Central Bank of Bolivia

Board of Directors

BOARD RESOLUTION NO. 021/2016

SUBJECT: TREASURY MANAGEMENT - APPROVAL OF NEW REGULATION ON MONETIZATION, DISTRIBUTION, AND DESTRUCTION OF MONETARY MATERIAL

VISTOS (VIEWED):

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 subsequent modifications.

The Regulation on Monetization, Distribution, and Destruction of Monetary Material, approved by Board Resolution No. 061/2015 and its modifications.

The Reports from the Treasury Management BCB-GTES-SAMM-DAMM-INF-2016-8 and BCB-GTES-SAMM-DAMM-INF-2016-11 of January 15 and 28, 2016, respectively.

The Reports from the Legal Affairs Management BCB-GAL-SANO-DLBCI-INF-2016-11 and BCB-GAL-SANO-INF-2016-26 of January 18 and February 2, 2016, respectively.

CONSIDERING:

That the Political Constitution of the State establishes in its article 328 that the attributes of the BCB, in coordination with the economic policy determined by the Executive Branch, in addition to those indicated by Law, include: determining and executing monetary policy, executing exchange rate policy, regulating the payment system, authorizing the issuance of currency, and administering international reserves.

That pursuant to articles 1 and 3 of Law No. 1670, the BCB is the sole monetary and exchange authority of the country with administrative, technical, and financial competence and specialized normative faculties of general application, being empowered to formulate policies in monetary, exchange, and payment system matters.

That the aforementioned Law in its articles 10, 11, 13, and 54, subsections a), o), and m), establishes the functions of the BCB regarding the issuance of banknotes and metallic coins, as well as the attributions of the Board to authorize and supervise the printing, issuance, and destruction of monetary material, being empowered to issue the norms and adopt the general decisions necessary for its compliance.

That pursuant to article 30 of Law No. 1670, all financial intermediation and financial service entities, whose operation is authorized by the Superintendence of Banks and Financial Entities, are subject to the normative competence of the BCB, with respect to their relationship as monetary, exchange, and payment system authority.

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That article 67 of the Statute of the Central Bank of Bolivia establishes that the Treasury Operations Management is responsible for establishing the requirements for the acquisition, distribution, destruction, and administration of monetary material.

That the Treasury Management through Reports BCB-GTES-SAMM-DAMM-INF-2016-8 and BCB-GTES-SAMM-DAMM-INF-2016-11 recommends the modification of the Regulation on Monetization, Distribution, and Destruction of Monetary Material in order to comply with Board instructions referred to the strategy for the storage and destruction of monetary material, and recommendations from Internal Audit Management.

That the Legal Affairs Management through Reports BCB-GAL-SANO-DLBCI-INF-2016-11 and BCB-GAL-SANO-DLBCI-INF-2016-26 concludes that the modifications of the Regulation on Monetization, Distribution, and Destruction of Monetary Material in the terms expressed in Reports BCB-GTES-SAMM-DAMM-INF-2016-8 and BCB-GTES-SAMM-DAMM-INF-2016-11 do not contradict the current legal framework as it is legally appropriate, being the competence of the Board of the Issuing Entity to consider its approval by two-thirds of the votes of all its members, in accordance with what is provided in subsection o) of article 54 of Law No. 1670 and numeral 29 of article 11 of the BCB Statute.

THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1.- Approve the Regulation on Monetization, Distribution, and Destruction of Monetary Material, in its V chapters and 20 articles, which in the annex, forms part of this Resolution.

Article 2.- This Regulation will enter into force from February 15, 2016.

Article 3.- Repeal from February 15, 2016, the Regulation on Monetization, Distribution, and Destruction of Monetary Material, approved by Board Resolution No. 061/2015 and its modifications.

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

La Paz, February 2, 2016

Marcelo Zabalaga Estrada

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Sergio Velarde Vera Ronald Polo Rivero Abraham Pérez Alandia Reynaldo Yujra Segales Alvaro Rodríguez Rojas

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ANNEX

REGULATION ON MONETIZATION, DISTRIBUTION, AND DESTRUCTION OF MONETARY MATERIAL

CHAPTER I

OBJECT AND DEFINITIONS

Article 1.- (Object)

This Regulation aims to regulate the monetization, distribution, demonetization, and destruction of monetary material.

Article 2.- (Definitions)

• ASFI: Financial System Supervision and Control Authority.
• BCB: Central Bank of Bolivia.
• Unfit Banknote: Mutilated, torn banknote, with impressions or writings foreign to its original condition, or that falls within the category of banknotes not suitable for circulation, according to the range of the degree of deterioration of "Boliviano" banknotes in categories 4, 5, and 6, provided it clearly retains its two signatures and a serial number.
• Demonetization: Process by which Boliviano banknotes and coins are withdrawn from legal circulation.
• EBP: Public Financial Intermediation Entity.
• GAL: Legal Affairs Management.
• GTES: Treasury Management.
• Monetization: Privative function of the Central Bank of Bolivia as the sole issuer of the Boliviano to put into circulation banknotes and coins of legal and forced course with unlimited liberatory power.

CHAPTER II

MONETIZATION OF BANKNOTES AND COINS

Article 3.- (Authorization of monetization)

The Board of the BCB, through express resolution, will authorize the monetization of monetary material based on reports from GTES and GAL, according to the issuance or storage requirements determined by GTES.

