Central Bank of Bolivia

Board of Directors

BOARD RESOLUTION NO. 094/2018

SUBJECT: TREASURY MANAGEMENT - REGULATION ON MONETIZATION, DISTRIBUTION, DESTRUCTION OF MONETARY MATERIAL, AND DESTRUCTION OF COUNTERFEIT MATERIAL

VISTOS:

• 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 BCB Statute approved by Board Resolution No. 128/2005 of October 21, 2005, and its modifications.
• Report BCB-GTES-SAMM-DAMM-INF-2018-89 of July 20, 2018, from the Treasury Management.
• Report BCB-GAL-SANO-DLBCI-INF-2018-225 of July 23, 2018, 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 sets out the powers 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 Article 1 of Law No. 1670 states that the BCB is the sole monetary and exchange rate authority of the country, with administrative, technical, and financial competence and specialized normative powers of general application.
• That Article 4 provides that the BCB will formulate policies of general application in monetary, exchange rate, and payment system matters to fulfill its objectives. That Article 10 establishes that the BCB will exercise exclusively and inalienably the function of issuing the monetary unit of Bolivia, which is the "Boliviano," in the form of banknotes and metallic coins.

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• That Article 11 states that the banknotes and coins issued by the BCB are legal tender throughout the territory of the State, with unlimited discharge power. They will have the denominations, dimensions, designs, and colors determined by its Board of Directors, which must make their characteristics public. Banknotes must bear the signatures of the President and the General Manager of the BCB and the serial number on both halves of them.
• That Article 44 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 BCB, approving their respective short and medium-term programs. For the monitoring and oversight of their execution, it will have access to information, independent analysis, and audit services.
• That subsections a), m), and o) of Article 54 indicate the powers of the BCB Board of Directors to issue norms and adopt general decisions necessary for the BCB to fulfill the functions, competencies, and powers assigned to it by Law; to authorize and supervise the printing, issuance, and destruction of banknotes and the minting and withdrawal of coins within the norms established by Law; as well as to approve, modify, and interpret the Statute and Regulations of the Issuing Entity, by two-thirds of the votes of all its members, without the need for any additional administrative act.
• That subsection 29 of Article 11 of the BCB Statute states that the Board of Directors of the Issuing Entity has the power 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 any additional administrative act.
• That subsection 4) of Article 67 establishes that the Treasury Management has as its objective to establish requirements for the acquisition and destruction of monetary material and its administration, and to carry out the custody of valuables.
• That Report BCB-GTES-SAMM-DAMM-INF-2018-89, from the Treasury Management, indicates the need to have a new Regulation on Monetization, Distribution, Destruction of Monetary Material, and Destruction of Counterfeit Material, which contemplates aspects related to the destruction of counterfeit banknotes, numismatic collection, among others, and therefore recommends its approval.
• That Report BCB-GAL-SANO-DLBCI-INF-2018-225 from the Legal Affairs Management establishes that the proposal for the Regulation on Monetization, Distribution, Destruction of Monetary Material, and Destruction of Counterfeit Material of the BCB does not contravene the current legal framework, and therefore is legally appropriate.

THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

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Article 1.- Approve the Regulation on Monetization, Distribution, Destruction of Monetary Material, and Destruction of Counterfeit Material, which is attached as an Annex and forms part of this Board Resolution.

Article 2.- This Regulation on Monetization, Distribution, Destruction of Monetary Material, and Destruction of Counterfeit Material shall enter into force as of August 8, 2018.

Article 3.- Repeal as of August 8, 2018 the Regulation on Monetization, Distribution, and Destruction of Monetary Material, approved by Board Resolution No. 021/2016 of February 2, 2016, and its modifications approved by Board Resolutions No. 149/2017 of October 24, 2017, and No. 019/2018 of January 30, 2018.

Article 4.- The Presidency and the General Management are charged with the execution and compliance of this Resolution.

La Paz, July 24, 2018

Pablo Ramos Sánchez Abraham Pérez Alandia Gabriel Herbas Camacho Luis Baudoin Olea Ronald Polo Rivero Sergio Velarde Vera

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ANNEX

REGULATION ON MONETIZATION, DISTRIBUTION, DESTRUCTION OF MONETARY MATERIAL, AND DESTRUCTION OF COUNTERFEIT MATERIAL

CHAPTER I

GENERAL 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 Financial Intermediation Entity (Banking).
• EIF: Financial Intermediation Entities.
• GAL: Legal Affairs Management.
• GGRAL: General Management.
• GTES: Treasury Management.
• SOMM: Sub-Management of Monetary Material Operations.
• Unfit Banknote: It is a banknote issued by the BCB that clearly retains its two signatures and at least one serial number, and which, 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.
• BCB Numismatic Collection: Set of banknote and coin specimens, held in custody at the BCB for numismatic purposes.
• Demonetization: Process by which Boliviano banknotes and coins are withdrawn from legal circulation.

