Resolution modifying the General Provisions applicable to the activities of Savings and Loan Cooperative Societies

DOF: 08/09/2021

RESOLUTION modifying the General Provisions applicable to the activities of Savings and Loan Cooperative Societies

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 agreement of its Board of Directors and based on

Article 31, fractions II, IV, VI, VII, VIII and XI and second paragraph of the Law to Regulate the Activities of

Savings and Loan Cooperative Societies; 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 of Regulatory Improvement and with the purpose of reducing the

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

resolution published in the Official Journal of the Federation on December 26, 2017, reformed the

"General Provisions applicable to credit institutions", with the object of granting an

extension to the deadline to which multiple banking institutions were subject to constitute their

operational risk capital requirements;

That, with the purpose of achieving a healthy and balanced development of savings and loan cooperative

societies with operation levels I to IV, it is considered necessary to reinforce the legal framework that they must

observe in the integration of files in order to ensure that evidence of the guarantees

constituted in their favor by the loans granted is documented;

That, to mitigate the risk derived from the celebration of productive microcredits that are carried out in a

non-presential manner and to avoid regulatory discrepancies, it is provided that savings and loan cooperative

societies with operation levels I to IV are obliged to observe the procedures and limits established in

the General Provisions referred to in Articles 71 and 72 of the Law to Regulate the

Activities of Savings and Loan Cooperative Societies, and

That, in order for the aforementioned savings and loan cooperative societies to take into

consideration the risk mitigants they have, seeking their stability and solvency, it is necessary to incorporate into the methodology for

the classification of the credit portfolio and for the calculation of capital requirements, the recognition of schemes of real financial and non-financial guarantees,

personal and first-loss coverage; it has resolved to issue the following:

RESOLUTION MODIFYING THE GENERAL PROVISIONS APPLICABLE

TO THE

ACTIVITIES OF SAVINGS AND LOAN COOPERATIVE SOCIETIES

SOLO.- The Articles 1, fractions XXXI, XXXII, and XXXIII; 25; 33, fraction II, subsection b),

numerals 9, 10 and 11; 35, fraction I, first paragraph; 41, second paragraph; 45, fraction I, fourth paragraph; 50,

fifth paragraph; 73, fraction VI, fifth paragraph, subsections d), e) and f); 78, fraction I, first paragraph; 81, second

paragraph; 85, fraction I, fourth paragraph; 90, fifth paragraph; 118, fraction VI, sixth paragraph, subsections d), e) and f); 123,

fraction I, first paragraph; 126, second paragraph; 130, fraction I, fourth paragraph; 135, fifth paragraph; 174,

fraction VI, seventh paragraph, subsections d), e) and f); 180, fraction I, first paragraph; 183, second paragraph, and 188,

fraction I, fourth paragraph; are REFORMED; Articles 1, fraction XXXIII Bis and LVI Bis; 33, fraction II,

subsection b), numeral 12; 35, fraction I, second paragraph; 42 Bis; 73, fraction VI, fifth paragraph, subsection g); 78, fraction I,

second paragraph; 82 Bis; 118, fraction VI, sixth paragraph, subsection g); 123, fraction I, second paragraph; 127 Bis;

180, fraction I, second paragraph; 174, fraction VI, seventh paragraph, subsection g); 185 Bis, as well as Annex C Bis

1, are ADDED; and Annex C of the "General Provisions applicable to the activities of

savings and loan cooperative societies", published in the Official Journal of

the Federation on June 4, 2012, and reformed for the last time by the resolution published in said dissemination organ on November 9,

2020, is SUBSTITUTED to read as follows:

" TITLES FIRST TO EIGHTH

. . .

ANNEXES A and B

. . .

ANNEX C

Procedure for the classification and constitution of preventive provisions.

ANNEX C Bis

. . .

ANNEX C Bis 1

Requirements that guarantees must meet to be recognized for purposes

of the determination of the capitalization requirement for credit risk and of the

preventive provisions for credit risks.

ANNEXES D to U

. . . "

" Article 1.

. . .

I. to XXX.

. . .

XXXI.

Director or General Manager, to the director or general manager of the Societies referred to in

Article 34, fraction V, subsection c) of the General Law of Cooperative

Societies, as well as to the General Manager of the Protection Fund referred to in

Article 43, second paragraph of the Law, as applicable.

XXXII.

Access Device: to the equipment that allows a User to access the Electronic

Services.

XXXIII.

First-Loss Coverage Scheme: to the contractual scheme, under the figure of

guarantee or credit insurance, through which the beneficiary or grantor mitigates the

loss derived from non-compliance due to non-payment of one or several

grantees, upon

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.

XXXIII Bis.

Pari-Passu Coverage Scheme: to the contractual scheme, under the

figure of guarantee or credit insurance, through which the beneficiary or grantor

mitigates the loss derived from non-compliance due to non-payment of a grantee 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, with the aim of covering in the proportion

agreed upon, the losses derived from the credit.

XXXIV. to LVI

. . .

LVI Bis.

Protection Provider: to the persons referred to in Groups 1, 2 and 3 described

in Annex C, Section V of these provisions.

LVII. to LXXXI.

. . . "

" Article 25.- The Societies, for the determination of the capital requirement for credit risk,

must adhere to the procedure described in this article.

The capital requirement for credit risk will be that obtained by applying 8% to the total amount

the loan portfolio granted by the Societies, net of the corresponding provisions for credit

risks.

Additionally, for the purposes of what is stated in this article, the Societies may deduct from the

total amount of each loan, up to 100% of the money deposits constituted by the grantee himself or

by third parties who are members of the Society, which meet the conditions to be considered a guarantee in terms of what is provided by Annex C, Section V of these provisions. The amount

to be deducted cannot exceed the outstanding balance of the loan.

Likewise, the Societies may recognize the coverage provided by the First-Loss Coverage Scheme

or by the Pari-Passu Coverage Scheme. In order to determine the risk weightings

corresponding to the operations covered by these schemes, the Societies must comply with

the following:

To the covered portion, which may be up to 100%, the risk weighting

corresponding to that of the Protection Provider will be assigned, while for the rest of the operation it will

proceed in accordance with what is established in the second paragraph of this article, in accordance with what is

indicated below, and subsequently, it must be multiplied by 8% to determine the corresponding capitalization requirement. Only the following

Protection Providers will be eligible, both in the case of the First-Loss Coverage Scheme and

in the Pari-Passu Coverage Scheme or proportional:

Group 1 (Weighting of 0%):

Development banking institutions.

National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development, or the one that

substitutes it.

Public trusts that are part of the Mexican financial system in accordance with

Article 3rd of the Credit Institutions Law.

Trusts celebrated specifically with the purpose of sharing credit risk,

in which development banking institutions act as settlors and trustees that have explicit guarantee from the Federal Government.

National Guarantee Fund for the Agricultural, Forestry, Fisheries and Rural Sectors, or

the one that substitutes it.

National Infrastructure Fund, or the one that substitutes it.

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 Federal Expenditure Budget.

Funds constituted with resources contributed as guarantee by state or

municipal governments that are liquid and irrevocable in favor of the Society.

Group 2 (Weighting of 20%):

National multiple banking institutions that have a rating of at least

investment grade on the national scale.

Other entities belonging to the Mexican financial system, including insurers,

that have at least investment grade on the national scale.

Other legal persons or international financial entities that have at least

investment grade on the international scale.

Group 3 (Weighting of 100%):

Other members of the same Society.

II.

