Resolution 011/2002 Approving Modifications to the Foreign Exchange Position Regulation of the Financial System

BOARD RESOLUTION NO. 011/2002
SUBJECT: ECONOMIC POLICY ADVISORY – APPROVAL OF MODIFICATIONS TO THE FOREIGN EXCHANGE POSITION REGULATION OF THE FINANCIAL SYSTEM.

HAVING SEEN:
Law 1670 of October 31, 1995.
Board Resolution No. 109/97 of May 8, 1997.
Board Resolution No. 064/98 of July 7, 1998.
Supreme Decree 26390 of November 8, 2001.
Technical Report from the Economic Policy Advisory APEC-INEP No. 038/01 of December 14, 2001.
Internal Communication from the Legal Affairs Management SANO No. 390/2001 of December 14, 2001.

CONSIDERING:
That the Central Bank of Bolivia, in compliance with Law 1670, has established a Foreign Exchange Position Regulation of mandatory compliance for Institutions of the Financial System.

That pursuant to Supreme Decree 26390, legally established financial entities in Bolivia and all natural, legal, or collective persons are authorized to voluntarily and freely carry out any type of legal acts, operations, and contracts, which shall be charged and paid in national currency with value maintenance according to the daily evolution of the Housing Development Unit (UFV).

That the technical report from the Economic Policy Advisory APEC-INEP No. 038/01, in order to eliminate ambiguous situations in the determination of overbought and oversold positions, and to introduce the concept of value maintenance with respect to the UFV, recommends making modifications to the Foreign Exchange Position Regulation of the Financial System.

That the report from the Legal Affairs Management SANO No. 390/2001 states that, based on the powers conferred by articles 1, 3, 19, and 54, subsections a), o), and q) of Law 1670, it corresponds to the Board of Directors of the BCB to consider the proposals for modification to the Foreign Exchange Position Regulation of the Financial System.

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

Article 1.- Modify Article 1 of the Foreign Exchange Position Regulation of the Financial System, in the following terms:
SAYS:
The present Regulation aims to regulate the foreign exchange position of banking and non-banking financial entities, in foreign currency and in national currency with value maintenance, in order to regulate the growth of monetary aggregates, preserve the stability of the financial system, and maintain the necessary control over the aggregated, active, and passive positions of financial institutions.

SHOULD SAY:
“The present Regulation aims to regulate the foreign exchange position of banking and non-banking financial entities, in foreign currency and in national currency with value maintenance with respect to the US Dollar, in order to regulate the growth of monetary aggregates, preserve the stability of the financial system, and maintain the necessary control over the aggregated, active, and passive positions of financial institutions.”

Article 2.- Modify Article 2 of the Foreign Exchange Position Regulation of the Financial System and add an additional definition within the same, in the following terms:
SAYS:
National Currency with Value Maintenance: A unit of account that allows for the maintenance of the value of the Bolivian regarding the American Dollar.

SHOULD SAY:
“National Currency with Value Maintenance with respect to the US Dollar: A denomination that allows for the maintenance of the value of the Bolivian with respect to the US Dollar.”

SAYS:
Other Foreign Currencies: These are the currencies indicated at the top of the BCB quotation table.

SHOULD SAY:
“Other Foreign Currencies: These are the currencies indicated in the BCB quotation table.”

SAYS:
Overbought position in a specific currency: It is the excess of assets over liabilities in a specific currency.

SHOULD SAY:
“Overbought position in a specific denomination: It is the excess of assets over liabilities in a specific denomination.”

SAYS:
Oversold position in a specific currency: It is the excess of liabilities over assets in a specific currency.

SHOULD SAY:
“Oversold position in a specific denomination: It is the excess of liabilities over assets in a specific denomination.”

Add the following definition:
“National Currency with Value Maintenance with respect to the Housing Development Unit: A denomination that allows for the maintenance of the value of the Bolivian with respect to the Housing Development Unit.”

