Board Resolution No. 072/2020: Modifications to the Regulation on Monetization, Distribution, Destruction of Monetary Material, and Destruction of Counterfeit Material

BOARD RESOLUTION NO. 072/2020
SUBJECT: TREASURY MANAGEMENT – MODIFICATIONS TO THE REGULATION ON MONETIZATION, DISTRIBUTION, DESTRUCTION OF MONETARY MATERIAL, AND DESTRUCTION OF COUNTERFEIT MATERIAL

HAVING VIEWED:
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).
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 modifications.
Board Resolution No. 094/2018 of July 24, 2018, which approves the Regulation on Monetization, Distribution, Destruction of Monetary Material, and Destruction of Counterfeit Material.
The Report BCB-GTES-SAMM-DAMM-INF-2020-69 of July 29, 2020 from the Treasury Management.
The Report BCB-GAL-SANO-DLBCI-INF-2020-68 of July 31, 2020 from the Legal Affairs Management.

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 Article 328 outlines the attributions of the BCB, in coordination with the economic policy determined by the Executive Branch, namely: i) Determine and execute monetary policy; ii) Execute exchange rate policy; iii) Regulate the payment system; iv) Authorize the issuance of currency; and v) Administer international reserves.

That Law No. 1670 in Articles 1 and 3 states that the BCB is the sole monetary and exchange authority of the country with administrative, technical, and financial competence and specialized normative powers of general application, being empowered to formulate policies in monetary, exchange, and payment system matters.

That the aforementioned Law in its Articles 10, 11, 13, and 54, subsections a), o), and m), establishes the functions of the BCB regarding the issuance of banknotes and metallic coins, as well as the attributions of the Board to authorize and supervise the printing, issuance, and destruction of monetary material, being empowered to issue norms and adopt general decisions necessary for its compliance.

That Law No. 393 on Financial Services in paragraph II of its Article 8 provides that the Financial System Supervision Authority – ASFI, is the institution responsible for exercising regulation, supervision, and control functions over financial entities.

That subsection j) of its Article 23 establishes as an attribution of the ASFI to impose administrative sanctions on financial entities under its control when they infringe legal and regulatory provisions.

That paragraph I of its Article 29 establishes that the ASFI will require from each entity under its scope of competence the documents, reports, or others necessary, within the framework of its attributions.

That the BCB Statute approved by Board Resolution No. 128/2005 in numerals 1, 2, and 29 of its Article 11 establish that the Board of the Issuing Entity has the attributions 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 Law; define the BCB's policies, specialized norms of general application, and internal norms; as well as approve and modify BCB Regulations by two-thirds of its total members, without the need for any additional administrative act.

That numeral 11) of its Article 11 states that the BCB Board has the attribution to approve the printing, issuance, and destruction of Boliviano banknotes and coins, and those issued for commemorative and numismatic purposes as well as their denominations, dimensions, designs, and colors, in accordance with Regulations when applicable.

That numeral 4) of Article 67 establishes that Treasury Management has as its objective to establish requirements for the acquisition and destruction of monetary material and its administration and to perform the custody of securities.

That the Regulation on Monetization, Distribution, Destruction of Monetary Material, and Destruction of Counterfeit Material aims to regulate the monetization, distribution, demonetization, destruction of monetary material, and destruction of counterfeit banknotes seized by Financial Intermediation Entities (EIF) and sent to the BCB.

That the Report BCB-GTES-SAMM-DAMM-INF-2020-69 from Treasury Management states that with the objective of including control and supervision activities, clarifying the difference in the dissemination of banknotes and coins with new design, and incorporating the sending of dollars to the EBP, among others exposed in the present report, GTES recommends approving the modifications to the Regulation on Monetization, Distribution, Destruction of Monetary Material, and Destruction of Counterfeit Material.

That the Report BCB-GAL-SANO-DLBCI-INF-2020-68 from Legal Affairs Management establishes that the BCB Board is empowered to approve the modification of the Regulation on Monetization, Distribution, Destruction of Monetary Material, and Destruction of Counterfeit Material by two-thirds of the votes of its total members, in accordance with what is provided in subsection o) of Article 54 of Law No. 1670 concordant with numeral 29) of Article 11 of the BCB Statute, since it is legally procedible as it does not contravene the current legal framework.

