Resolution 007/2012 Approving Modifications to the Legal Reserve Regulation

BOARD RESOLUTION NO. 007/2012
SUBJECT: ECONOMIC POLICY ADVISORY – FINANCIAL ENTITIES MANAGEMENT – APPROVES MODIFICATION TO THE LEGAL RESERVE REGULATION.

HAVING SEEN:
The Political Constitution of the State promulgated on February 7, 2009.
Law No. 1670 of October 31, 1995 of the Central Bank of Bolivia (BCB).
The BCB Statute approved by Board Resolution No. 128/2005 of October 21, 2005 and its subsequent modifications.
The Legal Reserve Regulation approved by Board Resolution No. 070/2009 of June 23, 2009 and modified according to Board Resolutions No. 130/2010 of November 23, 2010, No. 007/2011 of January 18, 2011 and No. 072/2011 of June 14, 2011. The Report from the Economic Policy Advisory BCB-APEC-SSIEE-INF-2012-01 and from the Financial Entities Management BCB-GEF-SANA-INF-2012-01 of January 3, 2012. The Report from the Legal Affairs Management BCB-GAL-SANO-INF-2012-3 of January 6, 2012.

CONSIDERING:
That the Political Constitution of the State in its article 328 provides that the BCB is authorized, in coordination with the economic policy determined by the Executive Branch, to determine and execute monetary policy.

That Law No. 1670 in its article 7 provides that the Issuing Entity may establish legal reserves of mandatory compliance for financial intermediation entities and, for this purpose, will determine their composition, amount, calculation method, characteristics, and remuneration.

That in its article 37, the aforementioned legal norm establishes that the BCB is the custodian of the liquid reserves intended to cover said reserve and may delegate the custody of these deposits according to the specific regulation.

That the BCB Statute in article 11 numeral 7) states that it is the faculty of the Board to establish by 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 according to Regulation.

That the Legal Reserve Regulation aims to establish the technical and operational conditions of mandatory compliance for financial entities that are duly authorized for their operation by the Financial System Supervision Authority, regarding the constitution and form of administration of the legal reserve.

That the Economic Policy Advisory through Report BCB-APEC-SSIEE-INF-2012-01 and the Financial Entities Management through Report BCB-GEF-SANA-INF-2012-01, recommend the approval of the partial modification of articles 2 and 4 of the Legal Reserve Regulation.

That according to Report BCB-GAL-SANO-INF-2012-3, the Legal Affairs Management concludes that the proposed modification indicated is legally appropriate, since it does not contravene the current legal framework, being the competence of the BCB Board to consider its approval.

That, the BCB Board in its capacity as the highest authority of the Institution, is responsible for defining its policies, specialized normative of general application and internal rules, being authorized to issue norms and adopt general decisions that were necessary for the fulfillment of the functions, competencies, and faculties assigned by Law to the Issuing Entity, as established in articles 44 and 54 inc. o) of Law No. 1670 and articles 9, 11 and 24 of the BCB Statute.

THEREFORE,
THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA RESOLVES:

Article 1.- Approve the partial modification to article 2 (Terms and Abbreviations) of the Legal Reserve Regulation as follows:
SAYS:
For the purposes of this Regulation, the following terms and abbreviations are used:
BCB: Central Bank of Bolivia.
ASFI: Financial System Supervision Authority
COMA: Open Market Operations Committee of the BCB.
DPF: Fixed-Term Deposits.
UFV: Housing Development Unit.
MN: National currency.
ME: Foreign currency.
MNUFV: National currency with value maintenance in relation to the UFV.
MVDOL: National currency with value maintenance in relation to the US dollar.

