Resolution 028/2001 Approving New Regulations for Operations with Securities Issued by the General Treasury of the Nation for Fiscal Policy Purposes

BOARD RESOLUTION NO. 028/2001
SUBJECT: MONETARY OPERATIONS MANAGEMENT – APPROVES NEW REGULATIONS FOR OPERATIONS WITH SECURITIES ISSUED BY THE GENERAL TREASURY OF THE NATION FOR FISCAL POLICY PURPOSES

HAVING VIEWED:
Law No. 1670 of October 31, 1995.
Supreme Decree No. 23380 of December 29, 1992, which authorizes the General Treasury of the Nation to issue securities.
Board Resolution No. 074/98 of August 11, 1998, which approves the Open Market Operations Regulations.
Board Resolution No. 010/99 of March 2, 1999, which approves the Regulations for Operations with Securities Issued by the General Treasury of the Nation for Fiscal Policy Purposes.
Board Resolution No. 007/2000 of February 1, 2000, which modifies the Regulations for Operations with Securities Issued by the General Treasury of the Nation for Fiscal Policy Purposes and for Monetary Regulation Purposes. The Interinstitutional Agreement signed on January 6, 1999, between the Central Bank of Bolivia and the Ministry of Finance. The Technical Report from the Monetary Operations Management No. 003/2001 of March 27, 2001. The Report from the Legal Affairs Management SANO 054/2001 dated April 4, 2001.

CONSIDERING:
That Article 29, paragraph e) of Law No. 1670 of October 31, 1995, authorizes the Central Bank of Bolivia (BCB), in its capacity as the Government's Financial Agent, to participate in the issuance, administration, and placement of public debt securities.

That the Interinstitutional Agreement signed between the BCB and the Ministry of Finance on January 6, 1999, establishes the administrative guidelines for the issuance, placement, administration, and redemption operations of Treasury securities.

That the Technical Report from the Monetary Operations Management No. 003/2001 recommends the approval by the Board of the new Regulations for Operations with Securities Issued by the General Treasury of the Nation for Fiscal Policy Purposes.

That in the opinion of the Legal Affairs Management, there is no legal impediment for the Board to approve a new Regulation.

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

Article 1.- Approve the Regulations for Operations with Securities Issued by the General Treasury of the Nation for Fiscal Policy Purposes, consisting of 6 chapters and 35 articles, which, as an annex, forms part of this Resolution.

Article 2.- These Regulations shall enter into force on May 15, 2001.

Article 3.- Repeal, effective May 15, 2001, the following Board Resolutions:

• Board Resolution No. 010/99 of March 2, 1999, which approved the previous Regulations for Operations with Securities Issued by the General Treasury of the Nation for Fiscal Policy Purposes.
• Board Resolution No. 007/2000 of February 1, 2000, which modified the Regulations for Operations with Securities Issued by the General Treasury of the Nation for Fiscal Policy Purposes and for Monetary Regulation Purposes.

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

La Paz, April 10, 2001

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Juan Antonio Morales A.
_______________ ___________________ __________________ Armando Pinell S. Jaime Ponce G. Juan Medinaceli V.

ANNEX
REGULATIONS FOR OPERATIONS WITH SECURITIES ISSUED BY THE GENERAL TREASURY OF THE NATION FOR FISCAL POLICY PURPOSES

CHAPTER I
GENERAL PROVISIONS

Article 1.- (Object) These Regulations aim to determine the conditions for the auction, allocation, redemption, administration, and control of operations with short- and long-term securities issued by the General Treasury of the Nation (TGN) for fiscal policy objectives.

Article 2.- (Administration) The Central Bank of Bolivia (BCB), in its capacity as the Government's Financial Agent, administers the auctions, allocations, redemptions, and other operations with securities issued by the TGN, at the request and on behalf and at the expense of the TGN.

Article 3.- (Characteristics of Securities) The characteristics of the securities issued by the TGN will be defined by the TGN. These securities may be allocated through Public Auction, Money Market, or other mechanisms that may be authorized by the Interinstitutional Council established in Article 6.

Article 4.- (Issuance Currency) The securities, which may be indexed, will be issued by the TGN in national currency or in United States dollars.

Article 5.- (Registration) For public offering, the securities issued by the TGN will be registered in the Securities Market Registry of the Superintendence of Pensions, Securities, and Insurance.

CHAPTER II
COUNCIL FOR THE ADMINISTRATION OF SECURITIES OF THE GENERAL TREASURY OF THE NATION (CATT)

Article 6.- (Object of the CATT) The Council for the Administration of Securities of the General Treasury of the Nation (CATT), composed of representatives from the BCB and the Ministry of Finance (MH), is the interinstitutional body responsible for establishing the policy and conditions for operations with securities issued by the TGN for fiscal policy objectives, which are administered by the BCB.

