Resolution modifying the General Provisions applicable to general warehouse receipts, exchange houses, credit unions, and multiple-object financial societies

DOF: 04/01/2022

RESOLUTION that modifies the General Provisions applicable to general warehouse receipts, exchange houses, credit unions, and multiple-object financial societies regulated.

At the margin, a seal with the National Coat of Arms, which says: United Mexican States.- TREASURY.- Ministry of

Treasury and Public Credit.- National Banking and Securities Commission.

The National Banking and Securities Commission, with the prior agreement of its Board of Directors, based on

articles 46; 47, fractions I and II, and 48, first and fourth paragraphs of the Credit Unions Law;

98 Bis of the Credit Institutions Law, as well as 4, fractions II, XXXVI and XXXVIII and 16, fraction

I of the Law of the National Banking and Securities Commission, and

CONSIDERING

That, in accordance with article 78 of the General Law for Regulatory Improvement and with the purpose of reducing the

cost of compliance of these provisions, the National Banking and Securities Commission, through

resolution published in the Official Gazette of the Federation on December 26, 2017, modified the

"General Provisions applicable to credit institutions", with the purpose of flexing the

term to which multiple banking institutions were subject to constitute their capital requirements

for operational risk;

That, with the purpose of achieving a sound and balanced development of credit unions, it is estimated

necessary that the regulations applicable to them provide for the recognition of guarantees under the

schemes of first loss coverage and pari-passu coverage as mitigants of credit risk,

regarding both individual credits and portfolios of credits that have similar characteristics;

That, in order to provide greater elements of certainty and financial viability in the operations

concluded by credit unions, it is considered appropriate to strengthen the requirements that must be met by the

eligible guarantees for purposes of being recognized in the determination of capital requirements and of

provisional estimates for credit risks, and

That, in order to provide credit unions with greater elements of risk mitigation, procuring

their stability and solvency, it is necessary to incorporate into the methodology for the qualification of the

credit portfolio and for the calculation of capital requirements, the recognition of the schemes of coverage

and of the guarantees that are eligible by reason of the portion of the credit that is covered by said

guarantees, as well as the diversification of risks in their operations, has resolved to issue the following:

RESOLUTION THAT MODIFIES THE GENERAL PROVISIONS APPLICABLE TO THE

GENERAL WAREHOUSES OF DEPOSIT, EXCHANGE HOUSES, CREDIT UNIONS AND SOCIETIES

OF MULTIPLE OBJECT REGULATED

SINGLE.- The articles 1, fraction XXIII; 78; 89; 90; 93; 94; 95, first paragraph, fraction IV and

paragraphs second and third; 96, first paragraph, fraction I, subsections a), b), c), d), e), f) and g), as well as 97; are

AMENDED; articles 1, fractions XXIII Bis, XXV, second paragraph, XXV Bis, XXV Bis 1, XXX Bis and XLI

Bis, as well as Chapter II Bis of Title Seventh, which comprises articles 105 Bis and 105 Bis 1; are

ADDED; article 84 is REPEALED, and Annexes 19, 21 and 34 of the "General Provisions applicable to general warehouse receipts, exchange houses, credit unions, and multiple-object financial societies regulated" are SUBSTITUTED, published in the Official Gazette of the Federation on January 19, 2009 and last reformed by resolution published in said dissemination organ on November 9, 2020, to read as follows:

" FIRST TO SIXTH TITLES

...

SEVENTH TITLE

...

Chapters I and II

...

Chapter II Bis

Diversification of risks.

Chapters III to V

...

EIGHTH TITLE

...

ANNEXES 1 to 18

...

ANNEX 19

Parametric methodology for credit unions.

ANNEX 20

...

ANNEX 21

Requirements that guarantees must meet to be recognized for purposes of the determination of the capitalization requirement for credit risk and of the provisional estimates for credit risks.

ANNEXES 22 to 33

...

ANNEX 34

Mapping of ratings and risk grades. "

" Article 1.-

...

I to XXII.

...

XXIII.

First Loss Coverage Scheme, to the contractual scheme, under the figure of guarantee or credit insurance, through which the beneficiary or lender mitigates the loss derived from default due to non-payment by one or more borrowers, by receiving, from the Protection Provider, a percentage of the outstanding balance of the credit in question, in order to cover with a limited amount the first losses derived from the credit or from a portfolio of credits, once the terms and conditions agreed upon for the claim of the guarantee or insurance are met.

XXIII Bis.

Pari-Passu Coverage Scheme, to the contractual scheme, under the
figure of guarantee or credit insurance, through which the beneficiary or lender
mitigates the loss derived from default due to non-payment by a borrower or a group of them, by receiving from the Protection Provider a percentage of the outstanding balance of the credit or of a portfolio of credits, in order to cover in the agreed proportion, the losses derived from the credit.

XXIV.

...

XXV.

...

Financial derivative operations concluded by credit unions in recognized markets by the financial authorities of the country, whose fulfillment corresponds to a central counterparty, shall be excluded from what is stated in the previous paragraph.

XXV Bis.

Investment Grade: the rating granted by any Rating Institution that is located within risk grades 2 and 3 on a global scale for long term, and risk grade 3 on a global scale for short term, in accordance with what is established in the corresponding tables for short and long term of Annex 34 of these provisions.

XXV Bis 1.

Risk Grade: the risk grades indicated in the tables of correspondence of ratings and risk grades, for long term and for short term, both for the global scale as for the Mexico scale, included in Annex 34 of these provisions.

XXVI. to XXX.

...

XXX Bis.

Rating Institutions: the Securities Rating Institutions indicated in the
Annex 34 of these Provisions. Also considered as Rating Institutions
those that, attending to the criteria contained in these Provisions, the Commission makes known on the Internet at the site http://www.cnbv.gob.mx.

XXXI. to XLI.

...

XLI Bis.

Protection Provider: the persons referred to in Groups 1, 2 and 3 described in Article 78, fraction I of these provisions.

XLII. to LVII.

... "

" Article 78.- Credit unions, for the determination of the capital requirement for credit risk, must adjust to the procedure described in this article.

The capital requirement for credit risk will be that obtained by applying 8% to the total amount of the credit portfolio granted by credit unions, net of the corresponding estimates for credit risks.

Additionally, for purposes of what is stated in this article, credit unions may deduct from the total amount of each credit, up to 100% of the loans to members granted by the lender itself or by third parties who are members in the credit union, as well as payment instruments with immediate liquidity constituted in favor of the credit union, which meet the conditions to be considered a guarantee in terms of what is provided in Annex 21 of these provisions. The amount to be deducted cannot exceed the outstanding balance of the credit.

Likewise, credit unions may recognize the coverage provided by First Loss Coverage Schemes or by Pari-Passu Coverage Schemes. In order to determine the corresponding risk weightings for operations covered by these schemes, credit unions must comply with the following:

I.

To the covered portion, the risk weighting corresponding to the Protection Provider will be assigned, while to the rest of the position, the treatment provided in the second paragraph of this article will be applied, to determine the corresponding capitalization requirement.

