Board Resolution No. 068/2023 - Modify the Legal Reserve Regulation for Financial Intermediation Entities

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B O A R D

BOARD RESOLUTION No. 068/2023

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

SEEN:

The Political Constitution of the State of February 7, 2009.

Law No. 1670 of October 31, 1995, of the Central Bank of Bolivia and its modifications.

Law No. 393 of August 21, 2013, of Financial Services.

Supreme Decree No. 4539 of July 07, 2021.

Board Resolution No. 095/2022 of October 6, 2022, which approves the Statute of the Central Bank of Bolivia.

Board Resolution No. 063/2013 of June 11, 2013, which approves the Foreign Exchange Operations Regulation and its modifications.

Board Resolution No. 076/2022 of August 26, 2022, which approves the Legal Reserve Regulation for Financial Intermediation Entities and its modifications.

Report BCB-APEC-SADBC-INF-2023-18 of April 28, 2023 from the Economic Policy Advisory and the Financial Entities Management.

Report BCB-GAL-SANO-DLBCI-INF-2023-144 of 28 from the Legal Affairs Management.

CONSIDERING:

That Article 327 of the Political Constitution of the State, indicates that the Central Bank of Bolivia (BCB) is a public law institution, with legal personality and its own assets. Within the framework of the State's economic policy, it is the function of the BCB to maintain the stability of the internal purchasing power of the currency, to contribute to economic and social development.

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That Article 328 of the Political Constitution of the State, indicates that the BCB, in coordination with the economic policy determined by the Executive Branch, in addition to those indicated by law, has the following attributions: 1. Determine and execute monetary policy. 2. Execute exchange rate policy. 3. Regulate the payment system. 4. Authorize the issuance of currency. 5. Administer international reserves.

That Article 1 of Law No. 1670 of the Central Bank of Bolivia, modified by Article 67, section A3, numeral 1 of Law No. 1864 of June 15, 1998, of Property and Popular Credit, determines that the BCB is a State institution, of public law, of autarchic character, of indefinite duration, with legal personality and its own assets and with legal domicile in the city of La Paz. It is the sole monetary and exchange authority of the country, with administrative, technical and financial competence and specialized regulatory powers of general application.

That Article 2 of Law No. 1670 establishes that the object of the BCB is to procure the stability of the internal purchasing power of the national currency.

That Article 3 of Law No. 1670 provides that the BCB, shall formulate policies of general application in monetary, exchange rate and payment system matters for the fulfillment of its object.

That Article 7 of Law No. 1670, determines that the BCB may establish Legal Reserves of mandatory compliance by Banks and financial intermediation entities. Their composition, amount, calculation method, characteristics and remuneration shall be established by the Board of the Bank, by absolute majority of votes. The control and supervision of the Legal Reserve shall correspond to the current Financial System Supervision Authority.

That Article 8 of Law No. 1670, indicates that the reserve and deposits constituted in the BCB by banks and financial entities, shall not be subject to any type of embargo or retention by third parties.

That Article 37 of Law No. 1670, establishes that the BCB shall be the depository of liquid reserves intended to cover the Legal Reserve and attend the payment system and other operations with the BCB of the EIFs subject to the authorization and control of the Financial System Supervision Authority.

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That Article 44 of Law No. 1670, provides that the highest authority of the BCB is its Board, which is responsible for defining its policies, specialized regulations of general application and internal norms; as well as establishing administrative, operational and financial strategies of the Issuing Entity, approving their respective short and medium term programs.

That sections a), i) and o) of Article 54 of Law No. 1670, indicate as attributions of the Board of the BCB to dictate the norms and adopt the general decisions that were necessary for the Issuing Entity to comply with the functions, competences and powers assigned by the Law; fix and regulate the administration of the Legal Reserve to which banks and other financial entities must be subject, arranging the measures for their compliance; as well as approve, interpret and modify the Statute and Regulations of the BCB by two thirds of votes of the totality of its members, without the need for additional administrative act.

