Central Bank of Bolivia

Board of Directors

BOARD RESOLUTION NO. 042/2017

SUBJECT: MONETARY OPERATIONS MANAGEMENT - APPROVES THE REGULATION FOR THE EXCHANGE OF FIXED-TERM DEPOSITS FOR DIRECT SALE SECURITIES.

VISTOS:

• Law No. 1670 of October 31, 1995 of the Central Bank of Bolivia (BCB).
• Law No. 1834 of March 31, 1998 on the Securities Market.
• The Statute of the BCB approved by Board Resolution No. 128/2005 of October 21, 2005 and its subsequent modifications.
• The Open Market Operations (OMA) Regulation, approved by Board Resolution No. 149/2015 of August 25, 2015 and its modifications.
• Report BCB-GOM-SOMA-INF-2017-31 of March 27, 2017, from the Monetary Operations Management.
• Report BCB-GAL-SANO-INF-2017-67 of March 27, 2017, from the Legal Affairs Management.

CONSIDERING:

• That Article 6 of Law No. 1670 empowers the BCB to execute monetary policy and regulate the quantity of money and credit volume according to its monetary program, being able to issue, place, and acquire securities and carry out other open market operations for this purpose.
• That in virtue of the powers conferred by subsections a), d), and o) of Article 54 of Law No. 1670 and items 1), 4), and 29) of Article 11 of the BCB Statute, the BCB Board of Directors is empowered to issue norms and adopt general decisions so that the BCB fulfills the functions, competencies, and powers assigned by Law, as well as to issue norms for open market operations carried out by the BCB and approve the BCB Regulations, by two-thirds of the votes of all its members.
• That according to Article 3 of Law No. 1834 "The over-the-counter market shall be understood as that which is carried out outside of stock exchanges, with the participation of authorized intermediaries, with Securities registered in the Securities Market Registry. Only Securities authorized by the Securities Superintendency may be traded in the over-the-counter market."
• That Article 4 of the OMA Regulation states that the BCB Board of Directors defines monetary policies in general and open market operation policies in particular. Likewise, in its Article 13, it empowers the BCB Board of Directors to authorize other mechanisms to carry out open market operations. For its part, item II of Article 14 states that operations in the secondary market may be carried out with securities from private issuers expressly authorized by the BCB Board of Directors.

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• That Report BCB-GOM-SOMA-INF-2017-31 from the Monetary Operations Management recommends to the BCB Board of Directors approve the mechanism for the Exchange of Fixed-Term Deposits for Direct Sale Securities, in order to provide the BCB with an additional mechanism to assist in the Bolivianization process.
• That Report BCB-GAL-SANO-INF-2017-67 from the Legal Affairs Management establishes that there is no legal impediment for the BCB Board of Directors to approve the mechanism for the Exchange of Fixed-Term Deposits for Direct Sale Securities, as well as its respective regulation.

THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1.- Approve the implementation of the mechanism for the Exchange of Fixed-Term Deposits for Direct Sale Securities.

Article 2.- Approve the Regulation for the Exchange of Fixed-Term Deposits for Direct Sale Securities, in its 3 Chapters and 8 Articles, which shall enter into force from the date of its approval.

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

La Paz, March 28, 2017

Pablo Ramos Sánchez Luis Baudoin Olea Ronald Polo Rivero

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Abraham Pérez Alandia Sergio Velarde Vera

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ANNEX

REGULATION FOR THE EXCHANGE OF FIXED-TERM DEPOSITS FOR DIRECT SALE SECURITIES

CHAPTER I

General Provisions

Article 1. (Object).- This Regulation aims to establish the conditions, procedures, and operations for the Exchange of Fixed-Term Deposits for Direct Sale Securities.

Article 2. (Definition).- The Exchange of Fixed-Term Deposits for Direct Sale Securities is a mechanism by which the BCB may acquire Fixed-Term Deposits (DPF) in dollars, issued by financial entities with a license from the Financial System Supervision Authority (ASFI) that are on the list of DPFs accepted by the BCB, and issue Bolivianization BCB Bonds as consideration for this acquisition.

