Resolution modifying the general provisions applicable to Credit Institutions

DOF: 04/12/2020

RESOLUTION modifying the general provisions applicable to Credit Institutions

A seal bearing the National Coat of Arms appears at the margin, which reads: United Mexican States.- TREASURY.- Ministry of Finance and Public Credit.- National Banking and Securities Commission.

The National Banking and Securities Commission, with the prior agreement of its Board of Directors and based on the provisions of Article 50 of the Credit Institutions Law; as well as Articles 4, paragraphs XXXVI and XXXVIII, and 16, paragraphs I and VI of the National Banking and Securities Commission Law, having received the prior opinion of the Bank of Mexico, and

CONSIDERING

That in order to reduce the capital requirement for credit risk, credit institutions may apply credit risk hedging techniques that use real guarantees, that is, consider those real guarantees received from their clients to guarantee the payment of credits; therefore, to eliminate confusion, it is necessary to clarify in the regulation that Institutions, regardless of the credit risk hedging method used, must establish internal methods and controls to guarantee that the real guarantees received from the borrower are not securities issued by the same common risk group to which the borrower belongs;

That, in another order of ideas, the Eighth Transitory Article of the Resolution modifying the General Provisions applicable to Credit Institutions, published in the Official Journal of the Federation on November 28, 2012, provides a vacatio legis regarding the application of the matrix contained in Article 220 of said provisions as of that date; however, this latter article has been reformed on several occasions, so the legal situation provided for in the transitory article can no longer be configured;

That in order to avoid a possible antinomy and confusion between the scope of the content of the Eighth Transitory Article referred to above and what is provided in the current Article 220 of the aforementioned provisions, it is necessary to expressly render said transitory provision ineffective;

That derived from the current situation in which credit institutions have reduced their operational capacity and human resources due to the sanitary measures adopted for the health contingency caused by the disease generated by the virus known as COVID-19, without it being feasible to specify the times in which human and technical resources can be allocated to implement the modifications made to the General Provisions applicable to Credit Institutions by resolution published in the Official Journal of the Federation on March 13, 2020, as well as the economic impacts that these institutions might have against the effects of the aforementioned health contingency, it is necessary to postpone the entry into force of the aforementioned modifications as well as those Financial Information Standards contained in Annex 33 modified as a consequence of the changes to the aforementioned provisions of December 27, 2017, has resolved to issue the following:

RESOLUTION MODIFYING THE GENERAL PROVISIONS APPLICABLE TO

CREDIT INSTITUTIONS

FIRST. Article 2 Bis 32, paragraph III, subsection a) of the General Provisions applicable to Credit Institutions published in the Official Journal of the Federation on December 2, 2005 and last modified on November 19, 2020, is REFORMED, to read as follows:

" Article 2 Bis 32.-

. . .

I. and II.

. . .

III.

. . .

a)

That the real guarantees received are not securities issued by the same Common Risk Group to which the borrower belongs.

b) and c)

. .

. "

SECOND. The transitory articles FIRST, THIRD, FIFTH, SEVENTH, EIGHTH, NINTH and TENTH are REFORMED; and the transitory article ELEVENTH of the Resolution modifying the General Provisions applicable to Credit Institutions, published in the Official Journal of the Federation on March 13, 2020, is REPEALED, to read as follows:

" FIRST.- This Resolution shall enter into force on January 1, 2022, with the exception of the modifications to articles 2 Bis 98 c, 51 Bis and 51 Bis 3, as well as the substitution of Annex 71, which shall enter into force the day following the publication of this Resolution in the Official Journal of the Federation. "

" THIRD.- Credit institutions, in order to constitute the amount of preventive reserves for credit risks as established in this Resolution, may opt for one of the alternatives indicated in the following paragraphs:

I.

Recognize in the accounting capital, within the result of previous exercises, as of January 31,

2022 the initial accumulated financial effect derived from applying for the first time the credit portfolio rating methodology that corresponds, provided that it reveals in the corresponding quarterly and annual financial statements of the 2022 exercise, as well as in any public communication of financial information, at minimum the following:

a)

The rating methodology used to constitute the amount of reserves;

b)

That it opted to recognize the initial accumulated financial effect derived from the

first application of this Resolution;

c)

A broad explanation of the accounting record made to recognize the said effect;

d)

The amounts that would have been recorded and presented both in the statement of financial position

as well as in the statement of comprehensive income had it opted to effect the recognition of the

aforementioned effect in the results of the exercise, and

e)

A detailed explanation of the items and amounts for which the accounting

affectation was made.

For the purposes of this paragraph, the initial accumulated financial effect shall be understood as the difference resulting from subtracting on the same date the reserves that must be constituted for the balance

of the Credit Portfolio in accordance with this instrument, applying the methodology by which they have

opted, effective from January 1, 2022, minus the reserves that would be held for the balance of

said portfolio, with the methodology in effect until December 31, 2021.

II.

Constitute the amount of preventive reserves for credit risks at 100%, within a period of 12

months, counted from January 31, 2022. Regarding this, Credit Institutions must

constitute said reserves cumulatively according to the following formula:

MEFACIi =

MEFACI x

(i/12)

Where:

MEFACIi = Amount of reserves to recognize in accounting capital for the Credit Portfolio

corresponding to month i.