Only the following Protection Providers of credit risk are eligible, both in the case of First Loss Coverage Schemes and in Pari-Passu Coverage Schemes or proportional:

a)

Group 1 (Weighting of 0%):

1.

Development banking institutions.

2.

National Financial Development Entity for Agriculture, Forestry, Fisheries and Rural Activities, or the one that replaces it.

3.

Public trusts that are part of the Mexican financial system, in accordance with
article 3 of the Credit Institutions Law.

4.

Trusts celebrated specifically for the purpose of sharing credit risk, in which development banking institutions act as settlors and trustees that have an express guarantee from the Federal Government.

5.

National Guarantee Fund for the Agricultural, Forestry, Fisheries and Rural Sectors, or the one that replaces it.

6.

National Infrastructure Fund, or the one that replaces it.

7.

Entities of the Federal Public Administration under direct budgetary control, state productive enterprises or programs derived from a federal law that form
part of the Expenditure Budget of the Federation.

b)

Group 2 (Weighting of 20%):

1.

National multiple banking institutions that have a rating of at least Investment Grade on the national scale and controlling societies of the lender.

2.

Other entities belonging to the Mexican financial system, including insurers that have at least Investment Grade on the national scale.

3.

Other legal persons or international financial entities that have at least Investment Grade on the international scale.

c)

Group 3 (Weighting of 100%):

1.

Other members of the same credit union.

II.

In the case of First Loss Coverage Schemes for portfolios of credits, they must be subject to the following:

a)

If the amount of the said coverage is equal to or greater than the sum of the capital requirements of the credits that make up the portfolio, no capital will be required for the entire individual credits as there is no uncovered portion. For the part covered by the First Loss Coverage Scheme, a weighting will be assigned in accordance with the credit risk against the guarantor. In this case, the covered part is equal to the sum of the capital requirements of the individual credits.

b)

If the amount of the coverage is less than the said sum of capital requirements for the individual credits, the credit union will constitute capital for the uncovered part for an amount equal to 8% of the difference between both concepts. For the part covered by the First Loss Coverage Scheme, a weighting will be assigned in accordance with the credit risk against the guarantor. In this case, the covered part is equal to the value of the First Loss Coverage Scheme.

III.

In the case of guarantees under the Pari-Passu Coverage Scheme, in which the guarantee does not cover the total exposure and, in addition, the covered and unguaranteed portions have the same precedence, reductions in total capitalization requirements will be allowed proportionally, that is, the covered part of the position will receive the treatment applicable to admissible guarantees and the rest will be considered as unguaranteed.

What is established in Article 85 of these provisions will not be applicable when credit unions have First Loss Coverage Schemes and Pari-Passu Coverage Schemes, or with the payment instruments with immediate liquidity referred to in Annex 21, fraction I, subsections b) to f) of these provisions. "

" Article 84.- Repealed. "

" Article 89.- Credit unions will qualify the Commercial Credit Portfolio using the general methodology referred to in Articles 91 to 98 of these provisions.

In applying said methodology, credit unions will use for purposes of the qualification of the mentioned portfolio, information on payment experience and credit balance relative to figures on the last day of each calendar month, and will register in their accounting, at the close of each month, the corresponding provisional estimates, considering the balance of the debt registered on the last day of the month.

For purposes of what is established in the previous paragraph, it will be necessary to update the payment experience and the corresponding credit balance; however, it will not be required that credit unions update the financial information of the borrowers for the corresponding month.

Article 90.- Credit unions, to determine the net value of the Commercial Credit Portfolio,
will qualify individually the entirety of their portfolio according to the methodology that corresponds to them based on their balance, as follows:

I.

Credits whose balance is less than the equivalent in national currency to 4 million UDIs at the date of qualification, including those credits under the same debtor whose sum in their entirety is less than said amount, may be qualified individually using the parametric qualification methodology referred to in Annex 19 of these provisions.

II.

Credits whose balance is equal to or greater than an amount equivalent in national currency to 4 million UDIs at the date of qualification, including those credits under the same debtor whose sum in their entirety is equal to or greater than said amount, must be qualified individually applying the methodology indicated in Articles 91 to 98 of these provisions insofar as applicable. Likewise, financing granted to trustees acting under trusts and credit schemes commonly known as structured, will be qualified individually, taking the settlor or settlors as the borrower or, in its case, the source of resources of the structured in question and considering as guarantee the affected equity of the referred scheme.

For the determination of provisional estimates in factoring operations or assignment of portfolio, credit unions will identify who bears the credit risk. For such purposes, the factored party or assignor that transmits the credit rights that it has in its favor to the own factoring or assigning credit union and the subject obligated to the payment of the corresponding credit rights will be considered. For purposes of this paragraph, the provisional estimate corresponds to the subject obligated to the payment of the credit rights and may be substituted by that of the factored party or assignor when the joint obligation of these is agreed upon in the document that formalizes the operation.

In any case, only credit rights that are not subject to conditions or controls by which the debtor could oppose their payment may be considered. "

" Article 93.- Credit unions may adjust for each credit, the qualification applicable to the credit quality of the debtor obtained in accordance with Article 92 of these provisions, through the recognition of guarantees to estimate a probable loss, without this reason modifying the qualification applicable to the credit quality of the debtor using, for this purpose, the procedure that indicate Articles 94 to 98 of these provisions.

Credit unions, in no case may simultaneously take personal and real guarantees from the same guarantor for purposes of adjustments in the credit qualification of the debtor.

Credit unions, regarding restructurings, renewals and assignments in which these act as assignees of credits that, on the date of obtaining the corresponding qualification, are due according to accounting criteria, must grant as an initial qualification to said credits, at least, that of Risk Grade C-2.

Credit unions may only recognize reductions in the days of delinquency of credits that have been subject to restructuring or renewal, once there is sustained payment in accordance with what is established in the accounting criteria. In making said modifications, credit unions will adjust to the policies that, for such purpose, they have approved.

When credit unions have guarantees that meet what is provided in Annex 21, fraction I of these provisions, they may reduce the percentage of provisional estimates of the credit or credits in question, taking the necessary measures so that the guarantee can be executed and adjudicated at the moment when defaults occur by the borrower, placing them in delinquent portfolio, in accordance with what is established in the accounting criteria. The uncovered part will maintain the percentage of provisional estimates that corresponds to it.

Credit unions may only recognize reductions in the days of delinquency derived from the application of personal and non-financial real guarantees of credits that have been subject to restructuring or renewal when there is sustained payment, and must take the necessary measures to execute and adjudicate the guarantee at the moment when defaults occur by the borrower that place it in delinquent portfolio in accordance with what is established in the accounting criteria. In case that the efforts for the adjudication and execution of the guarantee do not begin within 120 days following the transfer of the credit to delinquent portfolio, credit unions must cease to recognize the coverage provided by said guarantee and assign the provisional estimates that correspond to the days of delinquency recorded.

Article 94.- Credit unions, when qualifying credits that have 2 or more guarantees, once
assigned the initial qualification to each credit, may segment the outstanding balance of the credit into the parts that result from applying the following criteria:

I.