In the case of the First-Loss Coverage Scheme for credit portfolios, the

Societies must adhere to the following:

If the amount of said coverage is equal to or greater than the sum of the requirements of capital of the loans that make up the portfolio, no capital will be required for the entirety of

the individual loans as there is no uncovered portion. For the portion covered by the

First-Loss Coverage Scheme, capital will be required in accordance with the credit risk before the guarantor. In this case, the covered portion is equal to the sum of the capital requirements of

the individual loans.

If the amount of the coverage is less than the aforementioned sum of capital requirements for the

individual loans, the Society will constitute capital for the uncovered portion for an amount

equal to the difference between both concepts. For the portion covered by the

First-Loss Coverage Scheme, capital will be required in accordance with the credit risk before the

guarantor. In this case, the covered portion 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 entire exposure and, in addition, the covered and uncovered portions have the

same priority, reductions of total capitalization requirements will be allowed in a

proportional manner, that is, the covered portion of the position will receive the treatment applicable to admissible guarantees

and the rest will be considered as uncovered. "

" Article 33.-

. . .

II.

. . .

to 8. . . .

Guarantees.

Documentation to be collected in order to evidence the existence of

guarantees in favor of the Society for the loan granted and information relative to the

storage, custody and follow-up given to said guarantees,

such as:

Appraisals of the assets that guarantee the debt.

The Societies, in their credit manuals, must provide that the appraisals

are prepared in terms of what is provided by the Transparency Law and

Promotion of Competition in Secured Credit and in accordance with what is

established in Annex C Bis 1, Section VII of these provisions.

Insurance policies on the guarantees in favor of the Society.

Certificate of freedom from encumbrance of the guarantee assets.

ii)

Reports from the Society on the verification of the existence, legitimacy, value and

dother characteristics of the guarantees.

iii)

Regarding guarantees granted by autonomous bodies of the federal entities

and municipalities, decentralized bodies, majority state-owned enterprises and trusts of the federal entities and the

municipalities, as well as any other public entity over which the entities

federative and municipal have control over their decisions or actions, in

addition to what is provided above, the Societies must document

the following:

If applicable, the evidence of the existence of federal participations or contributions

or local income as guarantees or source of payment of the loan.

For cases where a trust is established to guarantee and be a

source of payment of the obligations, a copy of the corresponding contract as

well as, if applicable, copies of the decree in which its constitution is ordered and

of the authorization of the local congress that allows the affectation of

federal participations in the said guarantee or source of payment

trust, in accordance with what is established in Article 34, fraction II of the Law of

Financial Discipline of the Federal Entities and Municipalities, or the one that

substitutes it.

10.

Restructuring.

Documentation related to the restructuring of the loan, which includes:

The analysis or feasibility studies of the restructuring.

ii)

The conditions and authorization of the restructuring or, if applicable, of the judicial

agreement, or both.

iii)

The periodic information of the person responsible for the judicial or extrajudicial collection of the

loan, as well as the corresponding supporting documentation.

11.

Regarding liquidity loans referred to in Article 19, fraction I, subsection h)

of the Law, the evidence of the approval made by the Technical Committee indicated in

Article 18 of these provisions.

12.

Charged-off Loans.

The information that accredits that the different instances of

recovery have been exhausted, or the necessary information in accordance with the policies

institutional in this matter.

ii)

The information through which the corresponding instances request the

application of the charge-off of the loan in accordance with the policies implemented by the

Society in this matter.

. . .

c) and d)

. . .

. . . "

" Article 35.-

. . .

To carry out a verification visit or perform an on-site inspection at the place where the grantee

carries out the productive activity that will be financed.

In cases where the contracting for the granting of Productive Microcredits is celebrated in a

non-presential manner, the Societies must observe the procedure and limits established in the

disposition 4th Bis of the General Provisions referred to in Articles 71 and 72 of

the Law to Regulate the Activities of Savings and Loan Cooperative Societies, issued by

the Ministry, or those that substitute it.

II.

. . .

III.

. . .

. . . "

" Article 41.-

. . .

The Societies that grant Productive Microcredits must use the table of preventive

provisions for credit risks contained in Annex C, Section III of these

provisions.

. . . "

" Article 42 Bis.- The amount of preventive provisions for credit risks will include the

additional provisions required in various regulations, as well as those ordered and recognized by

the Commission, and must be recognized in the results of the exercise of the period that corresponds.

The additional provisions recognized by the Commission referred to in the previous paragraph are those

that are constituted to cover risks that are not provided for in the procedures established in

these provisions for the determination of preventive provisions for credit risks and

for adjudicated assets and over which, prior to their constitution, the Societies must inform the

Commission of the following:

Origin of the provisions.

II.

Methodology for determining the provisions.

III.

Amount of provisions to be constituted.

IV.

Time considered necessary for the provisions. "

" Article 45.- . . .

. . .

a) and b)

. . .

The financings that have unconditional and irrevocable guarantees, which cover

the

principal and the accessories thereof, constituted with any of the means referred to in

Annex C Bis

1, Section I, subsections a) to d) of these provisions, as well as those granted by any of

the guarantors referred to in Group 1 of Annex C, Section V of these provisions, do not

count for the purposes of the maximum financing limit to which this fraction refers,

can accumulate multiple guarantees from these guarantors. Likewise, the guarantees granted by

the guarantors of Groups 2 and 3 of Annex C, Section V of these provisions do not

count for the purposes of the maximum financing limit referred to in this fraction, up

to the equivalent of 75% of the value of said guarantees, and multiple guarantees from

these guarantors can also be accumulated.

. . .

II. and III

. . . "

" Article 50.- . . .

I. to III.

. . .

Regarding repo operations, the Societies must determine prior to the

credit risk weighting, the result of subtracting from the debtor's balance for repo, the corresponding

fair value of the collateral received in each operation, referred to in the Accounting Criteria

contained in Annex E of these provisions. In case the result obtained is positive,

this difference will be multiplied by the weighting corresponding to the risk group of the counterparty.

For the purposes of what is stated in this article, the Societies may deduct from the total amount

of each loan, up to 100% of the money deposits constituted by the grantee himself or by third

parties who are members of the Society, which meet the conditions to be considered a guarantee in

terms of what is provided by Annex C, Section V of these provisions. The amount to be deducted cannot

exceed the outstanding balance of the loan.

Likewise, the Societies may recognize the coverage provided by the First-Loss Coverage

Scheme or by the Pari-Passu Coverage Scheme. In order to determine the risk weightings

corresponding to the operations covered by these schemes, the Societies must comply with

the following:

To the covered portion, which may be up to 100%, the risk weighting

corresponding to that of the Protection Provider will be assigned, while for the rest of the operation it will

proceed in accordance with what is established in the second paragraph of this article, in accordance with what is

indicated below, and subsequently, it must be multiplied by 8% to determine the corresponding capitalization requirement. Only the following

Protection Providers will be eligible, both in the case of the First-Loss Coverage Scheme and

in the Pari-Passu Coverage Scheme or proportional:

Group 1 (Weighting of 0%):

Development banking institutions.

National Financial Institution for Agricultural, Rural, Forestry and Fisheries Development, or the one that

substitutes it.

Public trusts that are part of the Mexican financial system in accordance with

Article 3rd of the Credit Institutions Law.

Trusts celebrated specifically with the purpose of sharing credit risk,

in which development banking institutions act as settlors and trustees that have explicit guarantee from the Federal Government.

National Guarantee Fund for the Agricultural, Forestry, Fisheries and Rural Sectors, or

the one that substitutes it.

National Infrastructure Fund, or the one that substitutes it.

