BOARD

BOARD RESOLUTION NO. 046/2022

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

VIEWED:

The Political Constitution of the State of February 7, 2009.
Law No. 1670 of October 31, 1995, of the Central Bank of Bolivia.
Board Resolution No. 128/2005 of October 21, 2005, which approves the Statute of the Central Bank of Bolivia and its modifications.
Board Resolution No. 018/2020 of February 18, 2020, which approves the Legal Reserve Regulation for Financial Intermediation Entities and its modifications.
Report BCB-APEC-SIE-INF-2022-8 of June 8, 2022, from the Economic Policy Advisory (APEC) and the Financial Entities Management (GEF).
Report BCB-GAL-SANO-DLBCI-INF-2022-106 of June 20, 2022, from the Legal Affairs Management (GAL).

CONSIDERING:

That Articles 327 and 328 of the Political Constitution of the State establish that the Issuing Entity has the function of maintaining the stability of the internal purchasing power of the currency, to contribute to economic and social development, being its attribute, in coordination with the economic policy determined by the Executive Branch, in addition to those indicated by Law, to determine and execute monetary and exchange rate policy, regulate the payment system, authorize the issuance of currency and administer international reserves.

That Articles 7 and 8 of Law No. 1670 indicate that the Central Bank of Bolivia (BCB) may establish legal reserves of mandatory compliance by Banks and Financial Intermediation Entities (EIF); their composition, amount, method of calculation, characteristics and remuneration, shall be established by the Board of the Bank, by an absolute majority of votes.

That Articles 37 and 44 of Law No. 1670 establish that the BCB constitutes itself as the depositary of liquid reserves intended to cover the legal reserve of EIFs subject to the authorization and control of the Financial System Supervisory Authority (ASFI). The highest authority of the BCB is its Board, responsible for defining its policies, specialized regulations of general application and internal rules; as well as establishing administrative, operational and financial strategies of the BCB, approving their respective short and medium-term programs.

That subsections a) and i) of Article 54 of Law No. 1670 of the BCB indicate as attributes of the BCB Board, to issue norms and adopt general decisions that may be necessary for the Issuing Entity to fulfill the functions, competencies and powers assigned to it by the Law and to fix and regulate the administration of the legal reserve to which banks and other financial entities must be subject, disposing measures for its compliance.

That items 1), 7) and 29) of Article 11 of the BCB Statute, within the framework of Law No. 1670, establish that the Board has among its attributes to approve general decisions and issue the norms that may be necessary for the Issuing Entity to fulfill the functions, competencies and powers assigned to it by the Law. Likewise, to establish, by absolute majority of votes, legal reserves of mandatory compliance by EIFs and approve their composition, amount, calculation, characteristics, forms of administration, custody and remuneration, in accordance with the Regulation, in addition to approve, modify and interpret the Statute and Regulations of the BCB, by two-thirds of the votes of all its members, without the need for an additional administrative act.

That Articles 24 and 26 of the aforementioned Statute, provide that resolutions and decisions of the Board are adopted by a simple majority of votes of the members present in a meeting, except in cases where Law No. 1670 or the Statute require qualified majorities, it may also pronounce itself on matters within its competence through resolutions or through decisions that will be expressly recorded in the minutes; every draft Board resolution must be motivated and justified by a technical report from the Management or Managements to which the matter subject to the resolution corresponds and by a report from the Legal Affairs Management (GAL), which must be sent to the Board by the General Management with its recommendation.

That Articles 1 and 2 of the Legal Reserve Regulation for EIFs, provide that all EIFs, authorized for their operation by the ASFI, are subject to the provisions of the aforementioned Regulation.

That through Report BCB-APEC-SIE-INF-2022-8 prepared jointly by APEC and GEF, they put before and recommend to the Board the approval of the proposal to modify the Legal Reserve Regulation for EIFs in the following areas: Early Withdrawals of Time Deposits, Extension of terms in the CPVIS II Fund and complementation of the object of the CPRO Fund.

That Report BCB-GAL-SANO-DLBCI-INF-2022-106, from GAL concludes that within the framework of what is stated in Report BCB-APEC-SIE-INF-2022-8, the proposal to modify the Legal Reserve Regulation for EIFs does not contravene the legal order, being therefore legally appropriate and corresponding to the BCB Board to consider its approval.

