Board Resolution No. 009/98

BOARD RESOLUTION NO. 009/98
SUBJECT: FINANCIAL SYSTEM - LIQUIDITY LOAN TO BANCO DE LA PAZ S.A.

VIEWED:
Law No. 1670 of the Central Bank of Bolivia (BCB) dated October 31, 1995.
Board Resolution No. 148/95 dated November 23, 1995.
The Regulation to Address Temporary Liquidity Needs of the Financial System, approved by Board Resolution No. 025/94 dated February 17, 1994.
Resolutions No. 09/97 and 031/97 of the Financial System Development and Productive Sector Support Fund (FONDESIF) dated March 31 and October 15, 1997, respectively.
Note from Banco de La Paz S.A. G.G.E. 005/98 dated January 27, 1998.
Note from the Central Bank of Bolivia SG-AYO-E- No. 052/98 dated January 27, 1998.
Note from the Superintendence of Banks and Financial Entities SB/ISB/DOCUMENT 4427 dated January 28, 1998.
Board Resolution No. 176/97 dated December 23, 1997.
Report from the Financial System Management GSF-007/98 dated January 28, 1998.
Report from the Legal Advisory Office ALEG No. 034/98 dated January 28, 1998.
Minutes No. 05/98 of the Financial System Analysis Committee (COASIF) dated January 28, 1998.

CONSIDERING:

That Banco de La Paz S.A. has requested the BCB to grant a liquidity credit up to an amount equivalent to its net worth, due to the decline in its deposits and having exhausted other financing sources for the stated purpose.

That as of December 30, 1997, Banco de La Paz S.A. fully repaid the liquidity credit granted by the BCB through Board Resolution No. 176/97 of December 23 of that year, and that the shareholders of that financial entity completed a capital contribution of US$3,700,000. Furthermore, FONDESIF released US$4,000,000 from its special account of the subordinated capitalization credit in favor of said institution and also disbursed the US$5,000,000 of the structural liquidity credit contemplated in its Strengthening Plan.

That according to FONDESIF Resolution No. 031/97 of October 15, 1997, Banco de La Paz S.A. has until March 31, 1998, to incorporate the strategic partner provided for in its Strengthening Plan.

That in Minutes No. 05/98 of January 28, 1998, the favorable opinion of the Financial System Analysis Committee (COASIF) appears for the granting of the aforementioned liquidity credit in the amount and conditions established by the BCB Board of Directors.

That the liquidity credit requested by Banco de La Paz S.A. will be backed primarily by a portfolio with rating 1 (normal), in a 2 to 1 proportion, thus guaranteeing the recovery of State funds.

That according to the Report from the Financial System Management, based on data provided by the Superintendence of Banks and Financial Entities, the net worth of the requesting entity is Bs.111,750,847.- as of December 1997, valid from January 20 to February 19, 1998.

That in the opinion of the Legal Advisory Office, the requirements established in the Regulation to Address Temporary Liquidity Needs of the Financial System have been met and, consequently, the Board may proceed with the request of Banco de La Paz S.A.

That Article 36 of Law 1670 of October 31, 1995, authorizes the BCB to grant liquidity credits to banks and financial intermediation entities, in duly justified cases qualified by its Board of Directors by an absolute majority of votes.

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

Article 1.- Exceptionally grant a liquidity credit to Banco de La Paz S.A., in accordance with the requirements established in the Regulation to Address Temporary Liquidity Needs of the Financial System and Law 1670 of October 31, 1995, under the following conditions:

Amount: Up to the sum of US$5,000,000.-
Currency: United States Dollars.
Interest Rate: 16.36% per annum, the average active rate of the system at 30 days, in foreign currency (United States Dollars), prevailing in the market during the week of January 19 to 23, 1998. Term: 30 days from the signing of the contract. Amortization: Single payment at maturity. Guarantees: Credit portfolio with own resources of Banco de La Paz S.A., primarily with rating 1 (normal) following the criteria of the Superintendence of Banks and Financial Entities. This portfolio should, as far as possible, have real guarantees, whose loans have maturities greater than 30 days and less than 360, computable from the date of credit disbursement, and must be fully satisfactory to the BCB. The temporary assignment of credit will be documented through a contract. The sum of the guarantees must be equivalent to twice the amount of the credit.

Banco de La Paz S.A. will have three business days to constitute the portfolio.

Automatic debit in its current accounts and legal reserve held at the BCB.

Article 2.- The resources will be disbursed prior to the signing of the temporary portfolio assignment contract and will be used solely to cover exchange deficiencies of Banco de La Paz S.A. in the Clearing House.

Article 3.- During the validity of the credit, Banco de La Paz S.A. may not increase its loan or investment portfolio in accordance with Article 15 of the aforementioned Regulation. The BCB will request the Superintendence of Banks and Financial Entities to strictly monitor all provisions of this Resolution.

Article 4.- In accordance with Article 8 of the Regulation to Address Temporary Liquidity Needs of the Financial System, Banco de La Paz S.A. must send daily to the Central Bank of Bolivia, through the Financial System Management, the following information:
a) Outstanding and delinquent portfolio (consolidated). b) Public deposits by class of deposits (consolidated). c) Passive rates by class of deposit. d) Daily projected liquidity flow for the next 7 days, including obligations with the public, portfolio recovery, and obligations with the exterior.

Article 5.- Authorize the President of the BCB to sign the loan and temporary portfolio assignment contracts with Banco de La Paz S.A.

Article 6.- The Presidency and General Management are responsible for the execution and compliance with this Resolution.

29.I.98

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Juan Medinacelli V.

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Armando Pinell S.

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Jaime Ponce G.

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Fernando Campero P.