Resolution 061/2002: Creation of the Extended Foreign Currency Deposit Service at the BCB

BOARD RESOLUTION NO. 061/2002 SUBJECT: ECONOMIC POLICY ADVISORY - APPROVES THE CREATION OF THE EXTENDED FOREIGN CURRENCY DEPOSIT SERVICE AT THE BCB.

VIEWED: The Law 1670 of October 31, 1995. The Board Resolution No. 036/2002 of April 9, 2002. The Report from the Economic Policy Advisory Office APEC-INEP No. 023/02 of June 24, 2002. The Report from the Legal Affairs Management SANO No. 125/2002 of June 25, 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 Extended Deposit Service at the BCB.

That through Board Resolution No. 036/2002, the creation of the Restricted Foreign Currency Deposit Service (SRD-ME) was approved.

That central banks can receive deposits from financial entities with the purpose of ensuring the stability of the financial system.

That the Economic Policy Advisory recommends the creation of an "Extended Foreign Currency Deposit Service" account, as a mechanism to strengthen the international reserves of the BCB, allowing the normal functioning of the payment system and consolidating public confidence in financial intermediaries.

That the Legal Affairs Management states that in accordance with Article 54 subsections a) and d) of Law 1670, it corresponds to the Board to consider the approval of the Extended Deposit Service.

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

Article 1.- Create at the Central Bank of Bolivia an Extended Foreign Currency Deposit Service for the strengthening of international reserves, which will enter into effect as of July 1, 2002.

Article 2.- Approve the Regulations for the Extended Foreign Currency Deposit Service, in its 9 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, June 25, 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. Enrique Ackermann A.

ANNEX REGULATIONS FOR THE EXTENDED FOREIGN CURRENCY DEPOSIT SERVICE

Article 1.- An account named "Extended Foreign Currency Deposit Service" (SED-ME) is established, in which the BCB may accept remunerated deposits from banking entities that maintain a "current and reserve account" at the BCB. This account will be administered by the Monetary Operations Management of the BCB.

Article 2.- The SED-ME account may reach up to an amount of USD 250 million in deposits placed for a maximum term of 56 days.

Article 3.- For the constitution of deposits in the SED-ME account, the resources must necessarily originate from abroad. To this effect, banks must deposit the committed amounts in a BCB account abroad assigned for this purpose. This operation will be exempt from payment of transfer commissions from abroad if the deposit in the SED-ME account is maintained until its maturity.

Article 4.- Upon maturity of the deposit in the SED-ME account, the deposited resources and accrued interest will be credited to the "current and reserve account" that the entity maintains at the BCB, or to a bank account abroad at the request of the depositing entity, without applying the fund transfer commission to abroad.

Article 5.- Deposits in the SED-ME account may be redeemed, in whole or in part, before their maturity, under the terms defined by the COMA, prior to notification by the entity to the BCB at least five business days before the withdrawal date. In this case, the BCB will apply the transfer commission from abroad, and will not exempt the entity from payment of the commission if the funds redeemed early are sent abroad.

Article 6.- While the deposit lasts, the resources constituted by each financial entity in the SED-ME account cannot be used to meet legal reserve requirements.

Article 7.- The resources constituted by each financial entity in the SED-ME account may be used as collateral for credits that are requested via written application to the Financial Entities Management of the BCB. The BCB may lend an amount up to 100% of the value deposited in the SED-ME account.

The term of the credits guaranteed by the resources in the SED-ME account may be from 1 to 7 days renewable, via written application to the Financial Entities Management, provided that the credit maturity does not exceed the guarantee maturity date.

The fraction of a deposit in the SED-ME account that constitutes collateral for a credit granted by the BCB cannot be redeemed during the validity of the credit.

Upon maturity of the credits granted with collateral of the value deposited in the SED-ME account, the BCB will automatically debit the amount lent, its interest, and surcharges, from the current and reserve account that the banking entity maintains at the BCB. In case of insufficient funds in said account, the guarantee will be enforced, including the surcharges established by the COMA.

The Financial Entities Management will inform the Committee for the Analysis of the Financial System (COASIF) regarding the loans granted with collateral of the resources in the SED-ME account. The COASIF will regulate the operational procedures of the credits and may determine other additional conditions for granting new credits or renewing those already granted.

Article 8.- If by the valuation date of the constitution of the deposit an entity has not deposited in the assigned BCB account abroad, sufficient funds to effect the committed investment, a fine of 0.5% on the missing amount of the investment will be applied, and the SED-ME deposit will be constituted with the remaining balance.

Article 9.- Within the framework of the SED-ME, the following attributions of the COMA are established:

I. With respect to the constitution of deposits in the SED-ME account: a) Establish amounts and terms for deposits, within the limits indicated in Article 2. b) Define the allocation mechanism for the constitution of deposits. c) Determine the modalities and conditions for early redemption of deposits.

II. With respect to the granting of credits with collateral of the resources in the SED-ME account: a) Define the applicable rate for these credits based on the rate in effect in repo operations.

III. The COMA will determine other operational aspects regarding the deposit facility and submit to the Board of Directors for consideration the modifications required in these Regulations. ---ooo---