Board Resolution No. 083/2000 Approving the New Repo Operations Regulation

BOARD RESOLUTION NO. 083/2000 SUBJECT: MONETARY OPERATIONS MANAGEMENT – APPROVES NEW REPO OPERATIONS REGULATION

HAVING VIEWED: The Law of the Central Bank of Bolivia (BCB), No. 1670 of October 31, 1995. The Statute of the Central Bank of Bolivia, approved by Board Resolution No. 082/97 of February 20, 1997. The Open Market Operations (OMA) Regulation, approved by BCB Board Resolution No. 074/98 of August 11, 1998. The Regulation of the Open Market Operations Committee (COMA), approved by BCB Board Resolution No. 145/97 of September 2, 1997. The Repo Operations (OR) Regulation, approved by BCB Board Resolution No. 103/98 of November 24, 1998. The Technical Report from the Monetary Operations Management, No. 008/2000 of November 14, 2000. The Report from the Legal Affairs Management SANO 229/2000 of November 15, 2000.

CONSIDERING: That Article 6 of Law No. 1670 empowers the Central Bank of Bolivia to execute monetary policy and regulate the money supply and credit volume according to its monetary program, being able to issue, place, and acquire securities and carry out other open market operations, such as all those related to purchase or sale operations of repos.

That in order to regulate the liquidity of the economy, the stability of the purchasing power of the currency, and ensure compliance with the monetary targets defined for each management period, it corresponds to the BCB to control the volume and composition of available means of payment in the economy, through repo operations.

That within the framework of the Open Market Operations Regulation and given the importance of repos in the execution of the BCB's monetary policy, it has been deemed convenient to issue a new regulation that optimizes the procedures for these operations.

That, Technical Report No. 008/2000 recommends the approval of an updated Regulation by the Board of Directors of the Central Bank of Bolivia.

That, Legal Report SANO 229/2000 makes comments and suggestions on the draft regulation.

That, Article 54, subsection d) of Law 1670 of October 31, 1995 (Law of the Central Bank of Bolivia) empowers the BCB Board of Directors to issue norms for Open Market Operations.

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

Article 1.- Approve the new Regulation of Repo Operations in its IV Chapters and 14 articles, which, as an annex, forms part of this Resolution. The new Regulation will enter into force on December 1, 2000.

Article 2.- Repeal, from the effective date of this Resolution, the Regulation of Repo Operations approved by Board Resolution No. 103/98 of November 24, 1998. The existing Single Contracts for Participation in Repo Operations that are currently in force will maintain their validity until replaced by the new Contract, or until their expiration.

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

La Paz, November 21, 2000

---

Juan Antonio Morales A.

---

Armando Pinell S. Jaime Ponce G.

---

Juan Medinaceli V. Armando Méndez M.

REGULATION OF REPO OPERATIONS

CHAPTER I GENERALITIES

Article 1 (Object). – This regulation aims to govern the Repo Operations carried out by the Central Bank of Bolivia (OR-BCB) with authorized financial entities.

Article 2 (Definition). – An OR-BCB consists of the sale made by an agent (the seller/reportado), at a determined price (outward value) calculated based on unit values, of securities issued by the BCB or the TGN, to a second agent (the buyer/reportador), with the commitment of the seller to repurchase the securities, or other equivalents, within a predetermined term and at a predetermined price (inward value) on the date of the transaction. The repurchase date cannot be later than the maturity date of the reported security.

Article 3 (Calculation of unit inward value). - The unit inward value must establish a premium in favor of the buyer, as determined by the following formula:

VUV = VUI * (1 + (TP * PL) / 360)

Where: VUV = Unit inward value of the repo; VUI = Unit outward value of the repo; TP = Premium rate; and PL = Term of the repo operation in days.

Article 4 (Eligible Entities). – Entities authorized to carry out OR-BCB, prior to compliance with what is determined in Chapter III of this Regulation, are those that are authorized for their operation by the Superintendency of Banks and Financial Entities (SBEF) or by the Superintendency of Pensions, Securities, and Insurance (SPVS). The Open Market Operations Committee (COMA) will determine the mode of participation of these entities. In all cases, the settlement of the operations must be carried out exclusively in the Current and Reserve Account that banking entities hold at the Central Bank of Bolivia, during the hours determined by the BCB.

