Resolution 069/2003 Approving the Regulation on Administration and Disposal of Assets under Supreme Decree 26688

BOARD RESOLUTION NO. 069/2003
SUBJECT: FINANCIAL ENTITIES MANAGEMENT – APPROVES REGULATION ON ADMINISTRATION AND DISPOSAL OF ASSETS UNDER SUPREME DECREE 26688.

HAVING SEEN:
Law 1670 of October 31, 1995.
Law 1488 of April 14, 1993 (Consolidated Text approved by Supreme Decree 26581 of April 3, 2002).
Law 2196 of May 4, 2001.
Law 2297 of December 20, 2001.
Supreme Decree 25964 of October 21, 2000.
Supreme Decree 26688 of July 5, 2002.
Statute of the Central Bank of Bolivia of December 13, 2001.
Note from the Standards Unit of the Ministry of Finance SABS/675/03 of June 2, 2003.
Reports from the Financial Entities Management GEF-SRRA No. 059/2003 of February 26, 2003 and GEF-SRRA No. 183/2003 of June 17, 2003.
Report from the Legal Affairs Management SANO No. 114/2003 of June 16, 2003.
Note from the General Management GGRL. I. No. 484/2003 of June 23, 2003.

CONSIDERING:
That Article 38, paragraph d) of Law 1670 empowers the BCB to purchase, discount, or guarantee assets; capitalize credits, dispose of resulting shares, and carry out cash or term credit assignments, for the purpose of preserving a stable and competitive intermediation system.

That Article 86 of the aforementioned Law states that the BCB shall not acquire or maintain participations in the capital of private, public, or mixed, financial or non-financial companies, except in international financial entities of public law. Likewise, it states that in those cases where the BCB's shares or participations in any type of company or entity originated from the payment of debts, capitalization of credits, or judicial award, they must be disposed of for consideration within one year of their acquisition, unless there is a duly justified impossibility.

That Article 54 of the aforementioned Law in paragraphs a) and n) determines the authority of the BCB Board to issue norms and adopt general decisions necessary for the BCB to fulfill the functions, competencies, and powers assigned to it by said law, as well as to formulate policies regarding the internal management of the BCB, supervising their execution.

That paragraph o) of Article 54 of Law 1670 states that the BCB Board has the authority to approve, modify, and interpret the statute and regulations of the BCB.

That Article 57 of Law 1488 determines that movable or immovable assets that become the property of a financial intermediation entity as a consequence of judicial or extrajudicial actions exercised to recover their credits must be sold within one year from the date of award; likewise determining the percentages that must be provided for if sales are not carried out within the specified period.

That Article 13 of Law 2196 establishes that assets owned by a financial intermediation entity awarded in its favor between January 1, 1999, and December 31, 2002, as a consequence of judicial or extrajudicial actions exercised to recover their credits, must be sold within two years for movable assets and within three years for immovable assets from the date of award; stating that provisions shall be made in accordance with what is established in Article 57 of Law 1488.

That Supreme Decree 26688 in its Article 9 determines that the characteristics, deadlines, discounts, and other terms and conditions of operations regarding the administration and disposal of assets and goods resulting from financial support granted by the Central Bank of Bolivia for the strengthening, intervention, or liquidation of financial entities shall be defined and expressly authorized by the Board of the issuing entity and sent for compatibility to the Governing Body of the System for the Administration of Goods and Services.

That Article 10 of Supreme Decree 26688 establishes that disposal operations initiated by the BCB and that are in the process of execution according to Supreme Resolutions 216144 and 218899, will continue until their completion, in accordance with what is provided in said resolutions.

That the Standards Unit of the Ministry of Finance through note SABS/675/03 compatibilizes the draft Regulation on Administration and Disposal of Assets of the BCB.

That the Financial Entities Management through Report GEF-SRRA No. 183/2003 recommends approving the Regulation on Administration and Disposal of Assets prepared within the framework of Supreme Decree 26688.

That in the opinion of the Legal Affairs Management, there is no legal impediment for the BCB Board to approve the Regulation on Administration and Disposal of Assets prepared within the framework of Supreme Decree 26688.

That the General Management through note GGRL. I. 484/2003 recommends to the Board to consider and approve the Draft Regulation on Administration and Disposal of Assets prepared within the framework of Supreme Decree 26688.

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

Article 1.- Approve the Regulation on Administration and Disposal of Assets within the framework of Supreme Decree 26688, in its 4 chapters, 23 articles, and three final provisions, which, as an annex, forms part of this resolution.

Article 2.- The Regulation on Administration and Disposal of Assets within the framework of Supreme Decree 26688 will enter into force on the day of its approval.

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

La Paz, June 23, 2003

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Juan Antonio Morales A.

