Central Bank of Bolivia

Board of Directors

BOARD RESOLUTION NO. 150/2015

SUBJECT: MONETARY OPERATIONS MANAGEMENT - APPROVES THE REGULATION OF OPEN MARKET OPERATIONS FOR MONETARY REGULATION PURPOSES WITH SECURITIES ISSUED BY THE CENTRAL BANK OF BOLIVIA OR THE GENERAL TREASURY OF THE NATION

VISTOS:

• Law No. 1670 of October 31, 1995 of the Central Bank of Bolivia (BCB).
• Law No. 1834 of March 31, 1998 on the Securities Market.
• The Statute of the BCB approved by Board Resolution (B.R.) No. 128/2005 of October 21, 2005 and its subsequent modifications.
• The Regulation of Operations for Monetary Regulation Purposes with Securities Issued by the General Treasury of the Nation or by the Central Bank of Bolivia, approved by B.R. No. 129/2003 of November 11, 2003 and modified by B.R. No. 070/2005 of May 24, 2005 and B.R. No. 120/2009 of October 6, 2009.
• Report BCB-GOM-SOMA-INF-2015-46 of August 18, 2015, from the Monetary Operations Management.
• Report BCB-GAL-SANO-INF-2015-329 of August 21, 2015, from the Legal Affairs Management.

CONSIDERING:

• That Article 6 of Law No. 1670 empowers the BCB to execute monetary policy and regulate the quantity of money and the volume of credit according to its monetary program, being able to issue, place, and acquire securities and carry out other open market operations for this purpose.
• That in virtue of the attributions conferred by subsections a), d), and o) of Article 54 of Law No. 1670 and items 1), 4), and 29) of Article 11 of the BCB Statute, the BCB Board of Directors is empowered to issue norms and adopt general decisions so that the BCB fulfills the functions, competencies, and powers assigned by Law, as well as to issue norms for the open market operations carried out by the BCB and approve the BCB Regulations, by two-thirds votes of all its members.
• That Article 7 of Law No. 1834 establishes that both the issuances of the BCB and the TGN are exempt from the public offering authorization by the Superintendence of Pensions, Securities, and Insurance (SPVS), their own legal norms backing their issuance and public offering being sufficient.
• That Report BCB-GOM-SOMA-INF-2015-46 from the Monetary Operations Management (GOM) recommends replacing the current Regulation of Operations for Monetary Regulation Purposes with Securities Issued by the General Treasury of the Nation or by the Central Bank of Bolivia with a new one that has a broader and more flexible character.
• That Report BCB-GAL-SANO-INF-2015-329 from the Legal Affairs Management establishes that there is no legal impediment for the BCB Board of Directors to approve the new Regulation of Open Market Operations for Monetary Regulation Purposes with Securities Issued by the Central Bank of Bolivia or by the General Treasury of the Nation proposed by the GOM.

THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1.- Approve the new Regulation of Open Market Operations for Monetary Regulation Purposes with Securities Issued by the Central Bank of Bolivia or by the General Treasury of the Nation in its 7 Chapters, 33 articles, and 2 transitional provisions, which will enter into force from the date of its approval.

Article 2.- Repeal, from the approval of this Resolution, the Regulation of Operations for Monetary Regulation Purposes with Securities Issued by the General Treasury of the Nation or by the Central Bank of Bolivia, approved by Board Resolution No. 129/2003, of November 11, 2003.

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

La Paz, August 25, 2015

Marcelo Zabalaga Estrada

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Reynaldo Yujra Segales Abraham Pérez Alandia Ronald Polo Rivero Sergio Velarde Vera

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ANNEX

REGULATION OF OPEN MARKET OPERATIONS FOR MONETARY REGULATION PURPOSES WITH SECURITIES ISSUED BY THE CENTRAL BANK OF BOLIVIA OR THE GENERAL TREASURY OF THE NATION

CHAPTER I

GENERAL PROVISIONS

Article 1.- (Object) The present Regulation aims to determine the conditions for the auction, adjudication, redemption, administration, and control of operations with securities issued by the Central Bank of Bolivia (BCB) or by the General Treasury of the Nation (TGN), and placed by the BCB for monetary policy purposes.

