BOARD OF DIRECTORS

BOARD RESOLUTION NO. 042/2022

SUBJECT:

INTERNATIONAL OPERATIONS DEPARTMENT – APPROVE INVESTMENT GUIDELINES FOR THE ADMINISTRATION OF THE FOREIGN CURRENCY AND NATIONAL CURRENCY WITH VALUE MAINTENANCE RELATIVE TO THE DOLLAR LIQUID ASSET REQUIREMENT FUNDS (RAL-ME AND RAL-MVDOL).

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).
• The Statute of the Central Bank of Bolivia, approved by Board Resolution No. 128/2005 of October 21, 2005, and its modifications.
• Board Resolution No. 018/2020 of February 18, 2020, which approves the Legal Reserve Regulation for Financial Intermediation Entities.
• Board Resolution No. 007/2016 of June 12, 2016, modified by Board Resolution No. 045/2019 of May 7, 2019; which approves Investment Guidelines for the Administration of the Foreign Currency Liquidity Asset Requirement Fund (RAL-ME).
• Report BCB-GOI-SRES-DNI-INF-2022-13 dated May 25, 2022, issued by the International Operations Department (GOI).
• Report BCB-GAL-SANO-DLBCI-INF-2022-95 dated June 1, 2022, issued by the Legal Affairs Department (GAL).

CONSIDERING:

That Article 327 of the Political Constitution of the State states that the 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 Central Bank of Bolivia to maintain the internal purchasing power stability of the currency, to contribute to economic and social development.

That Article 328 of the Political Constitution of the State provides that the attributions of the Central Bank of Bolivia, in coordination with the economic policy determined by the Executive Branch, in addition to those indicated by the Law, are to determine and execute monetary policy, execute exchange rate policy, regulate the payment system, authorize the issuance of currency, and administer international reserves.

That Article 1 of Law No. 1670 of the Central Bank of Bolivia, modified by Article 67, section A3, numeral 1 of Law No. 1864 of June 15, 1998, on Popular Property and Credit, states that the BCB is a State institution, of public law, of an autarkic nature, of indefinite duration, with its own legal personality and assets; it is the sole monetary and exchange rate authority of the country with administrative, technical, and financial competence and specialized normative powers of general application.

That Article 7 of Law No. 1670 establishes that the BCB may establish Legal Reserves of mandatory compliance for Banks and financial intermediation entities. It also states that their composition, amount, method of calculation, characteristics, and remuneration shall be established by the Board of the Bank, by an absolute majority of votes.

That Article 37 of Law No. 1670 determines that the BCB will be the depository of the liquid reserves intended to cover the legal reserve and attend to the payment system and other operations with the BCB of financial intermediation entities, and that the BCB may delegate the custody of these deposits to the same or other financial entities, according to regulations.

That Articles 44 and subsections a) and i) of Article 54 of Law No. 1670 of the BCB define that the Highest Authority of the Central Bank of Bolivia is its Board of Directors and that its attributions include issuing norms and adopting general decisions that are necessary for the BCB to fulfill the functions, competencies, and powers assigned to it by the Law, as well as Fixing and regulating the administration of the legal reserve to which banks and other financial entities must be subject, disposing of measures for its compliance.

That numerals 1) and 7) of Article 11 of the Statute of the Central Bank of Bolivia establish that the Board has the attributions to approve decisions and issue norms, as well as to establish, by an absolute majority of votes, legal reserves of mandatory compliance for financial intermediation entities and approve their composition, amount, calculation, characteristics, forms of administration, custody, and remuneration, in accordance with Regulations.

That Article 26 of the BCB Statute determines that the Board pronounces itself on matters within its competence through resolutions and may also do so through decisions that will be expressly recorded in the minutes. It also refers that every draft Board Resolution must be motivated and justified by a Technical Report from the Department or Departments to which the matter subject to the Resolution corresponds, and by a Report from the Legal Affairs Department. These reports must be sent to the Board by the General Management with its recommendation.

That through Board Resolution No. 007/2016, modified by Board Resolution No. 045/2019, the Investment Guidelines for the Administration of the Foreign Currency Liquidity Asset Requirement Fund (RAL-ME) were approved.

That through Board Resolution No. 018/2020 and its modifications, the Legal Reserve Regulation for Financial Intermediation Entities was approved, through which the closed-end investment fund "Fixed Asset Requirement Fund," constituted by resources contributed by Financial Intermediation Entities through legal reserve in securities, is established.

