Central Bank of Bolivia

Board of Directors

BOARD RESOLUTION NO. 147/2021

SUBJECT: ECONOMIC POLICY ADVISORY AND FINANCIAL ENTITIES MANAGEMENT – MODIFY THE LEGAL RESERVE REGULATION FOR FINANCIAL INTERMEDIATION ENTITIES, CREATING THE FUND FOR PRODUCTIVE CREDIT (CPRO).

VISTOS (VIEWED):

• The Political Constitution of the State of February 7, 2009.
• Law No. 1670 of October 31, 1995, of the Central Bank of Bolivia.
• Board Resolution No. 128/2005 of October 21, 2005, which approves the Statute of the BCB and its modifications.
• Board Resolution No. 018/2020 of February 18, 2020, which approves the Legal Reserve Regulation for Financial Intermediation Entities and its modifications.
• Report BCB-APEC-SIE-INF-2021-76 of December 24, 2021, from the Economic Policy Advisory and Financial Entities Management.
• Report BCB-GAL-SANO-DLBCI-INF-2021-253 of December 27, 2021, from the Legal Affairs Management.

CONSIDERING (CONSIDERATIONS):

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 Law No. 1670 of the Central Bank of Bolivia, in its Article 7, provides that the BCB may establish legal reserves of mandatory compliance by banks and financial intermediation entities. Their composition, amount, method of calculation, characteristics, and remuneration shall be established by the Board of Directors of the Bank, by an absolute majority of votes.

That Law No. 1670 of the Central Bank of Bolivia, in its Article 8, states that the reserve and deposits constituted in the BCB by banks and financial entities shall not be subject to any type of attachment or retention by third parties.

That Law No. 1670 of the Central Bank of Bolivia, in its Article 37, establishes that the BCB shall be the depositary of the liquid reserves intended to cover the legal reserve and attend to the

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payment system and other operations with the BCB of financial intermediation entities subject to the authorization and control of the Supervisory Authority of the Financial System.

That Article 44 of Law No. 1670 of the Central Bank of Bolivia provides that the highest authority of the BCB is its Board of Directors, which is responsible for defining its policies, specialized regulations 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.

That subsections a) and i) of Article 54 of Law No. 1670 of the Central Bank of Bolivia indicate as attributes of the BCB Board of Directors to issue regulations and adopt general decisions that are necessary for the Issuing Entity to fulfill the functions, competencies, and powers assigned to it by Law; and to fix and regulate the administration of the legal reserve to which banks and other financial entities must be subject, disposing measures for its compliance.

That the BCB Statute determines in subsections 1) and 7) of its Article 11 that the Board of Directors of the Issuing Entity has the attributes to approve general decisions and issue regulations that are necessary for the BCB to fulfill the functions, competencies, and powers assigned to it by Law, as well as to establish, by an 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, in accordance with the Regulation.

That Article 26 of the BCB Statute stipulates that the Board of Directors 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 of Directors by the General Management with its recommendation.

That in Article 1 of the “Legal Reserve Regulation for Financial Intermediation Entities,” it is provided that all Financial Intermediation Entities (EIF), authorized for operation by the Supervisory Authority of the Financial System – ASFI, are subject to the provisions of the aforementioned Regulation.

That Article 2 of the Legal Reserve Regulation for Financial Intermediation Entities defines, among others, the required legal reserve, the constituted legal reserve, the legal reserve in cash, and the legal reserve in securities.

That Report BCB-APEC-SIE-INF-2021-76 from the Economic Policy Advisory and Financial Entities Management puts before and recommends to the Board of Directors the approval of the proposal to modify the Legal Reserve Regulation for Financial Intermediation Entities with the objective of contributing to deepen the expansive orientation of monetary policy.

That Report BCB-GAL-SANO-DLBCI-INF-2021-253 from the Legal Affairs Management concludes that the modifications and additions to the Legal Reserve Regulation for Financial Intermediation Entities proposed by the Economic Policy Advisory and Financial Entities Management do not contravene the current legal framework, therefore it is legally procedent, recommending to the Board of Directors its approval.

THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA,

RESOLVES:

Article 1.- Approve the modification to Article 2 (Terms and Abbreviations) of the Legal Reserve Regulation for Financial Intermediation Entities, including:

“Fund for credits destined to the productive sector (CPRO): This Fund is constituted in the BCB with the resources of the RAL Fund available after the application of the current legal reserve rates effective from January 10, 2022 and/or voluntary contributions.”