They will determine the part of the balance that is covered by 2 or more guarantees, whether it is means of payment with immediate liquidity, non-financial guarantees or Pari-Passu Coverage Schemes or First Loss Coverage Schemes, as well as the exposed or uncovered portion.

II.

They will apply to the covered part of the balance, based on the type of guarantees that have been granted, the following procedure:

a)

If it has 2 or more Pari-Passu Coverage Schemes or First Loss Coverage Schemes, each Protection Provider must respond for the guaranteed part of the credit balance, provided that there are no exceptions or defenses of precedence order in the collection among the Protection Providers themselves.

b)

If it has 2 or more guarantees constituted with means of payment with immediate liquidity or non-financial guarantees, each of them must cover the guaranteed part of the credit balance, provided that it has been expressly agreed upon in the contracts that give rise to the guarantee the part of the credit that will remain guaranteed with each encumbered asset.

c)

Regarding combinations of Pari-Passu Coverage Schemes or First Loss Coverage Schemes and means of payment with immediate liquidity or non-financial guarantees, each of them may be considered, provided that they are executable at the moment of qualification and meet the requirements established in subsections a) and b) of the present fraction.

When credit unions participating in a credit receive guarantees assignable to each of these in proportional parts, all with the same degree of precedence, they will consider for purposes of the present article the proportional part that corresponds to said guarantee to them.

Article 95.-

...

I. to III.

...

IV.

In case that credit unions are beneficiaries of guarantees under the First Loss Coverage Scheme for a credit or for a portfolio of credits identified and with similar characteristics, they must adhere to the following:

a)

Only guarantees that are granted by the persons referred to in Groups 1, 2 and 3 of Article 78, fraction I of these provisions may be considered.

b)

In their case, ensure that the credits that make up the portfolio covered by the guarantee received are clearly identified and have similar characteristics.

Upon receiving guarantees whose validity is subject to the fulfillment of terms and conditions by the credit union that is the creditor of the guarantee and fails to meet them, the guarantee must not be taken into account for purposes of what is established in this article.

In any case, personal guarantees must be duly formalized in the form and terms established in the applicable legal provisions.

Article 96.- Credit unions, when carrying out the analysis of real guarantees and, in their case, adjusting the
initial qualification assigned to each credit, will be subject to the following:

I.

They will determine, for purposes of this chapter, the value of the guarantees taking into account the following:

a)

The realization value when the guarantee is constituted with the instruments referred to in
Annex 21, fraction I, subsection a) of these provisions.

b)

The fair value referred to by accounting criteria, regarding guarantees constituted with the means referred to in Annex 21, fraction I, subsections b) to d) of these provisions.

c)

The equivalent to 85% of the fair value referred to by accounting criteria, regarding guarantees referred to in Annex 21, fraction I, subsection e) of these provisions.

d)

The equivalent to 75% of the fair value referred to by accounting criteria, regarding guarantees referred to in Annex 21, fraction I, subsection f) of these provisions.

e)

The equivalent to 70% of the fair value referred to by accounting criteria, regarding guarantees referred to in Annex 21, fraction I, subsection g) of these provisions.

f)

The equivalent to the percentage that corresponds to the realization value of the underlying referred to by accounting criteria, regarding guarantees referred to in Annex 21, fraction I, subsection h) of these provisions.

g)

When they have non-financial real guarantees that cover at least 50% of the outstanding balance of the credit at the date of calculating the preventive estimates, they may recognize said guarantees for the purposes of calculating estimates of their credit portfolio, up to the amount resulting from multiplying the recognition percentage provided in the following table by their last appraisal value, updated for depreciation in the case of movable property:

Type of non-financial guarantee or assimilable instrument	Recognition Percentage (%)
Commercial and residential real estate	75
Movable property and others	50

II. and III.

...

...

...

Article 97.- Credit unions may adjust the classification of credits in the portion of the balance that is covered by the value of real guarantees obtained in accordance with Article 96, fraction I of these provisions, as follows:

I. Regarding guarantees constituted with the payment means referred to in Annex 21, fraction I, items a) to d) of these Provisions, against which the application of said resources to the total outstanding balance or, in its case, to a certain percentage of the outstanding balance of the credit can be ensured, credit unions may exempt from the constitution of preventive estimates the portion of the credit covered by said guarantees.

II. Regarding guarantees provided for in Annex 21, fraction I, items e), f) and h) of these provisions, against which the application of said resources to the total outstanding balance or, in its case, to a certain percentage of the outstanding balance of the credit can be ensured, credit unions will constitute for the covered portion the estimates corresponding to a percentage of 0.5%.

III. Regarding guarantees provided for in Annex 21, fraction I, item g) of these provisions, against which the application of said resources to the total outstanding balance or, in its case, to a certain percentage of the outstanding balance of the credit can be ensured, credit unions will constitute for the covered portion the estimates corresponding to a percentage of 1%.

IV. To determine the estimates corresponding to the covered portion of each credit or portfolios covered with non-financial guarantees or assimilable instruments, an estimate percentage of 0.5% will be assigned.

V. In the event that credit unions have First Loss Coverage Schemes for a credit or for a portfolio of identified credits with similar characteristics, they must apply the following procedure:

a) Calculate the estimates resulting from determining the applicable classification to the credit quality of the debtor referred to in Article 92 of these provisions for the credit, or for each of the credits in the covered portfolio, and in the case of credit portfolios, sum the results of each of the credits to determine the total estimates of said portfolio.

b) The total estimates calculated in accordance with the previous item must be compared against the value of the corresponding First Loss Coverage Schemes, in order to adjust as follows:

1. If the value of the First Loss Coverage Schemes is greater than or equal to the total estimate requirement for the credit or for the portfolio of credits before the recognition of their own guarantees, the credit union will only constitute the estimates resulting from multiplying the estimate percentage that corresponds to the Protection Provider, in accordance with this article, by the amount of the estimates required for the credit or portfolio of credits.

2. If the value of the First Loss Coverage Schemes is less than the total estimate requirement of the credit or portfolio of credits before the recognition of their own guarantees, the credit union must constitute estimates for the uncovered portion up to the amount necessary to reach the total of the required estimates, while for the covered portion it must constitute the estimates resulting from multiplying the estimate percentage that corresponds to the Protection Provider, in accordance with Annex 19 of these provisions, by the amount of the guarantee.

For credit unions to recognize guarantees and assign the corresponding estimate to the covered tranches of the credit or portfolio, there must be evidence of compliance with the terms and conditions established by the Protection Providers regarding the information they require, as well as compliance with the processes that, in their case, are established in the corresponding contracts.

Regarding Step-by-Step Coverage Schemes, the credit union must separate the covered portion of the credit or covered portfolio from the uncovered portion, assigning to the first the estimate percentage that corresponds to the Protection Provider and to the second the estimate percentage that corresponds to the original borrower, in accordance with this article.