Article 3.- Modify Article 3 of the Foreign Exchange Position Regulation of the Financial System, in the following terms:
SAYS:
The calculation of the foreign exchange position will be carried out daily, based on the balances at the close of each business day. The calculations of the foreign exchange positions for foreign currency and national currency with value maintenance will be carried out independently.

SHOULD SAY:
“The calculation of the foreign exchange position will be carried out daily, based on the balances at the close of each business day. The calculations of the foreign exchange positions for foreign currency and national currency with value maintenance with respect to the US Dollar will be carried out independently.”

Article 4.- Modify subsections b), d), f), and g) of Article 4 of the Foreign Exchange Position Regulation of the Financial System, and add a subsection and a final paragraph to this Article, in the following terms:
SAYS:
b) An overbought position in national currency with value maintenance, which added to the amount of overbought in foreign currency does not exceed 80% of the value of tangible equity, minus the amount of investment in fixed assets.

SHOULD SAY:
“b) An overbought position in national currency with value maintenance with respect to the US Dollar, which added to the amount of overbought in foreign currency does not exceed 80% of the value of tangible equity, minus the amount of investment in fixed assets.”

SAYS:
d) An oversold position in national currency with value maintenance, which added to the oversold in foreign currency does not exceed 20% of the value of tangible equity.

SHOULD SAY:
“d) An oversold position in national currency with value maintenance with respect to the US Dollar, which added to the oversold in foreign currency does not exceed 20% of the value of tangible equity.”

SAYS:
f) Financial institutions that have tangible equity lower than the value of their investments in fixed assets may not incur in overbought positions in foreign currency and national currency with value maintenance.

SHOULD SAY:
“f) Financial institutions that have tangible equity lower than the value of their investments in fixed assets may not incur in overbought positions in foreign currency and national currency with value maintenance with respect to the US Dollar.”

SAYS:
g) Financial entities that have a capital adequacy coefficient above 50% may maintain an overbought position in foreign currency that, added to the amount of overbought in national currency with value maintenance, does not exceed 100% (ONE HUNDRED PERCENT) of the value of tangible equity, minus the amount of investment in fixed assets. Financial entities whose capital adequacy coefficient has been located at some point below 50% will lose the right to avail themselves of this exemption.

SHOULD SAY:
“g) Financial entities that have a capital adequacy coefficient above 50% may maintain an overbought position in foreign currency that, added to the amount of overbought in national currency with value maintenance with respect to the US Dollar, does not exceed 100% (one hundred percent) of the value of tangible equity, minus the amount of investment in fixed assets. Financial entities whose capital adequacy coefficient has been located at some point below 50% will lose the right to avail themselves of this exemption.”

Add the following subsection after subsection d):
“In the event of an overbought foreign currency foreign exchange position, the oversold in national currency with value maintenance with respect to the US Dollar must not exceed 20% (twenty percent) of tangible equity. In the event of an oversold position in foreign currency, the overbought in national currency with value maintenance with respect to the US Dollar must not exceed 80% (eighty percent) of the value of tangible equity, minus the amount of investment in fixed assets.”

Add a final paragraph:
“For purposes of foreign exchange position control, assets and liabilities in national currency with value maintenance with respect to the Housing Development Unit will be considered as assets and liabilities in national currency.”

Article 4.- Modify Article 6 of the Foreign Exchange Position Regulation of the Financial System, in the following terms:
SAYS:
The daily report that financial entities will send to the BCB, regarding their position of assets and liabilities in foreign currency and national currency with value maintenance, will have the character of a sworn declaration.

SHOULD SAY:
“The daily report that financial entities will send to the BCB, regarding their position of assets and liabilities in foreign currency and national currency with value maintenance with respect to the US Dollar, will have the character of a sworn declaration.”

Article 5.- The modifications and additions preceding will enter into force as of February 15, 2002.

Article 6.- The Presidency and the General Management are charged with the execution and compliance of this Resolution.

La Paz, January 22, 2002

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Juan Antonio Morales A.

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Juan Medinaceli V. Roberto Camacho S.

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Javier Comboni S. Enrique Ackermann A.