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 Federal Expenditure Budget.

Funds constituted with resources contributed as guarantee by state or

municipal governments that are liquid and irrevocable in favor of the Society.

Group 2 (Weighting of 20%):

National multiple banking institutions that have a rating of at least

investment grade on the national scale.

Other entities belonging to the Mexican financial system, including insurers,

that have at least investment grade on the national scale.

Other legal persons or international financial entities that have at least

investment grade on the international scale.

Group 3 (Weighting of 100%):

Other members of the same Society.

II.

In the case of the First-Loss Coverage Scheme for credit portfolios, the

Societies must adhere to the following:

If the amount of said coverage is equal to or greater than the sum of the requirements of capital of the loans that make up the portfolio, no capital will be required for the entirety of

the individual loans as there is no uncovered portion. For the portion covered by the

First-Loss Coverage Scheme, capital will be required in accordance with the credit risk before the guarantor. In this case, the covered portion is equal to the sum of the capital requirements of

the individual loans.

If the amount of the coverage is less than the aforementioned sum of capital requirements for the

individual loans, the Society will constitute capital for the uncovered portion for an amount

equal to the difference between both concepts. For the portion covered by the

First-Loss Coverage Scheme, capital will be required in accordance with the credit risk before the guarantor. In this case, the covered portion 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 entire exposure and, in addition, the covered and uncovered portions have the

same priority, reductions of total capitalization requirements will be allowed in a

proportional manner, that is, the covered portion of the position will receive the treatment applicable to admissible guarantees

admissible and the remainder will be considered unsecured.

" Article 73.-

. . .

I. to V.

. . .

VI.

. . .

a) to c)

. . .

Guarantees.

Documentation to be collected to evidence the existence of guarantees in favor of the Society for the credit granted and information regarding the storage, custody, and monitoring of said guarantees, such as:

Appraisals of the assets securing the debt.

The Societies, in their credit manuals, must provide that appraisals be prepared in accordance with what is stipulated by the Law on Transparency and Promotion of Competition in Secured Credit and in accordance with what is established in Annex C Bis 1, Section VII of these provisions.

ii)

Insurance policies on the guarantees in favor of the Society.

iii)

Certificate of freedom from encumbrance of the guarantee assets.

Reports from the Society regarding the verification of the existence, legitimacy, value, and other characteristics of the guarantees.

Regarding guarantees granted by autonomous bodies of the federal entities and municipalities, decentralized bodies, majority state-owned companies, and trusts of the states and municipalities, as well as any other public entity over which the federal entities and municipalities have control over their decisions or actions, in addition to what is previously provided, the Societies must document the following:

If applicable, evidence of the existence of federal participations or contributions or local revenues as guarantees or source of payment for the credit.

ii)

For cases where a trust is established to guarantee and serve as a source of payment for the obligations, a copy of the corresponding contract as well as, if applicable, copies of the decree ordering its establishment and the authorization of the local congress allowing the allocation of federal participations in said guarantee or source of payment trust, in accordance with what is established in Article 34, fraction II of the Law on Financial Discipline of the Federal Entities and Municipalities, or the one that replaces it.

Restructuring.

Documentation related to the restructuring of the credit, which includes:

The analysis or feasibility studies of the restructuring

The conditions and authorization of the restructuring or, if applicable, the judicial agreement, or both.

Periodic information from the person responsible for the judicial or extrajudicial collection of the credit, as well as the corresponding supporting documentation.

Regarding liquidity loans referred to in Article 19, fraction I, subsection h) of the Law, the approval made by the Technical Committee indicated in Article 18 of these provisions.

Charged-off credits.

Information that verifies that the different recovery instances have been exhausted, or the necessary information according to the institutional policies in this matter.

The information through which the corresponding instances request the application of the charge-off of the credit, in accordance with the policies implemented by the Society in this matter.

. . .

. . . "

" Article 78.- . . .

Conduct a verification visit or perform an on-site inspection at the place where the borrower carries out the productive activity that will be financed.

In cases where the contracting for the granting of Productive Microcredits is concluded non-presentially, the Societies must observe the procedure and limits provided in disposition 4th Bis of the General Provisions referred to in articles 71 and 72 of the Law to Regulate the Activities of Savings and Loan Cooperative Societies, issued by the Secretariat, or those that replace them.

II.

. . .

III.

. . .

. . . "

" Article 81.-

. . .

The Societies that grant Productive Microcredits must use the table of preventive estimates for credit risks contained in Annex C, Section III of these provisions.

. . . "

" Article 82 Bis.- The amount of preventive estimates for credit risks will include the additional estimates required in various regulations, as well as those ordered and recognized by the Commission, and must be recognized in the results of the exercise of the corresponding period.

The additional estimates recognized by the Commission referred to in the previous paragraph are those that are constituted to cover risks that are not foreseen in the procedures established in these provisions for the determination of preventive estimates for credit risks and for adjudicated assets, and regarding which, prior to their constitution, the Societies must inform the Commission of the following:

Origin of the estimates.

II.

Methodology for determining the estimates.

III.

Amount of the estimates to be constituted.

IV.

Time considered necessary for the estimates. "

" Article 85.-

. . .

a) and b) . . .

. . .

Financing that has unconditional and irrevocable guarantees, which cover the principal and the accessories thereof, constituted with any of the means referred to in Annex C Bis 1, Section I, subsections a) to d) of these provisions, as well as those granted by any of the guarantors referred to in Group 1 of Annex C, Section V of these provisions, will not count for the purposes of the maximum financing limit to which this fraction refers, and multiple guarantees from these guarantors may be accumulated. Likewise, guarantees granted by guarantors from Groups 2 and 3 of Annex C, Section V of these provisions, will not count for the purposes of the maximum financing limit referred to in this fraction, up to the equivalent of 75% of the value of said guarantees, and multiple guarantees from these guarantors may also be accumulated.

. . .

II. and III.

. . . "

" Article 90 .- . . .

I. to III.

. . .

Regarding repo operations, the Societies must determine prior to the risk-weighted credit calculation, the result of subtracting from the repo debtor balance, the corresponding fair value of the collateral received in each operation, referred to in the Accounting Criteria contained in Annex E of these provisions. In case the obtained result is positive, said difference will be multiplied by the weighting corresponding to the risk group of the counterparty.

For the purposes of what is stated in this article, the Societies may deduct from the total amount of each credit, up to 100% of the money deposits constituted by the borrower themselves or by third parties who are members of the Society, that meet the conditions to be considered a guarantee in terms of what is stipulated by Annex C, Section V of these provisions. The amount to be deducted cannot exceed the outstanding balance of the credit.

Likewise, the Societies may recognize the coverage provided by the First Loss Coverage Scheme or the Step-by-Step Coverage Scheme. In order to determine the weightings corresponding to the operations covered by said schemes, the Societies must comply with the following:

To the covered portion, which may be up to 100%, the risk weighting corresponding to that of the Protection Provider will be assigned, while for the rest of the operation, the procedure will follow what is established in the second paragraph of this article, in accordance with what is indicated below, and subsequently, it must be multiplied by 8% to determine the corresponding capitalization requirement. Only the following Protection Providers will be eligible, both in the case of the First Loss Coverage Scheme and in the Step-by-Step Coverage Scheme or proportional:

Group 1 (Weighting of 0%):

Development banking institutions.

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

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

Trusts celebrated specifically with 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.

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

National Infrastructure Fund, or the one that replaces it.

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

Funds constituted with resources contributed as guarantee by state or municipal governments that are liquid and irrevocable in favor of the Society.