In the case of both First Loss Coverage Schemes and Step-by-Step Coverage Schemes or proportional ones, only the following groups of admissible Protection Providers will be recognized, for the purposes of portfolio classification:

Group 1:

I. Development banking institutions.

II. National Financial Development Institution for Agriculture, Rural, Forestry and Fisheries, or the one that replaces it.

III. Public trusts that are part of the Mexican financial system in accordance with article 3 of the Credit Institutions Law.

IV. Trusts celebrated specifically for the purpose of sharing credit risk, in which development banking institutions act as settlors and trustees, which have an express guarantee from the Federal Government.

V. The National Guarantee Fund for the Agricultural, Forestry, Fisheries and Rural Sectors, or the one that replaces it.

VI. National Infrastructure Fund, or the one that replaces it.

VII. Entities of the Federal Public Administration under direct budgetary control, state productive companies or programs derived from a federal law that are part of the Federal Expenditure Budget.

Group 2

I. National multiple banking institutions that have a rating of at least Investment Grade on the national scale and controlling companies of the borrower.

II. Other entities belonging to the Mexican financial system and insurance companies that have, at least, Investment Grade on the national scale.

III. Other legal persons or international financial entities that have, at least, Investment Grade on the international scale.

Group 3:

I. Personal guarantees from other members of the same credit union.

When Protection Providers listed in Group 1 are available, the estimate percentage that will correspond to the covered portion will be 0.5%. Regarding Protection Providers listed in Group 2, an estimate percentage of 1% will be assigned to the covered portion. In the case of guarantees granted by the persons referred to in Group 3, the estimate percentage corresponding to the maximum days of default that said client registers in other operations will be assigned to the covered portion, applied in accordance with the methodology corresponding to the covered operation.

In the event that the uncovered portion corresponds to an estimate percentage lower than that corresponding to the covered portion, as indicated in the previous paragraph, credit unions may use the former for the entire operation.

In the case of credits intended to finance the primary activity of the agricultural sector that have an agricultural and animal damage insurance, which meets the characteristics referred to in Annex 21, fraction IX, item d) of these provisions, credit unions may multiply the estimates corresponding to the direct borrower by a factor of 95%, as long as no insurance claim is presented.

For the purposes of the previous paragraph, "credits to the agricultural and rural sector" will be understood as those directed to the primary production of the agricultural, livestock, forestry and fishing sectors, as well as to the industrial, commerce and services sectors when they are integrated into the primary activity of the initially mentioned sectors, whose branches and sub-branches of economic activity correspond to those indicated as sector 11 of the North American Industrial Classification System 2018 (NAICS) of the National Institute of Statistics and Geography (INEGI), or the one that replaces it.

In the event that the lending credit union files a claim with the entity granting the insurance and said entity accepts it, as long as the covered amount has not been executed or paid and, therefore, the credit has not been removed from the balance sheet of the credit union, it may calculate the estimates by multiplying the balance of the covered credit by 0.5% when the aforementioned insurance-granting entity has an Investment Grade rating on the national scale.

Guarantees constituted in accordance with this article may cover the total or a certain percentage of the outstanding balance of one or more credits when the deposit contracts or modifications to them provide that there is no possibility of making withdrawals or disposing of said guarantees during the validity of the credits, and that these can be covered from such deposits or values.

" Chapter II Bis

Risk Diversification

Article 105 Bis. - Credit unions, for the purposes of risk diversification in their operations, must adjust to the following, in the items indicated below:

I. Asset Diversification:

The maximum limit of Financing that credit unions may operate with the same person, entity or group of persons that, due to their patrimonial or liability links, constitute common risks, will be 50% of the net capital of the credit union in question, as stated in article 48 of the LUC.

Financings that have unconditional and irrevocable guarantees, which cover the principal and their accessories, constituted with any of the means referred to in Annex 21, fraction I, items a) to d) of these provisions, as well as those granted by any of the Protection Providers referred to in Group 1 provided for in Article 97, fraction V of these provisions, will not count for the purposes of the maximum financing limit to which this fraction I refers, allowing multiple guarantees from these Protection Providers to be accumulated. Likewise, guarantees granted by Protection Providers from Groups 2 and 3 of Article 97, fraction V of these provisions, will not count for the purposes of the maximum financing limit referred to in this fraction I, up to the equivalent of 75% of the value of said guarantees, and multiple guarantees from these Protection Providers can also be accumulated.

II. Liability Diversification:

The maximum percentages of liabilities owed by a credit union that correspond to direct or contingent obligations in favor of the same member or group of persons cannot represent more than once the net capital of the credit union.

The liabilities referred to in Article 40, fraction I of the LUC will not count for the purposes of the maximum liability percentage provided for in this article, up to the equivalent of 100% of the value of the credits granted by credit unions to their members, when the former have been constituted as irrevocable guarantees and cover the principal and accessories of said credits.

A credit will be understood to be guaranteed when what is provided in fraction I of this article is met.

Article 105 Bis 1.- Credit unions will not have to identify the credits that represent a Common Risk in compliance with what is provided by Article 86 Bis 44 of these provisions, as long as the sum of the twenty credits with the largest outstanding balance granted by the credit union in question does not represent more than 10% of its total portfolio and no credit is greater than 3.5% of its net capital.

For the purposes of these limits, the covered portion in the terms indicated in Article 105 Bis, fraction I of these provisions will not be considered.

Credit unions will keep control regarding the patrimonial and kinship links of the borrowers referred to in the previous paragraph that exceed 2% of their net capital. However, if the credit union has evidence that allows it to infer the existence of links between borrowers that, in their entirety, could exceed the diversification limit provided by Article 105 Bis, fraction I of these provisions, it must establish procedures for monitoring the behavior of the persons in question.

TRANSITORY CLAUSES

FIRST.- This Resolution will enter into force the day following its publication in the Official Gazette of the Federation, except for what is provided in the following Second and Third Transitory Articles.

SECOND.-

Credit unions must carry out the calculations of capitalization requirements for credit risk in accordance with what is established in this Resolution, starting from the day following its publication, with figures corresponding to the immediate preceding month.

THIRD.- Credit unions, in order to constitute the total amount of preventive estimates for credit risks derived from the use of the methodologies referred to in this Resolution, must observe the following:

I. Recognize in the accounting capital, within the result of previous exercises, the initial financial effect derived from the application of the methodologies cited in the first paragraph of this Transitory Article. For the purposes of this fraction, "initial financial effect" will be understood as the difference resulting from subtracting, on the same date, the estimates that must be constituted for the portfolio balance applying the methodology referred to above on October 1, 2022, minus the estimates that would be had for the balance of said portfolio, with the methodology in force on September 30, 2022.

II. Recognize in the results of the 2022 exercise, the difference that results when the amount of estimates to be constituted by the application of the methodology in force from October 1, 2022, is greater than the balance of the result of previous exercises item.

