Central Bank of Bolivia

Board of Directors

BOARD RESOLUTION NO. 007/2016

SUBJECT: INTERNATIONAL OPERATIONS MANAGEMENT - APPROVES INVESTMENT GUIDELINES FOR THE ADMINISTRATION OF THE FOREIGN CURRENCY LIQUID ASSET REQUIREMENT FUND (RAL-ME).

VIEWED:

Law No. 1670 of October 31, 1995.

The Legal Reserve Regulation approved by Board Resolution No. 070/2009 of June 23, 2009.

The Regulation for the Contracting of Specialized Goods and Services Abroad approved by Board Resolution No. 063/2003 of June 6, 2003.

Board Resolution No. 141/2009 of December 8, 2009, which approves the Investment Guidelines for the Administration of the Foreign Currency Liquid Asset Requirement Fund (RAL-ME).

The Report from the International Operations Management BCB-GOI-SRES-DNI-INF-2016-02 of January 6, 2016.

The Report from the Legal Affairs Management BCB-GAL-SANO-DLBCI-INF-2016-6 of January 8, 2016.

CONSIDERING:

That Law No. 1670 in its article 7 provides that the Central Bank of Bolivia 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 the specific regulation.

That article 24 of the Legal Reserve Regulation establishes that the Administration of the RAL-ME Fund will be entrusted to one or more specialized entities in Delegated Administration, with recognized technical capacity and international solvency, in accordance with the norms approved by the BCB Board of Directors.

That the International Operations Management, in its Report BCB-GOI-SRES-DNI-INF-2016-02, recommends to the Board of Directors the approval of investment guidelines for the Administration of the RAL-ME Fund, effective from July 1, 2016.

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//2. B.D. No. 007/2016

That according to the Report BCB-GAL-SANO-DLBCI-INF-2016-6 from the Legal Affairs Management, there is no legal impediment for the BCB Board of Directors to approve the guidelines for the Administration of the RAL-ME Fund, in accordance with the technical recommendation made by the International Operations Management.

THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1.- Approve, effective from July 1, 2016, the investment guidelines for the Administration of the RAL-ME Fund, in accordance with the following terms:

a) Currency:
Investments in US dollars are authorized.

b) Countries
Investments in the following countries are authorized: Germany, Austria, Australia, Belgium, Canada, Denmark, United States of North America, France, Netherlands, Japan, Norway, United Kingdom, Sweden, and Switzerland.

c) Reference Comparator (Benchmark)
Merrill Lynch 3 – 6 months Treasury Bill Index

d) Instruments:

• Sovereign
  • Government fixed-income securities.
  • Government agency securities.
  • Floating Rate Notes
• Supranational
  • Fixed-income securities.
  • Floating Rate Notes
• Banking Corporates
  • Certificates of deposit.
  • Bank commercial paper.
  • Bonds.
  • Floating Rate Notes
• Non-banking Corporates
  • Commercial paper.
  • Bonds.
• Interest rate futures contracts

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//3. B.D. No. 007/2016

e) Risks and concentration limits

Investments in issuers or issues with a short-term credit risk rating equal to or higher than F-1 and a long-term rating of A are authorized, in at least 2 of the following risk rating agencies: Fitch, S&P, and Moody’s.

The concentration limits on the total portfolio are:

Sector/Issuer	Limit as Percentage of Portfolio
Government Agencies	40%
Supranational Entities	30%
Banking Corporations	30%
Per Banking Corporation	5%
Non-Banking Corporations	10%
Per Non-Banking Corporation	3%

f) Intermediaries:
Intermediation is carried out exclusively with financial institutions that have the category of authorized primary dealers.

Primary issuances may be negotiated directly with the issuer.

g) Duration
The average duration of the portfolio must not exceed 0.6 years.
The individual duration per security must not exceed 2 years.

h) Other Operations
Cash accounts may only be maintained with the Securities Custodian.

The Securities Custodian is authorized to conduct securities lending operations for the RAL-ME Fund securities for a term of one day.

i) Restrictions
Investments will be made in non-subordinated debt securities without any component associated with the equity market.
Investment or negotiation with institutions affiliated with the administrator is prohibited.
Investments in financial centers classified as off-shore are prohibited.
All investments will be carried out exclusively under the delivery versus payment (DVP) modality.

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//4. B.D. No. 007/2016

Article 2.- The Delegated Administration of the RAL-ME Fund will be carried out through international organizations, financial institutions, and/or investment fund administrators.

Article 3.- Effective from July 1, 2016, the RAL-ME Fund will be managed by three Delegated Administrators, each with one-third of said Fund. The Delegated Administrators will be hired in accordance with what is established in the Regulation for the Contracting of Specialized Goods and Services Abroad.

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

La Paz, January 12, 2016.

Marcelo Zabalaga Estrada
Sergio Velarde Vera
Ronald Polo Rivero
Abraham Pérez Alandia
Reynaldo Yujra Segales