Central Bank of Bolivia

Board of Directors

BOARD RESOLUTION NO. 070/2021

SUBJECT: ECONOMIC POLICY ADVISORY AND FINANCIAL ENTITIES MANAGEMENT – APPROVING MODIFICATION TO THE FOREIGN EXCHANGE POSITION 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 Financial Services of August 21, 2013.
• The Statute of the BCB, approved by Board Resolution No. 128/2005 of October 21, 2005, and its subsequent modifications.
• Board Resolution No. 108/2016 of June 14, 2016, which approves the Foreign Exchange Position Regulation adapted to Law No. 393 and its modifications in Board Resolutions No. 174/2016 of September 6, 2016, No. 008/2018 of January 16, 2018, and No. 011/2019 of January 24, 2019.
• The Report from the Economic Policy Advisory and the Financial Entities Management BCB-APEC-SIE-INF-2021-27 of May 6, 2021.
• The Report from the Legal Affairs Management BCB-GAL-SANO-DLBCI-INF-2021-105 of May 6, 2021.

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 foreign exchange policy.
• That Law No. 1670 of October 31, 1995, in its article 19 establishes that the BCB will establish the exchange regime and execute foreign exchange policy, regulating the conversion of the Boliviano in relation to the currencies of other countries and the procedures to determine the exchange rates of the national currency. The latter must be published daily.
• That in its article 30 it states that all financial intermediation entities and financial services are subject to the regulatory competence of the BCB, whose operation is authorized by the Superintendence of Banks and Financial Entities, now the Financial System Supervision Authority (ASFI).
• That article 54 in subsections a) and o) establishes as attributions of the BCB Board of Directors to issue norms and adopt general decisions that are necessary for the Issuing Entity to fulfill the functions, competencies, and powers assigned by the Law, and to approve, modify, and interpret the Statute and Regulations of the Issuing Entity, by two-thirds of the votes of all its members, without the need for any additional administrative act.
• That article 11 numeral 12) of the BCB Statute establishes that the Board of Directors of the Issuing Entity has the attribution to determine the exchange regime and the foreign exchange policy of the country.
• That article 11 in numerales 1) and 29) states among the attributions of the Board of Directors, to approve general decisions and issue the norms that are necessary for the BCB to fulfill the functions, competencies, and powers assigned by the Law, and 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 the Foreign Exchange Position Regulation for Financial Intermediation Entities, approved by Board Resolution No. 108/2016 of June 14, 2016, and its modifications, aims to regulate the foreign exchange position of Financial Intermediation Entities in denominations other than the national currency, in order to preserve the stability of the financial system, maintain the necessary control over the aggregated active and passive positions of the FIEs, and promote the remonetization of the financial system.
• That the Economic Policy Advisory and the Financial Entities Management through Report BCB-APEC-SIE-INF-2021-27, recommend the approval of the modification of articles 2, 4, and 6 of the Foreign Exchange Position Regulation, with the object of maintaining the stability of the financial system and maintaining the necessary control over the aggregated active and passive positions of the FIEs.
• That the Legal Affairs Management, in its Report BCB-GAL-SANO-DLBCI-INF-2021-105, concludes that the modification of the Foreign Exchange Position Regulation does not contravene the current legal framework, therefore it is legally procedent, being within the competence of the BCB Board of Directors to consider its approval, in accordance with what is established in subsections a) and o) of article 54 of Law No. 1670 of the BCB and in numerales 1) and 29) of article 11 of its Statute.

THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1.- The purpose of this Board Resolution is to approve the modifications to articles 2, 4, and 6 of the Foreign Exchange Position Regulation approved by Board Resolution No. 108/2016.

Article 2.- I. Article 2 (Terms and Abbreviations) of the Foreign Exchange Position Regulation approved by Board Resolution No. 108/2016 is modified, as follows:

IT SAYS:

"Article 2. (Terms and Abbreviations)

For the purposes of this Regulation, the following terms and abbreviations are used:

Business Day: From Monday to Friday, does not include Saturdays, Sundays, or holidays

National Currency (NC): Currency that refers exclusively to the Boliviano.

Foreign Currency (FC): Monetary unit of the United States of America denominated as the US dollar.

Other Foreign Currencies (OFC): All other currencies indicated in the BCB quotation table except the US dollar.

UFV: Housing Development Unit.

National Currency with Value Maintenance (MVDOL): Unit of account that allows the maintenance of the value of the Boliviano with respect to the US dollar.

National Currency with Value Maintenance in relation to the Housing Development Unit (MNUFV): Denomination that allows the maintenance of the value of the Boliviano in relation to the Housing Development Unit.

Accounting Equity: It is the equity that arises from the Consolidated Statement of Financial Position of a Financial Intermediation Entity.

Long Position: It is the excess of assets over liabilities in a specific denomination.

Short Position: It is the excess of liabilities over assets in a specific denomination."

IT MUST SAY:

"Article 2. (Terms and Abbreviations)

For the purposes of this Regulation, the following terms and abbreviations are used:

Business Day: From Monday to Friday, does not include Saturdays, Sundays, or holidays

National Currency (NC): Currency that refers exclusively to the Boliviano.

Foreign Currency (FC): Monetary unit of the United States of America denominated as the US dollar.

Other Foreign Currencies (OFC): All other currencies indicated in the BCB quotation table except the US dollar.