III. Release the surplus when the preventive estimates for credit risks that they had constituted prior to October 1, 2022, were greater than 100% of the amount required in accordance with the methodology in force from October 1, 2022, carrying out any of the following actions:

a) Adhere to what is provided in the accounting criteria referred to in article 6 of the "General Provisions applicable to general warehouse receipts, exchange houses, credit unions and multiple-object financial companies regulated" in force before the entry into force of this Resolution.

b) Preserve the surplus indicated in the first paragraph of this fraction, until the credits that gave rise to it are liquidated, defaulted, renewed or restructured. Once said credits are liquidated, defaulted, renewed or restructured, credit unions must release the surplus in accordance with the accounting criteria indicated in the previous item a).

IV. Disclose in quarterly and annual financial statements, as well as in any public communication of financial information, at minimum, what is established in the following items a) to e):

a) That they carried out the recognition of the accumulated financial effect derived from the application of the methodologies referred to in this Resolution in accordance with fractions I to III of this Transitory Article;

b) A detailed explanation of the accounting record made for the recognition of said effect;

c) The amounts that have been recorded and presented, both in the balance sheet and in the income statement, if the recognition of the aforementioned effect had been made in the results of the exercise;

d) A detailed explanation about the items and amounts for which the accounting effect was made, and

e) The comparison between the amounts of preventive estimates for credit risks, calculated with the methodologies referred to in this instrument, against the preventive estimates determined in accordance with the methodology in force prior to the entry into force of this Resolution.

Respectfully,

Mexico City, December 17, 2021.- President of the National Banking and Securities Commission, Dr. Jesús De la Fuente Rodríguez.- Rubric.

ANNEX 19

PARAMETRIC METHODOLOGY FOR CREDIT UNIONS

This Annex will be applicable for the classification of the Commercial Credit Portfolio specified in Article 90, fraction I of these provisions.

I. Portfolio Stratification

The entire portfolio will be stratified based on the number of periods that report total or partial payment default at the date of classification, using data from at least the twelve months prior to said date, and in the case of new portfolio, the data available at the time of classification, classifying it as follows:

Portfolio 1

The Commercial Credit Portfolio that has not been subject to restructuring or renewal as a result of being considered as distressed portfolio, will be provisioned based on the corresponding percentages of the column identified as "Portfolio 1" according to the table provided in fraction II of this Annex.

Portfolio 2

Regarding credits that have been restructured or renewed due to being considered as distressed portfolio, they will be provisioned using the percentages of the column identified as "Portfolio 2" according to the table provided in fraction II of this Annex.

For the purposes of what is established in the classification referred to in this fraction, "distressed credits" will be understood as those commercial credits regarding which it is determined that, based on current information and facts, as well as in the credit review process, there is a probability that they will not be able to recover in their entirety, both their principal component and interest, as established in the contract. Both the current portfolio and the overdue portfolio are susceptible to being identified as distressed portfolio.

II. Estimate Percentage

For each stratum, preventive estimates will be constituted resulting from applying to the total outstanding balance of the credit, at the date of evaluation, the percentage indicated, according to the type of portfolio, in the following table. The amount subject to classification must not include accrued but uncollected interest, recorded in the balance sheet, of credits that are in the overdue portfolio:

Days in arrears	Estimate Percentage (%) Portfolio 1	Estimate Percentage (%) Portfolio 2
0	0.50	10
1 to 30	2.5	10
31 to 60	15	30
61 to 90	30	40
91 to 120	40	50
121 to 150	60	70
151 to 180	75	95
181 to 210	85	100
211 to 240	95	100
More than 240	100	100

The amount subject to classification must not include accrued but uncollected interest, recorded in the balance sheet, of credits that are in the overdue portfolio.

In the case of credits that register payment default and are subject to restructuring or renewal, credit unions cannot relocate them to strata with a lower number of defaulted months than the one they previously had before the restructuring or renewal, until there is evidence of sustained payment of the credit in accordance with what is established in the Criterion "B-5 Credit Portfolio" of the accounting criteria. In the event that, after the restructuring or renewal, payment default persists, the credit in question will be relocated to the stratum applicable to it, by accumulating to the previous defaulted payments the subsequent defaults.

III. Guarantees

When credit unions have guarantees that meet what is provided in Annex 21 of these provisions, they may reduce the percentage of preventive estimates of the credit or credits in question. The uncovered portion, determined in consideration of what is established in articles 94 and 95 of these provisions, will maintain the percentage of preventive estimates that corresponds to it.

The foregoing, considering that the guarantees thus constituted may cover the total or a certain percentage of the outstanding balance of one or more credits, and when in the deposit contracts or modifications to them it is foreseen that there is no possibility of making withdrawals or disposing of said guarantees during the validity of the credits and that these can be covered from such deposits or values.

To the covered portion, an estimate percentage of 0.5% or 10% will be assigned for portfolios 1 and 2, respectively. The amount subject to classification must not include accrued but uncollected interest, recorded in the balance sheet, of credits that are in the overdue portfolio.

Likewise, preventive estimates must be constituted resulting from applying to the exposed portion of the outstanding balance of the credit at the date of evaluation, the estimate percentage resulting from fraction II of this Annex.

In the case where First Loss Coverage Schemes and Step-by-Step Coverage Schemes are received, the credit union will follow the treatment indicated in Article 97, fraction V of these provisions.

For credits that do not have the backing of a guarantee or that have a guarantee that does not meet the characteristics indicated in Annex 21 of these provisions, preventive estimates must be constituted resulting from applying to the total outstanding balance of the credit, at the date of evaluation, the estimate percentage resulting from the process indicated in fractions I and II of this Annex. The amount subject to classification must not include accrued but uncollected interest, recorded in the balance sheet, of credits that are in the overdue portfolio.

When credit unions reduce the percentage of preventive estimates for credit or credits as provided in this subsection, they must take the necessary measures to adjudicate and execute the guarantee at the moment defaults occur on the part of the borrower, placing them in non-performing portfolio status, in accordance with what is established in the accounting criteria. The uncovered portion will maintain the percentage of preventive estimates corresponding to it.

Credit unions may only recognize reductions in delinquency days derived from the application of personal and non-financial real guarantees on credits that have been subject to restructuring or renewal when there is sustained payment, and they must take the necessary measures to adjudicate and execute the guarantee at the moment defaults occur on the part of the borrower, placing them in non-performing portfolio status, in accordance with what is established in the accounting criteria. In the event that the management for the adjudication and execution of the guarantee does not begin within the 120 days following the transfer of the credit to non-performing status, credit unions must cease recognizing the coverage provided by said guarantee and assign the preventive estimates corresponding to the days of delinquency registered.

IV.

Risk Degree

A risk degree of A-1, A-2, B-1, B-2, B-3, C-1, C-2, D, and E shall be assigned to the percentage of preventive estimates in accordance with the following table:

RISK DEGREE

PERCENTAGE OF PREVENTIVE ESTIMATES

A-1

0% to 0.50%

A-2

0.51% to 0.99%

B-1

1% to 4.99%

B-2

5% to 9.99%

B-3

10% to 19.99%

C-1

20% to 39.99%

C-2

40% to 59.99%

D

60% to 89.99%

E

90% to 100%

ANNEX 21

REQUIREMENTS THAT GUARANTEES MUST MEET TO BE RECOGNIZED FOR THE PURPOSES OF DETERMINING THE CAPITALIZATION REQUIREMENT FOR CREDIT RISK AND PREVENTIVE ESTIMATES FOR CREDIT RISKS

When credit unions have guarantees constituted with payment means with immediate liquidity, with Step and Measure Coverage Schemes or First Loss Coverage Schemes, with non-financial guarantees or assimilable instruments that comply with what is provided in this Annex, they may reduce the percentage of preventive estimates or capitalization requirements for credit risk of the credit or credits in question in accordance with what is established in Article 97 of these provisions.