That points (iii) and (iv) of Article 20 of the Legal Reserve Regulation for Financial Intermediation Entities establish the composition of the RAL-ME and RAL-MVDOL Funds, determining that their investment guidelines will be approved by the BCB Board of Directors.

That Article 22 of the Legal Reserve Regulation for Financial Intermediation Entities establishes, among other things, that the RAL-ME and RAL-MVDOL Funds will be administered by the Central Bank of Bolivia or by one or more specialized entities in Delegated Administration, with recognized technical capacity and international solvency, in accordance with the norms approved by the BCB Board of Directors.

That Report BCB-GOI-SRES-DNI-INF-2022-13 from the GOI establishes the evaluation of the investment guidelines, concluding that there is a need to update and adapt them, recommending to the Board the approval of the "Investment Guidelines for the Administration of the Foreign Currency and National Currency with Value Maintenance Relative to the Dollar Liquidity Asset Requirement Fund (RAL-ME and RAL-MVDOL)."

That Report BCB-GAL-SANO-DLBCI-INF-2022-95 from the GAL concludes that the "Investment Guidelines for the Administration of the Foreign Currency and National Currency with Value Maintenance Relative to the Dollar Liquidity Asset Requirement Fund (RAL-ME and RAL-MVDOL)," justified and proposed by the GOI, do not contravene the current legal framework; therefore, it recommends to the BCB Board of Directors their approval.

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THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1.- Approve the Investment Guidelines for the Administration of the Foreign Currency and National Currency with Value Maintenance Relative to the Dollar Liquidity Asset Requirement Fund (RAL-ME and RAL-MVDOL), which form part of the Annex to this Board Resolution.

Article 2.- This Resolution will enter into force from its approval.

Article 3.- The RAL-ME and RAL-MVDOL Funds will be managed by the Central Bank of Bolivia through the International Operations Department.

Article 4.- Repeal Board Resolutions No. 007/2016 and No. 045/2019.

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

La Paz, June 13, 2022

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

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ANNEX

INVESTMENT GUIDELINES FOR THE ADMINISTRATION OF THE FOREIGN CURRENCY AND NATIONAL CURRENCY WITH VALUE MAINTENANCE RELATIVE TO THE DOLLAR LIQUID ASSET REQUIREMENT FUNDS (RAL ME AND RAL MVDOL).

a) Currency

Investments in United States dollars are authorized.

b) Authorized Countries for Investment.

The country where the investments are made and the country of the headquarters of the institutions in which the investments of the RAL ME and RAL-MVDOL Funds are made, must have a long-term sovereign credit risk rating equal to or greater than AA (S&P), AA (Fitch), or Aa2 (Moody’s).

c) Referential Comparator (Benchmark)

ICE BofA 3-6 Month US Treasury Bill Index.

d) Instruments:

The authorized investment instruments are:

• Overnight Deposits
• Commercial Paper
• Certificates of Deposit
• Bills
• Notes
• Bonds
• Medium Term Notes
• Floating Rate Notes

e) Risk and Concentration Limits

Investments in issuers with a long-term credit risk rating equal to or greater than A (S&P), A (Fitch), or A2 (Moody’s), and a short-term rating equal to or greater than A-1 (S&P), F1 (Fitch), or P-1 (Moody’s) are authorized, using in the first instance the ratings of the agency with a current contract with the BCB. In cases where the contracted rating agency does not assign a credit rating to a counterparty, the lower rating of the other two rating agencies will be used.

Investments may be made in the Bank for International Settlements (BIS).

The Concentration Limits on the total portfolio are:

Sector / Issuer	Limit as Percentage of Portfolio
Government	100%
Government Agencies	40%
Supranational	30%
Banking	30%
Per Banking Issuer*	5%

*Limit applicable if the value of the Fund is greater than USD 100 million.

f) Intermediaries:

The purchase and sale of securities will be carried out with primary dealers, eligible financial institutions, or institutions registered in the Stock Exchanges of authorized countries.

Primary issuances may be negotiated directly with the issuer.

g) Duration

The average duration of the portfolio must not exceed 0.6 years. The individual duration per security must not exceed 2 years.

h) Other Operations

The Securities Custodian is authorized to carry out securities lending operations of the RAL-ME and RAL-MVDOL Fund securities for a term of one day (Securities Lending).

i) Restrictions

Investments in subordinated debt securities are prohibited. Investments cannot have components associated with the equity market. Investments in financial centers classified as off-shore are prohibited.