Group 2 (Weighting of 20%):

National multiple banking institutions that have a rating of, at least, investment grade on the national scale.

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

Other legal persons or international financial entities that have, at least, investment grade on the international scale.

Group 3 (Weighting of 100%):

Other members of the same Society.

II.

In the case of the First Loss Coverage Scheme for credit portfolios, the Societies must adhere to the following:

If the amount of 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 entirety of the individual credits as there is no uncovered portion. For the part covered by the First Loss Coverage Scheme, capital will be required in accordance with the credit risk before the guarantor. In this case, the covered part is equal to the sum of the capital requirements of the individual credits.

If the amount of the coverage is less than the aforementioned sum of capital requirements for the individual credits, the Society will constitute capital for the uncovered part for an amount equal to the difference between both concepts. For the part covered by the First Loss Coverage Scheme, capital will be required in accordance with the credit risk before 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 Step-by-Step Coverage Scheme, where the guarantee does not cover the entirety of the exposure and, in addition, the covered and uncovered 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 remainder will be considered as unsecured. "

" Article 118.-

. . .

I. to V.

. . .

VI.

. . .

a) to c)

. . .

Guarantees.

Appraisals of the assets securing the debt.

ii)

Insurance policies on the guarantees in favor of the Society.

iii)

Certificate of freedom from encumbrance of the guarantee assets.

Reports from the Society regarding the verification of the existence, legitimacy, value, and other characteristics of the guarantees.

If applicable, evidence of the existence of federal participations or contributions or local revenues as guarantees or source of payment for the credit.

ii)

Restructuring.

Documentation related to the restructuring of the credit, which includes:

The analysis or feasibility studies of the restructuring.

The conditions and authorization of the restructuring or, if applicable, the judicial agreement, or both.

Periodic information from the person responsible for the judicial or extrajudicial collection of the credit, as well as the corresponding supporting documentation.

Regarding liquidity loans referred to in Article 19, fraction I, subsection h) of the Law, the approval made by the Technical Committee indicated in Article 18 of these provisions.

Charged-off credits.

Information that verifies that the different recovery instances have been exhausted or the necessary information according to the institutional policies in this matter.

The information through which the corresponding instances request the application of the charge-off of the credit, in accordance with the policies implemented by the Society in this matter.

. . .

. . . "

" Article 123.-

. . .

Conduct a verification visit or perform an on-site inspection at the place where the borrower carries out the productive activity that will be financed.

II.

. . .

III.

. . .

. . . "

" Article 126.-

. . .

The Societies that grant Productive Microcredits must use the table of preventive estimates for credit risks contained in Annex C, Section III of these provisions. "

. . . "

" Article 127 Bis.- The amount of preventive estimates for credit risks will include the additional estimates required in various regulations, as well as those ordered and recognized by the Commission, and must be recognized in the results of the exercise of the corresponding period.

Origin of the estimates.

II.

Methodology for determining the estimates.

III.

Amount of the estimates to be constituted.

IV.

Time considered necessary for the estimates. "

" Article 130.-

. . .

a) and b)

. . .

II. and III.

. . . "

" Article 135.-

. . .

I. to III.

. . .

Group 1 (Weighting of 0%):

Development banking institutions.

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

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

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

National Infrastructure Fund, or the one that replaces it.

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

Funds constituted with resources contributed as guarantee by state or municipal governments that are liquid and irrevocable in favor of the Society.

Group 2 (Weighting of 20%):

National multiple banking institutions that have a rating of, at least, investment grade on the national scale.

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

Other legal persons or international financial entities that have, at least, investment grade on the international scale.

Group 3 (Weighting of 100%):

Other members of the same Society.

II.

In the case of the First Loss Coverage Scheme for credit portfolios, the Societies must adhere to the following:

III.

" Article 174.-

. . .

I. to V.

. . .

VI.

. . .

a) to c)

. . .

Guarantees.

Appraisals of the assets securing the debt.

. . ."

Societies, in their credit manuals, must provide that appraisals are prepared in accordance with the provisions of the Law on Transparency and Promotion of Competition in Secured Credit and as established in Annex C Bis 1, Section VII of these provisions.

ii)
Insurance policies on guarantees in favor of the Society.

iii)
Certificate of freedom from encumbrance of the guarantee assets.

2.
Reports by the Society on the verification of the existence, legitimacy, value, and other characteristics of the guarantees.

3.
Regarding guarantees granted by autonomous bodies of the federal entities and municipalities, decentralized bodies, majority state-owned companies, and trusts of the states and municipalities, as well as any other public entity over which the federal entities and municipalities have control over their decisions or actions, in addition to what is provided above, the Societies must document the following:

i)
If applicable, evidence of the existence of federal participations or contributions or local revenues as guarantees or source of payment for the credit.

ii)
For cases where a trust is established to guarantee and serve as a source of payment for the obligations, a copy of the corresponding contract as well as, if applicable, copies of the decree ordering its establishment and the authorization of the local congress allowing the allocation of federal participations in said guarantee or payment trust, as established in Article 34, fraction II of the Law on Financial Discipline of the Federal Entities and Municipalities, or the one that replaces it.

e)
Restructuring.

Documentation related to the restructuring of the credit, including:

1.
The analysis or feasibility studies of the restructuring.

2.
The conditions and authorization of the restructuring, or if applicable, the judicial agreement, or both.

3.
Periodic information from the person responsible for the judicial or extrajudicial collection of the credit, as well as the corresponding supporting documentation.

f)
Regarding liquidity loans referred to in Article 19, fraction I, subsection h) of the Law, the approval made by the Technical Committee indicated in Article 18 of these provisions.

g)
Charged-off credits.

1.
Information that verifies that the different recovery instances were exhausted or the necessary information according to institutional policies in this matter.

2.
Information through which the corresponding instances request the application of the charge-off of the credit, according to the policies implemented by the Society in this matter.

. . .

. . . "

" Article 180.- . . .

I.
Conduct a verification visit or perform an on-site inspection at the place where the borrower carries out the productive activity that will be financed.

In cases where the contracting for the granting of Productive Microcredits is concluded non-presentially, the Societies must observe the procedure and limits provided in disposition 4ª Bis of the General Provisions referred to in articles 71 and 72 of the Law to Regulate the Activities of Savings and Loan Cooperative Societies, issued by the Secretariat, or those that replace them.

II.

. . .

III.

. . .

. . . "

" Article 183.-

. . .

Societies that grant Productive Microcredits must use the table of preventive estimates for credit risks contained in Annex C, Section III of these provisions. "

" Article 185 Bis.- The amount of preventive estimates for credit risks will include the additional estimates required in various regulations, as well as those ordered and recognized by the Commission, and must be recognized in the results of the period's exercise corresponding.

The additional estimates recognized by the Commission referred to in the previous paragraph are those constituted to cover risks that are not provided for in the procedures established in these provisions for the determination of preventive estimates for credit risks and for adjudicated assets, and prior to their constitution, the Societies must inform the Commission of the following:

I.
Origin of the estimates.

II.
Methodology for determining the estimates.

III.
Amount of the estimates to be constituted.

IV.
Time considered necessary for the estimates. "

" Article 188.-

. . .

a) and b)

. . .