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

Article 1.- Modify Articles 2, 4, 6, 10, and 12 of the Regulation on Monetization, Distribution, Destruction of Monetary Material, and Destruction of Counterfeit Material in the following manner:

SAYS
Article 2.- (Abbreviations and definitions). This Regulation will use the following abbreviations and definitions:
(...)
Ineligible Banknote: It is a banknote issued by the BCB that clearly retains its two signatures and at least one serial number, and that according to the criteria of 1) Dirt, stains, graffiti, and discoloration and 2) Tears, mutilations, holes, and repairs, established in the "Manual for the Selection of Boliviano Banknotes", must be withdrawn from circulation. (...)

Article 4.- (Monetization Certificate). The monetization authorization will consist of an Act signed by a Director designated by the BCB Board, the General Manager, the Treasury Manager, and the Submanager of Monetary Material Operations.

Article 6.- (Dissemination). Prior to the circulation of a new family, series of banknotes, or a new coinage, the dissemination of the main characteristics of this monetary material will proceed.

Article 10.- (Quality of monetary material). To guarantee the quality of the monetary material, EIFs must deliver to the financial consumer, for any type of operation, only eligible banknotes, according to what is established in the Manual for the Selection of Boliviano Banknotes.

Article 12.- (Withdrawal from circulation of monetary material).
I. Prior verification of the monetary material sent as ineligible by EIFs, GTES will proceed to withdraw said monetary material for subsequent destruction.
II. This verification may be carried out by sampling, according to technical and statistical criteria defined by GTES.
III. The BCB may contract the provision of services for the verification of monetary material within the framework of current regulations.

SHOULD SAY
"Article 2.- (Abbreviations and definitions). This Regulation will use the following abbreviations and definitions:
(...)
MM: Monetary Material
(...)
Ineligible Banknote: It is a banknote issued by the BCB that clearly retains its two signatures and at least one serial number, and that according to the criteria established in the "Manual for the Selection of Boliviano Banknotes", must be withdrawn from circulation. (...) Verification Sheet: Form containing a detail of boxes of new MM selected and verified during the act of monetization.

Article 4.- (Monetization Certificate). The monetization authorization will consist of an Act and Verification Sheet signed by a Director designated by the BCB Board, the General Manager, the Treasury Manager, and the Submanager of Monetary Material Operations.

Article 6.- (Dissemination).
For coins:
Prior to the circulation of a new coinage, provided it has a new design or uses a new material, the dissemination of the main characteristics of this MM will proceed.
For banknotes:
Prior to the circulation of a new family or series of banknotes, the dissemination of the main characteristics of this MM to EIFs and the Police will proceed.
After having been officially authorized and put into circulation a new family or series of banknotes, the dissemination of the main characteristics of this MM to the general population will proceed.

Article 10.- (Quality of monetary material). To guarantee the quality of MM, EIFs must deliver to the financial consumer, for any type of operation, only eligible banknotes, according to what is established in the Manual for the Selection of Boliviano Banknotes, prioritizing the recirculation of eligible banknotes from the Previous Banknote Family.

Article 12.- (Withdrawal from circulation of ineligible monetary material).
I. Prior verification of the MM sent as ineligible by EIFs, GTES will proceed to withdraw said MM for subsequent destruction.
II. The BCB may contract the provision of services for the verification of MM within the framework of current regulations."

Article 2.- Include in the Regulation on Monetization, Distribution, Destruction of Monetary Material, and Destruction of Counterfeit Material the following transitional provision:
Transitional Provision Only.- (Sending of remittances of Monetary Material to the EBP). During the validity of the Mandate Contract signed with the EBP, the GGRAL of the BCB will authorize in writing the sending of remittances of United States Dollars to the EBP for sale to Exchange Houses legally authorized by the ASFI.

Article 3.- Include in the Regulation on Monetization, Distribution, Destruction of Monetary Material, and Destruction of Counterfeit Material the abbreviation of Monetary Material (MM) and other formatting adjustments that are included in the Consolidated Text attached to this Resolution.

Article 4.- The modifications to the Regulation on Monetization, Distribution, Destruction of Monetary Material, and Destruction of Counterfeit Material will enter into force starting from August 10, 2020.

