particularly important in mexico, since a little more than 70 percent of assets in the banking systems are owned by foreign institutions. the above was reinforced by modest mexican banks direct exposure to assets linked to the u. s. mortgage market and to the euro zone, and by the fact that retail deposits in the domestic market are the main source of financing for mexican banks. this allowed the financial system to respond more flexibly to liquidity problems in international markets. macroprudential policies implemented before and in response to the crisis contributed to maintaining a solid financial system in this difficult period. i would highlight in particular six measures in this connection : a. regulations for banks ’ foreign - currency operations ( structural and short - term liquidity and exchange rate risk positions ), which allow banks not to be exposed to a structural imbalance due to funding long - term foreign - currency assets with shortterm liabilities, insufficient liquid assets to face short - term obligations, and an imbalance between assets and liabilities in the face of significant foreign - exchange bis central bankers ’ speeches moves. together, these rules limited structural currency gaps and kept abrupt foreign exchange movements in 2008 – 09 from having an effect on the banking system through this channel. b. the establishment of a cap on exposure to related counterparties. in 2011, the rules on capital were changed with the aim of requiring banks to limit exposure to 25 percent of capital. the key aim of these measures was to prevent possible contagion of problems from related counterparties, including difficulties in foreign parent banks passed to subsidiaries, which is of great importance to mexico given the proportion of assets held by foreign banks. c. in october 2012, banco de mexico established the requirement to seek authorization from the central bank to make transfers of assets and implement other operations among banks operating in mexico and related counterparties, when in one year these operations exceed 25 percent of tier - 1 capital. the objective is to ensure that these operations are carried out under market conditions. d. caps on interbank exposures, including among other instruments net positions in derivatives and repurchase agreements. the financing cap among banks is equivalent to one time the tier - 1 capital of the lending institution. this rule has reduced the risk of interbank contagion. e. higher limits on value at risk ( var ) for pension fund portfolios at times of high volatility. when a pension fund reaches its risk limit according to the var, it is required to unwind positions to reduce risk

recipient country, causing substantial financial disturbances. the obvious case at present could be the expectation that the federal reserve will start unwinding its expansionary monetary policy. before such an eventuality occurs, for whatever reason, and about which only the timing and magnitude are uncertain, it is absolutely necessary for savers and borrowers as well as financial intermediaries to take into account that interest rates will eventually rise. the real danger is to believe that this time will be different and that somehow present favorable conditions will last forever. such myopic behavior has often led to excessive risk - taking, overleveraging and the formation of bubbles in credit and real estate markets, frequently the prelude to financial crises and painful massive redistributions of wealth. 3 fortunately, mexico ’ s banks have been operating cautiously, thereby maintaining strong balance sheets and healthy loan portfolios. also, no lending bubble is apparent. however, authorities will have to continue monitoring threats to stability in any part of the financial system, in order to act in a timely way if they emerge. the challenges to monetary policy in 2012 annual inflation exhibited a rising trend to a maximum of 4. 8 percent in september. during seven months it surpassed the upper limit of the variability interval of plus or minus one percentage point around the permanent target of 3 percent established by the bank of mexico. factors exerting pressure on inflation included the international draught and the domestic bird flu epidemic that resulted in significant agricultural price increases, and some pass - through from peso depreciation to merchandise prices. in december 2012 and january 2013, inflation fell to below 4 percent, a welcome development in light of the previous considerable deviation from the target. nevertheless, the recent decline in inflation should be seen with caution. this is because, first, it is based only on two observations, which cannot yet be proven to be the beginning of a new trend. second, the drop in inflation depended significantly on sharp declines in telecom prices and moderating agricultural price increases. if one were to exclude the effect of telecom prices on inflation in december and january, inflation would have been above and practically on the upper limit of the variability interval, respectively. also, as occurs with negative disturbances, positive shocks like the recent ones sooner or later die out and could be followed in their own turn by adverse shocks. third, the proportion of the components of the national consumer price index ( inpc ) basket with annual increments higher than 4 percent is still substantial. fourth, the two most recent