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Policy and Functions of the Banco De México on Financial

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Policy and Functions of the Banco De México on Financial Banco de México Banco de México’s Policies and Functions Regarding Financial Market Infrastructures August 2016 Banco de México’s Policies and Functions Regarding Financial Market Infrastructures 1 Banco de México NOTE This text is provided for readers’ convenience only. Discrepancies may possibly arise between the original document and its translation to English. The original and unabridged document in Spanish is the only official document. Banco de México’s Policies and Functions Regarding Financial Market Infrastructures 2 Banco de México Contents Contents .............................................................................................................................................. 3 1. Introduction ................................................................................................................................ 5 1.1. Banco de México’s general objectives with regard to FMIs................................................ 6 1.2. Content and structure of the document ............................................................................. 6 2. Overview of FMIs ........................................................................................................................ 7 2.1. Types of FMIs ...................................................................................................................... 7 2.2. Principles that apply to FMIs ............................................................................................. 10 3. Landscape of FMIs in Mexico .................................................................................................... 12 3.1. Payment systems............................................................................................................... 12 3.2. Central securities depositories and securities settlement systems .................................. 13 3.3. Central counterparties ...................................................................................................... 14 3.4. Trade repositories ............................................................................................................. 14 3.5. Cross‐border payment systems and foreign‐currency payment systems ......................... 14 4. Banco de México and its relationship with FMIs ...................................................................... 16 4.1. The central bank’s multiple roles in FMIs ......................................................................... 16 4.2. Banco de México’s policies and objectives concerning FMIs ............................................ 17 4.3. Intraday liquidity provision ............................................................................................... 19 4.4. Supervision ........................................................................................................................ 20 5. Systemically important FMIs in Mexico .................................................................................... 22 5.1. SPEI .................................................................................................................................... 22 5.2. SIAC ................................................................................................................................... 27 5.3. DALI ................................................................................................................................... 31 5.4. CCV .................................................................................................................................... 35 5.5 Asigna ................................................................................................................................ 40 5.6. Banco de México’s Derivatives Trade Repository ............................................................. 45 6. Retail payment infrastructures in Mexico ................................................................................. 48 6.1. National Electronic Clearinghouse (CCEN) ........................................................................ 48 6.2. Clearinghouses for card payments .................................................................................... 52 6.3. Clearinghouses for mobile payments ................................................................................ 56 6.4. Payment technologies ....................................................................................................... 59 7. Cross‐border and foreign‐currency‐denominated payments ................................................... 61 7.1. Banco de México’s policy regarding cross‐border and foreign‐currency‐denominated payments ....................................................................................................................................... 61 7.2. Domestic U.S. dollar interbank payment system (SPID) ................................................... 62 Banco de México’s Policies and Functions Regarding Financial Market Infrastructures 3 Banco de México 7.3. Directo a México ............................................................................................................... 66 7.4. Continuous Linked Settlement .......................................................................................... 69 7.5. Foreign correspondent banking ........................................................................................ 72 8. Information technology security ............................................................................................... 73 8.1. Background ........................................................................................................................ 73 8.2. Risks to cybersecurity ........................................................................................................ 73 8.3. Banco de México’s policy regarding cybersecurity ........................................................... 74 9. Final considerations .................................................................................................................. 74 Statistical appendix ........................................................................................................................... 75 Annex ................................................................................................................................................ 79 List of acronyms ................................................................................................................................ 80 Banco de México’s Policies and Functions Regarding Financial Market Infrastructures 4 Banco de México 1. Introduction In order to make better use of a society’s resources, payment mechanisms that allow its members to complete financial transactions in a simple, safe, inexpensive and fast way should be available. Considering this social necessity, the Banco de México Law establishes as two of the central bank’s purposes fostering the proper functioning of payment systems, and promoting the financial system’s sound development, implying that Banco de México must ensure that financial market infrastructures (FMIs) function properly. FMIs are multilateral arrangements among participating institutions, including the operators of the infrastructures used for clearing, settlement and registering of payments, securities operations, derivatives contracts, and other financial transactions. FMIs usually establish a set of common rules and procedures, a technological infrastructure, and a suitable and specialized risk management framework. FMIs are composed of payment systems, central securities depositories, securities settlement systems, central counterparties, and trade registers. This document describes the Mexican FMIs, their interrelationships and the type of transactions they carry out. Additionally, the different roles of the central bank with respect to FMIs are described, and the objectives of Banco de México for each FMI are detailed. This information allows authorities, participants, and the general public to become familiar with the structure of the systems used to process financial transactions, thereby contributing to the proper functioning of financial systems and the economy in general. In order to comply with its mandate, Banco de México adheres to an overall policy guiding its functions as regulator, supervisor, user, and operator of FMIs. These functions involve a great number and diversity of actions due to the variety of FMIs and their participants. As a regulator, the central bank implements rules that apply to FMIs and their participants, analyzes new technologies that could be used to improve the efficiency and safety of FMIs, and analyzes statistical information concerning the transactions executed in FMIs in order to detect risks and identify potential improvements. These activities involve coordination with other authorities, mainly for those cases in which the infrastructure is regulated in conjunction with several authorities. As a supervisor, Banco de México ascertains whether or not FMIs and their participants comply with established rules. Finally, Banco de México performs the role of operator of the most important payment system in the country, SPEI. Economic activity depends on the proper operation of FMIs, both for processing financial system transactions and for operations carried out by individuals. This document aims to describe Banco de México’s policy as well as its regulatory and supervisory functions to achieve properly functioning FMIs. In addition,
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