Article 2.- (Issuance Currency) Securities may be issued in national currency, in other currencies, or indexed, according to the requirements of monetary policy.

Article 3.- (Registration) For their public offering, securities will be registered in the Securities Market Registry of the Authority for the Supervision of the Financial System (ASFI).

CHAPTER II

OPEN MARKET OPERATIONS COMMITTEE

Article 4.- (Object of COMA) The Open Market Operations Committee (COMA) is responsible for the management and administration of Open Market Operations (OMA), within the framework of the BCB Statute and the OMA Regulation.

Article 5.- (Organization) The COMA is composed of the following BCB authorities:

• The President of the BCB.
• The Manager of Monetary Operations.
• The Main Advisor of Economic Policy.
• The Deputy Manager of Open Market Operations, who acts as Secretary, with the right to speak but without vote.

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The President of the BCB and the other members of the COMA may delegate their representation, according to what is established in the BCB Statute. The BCB Directors may participate in an informative capacity.

Article 6.- (Attributions) Are attributions of the COMA, in addition to those established in Article 53 of the BCB Statute: a) Design and propose to the Board of Directors the application of monetary policy instruments through OMA. b) Apply the quarterly guidelines concerning OMAs, defined by the BCB Board of Directors, as well as the recommendations of the Monetary and Exchange Policy Committee. c) Define the form of issuance, the cut-off rates or prices, the quantities offered, the terms, the currencies, the minimum and/or maximum amounts, and other characteristics of the securities for operations authorized by the Board of Directors. d) Determine the autonomous trading ranges of the responsible area for execution defined in Article 12, for authorized operations, when applicable. e) Publicly summon to the securities auction session at least one day in advance. f) Declare the auction totally or partially void, in the following cases:

• When no bids are presented.
• When the presented bids have been rejected due to the causes defined in Article 19. g) Ensure compliance with this Regulation, propose amendments to the Board of Directors, and resolve situations not contemplated in it. h) Recommend to the Board of Directors the necessary actions for the development and control of OMAs. i) Determine the eligibility criteria for the contracting of placement agents or other services required for the execution of OMAs.

Article 7.- (Sessions) The COMA will determine the periodicity of its ordinary sessions. This decision will be communicated to the Board of Directors. The President may summon extraordinary sessions when deemed necessary.

Article 8.- (Quorum) The number necessary to meet quorum will be at least three of its members, two of whom must necessarily be the President and the Manager of Monetary Operations or their representatives.

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Article 9.- (Resolutions) COMA resolutions will be taken by a simple majority of votes of the members present at the session. In case of a tie, the President will have the casting vote.

Article 10.- (Minutes) The Secretary will draft Minutes of each of the COMA sessions, which will be approved in the next session.

Article 11.- (Activity Report) The COMA, through its President, will keep the Board of Directors informed about the development of its activities.

Article 12.- (Responsible Area for Execution) The Monetary Operations Management of the BCB (GOM) will be responsible for carrying out all operations related to the operation mechanisms defined by the BCB Board of Directors. The GOM, when applicable, is responsible for carrying out the control and supervision of operations carried out through the Securities Depository Entity (EDV).

CHAPTER III

PUBLIC AUCTION

Article 13.- (Call for Bids) The public auction will be carried out through the system provided by the BCB, prior to a call, which will be published at least one business day before its realization. The publication will be made in at least one written communication medium, without prejudice to the use of other means authorized by the COMA.

Article 14.- (Authorized Agents) All financial entities with a license of operation granted by the ASFI or by the Authority for the Supervision and Control of Pensions and Insurance (APS) may participate in the auctions, prior to signing the Electronic Securities Auction and Repo Contract, and prior to compliance with the requirements of the Open Market Operations Regulation and those defined in this Regulation. Private individuals and non-financial entities in the private sector may participate in securities auctions through authorized agents.

