Banxico Seeks Input on New CAT Rules to Boost Transparency

Mexico’s Central Bank (Banxico) has opened a public consultation on proposed modifications to the general provisions that define the methodology, formulas, components, and assumptions used to calculate the Total Annual Cost (CAT) of credits offered by regulated financial institutions.

The central bank explained that the goal is to enhance the usefulness of the CAT, enabling consumers to compare costs more effectively and make better-informed financing decisions. The CAT represents the total annual financing cost, expressed as an annual percentage, which incorporates all associated expenses and charges of a given credit product.

Banxico stated that updating the regulation governing the CAT’s components and assumptions is necessary to address issues identified during the bank’s authorization, supervision, and enforcement processes. The proposed changes aim to improve the indicator’s clarity and interpretability, strengthen transparency and market competition, and ensure financial institutions offer fair, accessible, and reasonably priced credit products.

Key Modifications Proposed by Banxico

• Simplified Calculation Methodology: Revising and simplifying the CAT calculation methodology used in advertising materials and credit card statements to promote greater consistency and comparability.

• Revolving Credit: Establishing a standardized calculation methodology for non-card revolving credits, where the credit line is exercised only through fixed-term disbursements.

• Insurance Premiums: Requiring entities to calculate the CAT based on insurance premium quotes provided by clients, as long as the insurance product meets the institution’s specifications for the corresponding credit.

• Expanded Scope of Application: Including collective debt financing institutions as entities obligated to comply with CAT calculation requirements.

• Commission Consistency: Mandating that entities registering commissions with Banxico ensure the figures used for CAT calculations are fully aligned with those recorded by the central bank.

• Information Clarity: Introducing additional definitions, clarifications, and presentation guidelines to enhance public understanding and ensure greater consistency in how CAT information is disclosed.

• Simulator Compliance: Requiring that if entities provide customers with credit simulators or comparison tools, the CAT displayed must comply with the parameters established in the new circular.
   

Banxico announced that it will receive public comments on the draft provisions until Dec. 22, 2025, before finalizing the regulatory updates.