Financing that has unconditional and irrevocable guarantees, covering the principal and accessories thereof, constituted with any of the means referred to in Annex C Bis 1, Section I, subsections a) to d) of these provisions, as well as those granted by any of the guarantors referred to in Group 1 of Annex C, Section V of these provisions, will not count for the purposes of the maximum financing limit referred to in this fraction, and multiple guarantees from these guarantors may be accumulated. Likewise, guarantees granted by guarantors from Groups 2 and 3 of Annex C, Section V of these provisions, will not count for the purposes of the maximum financing limit referred to in this fraction, up to the equivalent of 75% of the value of said guarantees, and multiple guarantees from these guarantors may also be accumulated.

. . .

II. and III.

. . . "

TRANSITORY PROVISIONS

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

SECOND.- Savings and loan cooperative societies with operation levels I to IV, in order to constitute the total amount of preventive estimates for credit risks derived from the use of the methodologies referred to in Annex C that is replaced by this instrument, 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 cited methodologies. For the purposes of this fraction, "initial financial effect" shall be understood as the difference resulting from subtracting, on the same date, the estimates that must be constituted for the portfolio balance applying the aforementioned methodology on October 1, 2022, from the estimates that would be held 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 resulting 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 item "result of previous exercises."

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 according to 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 195 of the "General Provisions applicable to the activities of savings and loan cooperative societies" in force before the entry into force of this Resolution.

b)
Retain the surplus indicated in the first paragraph of this fraction, until such time as the credits that gave rise to it are liquidated, defaulted, renewed, or restructured. Once such credits are liquidated, defaulted, renewed, or restructured, the savings and loan cooperative societies must release the surplus according to the Accounting Criteria indicated in subsection a) above.

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

a)
That they recognized 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 Second 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, had the recognition of the aforementioned effect been made in the results of the exercise;

d)
A detailed explanation regarding 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 according to the methodology in force prior to the entry into force of this Resolution.

RESPECTFULLY

Mexico City, August 25, 2021. - President of the National Banking and Securities Commission, Juan Pablo Graf Noriega.- Signature.

ANNEX C

PROCEDURE FOR THE QUALIFICATION AND CONSTITUTION OF PREVENTIVE ESTIMATES

I.
Consumer credit portfolio

Societies must qualify and constitute the corresponding preventive estimates for their consumer credit portfolio, with figures as of the last day of each calendar month, adjusting to the following procedure:

a)
They must classify the entirety of their consumer credit portfolio, based on the number of days of delay or delinquency elapsed from the day of the first amortization of the credit, which has not been covered by the borrower as of the date of qualification.

b)
Likewise, they must classify their credit portfolio into Type 1 and Type 2 as follows:

1.
Type 1 Portfolio, that credit portfolio with respect to which it is not estimated probable that the debtor will default on its credit obligations to the Society, and is not within the circumstances of being considered as "troubled portfolio".

2.
Type 2 Portfolio, that credit portfolio whose credits it is probable that the debtor will default on its credit obligations to the Society, updating such circumstance when it determines that any of the credits owed by the debtor constitutes "troubled portfolio". Once a credit has been classified as Type 2 Portfolio, it will remain in that classification until its liquidation.

For the purposes of what is established in items 1 and 2 above, "troubled portfolio" shall be understood as that constituted by consumer credits with respect to which it is determined that, based on current information and facts, as well as in the credit review process, there is a considerable probability that they cannot be recovered in their entirety, both their principal amount and interest, as established in the contract. Likewise, it will be "troubled portfolio" that which, having undergone restructuring or renewal, becomes past due portfolio in accordance with what is established in the Accounting Criteria. Both the performing and past due portfolios are susceptible to being identified as troubled portfolio.

c )
For each stratum and type of portfolio, they must maintain and constitute the preventive estimates resulting from applying to the total amount of their consumer credit portfolio, the percentage of estimates corresponding according to the following table:

Days of Delinquency
Percentage (%) of preventive estimates
Type 1 Portfolio
Percentage (%) of preventive estimates
Type 2 Portfolio
0
1
10
1 to 7
2
13
8 to 30
10
20
31 to 60
20
35
61 to 90
40
55
91 to 120
70
80
121 to 180
85
95
181 or more
100
100

The amount subject to qualification shall not include accrued but uncollected interest, recorded in the balance sheet, of credits that are in past due portfolio.

II.
Commercial credit portfolio

Societies must qualify and constitute the corresponding preventive estimates for their commercial credit portfolio, with figures as of the last day of each calendar month, adjusting to the following procedure:

a)
They must classify the entirety of their commercial credit portfolio, based on the number of days of delay or delinquency elapsed from the day of the first amortization of the credit that has not been covered by the borrower as of the date of qualification.

b)
They must classify their credit portfolio into Type 1 and Type 2 as follows:

1.
Type 1 Portfolio, that with respect to which it is not estimated probable that the debtor will default on its credit obligations to the Society, and is not within the circumstances of being considered as "troubled portfolio".

2.
Type 2 Portfolio, that integrated by credits with respect to which it is probable that the debtor will default on its credit obligations to the Society, updating such circumstance when it determines that any of the credits owed by the debtor constitutes a "troubled portfolio". Once a credit has been classified as Type 2 Portfolio, it will remain in that classification until its liquidation.

For the purposes of what is established in items 1 and 2 above, "troubled portfolio" shall be understood as that constituted by commercial credits with respect to which it is determined that, based on current information and facts, as well as in the credit review process, there is a considerable probability that they cannot be recovered in their entirety, both their principal amount and interest, as established in the contract. Likewise, it will be "troubled portfolio" that which, having undergone restructuring or renewal, becomes past due portfolio in accordance with what is established in the Accounting Criteria. Both the performing and past due portfolios are susceptible to being identified as troubled portfolio.

c)
For each stratum and type of portfolio, they must maintain and constitute the preventive estimates resulting from applying to the total amount of their commercial credit portfolio, the percentage of estimates corresponding according to the following table:

Days of Delinquency
Percentage (%) of preventive estimates
Type 1 Portfolio
Percentage (%) of preventive estimates
Type 2 Portfolio
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 qualification shall not include accrued but uncollected interest, recorded in the balance sheet, of credits that are in past due portfolio.

III.
Productive Microcredits

Societies must qualify and constitute the corresponding preventive estimates for their Productive Microcredits, adjusting to the following procedure:

a)
They must classify the entirety of their Productive Microcredits, based on the number of billing periods that as of the date of qualification report non-compliance or delinquency of the due payment established by the Society.

b)
For each stratum, they must maintain and constitute the preventive estimates resulting from applying to the total amount of their Productive Microcredits, the percentage of estimates corresponding according to the following tables, depending on whether the billing periods with non-compliance are weekly, biweekly, or monthly.

Weeks of Delinquency
Percentage (%) of preventive estimates
0
0.5
1
1
2
3
3
4
4
5
5
10
6
15
7
20
8
25
9
30
10
35
11
40
12
45
13
50
14
60
15
70
16
80
17
85
18
90
19
95
20 or more
100

Biweeks of Delinquency
Percentage (%) of preventive estimates
0
0.50
1
3
2
5
3
15
4
25
5
35
6
45
7
60
8
80
9
90
10 or more
100

Months of Delinquency
Percentage (%) of preventive estimates
0
0.50
1
5
2
25
3
45
4
80
5 or more
100

IV.
Housing credit portfolio

Societies must qualify and constitute the corresponding preventive estimates for their housing credit portfolio, with figures as of the last day of each calendar month, adjusting to the following procedure:

a)
They must classify the entirety of their housing credit portfolio, based on the number of days of delay or delinquency elapsed from the day of the first amortization of the credit, which has not been covered by the borrower as of the date of qualification.

b)
They must classify their credit portfolio into Type 1 and Type 2 as follows:

2.
Type 2 Portfolio, that integrated by credits with respect to which it is probable that the debtor will default on its credit obligations to the Society, updating such circumstance when it determines that any of the credits owed by the debtor constitutes "troubled portfolio". Once a credit has been classified as Type 2 Portfolio, it will remain in that classification until its liquidation.