Legal Reserve: It is the proportion of deposits of natural and legal persons that financial entities must maintain as a reserve, at the BCB or through the BCB.
Required Legal Reserve: Amount that every financial entity must deposit in the BCB or in financial entities authorized for legal reserve purposes.
Constituted Legal Reserve: Amount deposited by financial entities in the BCB or in financial entities authorized for legal reserve purposes.
Legal Reserve in Cash: Required and constituted legal reserve in cash by financial entities, which will be maintained in deposit in the accounts enabled for this effect.
Legal Reserve in Titles: Required and constituted legal reserve in cash by financial entities, to be invested by the BCB or the Delegated Administrators of the RAL-MN, RAL-MNUFV and RAL-ME Funds in titles, securities or authorized instruments. RAL Fund: The Liquid Asset Requirement Fund is a closed investment fund constituted solely by the resources contributed by financial entities through the legal reserve in titles. Each financial entity will have its contribution to the RAL Fund registered individually. The RAL Fund is constituted by the following denominations: National Currency (RAL Fund- MN), National currency with value maintenance in relation to the UFV (RAL Fund–MNUFV) and Foreign Currency (RAL Fund-ME). Delegated Administrator of the RAL-MN Fund: Corresponds to the BCB or the financial entity that acts as Delegated Administrator in the administration of the RAL-MN Fund. When it concerns a financial entity other than the BCB, it will be selected based on competitive mechanisms and conditions approved by the BCB Board by express resolution. Delegated Administrator of the RAL-MNUFV Fund: Corresponds to the BCB or the financial entity that acts as Delegated Administrator in the administration of the RAL-MNUFV Fund. When it concerns a financial entity other than the BCB, it will be selected based on competitive mechanisms and conditions approved by the BCB Board by express resolution. Delegated Administrator of the RAL-ME Fund: Is the foreign financial institution that acts as Delegated Administrator in the administration of the RAL-ME Fund, selected based on competitive mechanisms and conditions approved by the BCB Board by express resolution. Legal Reserve Requirement Period: Period of 14 consecutive days, determined by the ASFI for the purposes of calculating the required legal reserve. Legal Reserve Constitution Period: Period of 14 consecutive days, lagging by 9 days in relation to the legal reserve requirement period. Obligations Subject to Reserve (OSE): Are the liabilities denominated in MN, MNUFV, MVDOL and ME, detailed in articles 3 and 4 of this Regulation. Short-term liabilities with the exterior mentioned in article 6 of this Regulation are excluded from the scope of this definition. Obligations in ME and MVDOL Subject to Additional Reserve (OSEA-ME): Are the liabilities denominated in ME and MVDOL, detailed in articles 3 and 4 of this Regulation. For calculation purposes, the BCB will express these balances in US dollars at the BCB's buying exchange rate. DPFs in ME and MVDOL with a maturity greater than two years, registered in the BCB, and short-term liabilities with the exterior, contracted exclusively for foreign trade operations with exact matching between asset and liability for each operation, are excluded from these obligations. Additional Reserve Base (BEA): Corresponds to the difference between the OSEA-ME and the OSEA-ME of the base date.

SHOULD SAY:
“For the purposes of this Regulation, the following terms and abbreviations are used:
BCB: Central Bank of Bolivia.
ASFI: Financial System Supervision Authority
COMA: Open Market Operations Committee of the BCB.
DPF: Fixed-Term Deposits.
UFV: Housing Development Unit.
MN: National currency.
ME: Foreign currency.
MNUFV: National currency with value maintenance in relation to the UFV.
MVDOL: National currency with value maintenance in relation to the US dollar.