The guarantees eligible for these purposes are the following:

I.

Guarantees constituted with payment means with immediate liquidity, for which credit unions must comply with the following:

It will be understood that a guarantee is constituted with payment means with immediate liquidity when it concerns:

a)

Cash or loans granted by the borrower or by any other member of the credit union itself in favor of this, as well as payment means with maturity equal to or greater than the term of the credit granted to the member in favor of the credit union in question, taking the necessary measures to adjudicate and execute the guarantee at the moment defaults occur on the part of the borrower that place them in non-performing portfolio status, in accordance with what is established in the accounting criteria, when the debtor or a third party constitutes a deposit in the credit union itself and grants it an irrevocable mandate to apply the respective resources to the payment of credits, or when it concerns negotiable credit titles of immediate realization and wide circulation and which, in case of default, are available without any legal restriction for the credit union and from which the debtor or any other person distinct from the credit union itself cannot dispose while the obligation subsists.

b)

Values issued by the Bank of Mexico.

c)

Values issued or guaranteed by the Federal Government.

d)

Values, titles, and documents issued by the Institute for the Protection of Bank Savings, as well as obligations guaranteed by said institute.

e)

Bank titles that have a credit rating issued by a Rating Institution, equal to or better than Risk Grade A- in the national scale granted, by at least one Rating Institution.

f)

Other debt titles that have a credit rating issued by a Rating Institution, equal to or better than Risk Grade A- in the national scale granted, by at least one Rating Institution and highly liquid shares listed on the stock exchange or in recognized markets in accordance with applicable provisions.

g)

Shares of medium and low liquidity listed on the stock exchange or in recognized markets in accordance with applicable provisions.

h)

Investments in shares representing the social capital of daily liquidity investment funds.

II.

Non-financial guarantees and assimilable instruments, for which credit unions must consider the following:

Credit unions, in order to use non-financial guarantees and assimilable instruments for the purposes of determining preventive estimates and capitalization requirements for their credit portfolio, must have available to the Commission evidence that accredits the following:

a)

The signing of contracts or other instruments documenting the constitution of the guarantees, in which the causes of default that generate the right of the credit union to execute said guarantees are stated.

b)

In the case of movable guarantees provided for in article 32 bis 1 of the Commerce Code, the consultation or, if applicable, the certification obtained from the Unique Registry of Movable Guarantees, and regarding deposit certificates and warehouse receipts, the consultation or, if applicable, the certification obtained from the Unique Registry of Certificates, Warehouses, and Merchandise referred to by its acronym "RUCAM", as referred to in article 22 Bis 6 of the General Law of Organizations and Auxiliary Credit Activities.

Regarding warehouse receipts negotiated for the first time separately from the deposit certificate, credit unions must have evidence that they complied with what is provided in article 236 of the General Law of Credit Titles and Operations. In the event that credit unions take deposit certificates as guarantee, they must notify the general warehouses of deposit of such situation and have evidence of it.

c)

The adoption of necessary measures to ensure the conservation of the goods subject to the guarantees, which includes their registration in the Public Property Registry corresponding; in the case of movable guarantees provided for in article 32 bis 1 of the Commerce Code, registration in the Unique Registry of Movable Guarantees, and in the case of participations in federal revenues, federal contributions, and other own revenues of states and municipalities, in the registry of loans and obligations of the corresponding federal entity, and in the Unique Registry referred to in the Law of Financial Discipline of the Federal Entities and Municipalities or that which replaces it, as well as those necessary to exercise the right to compensation based on the transfer of ownership of non-financial guarantees.

Credit unions that take deposit certificates and warehouse receipts must exercise the right stipulated in the second paragraph of article 22 Bis 6 of the General Law of Organizations and Auxiliary Credit Activities and have the certification of the electronic file of the deposit certificate obtained in RUCAM, in which it is indicated that the corresponding annotations of the taking of said certificates and warehouse receipts were made.

d)

The existence of risk management processes that explicitly consider the legal, operational, liquidity, and market risks derived from the use of non-financial guarantees.

Such processes must comply with the requirements indicated in subsection VI of this Annex.

e)

The incorporation into credit policies and manuals derived from them, of guidelines and procedures for the administration of non-financial guarantees in general, and of elements for reducing estimation requirements specifically. Regarding this, credit unions must have policies to ensure that:

1.

A frequent valuation of non-financial guarantees is carried out, in accordance with what is indicated in subsection VII of this Annex, including tests and scenario analysis under unusual or extreme market conditions.

2.

Updated information is available regarding the situation, location, and state of the non-financial guarantees received, as well as potential liquidation problems.

3.

There is adequate diversification of risks with respect to non-financial guarantees.

4.

Correct administration of guarantees is carried out, so that differences in maturity dates and the consequent exposure periods are contemplated, once the non-financial guarantees expire.

5.

Vigilance and attention to risks derived from external factors, which could influence the ability of non-financial guarantees to face credit risk (for example, liquidity behavior in the non-financial guarantee market).

6.

The governing bodies of the credit union and members know the policies related to the management and administration of risks, derived from the use of non-financial guarantees as coverage for credit risk.

f)

The establishment of methods and internal controls that ensure:

1.

That the non-financial guarantees granted are not values issued by the same common risk group to which the borrower belongs.

2.

Compliance with the conditions and terms established in the contracts, as well as the identification of any default by the counterparty, and consequently, the execution of non-financial guarantees can be requested. For the purposes of the above, the default event defined in the contracts must consider situations where the debtor is in non-performing portfolio status with respect to the credit union, or when this determines that any of the credits owed by the debtor constitutes a troubled portfolio, has demanded the commercial bankruptcy of the debtor, or the latter has requested it.

3.

The taking of necessary measures to ensure the separation of non-financial guarantees with respect to other assets when the real guarantee is under the custody of a third party or the borrower itself.

III.

Non-financial guarantees and assimilable instruments to be admissible must correspond to one of the following types:

a)

Commercial or residential real estate for an amount that does not exceed the fair value at which the property could be sold through a private contract between a seller and a buyer.

b)

Movable goods or other guarantees provided for in article 32 bis 1 of the Commerce Code, registered in the Unique Registry of Movable Guarantees referred to in the Commerce Code or deposited in general warehouses of deposit, including those goods granted in lease, regarding which there is no purchase option at the end of the contract term. The guarantee must be considered in an amount that does not exceed the current fair value, at which the good could be sold through a private contract between a seller and a buyer.

