Central Bank of Bolivia

Board of Directors

BOARD RESOLUTION NO. 054/2018

SUBJECT: ECONOMIC POLICY ADVISORY AND FINANCIAL ENTITIES MANAGEMENT APPROVE MODIFICATION OF THE LEGAL RESERVE REGULATION FOR FINANCIAL INTERMEDIATION ENTITIES.

VISTOS:

• 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).
• Law No. 393 of August 21, 2013 on Financial Services.
• 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. 69/2017 of May 22, 2017.
• Board Resolutions No. 078/2017 and No. 079/2017, both dated June 6, 2017.
• The Report from the Economic Policy Advisory and Financial Entities Management BCB-APEC-SIE-INF-2018-23 of April 24, 2018.
• The Report from the Legal Affairs Management BCB-GAL-SANO-DLBCI-INF-2018-82 of April 24, 2018.

CONSIDERING:

• That Article 328 of the CPE indicates among the attributions of the BCB, in coordination with the economic policy determined by the Executive Branch, to determine and execute monetary policy.
• That Article 7 of Law No. 1670 provides that the BCB may establish legal reserves of mandatory compliance by Banks and financial intermediation entities. Their composition, amount, method of calculation, characteristics, and remuneration shall be established by the Bank's Board of Directors, by an absolute majority of votes. The control and supervision of the legal reserve shall correspond to the Superintendence of Banks and Financial Entities, currently the Financial System Supervision Authority (ASFI).
• That pursuant to subsections a) and i) of Article 54 of the same Law, the Board of the Issuing Entity has the authority to approve general decisions and issue the norms that

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are necessary for the BCB to fulfill the functions, competencies, and powers assigned to it by the Law and to set and regulate the administration of the legal reserve to which banks and other financial entities must adhere, disposing of measures for its compliance.

• That subsections 1, 2, and 7 of Article 11 of the BCB Statute provide that its Board of Directors has the authority to approve general decisions and issue the norms that are necessary for the BCB to fulfill the functions, competencies, and powers assigned to it by the Law; define the BCB's policies, specialized general application regulations, and internal norms, as well as establish, by an 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, in accordance with the Regulation.

• That the Legal Reserve Regulation for Financial Intermediation Entities aims to establish the technical and operational conditions of mandatory compliance for financial entities authorized for operation by the ASFI, regarding the constitution and form of administration of the legal reserve.

• That Report BCB-APEC-SIE-INF-2018-23 from the Economic Policy Advisory and Financial Entities Management recommends the modification of Article 5 and Title V of the Legal Reserve Regulation for Financial Intermediation Entities.

• That Report BCB-GAL-SANO-DLBCI-INF-2018-82 from the Legal Affairs Management establishes that the proposal for modification of the Legal Reserve Regulation for Financial Intermediation Entities made by the APEC is legally appropriate.

THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1.- Approve the partial modification to Article 5 (Legal Reserve Rates) of the Legal Reserve Regulation as follows:

IT SAYS:

The legal reserve rates on the liabilities detailed in Article 3 of this Regulation are as follows:

In MN and MNUFV:

• Cash
  • Six percent (6%) for cash reserve.

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Titles

• Five percent (5%) for title reserve.

In ME and MVDOL:

• Cash

  • Thirteen point five percent (13.5%) for cash reserve.

• Titles

  • Thirty-five percent (35%) for title reserve for DPFs greater than 720 days; and forty-three percent (43%) for the rest of liabilities.

Financial Intermediation Entities must constitute the legal reserve in cash, equivalent to a rate of one hundred percent (100%), on accounts included in "Other Obligations with the public, with companies with state participation and with banks and financing entities" indicated in Article 3 of this Regulation.

IT MUST SAY:

“The legal reserve rates on the liabilities detailed in Article 3 of this Regulation are as follows:

In MN and MNUFV:

• Cash
  • Six percent (6%) for cash reserve.
• Titles
  • Five percent (5%) for title reserve.