THEREFORE,

THE BOARD OF THE CENTRAL BANK OF BOLIVIA,

RESOLVES:

Article 1.- Modify Article 14 (Sanctions for Early Withdrawals of Time Deposits) of the Legal Reserve Regulation for EIFs, with the following text:

“Article 14.- (Sanctions for Early Withdrawals of Time Deposits).

Time deposits that maintain any reserve exemption, under what is established in this Regulation, cannot be redeemed early.

The following cases are excepted from this prohibition:

Time deposits in foreign currency (ME) and foreign currency deposits for non-residents (MVDOL) that, being exempt from constituting legal reserve, are redeemed with the sole and exclusive purpose of converting them into deposits in national currency (MN).

Time deposits in national currency (MN), foreign currency deposits for non-residents without free convertibility (MNUFV), foreign currency (ME) and foreign currency deposits for non-residents (MVDOL) that, being exempt from constituting legal reserve, are redeemed to comply with fund remittance orders issued by Competent Authority. In the event that the fund remittance order is for an amount lower than the value of the Time Deposit, prior to the early redemption of said deposit, it will be split, so that only the amount equivalent to the aforementioned order is redeemed.

When the issuing entity acquires its own time deposit certificates, these must be cancelled and withdrawn from accounting, and such withdrawal must be communicated to the BCB within a period not exceeding 48 hours after it occurs.”

Article 2.- Modify Article 29 (Constitution of the Fund for Credits destined to the Productive Sector and Social Housing II) of the Legal Reserve Regulation for Financial Intermediation Entities, with the following text:

“Article 29 (Constitution of the Fund for Credits destined to the Productive Sector and Social Housing II).

The Fund for Credits destined to the Productive Sector and Social Housing II (CPVIS II Fund) is constituted with the resources released by the modifications to the Legal Reserve Regulation dated April 24, 2018 and voluntary contributions.

EIFs may make new voluntary contributions to the CPVIS II Fund until October 31, 2022, only with resources in foreign currency (ME) deposited in the BCB account in their corresponding bank abroad since February 19, 2019. EIFs may request the BCB for the partial or total return of their participation in the CPVIS II Fund that is not guaranteeing national currency liquidity credits. In the event that EIFs request the return of resources that are guaranteeing national currency liquidity loans, they must first pay them. This return may be made in the EIFs' accounts abroad or in another account abroad that the EIF communicates to the BCB, without the BCB charging the Commission for transfer of funds abroad for the financial system, established in the BCB's Service Commissions Table approved by Board Resolution, up to the amount corresponding to the voluntary contributions made from February 19, 2019 to October 31, 2022.”

Article 3.- Modify Article 31 (National Currency Liquidity Loans with Guarantee of the Fund for Credits destined to the Productive Sector and Social Housing II) of the Legal Reserve Regulation for EIFs, with the following text:

“Article 31 (National Currency Liquidity Loans with Guarantee of the Fund for Credits destined to the Productive Sector and Social Housing II).

The resources of each participant in the CPVIS II Fund will serve as guarantee for the national currency liquidity loans requested from the BCB, under the following conditions:

EIFs may request liquidity loans from the BCB in national currency at an interest rate of 0%. These loans may be requested until October 31, 2022.

The maximum amount of accumulated liquidity loans will be the participation amount of each EIF in the CPVIS II Fund, equivalent in national currency to the prevailing buying exchange rate. Liquidity loans will have a maturity date of December 31, 2022. These loans may be paid early.

On December 31, 2022, the BCB will return in foreign currency (ME) to the EIFs their participation in the CPVIS II Fund prior to the cancellation of their national currency liquidity loans with guarantee of the CPVIS II Fund. In the event that an EIF does not have sufficient resources in its current or reserve account in national currency to pay its liquidity loans, the BCB may offset the difference with its participation in the CPVIS II Fund at the prevailing buying exchange rate. This return may be made in the EIFs' accounts abroad or in another account abroad that the EIF communicates to the BCB, without the BCB charging the Commission for transfer of funds abroad for the financial system, established in the BCB's Service Commissions Table, up to the amount corresponding to the voluntary contributions made from February 19, 2019 to October 31, 2022. The validity of this Fund may be extended to the extent that the BCB considers pertinent.”

