Resolution 021/98 Approving Regulations for Operations with Deposit Refund Certificates (CDDs) for Partial Subrogation of BIDESA Deposits

BOARD RESOLUTION NO. 021/98 SUBJECT: CURRENCY AND CREDIT - APPROVES REGULATIONS FOR OPERATIONS WITH CERTIFICATES OF DEPOSIT REFUND (CDDs) ISSUED BY THE BCB FOR THE PARTIAL SUBROGATION OF DEPOSITS OF BIDESA IN LIQUIDATION.

VIEWED: The Law No. 1670 of October 31, 1995. The Law No. 1488 of April 14, 1993. The Board Resolution of the Central Bank of Bolivia (BCB) No. 145/97 of September 2, 1997, which regulates the functioning of the Open Market Operations Committee (COMA). The Resolution No. SB/143/97 of the Superintendence of Banks and Financial Entities (SBEF) of December 12, 1997. The Board Resolution No. 170/97 of December 13, 1997, which authorizes the partial subrogation of the rights of depositors of the Banco Internacional de Desarrollo S.A. (BIDESA) in liquidation. The Board Resolution No. 020/98 of March 3, 1998, which approves the partial subrogation of deposits greater than US$5,000 of BIDESA in liquidation. The Report No. 025/98 of the Financial System Management of March 3, 1998. The Report No. 05/98 of the Currency and Credit Management of March 6, 1998. The Report of the Legal Advisory ALEG No. 082/98 of March 6, 1998.

CONSIDERING: That the Superintendence of Banks and Financial Entities, through Resolution No. SB/143/97 of December 12, 1997, ordered the takeover of BIDESA with the objective of proceeding to its forced liquidation. That the Central Bank of Bolivia, by its Board Resolution No. 170/97, decided to partially subrogate the rights of the depositors of BIDESA in liquidation up to a maximum amount per depositor equivalent to US$5,000, to be paid in cash in the originally agreed currency. That Board Resolution No. 020/98, at the time of approving the partial subrogation of deposits greater than US$5,000 of BIDESA in liquidation, establishes that the BCB will acquire the rights of depositors with Certificates of Deposit Refund (CDDs). That in accordance with what is provided in Article 1 of the aforementioned Resolution, it corresponds to regulate the issuance and administration of the CDDs. That the Currency and Credit Management indicates that the procedures and characteristics of the issuance of negotiable CDDs are appropriate as an instrument for the partial return of the deposits of BIDESA in liquidation for amounts greater than US$5,000, recommending the approval of the respective Regulation. That in the opinion of the Legal Advisory, the Board is empowered to approve the Regulation for Operations with Certificates of Deposit Refund.

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

Article 1.- Approve the Regulation for Operations with Certificates of Deposit Refund (CDDs) for the partial subrogation of claims exceeding the equivalent of US$5,000 of the Banco Internacional de Desarrollo S.A. in liquidation, which, as an annex, forms part of this Resolution.

Article 2.- Entrust the Presidency and General Management to manage before the Superintendence of Securities the registration of these titles for public offering, so that they can be traded on the Bolivian Stock Exchange.

Article 3.- The Presidency and General Management are in charge of the execution and compliance of this Resolution. La Paz, March 10, 1998

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Juan Antonio Morales A.

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Armando Pinell S. Jaime Ponce G. Juan Medinacelli V.

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Fernando Campero P. Juan Pablo Zegarra A.

REGULATION FOR OPERATIONS WITH CERTIFICATES OF DEPOSIT REFUND (CDDs) ISSUED BY THE BCB FOR THE PARTIAL SUBROGATION OF DEPOSITS OF BIDESA IN LIQUIDATION

CHAPTER I OBJECT

Article 1 (Object). This Regulation establishes the rules for the issuance and administration of the Certificates of Deposit Refund (CDDs), intended for the partial return of deposits exceeding the equivalent of US$5,000 of the Banco Internacional de Desarrollo S.A. (BIDESA) in liquidation, in accordance with what is established by Board Resolution No. 020/98 of March 3, 1998. It also establishes the procedures for the redemption of the CDDs at their maturity or in advance.

CHAPTER II ON THE CERTIFICATES OF DEPOSIT REFUND

Article 2 (Definition of CDDs). For the purposes of this Regulation, the CDDs are public offering securities, order securities, of credit content and negotiable, issued by the Central Bank of Bolivia (BCB) with the aim of partially returning the demand, savings, and time deposits of BIDESA in liquidation, for amounts greater than the equivalent of US$5,000.

Article 3 (Issuance Currency). The CDDs will be issued in United States dollars. For deposits expressed in bolivianos, the exchange rate corresponding to December 12, 1997 (US$1=Bs.5.34) will be used.

Article 4 (Characteristics of the CDDs). The CDDs will be fractional, with a minimum fractional value equal to US$10,000, and redeemable by the BCB on their maturity date against the presentation of the certificate. The titles resulting from the fractionalization will have the same maturity date as the original title. The CDDs will be negotiable by simple endorsement, without the need for registration.

