Resolution 108/2007

BOARD RESOLUTION NO. 108/2007
SUBJECT: MONETARY OPERATIONS MANAGEMENT - APPROVES MODIFICATIONS TO THE OPEN MARKET OPERATIONS REGULATION.

HAVING SEEN:

The Law of the Central Bank of Bolivia No. 1670, of October 31, 1995, and its modifications.

The Statute of the Central Bank of Bolivia, approved by Board Resolution No. 128/2005 of October 21, 2005, and its modification approved by Board Resolution No. 031/2006 of April 18, 2006.

The Open Market Operations (OMA) Regulation, approved by Board Resolution No. 127/2003 of November 11, 2003.

Board Resolution No. 017/2004, of February 10, 2004.

Board Resolution No. 070/2005, of May 24, 2005.

The Technical Report from the Economic Policy Advisory APEC-INEP No. 020/2007 of August 17, 2007.

The Report from the Legal Affairs Management SANO 199/2007 of August 20, 2007.

CONSIDERING:

That Article 6 of Law No. 1670 empowers the Central Bank of Bolivia to execute monetary policy and regulate the money supply and credit volume in accordance with its monetary program, being able to issue, place, and acquire securities and carry out other open market operations for this purpose.

That Article 54, subsection d) of Law No. 1670 of October 31, 1995 (Law of the Central Bank of Bolivia) and numeral 4) of Article 11 of the BCB Statute, empower the BCB Board of Directors to issue regulations for Open Market Operations.

That Article 87 of Law No. 1670 establishes that within the scope of its functions as the monetary authority and payments system, and in its capacity as the government's financial agent, the BCB may, under the conditions determined by its Board of Directors, deposit, custody, register, administer, transact, clear, and settle securities issued, guaranteed, or administered by the BCB and by the General Treasury of the Nation.

That the Technical Report from the Economic Policy Advisory APEC-INEP No. 020/2007 recommends the sale of public securities to natural or legal persons directly, to incentivize the increase of passive rates in the financial system and contribute to the growth of financial savings, suggesting that operational implementation problems be analyzed by the Monetary Operations Management, which prepared the corresponding draft Board Resolution.

That, in the opinion of the Legal Affairs Management, there is no impediment for the Board of Directors to approve the modification in the aforementioned Regulation.

THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1.- Modify Article 1 of the Open Market Operations Regulation, in the following terms:

SAYS:
Article 1 (Object).
The present Regulation aims to establish the rules for Open Market Operations (OMA) carried out by the Central Bank of Bolivia (BCB) with financial entities or public institutions in compliance with its functions as a monetary authority.

SHOULD SAY:
“Article 1 (Object).
The present Regulation aims to establish the rules for Open Market Operations (OMA) carried out by the Central Bank of Bolivia (BCB) with financial entities, public institutions, or natural and legal persons, in compliance with its functions as a monetary authority.”

Article 2.- Modify Article 12 of the Open Market Operations Regulation, in the following terms:

SAYS:
Article 12 (Operating Mechanisms).
OMAs may be carried out through public auction, the BCB's money desk, or other mechanisms authorized by the BCB Board of Directors.

I. Public Auction. It is a competitive mechanism for the allocation of securities, issued by the BCB or the TGN, to authorized institutions. Allocation in auction may be carried out in the following modalities:

a) Explicit proposals. In this case, the COMA will allocate the securities to the best proposals (in descending order of prices, or ascending in terms of rates) made by the agents participating in the auction.
At the time of making the allocation, the COMA may reject bids with prices lower or rates higher than their reference levels.
If in the margin there is equality of prices, discount rates, or yields between bids, the securities will be allocated by the pro-rata system when applicable.
If in the margin the quantity demanded in a single bid is higher than the available supply remainder, only that remainder will be allocated.

b) Adhesion proposals. In this case, the COMA will define the maximum offer, which cannot exceed 50% of the total amount in each currency and term, and will allocate the securities to the demanding entities at the average price or rate obtained in the modality described in subsection a) of this Article. If the total demand for a security in this modality is higher than the available supply, the COMA will carry out the allocation by pro-rata, up to the limit of the available amount. The amount requested under this modality by each participating entity must not exceed US$ 1,000,000 for securities in foreign currency and Bs 1,000,000 for securities in national currency, in each term. These amounts may be modified by the COMA.

The COMA will not effect allocation of securities under this second modality if there were no allocations in the first modality, as it would not be possible to determine an average allocation price or rate.

c) Under other modalities defined by the COMA with the approval of the Monetary and Exchange Policy Committee.

II. Money Desk. It is a mechanism through which the GOM carries out purchase, sale, or repurchase operations with public securities issued by the TGN or the BCB, approved by the COMA, with authorized institutions. In the money desk, economic agents also have the possibility to redeem operations or transactions with securities in advance, under the conditions determined by the COMA.

