Board Resolution No. 019/98: Financial System - Liquidity Credit to Banco de La Paz S.A.

BOARD RESOLUTION NO. 019/98
SUBJECT: FINANCIAL SYSTEM - LIQUIDITY CREDIT TO BANCO DE LA PAZ S.A.

VIEWED:
Law No. 1670 of the Central Bank of Bolivia (BCB) of October 31, 1995.
Board Resolution No. 148/95 of November 23, 1995.
The Regulation to Address Temporary Liquidity Needs of the Financial System, approved by Board Resolution No. 025/94 of February 17, 1994.
Resolution No. 031/97 of the Financial System Development and Productive Sector Support Fund (FONDESIF) of October 15, 1997.
Board Resolution No. 009/98 of January 29, 1998.
Note from Banco de La Paz S.A. G.G.E. 018/98 of February 27, 1998.
Note from the Central Bank of Bolivia SG-AYO-E/090/98 of February 27, 1998.
Note from the Superintendence of Banks and Financial Entities SB/ISB/DOCUMENT 9394 of February 27, 1998.
Report from the Financial System Management GSF-023/98 of February 27, 1998.
Report from the Legal Advisory ALEG No. 067/98 of February 27, 1998.
Minutes No. 07/98 of the Financial System Analysis Committee (COASIF) dated February 27, 1998.

CONSIDERING:
That Banco de La Paz S.A., after exhausting other sources of financing, has requested the granting of a liquidity credit for US$20,000,000, due to the loss of deposits it has been facing, primarily as a result of the rumor campaign against the financial system in general, which particularly affected Banco de Santa Cruz from February 14 to 17, 1998.

That, likewise, Banco de La Paz has suffered a pronounced mismatch in recent periods.

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

That by Board Resolution No. 009/98 of January 29, 1998, the BCB granted Banco de La Paz S.A. a liquidity loan of US$5,000,000, which must be paid upon maturity.

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 in Minutes No. 07/98 of February 27, 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 according to the Report from the Financial System Management, Banco de La Paz S.A. is going through a situation of temporary illiquidity due to the withdrawal of deposits, at the time of recommending that the total indebtedness of the aforementioned financial entity with the BCB does not exceed the limit of once its equity, which from February 20 to March 19, 1998, is Bs114,456,647, in accordance with Article 14 of the Regulation to Address Temporary Liquidity Needs of the Financial System.

That in the opinion of the Legal Advisory, the requirements established in the Regulation to Address Temporary Liquidity Needs of the Financial System have been met and, consequently, the Board of Directors 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 and 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.- Grant a liquidity credit to Banco de La Paz S.A., in accordance with Law 1670 of October 31, 1995, and the requirements established in the Regulation to Address Temporary Liquidity Needs of the Financial System, under the following conditions:

Amount: Up to the sum of US$20,000,000.
Currency: United States Dollars.
Interest Rate: 13.82% annual, the average active rate of the system for 90 days, in foreign currency (United States Dollars), prevailing in the market during the week of February 16 to 20, 1998.
Term: 90 days from the signing of the contract.
Amortization: A 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 disbursement of the credit, and must be fully satisfactory to the BCB. The temporary assignment of credit will be documented by means of 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 seven business days to constitute the portfolio.

Automatic debit in its current accounts and legal reserve that it maintains at the BCB.

Article 2.- The resources will be disbursed prior to the signing of the temporary portfolio assignment contract and will be used by Banco de La Paz S.A. to cover its mismatch, through credits to the current account it maintains at the BCB; to cover its exchange deficiencies in the Clearing House, as well as overdrafts in its current account at the BCB.

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 view of what is provided for in 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 overdue 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, comprising obligations with the public, portfolio recovery, and obligations with the exterior.

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

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

La Paz, February 27, 1998

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Juan Antonio Morales A.

________________ _______________ _________________ Armando Pinell S. Jaime Ponce G. Juan Medinacelli V.

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Fernando Campero P. Juan Pablo Zegarra A.