CHAPTER II

Operational Procedure for the Exchange of Fixed-Term Deposits for Direct Sale Securities

Article 3. (Communication of Accepted DPFs for the Exchange Mechanism).- The BCB Board of Directors will define and authorize the list of issuers whose dollar-denominated DPFs will be accepted for exchange, depending on their risk rating. Subsequently, the BCB will communicate the list of approved DPFs through the Monetary Operations Management.

Only DPFs with the following characteristics will be accepted:

• That they be public offer securities
• Represented by book entries
• Issued in dollars
• Issued by financial entities with a license granted by ASFI with the latest risk rating of AAA, AA, A, or BBB.
• Opened on a date prior to March 21, 2017, with the exception of fractional DPFs, for which the opening date of the original security must be prior to March 21, 2017.
• That they fall within the following range:
  • Minimum nominal value of the DPF: $us146.00 (one hundred forty-six 00/100 dollars)
  • Maximum nominal value of the DPF: $us100,000.00 (one hundred thousand 00/100 dollars)

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If the nominal value of the DPF exceeds the maximum permitted limit, the holder must request the fractionalization of the DPF with its issuer, so that at least one of the fractional DPFs has a maximum nominal value of $100,000 (one hundred thousand 00/100).

It is not possible to make payments with cash or other alternative payment means for the acquisition of Bolivianization BCB Bonds.

Article 4. (Registration of Exchange Requests).- Natural persons who are holders of DPFs that are on the list disseminated by the BCB and who wish to access the mechanism for the Exchange of Fixed-Term Deposits for Direct Sale Securities must go to the BCB Customer Service Platform or any agency and/or branches of the Placement Agent (PA) nationwide to submit their exchange request, presenting the Certificate of Accreditation of Ownership (CAT) of the DPF. In the case of fractional DPFs, the presentation of the CAT of both DPFs (original and fractional) is indispensable. CATs indicating that the status of the DPF is other than "Available" will not be accepted.

Once the exchange request is registered, an Exchange Request Form (ERF) will be issued, which is valid for 15 business days. If the operation is not completed within this period, the ERF is cancelled.

Article 5. (Transfer and Transfer of Ownership of DPFs).- To make the exchange request effective, the holder of the DPFs subject to the exchange must go to the offices of the entity whose master account holds this security and request the transfer of the DPF to the BCB's master account.

Once the BCB receives the transfer through the system provided by the Bolivia Securities Depository S.A. (EDV), it will carry out the transfer of ownership of the DPFs so that they pass to its investment portfolio.

Article 6. (Issuance of Bolivianization BCB Bonds).- Upon registration of the transfer of ownership of the DPFs in favor of the BCB, the pending exchange request will be finalized, and Bolivianization BCB Bonds will be issued in the name of the operation applicant, for an amount equivalent to the price corresponding to the transferred DPFs, calculated according to the Issuance Prospectus of the Bolivianization BCB Bonds, converted to bolivianos at the prevailing purchase exchange rate on the day of the operation. The price includes the nominal value of the DPF and accrued interest that has not been paid up to the date of the operation.

If, as a result of the conversion, after the Bonds are issued, there is a remaining amount less than the nominal value of a Bolivianization BCB Bond, this will be returned to the customer on the day of the issuance of the securities, through an electronic transfer.

The acquired DPFs will remain in the BCB's master account until maturity.

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Article 7. (Other Operational Aspects).- The Open Market Operations Committee (COMA) may define and implement any operational aspect not foreseen in this Regulation.

CHAPTER III

ACTIVITY REPORT

Article 8.- (Activity Report).- The COMA, through the GOM, will keep the Board of Directors informed about the Exchange of Fixed-Term Deposits for Direct Sale Securities operations.