Article 15.- (Participation) [Text incomplete in the provided image]

# Central Bank of Bolivia
## Board of Directors

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To participate in the public auction, entities must previously sign the Electronic Securities Auction and Repo Contract with the BCB, which enables them to access the system provided to carry out operations remotely with securities issued by the BCB or by the TGN, through electronic transactions.

Electronic transactions sent by participants to the system provided by the BCB will be confirmed through electronic means containing the data of the bid, which will have the quality of acknowledgment of receipt and their content will be binding and irrevocable.

In case of contingency that prevents the realization of electronic transactions, the "Open Market Operations – Public Securities Auction" Form, approved by General Management, will be used. The GOM will inform participants of the start of operations in contingency. The detail of the mechanisms will be established in an Operational Guide of the system provided by the BCB, which is an integral part of the Electronic Securities Auction and Repo Contract with the BCB.

The "Open Market Operations – Public Securities Auction" Form may be sent via email or any other means accepted by the COMA.

Participants must specify the legal name of the bidder, number of bids, and for each of them, as applicable, rate or price, quantity of securities, currency, term of the security, as well as other additional data according to the Call. The BCB will validate the information and the signatures of its legal representatives duly registered in the BCB, and will enter the received information.

The Deputy Manager of Open Market Operations (SOMA) will certify the time of receipt of the requests, without this implying any order of precedence.

## Article 16.- (Fund Provision to Guarantee Participation in Auction)

Entities participating in the public auction must guarantee their bids with the equivalent of 2% of the nominal value of the demanded securities, through written communication authorizing the debit of their current account and/or reserve account for their own operations. Participating entities that do not have a current account and/or reserve account in the BCB must send written communication from their clearing entity authorizing the debit of their current account and/or reserve account for their operations. In both cases, the authorization may be indefinite.

## Article 17.- (Acceptance of Terms and Conditions)

With the electronic submission of the request, or written in case of contingency, the participant submits to the terms of this Regulation and to those of the Call, not being able to withdraw their request once received by the BCB.

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## Article 18.- (Reading of Bids)

The received bids and their characteristics will be read at the COMA meeting.

## Article 19.- (Causes for Rejection)

Causes for rejection are:

a) When operating through the electronic system provided by the BCB, if the entity does not send the written communication (own or from its clearing entity) to the SOMA, authorizing the debit of its current account and/or reserve account in the BCB until the conclusion of the auction, as established in Article 16 of this regulation.

b) In case of contingency:

i. If the entity does not send the written communication (own or from its clearing entity) to the SOMA, authorizing the debit of its current account and/or reserve account in the BCB until the conclusion of the auction, as established in Article 16 of this regulation.

ii. Incomplete or incorrect information in the request, with respect to what is established in this Regulation and the conditions defined in the Call.

iii. Receipt of the form outside the schedule established by the Executive Body at the time of informing the State of Contingency.

## CHAPTER IV
## ADJUDICATION

## Article 20.- (Types of Adjudication)

In the modality of auction on explicit prices or rates proposed by participants, the COMA will carry out the adjudication of the Securities to the best proposals, in descending order of price or ascending in terms of discount rate or yield.

At the time of carrying out the adjudication, the COMA may reject bids with prices lower or rates higher than their reference levels. If in the margin there is equality of prices, discount rates, or yields between bids, the securities will be adjudicated by the pro-rata system, when applicable. If in the margin the quantity demanded in a single bid is higher than the available remainder of supply under this modality, only that remainder will be adjudicated.

The COMA may define other types of adjudication with the approval of the Monetary and Exchange Policy Committee.

## Article 21.- (Settlement of Operations)

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The sale will be effective 48 hours after the auction adjudication or in another term defined by the COMA. Within this term, the adjudicatee must ensure the provision of sufficient funds through written communication authorizing the debit of their current account and/or reserve account in the BCB for their own operations; entities that are adjudicatees and that do not have a current account and/or reserve account in the BCB must send written communication from their clearing entity authorizing the debit of their current account and/or reserve account for the adjudicated amount. In both cases, the authorization may be indefinite.

