Board Resolution No. 071/2020 Amending the Legal Reserve Regulation for Financial Intermediation Entities

BOARD RESOLUTION NO. 071/2020 SUBJECT: ECONOMIC POLICY ADVISORY OFFICE AND FINANCIAL ENTITIES MANAGEMENT – AMEND THE LEGAL RESERVE REGULATION FOR FINANCIAL INTERMEDIATION ENTITIES. SEEN: The Political Constitution of the State (CPE) promulgated on February 7, 2009. Law No. 1670 of October 31, 1995 of the Central Bank of Bolivia (BCB). The Statute of the BCB approved by Board Resolution No. 128/2005 of October 21, 2005 and its amendments. The Legal Reserve Regulation for Financial Intermediation Entities approved by Board Resolution No. 018/2020 of February 18, 2020, Board Resolution No. 044/2020 of March 24, 2020, Board Resolution No. 055/2020 of May 15, 2020 and Board Resolution No. 060/2020 of June 29, 2020. Report BCB-APEC-SIE-INF-2020-33 of July 27, 2020, from the Economic Policy Advisory Office (APEC) and the Financial Entities Management (GEF). Report BCB-GAL-SANO-DLBCI-INF-2020-67 of July 29, 2020, from the Legal Affairs Management (GAL). CONSIDERING: That article 327 of the CPE establishes that the 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. That in its article 328, 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 for banks and financial intermediation entities. Their composition, amount, calculation method, characteristics and remuneration, shall be established by the Board of Directors of the Bank, by absolute majority of votes. The control and supervision of the legal reserve shall correspond to the Superintendency of Banks and Financial Entities currently Financial System Supervision Authority (ASFI).

//2. Board Resolution No. 071/2020 That article 37 establishes that the BCB shall be the depositary of the liquid reserves destined to cover the legal reserve and attend the payment system and other operations with the BCB of the financial intermediation entities subject to the authorization and control of the Superintendency of Banks and Financial Entities (currently ASFI). That article 44 indicates that the highest authority of the BCB is its Board of Directors, 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 BCB, approving their respective short and medium term programs. For the follow-up and oversight of their execution, it shall have information, analysis services and independent audit. That subsections a) and i) of article 54, indicate as attributions of the Board of Directors of the BCB to issue norms and adopt general decisions that were necessary for the Issuing Entity to comply with the functions, competencies and faculties assigned to it by Law; and to set and regulate the administration of the legal reserve to which banks and other financial entities must be subject, establishing measures for their compliance. That numerals 1) and 7) of its article 11 of the Statute of the BCB establish that the Board of Directors of the Issuing Entity has the attributions to approve general decisions and issue norms that were necessary for the BCB to comply with the functions, competencies and faculties assigned to it by Law, as well as 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 in accordance with Regulation. That the second paragraph of its article 26, determines that every draft Board Resolution 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 sent to the Board by the General Management with its recommendation. That the Legal Reserve Regulation for Financial Intermediation Entities has the purpose of establishing the technical and operational conditions, on the constitution and form of administration of the legal reserve, for the Financial Intermediation Entities authorized by the ASFI. That through Report BCB-APEC-SIE-INF-2020-33, the APEC and the GEF submit to the consideration of the Board the modification of the Legal Reserve Regulation for Financial Intermediation Entities with the objective of maintaining the expansive orientation of monetary policy. That in Report BCB-GAL-SANO-DLBCI-INF-2020-67, the GAL concludes that the modification of the Legal Reserve Regulation for Financial Intermediation