In ME and MVDOL:

• Cash
  • Thirteen point five percent (13.5%) for cash reserve.
• Titles
  • Twenty-five percent (25%) for title reserve for DPFs greater than 720 days; and thirty-three percent (33%) for the rest of liabilities.

Financial Intermediation Entities must constitute the legal reserve in cash, equivalent to a rate of one hundred percent (100%), on accounts included in 'Other Obligations with the public, with companies with state participation and with banks and financing entities' indicated in Article 3 of this Regulation.”

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Article 2.- Modify Title V of the Legal Reserve Regulation for Financial Intermediation Entities in the following terms.

IT SAYS:

TITLE V

OF THE FUND FOR CREDITS DESTINED TO THE PRODUCTIVE SECTOR AND SOCIAL HOUSING

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

The Fund for Credits destined to the Productive Sector and Social Housing (CPVIS Fund) is constituted in the BCB with the resources released from the RAL-ME Fund by the application of the legal reserve rates in titles in ME and MVDOL determined in this regulation. The participation of each FIE in the CPVIS Fund will be equal to its participation in the released RAL-ME Fund.

Article 30 (Rights and Responsibilities).

The participating Financial Intermediation Entities will be beneficiaries of all rights of the Fund for Credits destined to the Productive Sector and Social Housing.

Article 31 (Liquidity Loans in MN with Guarantee of the Fund for Credits destined to the Productive Sector and Social Housing).

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

1. FIEs may request liquidity loans from the BCB in MN at an interest rate of 0%, with the purpose of increasing their credit portfolio destined to the productive sector and social housing in national currency. These loans may be requested from the constitution of the CPVIS Fund until December 28, 2017.

2. The maximum amount of accumulated liquidity loans will be the amount of participation of each FIE in the CPVIS Fund, equivalent in MN to the buying exchange rate. The liquidity loans will have a maturity date of January 30, 2018 and cannot be cancelled in advance.

3. With information as of the end of each month, the balance of credits destined to the productive sector and social housing in MN of each entity will be compared with the balance of April 30, 2017 provided by the ASFI. If this increase is less than the accumulated loans granted by the BCB, the difference will pay interest at the MN repo rate of the evaluation date (end of each

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month), from that date until the FIE has remedied that difference.

4. For the purposes of the comparison indicated in point (3) above, FIEs must send a letter to the BCB in the form of a sworn declaration, with a copy to the ASFI, with information on their credits of the Productive Sector and Social Housing as of the cut-off date of each month, until the 5th business day of the following month. For cooperatives, the total gross portfolio will be considered.

5. In the event that an FIE needs to demonstrate compliance with the portfolio increase on a date other than the end of the month to remedy the difference indicated in point (3), it must send a letter to the BCB, with a copy to the ASFI, in the form of a sworn declaration with this information within a maximum period of five business days after the compliance with the portfolio increase.

6. In the event that the FIE does not send the letters cited in the two previous points within the established deadlines, the ASFI will apply the corresponding fines or sanctions.

7. Credits destined to the productive sector will be understood as credit operations of a business, microcredit, or SME type, whose destination corresponds to the following categories of the Economic Activity Code and Credit Destination (CAEDEC), used by the ASFI: a. Agriculture and Livestock; b. Hunting, Forestry and Fishing; c. Extraction of Crude Oil and Natural Gas; d. Metallic and Non-Metallic Minerals; e. Manufacturing Industry; f. Production and Distribution of Electrical Energy; g. Construction.

Likewise, credit operations destined to the economic activities of the tourism and intellectual production sector will be considered, detailed in Annexes 2 and 3 of the Regulation for Credit Operations to the Productive Sector, contained in the Compilation of Norms for Financial Services of the ASFI.

8. On January 30, 2018, the BCB will return in ME to the FIEs their participation in the CPVIS Fund prior to the cancellation of their liquidity loans in MN with guarantee of the CPVIS Fund. In the event that an FIE 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 Fund at the buying exchange rate.

