Resolution 075/98 Approving New Regulations for Operations with Central Bank of Bolivia Deposit Certificates

BOARD RESOLUTION NO. 075/98 SUBJECT: CURRENCY AND CREDIT - APPROVES NEW REGULATION FOR OPERATIONS WITH DEPOSIT CERTIFICATES (CDs) OF THE CENTRAL BANK OF BOLIVIA.

HAVING VIEWED: Central Bank of Bolivia Law No. 1670 of October 31, 1995. The Regulation for the Issuance and Operation of Negotiable Deposit Certificates (CDs), approved by Board Resolution No. 149/97 of September 9, 1997. The Report from the Currency and Credit Management No. 012/98 of August 4, 1998. The Report from the Legal Advisory Office ALEG No. 225/98 of June 22, 1997.

CONSIDERING: That Article 6 of Law No. 1670 authorizes the Central Bank of Bolivia to execute monetary policy and regulate the money supply and credit volume in accordance with its monetary program, and to this end, to issue, place, and acquire securities and carry out other open market operations. That Article 54, subsection b) of Law 1670 of October 31, 1995, authorizes the Board of Directors to issue norms for open market operations. That the technical and legal reports indicate that the new draft Regulation for Operations with Deposit Certificates of the Central Bank of Bolivia meets the necessary requirements and there is no legal impediment to its approval.

THEREFORE

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

Article 1.- Approve the new Regulation for Operations with Deposit Certificates of the Central Bank of Bolivia in its five chapters and 22 articles, which, as an annex, forms part of this Resolution.

Article 2.- Repeal the Regulation for the Issuance and Operation of Negotiable Deposit Certificates (CDs), approved by Board Resolution No. 149/97 of September 9, 1997.

Article 3.- This Regulation shall enter into force on September 14, 1998.

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

La Paz, August 11, 1998

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Juan Antonio Morales A.

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Jaime Ponce G. Juan Medinaceli V.

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Fernando Campero P.

REGULATION FOR OPERATIONS WITH DEPOSIT CERTIFICATES (CDs) OF THE CENTRAL BANK OF BOLIVIA

CHAPTER I GENERAL PROVISIONS

Article 1 (Object). This instrument aims to regulate the administration and control of the issuance of Deposit Certificates (CDs), and to establish procedures for their auction, allocation, and redemption, under the provisions of the Open Market Operations Regulation, approved by Board Resolution No. 074/98 of August 11, 1998.

Article 2 (Characteristics of CDs). CDs are short-term, credit-content, registered securities, issued at a discount by the Central Bank of Bolivia and allocated through Public Auction, Money Desk, or other mechanisms authorized by the BCB Board of Directors.

Article 3 (Currency of Issuance). CDs are issued in national currency and United States dollars, in denominations of one thousand units of the respective currencies.

Article 4 (Registration). For public offering, CDs shall be registered with the Securities Superintendent.

CHAPTER II PUBLIC AUCTION

Article 5 (Call for Bids). The public auction shall be held at the BCB following a call, which shall be published at least one business day in advance. The publication shall be made in at least one written communication medium, without prejudice to the use of other means authorized by the COMA.

Article 6 (Authorized Agents). Only financial entities authorized for operation by the corresponding Sectoral Superintendencies of the Financial Regulation System (SIREFI), which meet the requirements of the Open Market Operations Regulation and those defined in this Regulation, may participate in CD auctions. Individual persons and non-financial entities in the private sector may participate in CD auctions through financial entities covered by the SIREFI regime.

Article 7 (Application). The application to participate in the auction must specify the legal name of the applicant, number of bids, and quantity of securities for each bid, unit price per security or discount rate, currency, term, payment method, and other additional data according to the call. The application shall be submitted to the BCB up to 15 minutes before the scheduled time for the opening of the auction session, in one of the following forms: a) In a sealed envelope, with signatures of their legal representatives duly registered with the Sub-Management of Open Market Operations (SOMA). b) Through the Information System for Open Market Operations (SIOMA). c) Any other means accepted by the COMA. The SOMA shall certify the time of receipt of applications.

