Central Bank of Bolivia

Board of Directors

BOARD RESOLUTION NO. 065/2017

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

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).
• Law No. 393 of Financial Services of August 21, 2013.
• 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. 107/2016 of June 14, 2016.
• Board Resolutions No. 107/2016 dated June 14, 2016 and No. 214/2016 of November 15, 2016.
• The Report from the Economic Policy Advisory and Financial Entities Management BCB-APEC-SIE-INF-2017-35 of May 12, 2017.
• The Report from the Legal Affairs Management BCB-GAL-SANO-DLBCI-INF-2017-105 of May 12, 2017.

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 and execute exchange rate policy.
• That the BCB, in compliance with what is provided in article 19 of Law No. 1670, has established a Legal Reserve Regulation of mandatory compliance by Institutions of the Financial System.
• That the BCB Statute in article 11 numeral 7), states that it is the authority of the Board to establish by absolute majority of votes, legal reserves of mandatory compliance by Financial Intermediation Entities and approve their composition, amount, calculation, characteristics, forms of administration, custody and remuneration according to Regulation.

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• That the Legal Reserve Regulation aims to establish the technical and operational conditions of mandatory compliance for financial entities that are duly authorized for their operation by the Financial System Supervision Authority, regarding the constitution and form of administration of the legal reserve.
• That the Economic Policy Advisory and the Financial Entities Management through Report BCB-APEC-SIE-INF-2017-35 recommend the approval of the Legal Reserve Regulation.
• That according to Report BCB-GAL-SANO-DLBCI-INF-2017-105 the Legal Affairs Management concludes that the proposed modification is legally appropriate, as it does not contravene the current legal framework, being the competence of the BCB Board to consider its approval by two-thirds of votes of all its members, in accordance with what is provided by subsection o) of article 54 of Law No. 1670 concordant with numeral 29) of article 11 of the BCB Statute.

THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1.- Approve the Legal Reserve Regulation, which in the annex, forms part of this Resolution.

Article 2.- The Legal Reserve Regulation will enter into force from May 23, 2017.

Article 3.- From the entry into force of this Resolution, Board Resolutions No. 107/2016 of June 14, 2016 and No. 214/2016 of November 15, 2016 are repealed.

Article 4.- The Presidency and General Management are entrusted with the execution and compliance of this Resolution.

La Paz, May 16, 2017

Pablo Ramos Sánchez

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

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LEGAL RESERVE REGULATION

FOR FINANCIAL INTERMEDIATION ENTITIES

TITLE I

GENERALITIES

Article 1 (Scope of Application).
All Financial Intermediation Entities, authorized for their operation by the Financial System Supervision Authority, are subject to the provisions of this Regulation.

State Financial Intermediation Entities or with majority state participation (Productive Development Bank, Public Bank and Public Development Financial Entity) will be subject to the provisions of this Regulation provided that they capture resources from the public in the Plurinational State of Bolivia.

Branches abroad authorized for their operation by the Financial System Supervision Authority, which capture resources in the Plurinational State of Bolivia, must constitute legal reserve under the terms of this Regulation when they are exempt from reserve in the country where they operate. When abroad they are subject to a reserve requirement lower than that of this Regulation, they must constitute reserve in the amount and modality that allows covering the difference, which will be determined by the Board of Directors of the Central Bank of Bolivia.

Article 2 (Terms and Abbreviations).
For the purposes of this Regulation, the following terms and abbreviations are used:

Abbreviation	Definition
BCB	Central Bank of Bolivia.
ASFI	Financial System Supervision Authority
COMA	Open Market Operations Committee of the BCB.
BDR	Productive Development Bank
DPF	Time Deposits.
UFV	Housing Development Unit.
MN	National currency.
ME	Foreign currency.
MNUFV	National currency with value maintenance in relation to the UFV.
MVDOL	National currency with value maintenance in relation to the US dollar.

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Legal Reserve:
It is the proportion of deposits of natural and legal persons that Financial Intermediation Entities must maintain as a reserve, at the BCB or through the BCB.

Required Legal Reserve:
Amount that Financial Intermediation Entities must deposit in the BCB or in Financial Intermediation Entities authorized for legal reserve purposes.

Constituted Legal Reserve:
Amount deposited by Financial Intermediation Entities in the BCB or in Financial Intermediation Entities authorized for legal reserve purposes.

Legal Reserve in Cash:
Required and constituted legal reserve in cash by Financial Intermediation Entities, which will be maintained in deposit in accounts enabled for this effect.

