Resolution 044/2002: Approves Transitional Portfolio Administration Regulations under Law 2297

BOARD RESOLUTION NO. 044/2002
SUBJECT: FINANCIAL ENTITIES MANAGEMENT – APPROVES TRANSITIONAL PORTFOLIO ADMINISTRATION REGULATIONS WITHIN THE FRAMEWORK OF LAW NO. 2297 “LAW FOR THE STRENGTHENING OF FINANCIAL REGULATIONS AND SUPERVISION” AND SUPREME DECREE NO. 26575.

SEEN:
The Law 1670 of October 31, 1995.
The Law 2297 on the Strengthening of Financial Regulations and Supervision of December 20, 2001.
The Supreme Decree 26575 Regulating Law 2297, of April 3, 2002.
The Statute of the Central Bank of Bolivia of December 13, 2001.
Board Resolution No. 093/99 of October 15, 1999.
Board Resolution No. 101/99 of November 23, 1999.
Board Resolution No. 077/2000 of October 24, 2000.
Board Resolution No. 083/2001 of August 21, 2001.
The Report from the Financial Entities Management and the Legal Affairs Management GEF-GAL No. 118/2002 of April 25, 2002.

CONSIDERING:

That Article 1 of Law 2297, on the Strengthening of Financial Regulations and Supervision, establishes the terms for the reprogramming of portfolios of intervened entities for their forced sale.

That Article 21 of Law 2297 establishes, for payment in cash, the benefit of forgiveness up to a maximum amount of five thousand United States dollars ($us. 5,000), in favor of borrowers corresponding to non-linked credit portfolios whose balances are equal to or less than ten thousand United States dollars ($us. 10,000), prior to cancellation in cash and in a single payment of fifty percent (50%) of the outstanding capital balance.

That Chapter I of Supreme Decree 26575 regulates payment in kind and write-off of operations.

That Chapter II of Supreme Decree 26575 regulates the benefit for payment in cash.

That Chapter IV, Article 14 of Supreme Decree 26575, regulates the cancellation by the General Treasury of the Nation with bonds in favor of the Central Bank of Bolivia for the forgiveness operations indicated in Chapter II of the aforementioned Decree.

That the Financial Entities Management and the Legal Affairs Management, in their report GEF–GAL No. 118/2002 recommend, within the framework of Law 2297, to temporarily modify the Portfolio Administration and Asset Sale Regulation of the Administration Mandate of Banco Mercantil S.A.

THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1.- Approve the Transitional Portfolio Administration Regulation within the framework of Law 2297 “Law for the Strengthening of Financial Regulations and Supervision” and Supreme Decree 26575, corresponding to the Administration Mandate granted by the BCB to Banco Mercantil S.A. in its 5 chapters and 27 articles, which, as an annex, forms part of this Resolution.

Article 2.- Instruct the Financial Entities Management to request from the General Treasury of the Nation the reimbursement of the amounts forgiven in capital and the current interest calculated at the Reference Interest Rate – TRE in the month prior to payment for credits that take advantage of the cash payment benefit, with bonds in favor of the Central Bank of Bolivia.

Article 3.- Authorize the President of the BCB to sign an addendum to the Administration Mandate contract signed between the BCB and Banco Mercantil on December 1, 1999, which contains what is established in Article 1 of this Resolution.

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

La Paz, April 30, 2002

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Juan Antonio Morales A.

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Juan Medinaceli V. Armando Méndez M.

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Roberto Camacho S. Javier Comboni S.

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Enrique Ackermann A.

ANNEX
ADMINISTRATION MANDATE GRANTED BY THE CENTRAL BANK OF BOLIVIA TO BANCO MERCANTIL S.A.
TRANSITIONAL PORTFOLIO ADMINISTRATION REGULATION WITHIN THE FRAMEWORK OF LAW 2297

CHAPTER I
GENERAL PROVISIONS

Article 1.- (Scope of Application)
This regulation will apply to borrowers of the credit portfolio received by the Central Bank of Bolivia from the former Banco Boliviano Americano S.A. and administered under mandate by Banco Mercantil S.A.

