BOARD OF DIRECTORS

BOARD RESOLUTION NO. 075/2023

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

VIEWING:

• 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, on Financial Services.
• Law No. 1503 of May 5, 2023.
• Board Resolution No. 095/2022 of October 6, 2022, which approves the Statute of the Central Bank of Bolivia.
• 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-2023-20 of May 10, 2023, from the Economic Policy Advisory and the Financial Entities Management.
• Report BCB-GAL-SANO-DLBCI-INF-2023-154 of May 10, 2023, from the Legal Affairs Management.

CONSIDERING:

That Article 327 of the Political Constitution of the State states 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.

That Article 328 of the Political Constitution of the State states that the BCB, in coordination with the economic policy determined by the Executive Branch, in addition to those specified by law, has the following attributes: 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 on the Central Bank of Bolivia, modified by Article 67, section A3, numeral 1 of Law No. 1864 of June 15, 1998, on Popular Property and Credit, determines that the BCB is a State institution, of public law, autarkic in nature, of indefinite duration, with its own legal personality and assets, and with legal domicile in the city of La Paz. It is the sole monetary and exchange rate authority of the country, with administrative, technical, and financial competence and specialized normative faculties 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 will formulate policies of general application in monetary, exchange rate, and payment system matters to fulfill 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, method of calculation, characteristics, and remuneration shall be established by the Board of Directors of the Bank, by an absolute majority of votes. The control and supervision of the Legal Reserve shall correspond to the current Financial System Supervisory Authority.

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

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

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

That subsections a), i), and o) of Article 54 of Law No. 1670 indicate as attributes 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 faculties assigned by Law; to fix and regulate the administration of the Legal Reserve to which banks and other financial entities must be subject, disposing of measures for its compliance; as well as 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 Article 430 of Law No. 393 determines that the BCB may grant liquidity credits to Financial Intermediation Entities with the guarantee of the Legal Reserve constituted, as well as with other guarantees determined by the Issuing Entity, according to a regulation approved by its Board of Directors.

That Article 532 of Law No. 393 provides that the BCB may flexibilize its legal reserve policy and facilitate liquidity windows, to facilitate acquiring entities, within resolution processes, the absorption of the impact that the acquisition of assets and the assumption of liabilities may entail.

That the Sole Final Provision of Law No. 1503 states that within the framework of Articles 327 and 328 of the Political Constitution of the State, the BCB, with the objective of complying with its constitutional mandate, is authorized to apply what is provided in Law No. 1670 of October 31, 1995, of the Central Bank of Bolivia and its modifications, which is sufficient for the development of its functions, without requiring greater provisions than said law.

That numerales 1) and 7) of Article 10 of the BCB Statute determine that the Board of Directors of the Issuing Entity has the attributes to approve general decisions and issue norms that are necessary for the BCB to fulfill the functions, competencies, and faculties assigned to it by Law; 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.

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

That Article 26 of the Issuing Entity's Statute stipulates that the Board of Directors pronounces itself on matters within its competence through resolutions. It may also do so through decisions that will be expressly recorded in the minutes. Likewise, every draft resolution of the Board of Directors must be motivated and justified by a technical report from the Management or Managements to which the matter subject to the resolution corresponds, and by a report from the Legal Affairs Management. These reports must be sent to the Board of Directors by the General Management with its recommendation, except in technical matters corresponding to the Economic Policy Advisory, which may submit reports to the Board of Directors with its own recommendation.

That the Legal Reserve Regulation for Financial Intermediation Entities, approved by Board Resolution No. 076/2022 of August 26, 2022, provides in its Article 1 that its object is to fix and regulate the administration of the Legal Reserve and the resources resulting from its modification, in order to have instruments of monetary regulation and preservation of the stability of the financial system.

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

That the Economic Policy Advisory and the Financial Entities Management, through Report BCB-APEC-SADBC-INF-2023-20, conclude and recommend to the BCB Board of Directors the approval of the modifications to the Legal Reserve Regulation for Financial Intermediation Entities with the objective of strengthening the liquidity of the financial system.

That the Legal Affairs Management, through Report BCB-GAL-SANO-DLBCI-INF-2023-154, concludes that the content of the draft modifications to the Legal Reserve Regulation for Financial Intermediation Entities, proposed by the APEC and GEF, is legally viable, as it does not contravene the legal order, recommending to the Board of Directors of the Issuing Entity its approval.

THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA,

RESOLVES:

Article 1.- Incorporate Title IX (Facilitation of Liquidity Credits within the framework of resolution procedures) into the Legal Reserve Regulation for Financial Intermediation Entities, with the following text:

//5. B.D. No. 075/2023

"TITLE IX

FACILITATION OF LIQUIDITY CREDITS WITHIN THE FRAMEWORK OF RESOLUTION PROCEDURES

Article 44 (Liquidity credits to support resolution procedures).

Within the framework of Articles 430 and 532 of Law No. 393 on Financial Services, the BCB may grant liquidity credits in national currency with the guarantee of the RAL Fund and the Legal Reserve constituted in cash in national currency and foreign currency.

Access to these credits does not restrict the requesting entities from using their resources in current and reserve accounts, nor does it exempt them from their obligation to constitute the Legal Reserve.

To access the aforementioned credits, the participating Financial Intermediation Entity within a resolution procedure will make its request through a written application to the BCB at least one business day in advance, under the terms defined by the BCB through External Circular and up to 90 calendar days after the award.

The total amount of liquidity credits requested through the liquidity windows enabled within the framework of Article 532 of Law No. 393 on Financial Services, shall not exceed the amount awarded in a specific resolution procedure.

Article 45 (Maximum amounts of liquidity credits).

The entities indicated in the previous Article may access liquidity credits in national currency up to an amount equivalent to 70% (seventy percent) of the Financial Intermediation Entity's share in the RAL Fund in national currency and foreign currency at the date of its request.

Additionally, these entities may access liquidity credits in national currency up to an amount equivalent to 100% (one hundred percent) of their required Legal Reserve in cash in national currency on the day of the request. For this effect, the required Legal Reserve in cash will be calculated with the information on obligations subject to reserve corresponding to the eight previous days.

//6. B.D. No. 075/2023

The total amount of liquidity credits requested within the framework of this Title shall not exceed the amount equivalent to the first-priority privileged obligations corresponding to demand deposits and savings accounts assumed in a specific resolution procedure.

Article 46 (Financial conditions and term of liquidity credits).

The conditions of the liquidity credits, within the framework of this Title, shall be determined by the Board of Directors, for each resolution procedure.

For the determination of the term, the specific characteristics of each resolution procedure will be considered.

Article 47 (Payments).

Acquiring Financial Intermediation Entities may make partial or total payments in advance.

The BCB will debit at the close of each month from the current and reserve account of the acquiring financial entity the amount corresponding to the interest of the credit.

Article 48 (Access to liquidity credits from Tranche I and Tranche II of the RAL Fund).

Acquiring Financial Intermediation Entities may access liquidity credits from Tranche I and Tranche II with the guarantee of the RAL Fund.

Article 49 (Payment at maturity and execution of guarantees for non-payment).

Upon maturity of the liquidity credits granted to Acquiring Financial Intermediation Entities within resolution procedures, the BCB will automatically debit the amount lent, the accrued interest, and related surcharges, from the current and reserve accounts that these Financial Intermediation Entities maintain at the BCB. In case of insufficient funds in the corresponding account, the contributions of RAL Fund titles will be liquidated up to the amount of the capital and interest that the entity owes to the BCB. The liquidation will be carried out in National Currency (MN) as a first instance.

//7. B.D. No. 075/2023

In case of execution of the guarantee backing any of the liquidity credits of this Regulation, the entity must replenish the guarantee for the missing balance in its Legal Reserve.

Article 50 (Control of the destination of resources).

The control of the proper destination of these resources will be carried out by the Financial System Supervisory Authority (ASFI) within the framework of its competencies and procedures established in Law 393 on Financial Services.

In the event that ASFI verifies non-compliance, regardless of the sanctions it establishes, it must communicate within a period not exceeding 15 (fifteen) calendar days to the BCB so that the credit is adjusted to the conditions of Tranche II with respect to terms and interest rates.

Article 2.- The modifications to the Legal Reserve Regulation for Financial Intermediation Entities will enter into force from the publication of this determination.

Article 3.- The Presidency and the General Management are charged with the compliance of this Resolution.

La Paz, May 11, 2023

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