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

La Paz, August 4, 2020
Signed: Armando Pinell Siles
Signed: Walter Morales Carrasco
Signed: Alejandro Banegas Rivero
Signed: José Gabriel Espinoza Yañez

ANNEX
CONSOLIDATED TEXT OF THE REGULATION ON MONETIZATION, DISTRIBUTION, DESTRUCTION OF MONETARY MATERIAL, AND DESTRUCTION OF COUNTERFEIT MATERIAL

CHAPTER I
PRELIMINARY PROVISIONS

Article 1. (Object). This Regulation aims to regulate the monetization, distribution, demonetization, destruction of monetary material, and destruction of counterfeit banknotes seized by Financial Intermediation Entities and sent to the Central Bank of Bolivia.

Article 2. (Abbreviations and definitions). This Regulation will use the following abbreviations and definitions:
ASFI: Financial System Supervision Authority.
BCB: Central Bank of Bolivia.
EBP: Public Banking Intermediation Entity.
EIF: Financial Intermediation Entities.
GAL: Legal Affairs Management.
GGRAL: General Management.
GTES: Treasury Management.
MM: Monetary Material
SOMM: Submanager of Monetary Material Operations.
Ineligible Banknote: It is a banknote issued by the BCB that clearly retains its two signatures and at least one serial number, and that according to the criteria established in the "Manual for the Selection of Boliviano Banknotes", must be withdrawn from circulation. BCB Numismatic Collection: Set of banknote and coin specimens, custodied in the BCB for numismatic purposes. Demonetization: Process by which Boliviano banknotes and coins are withdrawn from legal circulation. Counterfeit Material: Boliviano banknotes or coins that are not issued by the BCB, but produced for illicit purposes by third parties, imitating the characteristics and security measures of the original banknotes and coins. Monetization: Privative function of the BCB as the sole issuer of the Boliviano to put into circulation banknotes and coins of legal and forced course with unlimited liberatory power. Verification Sheet: Form containing a detail of boxes of new MM selected and verified during the act of monetization.

CHAPTER II
MONETIZATION OF BANKNOTES AND COINS

Article 3. (Monetization Authorization). The BCB Board, by express resolution, will authorize the monetization of MM based on reports from GTES and GAL, according to the issuance or storage requirements determined by GTES.

Article 4.- (Monetization Certificate). The monetization authorization will consist of an Act and Verification Sheet signed by a Director designated by the BCB Board, the General Manager, the Treasury Manager, and the Submanager of Monetary Material Operations.

Article 5.- (Monetization Registration). GTES will register the monetization of banknotes and coins, transferring accountingly the nominal value of each of the denominations from "Monetary Material in Warehouses" to the "Central Vault" account.

Article 6.- (Dissemination).
For coins:
Prior to the circulation of a new coinage, provided it has a new design or uses a new material, the dissemination of the main characteristics of this MM will proceed.
For banknotes:
Prior to the circulation of a new family or series of banknotes, the dissemination of the main characteristics of this MM to EIFs and the Police will proceed.
After having been officially authorized and put into circulation a new family or series of banknotes, the dissemination of the main characteristics of this MM to the general population will proceed.

CHAPTER III
DISTRIBUTION OF MONETARY MATERIAL

Article 7.- (Distribution).
I. GTES will put MM into circulation through the financial intermediation system, its own offices, or other distribution mechanisms authorized by the Board.
II. GGRAL will determine and implant in each case the most suitable mechanisms for the efficient distribution of MM in the economy.
III. GTES, through GGRAL, will present to the Board a semi-annual program of MM distribution.

Article 8.- (Distribution Structure). GTES will determine the cut structure for the distribution of MM based on public requirements, the structure by cuts of unavailable MM available, and other factors it considers necessary.

Article 9.- (Distribution of lower denomination banknotes through ATMs).
I. EIFs that have two-tray ATMs are obliged to distribute ten or twenty Boliviano banknotes in one tray and fifty or one hundred Boliviano banknotes, in the other.
II. EIFs that have three-tray ATMs are obliged to distribute ten and twenty Boliviano banknotes, and fifty or one hundred Boliviano banknotes.
III. EIFs that have four or more tray ATMs are obliged to distribute, in at least seventy percent of them, ten, twenty, fifty, and one hundred Boliviano banknotes. In the rest of the four or more tray ATMs, EIFs are obliged to distribute ten, twenty, fifty, or one hundred Boliviano banknotes.
IV. For control purposes, EIFs must inform ASFI in detail the locations and ATMs where foreign currency is distributed.
V. EIFs must identify in a visible place for the public and their users, the ATMs that dispense Bolivianos and foreign currency.
VI. The BCB will establish the periodicity and format of the report for control and supervision by ASFI.