Article 2.- (Validity)
This regulation has a transitional character, in application of articles 1st, subsection a) and 21st of Law 2297 and SD 26575.
Borrowers who take advantage of the reprogramming of their credits may only do so within a period of up to 180 calendar days after the public notification.
Borrowers with credits whose outstanding capital balances on December 20, 2001, are equal to or less than ten thousand dollars ($us. 10,000), may benefit from capital forgiveness up to a maximum amount of five thousand dollars ($us. 5,000), provided that they cancel in cash and in a single payment fifty percent (50%) of the outstanding capital balance. This benefit will be valid until December 31, 2002.

CHAPTER II
ADMINISTRATION OF CREDIT PORTFOLIO
Reprogramming of Credits

Article 3.- (Subjects of Reprogramming)
Subjects of reprogramming are all borrowers regardless of the sector to which they belong and the risk rating of their credits.
Consequently, in the reprogramming provided for in this regulation, it will not be necessary to comply with what is established by Article 12 of Circular SB/291/99 Regulation of Evaluation and Rating of Credit Portfolios and subsequent updates.

Article 4.- (Consolidation of Credits)
All credit operations corresponding to a borrower or group of borrowers will be consolidated into a single reprogramming document.
The reprogramming of the credit will be carried out only once, considering what is established in this regulation.

Article 5.- (Guarantees)
I. The guarantees constituted in the credit documents will be maintained. Mortgage guarantees will retain the same registration grade, and there cannot be subsequent registrations in favor of third parties.
II. Personal guarantors will ratify their initial guarantee by updating their asset declarations.
III. Reprogramming will not proceed in the absence of guarantees. The exhaustion of the useful life of the asset and the non-updating of asset declarations by personal guarantors will also be considered as the absence of guarantees.

Article 6.- (Term for Reprogramming)
I. Reprogramming will be carried out for a term of up to eight (8) years, including two years of grace for the payment of capital. The reprogramming may consider the capitalization of interest according to what is provided by Article 800 of the Code of Commerce.
II. Borrowers whose credits have maturity terms greater than those indicated above may request the reprogramming of the same, subjecting themselves to the conditions established in this regulation.

Article 7.- (Debt Service)
The debt service will be agreed upon semi-annually, unless the borrower requests to make monthly, bimonthly, or quarterly amortizations. In no case will amortizations be annual. Any amortization will be applied first to the payment of interest and then to the payment of capital.

Article 8.- (Recognition of Outstanding Balance)
The borrower will recognize one hundred percent (100%) of the outstanding capital balance plus current interest calculated at the reference interest rate (TRe) in foreign currency plus five (5) percentage points, in effect in the month prior to the date of reprogramming.

Article 9.- (Interest Rate)
The interest rate of the reprogrammed credit will be the TRe rate in foreign currency plus five (5) percentage points, in effect in the month prior to the payment date.

Article 10.- (Currency)
Reprogramming will be carried out in United States dollars.

Article 11.- (Term for Application of Reprogramming)
Borrowers will be publicly notified of the application of the reprogramming provided for by Law 2297, granting them a period of 180 days from the publication to take advantage of said benefit.

Article 12.- (Expenses borne by the Borrower)
All expenses required for the reprogramming will be at the expense of the borrower. Likewise, in case of judicial execution, the fees of the sponsoring lawyer will be paid by the borrower.

Article 13.- (Forgiveness of Penalty Interest, Late Interest, and Other Expenses)
One hundred percent (100%) of penalty interest, late interest, judicial expenses, forms, and other expenses will be forgiven when the debtor pays the total obligation or when the operation is reprogrammed under the conditions established in this regulation.

Article 14.- (Provision and Rating Regime for the Credit Portfolio)
The rating of the credits and the provisions constituted on the date of reprogramming will be maintained until the cancellation of the reprogrammed credit, unless the operation is written off as irrecoverable.

Article 15.- (Approval of Reprogrammings)
The mandatary will approve the reprogramming of credit operations provided for within the framework of what is provided by Law 2297, its Regulatory Decree, and this regulation. The autonomous decision margin established by Article 8 of the Portfolio Administration and Asset Sale Regulation will not be applicable during the validity of this regulation.