The guarantees provided for in article 32 bis 1 of the Commerce Code cannot be previously registered in the Unique Registry of Movable Guarantees or covered by deposit certificates and warehouse receipts issued by general warehouses of deposit and registered in RUCAM.

c)

Receivables and fiduciary rights, understood as such to be value titles whose liquidation must be carried out through the flows derived from the underlying assets, regarding which the credit union must have ownership and disposal of the cash flows derived from the receivables, in any foreseeable circumstance.

Self-liquidating debts arising from the sale of goods or services linked to commercial operations, as well as amounts of any nature owed by buyers, suppliers, the Federal or State Public Administration, state productive companies, as well as other independent third parties not related to the sale of goods or services linked to a commercial operation, are included within this concept. Admissible receivables and fiduciary rights do not include those related to securitizations or sub-participations.

When the debtor makes payments directly to the assignor of the receivables, trust, or collection administrator, the credit union must periodically prove that these payments are forwarded to it within the terms included in the contract.

d)

Participations in federal revenues or federal contributions, or both, which correspond to the federal entities or municipalities, which may be granted through:

1.

Guarantee or administration trust, or both.

2.

Irrevocable instructions or guarantee mandate contracts, or both.

e)

Own revenues corresponding to the federal entities or municipalities, which may be granted through:

1.

Guarantee or administration trust, or both.

2.

Irrevocable instructions or guarantee mandate contracts, or both.

f)

Deposit certificates and warehouse receipts registered in RUCAM, provided that the credit union notifies the general warehouse of deposit issuing those titles, that these were taken by said credit union as guarantee and has the certification of the electronic file of the deposit certificate obtained in RUCAM in which it is indicated that the corresponding annotations of the taking in guarantee of said certificates and warehouse receipts by the credit union were made.

For the purposes of what is stipulated by this Annex, "other assimilable instruments" will be understood as those provided for in subsections d) and e) of this subsection.

IV.

The guarantees and instruments referred to in subsection III, subsections d) and e) above, to guarantee their legal certainty, must at least:

a)

Be duly constituted in favor of the credit union in question, and comply with the following:

1.

In the case of participations in federal revenues, federal contributions, and other own revenues of the federal entities and municipalities, they must:

i)

Have authorization from the local legislatures, in accordance with what is established in the corresponding local debt laws.

ii)

Be registered in the registry of loans and obligations of the corresponding federal entity.

iii)

Be registered in the Unique Registry referred to in the Law of Financial Discipline of the Federal Entities and Municipalities or that which replaces it.

iv)

Have clear mechanisms for channeling resources in favor of credit unions for the payment of financing, such as a valid letter of irrevocable instruction to the Treasury of the Federation or through trusts or other structured products.

v)

Have the opinion of an independent specialized legal firm, or that of the legal area of the credit union, regarding the validity of the backing of the participations and contributions in federal revenues based on the documents backing the obligations of the federal entity or municipality with the credit union.

vi)

Have the opinion of an independent specialized legal firm, or that of the legal area of the credit union, in the case of credits guaranteed with own revenues, regarding the validity of the backing of said revenues.

2.

In the case of real estate, they must:

i)

Be legally enforceable in the jurisdiction and be duly constituted.

ii)

Be registered in the Public Property Registry in question.

iii)

Have agreements or clauses documenting the guarantees and allowing the credit union in question to execute them.

3.

In the case of receivables and fiduciary rights, the documents or legal instruments in which they are stated must:

i)

Ensure the enforceability of their yields.

ii)

Be binding for all parties and legally enforceable in the corresponding jurisdiction. Credit unions must monitor compliance with their terms, for which they will have the necessary mechanisms to allow such verification.

iii)

Establish certain and clearly defined procedures that allow the rapid collection of the cash flows generated by the receivables. In all cases, the procedures that credit unions have must guarantee the observance of all pertinent conditions in the legal sphere for the declaration of client default and the rapid adjudication of the guarantee. Likewise, the documents or legal instruments in which the guarantees are stated must provide for the possibility of selling or assigning the receivables to third parties without the prior consent of the debtors in cases where there are financial difficulties or default by the borrower.

b)

Be free of liens with third parties or, in the contrary case, that the credit union in question appears first in the order of payment, considering for such effect the coverage of the guarantee.

c)

Be easy to realize.

V.

In the administration of movable and immovable goods, credit unions must clearly document the characteristics that must be met to be accepted as non-financial guarantees and the policies for their administration, as well as ensure that the goods accepted as guarantee are insured in favor of the credit union in question in case of damage or defects, and carry out continuous monitoring of the existence and degree of any preferential right over the property.

VI.

In the risk administration of the guarantees referred to in subsection III of this Annex, credit unions must:

a)

For the case of real estate, including those for residential use, related to credits that have been restructured or renewed and are considered troubled portfolio in terms established in Annex 19, subsection I of the provisions, have an appraisal, at least, every five years, in accordance with what is established in subsection VII, subsection a) of this Annex, in addition to generating an annual documentary report where their real existence and current physical state are evidenced, as well as the monitoring of the existence and degree of any preferential right over the property.

b)

For the case of receivables:

1.

Have a clear process to determine the credit risk of the receivables. Such process must, among other aspects, include the analysis of the borrower's business and the economic sector in which it operates, considering the effects of the economic cycle, as well as the type of clients with which it negotiates. In the event that they use information provided by the borrower to evaluate the credit risk of clients, credit unions must examine the borrower's credit history to corroborate its solidity and credibility.

2.

Ensure that the margin or coverage between the amount of the credit and the value of the receivables reflects all timely factors, including the cost of adjudication, the degree of concentration of receivables coming from a single borrower, and the concentration risk with respect to the total positions of the credit union in question.

3.

Carry out a continuous and adequate monitoring process for each type of risk, whether direct or contingent, attributable to the guarantee used as coverage. This process must include reports on aging, control of commercial documents, certification of the debt base, frequent audits of the guarantee, account confirmation, control of income from credited accounts, dilution analysis, and periodic financial analysis, both of the borrower and of the issuers of the receivables, especially in the case that the guarantee is formed by a small number of high-value receivables. Likewise, they must observe the concentration limits that the credit union in question establishes for its guarantees in receivables, as well as the agreements related to the loan in question.

4.

Ensure that the receivables pledged by a borrower are diversified. In the event that such receivables depend predominantly on the credit quality of the Protection Provider, the corresponding risks must be taken into consideration when establishing margins for the set of guarantees. Receivables coming from persons related to the borrower, including subsidiaries and employees, will not be recognized as risk coverage.

5.

Have a documented process for collecting receivables in situations of difficulty including the necessary services to carry it out, even if the collection work is performed by the borrower.

VII.

Appraisals must be carried out by professional appraisers, in accordance with what is established in the Law of Transparency and Promotion of Competition in Guaranteed Credit in relation to the authorization as a professional appraiser of real estate object of credits guaranteed to housing, and must be updated according to the policies of the credit union in question.