//3. Board Resolution No. 071/2020 Entities, justified by Report BCB-APEC-SIE-INF-2020-33 from the APEC and the GEF, does not contravene the current legal framework, therefore it is legally proceding being within the competence of the Board of Directors of the BCB, to consider its approval by absolute majority of votes, in conformity with what is established in article 7 of Law No. 1670 and numeral 7) of article 11 of its Statute. THEREFORE, THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA RESOLVES: Article 1.- Modify the Legal Reserve Regulation for Financial Intermediation Entities in the Single Transitional Provision. IT READS: Single Transitional Provision. (Extraordinary legal reserve). The exceptional funds (FE) of long term received by the EIFs through the issuance of DPF in the month of March 2020, must be employed by said entities for the generation of New Gross Portfolio (NCB) to the non-financial private sector, including the additional portfolio generated by credits to the Development Financial Institutions (IFD) and to the Savings and Credit Cooperatives (CAC) between April 1, 2020 until July 31, 2020. Monthly, the balance of the gross portfolio to the non-financial private sector, to the IFDs and to the CACs of each EIF will be compared with the corresponding balance at March 31, 2020, the resulting increase must be equal to or greater than the amount equivalent to 30% of the FE until the end of May, to 60% of the FE until the end of June and to 100% of the FE until the end of July 2020. In the case that this increase is less than the established percentages, the EIFs must constitute an extraordinary legal reserve in cash of 100% of the difference, from the date of measurement until the next measurement made by the BCB. The measurement will be made at five business days after having concluded each month. The extraordinary reserve will be registered in a restricted account at the BCB and will not be remunerated. For the gross credit to the IFDs and to the CACs to be computed in the NCB of the EIFs it must be destined to loans in the IFDs and CACs. For effects of validation of FE and corresponding measurement, the EIFs that were notified by express note from the BCB, must send to the BCB a letter in the form of a sworn statement with information of their credits at the cut-off date of each month, including the confirmation that the credit to the IFDs and CACs was granted for loans of these entities, until the fourth business day of the following month.

//4. Board Resolution No. 071/2020 After July 31, 2020, the EIFs that increased their gross portfolio to the non-financial private sector, to the IFDs and to the CACs in at least 100% of the indicated amounts will be exempt from the extraordinary legal reserve; otherwise, the extraordinary legal reserve will be maintained for the difference until said condition is met, taking into account that the measurement is monthly. IT SHOULD READ: "Single Transitional Provision. (Extraordinary legal reserve). The exceptional funds (FE) of long term received by the EIFs through the issuance of DPF in the month of March 2020, must be employed by said entities for the generation of New Gross Portfolio (NCB) to the non-financial private sector, including the additional portfolio generated by credits to the Development Financial Institutions (IFD) and to the Savings and Credit Cooperatives (CAC) between April 1, 2020 until July 31, 2020. Monthly, the balance of the gross portfolio to the non-financial private sector, to the IFDs and to the CACs of each EIF will be compared with the corresponding balance at March 31, 2020, the resulting increase must be equal to or greater than the amount equivalent to 30% of the FE until the end of May, to 60% of the FE until the end of June and to 100% of the FE until the end of July 2020. In the case that this increase is less than the established percentages, the EIFs must constitute an extraordinary legal reserve in cash of 100% of the difference, from the date of measurement until the next measurement made by the BCB. The measurement will be made at five business days after having concluded each month. The extraordinary legal reserve will be registered in a restricted account at the BCB and will not be remunerated. For the gross credit to the IFDs and to the CACs to be computed in the NCB of the EIFs it must be destined to loans in the IFDs and CACs. For effects of validation of FE and corresponding measurement, the EIFs that were notified by express note from the BCB, must send to the BCB a letter in the form of a sworn statement with information of their credits at the cut-off date of each month, including the confirmation that the credit to the IFDs and CACs was granted for loans of these entities, until the fourth business day of the following month. After July 31, 2020, the EIFs that increased their gross portfolio to the non-financial private sector, to the IFDs and to the CACs in at least 100% of the FE will be exempt from the extraordinary legal reserve; otherwise, the extraordinary legal reserve will be maintained for the difference until said condition is met, taking into account that the measurement is monthly. Additionally and temporarily at the closing of the months of

//5. Board Resolution No. 071/2020 July and August 2020, the extraordinary legal reserve applicable in August and September will be exempt in the amount equivalent to the loans requested until August 5, 2020 by the EIFs to the BCB using as collateral the resources in the CAPROSEN Fund. In these cases the portfolio generated by credits to the Development Financial Institutions (IFD) and to the Savings and Credit Cooperatives (CAC) between April 1, 2020 until September 30, 2020 is included." Article 2.- The modification to the Legal Reserve Regulation for Financial Intermediation Entities will enter into force from the date of its approval. Article 3.- The Presidency and the General Management are in charge of the execution and compliance of this Resolution. La Paz, July 31, 2020 Signed. Armando Pinell Siles Signed. Walter Morales Carrasco Signed. Alejandro Banegas Rivero Signed. José Gabriel Espinoza Yañez