Resolution 092/98 Authorizing Early Redemption of Time Deposits for Capitalization or Subordinated Debt

BOARD RESOLUTION NO. 092/98
SUBJECT: ECONOMIC POLICY ADVISORY - AUTHORIZES EARLY REDEMPTION OF TIME DEPOSITS AND THEIR CONVERSION INTO CAPITAL CONTRIBUTIONS OR SUBORDINATED DEBT IN THE ISSUING ENTITY.

HAVING SEEN:
The Law No. 1670 of the Central Bank of Bolivia of October 31, 1995. The Law No. 1488 on Banks and Financial Entities of April 14, 1993. The Regulation of Fixed Term Deposits of the Superintendence of Banks and Financial Entities, approved by Resolution SB No. 060/94 of February 23, 1994. The Legal Reserve Regulation of the BCB, approved by Board Resolution No. 180/97 of December 23, 1997. The Report from the Economic Policy Advisory APEC/ARINV No. 174/98 of September 29, 1998. The Report from the Legal Advisory ALEG No. 337/98 of September 29, 1998.

CONSIDERING:
That it is necessary to establish mechanisms that facilitate the timely capitalization of financial entities. That the conversion of fixed-term deposits into capital or subordinated debt should be facilitated to strengthen the equity of financial entities, when requested by depositors.

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That the Report from the Economic Policy Advisory recommends allowing the conversion of fixed-term deposits for the purpose of strengthening the equity of financial entities. That in the opinion of the Legal Advisory, there is no impediment to addressing the preceding recommendation, in accordance with subsections a), c), and o) of
Article 54 of Law 1670.

THEREFORE

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

Article 1.- Authorize banking financial entities to accept the early redemption
of fixed-term deposits, whose original term is greater than six months in national currency and one year in foreign currency, held by their shareholders or third parties, provided that they have the sole and exclusive purpose of increasing the capital of the issuing entity or constituting subordinated debt in the same, at the express request of the depositors and prior to the legal formalities.

Article 2.- Complement Article 6 of the Legal Reserve Regulation approved
by Board Resolution No. 180/97, with the inclusion of the following paragraph:

“The redemption of fixed-term deposits for the purpose of strengthening the equity of financial entities, when applicable, must be notified within the following 48 hours to the Management of the Financial System of the BCB for its cancellation in the respective records. This cancellation will proceed only if the financial entity has attached to said notification, notarized copies of the subscription contracts for shares or relevant debt and of the request letters from the depositants.”

Article 3.- Modify the first paragraph of Article 16 of the aforementioned
Regulation, in the following terms:

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SAYS:
Fixed-term deposits greater than one year in foreign currency and six months in national currency, that are redeemed by the issuing entity within a period shorter than the original term, will be subject to the sanctions established by the Superintendence of Banks and Financial Entities.

SHOULD SAY:
“Fixed-term deposits greater than one year in foreign currency and six months in national currency, that are redeemed by the issuing entity within a period shorter than the original term, will be subject to the sanctions established by the Superintendence of Banks and Financial Entities, except when they are redeemed with the sole and exclusive purpose of capitalizing or constituting subordinated debt in the issuing entity of the same.”

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

La Paz, September 29, 1998

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Juan Antonio Morales A.

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Armando Pinell S. Jaime Ponce G.

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Juan Medinaceli V. Fernando Campero P.