Legal Reserve in Securities:
Required and constituted legal reserve in cash by Financial Intermediation Entities, to be invested by the BCB or the Delegated Administrators of the RAL-MN, RAL-MNUFV, RAL-ME and RAL-MVDOL Funds in securities, values or authorized instruments.

RAL Fund:
The Liquid Assets Requirement Fund is a closed investment fund constituted solely by the resources contributed by Financial Intermediation Entities through legal reserve in securities. Each Financial Intermediation Entity will have its contribution to the RAL Fund registered individually. The RAL Fund is constituted by the following denominations: National Currency (RAL-MN Fund), National currency with value maintenance in relation to the UFV (RAL-MNUFV Fund), Foreign Currency (RAL-ME Fund) and National currency with value maintenance in relation to the US dollar (RAL-MVDOL Fund).

Productive and Social Housing Portfolio Fund:
This Fund is constituted with 10% of the reserve in securities in foreign currency as of May 30, 2017. This Fund will be constituted at the BCB.

Delegated Administrator of the RAL-MN Fund:
Corresponds to the BCB or the Financial Intermediation Entity that acts as Delegated Administrator in the administration of the RAL-MN Fund.

When it concerns a Financial Intermediation Entity other than the BCB, it will be selected based on competitive mechanisms and conditions approved by the BCB Board by express resolution.

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Delegated Administrator of the RAL-MNUFV Fund:
Corresponds to the BCB or the Financial Intermediation Entity that acts as Delegated Administrator in the administration of the RAL-MNUFV Fund.

When it concerns a Financial Intermediation Entity other than the BCB, it will be selected based on competitive mechanisms and conditions approved by the BCB Board by express resolution.

Delegated Administrator of the RAL-ME Fund:
It is the foreign financial institution that acts as Delegated Administrator in the administration of the RAL-ME Fund, selected based on competitive mechanisms and conditions approved by the BCB Board by express resolution.

Delegated Administrator of the RAL-MVDOL Fund:
It is the foreign financial institution that acts as Delegated Administrator in the administration of the RAL-MVDOL Fund, selected based on competitive mechanisms and conditions approved by the BCB Board by express resolution.

Legal Reserve Requirement Period:
Period of 14 consecutive days, determined by the ASFI for the purposes of calculating the required legal reserve.

Legal Reserve Constitution Period:
Period of 14 consecutive days, lagged by 8 days in relation to the legal reserve requirement period.

Obligations Subject to Reserve (OSE):
They are the liabilities denominated in MN, MNUFV, MVDOL and ME, detailed in articles 3 and 4 of this Regulation. Short-term liabilities with the exterior mentioned in article 6 of this Regulation are excluded from the scope of this definition.

TITLE II

LEGAL RESERVE ON DEMAND OBLIGATIONS, SAVINGS ACCOUNTS, TIME DEPOSITS AND OTHER OBLIGATIONS

Article 3 (Demand, savings and time obligations subject to legal reserve).
The Financial Intermediation Entities included in article 1 of this Regulation must constitute legal reserve in cash and in securities on the liabilities registered in the accounts detailed below:

# Central Bank of Bolivia
## Board of Directors

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### Obligations with the public and with state participation companies on demand
- Checking account deposits
- Inactive checking accounts
- Demand deposits
- Certified checks
- Wires and transfers payable
- Collections for reimbursement
- Matured securities
- Checking fiduciary deposits
- Demand fiduciary deposits

### Obligations with the public and with state participation companies for savings accounts
- Savings account deposits
- Savings account deposits closed due to inactivity
- Obligations with participants in savings plans
- Fiduciary deposits in savings

### Obligations with the public and with state participation companies at fixed term
- Fixed-term obligations
- Fixed-term obligations with account notation

### Obligations with the public and with state participation companies restricted
- Closed checking accounts
- Savings account deposits affected as collateral
- Term deposits affected as collateral
- Restricted fixed-term deposits with account notation

### Other payables
- Manager's checks

### Obligations with banks and financing entities
- Checking account deposits of country financial entities subject to reserve

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- Other demand obligations with country financial entities subject to reserve
- Demand financing from foreign entities
- Head office and branches on demand
- Foreign banks and correspondents on demand
- Savings account deposits of country financial entities subject to reserve
- Fixed-term deposits of country financial entities subject to reserve
- Fixed-term deposits of country financial entities with account notation subject to reserve
- Interbank operations
- Short-term financing from foreign entities freely available
- Short-term financing from foreign entities for foreign trade operations
- Head office and branches short-term freely available
- Head office and branches short-term for foreign trade operations

