Board Resolution No. 041/2024 - Amend the Legal Reserve Regulation for Financial Intermediation Entities

BOARD OF DIRECTORS

BOARD RESOLUTION No. 041/2024

SUBJECT: ECONOMIC POLICY ADVISORY AND FINANCIAL ENTITIES MANAGEMENT – AMEND THE LEGAL RESERVE REGULATION FOR FINANCIAL INTERMEDIATION ENTITIES.

SEEN:

The Political Constitution of the State (CPE) of February 7, 2009.

Law No. 1670 of October 31, 1995, of the Central Bank of Bolivia (BCB) and its modifications.

Law No. 393 of August 21, 2013, of Financial Services and its modifications.

Board Resolution No. 095/2022 of October 6, 2022, which approves the BCB Statute.

Board Resolution No. 076/2022 of August 26, 2022, which approves the Legal Reserve Regulation for Financial Intermediation Entities and its modifications.

Report BCB-APEC-SADBC-INF-2024-12 of March 22, 2024, issued by the Economic Policy Advisory (APEC) and the Financial Entities Management (GEF).

Report BCB-GAL-SANO-DLBCI-INF-2024-99 of March 25, 2024, issued by the Legal Affairs Management (GAL).

CONSIDERING:

That Article 327 of the Political Constitution of the State, states that the BCB is a public law institution, with legal personality and own assets. Within the framework of the State's economic policy, it is the function of the BCB to maintain the stability of the internal purchasing power of the currency, to contribute to economic and social development.

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//2. Board Resolution No. 041/2024

That Article 328 of the Political Constitution of the State, states that the BCB, in coordination with the economic policy determined by the Executive Branch, in addition to those indicated by law, has among its attributes to determine and execute monetary policy.

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, of Property and Popular Credit, determines that the BCB is a State institution, of public law, of autonomous character, of indefinite duration, with legal personality and own 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 regulatory powers of general application.

That Article 3 of the cited Law establishes that the BCB shall formulate general application policies in monetary, exchange and payment system matters for the fulfillment of its object.

That Articles 7 and 8 of Law No. 1670, determine that the BCB may establish Legal Reserves of mandatory compliance by Banks and financial intermediation entities. Their composition, amount, calculation method, characteristics and remuneration, shall be established by the Board of Directors of the Bank, by absolute majority of votes. The control and supervision of the Legal Reserve shall correspond to the current Financial System Supervisory Authority, given that the reserve and the deposits constituted in the BCB by banks and financial entities, shall not be subject to any type of attachment or retention by third parties.

That Articles 37 and 44 of Law No. 1670, establish that the BCB shall be the depositary of the liquid reserves destined to cover the Legal Reserve and attend the payment system and other operations with the BCB of the EIF subject to the authorization and control of the Financial System Supervisory Authority; providing that the highest authority of the BCB is its Board of Directors, which is responsible for defining its policies, specialized regulations of general application and internal norms; as well as establishing administrative, operational and financial strategies of the Issuing Entity, approving their respective short and medium-term programs.

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That paragraphs a), i) and o) of Article 54 of Law No. 1670, indicate as attributes of the Board of Directors of the BCB to issue the norms and adopt the general decisions that were necessary for the Issuing Entity to comply with the functions, competences and powers assigned by the Law; fix and regulate the administration of the Legal Reserve to which banks and other financial entities must be subject, providing the measures for their compliance; as well as approve, modify and interpret the Statute and Regulations of the BCB by two-thirds of the votes of the totality of its members, without the need for an additional administrative act.

That article 430 of Law No. 393, provides that the BCB may grant liquidity loans to financial intermediation entities with guarantee of the legal reserve constituted, as well as with other guarantees that the Issuing Entity determines, according to regulation approved by its Board of Directors.

That Article 6 of the BCB Statute establishes that the norms issued by the BCB shall be approved through Resolutions of its Board of Directors.

That numerals 1), 7) and 30) of Article 10 of the BCB Statute, determine that the Board of Directors of the Issuing Entity has the attributes to approve the general decisions and issue the norms that were necessary for the BCB to comply with the functions, competences and powers that the Law assigns to it; establish by absolute majority of votes, Legal Reserves of mandatory compliance by the EIF and approve their composition, amount, calculation, characteristics, forms of administration, custody and remuneration, according to Regulation and approve, modify and interpret the Regulations of the BCB.

That Articles 24 and 26 of the cited Statute refer that the resolutions and decisions of the Board of Directors are adopted by simple majority of votes of the members present in meeting, except in cases where Law No. 1670 or this Statute require qualified majorities and the Board of Directors pronounces on matters of its competence through Resolutions. It may also do so through decisions that will be expressly recorded in the Minutes. Likewise, every draft Board Resolution must be motivated and justified by a technical report of the Management or Managements to which the matter object of the Resolution corresponds and by a report of the GAL. These reports must be sent to the Board of Directors by the General Management with its recommendation.

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//4. Board Resolution No. 041/2024

That the Legal Reserve Regulation for the EIF establishes that the Regulation has the object of fixing and regulating the administration of the Legal Reserve and the resources coming from the modification of the same, in order to have monetary regulation instruments and preservation of the stability of the financial system.

That Report BCB-APEC-SADBC-INF-2024-12, issued by the APEC and the GEF conclude and recommend to the Board of Directors of the BCB the approval of the modifications to the Legal Reserve Regulation for the EIF with the objective of preserving the liquidity of both currencies of the financial system at adequate levels.

