credits Denominated in Foreign Currency and UDIS

For the case of credits denominated in foreign currency and UDIS, the estimate corresponding to said credits will be denominated in the currency or unit of account of origin that corresponds.

Cancellation of Excesses in the Preventive Estimate for Credit Risks

When the balance of the preventive estimate for credit risks has exceeded the amount required pursuant to paragraph 56, the differential must be cancelled in the period in which such changes occur against the results of the exercise, affecting the same concept or item that originated it, that is, the preventive estimate for credit risks.

Transfer to Performing Portfolio

Past-due credits will be returned to performing portfolio in which the pending payment balances (principal and interest, among others) are settled in total, or, that being restructured or renewed credits, meet the sustained payment of the credit.

Presentation Rules

Balance Sheet

a)

the portfolio will be grouped into performing and past-due, according to the type of credit (commercial credits, to financial entities, and consumer credits);

b)

the preventive estimate for credit risks must be presented in a separate item, subtracting from the total credit portfolio;

c)

interest charged in advance must be presented together with the portfolio that gave rise to it;

d)

charged commissions that represent a yield adjustment will be presented within the deferred credits item, and

e)

the unused amount of credit lines that the entity has granted will be presented in off-balance sheet accounts as credit commitments.

Income Statement

Accrued interest, amortization of interest charged in advance, charged commissions that represent a yield adjustment and for document discount operations, as well as exchange profit or loss and the result from UDIS valuation will be grouped as interest income or expenses.

The constitution of the preventive estimate for credit risks will be presented as a specific item, immediately after the financial result.

Charged commissions derived from the initial granting of credits and credit lines will be presented as part of the other products item.

Disclosure Rules

Through notes to the financial statements, the following must be revealed:

a)

main policies and procedures established for the granting, control, and recovery of

credits, as well as those related to the evaluation and monitoring of credit risk;

b)

policies and procedures established to determine credit risk concentrations;

c)

accounting policies and methods used to identify problematic commercial credits, whether current or overdue;

d)

breakdown of the total balance of commercial credits, identifying them as problematic and non-problematic, both current and overdue;

e)

breakdown of the current and overdue portfolio by type of credit (commercial credits, to financial entities, and consumer credits), distinguishing those denominated in national currency, foreign currency, and UDIS;

f)

in aggregate form, the percentage of concentration and main characteristics of the portfolio by sector, region, or economic group, understood as the latter being groups of natural and legal persons that constitute common risks due to their property or liability links;

g)

identification by type of credit, of the balance of the overdue portfolio from the date it was classified as such, in the following terms: 1 to 180 natural days, 181 to 365 natural days, 366 natural days to 2 years, and more than 2 years overdue;

h)

explanation of the main variations in the overdue portfolio identifying, among others: restructurings, renewals, adjudications, discounts, write-offs, transfers to the current portfolio, as well as from the current portfolio;

i)

number of credits for which the waiting period referred to in the previous paragraph 38 was granted, identifying their amount at the date of the aforementioned concession and the term granted. The foregoing broken down by region and type of credit;

j)

brief description of the methodology to determine specific and general preventive estimates for credit risks;

k)

classification by degree of risk, amount of the portfolio, as well as of the preventive estimate for credit risks, disaggregated into: commercial credits, to financial entities, and consumer credits, as well as the amount of the portfolio exempt from such classification;

l)

balance of the preventive estimate for credit risks, breaking it down into general and specific, as well as by type of credit;

m)

movements made to the preventive estimate for credit risks during the exercise due to its creation, collections, recoveries, write-offs, discounts, forgiveness, bonuses, discounts, and losses by adjudication, among others;

n)

amount derived from the cancellation of the preventive estimate for credit risks, and exhaustively, the reasons that motivated such cancellation;

o)

amount of overdue credits that, in accordance with paragraph 59, were eliminated from assets;

p)

the main policies and procedures related to the granting of restructurings and renewals, including restructurings or renewals that consolidate various credits granted by the entity to the same borrower, as well as the elements taken into account to evidence sustained payment;

q)

total accumulated amount of what was restructured or renewed by type of credit (commercial, to financial entities, and consumer) distinguishing those originated in the exercise. Each of these amounts must be broken down into:

i.

overdue credits that were restructured or renewed;

ii.

restructurings or renewals that were transferred to the overdue portfolio for having been restructured or renewed, in compliance with paragraph 42;

iii.

restructured or renewed credits that remained in the current portfolio in accordance with paragraphs 43 to 48;

iv.

consolidated credits that as a result of a restructuring or renewal were transferred to the overdue portfolio, in accordance with paragraph 49, and

v.

restructured credits to which the criteria regarding transfer to the overdue portfolio were not applied based on paragraph 50.

r)

amount and nature of additional guarantees and concessions granted in restructured credits;

s)

total amount of discounts granted;

t)

breakdown of interest and commissions by type of credit;

u)

impact on the income statement derived from the suspension of the accumulation of interest on the overdue portfolio;

v)

amount of accrued but uncollected interest recorded in off-balance sheet accounts;

w)

amount of interest income recognized in the credit in question, at the time of the capitalization referred to in paragraph 55, and

x)

amount of credit lines registered in off-balance sheet accounts.

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