MEFACI = Amount of reserves to constitute for the initial accumulated financial effect referred to in

paragraph I of this transitory article.

i = 1, ... , 12, where 1 represents the first month elapsed from the entry into force referred to in

transitory article FIRST.

Credit institutions must reveal in the quarterly and annual financial statements of the

2022 exercise the effect derived from what is provided by this paragraph, as well as in any

public communication of financial information, at minimum the following:

a)

The rating methodology used to constitute the amount of reserves in accordance with

this paragraph;

b)

That it opted to recognize the initial accumulated financial effect derived from the

first application of these provisions in accordance with this paragraph;

c)

A broad explanation of the calculation made in accordance with this formula and its effect both in

the statement of financial position as well as in the statement of comprehensive income, as well as in its

capitalization index and its components, and

d)

A detailed explanation of the items and amounts for which the accounting

affectation was made.

When the amount of preventive reserves to be constituted by the application of the methodology used from

January 1, 2022 is greater than the balance of the previous exercise result item, the difference

that results shall be recognized in the results of the corresponding exercise.

When the preventive estimates for credit risks that they had constituted prior to

January 1, 2022 were greater than 100% of the amount required in accordance with the methodology by which they have

opted effective from such date, credit institutions shall release the excess reserves adhering to

what is provided in the accounting criteria referred to in Article 174 of the General Provisions applicable to

credit institutions.

Credit institutions must have constituted 100% of the amount of preventive reserves for

credit risks corresponding to the rating of the Credit Portfolio, derived from the use of the applicable methodology, from December 31, 2022, except for what is established in article

transitory SECOND of this Resolution. "

" FIFTH.- As a practical solution, credit institutions in the application of the accounting criteria contained in

annex 33 that are modified with this Resolution, with the exception of what is stated in

transitory article SEVENTH of this instrument, may recognize on the initial application date, that is, January 1, 2022, the accumulated effect of the accounting changes derived from the present

Resolution. In any case, credit institutions must reveal in notes to the financial statements the

main changes in accounting regulations that affect or could significantly affect their financial

statements, as well as the adoption mechanism and the adjustments carried out in the determination of the

initial effects of the application of the accounting criteria contained in the present Resolution.

The basic consolidated quarterly and annual financial statements that are required to the

institutions, in accordance with the present provisions corresponding to the period concluded on December 31,

2022, shall not be presented comparatively with each quarter of the 2021 exercise and for the

period ended on December 31, 2021. "

" SEVENTH.- The tests that credit institutions perform in accordance with paragraphs 51 and 52

of criterion B-6 contained in annex 33, to determine if the credit portfolio portfolios current as of December 31

2021 meet the assumption that the cash flows of the contracts correspond

only to principal and interest payments, must have been authorized by the credit committee of the own

institution and communicated in writing to the National Banking and Securities Commission together with the

information referred to in transitory article NINTH of this Resolution.

EIGHTH.- Credit institutions that act as lessees in leases previously recognized as operating leases, must initially recognize the lease liability in accordance with subsection a) of paragraph 81.4 of Financial Information Standard D-5 "Leases", and the right-of-use asset, attending to what is provided in numeral ii), subsection b) of paragraph 81.4 of

the NIF

D-5.

For those credit institutions obliged to determine and report financial information to their head office, related with the initial application of the lease standard from the 2019 exercise, they may

register in the results of previous exercises the difference between the amount determined and reported to

said head office, and the initial effect determined on January 1, 2022 by effects of the initial application of

NIF D-5.

NINTH.- The modifications to the regulatory reports of annex 36 shall enter into force on January 1 of

2022, so the regulatory reports that are modified, must be sent to the National Banking and Securities

Commission with the periodicity and within the period established in this Resolution, in the month of

February 2022, with the information of the month of January 2022.

TENTH.- Upon the entry into force of this instrument, any reference to the "balance sheet" or to the "statement of results"

contained in the General Provisions applicable to credit institutions, must be understood that it refers to the "statement of financial position" and to the "statement of comprehensive income",

respectively. In addition to the above, a portfolio with stage 3 credit risk shall be understood as what was previously understood as past-due portfolio. Finally, references to the term securities held to maturity, shall be understood that they refer to financial instruments to collect principal and interest (securities). This in

consistency with the "Accounting Criteria applicable to credit institutions", contained in the

Annex 33 of said provisions. "

THIRD. The transitory article EIGHTH of the Resolution modifying the General Provisions applicable to Credit Institutions, published in the Official Journal of the Federation on November 28, 2012, is REPEALED.

FOURTH. Transitory article FOURTH of the "Resolution modifying the General Provisions applicable to Credit Institutions", published in the Official Journal of the Federation on December 27, 2017 and modified by resolutions published in said media on November 15, 2018 and November 4, 2019, is REFORMED, to read as follows:

" FOURTH.- 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", C-20 "Financial instruments to collect principal and interest", D-1 "Revenue from contracts with customers", D-2 "Costs from contracts with customers" and

D-5

"Leases", issued by the Mexican Council of Financial Information Standards, A.C. and referred to

in paragraph 3 of Criterion A-2 "Application of particular standards" of Annex 33 that is modified by the present instrument, shall enter into force on January 1, 2022. " .

TRANSITORY

SOLE. This Resolution shall enter into force the day following its publication in the Official Journal

of the Federation.

Respectfully

Mexico City, November 24, 2020. - The President of the National Banking and Securities

Commission, Juan Pablo Graf Noriega.- Signature.

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