For the purposes of what is established in items 1 and 2 above, "troubled portfolio" shall be understood as that constituted by housing credits with respect to which it is determined that, based on current information and facts, as well as in the credit review process, there is a considerable probability that they cannot be recovered in their entirety, both their principal amount and interest, as established in the contract. Likewise, it will be "troubled portfolio" that which, having undergone restructuring or renewal, becomes past due portfolio in accordance with what is established in the Accounting Criteria. Both the performing and past due portfolios are susceptible to being identified as troubled portfolio.

c)
For each stratum and type of portfolio, they must maintain and constitute the preventive estimates resulting from applying to the total amount of their housing credit portfolio, including the interest generated by the provisioning percentages indicated below:

Days of Delinquency
Percentage (%) of preventive estimates
Type 1 Portfolio
Percentage (%) of preventive estimates
Type 2 Portfolio
0
0.35
2
1 to 30
1.05
5
31 to 60
2.45
10
61 to 90
8.75
20
91 to 120
17.50
30
121 to 150
33.25
45
151 to 180
34.30
60
181 to 1460
70
80
More than 1460
100
100

The amount subject to qualification shall not include accrued but uncollected interest, recorded in the balance sheet, of credits that are in past due portfolio.

Societies may only constitute the preventive estimates referred to in this Section IV, for the part of the amount of their credits that is covered, with mortgage guarantees duly registered in their name, being applicable to them the percentage corresponding according to the previous table, while to the uncovered part corresponds a percentage of 100%, without the recognition of real estate guarantees being applicable, provided for in Section V of this Annex.

In those credits intended for remodeling or improvement of housing that do not have a mortgage guarantee duly registered in the name of the Society, to qualify and constitute the corresponding preventive estimates, they must apply the table referred to in Section I of this Annex, as appropriate.

V. Adjustments to preventive estimates and recognition of guarantees

Societies 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. When making such reductions, they will adjust to the policies that the Society itself has approved for such effect.

When Societies have guarantees that comply with what is provided in Annex C Bis 1, Section I of these provisions, they may reduce the percentage of preventive estimates of the credit or credits in question, taking the necessary measures so that the guarantee can be adjudicated and executed at the moment that defaults occur on the part of the borrower, placing them in past due portfolio, in accordance with what is established in the Accounting Criteria. The uncovered part will maintain the percentage of preventive estimates corresponding to it.

Societies 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 so that the guarantee can be adjudicated and executed at the moment that defaults occur on the part of the borrower, placing them in past due 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 at the moment the credit is classified as past due portfolio, the Societies must cease to recognize the coverage provided by said guarantee and assign the preventive estimates corresponding to the days of delinquency registered.

The guarantees constituted in terms of the previous paragraph, may cover the total or a determined percentage of the outstanding balance of one or more credits when in the deposit contracts or in the modifications to them it is provided 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.

Societies, when qualifying credits that have 2 or more guarantees, may recognize the coverage of said guarantees considering the following:

a)
They will determine the part of the balance that is covered by 2 or more guarantees, whether they are means of payment with immediate liquidity, non-financial guarantees, or Step-by-Step Coverage Scheme or First Loss Coverage Scheme, as well as the exposed or uncovered portion in the terms described.

b)
The covered part of the credit balance can be divided into 2 or more segments, based on the type of guarantees that have been granted, when they adjust to the following:

1.
If there are 2 or more Step-by-Step Coverage or First Loss Coverage schemes, each guarantor must respond for the guaranteed part of the credit balance, provided that there are no exceptions or defenses of priority order in collection among the guaritons themselves.

2.
If there are 2 or more guarantees constituted with means of payment with liquidity

immediate or non-financial guarantees, each of them must cover the guaranteed portion of the credit balance, provided that it has been expressly and irrevocably agreed in the contracts giving rise to the guarantee as to the portion of the credit that will remain guaranteed with each encumbered asset.

In the case of combinations of the Step-and-Measure Coverage Scheme or the First Loss Coverage Scheme and payment instruments with immediate liquidity or non-financial guarantees, each of them may be considered, provided that they are enforceable at the time of rating and meet the requirements established in items a) and b) of this Section.

Upon receiving guarantees whose validity is subject to compliance with terms and conditions by the Creditor Society and the latter fails to comply with such terms and conditions, the guarantee shall not be considered for the purposes of this Section.

Societies may not simultaneously apply the Step-and-Measure Coverage Scheme or the First Loss Coverage Scheme and payment instruments with immediate liquidity or non-financial guarantees from the same guarantor.

Societies may choose not to recognize guarantees if this results in higher preventive estimates.

The credit balance for portfolio rating purposes shall not include accrued but uncollected interest on credits in default, as these shall be reserved separately applying a 100% estimate.

Regarding guarantees constituted with payment instruments with immediate liquidity provided for in Annex C Bis 1, Section I, items a), b), c) and d) of these provisions, to which it can be ensured that such resources are applied to the entire outstanding balance or to a certain percentage of the outstanding credit balance, Societies may exempt the portion of the credit covered by such guarantees from the establishment of preventive estimates.

Regarding guarantees constituted with payment instruments with immediate liquidity provided for in Annex C Bis 1, Section I, items e) and f) of these provisions, to which it can be ensured that such resources are applied to the entire outstanding balance or to a certain percentage of the outstanding credit balance, Societies shall establish estimates corresponding to a percentage of 0.5% for the covered portion.

In the event that Societies are beneficiaries under the First Loss Coverage Scheme for a credit or for a portfolio of identified credits with similar characteristics, they shall apply the following procedure:

Ensure that the credits comprising the portfolio covered by the received guarantee are clearly identified and have similar characteristics.

Calculate the estimate requirement for the credit, or for each of the credits in the covered portfolio according to the methodologies described in Sections I to IV of this Annex, as applicable, and in the case of credit portfolios, sum the results of each credit to determine the total estimate requirement for said portfolios.

The total estimates calculated according to item b) above shall be compared with the value of the corresponding First Loss Coverage Schemes, in order to adjust as follows:

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 Society shall only establish the estimates resulting from multiplying the estimate percentage corresponding to the Protection Provider, in accordance with this Annex, by the amount of estimates required for the credit or portfolio of credits.

If the value of the First Loss Coverage Schemes is less than the total estimate requirement for the credit or portfolio of credits before the recognition of their own guarantees, the Society shall establish estimates for the uncovered portion up to the amount necessary to reach the total of the required estimates, while for the covered portion it shall establish the estimates resulting from multiplying the estimate percentage corresponding to the Protection Provider, in accordance with this Annex, by the amount of the guarantee.

For Societies to recognize guarantees and assign the corresponding reserve to the covered tranches of the credit or portfolio, there must be evidence of compliance with the terms and conditions established by the guarantors regarding the information they require, as well as compliance with the processes established in the corresponding contracts.

Regarding the Step-and-Measure Coverage Scheme, the Society shall separate the covered portion of the credit or covered portfolio from the uncovered portion, assigning to the former the estimate percentage corresponding to the Protection Provider and to the latter the estimate percentage corresponding to the original borrower, in accordance with this Annex.

In the case of both the First Loss Coverage Scheme and the Step-and-Measure or proportional Coverage Scheme, only the following groups of admissible Protection Providers shall be recognized for portfolio rating purposes:

Group 1:

Development banking institutions.