Legal Reserve: It is the proportion of deposits of natural and legal persons that financial entities must maintain as a reserve, at the BCB or through the BCB.
Required Legal Reserve: Amount that every financial entity must deposit in the BCB or in financial entities authorized for legal reserve purposes.
Constituted Legal Reserve: Amount deposited by financial entities in the BCB or in financial entities authorized for legal reserve purposes.
Legal Reserve in Cash: Required and constituted legal reserve in cash by financial entities, which will be maintained in deposit in the accounts enabled for this effect.
Legal Reserve in Titles: Required and constituted legal reserve in cash by financial entities, to be invested by the BCB or the Delegated Administrators of the RAL-MN, RAL-MNUFV and RAL-ME Funds in titles, securities or authorized instruments. RAL Fund: The Liquid Asset Requirement Fund is a closed investment fund constituted solely by the resources contributed by financial entities through the legal reserve in titles. Each financial entity will have its contribution to the RAL Fund registered individually. The RAL Fund is constituted by the following denominations: National Currency (RAL Fund- MN), National currency with value maintenance in relation to the UFV (RAL Fund–MNUFV) and Foreign Currency (RAL Fund-ME). Delegated Administrator of the RAL-MN Fund: Corresponds to the BCB or the financial entity that acts as Delegated Administrator in the administration of the RAL-MN Fund. When it concerns a financial entity other than the BCB, it will be selected based on competitive mechanisms and conditions approved by the BCB Board by express resolution. Delegated Administrator of the RAL-MNUFV Fund: Corresponds to the BCB or the financial entity that acts as Delegated Administrator in the administration of the RAL-MNUFV Fund. When it concerns a financial entity other than the BCB, it will be selected based on competitive mechanisms and conditions approved by the BCB Board by express resolution. Delegated Administrator of the RAL-ME Fund: Is the foreign financial institution that acts as Delegated Administrator in the administration of the RAL-ME Fund, selected based on competitive mechanisms and conditions approved by the BCB Board by express resolution. Legal Reserve Requirement Period: Period of 14 consecutive days, determined by the ASFI for the purposes of calculating the required legal reserve. Legal Reserve Constitution Period: Period of 14 consecutive days, lagging by 9 days in relation to the legal reserve requirement period. Obligations Subject to Reserve (OSE): Are the liabilities denominated in MN, MNUFV, MVDOL and ME, detailed in articles 3 and 4 of this Regulation. Short-term liabilities with the exterior mentioned in article 6 of this Regulation are excluded from the scope of this definition. Obligations in ME and MVDOL Subject to Additional Reserve (OSEA-ME): Are the liabilities denominated in ME and MVDOL, detailed in articles 3 and 4 of this Regulation. For calculation purposes, the BCB will express these balances in US dollars at the BCB's buying exchange rate. DPFs in ME and MVDOL with a maturity greater than two years, registered in the BCB, and short-term liabilities with the exterior, contracted exclusively for foreign trade operations with exact matching between asset and liability for each operation, are excluded from these obligations. Additional Reserve Base (BEA): Corresponds to the difference between the OSEA-ME and a percentage of the OSEA-ME of the base date according to the following schedule:

Requirement Period
Percentage of OSEA-ME of the Base Date
Start Date End Date
05/03/2012 18/03/2012 100.0%
02/04/2012 15/04/2012 92.5%
06/08/2012 19/08/2012 85.0%
10/12/2012 23/12/2012 77.5%
04/03/2013 17/03/2013 70.0%
05/08/2013 18/08/2013 62.5%
09/12/2013 22/12/2013 55.0%
03/03/2014 16/03/2014 47.5%
04/08/2014 17/08/2014 40.0%
08/12/2014 21/12/2014 32.5%
13/04/2015 26/04/2015 25.0%
03/08/2015 16/08/2015 17.5%
07/12/2015 20/12/2015 10.0%
11/04/2016 24/04/2016 2.5%
01/08/2016 14/08/2016 0.0%

Article 2.- Approve the partial modification to article 4 (Applications of the Reserve for DPF) of the Legal Reserve Regulation as follows:
SAYS:
The legal reserve requirements for DPF, according to terms and denominations, are established in the following table:
LEGAL RESERVE FOR DPF* ACCORDING TO MATURITY TERM AND DENOMINATION Only fixed-term deposits of 30 days or more are considered DPF.
SHOULD SAY:
“The legal reserve requirements for DPF, according to terms and denominations, are established in the following table:
LEGAL RESERVE FOR DPF ACCORDING TO MATURITY TERM AND DENOMINATION

Original Term on DPF | NATIONAL CURRENCY AND MNUFV | FOREIGN CURRENCY AND MVDOL

	Titles Reserve	Cash Reserve	Titles Reserve	Cash Reserve	Additional Reserve
30 to 60 days	Reserves
Greater than 60 days up to 360 days	Reserves
Greater than 360 days up to 720 days	No reserve	No reserve	Reserves	No reserve	Reserves
Greater than 720 days	No reserve	No reserve	No reserve	No reserve	Reserves

*Only fixed-term deposits of 30 days or more are considered DPF.”

Article 3.- This partial modification of the Legal Reserve Regulation will enter into force from April 2, 2012 and according to the established schedule.

Article 4.- The Presidency and the General Management are charged with the execution and compliance of this Resolution.

La Paz, January 10, 2012

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Marcelo Zabalaga Estrada

_________________________ _________________________ Rafael Boyán Téllez Hugo Dorado Araníbar

_________________________ _________________________ Ernesto Yáñez Aguilar Rolando Marín Ibáñez

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Gustavo Blacutt Alcalá