2023-12-12 | RESOLUCIONES DE DIRECTORIO N° 158/2023

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Board Resolution No. 158/2023

The Board of Directors of the Central Bank of Bolivia amends Article 23 of the Regulation for the Administration of International Reserves to establish specific sovereign and issuer credit rating thresholds for monetary reserves, gold investments, and repo operations. The resolution mandates minimum long-term ratings of A or higher for general monetary investments, AA- or higher for gold, and A- or higher for repo operations where the central bank is the lender, while capping annual credit risk at 1% of USD-denominated reserves. These requirements apply to all international reserve investments and intermediation activities managed by the central bank.

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BOARD OF DIRECTORS

BOARD RESOLUTION NO. 158/2023

SUBJECT: INTERNATIONAL OPERATIONS DEPARTMENT – MODIFY THE REGULATION FOR THE ADMINISTRATION OF INTERNATIONAL RESERVES.

VIEWING:

  • The Political Constitution of the State, dated February 7, 2009.
  • Law No. 1670 of October 31, 1995, of the Central Bank of Bolivia (BCB) and its modifications.
  • Law No. 1503, of May 5, 2023, Law on the Purchase of Gold Intended for the Strengthening of International Reserves.
  • The Statute of the BCB approved by Board Resolution No. 095/2022 of October 6, 2022, and its modifications.
  • The Regulation for the Administration of International Reserves approved by Board Resolution No. 071/2023 of May 9, 2023, and its modifications.
  • The Technical Report BCB-GOI-SRES-DNI-INF-2023-87 of December 1, 2023, from the International Operations Department (GOI).
  • The Legal Report BCB-GAL-SANO-DLBCI-INF-2023-405 of December 1, 2023, from the Legal Affairs Department (GAL).

CONSIDERING:

  • That Article 327 of the Political Constitution of the State determines that the Central Bank of Bolivia (BCB) is a public law institution, with legal personality and its own assets, which, within the framework of the State's economic policy, has the function of maintaining the stability of the internal purchasing power of the currency, to contribute to economic and social development.
  • That numeral 5) of paragraph I of Article 328 of the Political Constitution of the State establishes that the BCB has the authority to Administer international reserves.
  • That Article 1 of Law No. 1670 establishes that the BCB is a State institution, of public law, of an autarkic nature, of indefinite duration, with its own legal personality and assets and with its legal domicile in the city of La Paz. It is the sole monetary and exchange authority of the country, with administrative, technical, and financial competence and

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specialized normative powers of general application.

  • That Article 14 of Law No. 1670 establishes that the BCB will ensure the strengthening of International Reserves so as to allow the normal functioning of Bolivia's international payments.
  • That Article 16 of Law No. 1670 provides that the BCB will administer and manage its International Reserves, being able to invest them and deposit them in custody, as well as dispose of and pledge them, in the manner it considers most appropriate for the fulfillment of its object and functions and for their adequate safeguarding and security. It may also purchase foreign exchange hedging instruments with the objective of reducing risks. In the case of the pledge of gold, this must have legislative approval.
  • That Article 44 of Law No. 1670 establishes that the highest authority of the BCB is its Board of Directors, which is responsible for defining its policies, specialized normative rules of general application, and internal rules.
  • That subsections a), c), and o) of Article 54 of Law No. 1670 indicate the following as attributions of the Board of Directors: Issue the rules and adopt the general decisions that are necessary for the BCB to fulfill the functions, competencies, and powers assigned to it by the Law; monitor the execution of monetary, exchange, credit, financial intermediation, and international reserve administration policies and regulations; and 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 the Sole Final Provision of Law No. 1503 states that within the framework of Articles 327 and 328 of the Political Constitution of the State, the BCB, with the objective of complying with its constitutional mandate, is authorized to apply what is provided in Law No. 1670 of October 31, 1995, of the Central Bank of Bolivia and its modifications, which is sufficient for the development of its functions, without requiring further provisions from said law.
  • That Article 5 of the BCB Statute has normative, administrative, technical, and financial competence, including among these the normative authority to issue specialized rules in the fields assigned by the Law and technical authority for the formulation of policies and the application of instruments that allow it to fulfill its object.
  • That pursuant to the attributions conferred by numerales 1) and 6) of Article 10 of the BCB Statute, it provides that the Board of Directors has the authority to approve general decisions and issue the rules that are necessary for the BCB to fulfill the functions, competencies, and powers assigned to it by the Law; as well as to approve the policy and rules for the administration of International Reserves and monitor their execution.

