Resolution 047/2009 Approving the Regulation on Monetization, Exchange, and Destruction of Monetary Material

BOARD OF DIRECTORS RESOLUTION NO. 047/2009 SUBJECT: MONETARY OPERATIONS MANAGEMENT – APPROVES THE NEW REGULATION ON MONETIZATION, EXCHANGE, AND DESTRUCTION OF MONETARY MATERIAL OF THE CENTRAL BANK OF BOLIVIA.

SEEN:

Law No. 1670 of October 31, 1995 of the Central Bank of Bolivia (BCB). The BCB Statute approved by Board Resolution No. 128/2005 of October 21, 2005 and subsequent modifications. The Regulation on Issuance, Exchange, and Destruction of Monetary Material approved by Board Resolution No. 108/2001 of October 30, 2001. The Report from the Monetary Operations Management STES No. 39/2009 of March 17, 2009. The Reports from the Legal Affairs Management SANO No. 089/2009 of April 2, 2009.

CONSIDERING:

That pursuant to articles 1 and 3 of Law No. 1670, the BCB is the sole monetary and exchange authority of the country with administrative, technical, and financial competence and specialized normative powers of general application, being empowered to formulate policies in monetary, exchange, and payment system matters.

That the aforementioned Law in its articles 10, 11, 13, and 54, subsections a), o), and m), establishes the functions of the BCB regarding the issuance of banknotes and metallic coins, as well as the attributions of the Board to authorize and supervise the printing, issuance, and destruction of monetary material, being empowered to issue the rules and adopt the general decisions necessary for its compliance.

That pursuant to article 30 of Law No. 1670, all financial intermediation entities and financial services, whose operation is authorized by the Financial Supervision Authority (Institution for the Regulation of Banks and Financial Entities), are subject to the normative competence of the BCB, with respect to their relationship as monetary, exchange, and payment system authority.

That article 67 of the Statute of the Central Bank of Bolivia establishes that the Monetary Operations Management is responsible for establishing the requirements for the acquisition, distribution, destruction, and administration of monetary material.

That the Monetary Operations Management through Report STES No. 039/2009, recommends the approval of the Regulation on Monetization, Exchange, and Destruction of Monetary Material of the BCB, a norm that will allow improving the management and distribution of monetary material, as well as the average quality of banknotes in circulation.

That the Legal Affairs Management through Report SANO No. 089/2009, states that there is no legal impediment for the Board of the Issuing Entity, in the exercise of its powers, to consider the approval of the New Regulation on Monetization, Exchange, and Destruction of Monetary Material of the BCB.

THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1.- Approve the Regulation on Monetization, Exchange, and Destruction of Monetary Material, in its V chapters and 19 articles, which in the annex, forms an integral part of this Resolution.

Article 2.- This Regulation shall enter into force as of July 1, 2009.

Article 3.- Repeal Board Resolution 108/2001 of October 30, 2001, as of July 1, 2009.

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

La Paz, April 14, 2009

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Gabriel Loza Tellería

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Gustavo Blacutt Alcalá Hugo Dorado Araníbar

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Rolando Marín Ibáñez Ernesto Yáñez Aguilar Rafael Boyán Téllez

ANNEX REGULATION ON MONETIZATION, EXCHANGE, AND DESTRUCTION OF MONETARY MATERIAL

CHAPTER I OBJECT AND DEFINITIONS

Article 1.- (Object) The purpose of this Regulation is to regulate the monetization, exchange, demonetization, and destruction of monetary material.

Article 2.- (Definitions) Monetization: A privative function of the Central Bank of Bolivia as the sole issuer of the Boliviano to put into circulation banknotes and coins of legal and compulsory tender with unlimited liberatory power. Demonetization: Process by which Boliviano banknotes and coins are withdrawn from legal circulation.

CHAPTER II MONETIZATION OF BANKNOTES AND COINS

Article 3.- (Authorization of monetization) The Board of the BCB, through an express resolution, will authorize the monetization of monetary material based on reports from the Monetary Operations Management (GOM) and the Legal Affairs Management (GAL), according to the issuance or storage requirements determined by the GOM.

Article 4.- (Certificate of monetization) The monetization authorized by the Board will be recorded in an act signed by a Director designated by the BCB Board, the General Manager, the Manager of Monetary Operations, and the Submanager of Treasury.