CHAPTER III
RECEPTION OF ASSETS WITH DIVERSE PERFORMANCE FROM THAT DUE

Article 16.- (Requirements for Payment with Diverse Performance)
I. Payment with diverse performance will proceed when the borrower has failed to pay one of the installments of the reprogrammed credit under the conditions of this regulation.
II. The assets offered as payment will have legal documentation in order and taxes paid up to date; likewise, they will be free of liens or debts, settlement, and possession by third parties. In all cases, the borrower will grant the guarantee of eviction and legal soundness.
Rural assets must comply with the economic and social function according to what is established by Law 1715 INRA.

Article 17.- (Benefits)
Borrowers who make payments with diverse performance will benefit from the forgiveness of one hundred percent (100%) of penalty interest, administrative, and judicial expenses.

Article 18.- (Value Accepted in Payment)
The value of the asset to be received in payment will be equivalent to sixty percent (60%) of the commercial value according to an updated appraisal.

Article 19.- (Nullity)
The diverse performance will be celebrated through a contract, in which nullity will be stipulated in case of hidden defects or subsequent problems that prevent the BCB from exercising its proprietary right or the realization of the received assets. In this case, the originally contracted obligation will subsist, and legal collection actions must be initiated or continued.

Article 20.- (Expenses borne by the Borrower)
The expenses of payment with diverse performance, such as appraisal, taxes, notarial expenses, and others that may be necessary, will be at the expense of the borrower. Likewise, in case of judicial execution, the fees of the sponsoring lawyer will be honored by the borrower.

CHAPTER IV
BENEFIT OF CASH PAYMENT

Article 21.- (Beneficiaries)
Borrowers who on December 20, 2001, have one or more credits and whose individual balances are equal to or less than ten thousand dollars ($us. 10,000), may benefit from capital forgiveness up to five thousand dollars ($us. 5,000), per operation until December 31, 2002.

Article 22.- (Conditions)
I. The beneficiaries indicated in Article 21 of this regulation will cancel in cash and in a single payment fifty percent (50%) of the debt to capital, as well as the total fees of the sponsoring lawyer in case the credit is under judicial execution.
II. Upon making said payment, the borrower will benefit from the forgiveness of the remaining fifty percent (50%) of the outstanding capital balance, including all current interest, penalty interest, and other charges as well as administrative and judicial expenses, both of the forgiven capital and the paid capital.

Article 23.- (Report to the Risk Central and Credit Information of the SBEF)
The amounts of forgiven debt will be reported to the Central Credit Risk Information of the Superintendence of Banks and Financial Entities (SBEF).

Article 24.- (Prohibition)
Operations that are reprogrammed under the conditions established in this regulation will not take advantage of the cash payment benefit.

Article 25.- (Reimbursement on behalf of the TGN)
Banco Mercantil will send to the Central Bank of Bolivia a monthly detail of the amounts forgiven in capital and the current interest calculated at the Reference Interest Rate – TRE in the month prior to payment. The Central Bank of Bolivia, based on these reports and once the validity for the cash payment benefit indicated in Article 2 of this regulation has concluded, will request from the General Treasury of the Nation the reimbursement of the forgiven amounts with bonds in favor of the Central Bank of Bolivia.

CHAPTER V
FINAL PROVISIONS

Article 26.- (Reimbursement of Judicial Expenses)
Judicial expenses already carried out by Banco Mercantil S.A. and forgiven in application of this regulation, will be reimbursed by the Central Bank of Bolivia within thirty days following the payment of the obligation or the reprogramming of the credit, prior to the delivery of documentary discharge made by the lawyer of the case, duly authorized by Banco Mercantil S.A.

Article 27.- (Application of the Portfolio Administration and Asset Sale Regulation)
All aspects not expressly considered in this Regulation will continue to be subject to what is provided in the Portfolio Administration and Asset Sale Regulation and its modifications (Board Resolutions 101/99, 77/2000, and 83/2001). The Portfolio Administration and Asset Sale Regulation and its modifications will be applied with all their force once the validity of this regulation has ended. ---ooo---