That Report BCB-GAL-SANO-DLBCI-INF-2024-99 of the GAL concludes that the content of the modifications proposed by the APEC and GEF to Articles 30, 31 and the Sole Transitory Provision of the Legal Reserve Regulation for the EIF approved through Board Resolution No. 076/2022 of August 26, 2022 and its modifications, comply with the guidelines of the legal provisions and do not contravene the current legal framework, recommending to the Board of Directors of the BCB to approve through the issuance of an express Resolution.

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

Article 1.- Modify Article 30.- (Constitution of the Fund for Credits Destined to the Productive Sector and Social Interest Housing II) of the Legal Reserve Regulation for Financial Intermediation Entities, with the following text:

"Article 30.- (Constitution of the Fund for Credits Destined to the Productive Sector and Social Interest Housing II).

The Fund for Credits Destined to the Productive Sector and Social Interest Housing II (CPVIS II Fund) is constituted in foreign currency (CPVIS II Fund-ME) with the available resources product of the modifications to the Legal Reserve rates in force from April 30, 2018 and subsequent voluntary contributions and, in national currency (CPVIS II Fund-MN) with the resources that the Financial Intermediation Entities allocate to substitute the guarantee in

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//5. Board Resolution No. 041/2024

foreign currency of the liquidity loans in force in the fund, from April 8, 2024.

The EIFs may make voluntary contributions to the CPVIS II Fund until February 2, 2026, only with resources in ME deposited in the account of the BCB in its Correspondent Bank abroad.

The EIFs may request the BCB the partial or total return of their participation in the CPVIS II Fund that is not guaranteeing liquidity loans in MN. Alternatively, the EIFs may sell the resources that are not guaranteeing liquidity loans in MN, to the BCB according to what is established in the Foreign Exchange Operations Regulation.

The return of voluntary contributions, at the request of the EIFs, shall be made in the accounts abroad of the EIFs. In case the EIF does not have its own account abroad, the EIF shall communicate in writing to the BCB the account to which the return shall be credited. In both cases the collection by the BCB of the Commission for transfer of funds abroad for the financial system, established in the "Table of Commissions for BCB Services" shall not be made."

Article 2.- Modify Article 31 (Liquidity loans in MN with Guarantee of the Fund for credits destined to the Productive Sector and Social Interest Housing II) of the Legal Reserve Regulation for Financial Intermediation Entities, with the following text:

"Article 31 (Liquidity loans in MN with Guarantee of the Fund for credits destined to the Productive Sector and Social Interest Housing II).

The resources of each participant in the CPVIS II Fund shall serve as guarantee of the liquidity loans in MN that they request from the BCB, under the following conditions:

1. The EIFs may request liquidity loans from the BCB in MN at an interest rate of 0%. These loans may be requested until February 2, 2026.

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2. The maximum amount of accumulated liquidity loans shall be the amount of participation of each EIF in the CPVIS II Fund, equivalent in MN at the prevailing buy exchange rate. The liquidity loans shall have as maturity date March 31, 2026.

3. On March 31, 2026, the BCB shall return to the EIFs, in MN and in ME, respectively, their participation in the CPVIS II Fund-MN and CPVIS II Fund-ME, prior cancellation of their liquidity loans in MN with guarantee of the CPVIS II Fund. In the case that an EIF does not have sufficient resources in its current or reserve account in MN to pay its liquidity loans, the BCB may compensate the difference with its participation in the CPVIS II Fund-MN and, in case of insufficiency of this fund compensate the balance with the CPVIS II Fund-ME at the prevailing buy exchange rate.

The return of voluntary contributions, at the request of the EIFs, shall be made in the accounts abroad of the EIFs. In case the EIF does not have its own account abroad, the EIF shall communicate in writing to the BCB the account to which the return shall be credited. In both cases the collection by the BCB of the Commission for transfer of funds abroad for the financial system, established in the "Table of Commissions for BCB Services" shall not be made.

4. The EIFs voluntarily may request the BCB the substitution of the guarantee of the liquidity loans in force in the CPVIS II Fund from ME to MN in amount equivalent to the prevailing buy exchange rate, if at the time of its request it has liquidity loans in force in the CPVIS II Fund. The request must specify the amount of the substitution of guarantee in ME and the decrease of the legal reserve resources in MN. The amount in ME substituted shall be credited to the Legal Reserve Account in ME of the EIF for its cash withdrawal within the framework of the Monetary Material Administration Regulation. The requests of the EIFs, must be made according to what is established in the circular issued by the BCB."

Article 3.- Modify the Sole Transitory Provision of the Legal Reserve Regulation for Financial Intermediation Entities, with the following text:

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"Sole Transitory Provision.

The EIFs, voluntarily, may make early payments of the liquidity loans in MN corresponding to the CPVIS II-ME, CPVIS III, FIUSEER-ME and CPRO-ME Funds; in such a way that the resources in ME released from the guarantee of the loan are destined for their sale to the BCB, according to what is established in the Foreign Exchange Operations Regulation."

Article 4.- The modifications to the Legal Reserve Regulation for Financial Intermediation Entities shall enter into force from the publication of the present determination.

Article 5.- The Presidency and the General Management are entrusted with the compliance of the present Resolution.

La Paz, March 26, 2024

SIGNED: ROGER EDWIN ROJAS ULO, Oscar Ferrufino Morro, Gabriel Herbas Camacho, Gumercindo Héctor Pino Guzmán, Diego Alejandro Pérez Cueto Eulert.