BOARD

BOARD RESOLUTION NO. 104/2023

SUBJECT: ECONOMIC POLICY ADVISORY AND FINANCIAL ENTITIES MANAGEMENT – MODIFY 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.
• 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.
• Board Resolution No. 063/2013 of June 11, 2013, which approves the Foreign Exchange Operations Regulation and its modifications.
• Report BCB-APEC-SADBC-INF-2023-43 of July 14, 2023, from the Economic Policy Advisory and Financial Entities Management.
• Report BCB-GAL-SANO-DLBCI-INF-2023-250 of July 18, 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 indicated by law, has the following attributes: 1. Determine and execute monetary policy. 2. Execute foreign exchange 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 Property and Popular Credit, determines that the BCB is a State institution, of public law, of an autarkic nature, of indefinite duration, with legal personality and its own assets and with legal domicile in the city of La Paz. It is the sole monetary and foreign exchange 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 seek 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, foreign exchange and payment system matters for the fulfillment of 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. Its composition, amount, method of calculation, characteristics and remuneration will be established by the Board of the Bank, by an absolute majority of votes. The control and supervision of the Legal Reserve will correspond to the current Authority for the Supervision of the Financial System.

That Article 8 of Law No. 1670 states that the reserve and deposits constituted in the BCB by banks and financial entities will not be subject to any type of seizure 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 FIEs subject to the authorization and control of the Authority for the Supervision of the Financial System.

That Article 44 of Law No. 1670 provides that the highest authority of the BCB is its Board, which is responsible for defining its policies, specialized norms of general application and internal norms; as well as establishing administrative, operational and financial strategies of the Issuer 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 Board of the BCB to issue norms and adopt general decisions that are necessary for the Issuer Entity to fulfill the functions, competencies and faculties assigned by the 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 FIEs with the guarantee of the Legal Reserve constituted, as well as with other guarantees determined by the Issuer Entity, according to a regulation approved by its Board.

That numerales 1) and 7) of Article 10 of the Statute of the BCB, determines that the Board of the Issuer Entity has the attributes to approve general decisions and issue the norms that are necessary for the BCB to fulfill the functions, competencies and faculties assigned to it by the Law; to establish by absolute majority of votes, Legal Reserves of mandatory compliance by FIEs and approve their composition, amount, calculation, characteristics, forms of administration, custody and remuneration, according to Regulation.

That Article 24 of the Statute of the BCB refers that the resolutions and decisions of the Board are adopted by a 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 Statute of the Issuer Entity stipulates that the Board pronounces on matters within its competence through resolutions. It may also do so through decisions that will be expressly recorded in the minutes.

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 FIEs, authorized for their operation by the Authority for the Supervision of the Financial System ASFI, are subject to the provisions of this Regulation.

That the Foreign Exchange Operations Regulation approved by Board Resolution No. 063/2013 of June 11, 2013, regulates the procedures for the determination of the exchange rate of the boliviano and for the purchase and sale of United States dollars (USD) by the Central Bank of Bolivia (BCB) with financial entities and with the general public.

That Board Resolution No. 063/2023; dated April 12, 2023, which incorporates Additional Provision Fourth in the Foreign Exchange Operations Regulation, establishes that FIEs may sell to the BCB their resources in United States dollars (USD) in the different Funds constituted in the BCB, which are not guaranteeing liquidity loans at the official selling exchange rate.

That the Economic Policy Advisory and Financial Entities Management, through Report BCB-APEC-SADBC-INF-2023-43, conclude and recommend to the Board of the BCB the approval of the modifications to the Legal Reserve Regulation for FIEs with the objective of strengthening the liquidity of the financial system.

That the Legal Affairs Management, through Report BCB-GAL-SANO-DLBCI-INF-2023-250 concludes that the content of the project of modifications to the Legal Reserve Regulation for FIEs, proposed by the APEC and GEF is legally viable, since it does not contravene the legal order, recommending to the Board of the Issuer Entity its approval.

THEREFORE,

THE BOARD OF THE CENTRAL BANK OF BOLIVIA,

RESOLVES:

Article 1.- Modify Article 30.- (Constitution and purpose of the Fund for Credits destined to the Productive Sector and Social Interest Housing II) of the Legal Reserve Regulation for Financial Intermediation Entities, with the following text:

“Article 30 (Constitution and purpose of the Fund for Credits destined to the Productive Sector and Social Interest Housing II).

The Fund for Credits destined to the Productive Sector and Social Interest Housing II (CPVIS II Fund) is constituted with the available resources resulting from the modifications to the prevailing Legal Reserve rates as of April 30, 2018 and subsequent voluntary contributions.

FIEs may make voluntary contributions to the CPVIS II Fund until February 2, 2026, only with resources in FC deposited in the BCB account at its correspondent bank abroad.

FIEs may request the BCB for the partial or total return of their participation in the CPVIS II Fund that is not guaranteeing liquidity loans in LC. Alternatively, FIEs may sell the resources that are not guaranteeing liquidity loans in LC to the BCB in accordance with what is established in the Foreign Exchange Operations Regulation.

The return of voluntary contributions, at the request of the FIEs, will be made in the accounts abroad of the FIEs. In the event that the FIE does not have its own account abroad, the FIE will communicate in writing to the BCB the account to which the return will be credited. In both cases, the BCB will not charge the Commission for the transfer of funds abroad for the financial system, established in the “Table of Commissions for BCB Services.”