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  • That numeral 30) of the aforementioned Article 10 of the BCB Statute states that the Board of Directors may 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 paragraph I of Article 24 of the aforementioned Statute provides that resolutions and decisions of the Board of Directors are adopted by a simple majority of votes of its members present in a meeting, except in cases where Law No. 1670 or this Statute require qualified majorities.
  • That Article 26 of the Statute stipulates that the Board of Directors rules on matters within its competence through resolutions. It may also do so through decisions that will be expressly recorded in the minutes. Likewise, every draft resolution of the Board of Directors must be motivated and justified by a technical report from the Department or Departments to which the subject matter of the resolution corresponds and by a report from the Legal Affairs Department. These reports must be sent to the Board of Directors by the General Management with its recommendation.
  • That the Regulation for the Administration of International Reserves approved by Board Resolution No. 071/2023 of May 9, 2023, and its modifications aims to establish the guidelines and general rules for the administration, evaluation, and control of the International Reserves of the BCB.
  • That the Technical Report BCB-GOI-SRES-DNI-INF-2023-87 from the GOI concludes that there is a need to improve the liquidity of International Reserves, for which, within the framework of current legal regulations, it recommends submitting to the Board of Directors the approval of the modification to the Regulation for the Administration of International Reserves, prior to the legal opinion of the Legal Affairs Department.
  • That the Report BCB-GAL-SANO-DLBCI-INF-2023-405 from the GAL concludes that, in accordance with Report BCB-GOI-SRES-DNI-INF-2023-87, the modification of Article 23 of the Regulation for the Administration of International Reserves approved by Board Resolution No. 071/2023, and its modifications does not contravene any regulatory provision; therefore, it is legally appropriate, recommending to the Board of Directors of the BCB its approval.

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THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1. Approve the modification of Article 23 (Credit Risk) of the Regulation for the Administration of International Reserves approved by Board Resolution No. 071/2023 of May 9, 2023, and its modifications, with the following text:

“Article 23.- (Credit Risk)

I. The country where the investments are made and the country of the headquarters of the institutions in which the investments of International Monetary Reserves are made or with which the intermediation is carried out, must have a long-term sovereign credit risk rating equal to or greater than A (S&P), A (Fitch), or A2 (Moody’s).

II. For gold investments, the country where the investments are made and the country of the headquarters of the institutions in which the investments are made must have a long-term sovereign credit risk rating equal to or greater than AA- (S&P), AA- (Fitch), or Aa3 (Moody’s).

III. The long-term issuer credit risk rating where International Reserve investments are made must be equal to or greater than A (S&P), A (Fitch), or A2 (Moody’s) and short-term equal to or greater than A-1 (S&P), F1 (Fitch), or P-1 (Moody’s).

IV. The long-term issuer credit risk rating with which repo operations of International Reserves are carried out, when the BCB acts as the lender, must be equal to or greater than A- (S&P), A- (Fitch), or A3 (Moody’s) and short-term equal to or greater than A-1 (S&P), F1 (Fitch), or P-1 (Moody’s).

V. Investments are made in non-subordinated debt securities.

VI. Investments are made in securities with no component associated with the equity market.

VII. Investments of International Reserves may be made in international organizations: Bank for International Settlements (BIS), World Bank (WB), Latin American Bank of Foreign Trade (BLADEX), and Latin American Reserve Fund (FLAR).

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VIII. For gold investments, financial entities must be members of the London Bullion Market Association.

IX. The maximum credit loss in a year, measured by Credit Value at Risk (Credit VaR), is 1% for International Monetary Reserves denominated in United States dollars, with a confidence level of 99.9%. In case of non-compliance, the Investment Control Department will report this to the CRI, the body that will submit corrective actions to be followed to the Board of Directors for approval.”

Article 2. The modification to the Regulation for the Administration of International Reserves will enter into force from the publication of this Board Resolution.

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

La Paz, December 4, 2023

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

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