BOARD

BOARD RESOLUTION NO. 107/2022

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

VIEWED:

• 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.
• Report BCB-APEC-INF-2022-23 of November 11, 2022, from the Economic Policy Advisory and Financial Entities Management.
• Report BCB-GAL-SANO-DLBCI-INF-2022-234 of November 11, 2022, 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, item 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, of an

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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 exchange rate authority of the country, with administrative, technical, and financial competence and specialized normative faculties of general application.

That Article 2 establishes that the object of the BCB is to seek the stability of the internal purchasing power of the national currency.

That Article 3 provides that the BCB, within the framework of the present Law, will formulate policies of general application in monetary, exchange rate, 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 FIEs. Their composition, amount, method of calculation, characteristics, and remuneration shall be established by the Board of the Bank, by an absolute majority of votes. The control and supervision of the Legal Reserve shall correspond to the current Supervisory Authority 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 shall not be subject to any type of seizure or retention by third parties.

That Article 37 of Law No. 1670 establishes that the BCB shall be the depositary 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 Supervisory Authority 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 rules; as well as establishing administrative, operational, and financial strategies of the Issuer Entity, approving their respective short and medium-term programs.

That items a), i), and o) of Article 54 of Law No. 1670 indicate as attributes of the BCB Board 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.

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That Article 430 of Law No. 393 determines that the BCB may grant liquidity credits to FIEs with the guarantee of the constituted Legal Reserve, as well as with other guarantees determined by the Issuer Entity, according to a regulation approved by its Board.

That items 1) and 7) of Article 10 of the BCB Statute determine that the Board of the Issuer 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 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 BCB Statute refers that 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 Issuer Entity Statute stipulates that the Board pronounces on matters within its competence through resolutions. It may also do so through decisions that shall be expressly recorded in the minutes. Likewise, every draft Board resolution 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 by the General Management with its recommendation.

That the Legal Reserve Regulation for Financial Intermediation Entities, approved by Board Resolution No. 076/2022 of August 26, 2022, has the object of fixing and regulating 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 operation by the Supervisory Authority of the Financial System ASFI, are subject to the provisions of this Regulation.

That Article 41, on Constitution of the Fund for Credits destined to the Productive Sector, refers that it is constituted in the BCB, in national currency (Fund CPRO-MN) with the available resources resulting from the modification of the Legal Reserve rate in Securities in MN-MNUFV, effective as of January 10, 2022, and in foreign currency (Fund CPRO-ME) with the available resources resulting from the modification of the Legal Reserve rate in Securities in ME-MVDOL.

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That the Economic Policy Advisory and Financial Entities Management through Report BCB-APEC-INF-2022-23, conclude and recommend to the Board the approval of the modification to the Legal Reserve Regulation for FIEs.

That the Legal Affairs Management, through Report BCB-GAL-SANO-DLBCI-INF-2022-234 concludes that the modification of 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 6 (Legal Reserve Rates) of the Legal Reserve Regulation for Financial Intermediation Entities, with the following text:

“Article 6 (Legal Reserve Rates). The legal reserve rates on the liabilities detailed in Article 4 of this Regulation are as follows:

a) In NC and MNUFV: - Cash Five and a half percent (5.5%) for cash reserve. - Securities Three percent (3.0%) for securities reserve

b) In FC and MVDOL: - Cash Ten percent (10%) for cash reserve. - Securities Four percent (4%) for securities reserve for FPFs greater than 720 days; and five percent (5%) for the rest of liabilities.

FIEs must constitute the Legal Reserve in Cash, equivalent to a rate of one hundred percent (100%), on the accounts included in “Other Obligations with the public, with companies with state participation and with banks and financing entities” indicated in Article 4 of this Regulation.”**

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Article 2.- Modify Article 41 (Constitution of the Fund for Credits destined to the Productive Sector) of the Legal Reserve Regulation for Financial Intermediation Entities, with the following text:

“Article 41 (Constitution of the Fund for Credits destined to the Productive Sector). The Fund for Credits destined to the Productive Sector (Fund CPRO) was constituted in the BCB, in national currency (Fund CPRO-MN) with the available resources resulting from the modification of the Legal Reserve rate in Securities in MN-MNUFV effective as of January 10, 2022, and the modification of the Legal Reserve rate in securities in MN-UFW effective as of December 12, 2022; and in foreign currency (Fund CPRO-ME) with the available resources resulting from the modification of the Legal Reserve rate in Securities in ME-MVDOL effective as of January 10, 2022, and the modification of the Legal Reserve rate in securities in ME-MVDOL effective as of December 12, 2022; in addition to the voluntary contributions of FIEs in FC and deposited in the BCB account at its correspondent bank abroad, made from January 18, 2022, to December 29, 2023. The validity of this fund will be until March 31, 2025. The resources of each FIE in the fund will be returned by the BCB upon expiration of the fund according to what is provided in item 9 of Article 42.”**

Article 3.- Modify item 2 of Article 42 (Loans in NC with Guarantee of the Fund for Credits destined to the Productive Sector) of the Legal Reserve Regulation for Financial Intermediation Entities, with the following text:

“2. Loans may be requested until December 29, 2023. The extension of the loan application period will be reviewed annually by the BCB.”

Article 4.- The modifications to the Legal Reserve Regulation for Financial Intermediation Entities will enter into effect as of December 12, 2022.

Article 5.- The Presidency and the General Management are charged with the execution and compliance of this Resolution.

La Paz, November 15, 2022

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