## Article 22.- (Sanctions)

If on the day of the sale the adjudicatee or their clearing entity does not have sufficient resources to make the payment of the adjudicated securities or desists from the adjudication, the BCB will apply as a sanction the collection of a fine equivalent to 2% of the nominal value of the adjudicated amount, without prejudice to other sanctions that the COMA might determine.

## Article 23.- (Publication)

The GOM of the BCB will publish the results of the auction, without specifying the legal name of the adjudicatees.

## Article 24.- (Commercial Year)

The calculation of rates will be carried out taking as a base the commercial year of 360 days.

## CHAPTER V
## ISSUANCE, REGISTRATION, AND CUSTODY

## Article 25.- (Issuance of Securities)

The BCB will issue a security for each sale carried out through the mechanisms authorized by the Board of Directors, with the characteristics and security requirements that back the issuance.

The buyer, in the case of paper securities, must pay the cost of replacement of forms and custody that are established in the Table of Commissions and Other Incomes of the BCB.

## Article 26.- (Registration and Custody)

The BCB will electronically register the name of the buyer of the securities and all definitive purchase and sale operations of the same, independently of the records of securities represented by book entries in charge of the EDV, whose ownership information, for pertinent legal effects, will prevail over that recorded in the BCB registry.

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In the case of paper securities, communication to the SOMA, in writing or by another means authorized by the COMA, of the purchase and sale operations of the securities in the secondary market is mandatory. In case this communication does not exist, the transfer of ownership of the paper securities cannot be registered in the BCB and will lack validity for their holder until the omission of registration is remedied.

Additionally, the BCB may be custodian, in physical or electronic register, of the issued securities. The BCB may also register the repo operations carried out between agents.

## Article 27.- (Accounting Registration)

The Securities issued and placed by the BCB will be registered according to internal regulations.

The Treasury Securities placed on behalf and charge of the BCB for monetary policy purposes will be registered in the BCB accounting as determined in an Inter-institutional Agreement signed between the Ministry of Economy and Public Finances and the BCB.

## Article 28.- (Exchange Rate)

Operations in national currency indexed to the United States dollar will be carried out at the BCB's buying exchange rate in effect on the date, and operations indexed to the UFV will be carried out at the index in effect on the date of the operation. Operations in other currencies will be carried out at the exchange rate that the COMA determines.

## Article 29.- (Fractionation of Securities)

In repo operations, the BCB may fractionate the issued securities, respecting the characteristics and conditions of the original issuance.

## CHAPTER VI
## REPLACEMENT, REVERSION, REDEMPTION, AND PRESCRIPTION

## Article 30.- (Replacement of Paper Securities)

In case of loss or misplacement of paper securities, their replacement will proceed according to the norms established in the Commercial Code.

## Article 31.- (Reversion of Book Entry Securities)

Securities represented by book entries are subject to reversion to their paper expression, solely to enable their negotiation in international markets, according to the applicable current regulation for this effect.

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## Article 32.- (Redemption)

Securities issued by the BCB and registered by book entries will be redeemed on the maturity dates, prior to verification of the ownership of the holder and the amount with the EDV records, and in the case of paper securities, with those of the BCB prior to presentation of the paper security. The COMA may determine the modalities and conditions of early redemption and conversion of the securities in effect.

Interest will not be recognized after the maturity date, nor will automatic renewal of the securities be accepted.

If the maturity of the security coincides with a non-working day, they may be redeemed on the previous working day at the holder's request, at curve price.

## Article 33.- (Prescription)

Actions to collect securities prescribe in favor of the State within a period of ten years from the date of their enforceability, as established by the Commercial Code.

## CHAPTER VII
### TRANSITIONAL PROVISIONS

### Transitional Provision First.- (Previous Issuances)

Securities issued by the TGN or the BCB, and placed by the latter for monetary regulation purposes prior to this Regulation, are subject to the provisions that gave them origin, until their maturity.

### Transitional Provision Second.- (Addendums to Contracts with the BCB)

Entities that have valid Agreements or Contracts for Electronic Auction of Public Securities and Repos signed with the BCB, may operate for a period of three months with the valid contracts. After this period, addendums will be signed based on the current BCB regulations that regulate these operations.

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