That Article 430 of Law No. 393, determines that the BCB may grant liquidity credits to the EIFs with guarantee of the Legal Reserve constituted, as well as with other guarantees that the Issuing Entity determines, according to regulation approved by its Board.

That Supreme Decree No. 4539 has the object of integrally incentivizing the use of electrical energy with the purpose of contributing to the improvement of the environment, energy saving and efficiency through, among others, financial incentives for manufacturing, assembly and purchase of electric, hybrid motor vehicles and electric and hybrid agricultural machinery.

That numerals 1) and 7) of Article 10 of the Statute of the BCB, determine that the Board of the Issuing Entity has the attributions of approving the general decisions and dictating the norms that were necessary for the BCB to comply with the functions, competences and powers that the Law assigns it; establish by absolute majority of votes, Legal Reserves of mandatory compliance by the EIFs and approve their composition, amount, calculation, characteristics, forms of administration, custody and remuneration, according to Regulation.

That Article 24 of the Statute of the BCB refers that the resolutions and decisions of the Board are adopted by simple majority of votes of the members present in meeting, except in cases where Law No. 1670 or this Statute require qualified majorities.

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That Article 26 of the Statute of the Issuing Entity, stipulates that the Board pronounces on matters of its competence through resolutions. It can also do so through decisions that will be expressly recorded in the minutes. Likewise, every Board resolution project must be motivated and justified by a technical report from the Management or Managements to which the matter object of the resolution corresponds and by a report from the Legal Affairs Management. These reports must be remitted to the Board by the General Management with its recommendation, except in technical topics that correspond to the Economic Policy Advisory which may elevate reports to the Board with its own recommendation.

That the Legal Reserve Regulation for Financial Intermediation Entities, approved through Board Resolution No. 076/2022 of August 26, 2022 provides in its Article 1 that it has the object of fixing and regulating the administration of the Legal Reserve and the resources coming from the modification of the same, in order to have monetary regulation instruments and preservation of the stability of the financial system.

That Article 2 of the Legal Reserve Regulation for Financial Intermediation Entities provides that all EIFs, authorized for their operation by the Financial System Supervision Authority ASFI, are subject to the provisions of this Regulation.

That the Foreign Exchange Operations Regulation approved through Board Resolution No. 063/2013 of June 11, 2013, regulates the procedures for the determination of the exchange rate of the boliviano and for the purchase and sale of United States dollars (USD) of the Central Bank of Bolivia (BCB) with financial entities and with the general public.

That Board Resolution No. 063/2023, dated April 12, 2023, incorporates the Fourth Additional Provision in the Foreign Exchange Operations Regulation, establishing that the EIFs may sell to the BCB their resources in United States dollars (USD) in the different Funds constituted in the BCB, that are not guaranteeing liquidity loans at the official sale exchange rate.

That the Economic Policy Advisory and the Financial Entities Management, through Report BCB-APEC-SADBC-INF-2023-18, conclude and recommend to the Board of the BCB the approval of the modifications to the Legal Reserve Regulation for the EIFs with the objective of strengthening the liquidity of the financial system.

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That the Legal Affairs Management, through Report BCB-GAL-SANO-DLBCI-INF-2023-144 concludes that the content of the project of modifications to the Legal Reserve Regulation for the EIFs, proposed by the APEC and the GEF is legally viable, since it does not contravene the legal order, recommending to the Board of the Issuing Entity its approval.

THEREFORE, THE BOARD OF THE CENTRAL BANK OF BOLIVIA, RESOLVES:

Article 1.- Modify Article 38 (Constitution of the Incentive Fund for the Use of Electrical and Renewable Energy) of the Legal Reserve Regulation for Financial Intermediation Entities, with the following text:

"Article 38 (Constitution of the Incentive Fund for the Use of Electrical and Renewable Energy).

