TIIE
TIIE de Fondeo: A New Era in Financial Market Transparency and Confidence
At CIB Mexico, we are pleased to announce the adoption of the new Interbank Equilibrium Interest Rate (TIIE) de Fondeo as established by Banco de Mexico, a significant advance designed to strengthen the transparency, security, and confidence of the clients’ financial transactions. In this section, we will explain what the TIIE de Fondeo is, why it is being implemented, and how this improvement will have a positive impact on customers and their operations.
What is the TIIE de Fondeo?
The TIIE de Fondeo is a reference rate that reflects interbank market conditions in Mexico. Developed and published by Banco de México, this rate is based exclusively on actual transactions, which eliminates the use of estimates or subjective judgments in its calculation.
Its design follows international standards established by organizations such as the Financial Stability Board (FSB) and International Organization of Securities Commissions (IOSCO), which seek robust and transparent rates that are aligned with the best global practices.
New financial contracts in Mexico will be agreed on references based on TIIE de Fondeo rather than in the traditional term TIIEs of 28, 91 and 182 days, becoming the new standard for financial contracts in Mexico.
Why a new methodology?
After the 2008 global financial crisis, the need to migrate towards safer and more transparent reference rates was identified. Globally, reference rates were subject to manipulation, affecting market confidence.
In response, Banco de México adopted the TIIE de Fondeo to:
- Reduce risks of manipulation: By relying only on actual transaction data.
- Improve reliability: By reflecting the actual conditions of the Mexican interbank market.
- Align Mexico with global standards: By facilitating the country’s integration and competitiveness in international markets.
Benefits of the TIIE de Fondeo for our clients
The transition to the TIIE de Fondeo offers important advantages for companies and market participants:
- Transparency: The TIIE de Fondeo is based on actual interbank transactions, providing a clear and accurate view of market conditions.
- Security and Reliability: By eliminating the possibility of manipulation, the integrity of the financial market is reinforced.
- International Alignment: Follows the recommendations of international organizations, such as IOSCO, to guarantee reliable and standardized rates.
- Flexibility: Offers, among others, compounded in advance rates for 28, 91 and 182 days, adapting to diverse financial needs.
Impact on existing and new contracts
-Existing contracts:
- Contracts currently using the TIIE (28, 91 and 182 days) do not require modifications and will continue with the existing conditions.
- The TIIE will continue to be published by Banco de México indefinitely, ensuring continuity in current operations*.
-New contracts:
- All contracts originated as of or after the dates established by Banco de México must use a reference based on TIIE de Fondeo.
- This ensures that new operations benefit from the transparency and security offered by the new methodology.
-Renegotiations:
- In cases of renegotiation of current contracts, the transition from TIIE to TIIE de Fondeo will be encouraged. However, if the change is not made, the current contract may be maintained with the term TIIE, always adhering to the accounting criteria established by the CNBV.
*Banxico has announced its intention to publish the TIIE indefinitely. Nonetheless, if this rate is no longer available, contracts will have to use the TIIE de Fondeo.
Key Dates
- December 2022: Banxico announces the official prohibition dates.
- January 2nd, 2024: Prohibition of the use of TIIE term of 91 and 182 days in new transactions.
- January 2nd, 2025: Prohibition of the use of TIIE term 28 days in new transactions.
Available methodologies
For better adaptability, Banco de México and financial institutions such as BBVA offer two methodologies for the TIIE de Fondeo:
- In Advance: The rate is known at the beginning of the period of interest, based on the previous 28 days. It is ideal for products that require certainty at the beginning of the period of interest.
- In Arrears: The rate is known until the end of the period of interest, which allows greater flexibility in certain interbank transactions and bond emissions.
Commitment to continuity and support
At BBVA CIB, we understand the importance of providing clarity and stability in this transition. Our commitment is to ensure that all of our clients have the necessary information and support to adopt the TIIE de Fondeo successfully.
For any additional information, please contact your BBVA banker or visit the official Banco de México website here.
TIIE de Fondeo: A step towards a more solid, secure and transparent financial market.