Article 4.- (Certificate of monetization)

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The monetization authorized by the Board will be recorded in an act signed by a Director designated by the BCB Board, the General Manager, the Treasury Manager, and the Submanager of Monetary Material Operations.

Article 5.- (Registration of monetization)

GTES will register the monetization of banknotes and coins, transferring accounting the nominal value of each of the denominations of "Monetary Material in Warehouses" to the "Central Vault" account.

Article 6.- (Dissemination)

Prior to putting a new family, series of banknotes, or new coinage into circulation, the main characteristics of this monetary material will be disseminated.

CHAPTER III

DISTRIBUTION OF MONETARY MATERIAL

Article 7.- (Distribution)

GTES will put monetary material into circulation through the financial intermediation system, its own offices, or other distribution mechanisms authorized by the Board.

General Management will determine and implement in each case the most appropriate mechanisms for the efficient distribution of monetary material in the economy.

GTES, through General Management, will present to the Board a semi-annual program for the distribution of monetary material.

Article 8.- (Structure of distribution)

GTES will determine the structure of cuts for the distribution of monetary material based on public requirements, the structure by cuts of unfit and available monetary material, and other factors.

Article 9.- (Distribution of lower denomination banknotes through ATMs)

Financial entities that have two-tray ATMs are obligated to distribute ten or twenty Boliviano banknotes in one tray and fifty or one hundred Boliviano banknotes in the other.

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Financial entities that have three-tray ATMs are obligated to distribute ten and twenty Boliviano banknotes, and fifty or one hundred Boliviano banknotes.

Financial entities that have four or more tray ATMs are obligated to distribute, in at least seventy percent of them, ten, twenty, fifty, and one hundred Boliviano banknotes. In the remaining four or more tray ATMs, financial entities are obligated to distribute ten, twenty, fifty, or one hundred Boliviano banknotes.

For control purposes, financial entities must inform ASFI in detail the locations and ATMs where foreign currency is distributed.

Financial entities must identify in a visible place for the public and their users, the ATMs that dispense Bolivianos and foreign currency.

The BCB will establish the periodicity and format of the report for control and supervision by ASFI.

Article 10.- (Quality of monetary material)

To guarantee the quality of the monetary material available to the population, Financial Intermediation Entities must deliver to the financial consumer, for any type of operation, only fit banknotes according to the BCB's banknote classification range (grades 1, 2, and 3).

Article 11.- (Sending remittances of monetary material to the EBP)

The Presidency of the BCB will authorize in writing the sending of remittances of monetary material in national currency and foreign currency to the EBP, consisting of boxes of Boliviano banknotes and coins and packages of US dollars.

Monetary material in national currency will be sent to the EBP for storage or distribution.

In the case of foreign currency, the monetary material sent will be destined for sale, on behalf of the BCB.

CHAPTER IV

WITHDRAWAL AND DESTRUCTION OF MONETARY MATERIAL

Article 12.- (Withdrawal of monetary material from circulation)

Prior to verification of the monetary material sent as unfit by financial institutions, GTES will proceed to withdraw said monetary material for subsequent destruction. This verification may be carried out by sampling, according to technical and statistical criteria defined by GTES. The verification may be delegated to an entity qualified for this effect.

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Article 13.- (Withdrawal due to design change)

The BCB may withdraw from circulation monetary material whose substitution has been decided due to a change in design, family, or substrate, following the procedure used for the withdrawal of unfit monetary material.

Article 14.- (Destruction)

Monetary material withdrawn from circulation, after being rendered useless, will be physically destroyed in the Treasury area or other facilities determined by the BCB Board through resolution, using mechanisms that eliminate the possibility of reconstruction or reuse.

Article 15.- (Scheduling of Destruction)

Monthly, the Submanager of Monetary Material Operations will schedule the destruction of monetary material, for approval by the Treasury Manager and subsequent submission to General Management. This schedule may be modified exceptionally for justified reasons, with prior authorization from the General Manager.

Article 16.- (Supervision)

The verification of the monetary material to be destroyed will be carried out by a group composed of the Treasury Manager or a staff member of GTES designated by him, the Submanager of Monetary Material Operations, the Person in Charge of the Unfit Banknotes Area, a representative designated by the General Manager, and a Notary of Public Faith. The latter two must supervise the complete destruction process and provide a record of it.

In each destruction session, the corresponding Act will be drawn up, recording the cuts, number of packages, number of pieces, value of the destroyed material, and the sampling verification of said material. The Act will be signed by all participants.

Article 17.- (Destination of waste)

The waste from destroyed banknotes will be deposited in places determined for this type of waste by the Autonomous Municipal Governments or will be destined for other uses with authorization from General Management.

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The use of waste from destroyed coins will be determined and authorized by General Management.

CHAPTER V

OTHERS

Article 18.- (Reports from Treasury Management)

GTES, through General Management, will submit semi-annual reports to the Board concerning existing balances of monetary material, evolution of its distribution, quality of monetary material in circulation, results of banknote and coin destruction processes, and other aspects related to the management of monetary material.

Article 19.- (Reproduction of images of monetary material)

Partial or total reproduction of legal tender monetary material will only be permitted by any natural or legal person when: a) The area of the reproduced material is at least 50% larger or smaller than the area of the original monetary material, b) It does not include legends mentioning the Central Bank of Bolivia, and c) The material used for reproduction does not generate confusion with the original material.

Article 20.- (Specimens or samples without value)

GTES may send specimens or samples without value to other Central Banks. General Management will expressly authorize the delivery of specimens and samples without value to BCB authorities and related entities.

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