Board Resolution No. 081/2020 - Modification of the Legal Reserve Regulation for Financial Intermediation Entities

BOARD RESOLUTION No. 081/2020 SUBJECT: ECONOMIC POLICY ADVISORY OFFICE AND FINANCIAL ENTITIES MANAGEMENT – MODIFICATION OF 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 modifications. The Legal Reserve Regulation for Financial Intermediation Entities approved by Board Resolution No. 018/2020 of February 18, 2020, modified by Board Resolution No. 044/2020 of March 24, 2020, Board Resolution No. 055/2020 of May 15, 2020, Board Resolution No. 060/2020 of June 29, 2020 and Board Resolution No. 071/2020 of July 31, 2020. Report BCB-APEC-SIE-INF-2020-37 of September 7, 2020, from the Economic Policy Advisory Office (APEC) and the Financial Entities Management (FEM). Report BCB-GAL-SANO-DLBCI-INF-2020-84 of September 8, 2020, from the Legal Affairs Management (LAM). CONSIDERING: That article 327 of the CPE establishes that the BCB is a public law institution, with legal personality and 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 the Bank, by absolute majority of votes. The control and supervision of the legal reserve shall correspond to the Superintendence of Banks and Financial Entities current Authority of Supervision of the Financial System (ASFI).

//2. Board Resolution No. 081/2020 That article 37 establishes that the BCB shall be the depository 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 Superintendence of Banks and Financial Entities (current ASFI). That article 44 indicates 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 BCB, approving their respective short and medium term programs. For the follow-up and supervision 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 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, providing measures for their compliance. That numerals 1) and 7) of its article 11 of the Statute of the BCB establish that the Board 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 according to Regulation. That the second paragraph of its article 26, determines that 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. 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-2020-37, the APEC and the FEM 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 and safeguarding the liquidity of the EIFs.

//3. Board Resolution No. 081/2020 That in Report BCB-GAL-SANO-DLBCI-INF-2020-84, the LAM concludes that the modification of the Legal Reserve Regulation for Financial Intermediation Entities, justified by Report BCB-APEC-SIE-INF-2020-37 of the APEC and the FEM, does not contravene the current legal framework, therefore it is legally proceding being within the competence of the Board of the BCB, to consider its approval by absolute majority of votes, in accordance with what is established in article 7 of Law No. 1670 and numeral 7) of article 11 of its Statute. THEREFORE, THE BOARD OF THE CENTRAL BANK OF BOLIVIA RESOLVES: Article 1.- Approve the modification to article 30 (Constitution of the Fund for Credits destined to the Productive Sector and to Social Interest Housing III) of the Legal Reserve Regulation for Financial Intermediation Entities, in the following manner: SAYS: Article 30 (Constitution of the Fund for Credits destined to the Productive Sector and to Social Interest Housing III). The Fund for Credits destined to the Productive Sector and to Social Interest Housing III (Fund CPVIS III) is constituted in the BCB with the resources released from the RAL-ME Fund by the application of the legal reserve rates in titles in ME and MVDOL determined in the present modification of this regulation. The participation of each EIF in the Fund CPVIS III will be equal to its participation in the released RAL-ME Fund. SHALL READ: "Article 30 (Constitution of the Fund for Credits destined to the Productive Sector and to Social Interest Housing III). The Fund for Credits destined to the Productive Sector and to Social Interest Housing III (Fund CPVIS III) is constituted in the BCB with the resources of each EIF in this Fund on the date of approval of the present Resolution." Article 2.- Approve the modification to article 32 (Liquidity Loans in MN with Guarantee of the Fund for Credits destined to the Productive Sector and to Social Interest Housing III) of the Legal Reserve Regulation for Financial Intermediation Entities, in the following manner:

//4. Board Resolution No. 081/2020 SAYS: Article 32 (Liquidity Loans in MN with Guarantee of the Fund for Credits destined to the Productive Sector and to Social Interest Housing III). The resources of each participant in the Fund CPVIS III will serve as guarantee of the liquidity loans in MN that they request from the BCB, under the following conditions:

1. The EIFs may request liquidity loans from the BCB in MN at an interest rate of 0%, with the purpose of increasing their credit portfolio destined to the productive sector and to social interest housing in MN. These loans may be requested from the constitution of the Fund CPVIS III until January 29, 2021.
2. The maximum amount of accumulated liquidity loans will be the amount of participation of each EIF in the Fund CPVIS III, equivalent in MN at the buying exchange rate in force. The liquidity loans will have as maturity date February 1, 2021 and may be canceled early at the request of each EIF.
3. With information at the cut-off of each month end, the balance of credits destined to the productive sector and to social interest housing in MN of each entity will be compared in relation to the balance of December 31, 2018 provided by the ASFI. If this increment is less than the accumulated loans granted by the BCB, the difference will pay the interest of the report rate in MN of the evaluation date (cut-off of each month end), from said date until the EIF has remedied that difference.
4. For purposes of the comparison indicated in point (3) above, the EIFs with loans guaranteed with the Fund CPVIS III must send to the BCB a letter in the nature of a sworn declaration with information of their credits of the Productive Sector and of Social Interest Housing at the cut-off date of each month, until the 5th business day of the following month. For cooperatives the total gross portfolio will be considered.
5. In case an EIF requires to demonstrate compliance with the increment of the portfolio on another date that is not month end to remedy the difference indicated in point (3) it must send to the BCB, in the nature of a sworn declaration this information in a maximum period of five business days after compliance with the increment of the portfolio.
6. In case the EIF with loans guaranteed with the Fund CPVIS III does not remit the letters cited in the two previous points in the foreseen periods, the