### Other obligations with the public, with state participation companies and with banks and financing entities:
- Judicial deposits
- Third-party funds for operations in the Bolsín
- Third-party funds for stock market operations
- Funds to be delivered to third parties by the placement of securities
- Mobile wallet payment account
- Prepaid card account
- Other demand obligations with the public
- Judicial withholdings
- Prepaid letters of credit guarantee deposits
- Other guarantee deposits
- Other restricted obligations with the public
- Obligations with banks and other financial entities subject to restricted legal reserve
- Anticipated collections from credit card clients

### Article 4 (Reserve applications for Time Deposits).
The legal reserve requirements for Time Deposits, according to terms and denominations, are established in the following table:

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## LEGAL RESERVE FOR TIME DEPOSITS* ACCORDING TO MATURITY TERM AND DENOMINATION

| Original Term on Time Deposit | NATIONAL CURRENCY AND MNUFV | | FOREIGN CURRENCY AND MVDOL | |
| :--- | :--- | :--- | :--- | :--- |
| | **Reserve in Securities** | **Reserve in Cash** | **Reserve in Securities** | **Reserve in Cash** |
| From 30 to 60 days | Reserves | Reserves | Reserves | Reserves |
| Greater than 60 days up to 360 days | Reserves | Reserves | Reserves | Reserves |
| Greater than 360 days up to 720 days | No reserve | No reserve | Reserves | No reserve |
| Greater than 720 days | No reserve | No reserve | Reserves | No reserve |

*Only time deposits of 30 days or more are considered Time Deposits.

### Article 5 (Legal reserve rates).
The legal reserve rates on the liabilities detailed in article 3 of this Regulation are as follows:

#### In National Currency and MNUFV:
**Cash**  
Six percent (6%) for cash reserve.  
**Securities**  
Five percent (5%) for securities reserve.

#### In Foreign Currency and MVDOL:
**Cash**  
Thirteen point five percent (13.5%) for cash reserve.  
**Securities**  
Thirty-five percent (35%) for securities reserve for Time Deposits 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 the accounts included in "Other Obligations with the public, with state participation companies and with banks and financing entities" indicated in article 3 of this Regulation.

### Article 6 (Deductions and exemptions from reserve).
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.

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The following accounts of Financial Intermediation Entities are exempt from the application of cash reserve (in all currencies) and additional reserve in securities (in foreign currency and MVDOL):

- 237.01 Short-term financing from foreign entities freely available
- 237.02 Short-term financing from foreign entities for foreign trade operations (for the part that does not maintain exact matching with active operations)
- 237.08 Head office and branches short-term freely available
- 237.09 Head office and branches short-term for foreign trade operations (for the part that does not maintain exact matching with active operations).

### Article 7 (Registration).
Financial Intermediation Entities must register at the BCB, in detail, the Time Deposits referred to in article 4 of this Regulation. Likewise, they must inform the BCB about the redemptions of the same made in a term shorter than the original.

### Article 8 (Obligations between Financial Intermediation Entities).
Deposits of one Financial Intermediation Entity in other Financial Intermediation Entities will be subject to the legal reserve rules established in articles 3 and 4 of this Regulation, in case reserve had not been constituted previously.

## TITLE III
## CONSTITUTION OF LEGAL RESERVE IN CASH AND IN SECURITIES

### Article 9 (Legal Reserve Cash Accounts).
Multiple Banks, SME Banks, the Productive Development Bank, the Public Bank and the Public Development Financial Entity will maintain at the BCB a single account called "checking and reserve account" in each of the four denominations (MN, MNUFV, MVDOL and ME).

Housing Financial Entities, Savings and Credit Cooperatives, Development Financial Institutions and Communal Financial Entities authorized by the ASFI will maintain at the BCB a single account called "reserve account" in each of the four denominations (MN, MNUFV, MVDOL and ME) and on which checks cannot be drawn. For cash withdrawal from this account at BCB counters, the procedures established by the Issuer Entity will be followed.

Multiple Banks, SME Banks, the Productive Development Bank, the Public Bank and the Public Development Financial Entity must constitute the cash reserve in the checking and reserve account and Housing Financial Entities,

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Savings and Credit Cooperatives, Development Financial Institutions and Communal Financial Entities must do so in the reserve account. These accounts will not be subject to any type of judicial embargo or retention by third parties.

The legal reserve in cash must be constituted: (i) in national currency, for deposits in the same currency, (ii) in national currency at the equivalent value in UFV, for deposits in MNUFV and (iii) in US dollars, for deposits in foreign currency and MVDOL.