Regarding commercial real estate:

a)

An appraisal must be available, observing for this purpose what is provided in subsection VI, subsection a) of this Annex.

b)

When available information suggests that its value may have significantly reduced, with respect to general market prices, the real estate in question will not be considered as a mitigant of credit risk.

VIII.

Goods granted in financial leasing may be recognized receiving the same treatment as admissible non-financial guarantees when credit unions are not subject to residual value risk, which consists of the exposure of said credit unions to a potential loss derived from the fall of the fair value of the asset below its estimated residual value at the beginning of the lease. Credit unions must comply with the minimum requirements for the type of admissible real guarantee in question and, in addition, must observe the following criteria:

a)

The lessor must carry out adequate risk administration in accordance with the asset's location, its use, its age, and its expected life cycle.

b)
The lessor must hold title to the asset, as well as the capacity to exercise its rights as owner in a timely manner.

c)
The difference between the depreciation rate of the fixed asset and the amortization rate included in the lease payments must not be significant, in order to avoid overestimating the credit risk coverage attributed to the leased assets.

IX.

With respect to Step-and-Measure Coverage Schemes or First-Loss Coverage Schemes, the following must be attended to.

a)

Have policies, procedures, and internal controls to carry out the coverage analysis, which must consider, at a minimum, the following:

1.

The periodic evaluation of the credit quality of the entity providing the Step-and-Measure Coverage Scheme or First-Loss Coverage Scheme. For these purposes, it must consider, at a minimum, the monitoring and analysis of the ratings assigned by Rating Agencies.

2.

With respect to the Step-and-Measure Coverage Scheme or First-Loss Coverage Scheme, they must evaluate the manner in which such operations were structured and the ease of their execution, considering, where applicable, other direct and contingent obligations of the credit union or entity providing these.

b)

Have contracts or other instruments documenting the constitution of the guarantees, in which the assumptions and the procedure for exercising the guarantee are stated. Regarding this, the contracts, documents, or instruments in which the guarantees are stated must:

1.

Ensure that the credit union in question maintains the right to execute the guarantees legally in the event of default, insolvency, commercial bankruptcy, or any other similar event, and that the contract or instrument documenting them does not contain any clause that allows the Protection Provider to unilaterally cancel the coverage or increase the cost of the guarantee in the event of a deterioration in the credit quality of the covered position.

2.

Be irrevocable and unconditional, so the contracts or instruments in which they are stated cannot contain any clause that allows the Protection Provider to exempt itself from paying promptly in the event that the original counterparty presents any default. In any case, the contracts or other documents may only be modified with the agreement of the credit union in question.

3.

Be mandatory for the involved parties and legally enforceable in the corresponding jurisdictions.

4.

Provide that, upon the occurrence of a default or failure to pay by the debtor, the credit union may immediately initiate actions against the Protection Provider regarding the pending payment obligations. Likewise, the contracts, documents, or instruments in which the guarantees are stated must stipulate that the Protection Provider may make a single payment covering the total amount of the pending obligations owed by the debtor, or may assume the future payment of the obligations owed by the debtor. In any case, the obligation of the Protection Provider must be established in the documentation formalizing the operation.

c)

Comply with the applicable legal requirements to obtain and maintain the right to exercise Step-and-Measure Coverage Schemes or First-Loss Coverage Schemes, as well as carry out the necessary monitoring to ensure compliance with said requirements.

d)

Not recognize Step-and-Measure Coverage Schemes or First-Loss Coverage Schemes that are granted reciprocally between the entity providing any of these risk mitigation techniques and the beneficiary credit union itself.

e)

Disclose in notes to the financial statements the manner in which they use Step-and-Measure Coverage Schemes or First-Loss Coverage Schemes to cover credit risk. Such disclosure must be published in a general and aggregated manner, highlighting the amount covered by these mitigation techniques, where applicable, by Step-and-Measure Coverage Schemes or First-Loss Coverage Schemes.

X.

With respect to Step-and-Measure Coverage Schemes or First-Loss Coverage Schemes, credit unions must ensure, at a minimum, the following:

1.

That it is an explicitly documented obligation assumed by the Protection Provider.

2.

That the obligation cannot be unilaterally cancelled by the Protection Provider.

3.

That the Protection Provider will cover any type of payment that the debtor is obligated to make by virtue of the legal instrument regulating the operation.

XI.

With respect to Step-and-Measure Coverage Schemes or First-Loss Coverage Schemes, credit unions must, at a minimum, comply with the following regarding credit insurance:

a)

The insurance provider must be a specialized institution authorized by the Secretariat to grant insurance and must have a credit rating of Investment Grade or higher issued by at least one Rating Agency referred to in the Securities Market Law.

b)

The contracts or policies of the coverage schemes must:

1.

Consider the conditions of partial or total default by the accredited party.

2.

Be legally enforceable in the corresponding jurisdiction. For this effect, they must allow the beneficiary credit union to execute the coverage scheme under the agreed conditions and timeframes, unless the credit union in question:

i.

Fails to pay the insurance premium or the corresponding consideration for the granting of the guarantee.

ii.

Modifies, without authorization from the granting entity, the coverage scheme or the agreed conditions of the covered credits.

iii.

Cancels or transfers the insured credits under conditions different from those agreed, or commits any fraud linked to the guaranteed credit.

3.

Not include clauses that allow the entity granting the coverage scheme:

i.

Unilaterally cancel or revoke, except as provided in item 2 of this subsection b).

ii.

Increase the cost of the coverage scheme in the event of a deterioration in the credit quality of the covered position.

iii.

Object to or omit payment upon any default by the accredited party, except as provided in item 2, sub-item ii of this subsection b).

4.

Cover, in addition to the principal, the corresponding ordinary interest by virtue of the credit contract.

XII.

In the case of coverage with agricultural insurance, the following must be considered.

With respect to credits destined to finance the primary activity of the agricultural sector, agricultural damage and animal insurance may be recognized as mitigants of credit risk, when they meet the following requirements:

a)

The contracts or policies include the accrediting credit union directly as the beneficiary of the insurance, or there is some legal instrument providing for such circumstance.

b)

The insured amount covers, at least, the outstanding balance of the credit and its interest.

c)

The insurance covers the term of the credit. Regarding this, the contract must provide for the eventual extension of the term in the event of a restructuring or renewal.

d)

The corresponding insurance covers, at least, the following agricultural risks:

1.

Frost.

2.

Flood.

3.

Clogging.

4.

Heat wave.

5.

Low temperatures.

6.

Lack of floor for harvesting.

7.

Hail.

8.

Fire.

9.

Excess humidity (rain).

10.

Impossibility of planting.

11.

Drought.

12.

Earthquake.

13.

Hurricane.

14.

Cyclone.

15.

Tornado.

16.

Tromba.

17.

Strong winds.

e)

Are granted by specialized entities authorized by the National Insurance and Surety Commission that have a credit rating, superior or equal to, Investment Grade issued by at least one Rating Agency.

f)

The payment of the premium is up to date in accordance with what is contractually established.

ANNEX 34

MAPPING OF RATINGS AND RISK DEGREES

Long-Term Rating and Risk Degree Correspondence Table

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