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• 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 tender with unlimited discharge power.

CHAPTER II

MONETIZATION OF BANKNOTES AND COINS

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

Article 4.- (Monetization certificate). The monetization authorization will be recorded in an Act signed by a Director designated by the BCB Board of Directors, the General Manager, the Treasury Manager, and the Sub-Manager of Monetary Material Operations.

Article 5.- (Registration of monetization). The 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). Prior to putting a new family, series of banknotes, or new minting of coins into circulation, the main characteristics of this monetary material will be disseminated.

CHAPTER III

DISTRIBUTION OF MONETARY MATERIAL

Article 7.- (Distribution).

I. The GTES will put monetary material into circulation through the financial intermediation system, its own offices, or other distribution mechanisms authorized by the Board of Directors.

II. The GGRAL will determine and implement in each case the most suitable mechanisms for the efficient distribution of monetary material in the economy.

III. The GTES, through the GGRAL, will present to the Board of Directors a semi-annual program for the distribution of monetary material.

Article 8.- (Distribution structure). The GTES will determine the cut structure for the distribution of monetary material based on public requirements, the structure by cuts of unfit and available monetary material, and other factors it deems necessary.

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Article 9.- (Distribution of lower denomination banknotes through ATMs).

I. EIFs that have two-tray ATMs are obligated 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 obligated to distribute ten and twenty Boliviano banknotes, and fifty or one hundred Boliviano banknotes.

III. EIFs that have four or more tray ATMs are obligated to distribute, in at least seventy percent of them, ten, twenty, fifty, and one hundred Boliviano banknotes. In the remaining four or more tray ATMs, EIFs are obligated to distribute ten, twenty, fifty, or one hundred Boliviano banknotes.

IV. For control purposes, EIFs must provide detailed information to the ASFI regarding 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 the ASFI.

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

Article 11.- (Sending remittances of monetary material to the EBP). The Presidency of the BCB will authorize in writing the sending of remittances of monetary material in national currency to the EBP, consisting 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 monetary material).

I. Prior to verification of the monetary material sent as unfit by EIFs, the 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 the GTES.

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III. The BCB may contract the provision of services for the verification of monetary material within the framework of current regulations.

Article 13.- (Withdrawal from circulation of monetary material).

I. The BCB may withdraw from circulation monetary material whose replacement has been decided due to a change in family, series, or substrate, according to the procedure used for the withdrawal of unfit monetary material.

II. The BCB may determine the conservation of banknote and/or coin specimens at the BCB for numismatic purposes. In this case, the BCB Board of Directors, by express resolution, will authorize the demonetization of said specimens, based on reports from the GTES and GAL.

III. The demonetization authorized by the Board of Directors will be recorded in an Act signed by a Director designated by the BCB Board of Directors, the General Manager, the Treasury Manager, and the Sub-Manager of Monetary Material Operations.

IV. These specimens, once demonetized, will be deposited in Custody Valuables of the GTES for the BCB numismatic collection.

Article 14.- (Destruction of monetary material).

I. Monetary material withdrawn from circulation, after being rendered useless, will be physically destroyed at the BCB.

II. The BCB Board of Directors will determine, by express resolution, the destruction of monetary material in other facilities outside the BCB.

III. In both cases, mechanisms must be used that eliminate the possibility of reconstruction or reuse of the monetary material.

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

Article 16.- (Supervision). The verification of the monetary material to be destroyed will be carried out by a group composed of the Treasury Manager or a staff member of the GTES designated by him, the Sub-Manager of Monetary Material Operations, the Person in Charge of the Unfit Banknotes Area, a representative designated by the General Manager, and a Notary of Public Faith. The latter 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

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verification by sampling of said material. The Act will be signed by all participants.

CHAPTER V

DESTRUCTION OF COUNTERFEIT MATERIAL

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

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 tender monetary material 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 monetary material.

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). The GTES may send specimens or samples without value to other Central Banks. The GGRAL will expressly authorize the delivery of specimens and samples without value to BCB authorities and related entities.