Article 8 (Provision of Funds). To participate in the auction, authorized entities must provide funds in one of the following ways: a) Through written communication to the BCB, authorizing the debit of their current account or their legal reserve account for their own operations or in favor of other authorized financial entities. This authorization may be indefinite. b) Through a deposit equivalent to 2% of the nominal value of the CDs requested in the account designated "Sale of CDs" at the BCB.

Article 9 (Acceptance of Terms and Conditions). By submitting the application, the applicant submits to the terms of this Regulation and the call, and may not withdraw their application after the deadline mentioned in Article 7.

Article 10 (Reading of Bids). In the public auction session, the number of applications and bids received will be announced, and the bids will be read without specifying the legal name of the applicants.

Article 11 (Grounds for Rejection). The following are grounds for rejection of applications: a) Lack of fund provision. b) Incomplete, incorrect, contradictory, or incoherent information in the application.

CHAPTER III ALLOCATION AND SALE AT AUCTION

Article 12 (Allocation). The allocation of CDs in public auction shall be carried out i) on explicit prices or rates proposed by participants and ii) through adherence proposals to the prices or rates resulting from the auction. i) In the first modality, the COMA will allocate CDs to the best proposals, in descending order of price or ascending order in terms of discount rate. At the time of allocation, the COMA may reject bids with prices lower or rates higher than its reference levels. If there is equality of prices or discount rates among bids at the margin, they shall be allocated pro rata when applicable. The available offer under this modality shall be calculated after deducting the amount requested in modality ii), which shall represent up to 25% of the auction offer. If the quantity requested in a single bid exceeds the remaining available offer under this modality, only that remainder shall be allocated.

ii) In the second modality, the COMA will allocate CDs to participating entities at the average price or rate obtained in the modality described in point i) of this article. The amount allocated through this modality shall be at most 25% of the total offered amount. If the total demand for CDs in this modality exceeds the available offer, the COMA will allocate them pro rata, up to the limit of the available amount. In all cases, the amount requested under this modality by each participating entity shall not exceed the value of US$1,000,000 for foreign currency securities and Bs.1,000,000 for national currency securities. If there are no allocations in the first modality, and therefore it is not possible to determine an average allocation price or rate, the COMA will not make assignments of CDs under this modality.

Article 13 (Effective Sale). The sale shall be effective 48 hours after the auction allocation or within another period defined by the COMA. Within this period, the successful bidder must ensure the existence of sufficient funds in the following manner: a) In one of the accounts mentioned in Article 8. b) With matured securities issued by the BCB or the National Treasury (TGN), endorsed in favor of the BCB. c) Other modalities authorized by the COMA.

Article 14 (Sanctions). If on the day of the sale the successful bidder does not have sufficient resources to pay for the CDs, the BCB shall consolidate in its favor, as a fine, 2% of their nominal value, without prejudice to other sanctions that the COMA may determine.

Article 15 (Publication). The Currency and Credit Management of the BCB will publish the aggregated results of the auction, without specifying the legal name of the successful bidders.

Article 16 (Commercial Year). The calculation of rates shall be based on a commercial year of 360 days.

CHAPTER IV ISSUANCE, REGISTRATION, AND CUSTODY

Article 17 (Issuance). The BCB will issue a title for each sale made, with the security characteristics and requirements that support the issuance. The buyer must pay the cost of form replacement and custody established in the Table of Terms and Conditions for the Collection of Commissions and Other Income of the BCB.

Article 18 (Registration and Custody). The BCB will electronically register in the SIOMA the name of the buyer of the CDs, as well as all transfers of ownership thereof. Additionally, the BCB may act as custodian, in physical or electronic register, of the issued CDs.

CHAPTER V REPLACEMENT, REDEMPTION, AND PRESCRIPTION

Article 19 (Replacement). In the event of loss or misplacement of CDs allocated by the BCB, replacement shall proceed according to the norms established in the Commercial Code.

Article 20 (Redemption). CDs are redeemed by the BCB on their maturity date, after verifying the holder's ownership with BCB records and subject to the presentation of the title, where applicable. No interest will be recognized after the maturity date, nor will automatic renewal be accepted.

Article 21 (Prescription). Actions to collect CDs prescribe in favor of the State within a period of ten years from the date of their enforceability.

Article 22 (Transitory Provision). CDs issued prior to this Regulation are subject to the provisions that gave rise to them, until their maturity.

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