The Incentive Fund for the Use of Electrical and Renewable Energy (FIUSEER) is constituted in the BCB, in national currency (FIUSEER-MN) with the resources of the CAPROSEN-MN Fund and in foreign currency (FIUSEER-ME) with the resources of the CAPROSEN-ME Fund that did not guarantee liquidity loans with the BCB as of September 30, 2021 and as of December 22, 2022.

Likewise, it will be constituted in national currency (FIUSEER-MN) with the resources of the CAPROSEN-MN Fund and in foreign currency (FIUSEER-ME) with the resources of the CAPROSEN-ME Fund product of the early cancellation and at maturity of the liquidity loans with guarantee of the CAPROSEN Fund.

Additionally, seventy percent (70%) of the resources of each EIF in the FIUSEER-ME, that are not guaranteeing liquidity loans with the BCB as of April 3, 2023 and seventy-five percent (75%) of the resources of each EIF in the FIUSEER-ME, that are not guaranteeing liquidity loans with the BCB as of April 24, 2023, will become part of their participation in the CPRO-ME Fund. While ninety-five (95%) of the resources of each EIF in the FIUSEER-MN, that are not guaranteeing liquidity loans

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with the BCB as of April 24, 2023 will become part of their participation in the CPRO-MN Fund.

The EIFs may request from the BCB the partial or total return of their participation in the FIUSEER-ME that is not guaranteeing liquidity loans in MN, for its sale to the BCB according to what is established in the Foreign Exchange Operations Regulation."

Article 2.- Modify Article 41.- (Constitution of the Fund for Credits destined to the Productive Sector) of the Legal Reserve Regulation for Financial Intermediation Entities, with the following text:

"Article 41.- (Constitution of the Fund for Credits destined to the Productive Sector).

The Fund for Credits destined to the Productive Sector (CPRO Fund) was constituted in the BCB, in national currency (CPRO Fund-MN) with the available resources product of the modification of the Legal Reserve rate in Securities in MN-MNUFV in force as of date January 10, 2022 and the modification of the Legal Reserve rate in Securities in MN-UFV in force as of December 12, 2022; and in foreign currency (CPRO Fund-ME) with the available resources product of the modification of the Legal Reserve rate in Securities in ME-MVDOL in force as of date January 10, 2022 and the modification of the Legal Reserve rate in securities in ME-MVDOL in force as of December 12, 2022; in addition to the voluntary contributions of the EIFs in ME and deposited in the account of the BCB in its Correspondent bank abroad, made from January 18, 2022 to December 29, 2022.

Likewise, it will be constituted in foreign currency (CPRO Fund-ME) with seventy percent (70%) of the resources of the FIUSEER-ME; that are not guaranteeing liquidity loans with the BCB as of April 3, 2023 and seventy-five percent (75%) of the resources of the FIUSEER-ME, that are not guaranteeing liquidity loans with the BCB as of April 24, 2023. It will be constituted in national currency (CPRO Fund-MN) by ninety-five (95%) of the resources of the FIUSEER-MN, that are not guaranteeing liquidity loans with the BCB as of April 24, 2023.

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The validity of this fund will be until March 31, 2025. The resources of each EIF in the fund will be returned by the BCB at the maturity of the fund according to what is disposed in numeral 9 of article 42.

The EIFs may request from the BCB the partial or total return of their participation in the CPRO-ME that is not guaranteeing liquidity loans in MN, for its sale to the BCB according to what is established in the Foreign Exchange Operations Regulation."

Article 3.- The modifications to the Legal Reserve Regulation for Financial Intermediation Entities will enter into force as of the publication of this determination.

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

La Paz, May 2, 2023

SIGNED. ROGER EDWIN ROJAS ULO, Oscar Ferrufino Morro, Gabriel Herbas Camacho, Gumercindo Héctor Pino Guzmán, Diego Alejandro Pérez Cueto Eulert.