Resolution 036/2002 - Creation of the Restricted Foreign Currency Deposit Service at the Central Bank of Bolivia

BOARD RESOLUTION NO. 036/2002 SUBJECT: ECONOMIC POLICY ADVISORY - APPROVES THE CREATION OF THE RESTRICTED FOREIGN CURRENCY DEPOSIT SERVICE AT THE BCB.

HAVING SEEN: Law No. 1670 of October 31, 1995.

The Statute of the Central Bank of Bolivia of December 13, 2001. The Report from the Economic Policy Advisory APEC-INEP No. 010/02 of April 5, 2002. The Report from the Legal Affairs Management SANO No. 067/2002 of April 8, 2002.

CONSIDERING: That in virtue of the powers conferred by Articles 1, 2, 14, 18, and 38 subsections a) and f) of Law 1670, the Board of Directors of the BCB is authorized to create the Restricted Deposit Service at the BCB.

That the acceptance of short-term bank deposits with yield rates for monetary regulation purposes, with the aim of affecting the behavior of bank reserves and short-term interest rates, is an operation of central banks.

That the Economic Policy Advisory recommends the creation of a "Restricted Deposit Service" account as a mechanism to strengthen International Reserves and exert a decisive influence on short-term interbank interest rates.

That the Legal Affairs Management states that in accordance with Article 54 subsections a) and d) of Law 1670 and Article 11 paragraphs 1 and 4 of the BCB Statute, it corresponds to the Board of Directors to approve the Restricted Deposit Service.

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

Article 1.- To create at the Central Bank of Bolivia (BCB) a Restricted Foreign Currency Deposit Service for monetary regulation and adjustment of short-term interest rates purposes, which shall enter into force as of April 10, 2002.

Article 2.- To approve the Regulations of the Restricted Foreign Currency Deposit Service, in its 6 articles, which as an annex forms part of this Resolution.

Article 3.- The Presidency and the General Management are charged with the execution and compliance of this Resolution.

La Paz, April 9, 2002

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Juan Antonio Morales A.

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Juan Medinaceli V. Roberto Camacho S. Enrique Ackermann A.

//2. B.D. No. 036/2002 ANNEX REGULATIONS OF THE RESTRICTED FOREIGN CURRENCY DEPOSIT SERVICE

Article 1.- A Account named "Restricted Foreign Currency Deposit Service" (SRD-ME) is established, in which the BCB may accept restricted deposits from banking entities up to an amount of $50 million and for a maximum term of seven days. The Open Market Operations Committee (COMA) of the BCB will establish amounts and terms within these limits based on the liquidity conditions of the economy.

Article 2.- Funds deposited in the SRD-ME Account will earn a yield. The COMA will apply a competitive auction mechanism for the constitution of these remunerated deposits at the BCB, favoring first those that offer the lowest rates until the offered amount is exhausted. The COMA will define the base rate of the auction, taking into consideration: a) the foreign currency liquidity conditions of the national banking system, and b) the "overnight" rate of deposits in foreign banks authorized for BCB investments. If in the margin there is equality of yield rates between bids, deposits will be awarded by the pro-rata system.

Article 3.- Access to the auction will be limited to entities whose constituted foreign currency reserve requirement represents a percentage, determined by the COMA, above the legal reserve requirement. When banking entities that accessed the "Restricted Foreign Currency Deposit Service" have decreased their reserve excesses below the minimum established by the COMA during one or more days of the investment period, the account will be reduced by the equivalent of the deficiency and this part will not receive any remuneration.

Article 4.- Funds constituted by banks in the SRD-ME account may not be used to meet legal reserve requirements, nor to guarantee or carry out other types of operations.

//4. B.D. No. 036/2002 Article 5.- If the resources captured in the SRD-ME account originated from abroad, the BCB will exempt the depositing entity from the payment of commissions for transfers from abroad.

Article 6.- Upon maturity of the operation, the deposited resources and accrued interest will be credited to the "current and reserve account" of the corresponding financial entity, or to a bank account abroad at the request of the depositing bank, without applying the fund transfer commission to abroad if it were resources that had adhered to the application of Article 5. ---ooo---