Article 2.- Approve the modification to Article 5 (Legal Reserve Rates) of the Legal Reserve Regulation for EIF, as follows:

SAYS:

“Article 5 (Legal Reserve Rates). The legal reserve rates on the liabilities detailed in Article 3 of this Regulation are as follows:

• In NC and NCUFV:

  • Cash Five point five percent (5.5%) for cash reserve.
  • Securities Four point five percent (4.5%) for securities reserve.

• In FC and FVDO:

  • Cash Ten percent (10%) for cash reserve.
  • Securities Ten percent (10%) for securities reserve for FPFs greater than 720 days; and eleven percent (11%) for the rest of liabilities.”

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Financial Intermediation Entities must constitute the legal reserve in cash, equivalent to a rate of one hundred percent (100%), on accounts included in “Other Obligations with the public, with companies with state participation and with banks and financing entities” indicated in Article 3 of this Regulation.”

SHOULD SAY:

“Article 5 (Legal Reserve Rates).”

The legal reserve rates on the liabilities detailed in Article 3 of this Regulation are as follows:

• In NC and NCUFV:

  • Cash
    • Five point five percent (5.5%) for cash reserve.
  • Securities
    • Three point five percent (3.5%) for securities reserve.

• In FC and FVDO:

  • Cash
    • Ten percent (10%) for cash reserve.
  • Securities
    • Nine percent (9%) for securities reserve for FPFs greater than 720 days; and ten percent (10%) for the rest of liabilities.

Financial Intermediation Entities must constitute the legal reserve in cash, equivalent to a rate of one hundred percent (100%), on accounts included in “Other Obligations with the public, with companies with state participation and with banks and financing entities” indicated in Article 3 of this Regulation.”

Article 3.- Approve the modification to Article 32 (Liquidity Loans in NC with Guarantee of the Fund for Credits destined to the Productive Sector and Social Interest Housing III) in its subsection 7) of the Legal Reserve Regulation for Financial Intermediation Entities, as follows:

SAYS:

“7) Credits destined to the productive sector shall be understood as credit operations of business, microcredit, or SME type, whose destination corresponds to the following categories of the Economic Activity Code and Credit Destination (CAEDC), used by ASFI:

a. Agriculture and Livestock; b. Hunting, Forestry and Fishing; c. Extraction of Crude Oil and Natural Gas;

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d. Metallic and Non-Metallic Minerals; e. Manufacturing Industry; f. Production and Distribution of Electricity; g. Construction.

Likewise, credit operations destined to the economic activities of the tourism and intellectual production sector, detailed in Annexes 2 and 3 of the Regulation for Credit Operations to the Productive Sector, contained in the Compilation of Regulations for Financial Services of ASFI, will be considered.”

SHOULD SAY:

“7) Credits destined to the productive sector shall be understood as credit operations of business, microcredit, or SME type, whose destination corresponds to the following categories of the Economic Activity Code and Credit Destination (CAEDC), used by 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 Electricity; g. Construction.

Likewise, financing to the productive sector includes credit operations destined to the tourism sector, to intellectual production, to the manufacture, assembly, and purchase of electric and hybrid motor vehicles, as well as the manufacture, assembly, and acquisition of electric and hybrid agricultural machinery, in accordance with what is provided in Sections 3, 4, and 5 of the Regulation for Credit Operations to the Productive Sector, contained in the Compilation of Regulations for Financial Services of ASFI.

The financing of activities defined as direct complementary services to production, in accordance with what is provided in Articles 9° and 10° of section 2 of the Regulation for Credit Operations to the Productive Sector, contained in the Compilation of Regulations for Financial Services of ASFI, is part of credit to the productive sector.”

Article 4.- Approve the modification of Article 38 (Liquidity Loans in NC with Guarantee of the FIUSEER Fund) subsection e) of the Legal Reserve Regulation for Financial Intermediation Entities, as follows:

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SAYS:

“e) For the purposes of the comparison indicated in the previous subsection (d), EIFs with loans guaranteed by FIUSEER-NC must send to the BCB a letter in the form of a Sworn Declaration with a copy to ASFI with the information of the credits granted within the framework of FIUSEER, by the 5th business day of the following month. The information included must not consider credits reported in other sworn declarations (CPVIS III and CAPROSEN). The control will begin with information as of the end of August 2021.”

SHOULD SAY:

“e) For the purposes of the comparison indicated in the previous subsection (d), EIFs with loans guaranteed by FIUSEER-NC must send to the BCB a letter in the form of a Sworn Declaration with a copy to ASFI with the information of the credits granted within the framework of FIUSEER, by the 5th business day of the following month. The information included must not consider credits reported in other sworn declarations (Funds CPVIS III, CAPROSEN, and CPRO). The control will begin with information as of the end of August 2021.”