Article 4.- Modify Article 41 (National Currency Loans with Guarantee of the Fund for Credits destined to the Productive Sector) of the Legal Reserve Regulation for EIFs, with the following text:

“Article 41.- (National Currency Loans with Guarantee of the Fund for Credits destined to the Productive Sector).

The resources of each participant in the CPRO Fund will serve as guarantee for the national currency loans requested from the BCB, under the following conditions:

EIFs may request national currency loans from the BCB at an interest rate of 0%. These loans will have the following purpose according to the type of entity:

a. In the case of banks, loans guaranteed with the CPRO Fund will have the purpose of increasing their portfolio of national currency credits destined to the productive sector.

b. In the case of Savings and Loan Associations (EFV), loans guaranteed with the CPRO Fund will have the purpose of increasing their social housing portfolio.

c. In the case of Cooperatives and Financial Development Institutions (IFD), loans guaranteed with the CPRO Fund must be destined to their national currency credit portfolio, with a productive sector participation of no less than 50%.

Loans may be requested until December 30, 2022, the extension of the loan request period will be reviewed annually by the BCB.

The maximum amount of accumulated loans will be the participation amount of each EIF in the CPRO Fund, equivalent in national currency to the prevailing buying exchange rate. Loans will have a maturity date of March 31, 2025.

Monthly, the BCB will compare the amount of loans granted to each EIF with guarantee of its participation in the CPRO Fund, with the increase in the balance of credits disbursed by said entities in national currency with respect to December 31, 2021, as established in item 1 of this article. If the increase is less than the accumulated loans granted by the BCB, the difference will pay the prevailing national currency repo interest rate on the date of evaluation of each end of month, from said date until the entity has remedied that difference.

For the purposes of the comparison indicated in item 4 of this article, EIFs with loans guaranteed with the CPRO Fund must send to the BCB a letter with the character of a sworn declaration with information on their credits, as established in item 1 of this article. The cut-off will be made at the end of each month, until the fifth business day of the following month. The included information must not consider credits reported in other sworn declarations (CPVIS III, CAPROSEN and FIUSEER Funds). Control will begin with information cut-off at the end of January 2022.

In the event that an EIF needs to demonstrate compliance with the portfolio increase on a date other than the end of the month to remedy the difference indicated in item 4 of this article, it must send this information to the BCB, with the character of a sworn declaration, within a maximum period of five business days after the compliance with the portfolio increase.

In the event that the EIF with loans guaranteed with the CPRO Fund does not send the letters cited in the previous items within the established deadlines, the BCB will communicate the non-compliance to the ASFI so that this authority applies the corresponding fines or sanctions.

Credits destined to the productive sector will be understood as credit operations established in item 7 of Article 32 of this Regulation.

On March 31, 2025, the BCB will return to EIFs, in national currency (MN) and foreign currency (ME), respectively, their participation in the CPRO-MN Fund and CPRO-ME Fund, prior to the cancellation of their national currency loans with guarantee of the fund. In the event that an EIF does not have sufficient resources in its current or reserve account in national currency to pay its loans, the BCB may offset the difference with its participation in the CPRO-MN Fund and, in case of insufficiency of this fund, it will offset the balance with the CPRO-ME Fund at the prevailing buying exchange rate. The return of voluntary contributions, at the request of EIFs, may be made in the EIFs' accounts abroad or in another account abroad that the EIF communicates to the BCB, without the BCB charging the Commission for transfer of funds abroad for the financial system, established in the BCB's Service Commissions Table.

The validity of the CPRO Fund may be extended to the extent that the BCB considers pertinent.”

Article 5.- I. The modifications to Articles 14, 29, 31 and 41 of the Legal Reserve Regulation for EIFs will enter into force from the publication of this Resolution.

II. The other provisions provided for in Board Resolution No. 018/2020 of February 18, 2020 and its modifications, remain in force.

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

La Paz, June 22, 2022

SIGNED: OSCAR FERRUFINO MORRO, Gabriel Herbas Camacho, Gumercindo Héctor Pino Guzmán, Diego Alejandro Pérez Cueto Eulert.

Board Resolution No. 046/2022