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

Public trusts that are part of the Mexican banking system in accordance with Article 3 of the Credit Institutions Law.

Trusts entered into 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.

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

National Infrastructure Fund, or the one that replaces it.

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

Funds constituted with resources contributed as guarantee by state or municipal governments that are liquid and irrevocable in favor of the Society.

Group 2:

National multiple banking institutions that have a rating of at least investment grade on the national scale.

Other entities comprising the Mexican financial system, including insurers, that have at least investment grade on the national scale.

Other legal persons or international financial entities that have at least investment grade on the international scale.

Group 3:

Other members of the same Society.

When Protection Providers listed in Group 1 are available, the estimate percentage corresponding to the covered portion shall be 0.5%. Regarding Protection Providers listed in Group 2, an estimate percentage of 1% shall 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 member records in other credit operations with the Society, other than the one being guaranteed, shall be assigned to the covered portion, applied to the estimate table of the covered operation.

In the event that the uncovered portion corresponds to a lower estimate percentage than that corresponding to the covered portion, as indicated in the previous paragraph, Societies 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 crop and livestock insurance, which meet the characteristics referred to in Annex C Bis 1, Section IX, item d) of these provisions, Societies may multiply the estimates corresponding to the direct borrower by a factor of 95%, as long as no insurance claim is filed.

For the purposes of the previous paragraph, "credits to the agricultural and rural sector" shall 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 these are integrated into the primary activity of the initially mentioned sectors, whose branches and sub-branches of economic activity correspond to those designated as sector 11 of the North American Industry Classification System 2018 (NAICS) of the National Institute of Statistics and Geography (INEGI), or the one that replaces it.

In the event that a claim is made to the insurance-granting entity by the lending Society and said entity accepts it without the covered amount having been executed or paid and, therefore, the credit has not been written off from the balance sheet of the Societies, these may calculate the estimates by multiplying the balance of the covered credit by 0.5% when the aforementioned insurance-granting entity has a rating assigned by a rating institution of lower than investment grade on the national scale.

Societies that have non-financial real guarantees covering at least 50% of the outstanding credit balance at the date of calculation of preventive estimates may recognize such guarantees for the purposes of provisioning their credit portfolio up to the amount resulting from multiplying the recognition percentage provided for in the following table by their last appraised value, updated for depreciation in the case of movable goods:

Type of non-financial guarantee or assimilable instrument

Recognition Percentage (%)

Commercial and residential real estate

Movable goods and others

To determine the estimates corresponding to the covered portion of each credit or portfolio covered with non-financial guarantees and assimilable instruments, a provisioning percentage of 0.5% shall be assigned.

ANNEX C BIS 1

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 Societies have guarantees constituted with payment instruments with immediate liquidity, Step-and-Measure Coverage Schemes, First Loss Coverage Schemes, or non-financial guarantees or assimilable instruments that comply with what is provided for in this Annex, they may reduce the percentage of preventive estimates of the credit or credits in question, in accordance with what is established in Annex C, Section V of these provisions.

The eligible guarantees constituted for these purposes are those indicated below:

Guarantees constituted with payment instruments with immediate liquidity, regarding which Societies must comply with the following:

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

Cash or cash deposits constituted by the borrower or by another member or a third party in the Society itself in favor of the Society, as well as payment instruments with maturity equal to or greater than the term of the credit granted to the member in favor of the Society in question, taking the necessary measures so that the guarantee can be adjudicated and executed at the moment that defaults occur on the part of the borrower that place it in default portfolio, in accordance with what is established in the Accounting Criteria when the debtor or a third party constitutes a deposit in the Society 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, in case of default, they are available without any legal restriction for the Society and from which the debtor or any other person other than the Society itself cannot dispose while the obligation subsists.

Securities issued by the Bank of Mexico.

Securities issued or guaranteed by the Federal Government.

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

Bank titles that have a credit rating issued by a securities rating institution, equal to or better than risk grade A on the national scale granted, by at least one rating agency.

Investments in shares representing the social capital of daily liquidity investment funds. For the purposes of this item, the aforementioned investments shall be understood in terms of Articles 10, fraction I, item k) and 13, fraction II, item c) of these provisions.

II.

Non-financial guarantees and assimilable instruments, regarding which the following must be considered:

Societies, in order to use non-financial guarantees and assimilable instruments for the purposes of provisioning their credit portfolio, must have available to the Commission the evidence that accredits the following:

The signing of contracts or other instruments in which the constitution of the guarantees is documented, in which the causes of default that generate the Society's right to execute such guarantees are stated.

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

Regarding pledge bonds negotiated separately from the deposit certificate for the first time, Societies 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 Societies take deposit certificates as guarantee, they must notify the general deposit warehouses of such situation and have evidence thereof.

The adoption of necessary measures to ensure the conservation of the goods subject to the guarantees, which include 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 federative entity and in the Unique Registry referred to in the Financial Discipline Law of Federative Entities and Municipalities, or the one that replaces it, as well as those necessary to exercise the right to compensation based on the transfer of ownership of non-financial guarantees.

Societies that take deposit certificates and pledge bonds must exercise the right consigned in the second paragraph of Article 22 Bis 6 of the General Law of Auxiliary Credit Organizations and Activities and have the certification of the electronic file of the deposit certificate obtained in RUCAM indicating that the corresponding annotations of the taking of said certificates and pledge bonds as guarantee were made by the Society.

The existence of risk management processes that, in addition to what is provided in TITLE THREE, Chapter II of these provisions, explicitly consider the legal, operational, liquidity and market risks deriving from the use of non-financial guarantees. Such processes must meet the requirements indicated in Section VI of this Annex.

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

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

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

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

Proper 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.

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

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

The establishment of methods and internal controls that ensure:

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

Compliance with the conditions and terms established in the contracts, as well as the identification of any default by the counterparty and, consequently, the ability to request the execution of non-financial guarantees. For the purposes of the foregoing, the default event defined in the contracts must consider situations where the debtor is in a default portfolio situation with respect to the Society, or when it 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.

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:

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

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, 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.

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 pledge bonds issued by general warehouses and registered in RUCAM.

Receivable 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 Society must have ownership and disposal of the cash flows derived from the receivable rights, in any foreseeable circumstance.

The following are included within the concept referred to in the previous paragraph: 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 enterprises, as well as other independent third parties not related to the sale of goods or services linked to a commercial operation. Admissible receivable and fiduciary rights do not include those related to securitizations or sub-participations.

When the debtor makes payments directly to the assignor of the receivable rights, trust or collection administrator, the Society must periodically verify that these payments are forwarded to it within the terms included in the contract.

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

Guarantee or administration trust, or both.

Irrevocable instructions or guarantee mandate contracts, or both.

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

Guarantee or administration trust, or both.

Irrevocable instructions or guarantee mandate contracts, or both.

Deposit certificates and pledge bonds registered in RUCAM, provided that the Society notifies the general deposit warehouse issuing said titles that these were taken by said Society as guarantee and has the certification of the electronic file of the deposit certificate obtained in RUCAM, indicating that the corresponding annotations of the taking in guarantee of said certificates and pledge bonds by the Society were made.

For the purposes of what is provided in this Annex, "other assimilable instruments" shall be understood as those provided for in items d) and e) above of this Section.

IV.

The guarantees and instruments referred to in Section III, items d) and e) above of this Annex, to guarantee their legal certainty, must at least:

Must be duly constituted in favor of the relevant Society.