Article 5.- Approve the inclusion of Title VIII (On the Fund for Credits destined to the Productive Sector-CPRO) in the Legal Reserve Regulation for Financial Intermediation Entities, as follows:

Title VIII

ON THE FUND FOR CREDITS DESTINED TO THE PRODUCTIVE SECTOR (CPRO)

Article 40.- (Constitution of the Fund for Credits destined to the Productive Sector).

The Fund for Credits destined to the Productive Sector (CPRO Fund) is constituted in the BCB, in national currency (CPRO Fund-NC) with the available resources resulting from the modification of the legal reserve rate for securities in NC-NCUFV effective from January 10, 2022, and, in foreign currency (CPRO Fund-FC) with the available resources resulting from the modification of the legal reserve rate for securities in FC-FVDO effective from January 10, 2022; in addition to the voluntary contributions of EIFs in FC and deposited in the BCB account in its correspondent bank abroad, made from January 18 to December 30, 2022. The validity of this fund will be until March 31, 2025. The resources of each EIF in the fund will be returned by the BCB upon expiration of the fund in accordance with subsection 9 of Article 41.

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Article 41.- (Loans in NC with Guarantee of the Fund for Credits destined to the Productive Sector).

The resources of each participant in the CPRO Fund will serve as guarantee for the NC loans they request from the BCB, under the following conditions:

1. EIFs may request loans from the BCB in NC at an interest rate of 0%. These loans will have the purpose of increasing the credit portfolio destined to the Productive Sector in NC.

2. Loans may be requested until December 30, 2022; the extension of the loan request period will be reviewed annually by the BCB.

3. The maximum amount of accumulated loans will be the participation amount of each EIF in the CPRO Fund, equivalent in NC to the prevailing purchase exchange rate. Loans will have a maturity date of March 31, 2025.

4. Monthly, the balance of credits destined to the productive sector in NC of each EIF, with information as of each month-end, will be compared with the balance of December 31, 2021, provided by ASFI. If the increase, resulting from the comparison, is less than the accumulated loans granted by the BCB, the difference will pay interest at the NC repo rate of the date of evaluation of each month-end, from that date until the entity has remedied that difference.

5. For the purposes of the comparison indicated in subsection 4 of this article, EIFs with loans guaranteed by the CPRO Fund must send to the BCB a letter in the form of a sworn declaration with information on their credits to the productive sector, as of each month-end, by the fifth business day of the following month. The information included must not consider credits reported in other sworn declarations (Funds CPVIS III, CAPROSEN, and FIUSEER). The control will begin with information as of the end of January 2022.

6. In case an EIF needs to demonstrate compliance with the portfolio increase on a date other than month-end to remedy the difference indicated in subsection 4 of this article, it must send this information to the BCB, in the form of a sworn declaration, within a maximum period of five business days after the portfolio increase is met.

7. In case the EIF with loans guaranteed by the CPRO Fund does not send the letters cited in the previous subsections within the established deadlines, the BCB will communicate the non-compliance to ASFI so that this authority applies the corresponding fines or sanctions.

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8. Credits destined to the productive sector shall be understood as the credit operations established in subsection 7 of Article 32 of this Regulation.

9. On March 31, 2025, the BCB will return to EIFs, in NC and FC respectively, their participation in the CPRO Fund-NC and CPRO Fund-FC, prior to the cancellation of their NC loans guaranteed by the fund. In the case that an EIF does not have sufficient resources in its current or reserve account in NC to pay its loans, the BCB may offset the difference with its participation in the CPRO Fund-NC, and in case of insufficiency of this fund, it will offset the balance with the CPRO Fund-FC at the prevailing purchase exchange rate. The return of voluntary contributions, upon request of EIFs, may be made in the EIFs' accounts abroad or in another account abroad communicated by the EIF to the BCB, without the BCB charging the Commission for transfer of funds abroad for the financial system, established in the BCB's Service Fees Table.

10. The validity of the CPRO Fund may be extended to the extent that the BCB considers pertinent.”

Article 42.- (Rights and Responsibilities). Participating EIFs will be beneficiaries of all rights and responsibilities of the CPRO Fund.”

Article 6.- The modification of the Legal Reserve Regulation for Financial Intermediation Entities will enter into force from January 10, 2022.

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

La Paz, December 28, 2021

Roger Edwin Rojas Ulo PRESIDENT a.i.

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Oscar Ferrufino Morro VICEPRESIDENT a.i.

Gabriel Herbas Camacho DIRECTOR a.i.

Gumerindo Héctor Pino Guzmán DIRECTOR a.i.

Diego Alejandro Pérez Cueto Eulert DIRECTOR a.i.