Article 5 (Issuance of the CDDs). The Financial System Management (GSF) of the BCB will deliver to the Superintendence of Banks and Financial Entities (SBEF) the necessary quantities of blank CDDs to be filled out by the Liquidating Intendant, under their full responsibility. Once the CDDs are duly filled out, the BCB will proceed to their issuance with a nominal value equal to the value of the capital in the demand, savings, or time deposit specified in the assignment for restitution and payment made by the depositor, subrogating their rights in favor of the BCB, a document that will be attached to the CDDs by the SBEF. The GSF of the BCB will be responsible for the registry and accounting control of the issued CDDs, as well as the coordination and exchange of information with the SBEF.

Article 6 (Characteristics of the Issuance). The CDDs will be issued according to the details and maturity periods determined in Article 4 of Board Resolution No. 020/98. The issuance periods will be calculated from April 1, 1998.

CHAPTER III ATTRIBUTES OF THE OPEN MARKET OPERATIONS COMMITTEE

Article 7 (Expansion of the Attributes of COMA). With the purpose that operations are carried out in the secondary market of securities with the CDDs issued by the BCB, the attributes of the Open Market Operations Committee (COMA) established in the Regulation approved by Board Resolution No. 145/97 of September 2, 1997, are expanded with the following additional powers:

1. To convene auctions for the early redemption of CDDs, fixing the place, date, and time of their realization.
2. To determine the modality of the auction.
3. To determine, before the early redemption auction, the total maximum amount of CDDs by term that can be redeemed in the same, as well as the minimum and maximum reference prices. The total maximum amount of CDDs that can be redeemed will be determined by the COMA, based on the available cash balances from the recoveries carried out by BIDESA in liquidation.
4. To declare the auction void.

CHAPTER IV REDEMPTION OF CDDs

Article 8 (Redemption). The redemption of a CDD is understood as the cancellation of this security on its maturity date. This cancellation will be carried out in the payment modality requested by the holder of the title (deposit or bank transfer) and will be executed in any bank in the system that so requests in writing to the BCB.

Article 9 (Early Redemption). The early redemption of a CDD is understood as the purchase of that title by the BCB prior to its maturity date, in cash, at the value resulting from the auction convened for such effect by the BCB.

Article 10 (Purchase of Assets). With the aim of speeding up the process of asset recovery of BIDESA in liquidation, the BCB may authorize the use of CDDs for the purchase of said assets, in accordance with specific regulation.

CHAPTER V AUCTION OF CDDs

Article 11 (Auction). The auction for the early redemption of CDDs is understood as the procedure by which, upon public call by the BCB, the holder of a CDD of a certain term proposes to the BCB the early redemption of it at a discounted value. For each issuance term of CDDs, the auction determines the approval or rejection of the received proposals corresponding to each term.

Article 12 (Call). The call to the auction will be published at least one week before its realization.

Article 13 (Participants). All natural or legal persons of private law who demonstrate ownership of CDDs of a certain term may participate in the auctions. For this effect, they must obtain from the Sub-Management of Open Market Operations of the BCB (SOMA) the proposal form for the presentation of respective bids. During the auction, titles will not be fractionalized.

Article 14 (Bid). The bid is understood as the specification of the value at which the participant is willing to return the title in advance. This value will be specified by means of a price.

Article 15 (Data of the Proposal). The proposal, accompanied by a photocopy of the title or titles, will specify in the aforementioned proposal form the name or corporate name of the owner of the CDDs, number of bids, and, for each of them, the offered price, term, number of current or savings account, as well as other additional data required in the call. The proposal must be presented in a closed envelope with the signature of the applicant or their legal representative.

Article 16 (Deposit of the Proposal). The proposals will be deposited in the Money Desk of the BCB until one hour before the time set for the opening of envelopes. The time of their receipt will be certified.

Article 17 (Acceptance of Terms). The presentation of the proposal determines that the owner of the CDD submits to the terms of this Regulation and to those of the call, not being able to withdraw it after the deadline indicated in Article 16.

Article 18 (Opening and Review of Proposals). On the date and time of the publicly convened session, the number of envelopes received will be announced and their opening will proceed; subsequently, the proposals contained therein will be read, excluding the name of the applicant. Subsequently, all requests and titles will be reviewed, accepting or rejecting them.

Article 19 (Rejection). The causes for rejection will be: a) Incomplete, contradictory, or incoherent information in the request. b) Presentation of CDDs with a nominal value greater than the nominal value requested for their redemption.

Article 20 (Mechanism of Adjudication). The COMA will define the adjudication mechanisms based on competitive criteria. The adjudication will be carried out based on the prices offered by term.

Article 21 (Payment of Early Redemption). After the review and consideration of the proposals, the BCB will proceed to the early redemption of the accepted proposals, against the presentation of the original title, paying the adjudicatee the proposed price. This payment automatically cancels all obligation of the BCB for this concept. The payment will be made by credit to a current or savings account of any bank in the system.

Article 22 (Publication of Results). The Currency and Credit Management of the BCB will publish the results of the auction in an aggregated manner, without specifying the names or corporate names of the adjudicatees.

Article 23 (Calculation Base). The calculation of discount rates will be carried out taking the commercial year of 360 days as the base.

CHAPTER VI LOSS AND REPLACEMENT

Article 24 (Replacement of CDDs). In the event of loss or misplacement of the CDDs issued by the BCB, their replacement will proceed in accordance with what is established in articles 726 to 728 of the Commercial Code. --o--