Board Resolution No. 042/2014

RESOLUTION OF THE BOARD OF DIRECTORS NO. 042/2014

SUBJECT: ECONOMIC POLICY ADVISORY AND FINANCIAL ENTITIES MANAGEMENT APPROVE MODIFICATION TO THE LEGAL RESERVE REGULATION

HAVING 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 its subsequent modifications. The Legal Reserve Regulation approved by Board Resolution No. 070/2009 of June 23, 2009 and modified according to Board Resolutions No. 130/2010 of November 23, 2010, No. 007/2011 of January 18, 2011, No. 072/2011 of June 14, 2011, No. 07/2012 of January 10, 2012, No. 042/2012 of April 10, 2012 and No. 164/2013 of December 5, 2013. ASFI Resolution No. 687/2013 of October 16, 2013. The Report from the Economic Policy Advisory, Financial Entities Management and Monetary Operations Management BCB-APEC-SIE-INF-2014-20 of April 28, 2014. The Report from the Legal Affairs Management BCB-GAL-SANO-INF-2014-136 of April 29, 2014.

CONSIDERING: That the Political Constitution of the State in its article 328 provides that the BCB is authorized, in coordination with the economic policy determined by the Executive Branch, to determine and execute monetary policy. That Law No. 1670 in its article 7 provides that the Issuing Entity may establish legal reserves of mandatory compliance for financial intermediation entities and, for this purpose, determine their composition, amount, calculation method, characteristics and remuneration. That in its article 37, the aforementioned legal norm establishes that the BCB is the custodian of the liquid reserves intended to cover said reserve and may delegate the custody of these deposits according to specific regulations. That the BCB Statute in article 11 numeral 7) states that it is the faculty of the Board to establish by absolute majority of votes, legal reserves of mandatory compliance for Financial Intermediation Entities and approve their composition, amount, calculation, characteristics, forms of administration, custody and remuneration according to Regulation. That the Legal Reserve Regulation has the object of establishing the technical and operational conditions of mandatory compliance for financial entities that are duly authorized for their operation by the Supervisory Authority of the Financial System, regarding the constitution and form of administration of the legal reserve. That the Economic Policy Advisory, the Financial Entities Management and the Monetary Operations Management through Report BCB-APEC-SSIEE-INF-2014-20 recommend the approval of the modification of article 6 of the Legal Reserve Regulation. That according to Report BCB-GAL-SANO-INF-2014-136, the Legal Affairs Management concludes that the proposed modification is legally appropriate, since it does not contravene the current legal framework, being the competence of the BCB Board to consider its approval. That, the BCB Board in its capacity as the highest authority of the Institution, is responsible for defining its policies, specialized regulations of general application and internal norms, being authorized to issue norms and adopt general decisions that may be necessary for the fulfillment of the functions, competencies and faculties assigned by Law to the Issuing Entity, as established in articles 44 and 54 inc. o) of Law No. 1670 and articles 9, 11 and 24 of the BCB Statute.

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

Article 1.- Modify article 6 of the Legal Reserve Regulation according to the following:

SAYS: "(ARTICLE 6, deductions and exemptions of reserve) From the reserve required in NC and UFV, Banks and Private Financial Funds may deduct the increase in the gross portfolio destined to the productive sector in NC and UFV with respect to the balance registered on September 30, 2010 up to the equivalent to 100% of the reserve required in cash in the first instance and, subsequently, up to the equivalent to 40% of the reserve required in securities. For the deduction of the productive portfolio, the last information collected by the Supervisory Authority of the Financial System will be applied.

From the reserve required in NC and UFV, Mutuals and Cooperatives may deduct the increase in the total gross portfolio in NC and UFV with respect to the balance registered on September 30, 2010 up to the equivalent to 100% of the reserve required in cash in the first instance and, subsequently, up to the equivalent to 40% of the reserve required in securities.

These deductions will be applied only to deposits subject to the reserve rate of 2% in cash and 10% in securities according to article 5 of this Regulation.

For financial entities that obtain their operating license from the ASFI after September 30, 2010, the date that will be used for the calculation of the increase in the total gross portfolio (for Mutuals and Cooperatives) or productive (for Banks and Private Financial Funds), in NC and UFV will correspond to the last day of the month in which the entity obtained the said license.

Short-term liabilities with the exterior, contracted exclusively for foreign trade operations with exact matching between asset and liability for each operation, will be exempt from the requirement to constitute legal reserve."

SHOULD SAY: "From the reserve required in NC and UFV, Banks and Private Financial Funds may deduct the increase in the gross portfolio destined to the productive sector in NC and UFV with respect to the balance registered on September 30, 2010 up to the equivalent to the percentages indicated in Table 1 and in the respective periods. For the deduction of the productive portfolio, the last information collected by the Supervisory Authority of the Financial System will be applied.

Table 1: Compensation of LR for Banks and Private Financial Funds (In percentages)

Period of Requirement | Effective Compensation Percentage | Securities Compensation Percentage Start Date | End Date Currently | 100% | 40.0% 12-May-14 | 25-May-14 | 0.0% | 40.0% 26-May-14 | 08-Jun-14 | 0.0% | 40.0% 09-Jun-14 | 22-Jun-14 | 0.0% | 30.0% 23-Jun-14 | 06-Jul-14 | 0.0% | 20.0% 07-Jul-14 | 20-Jul-14 | 0.0% | 10.0% 21-Jul-14 | Forward | 0.0% | 0.0%

From the reserve required in NC and UFV, Mutuals and Cooperatives may deduct the increase in the total gross portfolio in NC and UFV with respect to the balance registered on September 30, 2010 up to the equivalent to the percentages indicated in Table 2 and in the respective periods.

Table 2: Compensation of LR for Cooperatives and Mutuals (In percentages)

Period of Requirement | Effective Compensation Percentage | Securities Compensation Percentage Start Date | End Date Currently | 100% | 40.0% 05-Jan-15 | 01-Mar-15 | 50.0% | 40.0% 02-Mar-15 | 10-May-15 | 0.0% | 40.0% 11-May-15 | 05-Jul-15 | 0.0% | 30.0% 06-Jul-15 | 13-Sep-15 | 0.0% | 20.0% 14-Sep-15 | 08-Nov-15 | 0.0% | 10.0% 09-Nov-15 | Forward | 0.0% | 0.0%

These deductions will be applied only to deposits subject to the reserve rate of 2% in cash and 10% in securities according to article 5 of this Regulation.

For financial entities that obtain their operating license from the ASFI after September 30, 2010, the date that will be used for the calculation of the increase in the total gross portfolio (for Mutuals and Cooperatives) or productive (for Banks and Private Financial Funds), in NC and UFV will correspond to the last day of the month in which the entity obtained the said license.

Short-term liabilities with the exterior, contracted exclusively for foreign trade operations with exact matching between asset and liability for each operation, will be exempt from the requirement to constitute legal reserve."

Article 2.- This partial modification of the Legal Reserve Regulation will enter into force as of May 12, 2014.

Article 3.- The Presidency and General Management are charged with the execution and compliance of this Resolution.

La Paz, April 29, 2014

Erez Alandia • Reynaldo Yujra Segale