2023-01-16 | RESOLUCIONES DE DIRECTORIO N° 012/2023

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Board Resolution No. 012/2023

The Board of Directors of the Central Bank of Bolivia amends the Regulation for the Administration of International Reserves to update investment policies and instruments. The resolution modifies Article 4 to require annual approval of the Investment Policy, expands Article 19 to authorize specific operations like securities lending and derivatives, and sets a 1% market risk limit in Article 24 while excluding certain asset swaps from Value at Risk calculations. These changes take effect immediately upon approval.

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BOARD OF DIRECTORS

BOARD RESOLUTION NO. 012/2023

SUBJECT: INTERNATIONAL OPERATIONS MANAGEMENT – MODIFICATION OF THE REGULATION FOR THE ADMINISTRATION OF INTERNATIONAL RESERVES.

VIEWING:

  • The Political Constitution of the State of February 7, 2009.
  • Law No. 1670 of October 31, 1995, of the Central Bank of Bolivia (BCB) and its modifications.
  • Board Resolution No. 095/2022 of October 6, 2022, which approves the Statute of the Central Bank of Bolivia.
  • Board Resolution No. 022/2022 of March 29, 2022, which approves the Regulation for the Administration of International Reserves.
  • The Report from the International Operations Management, Reports BCB-GOI-SRES-DNI-INF-2023-6 dated January 16, 2023.
  • The Report from the Legal Affairs Management BCB-GAL-SANO-DLBCI-INF-2023-12 dated January 16, 2023.

CONSIDERING:

  • That Article 328 of the Political Constitution of the State determines that the BCB, in coordination with the economic policy determined by the Executive Branch, has among other attributions, the authority to Administer International Reserves.
  • That Article 1 of Law No. 1670 of the BCB, modified by Article 67, section A3, numeral 1 of Law No. 1864 of June 15, 1998, states that the BCB is a State institution, of public law, autonomous in nature, of indefinite duration, with its own legal personality and assets, and with legal domicile in the city of La Paz. It is the sole monetary and exchange authority of the country with administrative, technical, and financial competence and specialized normative faculties of general application.
  • That Article 14 of the aforementioned Law No. 1670 establishes that the BCB will ensure the strengthening of International Reserves so as to allow the normal functioning of Bolivia's international payments.
  • That Article 16 of Law No. 1670 establishes that the BCB will administer and manage its

//2. B.R. No. 012/2023

International Reserves, being able to invest and deposit them in custody, as well to dispose of and pledge them, in the manner it considers most appropriate for the fulfillment of its object and functions and for their adequate safeguard and security. It may, likewise, purchase foreign exchange hedging instruments with the objective of reducing risks and that in the case of the pledge of gold, this must have Legislative approval.

  • That Article 44 of Law No. 1670 of the BCB establishes that the highest authority of the Central Bank of Bolivia is its Board of Directors, which is responsible for defining its policies, specialized norms of general application, and internal norms; as well as establishing administrative, operational, and financial strategies of the BCB, approving their respective short and medium-term programs.
  • That subsections a) and o) of Article 54 of Law No. 1670 of the BCB provide that the BCB Board of Directors has the attributions to issue norms and adopt general decisions that are necessary for the BCB to fulfill the functions, competencies, and faculties assigned to it by the Law, as well to approve, modify, and interpret the Statute and Regulations of the BCB, by two-thirds of the votes of all its members, without the need for any additional administrative act.
  • That numerales 1) and 6) of Article 10 of the Statute of the Central Bank of Bolivia approved by Board Resolution No. 095/2022, provide among other attributions of the Board of Directors, “Approve general decisions and issue norms that are necessary for the BCB to fulfill the functions, competencies, and faculties assigned to it by the Law” and “Approve the Policy and norms for the Administration of International Reserves, as well as carry out follow-up of their execution.”
  • That the Report BCB-GOI-SRES-DNI-INF-2023-6 concludes that in order to increase the liquidity position of International Reserves, it is necessary to resort to new investment operations and instruments, which are not contemplated in the current Regulation for the Administration of International Reserves, therefore recommending the approval of the modification to the Regulation for the Administration of International Reserves.
  • That the Report BCB-GAL-SANO-DLBCI-INF-2023-12 concludes that the approval of the Regulation for the Administration of International Reserves is technically and legally viable, since it does not contravene the legal framework, recommending to the Board of Directors its approval.

THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

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Article 1.- Approve the Modification of Article 4 of the Regulation for the Administration of International Reserves, with the following text:

“Article 4.- (Annual Investment Policy)

The Board of Directors will approve the Annual Investment Policy (AIP) of the International Reserves before the start of each management period and the corresponding modifications during the management period.”

Article 2.- Approve the Modification of Article 19 of the Regulation for the Administration of International Reserves, with the following text:

“Article 19.- (Investment operations and instruments)

I. The authorized investment operations are:

  • Establishment of time deposits
  • Securities Lending
  • Purchase-sale of assets, titles, and securities
  • Purchase-sale of foreign exchange
  • Risk hedging with derivatives
  • Asset swap
  • Foreign exchange swaps

II. The authorized investment instruments are:

  • Overnight Deposits
  • Commercial Paper
  • Certificates of Deposit
  • Time Deposits
  • Bills

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  • Notes
  • Bonds
  • Strips
  • Medium Term Notes
  • Floating Rate Notes
  • Treasury Inflation Protected Securities (TIPS)
  • Interest rate futures/forward contracts
  • Foreign exchange futures/forward contracts”

Article 3.- Approve the Modification of Article 24 of the Regulation for the Administration of International Reserves, with the following text:

“Article 24.- (Market risk)

I. The maximum expected loss in a year under a 95% confidence level, measured by the Market Value at Risk (Market VaR) is 1% for International Monetary Reserves denominated in United States dollars.

II. Instruments resulting from asset swap operations, derived from the temporary liquidity needs of International Reserves, which are denominated in United States dollars, will not be included in the calculation of Market VaR.”

Article 4.- Approve the Modification of the Transitional Provision of the Regulation for the Administration of International Reserves, with the following text:

“TRANSITIONAL PROVISION

Investments of International Reserves made in authorized instruments prior to and not contemplated in this Regulation may be maintained until their maturity or redemption. In the case of sale or if asset swap operations are carried out to cover the liquidity needs of International Reserves and fulfill their object, the involved areas will present technical and legal reports with the appropriate

//5. B.R. No. 012/2023

justification for the approval of the BCB Board of Directors.”

Article 5.- The modifications to the Regulation for the Administration of International Reserves will enter into force from their approval.

Article 6.- The Presidency and the General Management are charged with the compliance of this Resolution.

La Paz, January 16, 2023

SIGNED. ROGER EDWIN ROJAS ULO, Oscar Ferrufino Morro, Gabriel Herbas Camacho, Gumercindo Héctor Pino Guzmán.

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