Article 5 (Modalities of OR-BCB). – The BCB may act in OR-BCB as seller or buyer. The OR-BCB is called direct when the BCB is the buyer and reverse when it acts as the seller. The OR-BCB are carried out indistinctly in any currency authorized by the COMA, and the operation may be executed in a currency different from that of the security (crossed repo).

CHAPTER II EXECUTION, REPORTS, AND CONTROL

Article 6 (Attributions of COMA). – The Open Market Operations Committee (COMA) applies the quarterly guidelines approved by the BCB Board of Directors in OR-BCB. In this sense, COMA has the following attributions:

I. Define weekly, or with the periodicity it decides, global amounts, premium rates, minimum and maximum terms, currencies, and all characteristics of OR-BCB, as well as the autonomous negotiation ranges of the Monetary Operations Management (GOM).

II. Define, authorize, and modify with the periodicity it decides: a) the securities of the BCB and TGN that can be accepted in OR-BCB, b) the entities eligible to carry out OR-BCB, as well as the mode and additional participation requirements, prior to verification of compliance with what is established in Chapter III of this Regulation, c) the allocation mechanisms, competitive or non-competitive, for these operations, including their schedules and other characteristics, d) the method of calculating the unit outward value, which may consider hedging mechanisms (“haircuts”) that allow reducing the risk of loss for the BCB from fluctuations in the market price of the reported securities, e) The early redemption of OR-BCB and its mode.

Article 7 (Attributions of the Executive Body). – The Monetary Operations Management (GOM) is the body responsible within the BCB for the execution of OR-BCB, being able to carry them out within the autonomous negotiation ranges approved by COMA. If due to situational circumstances it is necessary to carry out operations outside the approved autonomous negotiation ranges, the GOM must obtain prior and express authorization from the President of COMA, which must be brought to the knowledge of COMA at its next meeting.

Article 8 (Reports to the Board). – The Economic Policy Advisory is responsible for evaluating the behavior of OR-BCB and their impacts on the Monetary Program, and must present reports to the Board every quarter. The BCB Internal Audit Management is responsible for presenting semi-annual audits of OR-BCB to the Board regarding compliance with this Regulation.

CHAPTER III REQUIREMENTS

Article 9 (Requirements). – The entities defined in Article 4 that wish to participate in OR-BCB must present the following documents:

I. Adhesion Contract to carry out OR-BCB, with indefinite validity, duly signed by the respective legal representatives.

II. Notarized Power of Special Attorney granted by the eligible financial entity in favor of its representative(s), which must include at least the following powers: a) General administrative powers. b) Express power to sign the OR-BCB Adhesion Contract on behalf of the financial entity. c) Express power to bind and be responsible in the name of the entity for those officials whose authorized signatures are or will be registered in the General Secretariat of the BCB, for the sending of OR-BCB requests through the mechanisms approved by COMA.

III. For the first time or when there are modifications, registration in the General Secretariat of the BCB of the authorized signatures that present the Request Forms for Participation in OR-BCB.

IV. Request Form for Participation in OR-BCB duly filled out and signed. The request may be sent in any of the modalities approved by COMA.

Article 10 (Additional Requirements). – In the case of direct OR-BCB, eligible financial entities must present the securities duly endorsed in favor of the Issuing Entity. In the case of reverse OR-BCB, COMA may implement them according to the guidelines for the placement of securities determined in Articles 12 and 13 of the Open Market Operations Regulation.

CHAPTER IV OTHER PROVISIONS

Article 11 (Custody of Securities). – In all cases, the securities subject to OR-BCB, during the validity of the operations, must remain in deposit and custody with the BCB, or with another entity authorized by the Issuing Entity.

Article 12 (Certification). – The BCB, at the request of eligible financial entities, will issue certifications of the OR-BCB carried out with the BCB by the requesting entity.

Article 13 (Sanctions for Non-Compliance). – In addition to the consolidation of ownership in favor of the BCB of the reported security, financial entities that fail to fulfill the repurchase commitment for OR-BCB at maturity will be disqualified from participating in OMA for a period of 3 months for the first time, 6 months for the second, and, if a third contravention occurs, the case will be submitted to the Board of Directors.

Article 14 (Regulation of other operational aspects). – COMA may define and implement any operational aspect not provided for in this Regulation.

---ooo---