Resolution 064/98: Approval of Modifications and Additions to the Foreign Exchange Position Regulations of the Financial System

BOARD RESOLUTION NO. 064/98
SUBJECT: ECONOMIC POLICY ADVISORY - APPROVES MODIFICATIONS AND ADDITIONS TO THE FOREIGN EXCHANGE POSITION REGULATIONS OF THE FINANCIAL SYSTEM.

HAVING SEEN:
Law 1670 of the Central Bank of Bolivia (BCB) of October 31, 1995.
Law 1488 on Banks and Financial Entities of April 14, 1993.
Board Resolution No. 109/97 of May 8, 1997.
Board Resolution No. 148/97 of September 9, 1997, which extends the application date of Board Resolution No. 109/97.
Board Resolution No. 165/97 of November 25, 1997.
Report APEC-ARINV No. 046/98 from the Economic Policy Advisory of June 24, 1998.
Report ALEG No. 228/98 from the Legal Advisory of June 30, 1998.

CONSIDERING:
That some entities in the financial system face temporary rigidities in adapting to the regulations of the Foreign Exchange Position Regulations approved by Board Resolution No. 109/97.
That sanctions for non-compliance with the Foreign Exchange Position Regulations must align with other norms issued by the BCB.
That the Report from the Economic Policy Advisory APEC-ARINV No. 046/98 recommends introducing modifications to the currently in force Foreign Exchange Position Regulations.

That the Report from the Legal Advisory ALEG No. 228/98 states that this Resolution complies with the current legal framework in this matter.

THEREFORE

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

Article 1.- Article 4 of the Foreign Exchange Position Regulations approved by Board Resolution No. 109/97 is modified, adding subsection g) with the following text:

g) Financial entities that have a capital adequacy coefficient above 50% may maintain an overbought position in foreign currency that, added to the amount of overbought position in national currency with value maintenance, does not exceed 100% (ONE HUNDRED PERCENT) of the value of book equity, minus the amount of investment in fixed assets.

Financial entities whose capital adequacy coefficient has been located at some point below 50% will lose the right to avail themselves of this exemption.

Article 2.- The text of Article 7 of the aforementioned Regulation is replaced with the following wording:

a) If it is determined that a financial entity exceeded the permitted limits for its foreign exchange positions for more than two consecutive business days, the Financial System Management, with the corresponding communication to the Currency and Credit Management and International Affairs Management, will suspend, for a period equal to that of the infringement, the participation of said entity in the following operations with the BCB:

i) Bolsín ii) Open Market and Money Desk Operations, including Repos.

b) If the financial entity exceeds the permitted limits for a period superior to 30 consecutive days, the Financial System Management will inform the General Manager who will instruct the respective area Managements to suspend, for the same time that the financial entity has exceeded those limits, its participation in the ALADI Agreement on Payments and Reciprocal Credits, in addition to imposing the sanctions established in subsection a) of this Article.

The suspension of operations of the ALADI Agreement on Payments and Reciprocal Credits will be carried out in accordance with what is provided in articles 39, 40, and 41 of the "Internal Regulation for the Channeling of Operations through the ALADI Agreement on Payments and Reciprocal Credits," approved by BCB Board Resolution No. 165/97.

The Financial System Management will periodically inform the Financial System Analysis Committee about the institutions that are under sanction under this Regulation.

Article 3.- Article 9 of the Regulation is complemented with the following paragraph:

If as of April 30, 1998, in the Financial Statements of each entity, the balance of the "Realizable Assets" account represented a proportion equal to or less than 10% of its book equity, the financial entity will have a period of one year, calculated from the effective date of this modification, to comply with the regulations of the Foreign Exchange Position Regulations approved by Board Resolution No. 109/97.

Article 4.- Financial Entities covered in articles 1 and 3, which from October 1, 1997, until the effective date of this modification, had exceeded the limits established for their foreign exchange position and maintained pending sanctions to be fulfilled, are released from the same for this one-time only.

Article 5.- The modifications and additions preceding will enter into force as of August 1, 1998.

Article 6.- The Presidency and the General Management are charged with the execution and compliance of this Resolution.

La Paz, July 7, 1998

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Juan Antonio Morales A.

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Armando Pinell S. Jaime Ponce G.

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Fernando Campero P.