Article 7.- (Organization) The CATT is composed as follows:
Representatives of the Central Bank of Bolivia

• The President of the BCB, who presides over the meetings, or by delegation, a Director or the General Manager of the BCB.
• The General Manager of the BCB.
• The Manager of Monetary Operations of the BCB.
• The Principal Advisor for Economic Policy of the BCB, with voice but no vote.
• The Deputy Manager of Open Market Operations of the BCB, with voice but no vote, who acts as Secretary.
• The Directors of the BCB may participate in the CATT in an informational capacity.
  Representatives of the Ministry of Finance
• The Undersecretary of Treasury and Public Credit.
• The General Director of Public Credit of the TGN.
• The Head of the Internal Public Debt Unit of the TGN, with voice but no vote.

Article 8.- (Powers) The CATT has the following powers:
a) Ensure compliance with these Regulations. b) Determine the dates of the auctions. c) Define quantities offered by currency and term, and, where applicable, the frequency of issuances. d) Reject bids, when it considers the rate too high or, alternatively, the price too low. e) Declare the auction totally or partially void in the following cases:

• When no bids are submitted.
• When none of the bids meet the requirements established in these Regulations.
  f) Resolve situations not contemplated in these Regulations. g) Propose to the Ministry of Finance and the BCB Board amendments and/or modifications to the current provisions in this matter.

Article 9.- (Sessions) Ordinary sessions of the CATT will be held once a week. The President may convene extraordinary sessions when deemed necessary.

Article 10.- (Quorum) The quorum will be established with four of its members with voice and vote, one of whom must necessarily be a representative of the MH.

Article 11.- (Resolutions) CATT resolutions will be taken by a simple majority of votes of the members present at the session. In case of a tie, the President of the Council will have the casting vote.

Article 12.- (Minutes) The Secretary will draw up minutes for each of the CATT sessions, which will be approved in the next session.

Article 13.- (Activity Report) The President of the Council will keep the BCB Board informed about the development of the CATT's activities. The MH representatives will report on securities operations to the MH authorities.

Article 14.- (Executing Body) The Monetary Operations Management of the BCB will be responsible for carrying out all operations related to the Public Auction process, in the Money Market, and other securities operations authorized by the CATT.

CHAPTER III
PUBLIC AUCTION

Article 15.- (Call for Bids) Auctions will be held at the BCB, with prior public notice at least one business day before their realization, in one or more written media, without prejudice to the use of other means or mechanisms authorized by the CATT.

Article 16.- (Authorized Agents) All financial entities with an operating license granted by the Superintendence of Banks and Financial Entities or by the Superintendence of Pensions, Securities, and Insurance may participate in the auctions, with prior authorization from the CATT, and provided they meet the requirements of Article 16 of the Open Market Operations Regulations and those defined in these Regulations. Private individuals and non-financial entities in the private sector may participate in Treasury Securities auctions through financial entities authorized by the CATT.

Article 17.- (Application) The application for participation in the auction must specify the legal name of the applicant, number of bids, and for each of them, as applicable, rate or price, quantity of securities, currency, payment method, term of the security, as well as other additional data according to the call for bids.
The application must be submitted to the BCB up to 15 minutes before the scheduled time for the opening of the auction session in one of the following forms:
a) In a sealed envelope, with signatures of its legal representatives duly registered in the Deputy Manager of Open Market Operations (SOMA). b) Through electronic means authorized by the COMA. c) Any other means accepted by the CATT. The Deputy Manager of Open Market Operations will certify the time of receipt of the applications.

Article 18.- (Provision of Funds) To participate in the auction, authorized entities must provide funds in one of the following forms:
a) Through written or electronic communication to the BCB authorizing the debit of their current and reserve accounts, for their own operations or in favor of other authorized financial entities. This authorization may be indefinite. b) By crediting an amount equivalent to 2% of the nominal value of the securities demanded in the "Various Creditors - Open Market" account, authorized for this purpose at the BCB.

Article 19.- (Acceptance of Terms and Conditions) With the written or electronic submission of the application, the applicant submits to the terms of these Regulations and the call for bids, and cannot withdraw their application after the deadline mentioned in Article 17.

Article 20.- (Reading of Bids) In the public auction session, the number of applications and bids received, as well as their characteristics, will be announced, without specifying the legal name of the applicants.

Article 21.- (Grounds for Rejection) The following are grounds for rejection of applications:
a) Lack of provision of funds. b) If the application contains incomplete or incorrect information regarding what is established in these Regulations and the conditions defined in the public call for bids. c) Submission of the application outside the established schedule.