III. Other Mechanisms. The BCB Board of Directors may authorize the execution of OMAs with mechanisms different from those of the public auction and money desk operations.

SHOULD SAY:
“Article 12 (Operating Mechanisms).
OMAs may be carried out through public auction, the BCB's money desk, direct sale to natural or legal persons, or other mechanisms authorized by the BCB Board of Directors.

I. Public Auction. It is a competitive mechanism for the allocation of securities, issued by the BCB or the TGN, to authorized institutions. Allocation in auction may be carried out in the following modalities:

a) Explicit proposals. In this case, the COMA will allocate the securities to the best proposals (in descending order of prices, or ascending in terms of rates) made by the agents participating in the auction.
At the time of making the allocation, the COMA may reject bids with prices lower or rates higher than their reference levels.
If in the margin there is equality of prices, discount rates, or yields between bids, the securities will be allocated by the pro-rata system when applicable.
If in the margin the quantity demanded in a single bid is higher than the available supply remainder, only that remainder will be allocated.

b) Adhesion proposals. In this case, the COMA will define the maximum offer, which cannot exceed 50% of the total amount in each currency and term, and will allocate the securities to the demanding entities at the average price or rate obtained in the modality described in subsection a) of this Article. If the total demand for a security in this modality is higher than the available supply, the COMA will carry out the allocation by pro-rata, up to the limit of the available amount. The amount requested under this modality by each participating entity must not exceed US$ 1,000,000 for securities in foreign currency and Bs 1,000,000 for securities in national currency, in each term. These amounts may be modified by the COMA.

The COMA will not effect allocation of securities under this second modality if there were no allocations in the first modality, as it would not be possible to determine an average allocation price or rate.

c) Under other modalities defined by the COMA with the approval of the Monetary and Exchange Policy Committee.

II. Money Desk. It is a mechanism through which the GOM carries out purchase, sale, or repurchase operations with public securities issued by the TGN or the BCB, approved by the COMA, with authorized institutions. In the money desk, economic agents also have the possibility to redeem operations or transactions with securities in advance, under the conditions determined by the COMA.

III. Direct Sale to Natural and Legal Persons. It is a mechanism for the direct placement of securities to natural and legal persons, except for financial entities with a license granted by the Superintendence of Banks and Financial Entities or by the Superintendence of Pensions, Securities, and Insurance. The characteristics of the securities, the prices, the quantities offered, the minimum and maximum amounts to be placed, as well as the channels and requirements to carry out these sales, will be determined by the COMA.
The cost for Registry Maintenance at the Bolivia Securities Depository Entity S.A. of the dematerialized securities placed through this mechanism will be assumed by the BCB.

IV. Other Mechanisms. The BCB Board of Directors may authorize the execution of OMAs with mechanisms different from the public auction, the money desk operations, and the direct sale.”

Article 3.- Modify Article 13 of the Open Market Operations Regulation, in the following terms:

SAYS:
Article 13 (Types of Operations).
The types of OMAs carried out by the BCB may be the following:

I. Primary Placement of Securities. Primary placement will be carried out with securities issued by the BCB or placed by the BCB through the monetary regulation account. The placement or sale of securities will be carried out through public auction, money desk, or another mechanism defined by the Board of Directors, and a public call for this purpose must be made previously, disseminated through written, oral, or electronic communication media. Such securities must be registered in the Securities Market Registry.

II. Operations with Securities in the Secondary Market. Operations in the secondary market can be carried out with any security issued by the TGN or the BCB, through repurchase, swap, purchase, sale of securities, and other operations authorized by the BCB Board of Directors and by the COMA, when applicable.

SHOULD SAY:
“Article 13 (Types of Operations).
The types of OMAs carried out by the BCB may be the following:

I. Primary Placement of Securities. Primary placement will be carried out with securities issued by the BCB or placed by the BCB through the monetary regulation account. The placement or sale of securities will be carried out through public auction, money desk, direct sale to natural and legal persons, or another mechanism defined by the Board of Directors, and a public call for this purpose must be made previously, disseminated through written, oral, or electronic communication media. Such securities must be registered in the Securities Market Registry.

II. Operations with Securities in the Secondary Market. Operations in the secondary market can be carried out with any security issued by the TGN or the BCB, through repurchase, swap, purchase, sale of securities, and other operations authorized by the BCB Board of Directors and by the COMA, when applicable.”

Article 4. The modifications established in articles 1, 2, and 3 of this resolution will enter into force from the day of their approval.

Article 5. The Presidency and the General Management are charged with the execution and compliance of this Resolution.

La Paz, August 21, 2007

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Raúl Garrón Claure

____________________________ __________________________ Gustavo Blacutt Alcalá Hugo Dorado Araníbar

__________________________ __________________________ Rolando Marín Ibáñez Ernesto Yánez Aguilar

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Osvaldo Nina Baltazar