_______________ _______________ __________________ Juan Medinaceli V. Armando Méndez M. Enrique Ackermann A.

ANNEX
REGULATION ON ADMINISTRATION AND DISPOSAL OF ASSETS WITHIN THE FRAMEWORK OF SUPREME DECREE 26688

CHAPTER I
GENERAL PROVISIONS

Article 1. (Object).
The present norm aims to regulate Chapter III of Supreme Decree 26688 of July 5, 2002, which approves the modalities for the disposal of movable and immovable assets of the Central Bank of Bolivia (BCB), received as payment in kind for the financial support granted to Banco del Progreso Nacional S.A.M. in Liquidation and the former Banco Potosí S.A..

Article 2. (Scope of Application).
The activities to be carried out for the administration and disposal of the assets mentioned in the preceding Article 1 are within the scope of application of this Regulation.

Article 3. (Administration and Disposal of Assets).
The administration and disposal of the assets covered by this Regulation will be carried out under the responsibility of the Financial Entities Management (GEF), through the Sub-Management of Recovery and Asset Realization (SRRA).

The Legal Affairs Management (GAL) will be responsible for perfecting the ownership rights of the received assets, as well as carrying out the corresponding legal procedures. The Administration Management (GADM) will be responsible for carrying out contracts and paying the taxes and services requested by the GEF.

Article 4. (Reports).
The GEF will send a semi-annual report to the General Management regarding the administration of the assets and the actions taken for their disposal. To this effect, it will request specific reports from the GAL and the GADM.

Article 5. (Administration and Disposal Expenses).
The expenses required for the administration and disposal of the assets included in this Regulation will be budgeted by the GEF in the Work and Budget Plan (POA) of its area for the corresponding management period.

CHAPTER II
ASSET ADMINISTRATION

Article 6. (Proof of Ownership Rights).
The BCB's ownership rights, in the case of immovable assets, will be evidenced by the testimony of the public deed of transfer of payment in kind registered in the Office of Real Rights, and for movable assets, through the Act of physical delivery in accordance with the Agreement and possession of the asset.

Article 7. (Technical Appraisals).
Annually, the GEF will request the GADM to contract technical appraisal services for the assets. The appraisal must be prepared by a registered and licensed appraiser qualified to provide this service.

Article 8. (Accounting Registration).
Movable and immovable assets must be registered in the BCB Balance Sheet accounts as Realizable Assets, in accordance with the current norms issued by the Superintendence of Banks and Financial Entities (SBEF).

Article 9. (Date for Computing the Holding Period and Establishment of Provisions).
The holding period for movable and immovable assets received as payment in kind will be computed from the date of the act of delivery in accordance with the Agreement that determines their transfer to the BCB, unless there is a Public Deed of Transfer in the case of immovable assets, in which case this date must be taken for computing the mentioned period.

The establishment of provisions for excess holding period and for updating or devaluation to market value shall be governed by the current norms issued by the SBEF.

Article 10. (Inspection, Maintenance, and Insurance Contracts).
Annually, the GEF must carry out inspection and supervision tasks on the assets. To this effect, it will require the GADM to delegate specialized officials.

The delegated officials, upon completion of the inspection, will present a report on the state of the assets to the GEF, based on which this Management may determine the following actions:
a) The contracting of maintenance and repair services, if factors that could cause damage to the assets have been evident. b) The contracting of 24-hour security guards for immovable assets, prior to cost-benefit analysis. c) The installation of visible signs announcing the BCB's ownership of these immovable assets. d) The contracting of insurance for immovable assets that present constructions.

These administration activities also extend to immovable assets whose ownership registration, in the name of the BCB, is in the process of perfectioning under the charge of the GAL.

CHAPTER III
DISPOSAL OF ASSETS

Article 11. (Modalities).
The GEF may adhere to the following disposal modalities, or a combination thereof:
a) Sale to third parties through open bidding or public call. Under the open bidding modality, the BCB will invite the public to participate in the Open Bidding event. Interested parties must offer, bid, and publicly commit to paying the price they have offered for the asset to be disposed of. Under the public call modality, the Issuing Entity will carry out publications in media outlets inviting the public to submit written proposals. Likewise, direct invitations may be sent to natural or legal persons simultaneously with the publication.

b) Onerous transfer under market conditions to Public Sector entities. The onerous disposal of assets to public sector entities under market conditions will be carried out through the General Treasury of the Nation upon a purchase proposal from a Public Entity.

c) Direct sale to third parties.- Under this modality, assets may be disposed of if they fall under any of the following cases:

1. Due to their perishable nature.
2. Due to imminent risk of deterioration, which causes the loss of their utility or functionality.
3. Due to risk of usurpation.
4. Due to risk of imminent obsolescence.
5. Due to being in total or partial physical possession by third parties.
6. Due to the impossibility of disposing of the assets under the modalities indicated in the preceding paragraphs a) and b).

Article 12. (Start of the Disposal Process).
To initiate the asset disposal process, the GEF will send to the General Management, for approval, the technical report containing the recommendation for the definitive disposal modality, in accordance with Article 11 of this Regulation. It will also attach the corresponding legal report issued by the GAL.

Article 13. (Base Value for Disposal).
The base value of the assets to be disposed of will be the commercial value according to the technical appraisal, whose age must not be greater than one year.