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

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 federative entity.

iii)

Be registered in the Single Registry referred to in the Law on Financial Discipline of the Federative Entities and Municipalities, or the one that replaces it.

iv)

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

Have the opinion of an independent specialized legal firm, or that of the Society's legal department, regarding the validity of the backing of the participations and contributions in federal revenues based on the documents supporting the obligations of the federative entity or municipality with the Society.

vi)

Have the opinion of an independent specialized legal firm, or that of the Society's legal department, in the case of credits guaranteed with own revenues, regarding the validity of the backing of said revenues.

In the case of real estate, they must:

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 that document the guarantees and allow the relevant Society to enforce them.

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

Ensure the enforceability of their yields.

ii)

Be binding on all parties and legally enforceable in the corresponding jurisdiction. The Societies 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 for the rapid collection of cash flows generated by the receivables. In all cases, the procedures available to the Societies must guarantee compliance with all relevant legal conditions for declaring the member's default and the rapid adjudication of the guarantee. Likewise, the documents or legal instruments in which the guarantees are recorded 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 creditor.

Be free of encumbrances with third parties or, otherwise, that the relevant Society appears first in the order of payment, considering for such effect the appraisal of the guarantee,

Be easy to realize.

In the administration of movable and immovable property, the Societies 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 collateral are insured in favor of the relevant Society 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 management of the guarantees referred to in Section III of this Annex, the Societies must:

In the case of real estate, including residential use, related to credits that have been restructured and are considered troubled portfolio, in the terms established in Annex C of these provisions, have an appraisal at least every three years, in accordance with what is established in subsection a) of Section VII of this Annex, 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.

In the case of receivables:

Have a clear process to determine the credit risk of the receivables. This process must, among other aspects, include the analysis of the creditor's business and the economic sector in which it operates, considering the effects of the economic cycle, as well as the type of member with whom it negotiates. In case they use information provided by the creditor to evaluate the credit risk of the members, the Societies must examine the creditor's credit history to corroborate its strength and credibility.

Ensure that the margin or appraisal between the credit amount and the value of the receivables reflects all timely factors including the cost of adjudication, the degree of concentration of receivables from a single creditor, and the concentration risk with respect to the total positions of the relevant Society.

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 age, control of commercial documents, certification of the debt base, frequent audits of the guarantee, account confirmation, control of income from paid accounts, dilution analysis, and periodic financial analysis of both the creditor and the issuers of the receivables, especially in the case that the guarantee is formed by a reduced number of high-value receivables. Likewise, they must observe the concentration limits that the relevant Society establishes for its guarantees in receivables, as well as the agreements related to the loan in question.

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

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

VII.

Appraisals must be carried out by professional appraisers, in accordance with what is established in the Law on Transparency and Promotion of Competition in Secured Credit, in relation to the authorization as a professional appraiser of real estate objects of credits guaranteed for housing, and must be updated according to the policies of the relevant Society.

Regarding commercial real estate:

A valid appraisal must be available, which must be updated at least every three years or with greater frequency when market conditions are unstable at the judgment of the Commission, observing for this effect what is provided in Section VI, subsection a) of this Annex. If as a result of the application of value estimates some properties are identified whose value has decreased and require new valuations, the appraisal must be updated.

When available information suggests that its value may have been significantly reduced compared to general market prices or when any default occurs, the real estate in question will not be considered as a mitigant of credit risk.

VIII.

Goods granted under financial leasing may be recognized receiving the same treatment as admissible non-financial guarantees when the Societies are not subject to residual value risk, which consists in the exposure of said Societies 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. The Societies must comply with the minimum requirements for the type of admissible real guarantee in question and, in addition, must observe the following criteria:

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

The lessor must have ownership of the asset, as well as the capacity to exercise its rights as owner in a timely manner.

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.

Regarding Step-and-Measure Coverage Scheme or First-Loss Coverage Scheme, the Societies must attend to the following.

Have policies, procedures, and internal controls to carry out the coverage analysis that consider, at least, the following:

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

Regarding the Step-and-Measure Coverage Scheme or the First-Loss Coverage Scheme, they must evaluate the way in which such operations were structured and the ease of their execution considering, where applicable, other direct and contingent obligations borne by the Society or entity providing these.

Have contracts or other instruments that document the constitution of the guarantees in which the assumptions and the procedure to exercise the guarantee are recorded. Regarding this, the contracts, documents, or instruments in which the guarantees are recorded must:

Ensure that the relevant Society maintains the right to enforce the guarantees legally in case of default, insolvency, commercial bankruptcy, or any other similar event, and that the contract or instrument in which they are documented 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 of the credit quality of the covered position.

Be irrevocable and unconditional, so the contracts or instruments in which they are recorded cannot contain any clause that allows the Protection Provider to exempt itself from paying promptly in the case that the original counterparty presents any default. In all cases, the contracts or other documents can only be modified with the agreement of the Society.

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

Provide that, upon the occurrence of a default or non-payment by the debtor, the Society can immediately initiate actions against the guarantor regarding the pending payment obligations. Likewise, the contracts, documents, or instruments in which the guarantees are recorded must stipulate that the guarantor can make a single payment covering the total amount of the pending obligations borne by the debtor, or can assume the future payment of the obligations borne by the debtor. In all cases, the obligation of the guarantor must be established in the documentation formalizing the operation.

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

Not recognize the Step-and-Measure Coverage Scheme or the First-Loss Coverage Scheme that are granted reciprocally between who provides any of these risk mitigation techniques and the Society itself.

Reveal in notes to the financial statements the way in which they use the Step-and-Measure Coverage Scheme or the First-Loss Coverage Scheme to cover credit risk. This disclosure of information must be published in a general and aggregated manner, highlighting the amount covered by the Step-and-Measure Coverage Scheme or by the First-Loss Coverage Scheme.

Ensure, at least, the following:

That it is an explicitly documented obligation assumed by the guarantor.

That the obligation cannot be unilaterally cancelled by the guarantor.

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

The Societies, regarding credit insurance, must, at least, comply with the following:

The insurance provider must be a specialized institution authorized to grant insurance and have a credit rating equal to or higher than investment grade issued, by at least, one securities rating agency referred to in the Securities Market Law.

The contracts or policies of the coverage schemes must:

Consider the conditions of partial or total default of a creditor.

ii)

Be legally enforceable in the corresponding jurisdiction. For this effect, they must allow the beneficiary Society to enforce the coverage scheme under the agreed conditions and timeframes, unless the relevant Society:

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

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

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

iii)

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

Cancel or revoke unilaterally, except for what is provided in subsection ii) of this subsection.

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

Object to or omit payment in the event of any default by the creditor, except for what is provided in subsection ii), subsection 2) of this subsection.

iv)

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

In the case of agricultural insurance coverages, the following must be considered:

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

The contracts or policies include the granting Society as the direct beneficiary of the insurance, or there is some legal instrument that provides for such circumstance.

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

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

Frost.

ii)

Flood.

iii)

Clogging.

iv)

Heat wave.

Low temperatures.

vi)

Lack of floor to harvest.

vii)

Hail.

viii)

Fire.

ix)

Excess humidity (rain).

Impossibility to sow.

xi)

Drought.

xii)

Earthquake.

xiii)

Hurricane.

xiv)

Cyclone.

xv)

Tornado.

xvi)

Tromba.

xvii)

Strong winds.

Are granted by specialized entities authorized by the National Insurance and Surety Commission that have a credit rating, equal to or higher, to investment grade, issued by, at least, one securities rating agency.

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

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