Article 2.- Modify Article 31.- (Liquidity Loans in LC with Guarantee of the Fund for Credits destined to the Productive Sector and Social Interest Housing II) of the Legal Reserve Regulation for Financial Intermediation Entities, with the following text:

“Article 31 (Liquidity Loans in LC with Guarantee of the Fund for Credits destined to the Productive Sector and Social Interest Housing II).

The resources of each participant in the CPVIS II Fund will serve as guarantee for the liquidity loans in LC that they request from the BCB, under the following conditions:

1. FIEs may request liquidity loans from the BCB in LC at an interest rate of 0%. These loans may be requested until February 2, 2026.

2. The maximum amount of accumulated liquidity loans will be the participation amount of each FIE in the CPVIS II Fund, equivalent in LC at the prevailing buying exchange rate. The liquidity loans will have a maturity date of March 31, 2026.

3. On March 31, 2026, the BCB will return in FC to the FIEs their participation in the CPVIS II Fund prior to the cancellation of their liquidity loans in LC with guarantee of the CPVIS II Fund. In the event that an FIE does not have sufficient resources in its current or reserve account in LC to pay its liquidity loans, the BCB may offset the difference with its participation in the CPVIS II Fund at the prevailing buying exchange rate.

The return of voluntary contributions, at the request of the FIEs, will be made in the accounts abroad of the FIEs. In the event that the FIE does not have its own account abroad, the FIE will communicate in writing to the BCB the account to which the return will be credited. In both cases, the BCB will not charge the Commission for the transfer of funds abroad for the financial system, established in the “Table of Commissions for BCB Services.”

Article 3.- Modify numerales 1, 2 and 8 of Article 33.- (Liquidity Loans in LC with Guarantee of the Fund for Credits destined to the Productive Sector and Social Interest Housing III) of the Legal Reserve Regulation for Financial Intermediation Entities, with the following text:

“Article 33 (Liquidity Loans in LC with Guarantee of the Fund for Credits destined to the Productive Sector and Social Interest Housing III).

The resources of each participant in the CPVIS III Fund will serve as guarantee for the liquidity loans in LC that they request from the BCB, under the following conditions:

1. FIEs may request liquidity loans from the BCB in LC at an interest rate of 0%. In the case of banks, these loans will have the purpose of increasing their credit portfolio destined to the productive sector and social interest housing in LC. Additionally, as of September 8, 2020, banks may request these loans also to increase their credit portfolio to Savings and Credit Cooperatives (CAC) and Development Financial Institutions (DFI). These loans may be requested until February 2, 2026.

2. The maximum amount of accumulated liquidity loans will be the participation amount of each FIE in the CPVIS III Fund, equivalent in LC at the prevailing buying exchange rate. The liquidity loans will have a maturity date of March 31, 2026.

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8. On March 31, 2026, the BCB will return in FC to the FIEs their participation in the CPVIS III Fund prior to the cancellation of their liquidity loans in LC with guarantee of the CPVIS III Fund. In the event that an FIE does not have sufficient resources in its current or reserve account in LC to pay its liquidity loans, the BCB may offset the difference with its participation in the CPVIS III Fund at the prevailing buying exchange rate. The validity of this Fund may be extended to the extent that the BCB considers pertinent.”

Article 4.- Modify subsections a), b) and g) of Article 39 (Liquidity Loans in LC with Guarantee of the FIUSEER) of the Legal Reserve Regulation for Financial Intermediation Entities, with the following text:

“Article 39 (Liquidity Loans in LC with Guarantee of the FIUSEER).

The resources of each participant in the FIUSEER will serve as guarantee for the liquidity loans in LC that they request from the BCB, under the following conditions:

a) The liquidity loans from the BCB to FIEs, guaranteed with the resources of each entity in the FIUSEER, will have an interest rate of 0% and may be requested until February 2, 2026. The liquidity loans must be used by the FIEs to grant credits in LC in accordance with what is established in article 3 of Supreme Decree No. 4539 of July 7, 2021.

b) The maximum amount of accumulated liquidity loans will be the participation amount of each FIE in the FIUSEER-LC, plus the FIUSEER-FC equivalent in LC at the prevailing buying exchange rate. The liquidity loans will have a maturity date of March 31, 2026.

g) On March 31, 2026, the BCB will return in LC and FC to the FIEs their participation in the FIUSEER-LC and FIUSEER-FC, respectively; prior to the cancellation of their liquidity loans in LC with guarantee of these funds. In the event that an FIE does not have sufficient resources in its current or reserve account in LC to pay its liquidity loans, the BCB may offset the difference with its participation in the FIUSEER-LC and, in case of insufficiency of this fund, it will offset the balance with the FIUSEER-FC at the prevailing buying exchange rate.

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Article 5.- Incorporate the Sole Transitional Provision in the Legal Reserve Regulation for Financial Intermediation Entities, with the following text:

“Sole Transitional Provision.

FIEs, voluntarily, may make advance payments of the liquidity loans in LC corresponding to the CPVIS II, CPVIS III, FIUSEER-FC and CPRO-FC Funds; in such a way that the FC resources released from the loan guarantee are destined for their sale to the BCB, in accordance with what is established in the Foreign Exchange Operations Regulation.”

Article 6.- The modifications to the Legal Reserve Regulation for Financial Intermediation Entities will enter into force from the publication of this determination.

Article 7.- The Presidency and General Management are charged with the compliance of this Resolution.

La Paz, July 19, 2023

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