Article 14. (Completion of the Disposal Process).
The disposal process will conclude after the following actions:
a) Contract Signing: Upon receipt of the total payment of the base disposal value, the GEF will submit a report to the General Management, which, based on the mentioned report, will instruct the GAL to draft the corresponding contract.

b) Transfer Expenses: The payment of the Transfer Tax will correspond to the BCB; the other expenses related to the disposal will be covered by the buyer.

c) Delivery of Documents: Once the contract is signed, the GEF, in coordination with the GAL representing the BCB, will deliver to the awardee the technical and legal documentation of the sold asset, with the payment of transfer taxes corresponding to the BCB.

d) Delivery of the Asset: The GEF will proceed to deliver the asset, through an Act signed by the awardee, which will be drafted by a Notary Public, in which the individualized state, value, and other conditions of the asset's delivery will be recorded.

Article 15. (Incompatibilities).

The following are incompatible to acquire the assets to be disposed of:

a) The President and Vice President of the Republic, National Representatives, Ministers of State, Directors of the BCB, public servants of the Issuing Entity who hold executive positions up to the level of Area Sub-Managers, and those who participate directly in the disposal process. b) Proposers who have a marital relationship or degree of kinship with the BCB public servants indicated in the preceding paragraph a), up to the third degree of consanguinity and second degree of affinity, as established in the Family Code.

Section 1
Sale to Third Parties through Open Bidding or Public Call

Article 16. (Public Invitation).
Upon receiving approval from the General Management for the disposal of the assets and their realization modality, the GEF will request the GADM to publicly disseminate the disposal of the asset. To this effect, it will send the following information:
a) Form of Disposal (Open Bidding or Public Call) b) Description and base price of the asset to be disposed of. c) Address and hours when the asset can be viewed. d) Amount of the proposal seriousness deposit. e) Place, date, and price of the disposal document specifications. f) Place and time where the Open Bidding event or opening of proposals for the Public Call will be held.

Article 17. (Publication of the Public Invitation).
The public invitation will be carried out in press media for the presentation of proposals for the purchase of the assets. Likewise, direct invitations may be sent to natural or legal persons simultaneously with the publication.

This invitation will be sent by the GADM to the Official Gazette of Calls for Publication for publication with a minimum advance of fifteen (15) business days prior to the date fixed for the disposal event, and to a morning newspaper of national circulation for publication during 3 consecutive days. One of these publications must be carried out on a Sunday.

Article 18. (Procedure).
The procedures to be followed for the Open Bidding and Public Call modalities will be carried out in accordance with what is established by the Regulation on Administration of Goods and Services of the Issuing Entity, with the GEF requesting authorization from the General Management to follow the chosen modality.

Article 19. (Reductions in the Base Sale Value).
In the event that there are no interested parties and the Open Bidding or Public Call event is declared void, within the year of initiating the process, the GEF will make quarterly offers, considering proportional and gradual reductions up to the quick sale or liquidation value provided for in the respective appraisal.

Section 2
Onerous Transfer to Public Sector Entities

Article 20. (Annual Report to SENAPE).
The GEF will send to the National State Heritage Service (SENAPE), at least once a year, the list of assets available for disposal under the onerous transfer modality, consigning the asset data, their location, sale value according to appraisal, and any additional information deemed necessary.

Article 21. (Evaluation of Proposal and Completion of the Disposal Process).
Upon purchase proposals for assets by Public Sector Entities, the GEF will evaluate the best offer and present a report to the Board for approval.

The disposal process will conclude in accordance with the procedure established in Article 14 of this Regulation.

Section 3
Direct Sale to Third Parties

Article 22. (Direct Sale to Third Parties)
To proceed with the direct sale of an asset, the GEF will send to the General Management the report indicated in Article 12 of this Regulation, for approval. The report must determine if any of the causes established to proceed with the sale under this modality exist.

Article 23. (Conclusion of the Direct Sale to Third Parties Procedure).
Once the buyer is identified, the disposal of the asset will proceed, following the procedure established in Article 14 of this Regulation, prior to approval by the Board.

CHAPTER IV
FINAL PROVISIONS

First. (Assets in Execution Process).
Asset disposal operations initiated by the BCB whose execution process predates the entry into force of Supreme Decree No. 26688 of July 5, 2002, will be governed until their conclusion by what is provided in Supreme Resolution No. 218899 of October 15, 1999, and the decisions of the BCB Board.

Second. (Tax Treatment).
In the case of immovable assets received with tax burdens (annual property taxes and fines), unpaid taxes will be cancelled by the GADM from the annual budget of the GEF.
The GEF will request the GAL to carry out exemption procedures from the registration of the ownership rights of the assets in the name of the BCB.

Third. (Disposal for Free).
In cases where the asset cannot be disposed of at the quick sale value and the maintenance and custody costs reach one third (1/3) of its liquidation value, the legal and economic contingencies that do not allow for its short-term disposal will be taken into account, and its disposal for free to Public Entities will be submitted for consideration to the Board.

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