Resolution 109/97 Approving the Foreign Exchange Position Regulation for the Financial System

BOARD RESOLUTION NO. 109/97
SUBJECT: ECONOMIC POLICY ADVISORY - APPROVES REGULATION ON FOREIGN EXCHANGE POSITIONS OF THE FINANCIAL SYSTEM.

VIEWING:
Law 1670 dated October 31, 1995.
Law 1488 dated April 14, 1993.
Board Resolution of the Central Bank of Bolivia No. 66/94, dated May 17, 1994, which establishes norms on foreign exchange positions of the financial system. Resolution of the Banking Superintendency No. 117/94 of June 16, 1994. Report No. 051/97 of the Economic Policy Advisory. Note S-JIN No. 278/97 of the Legal Advisory.

CONSIDERING:
That Articles 1 and 3 and subsection a) of Article 31 of Law 1670, recognize the Central Bank of Bolivia (CBB) as the sole exchange authority of the country, empowering it to issue general application norms on resource collections and placements and other services of the financial system.

That it is necessary to update the norms contemplated in Board Resolution No. 066/94, in order to adapt them to the changes that have occurred in the financial system of the country.

That the Economic Policy Advisory, at the time of recommending said update, points out that this will allow greater flexibility in matching and mismatching and less rigidity in the allocation of resources of the financial system.

In the opinion of the Legal Advisory, there is no impediment to the approval of the draft Regulation on Foreign Exchange Positions of the Financial System, which, furthermore, adapts to the current legal framework.

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

Article 1.- Approve the Regulation on Foreign Exchange
Positions of the Financial System, which, as an annex, forms part of this Resolution.

Article 2.- This Regulation will enter into force on September 1,
1997, from which date all provisions contrary to it are repealed.

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

8.V.97

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Juan Antonio Morales A.

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Armando Pinell S. Jaime Ponce G. Juan Medinacelli V. ________________ ________________

Fernando Campero P. Edgar Millares A.

REGULATION ON FOREIGN EXCHANGE POSITIONS OF BANKING AND NON-BANKING FINANCIAL ENTITIES, IN FOREIGN CURRENCY AND NATIONAL CURRENCY WITH VALUE MAINTENANCE

Article 1 (Object).
This Regulation aims to regulate the foreign exchange positions of banking and non-banking financial entities, in foreign currency and in national currency with value maintenance, in order to regulate the growth of monetary aggregates, preserve the stability of the financial system and maintain the necessary control over the aggregated positions, active and passive of financial institutions.

Article 2 (Definitions).
For the purposes of this Regulation, the following definitions are adopted:

Foreign Currency: Monetary unit of the United States of North America, which is the "Dollar".

National Currency with Value Maintenance: Unit of account that allows the maintenance of the value of the Boliviano with respect to the American Dollar.

Other Foreign Currencies: Are the currencies indicated in the upper part of the quotation table of the CBB.

Accounting Net Worth: Is the net worth that arises from the Consolidated Statement of Financial Position of a financial institution.

Overbought Position in a specific currency: Is the excess of assets over liabilities in a determined currency.

Oversold Position in a specific currency: Is the excess of liabilities over assets in a determined currency.

Article 3 (Calculation of the Position).
The calculation of the foreign exchange position will be carried out daily, calculated based on balances at the close of each business day. The calculations of the foreign exchange positions for foreign currency and national currency with value maintenance, will be carried out independently.

Article 4 (Limits of the Exchange Position).
Banking and non-banking financial entities may maintain an exchange position according to the following rules:
a) An overbought position in foreign currency up to the equivalent in US dollars of 80% (EIGHTY PERCENT) of the difference between the value of accounting net worth and the amount of investment in fixed assets. b) An overbought position in national currency with value maintenance, which added to the amount of the overbuy in foreign currency does not exceed 80% of the value of accounting net worth, minus the amount of investment in fixed assets. c) An oversold position in foreign currency up to the equivalent in US dollars of 20% (TWENTY PERCENT) of the value of the net worth accounting. d) An oversold position in national currency with value maintenance, which added to the oversell in foreign currency does not exceed 20% of the value of the accounting net worth. e) Oversold exchange positions in other convertible currencies up to 5% of the liabilities in those same currencies, provided that they are duly covered by an overbought position in US dollars. f) Financial institutions that have an accounting net worth lower than the value of their

investments in fixed assets, may not incur in overbought positions in foreign currency and national currency with value maintenance.

To this effect, all operations in other foreign currencies will be converted in a first instance to US dollars, according to the quotations that the Central Bank of Bolivia reports each day, and from this currency to Bolivianos.

Article 5 (Information).
Banking and non-banking financial entities, besides what the Banking and Financial Entities Superintendency (SBEF) might require, will report to the Financial System Management of the CBB their foreign exchange position at the close of each business day, at the latest within twenty-four (24) hours following.

Article 6 (Character of the Sworn Declaration).
The daily report that financial entities will send to the CBB, regarding their position of assets and liabilities in foreign currency and national currency with value maintenance, will have the character of a sworn declaration.

Article 7 (Suspension of Operations).
If it is determined that a financial entity exceeded the limits allowed for its exchange positions for three consecutive business days, the Financial System Management will inform the General Manager of the CBB, who will instruct the respective area Managers to suspend the participation of said entity in the following operations with the CBB:
a) Bolsín b) Reciprocal Payment Agreement of ALADI c) Open Market and Money Desk Operations, including Repos. The Financial System Management will inform periodically to the Financial System Analysis Committee about the institutions that are suspended.

Article 8 (Controlling Entity).
The Banking and Financial Entities Superintendency, in exercise of the powers conferred by Law 1488, will establish control norms for the compliance of this Regulation, as well as the regime of administrative infractions and procedures for the

imposition of sanctions. The SBEF will inform monthly to the CBB about the fines and sanctions imposed on offending entities.

Article 9 (Validity).
From September 1, 1997, all financial institutions must be subject to the provisions of this Regulation.

Article 10 (Interpretation, Reform and Repeal).
This Regulation can only be interpreted, reformed or repealed by the Board of Directors of the Central Bank of Bolivia.