IT MUST SAY:

“TITLE V OF THE FUND FOR CREDITS DESTINED TO THE PRODUCTIVE SECTOR AND SOCIAL HOUSING II

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

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The Fund for Credits destined to the Productive Sector and Social Housing (CPVIS II Fund) is constituted in the BCB with the resources released from the RAL-ME Fund by the application of the legal reserve rates in titles in ME and MVDOL determined in this regulation. The participation of each FIE in the CPVIS II Fund will be equal to its participation in the released RAL-ME Fund. FIEs may voluntarily contribute to this Fund up to a maximum of the excess reserve in ME that they have available at the BCB until April 23, 2018. This additional constitution may be carried out until May 11, 2018.

Article 30 (Rights and Responsibilities).

The participating Financial Intermediation Entities will be beneficiaries of all rights of the Fund for Credits destined to the Productive Sector and Social Housing. For cooperatives, the total portfolio will be considered.

Article 31 (Liquidity Loans in MN with Guarantee of the Fund for Credits destined to the Productive Sector and Social Housing).

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

1. FIEs may request liquidity loans from the BCB in MN at an interest rate of 0%, with the purpose of increasing their credit portfolio destined to the productive sector and social housing in MN. These loans may be requested from the constitution of the CPVIS II Fund until April 30, 2019.

2. The maximum amount of accumulated liquidity loans will be the amount of participation of each FIE in the CPVIS II Fund, equivalent in MN to the current buying exchange rate. The liquidity loans will have a maturity date of May 31, 2019 and cannot be cancelled in advance.

3. With information as of the end of each month, the balance of credits destined to the productive sector and social housing in MN of each entity will be compared with the balance of January 31, 2018 provided by the ASFI. If this increase is less than the accumulated loans granted by the BCB, the difference will pay interest at the MN repo rate of the evaluation date (end of each month), from that date until the FIE has remedied that difference.

4. For the purposes of the comparison indicated in point (3) above, FIEs must send a letter to the BCB in the form of a sworn declaration, with a copy to the ASFI, with information on their credits of the Productive Sector and Social Housing as of the cut-off date of each month, until the 5th business day of the following month. For cooperatives, the total gross portfolio will be considered.

5. In the event that an FIE needs to demonstrate compliance with the portfolio increase on a date other than the end of the month to remedy the difference indicated in point (3), it must send a letter to the BCB, with a copy to the ASFI, in the form of a sworn declaration with this information within a maximum period of five business days after the

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compliance with the portfolio increase.

6. In the event that the FIE does not send the letters cited in the two previous points within the established deadlines, the ASFI will apply the corresponding fines or sanctions.

7. Credits destined to the productive sector will be understood as credit operations of a business, microcredit, or SME type, whose destination corresponds to the following categories of the Economic Activity Code and Credit Destination (CAEDEC), used by the ASFI: a. Agriculture and Livestock; b. Hunting, Forestry and Fishing; c. Extraction of Crude Oil and Natural Gas; d. Metallic and Non-Metallic Minerals; e. Manufacturing Industry; f. Production and Distribution of Electrical Energy; g. Construction.

Likewise, credit operations destined to the economic activities of the tourism and intellectual production sector will be considered, detailed in Annexes 2 and 3 of the Regulation for Credit Operations to the Productive Sector, contained in the Compilation of Norms for Financial Services of the ASFI.

8. On May 31, 2019, the BCB will return in ME to the FIEs their participation in the CPVIS II Fund prior to the cancellation of their liquidity loans in MN with guarantee of the CPVIS II Fund. In the event that an FIE 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 at the current buying exchange rate. The validity of this Fund may be extended to the extent that the BCB considers pertinent.”

Article 3.- It is established that for the period from April 30 to May 7, 2018, the calculation of the legal reserve constituted in titles in foreign currency will consider, in addition, the amount of resources transferred to the CPVIS II Fund.

Article 4.- The modification to the Legal Reserve Regulation will enter into force from April 30, 2018.

Article 5.- The Presidency and General Management are charged with the execution and compliance of this Resolution.

La Paz, April 24, 2018

Pablo Ramos Sánchez

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Abraham Pérez Alandia Gabriel Herbas Camacho Luis Baudoin Olea Ronald Polo Rivero Sergio Velarde Vera