//5. Board Resolution No. 081/2020 BCB will communicate the non-compliance to the ASFI so that this authority applies the fines or sanctions that correspond. 7) It will be understood as credits destined to the productive sector the credit operations of business type, microcredit or SME, whose destination corresponds to the following categories of the Economic Activity Code and Credit Destination Code (CAEDEC), used by the ASFI: a. Agriculture and Livestock; b. Hunting, Forestry and Fishing; c. Extraction of Crude Oil and Natural Gas; d. Metallic and Non-Metallic Minerals; e. Manufacturing Industry; f. Production and Distribution of Electric Energy; g. Construction. Likewise, credit operations destined to the economic activities of the tourism sector and intellectual production, detailed in Annexes 2 and 3 of the Regulation for Credit Operations to the Productive Sector, contained in the Compilation of Norms for Financial Services of the ASFI, will be considered. 8) On February 1, 2021, the BCB will return in ME to the EIFs their participation in the Fund CPVIS III prior cancellation of their liquidity loans in MN with guarantee of the Fund CPVIS III. In the case that an EIF does not have sufficient resources in its current account or reserve in MN to pay its liquidity loans, the BCB may compensate the difference with its participation in the Fund CPVIS III at the buying exchange rate in force. The validity of this Fund may be extended to the extent that the BCB considers pertinent. SHALL READ: "Article 32 (Liquidity Loans in MN with Guarantee of the Fund for Credits destined to the Productive Sector and to Social Interest Housing III). The resources of each participant in the Fund CPVIS III will serve as guarantee of the liquidity loans in MN that they request from the BCB, under the following conditions:

1. The EIFs may request liquidity loans from the BCB in MN at an interest rate of 0%. For the case of banks, these loans will have the purpose of increasing their credit portfolio destined to the productive sector and to social interest housing in MN. Additionally, starting from September 8, 2020, banks may request these loans also to increase their credit portfolio to the Savings and Credit Cooperatives (CAC) and Development Financial Institutions (IFD). These loans may be requested until January 29, 2021.
2. The maximum amount of accumulated liquidity loans will be the amount of participation of each EIF in the Fund CPVIS III, equivalent in MN at the buying exchange rate in force. The liquidity loans will have as maturity date February 1, 2021.
3. With information at the cut-off of each month end, the balance of credits destined to the productive sector and to social interest housing in MN of each bank will be compared in relation to the balance of December 31, 2018 provided by the ASFI. Additionally, with information at the cut-off of each month end, the balance of credits destined to the CAC and IFD in MN of each bank will be compared in relation to the balance of August 31, 2020 provided by the ASFI. If the increment summing both differences is less than the accumulated loans granted by the BCB, the difference will pay the interest of the report rate in MN of the evaluation date (cut-off of each month end), from said date until the entity has remedied that difference. The banks may compensate this difference up to a value equivalent to the credits granted to the CAC and IFD starting from September 8, 2020.
4. For purposes of the comparison indicated in point (3) above, the banks with loans guaranteed with the Fund CPVIS III must send to the BCB a letter in the nature of a sworn declaration with information of their credits to the productive sector, to social interest housing, to the CAC and to the IFD, at the cut-off date of each month, until the 5th business day of the following month.
5. In case a bank requires to demonstrate compliance with the increment of the portfolio on another date that is not month end to remedy the difference indicated in point (3) it must send to the BCB, in the nature of a sworn declaration this information in a maximum period of five business days after compliance with the increment of the portfolio.
6. In case the bank with loans guaranteed with the Fund CPVIS III does not remit the letters cited in the two previous points in the foreseen periods, the

//6. Board Resolution No. 081/2020 BCB will communicate the non-compliance to the ASFI so that this authority applies the fines or sanctions that correspond. 7) It will be understood as credits destined to the productive sector the credit operations of business type, microcredit or SME, whose destination corresponds to the following categories of the Economic Activity Code and Credit Destination Code (CAEDEC), used by the ASFI: a. Agriculture and Livestock; b. Hunting, Forestry and Fishing; c. Extraction of Crude Oil and Natural Gas; d. Metallic and Non-Metallic Minerals; e. Manufacturing Industry; f. Production and Distribution of Electric Energy; g. Construction. Likewise, credit operations destined to the economic activities of the tourism sector and intellectual production, detailed in Annexes 2 and 3 of the Regulation for Credit Operations to the Productive Sector, contained in the Compilation of Norms for Financial Services of the ASFI, will be considered. 8) On February 1, 2021, the BCB will return in ME to the EIFs their participation in the Fund CPVIS III prior cancellation of their liquidity loans in MN with guarantee of the Fund CPVIS III. In the case that an EIF does not have sufficient resources in its current account or reserve in MN to pay its liquidity loans, the BCB may compensate the difference with its participation in the Fund CPVIS III at the buying exchange rate in force. The validity of this Fund may be extended to the extent that the BCB considers pertinent." Article 3.- The modification of the Legal Reserve Regulation for Financial Intermediation Entities will enter into force starting from September 8, 2020. Article 4.- The Presidency and the General Management are entrusted with the execution and compliance of the present Resolution. La Paz, September 8, 2020 Signed: Armando Pinell Siles Signed: Walter Morales Carrasco Signed: Alejandro Banegas Rivero Signed: José Gabriel Espinoza Yañez