Article 5.- (Registration of monetization) The GOM will register the monetization of banknotes and coins, accounting transferring the nominal value of each denomination from "Monetary Material in Warehouses" to the "Central Vault" account.

Article 6.- (Dissemination) Prior to putting a new family, series of banknotes, or new coinage into circulation, the main characteristics of this monetary material will be disseminated.

CHAPTER III DISTRIBUTION AND EXCHANGE OF MONETARY MATERIAL

Article 7.- (Distribution) The GOM will put monetary material into circulation through the financial intermediation system, its own offices, or other distribution mechanisms authorized by the Board. The General Management will determine and implement in each case the most suitable mechanisms for the efficient distribution of monetary material in the economy. The GOM, through the General Management, will present to the Board a semi-annual program for the distribution of monetary material.

Article 8.- (Structure of distribution) The GOM will determine the structure of cuts for the distribution of monetary material based on public requirements, the structure by cuts of ineligible and available monetary material, and other factors.

Article 9.- (Distribution of lower denomination banknotes through ATMs) Financial entities are obligated to distribute ten or twenty Boliviano banknotes through their ATMs, such that there are always banknotes of smaller cuts in all ATMs.

Article 10.- (Exchange and fragmentation of monetary material) Financial intermediation institutions in all their branches and agencies are obligated to exchange damaged or mutilated banknotes, provided they clearly retain their two signatures and a serial number. Financial intermediation entities are obligated to fragment banknotes into smaller cuts or coins in all their branches and agencies. The General Secretariat will provide financial intermediation entities with posters indicating this obligation, which must be placed in visible locations in all their branches and agencies.

Article 11.- (Sanctions for non-compliance) The General Management will coordinate with the Institution for the Regulation of Banks and Financial Entities the application of fines and sanctions for non-compliance with the functions described in the preceding Article.

CHAPTER IV WITHDRAWAL AND DESTRUCTION OF MONETARY MATERIAL

Article 12.- (Withdrawal of monetary material from circulation) After verifying the monetary material sent as ineligible by financial institutions, the GOM will proceed to withdraw said monetary material for subsequent destruction. This verification may be carried out by sampling, according to technical and statistical criteria defined by the GOM. The verification may be delegated to an entity qualified for this purpose.

Article 13.- (Withdrawal due to design change) The BCB may withdraw from circulation monetary material whose substitution has been decided due to a change in design, family, or substrate, following the procedure used for the withdrawal of ineligible monetary material.

Article 14.- (Destruction) The monetary material withdrawn from circulation, after being rendered unusable, will be physically destroyed in the Treasury area, using mechanisms that eliminate the possibility of reconstruction or reuse.

Article 15.- (Supervision) The verification of the monetary material to be destroyed will be carried out by a group composed of the Manager of Monetary Operations, the Submanager of Treasury, a representative designated by the General Manager, and a Notary of Public Faith. The latter two must supervise the complete destruction process and provide certification thereof. In each destruction session, the corresponding Act will be drawn up, recording the cuts, number of packages, number of pieces, value of the destroyed material, and the sampling verification of said material. The Act will be signed by all participants.

Article 16.- (Destination of waste) The waste from destroyed banknotes will be buried in places determined by common agreement with the respective Municipal Mayors or will be destined for other uses with the authorization of the General Management. The use of waste from destroyed coins will be determined and authorized by the General Management.

CHAPTER V OTHERS

Article 17.- (Reports from the Monetary Operations Management) The GOM, through the General Management, will submit semi-annual reports to the Board concerning existing balances of monetary material, evolution of its distribution, quality of monetary material in circulation, results of the destruction processes of banknotes and coins, and other aspects related to the management of monetary material.

Article 18.- (Reproduction of images of monetary material) The partial or total reproduction of images of monetary material by any natural or legal person will only be permitted when the dimension of the reproduced image is at least 50% larger or smaller than the dimensions of the original monetary material and the material used for reproduction does not generate confusion with the original material.

Article 19.- (Specimens or samples without value) The GOM may send specimens or samples without value to other Central Banks. The General Management will expressly authorize the delivery of specimens and samples without value to BCB authorities and related entities.

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