Board Resolution No. 007/2011

BOARD RESOLUTION NO. 007/2011
SUBJECT: ECONOMIC POLICY ADVISORY / FINANCIAL ENTITIES MANAGEMENT - APPROVES MODIFICATION TO THE LEGAL RESERVE REGULATION

HAVING SEEN:
The Political Constitution of the State promulgated on February 7, 2009.
Law No. 1670 of October 31, 1995, of the Central Bank of Bolivia (BCB).
The BCB Statute approved by Board Resolution No. 128/2005 of October 21, 2005, and its subsequent modifications.
The Legal Reserve Regulation approved by Board Resolution No. 070/2009 of June 23, 2009, and modified by Board Resolution No. 130/2010 of November 23, 2010.
The Report from the Main Economic Policy Advisory and the Financial Entities Management BCB-APEC-SSIEE-INF-2011-01 / BCB-GEF-SANA-DAN-INF-2011-5 of January 14, 2011.
The Report from the Legal Affairs Management BCB-GAL-SANO-INF-2011-13 of January 14, 2011.

CONSIDERING:
That the Political Constitution of the State in its article 328 provides that the BCB is authorized, in coordination with the economic policy determined by the Executive Branch, to determine and execute monetary policy. That Law No. 1670 in its article 7 provides that the Issuing Entity may establish mandatory legal reserves for financial intermediation entities and, for this purpose, will determine their composition, amount, calculation method, characteristics, and remuneration. That in its article 37, the aforementioned Law establishes that the BCB is the custodian of the liquid reserves intended to cover said reserve and may delegate the custody of these deposits according to a specific regulation. That the BCB Statute in article 11 numeral 7) states that it is the faculty of the Board to establish, by absolute majority of votes, mandatory legal reserves for Financial Intermediation Entities and approve their composition, amount, calculation, characteristics, forms of administration, custody, and remuneration according to Regulation. That the Legal Reserve Regulation aims to establish the technical and operational conditions, mandatory for financial entities duly authorized for operation by the Supervisory Authority of the Financial System, regarding the constitution and form of administration of the legal reserve. That the Main Economic Policy Advisory and the Financial Entities Management through Report BCB-APEC-SSIEE-INF-2011-01 / BCB-GEF-SANA-DAN-INF-2011-5, recommend the approval of modification to the cash and securities reserve rates. That according to Report BCB-GAL-SANO-INF-2011-13, the Legal Affairs Management concludes that the proposal to modify articles 5 and 17 of the Legal Reserve Regulation is legally appropriate, as it does not contravene the current legal framework, being within the competence of the BCB Board to consider its approval. That, the BCB Board in its capacity as the highest authority of the Institution, is responsible for defining its policies, specialized normative rules of general application, and internal norms, being authorized to issue norms and adopt general decisions that are necessary for the fulfillment of the functions, competencies, and faculties assigned by Law to the Issuing Entity, as established in articles 44 and 54 inc. o) of Law No. 1670 and articles 9, 11, and 24 of the BCB Statute.

THEREFORE,
THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA RESOLVES:

Article 1.- Approve the partial modification to article 5 (Legal Reserve Rates) of the Legal Reserve Regulation as follows:

SAYS:
Article 5.- (Legal Reserve Rates).- The legal reserve rates on the liabilities detailed in article 3 of this Regulation are the following:
In MN and MNUFV:
Two percent (2%) for cash reserve
Ten percent (10%) for securities reserve

In ME and MVDOL:
Three point five percent (3.5%) for cash reserve Twelve percent (12%) for securities reserve

Financial entities must constitute the legal reserve in cash, equivalent to a rate of one hundred percent (100%), on the accounts included in "Other Obligations with the public and with companies with state participation" indicated in article 3 of the present Regulation.

SHOULD SAY:
"Article 5.- (Legal Reserve Rates).- The legal reserve rates on the liabilities detailed in article 3 of this Regulation are the following:
In MN and MNUFV:
Two percent (2%) for cash reserve
Ten percent (10%) for securities reserve

In ME and MVDOL:
Thirteen point five percent (13.5%) for cash reserve.
Eight percent (8%) for securities reserve

Financial entities must constitute the legal reserve in cash, equivalent to a rate of one hundred percent (100%), on the accounts included in "Other Obligations with the public and with companies with state participation" indicated in article 3 of the present Regulation."

Article 2.- Approve the partial modification to article 17 (Funds in Custody) of the Legal Reserve Regulation as follows:

SAYS:
Financial entities may maintain up to 5% of their legal reserve requirement in cash in national and foreign currency in Funds in Custody in any location. Any excess that financial entities maintain above this percentage will not be recognized for reserve purposes.

SHOULD SAY:
"Financial entities may maintain up to 5% of their legal reserve requirement in cash in national currency in Funds in Custody in any location. Any excess that financial entities maintain above this percentage will not be recognized for reserve purposes. Financial entities must maintain 40% of their legal reserve requirement in cash in foreign currency in Funds in Custody in any location. Any excess that financial entities maintain above this percentage will not be recognized for reserve purposes. The global deficiency in Funds in Custody in foreign currency cannot be compensated with excesses of reserves in BCB accounts or securities reserves."

Article 3.- The modification to the Legal Reserve Regulation will enter into effect from February 7, 2011, for banking entities and April 4, 2011, for non-banking entities.

Article 4.- The Presidency and the General Management are charged with the execution and compliance of this Resolution.

La Paz, January 18, 2011

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Marcelo Zabalaga Estrada

_________________________ _________________________ Ernesto Yáñez Aguilar Rolando Marín Ibáñez _________________________ _________________________ Hugo Dorado Araníbar Rafael Boyán Téllez