UFV: Housing Development Unit.

National Currency with Value Maintenance (MVDOL): Unit of account that allows the maintenance of the value of the Boliviano with respect to the US dollar.

National Currency with Value Maintenance in relation to the Housing Development Unit (MNUFV): Denomination that allows the maintenance of the value of the Boliviano in relation to the Housing Development Unit.

Accounting Equity: It is the equity that arises from the Consolidated Statement of Financial Position of a Financial Intermediation Entity.

Long Position: It is the excess of assets over liabilities in a specific denomination.

Short Position: It is the excess of liabilities over assets in a specific denomination.

Balanced Position: It is the equality or equilibrium between liabilities and assets in a specific denomination.

Foreign Exchange Position: Long, short, or balanced position.

Investment in Fixed Assets: These are tangible goods that are used in the entity's activity and are not intended for sale; likewise, they include rented goods and goods for staff use that are not affected to the entity's use.

Net Equity: To the accounting equity, the investment in fixed assets is deducted."

II. Article 4 (Limits of the Foreign Exchange Position) of the Foreign Exchange Position Regulation approved by Board Resolution No. 108/2016 is modified, as follows:

IT SAYS:

"Article 4 (Limits of the Foreign Exchange Position).

Financial Intermediation Entities may maintain a foreign exchange position in accordance with the following rules:

a) For the sum of FC, MVDOL, and OFC, the limits are as follows:

• A long position up to the equivalent of 50% (FIFTY PERCENT) of the value of accounting equity.
• A short position up to the equivalent of 50% (FIFTY PERCENT) of the value of accounting equity.

b) A long position in MNUFV up to the equivalent of 10% (TEN PERCENT) of the value of accounting equity."

IT MUST SAY:

"Article 4 (Limits of the Foreign Exchange Position).

Financial Intermediation Entities may maintain a foreign exchange position in accordance with the following rules:

a) For the sum of FC, MVDOL, and OFC, the limits are as follows:

• A long position up to the equivalent of 50% (FIFTY PERCENT) of the value of net equity. FIEs whose net equity value registers a negative value will automatically be in breach of the Regulation.
• A short position up to the equivalent of 50% (FIFTY PERCENT) of the value of accounting equity.

b) A long position in MNUFV up to the equivalent of 10% (TEN PERCENT) of the value of accounting equity."

III. Article 6 (Suspension of Operations) of the Foreign Exchange Position Regulation, approved by Board Resolution No. 108/2016, is modified, as follows:

IT SAYS:

"Article 6 (Suspension of Operations).

a. If it is determined that a Financial Intermediation Entity exceeded the permitted limits for its foreign exchange positions for more than two business days, the Financial Entities Management will inform the corresponding Managements so that they suspend, for a period equal to that of the infringement, the participation of the infringing entity in the following operations with the BCB:

i. Purchase and sale of foreign currency at the BCB.

ii. Open Market and Money Desk Operations, including repos.

b. If a Financial Intermediation Entity exceeds the permitted limits for a period superior to 15 business days, in addition to the sanctions established in subsection a) of this article, the Financial Entities Management will inform this situation to the General Manager, who will instruct the Managements of the respective areas to suspend, for the same time that the Financial Intermediation Entity has exceeded those limits, its participation in the Agreement on Payments and Reciprocal Credits of ALADI.

The Financial Entities Management will periodically inform the Financial System Analysis Committee about the institutions that are under sanction of this Regulation."

IT MUST SAY:

"Article 6 (Suspension of Operations).

a. If it is determined that a Financial Intermediation Entity exceeded the permitted limits for its foreign exchange positions or presents a negative net equity in accordance with article 4 of this Regulation for more than two business days, the Financial Entities Management will inform the corresponding Managements so that they suspend, for a period equal to that of the infringement, the participation of the infringing entity in the following operations with the BCB:

i. Purchase and sale of foreign currency at the BCB.

ii. Open Market and Money Desk Operations, including repos.

b. If a Financial Intermediation Entity exceeds the permitted limits or presents a negative net equity in accordance with article 4 of this Regulation for a period superior to fifteen business days, in addition to the measures established in subsection a) of this article, the Financial Entities Management will inform this situation to the General Manager, who will instruct the Managements of the respective areas to suspend, for the same time that the Financial Intermediation Entity has exceeded those limits, its participation in the Agreement on Payments and Reciprocal Credits of ALADI.

The Financial Entities Management will inform the Financial System Analysis Committee about the institutions that are under suspension of operations in accordance with this Regulation."

Article 3.- I. The modifications made by this Board Resolution to the "Foreign Exchange Position Regulation" will enter into effect as of May 13, 2021.

II. Financial Intermediation Entities whose accounting equity value on May 7, 2021, is less than the total of investments in fixed assets, will have an adaptation period of 3 (three) months from the effective date of this Board Resolution. Upon its expiration, they will be subject to the measures established in article 6 of the "Foreign Exchange Position Regulation".

Article 4.- Board Resolutions No. 008/2018 of January 16, 2018, and No. 011/2019 of January 24, 2019, as well as any provisions contrary to this Board Resolution, are hereby repealed.

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

La Paz, May 7, 2021

Roger Edwin Rojas Ulo
Samuel Rafael Bayán Téllez
Bismarck Javier Arevelca Vásquez
Darwin Ugarte Ontiveros
Gabriel Herbas Camacho