CHAPTER IV
ALLOCATION AND SALE AT AUCTION

Article 22.- (Allocation) The allocation of Treasury Securities in public auction may be carried out: a) on explicit prices or rates proposed by participants and b) through proposals adhering to the prices or rates resulting from the auction.
a) In the first modality, the CATT will allocate the Treasury Securities to the best proposals, in descending order of price or ascending in terms of discount rate or yield.
At the time of allocation, the CATT may reject bids with prices lower or rates higher than their reference levels.
If there is equality of prices, discount rates, or yields at the margin between bids, the securities will be allocated by the pro-rata system where applicable.
If at the margin the quantity demanded in a single bid exceeds the available remaining supply under this modality, only that remaining amount will be allocated. b) In the second modality, the CATT will define the maximum offer and will allocate the Treasury Securities to participating entities at the average price or rate obtained in the modality described in paragraph a) of this article. The amount offered through this modality will be at most 50% of the total amount in each currency and term. If the total demand for Treasury Securities in this modality exceeds the available supply, the CATT will allocate them by pro-rata, up to the limit of the available amount. The amount requested under this modality by each participating entity may not exceed the value of US$ 1,000,000 for securities in foreign currency and Bs. 1,000,000 for securities in national currency, in each term. These amounts may be modified by the CATT. If there are no allocations in the first modality, and therefore it is not possible to determine an average allocation price or rate, the CATT will not make allocations of Treasury Securities under this second modality. The allocation of Treasury Securities may be carried out under other modalities proposed by the CATT with the approval of the Monetary and Exchange Policy Committee.

Article 23.- (Issuance Preference) The MH will take in its favor, totally or partially, the bids not rejected in the auction and will have preference in the definition of issuance requirements for securities for the next auction.

Article 24.- (Effective Sale) The sale will become effective 48 hours after the auction allocation or in another period defined by the CATT. Within this period, the awardee must ensure the existence of sufficient funds in one of the accounts mentioned in Article 18.

Article 25.- (Sanctions) If on the day of the sale, the awardee does not have sufficient resources to make the payment for the securities issued for fiscal policy purposes, the BCB will consolidate in favor of the TGN, as a fine, 2% of the nominal value of the same, without prejudice to other sanctions that the CATT may determine.

Article 26.- (Publication) The Monetary Operations Management of the BCB will publish the results of the auction, without specifying the legal name of the awardees.

Article 27.- (Commercial Year) The calculation of rates and prices will be based on a commercial year of 360 days.

CHAPTER V
ISSUANCE, REGISTRATION, AND CUSTODY

Article 28.- (Issuance) The BCB, on behalf of the TGN, will issue a title for each sale carried out through auction, Money Market, and other mechanisms authorized by the CATT, with the characteristics and security requirements that back the issuance.
The buyer must pay the cost of replacement of forms and custody that are established in the BCB's Commission and Other Income Table.

Article 29.- (Registration and Custody) The BCB will electronically register the name of the buyer of the securities and all definitive purchase and sale operations of the same. It is mandatory to communicate, in writing or by another means authorized by the COMA, the definitive purchase and sale operations of the same in the secondary market. In the absence of this communication, the transfer of ownership of the negotiated securities cannot be registered at the BCB and will lack validity for the holder until the omission of registration is remedied.
Additionally, the BCB may be custodian, in physical or electronic registration, of the issued securities. The BCB may also register repo operations carried out between agents.

Article 30.- (Exchange Rate) Operations in national currency indexed to the United States dollar will be carried out at the BCB's purchase exchange rate in effect on the date.

Article 31.- (Fractionation) The securities issued by the TGN may be fractionated according to the modalities defined by the CATT and the costs stipulated in the BCB's Commission and Other Income Table, respecting the characteristics and conditions of the original issuance.

CHAPTER VI
REPLACEMENT, REDEMPTION, AND PRESCRIPTION

Article 32.- (Replacement) In case of loss or misplacement of the allocated securities, replacement will be carried out according to the norms established in the Commercial Code.

Article 33.- (Redemption) Public securities issued by the TGN are redeemed by the BCB, on behalf and at the expense of the TGN, on the maturity dates of the security, and their coupons are paid after verification of the holder's ownership with the BCB's records and subject to the presentation of the title, where applicable. The CATT may determine the modalities and conditions for early redemption and conversion of existing securities.
Additionally, the BCB may request verification of public securities with the TGN's records. No interest will be recognized after the maturity date, nor will automatic renewal be accepted.
If the maturity of the security or coupon coincides with a non-working day, they may be redeemed on the previous business day at curve price at the request of the holder. The initial buyer will always be the BCB, with an option for repurchase by the TGN based on its availability.

Article 34.- (Prescription) Actions to collect the issued securities prescribe in favor of the State within a period of ten years from the date of their enforceability.

Article 35.- (Transitional Provision) Securities issued by the TGN prior to these Regulations are subject to the provisions that gave rise to them, until their maturity.

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