### Article 10 (Compensation between Securities and Cash).
Excesses of legal reserve in cash can compensate for deficiencies of legal reserve in securities. Excesses of legal reserve in securities cannot compensate for deficiencies of legal reserve in cash.

### Article 11 (Calculation of Legal Reserve).
All Financial Intermediation Entities of the country included in article 1 of this Regulation will maintain daily a legal reserve of their liabilities with the public, deposited in the accounts enabled for this effect.

The required legal reserve will comprise the reserve requirements of articles 3 and 4 of this Regulation, calculated as the average of the OSE that each Financial Intermediation Entity maintains at the end of the day in the legal reserve requirement period.

The constituted reserve will be calculated as the average of the daily balances credited in the respective accounts, in the legal reserve constitution period.

### Article 12 (Report of Liabilities Subject to Legal Reserve).
Financial Intermediation Entities must report daily all their liabilities subject to legal reserve, by denomination and by type of deposit through the financial information system and according to what is established by ASFI regulations. The report will correspond to the liabilities subject to legal reserve of the previous business day.

Cash deposits at the BCB or its correspondents will be subject to the schedules established by the BCB.

### Article 13 (No Compensation by Currencies).
The legal reserve in cash must be constituted in the denomination in which the deposits were captured. Compensations between denominations for legal reserve in cash will not be allowed. The legal reserve in securities must be constituted according to what is established in article 18 of this Regulation.

On the reserve constituted in MNUFV and MVDOL, the BCB will recognize in favor of Financial Intermediation Entities the differential by variation of the UFV for

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Central Bank of Bolivia
Board of Directors

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MNUFV and by variation of the exchange rate for MVDOL only up to the limit of the required legal reserve in cash.

**Article 14 (Sanctions for Early Withdrawals of Time Deposits).**  
Time deposits that maintain any exemption of reserve, under what is established in this Regulation, cannot be redeemed early. This prohibition is excepted for time deposits in foreign currency and MVDOL that, being exempt from constituting legal reserve, are redeemed with the sole and exclusive purpose of converting them into deposits in national currency.

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

**Article 15 (Funds in Custody).**  
Financial Intermediation Entities may maintain up to 50% of their required legal reserve in cash in MN and MNUFV in Funds in Custody in any location. Any excess that Financial Intermediation Entities maintain above this percentage will not be recognized for reserve purposes.

Financial Intermediation Entities must maintain 40% of their required legal reserve in cash in foreign currency and MVDOL in Funds in Custody in any location. Any excess that Financial Intermediation Entities maintain above this percentage will not be recognized for reserve purposes. The global deficiency in Funds in Custody in foreign currency and MVDOL cannot be compensated with excesses of reserve in BCB accounts or reserve in securities.

**Article 16 (Cash Movements of Funds at the BCB).**  
The BCB will charge the commission fixed in the Table of Commissions and Other Incomes, established by its Board, for cash movements of entry or exit of funds to Financial Intermediation Entities.

**Article 17 (Deposits in Other Currencies).**  
For deposits captured in other currencies, different from the boliviano and the US dollar, the reserve must be constituted in its equivalent in US dollars, at the reference buy exchange rate issued daily by the BCB.

**Article 18 (Constitution of Legal Reserve in Securities).**  
The legal reserve in securities must be constituted: (i) in national currency, for deposits in the same currency, (ii) in national currency at the equivalent value in UFV, for deposits in MNUFV and (iii) in US dollars, for deposits in foreign currency and MVDOL.

**Article 19 (Transfers to and from Legal Reserve in Securities).**

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## Article 30 (Rights and Responsibilities).
The participating Financial Intermediation Entities will be beneficiaries of all rights of the Fund for Productive and Social Housing Portfolio.

## Article 31 (Liquidity Loans with Guarantee of the Fund for Productive and Social Housing Portfolio).
The resources of each participant in this Fund will serve as guarantee for the liquidity credits they request from the BCB, under the following conditions:

a. Financial Intermediation Entities may access a credit from the BCB in national currency at an interest rate of 0%.  
b. The maximum amount of the credit will be the amount of each of the Financial Intermediation Entities invested in this Fund, equivalent in national currency at the buy exchange rate.  
c. Each end of month the gross productive and social housing portfolio in national currency of each entity will be compared in relation to its balance on April 30, 2017. If this increase is less than the credit granted by the BCB, the difference will pay the interest of the national currency repo rate of the evaluation date, from that date until the Financial Intermediation Entity demonstrates that it has remedied that difference. For cooperatives, the cart
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