Board Resolution No. 048/98 - Mandatory Liquidity Fund for Open Savings and Credit Cooperatives Pending Licensing by SBEF

BOARD RESOLUTION NO. 048/98

SUBJECT: ECONOMIC POLICY ADVISORY – MANDATORY LIQUIDITY FUND FOR OPEN SAVINGS AND CREDIT COOPERATIVES

WHOSE OPERATING LICENSE APPLICATION IS PENDING APPROVAL BY THE SBEF.

VIEWING:

The Notes SB/IAB document 13451 of April 6, 1994; SB/IAN document 23176 of June 10, 1994; SB/IAN document 42852 of November 11, 1994, corresponding to Procedure No. 223 of the Banking and Financial Entities Superintendence (SBEF). As well as the note SB/IEN document 16835 of April 9, 1998 from the same Regulatory Authority.

Supreme Decree No. 24439 of December 13, 1996.

The Board Resolution of the Central Bank of Bolivia (BCB) No. 180/97 of December 23, 1997, as well as the modifications incorporated in Resolution No. 028/98 of March 17, 1998.

The Legal Advisory Report ALEG No. 142/98 of April 20, 1998.

The Technical Report of the Economic Policy Advisory APEC/ARINV No. 081/98 of April 20, 1998.

CONSIDERING:

That in view of documents 13451, 23176, and 42852 from the SBEF and in compliance with Law 1488, the BCB opened legal reserve accounts for Open Savings and Credit Cooperatives, whose operating license application is pending approval by the Regulatory Authority.

That Supreme Decree No. 24439, in its Article 42, paragraph I, grants cooperative societies without an operating license a maximum period of three years to adapt their activities to the provisions of the aforementioned Supreme Decree and related regulations.

That the BCB Board Resolutions 180/97 and 028/98 regulate the legal reserve only for financial intermediation entities with an operating license from the SBEF.

That the SBEF, through note SB/IEN document 16835, requests that the Issuing Entity approve the inclusion in the universe of entities obligated to constitute a legal reserve, of open savings and credit cooperatives that are in the process of adaptation.

That the Technical Report APEC/ARINV No. 081/98 from the Economic Policy Advisory recommends that open savings and credit cooperatives with operating license applications pending approval by the SBEF, constitute a Mandatory Liquidity Fund until the regulatory authority authorizes their operation or the adaptation period expires, whichever occurs first.

That the Legal Advisory Report ALEG No. 142/98 recommends issuing a prudential norm establishing a mechanism that temporarily substitutes the legal reserve for open savings and credit cooperatives.

THEREFORE

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1.- Establish a prudential regime, as a temporary substitute for the legal reserve, for Open Savings and Credit Cooperatives whose operating license application is pending approval by the SBEF and that are instructed by said regulatory authority to constitute the Mandatory Liquidity Fund referred to in Article 2.

Article 2.- The aforementioned cooperatives will constitute a Mandatory Liquidity Fund (FOL) in a banking entity authorized as an Accredited Financial Entity (EFA), where they will deposit a percentage of the passive accounts included in Articles 3 and 4 of the Legal Reserve Regulation approved by BCB Board Resolution No. 180/97. They must communicate in writing to the SBEF their choice of EFA.

Article 3.- To enjoy the exemptions contemplated in Article 4 of the Legal Reserve Regulation, regarding fixed-term deposits greater than six months in national currency and one year in foreign currency, the cooperatives must report these liabilities weekly to the SBEF. They are exempt from the requirement to register said liabilities with the BCB.

Article 4.- The cooperatives must observe the schedule established by the BCB for the constitution of the FOL, and apply the following percentages on the liabilities mentioned in Article 2 of this Resolution:

SCHEDULE From: Percentage: May 4, 1998 6.5% June 1, 1998 7.0% June 29, 1998 7.5% July 27, 1998 8.0% August 24, 1998 8.5% September 21, 1998 9.0% October 19, 1998 9.5% November 16, 1998 10.0% December 14, 1998 10.5% January 11, 1999 11.0% February 8, 1999 12.0%

Article 5.- The FOL may be constituted up to 80% in savings accounts or fixed-term deposits. The remaining balance shall be constituted in current accounts.

This Fund must be constituted in the currency in which the deposits were captured, with no offsetting allowed between currencies.

Article 6.- The cooperatives subject to this Resolution must communicate daily to the SBEF, by 14:00 hours, the balances constituted in the FOL and their corresponding liabilities.

Article 7.- The SBEF will define the method for calculating the FOL and verify its observance. To grant an operating license to a cooperative, the SBEF will evaluate compliance with the norms of this Resolution.

Article 8.- The BCB will not recognize any commission to the EFAs for the maintenance of the FOL.

Article 9.- This Resolution will be in effect from May 4, 1998, until the SBEF authorizes the operation of the aforementioned cooperatives or the adaptation period established in Supreme Decree No. 24439 is fulfilled, whichever occurs first. Once a cooperative obtains its operating license, it must constitute the legal reserve in accordance with the Regulation approved by the BCB through Resolution No. 180/97.

Article 10.- The Presidency and the General Management are charged with the execution and compliance of this Resolution.

La Paz, April 20, 1998

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Juan Antonio Morales A.

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Armando Pinell S. Jaime Ponce G. Juan Medinaceli V.