Article 10.- (Quality of monetary material). To guarantee the quality of MM, EIFs must deliver to the financial consumer, for any type of operation, only eligible banknotes, according to what is established in the Manual for the Selection of Boliviano Banknotes, prioritizing the recirculation of eligible banknotes from the Previous Banknote Family.

Article 11.- (Sending of remittances of monetary material to the EBP). The Presidency of the BCB will authorize in writing the sending of remittances of MM in national currency to the EBP, composed of boxes of Boliviano banknotes and coins for storage and/or distribution.

CHAPTER IV
WITHDRAWAL AND DESTRUCTION OF MONETARY MATERIAL

Article 12.- (Withdrawal from circulation of ineligible monetary material).
I. Prior verification of the MM sent as ineligible by EIFs, GTES will proceed to withdraw said MM for subsequent destruction.
II. The BCB may contract the provision of services for the verification of MM within the framework of current regulations.

Article 13.- (Withdrawal from circulation of monetary material).
I. The BCB may withdraw from circulation the MM whose substitution has been decided by change of family, series, or substrate, according to the procedure used for the withdrawal of ineligible MM.
II. The BCB may determine the conservation of banknote and/or coin specimens in the BCB for numismatic purposes. In this case, the BCB Board, by express resolution, will authorize the demonetization of said specimens, based on reports from GTES and GAL.
III. The demonetization authorized by the Board will consist of an Act that will be signed by a Director designated by the BCB Board, the General Manager, the Treasury Manager, and the Submanager of Monetary Material Operations.
IV. These specimens, once demonetized, will be deposited in Custody Securities of GTES for the BCB numismatic collection.

Article 14.- (Destruction of monetary material).
I. The MM withdrawn from circulation, after being rendered useless, will be physically destroyed in the BCB.
II. The BCB Board will determine, by express resolution, the destruction of MM in other facilities outside the BCB.
III. In both cases, mechanisms must be used that eliminate the possibility of reconstruction or reuse of the MM.

Article 15.- (Destruction Scheduling). Monthly, SOMM will schedule the destruction of MM, for approval by the Treasury Manager and subsequent submission to GGRAL. This schedule may be modified exceptionally for justified reasons, with prior authorization of the General Manager.

Article 16.- (Supervision). The verification of the MM to be destroyed will be carried out by a group composed of the Treasury Manager or a staff member of GTES designated by him, the Submanager of Monetary Material Operations, the Person in Charge of the Useless Banknotes Area, a representative designated by the General Manager, and a Notary of Public Faith. The last two must supervise the complete destruction process and attest to it.
In each destruction session, the corresponding Act will be drawn up, recording the cuts, number of packages, number of pieces, value of the destroyed material, and the sampling verification of said material. The Act will be signed by all participants.

CHAPTER IV
DESTRUCTION OF COUNTERFEIT MATERIAL

Article 17.- (Destruction of counterfeit material). Within the framework of a specific procedure of GTES, the destruction of counterfeit banknotes seized by EIFs and attached documentation that have been and are sent to the BCB by the competent Public Authority, within the framework of the Seizure of Counterfeit Banknotes and Coins regulations, will proceed.

Article 18.- (Supervision). The verification of the counterfeit material to be destroyed will be carried out by a Notary of Public Faith and public servants of the BCB designated for this purpose.
In each destruction session, the corresponding act will be drawn up, recording the destruction. The act will be signed by all participants.

ADDITIONAL PROVISIONS

Additional Provision First.- (Reproduction of images of monetary material). Partial or total reproduction of legal course MM will only be permitted by any natural or legal person when:
a) The area of the reproduced material is at least 50% larger or smaller than the area of the original MM. b) It does not include legends mentioning the BCB. c) The material used for reproduction does not generate confusion with the original material.

Additional Provision Second.- (Specimens or samples without value). GTES may send specimens or samples without value to other Central Banks. GGRAL will expressly authorize the delivery of specimens and samples without value to BCB authorities and related entities.

TRANSITIONAL PROVISIONS

Transitional Provision Only.- (Sending of remittances of monetary material to the EBP). During the validity of the Mandate Contract signed with the EBP, the GGRAL of the BCB will authorize in writing the sending of remittances of United States Dollars to the EBP, for sale to Exchange Houses legally authorized by the ASFI.