Additional measures in financial markets in Mexico

With the purpose of fostering an orderly functioning of financial markets, strengthen the credit channels and provide liquidity, the financial authorities of the country have taken several measures to foster a better functioning of these markets. On April 21, the Banco de México’s Governing Board approved additional measures.

The measures approved support the functioning of the financial system for up to MXN 750 billion. These measures coupled with those previously announced amounts to 3.3% of 2019 GDP. Banco de México agreed to take the following measures:

1. Increasing liquidity during trading hours to facilitate the optimal functioning of financial markets and payment systems, with the purpose of fostering an orderly functioning of the money market in our country.

2. Extending the securities eligible for the Ordinary Additional Liquidity Facility (FLAO), foreign exchange hedging program operations, and USD credit operations, with the purpose of providing liquidity to securities.

3. Extending access to FLAO to development banks in order for them to obtain liquidity through collateralized credits or repos, with the same cost of 1.1 times Banco de México’s target for the overnight interbank interest rate.

4. Opening a facility to repurchase government securities in order to provide liquidity to financial institutions holding government debt.

5. Opening a debt securities temporary swap facility in order to promote an orderly behavior of Mexico’s debt market.

6. Implementing a corporate securities repurchase facility through credit institutions in order to provide liquidity to short-term corporate securities and long-term corporate debt.

7. Channeling resources to banking institutions in order foster lending to micro, small-, and medium-sized enterprises and individuals affected by the pandemic.

8. Opening temporarily a financing facility for commercial banks which will be guaranteed by credits to corporate, to finance micro, small- and medium-size enterprises.

9. Implementing swaps of government securities in order to promote the proper functioning of the government debt market.

10. Incorporating into its foreign exchange intervention tools, the possibility to conduct hedge transactions settled by differences in US dollars. This will be done in order to operate during the hours when Mexican markets are closed.

Banco de México expects that the first nine measures previously stated will be in force until September 30, 2020, except for the tenth measure, the validity of which will be determined by the Foreign Exchange Commission.