Resolution 113/2001

RESOLUTION OF THE BOARD OF DIRECTORS NO. 113/2001 SUBJECT: ECONOMIC POLICY ADVISORY – APPROVES MODIFICATIONS TO THE CONSOLIDATED TEXT OF THE LEGAL RESERVE REGULATION.

HAVING SEEN: Law 1670 of October 31, 1995. Board of Directors Resolution No. 088/2000 of November 28, 2000. Board of Directors Resolution No. 070/2001 of July 24, 2001. Board of Directors Resolution No. 071/2001 of July 31, 2001. Reports from the Economic Policy Advisory APEC-INEP 026/01 of September 26, 2001 and APEC-INEP 035/01 of November 8, 2001. Reports from the Legal Affairs Management SANO No. 031/2001 of October 8, 2001 and SANO No. 055/2001 of November 9, 2001.

CONSIDERING: That the Central Bank of Bolivia, in compliance with Law 1670, has established a legal reserve regime of mandatory compliance for institutions of the financial system.

That the BCB Board of Directors has ordered the adaptation of the BCB regulations that contemplate operations related to SIPAV.

That the BCB Board of Directors has resolved to cancel banks a commission for the administration of current account services for transfers from non-bank entities between May 1998 and June 2001 and, at the same time, authorized the annual payment of commissions starting from July 1, 2001 to all banking entities that administer these accounts.

That the Economic Policy Advisory, in consultation with other BCB management departments, recommends modifying Articles 3, 8, 11, 15, 20, 21, 22, 24, and 28 of the Legal Reserve Regulation to make its provisions more effective.

That in virtue of the powers conferred by Articles 1, 7, 37, and 54 subsections a), i), and o) of Law 1670, the BCB Board of Directors is authorized to modify the current regulations.

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

Article 1.- Modify the first paragraph of Article 3 of the Consolidated Text of the Legal Reserve Regulation, as follows:

Article 3 (Legal Reserve Requirements for Demand Deposits and Savings Accounts).

SAYS: Entities included in Article 1 must constitute legal reserve in cash and in securities on their liabilities in the accounts detailed below, in national currency, MVDOL, and foreign currency, separately for each of the currencies in which the aforementioned liabilities were incurred.

SHOULD SAY: “Entities included in Article 1 must constitute legal reserve in cash and in securities on their liabilities in the accounts detailed below:”

Article 2.- Modify Article 8 of the Consolidated Text of the Legal Reserve Regulation, as follows:

SAYS: Article 8 (Legal Reserve Requirement for Other Deposits). Entities included in Article 1 must constitute legal reserve in cash, equivalent to a rate of 100% on their liabilities, in the accounts detailed below:

Other Deposits

• Judicial Deposits
• Third-party funds for operations in the Bolsín
• Third-party funds for authorized operations
• Funds to be delivered to third parties for the placement of securities
• Other public obligations on demand
• Judicial Withholdings
• Prepaid credit letter guarantee deposits
• Other guarantee deposits
• Other restricted public obligations
• Advance collections from credit card clients
• Transfer Current Accounts for Non-Bank Financial Entities
• Public official check

SHOULD SAY: “Article 8 (Legal Reserve Requirement for Other Deposits). Entities included in Article 1 must constitute legal reserve in cash, equivalent to a rate of 100% on their liabilities, in the accounts detailed below:

Other Deposits

• Judicial Deposits
• Third-party funds for operations in the Bolsín
• Third-party funds for authorized operations
• Funds to be delivered to third parties for the placement of securities
• Other public obligations on demand
• Judicial Withholdings
• Prepaid credit letter guarantee deposits
• Other guarantee deposits
• Other restricted public obligations
• Advance collections from credit card clients
• Transfer Accounts for Non-Bank Financial Entities
• Public official check”

Article 3.- Modify Article 11 of the Consolidated Text of the Legal Reserve Regulation, as follows:

SAYS: Article 11 (Legal Reserve Accounts). Banking entities must maintain in the BCB a single account called “current and reserve account” in each of the three currencies (national currency, MVDOL, and foreign currency), in replacement of the current and legal reserve cash accounts they maintained in the BCB.

Banking entities must constitute legal reserve in cash, in the current and reserve account enabled in the BCB, or in the account enabled for this purpose in entities authorized by the BCB. This account shall not be subject to any type of embargo or judicial retention by third parties.

Non-bank financial entities that maintained legal reserve cash accounts in the BCB may maintain only one account called reserve account in each of the three currencies (national currency, MVDOL, and foreign currency), in replacement of the aforementioned legal reserve cash accounts.

Legal reserve in cash must be constituted: (i) in national currency, for deposits in the same currency, (ii) in MVDOL, for deposits in MVDOL, and, (iii) in US dollars, for deposits in foreign currency.

SHOULD SAY: “Article 11 (Legal Reserve Accounts). Banking entities must maintain in the BCB a single account called “current and reserve account” in each of the three denominations (national currency, MVDOL, and foreign currency), in replacement of the current and legal reserve cash accounts they maintained in the BCB.

Banking entities must constitute legal reserve in cash, in the current and reserve account enabled in the BCB, or in the account enabled for this purpose in entities authorized by the BCB. This account shall not be subject to any type of embargo or judicial retention by third parties.

Non-bank financial entities that maintained legal reserve cash accounts in the BCB may maintain only one account called reserve account in each of the three denominations (national currency, MVDOL, and foreign currency), in replacement of the aforementioned cash reserve accounts.

Legal reserve in cash must be constituted: (i) in national currency, for deposits in the same currency, (ii) in MVDOL, for deposits in MVDOL, and, (iii) in US dollars, for deposits in foreign currency.”

Article 4.- Modify the first paragraph of Article 15 of the Consolidated Text of the Legal Reserve Regulation, as follows:

Article 15 (Compensation by Currencies).

SAYS: Legal reserve in cash must be constituted in the currency in which the deposits were captured. Compensation between currencies for legal reserve in cash is not permitted. Legal reserve in securities must be constituted in accordance with Article 22 of this Regulation.

SHOULD SAY: “Legal reserve in cash must be constituted in the denomination in which the deposits were captured. Compensation between currencies for legal reserve in cash is not permitted. Legal reserve in securities must be constituted in accordance with Article 21 of this regulation.”

Article 5.- Modify Article 20 of the Consolidated Text of the Legal Reserve Regulation, as follows:

SAYS: Article 20 (Transfer Current Accounts for Non-Bank Financial Entities). Non-bank financial entities that do not have a reserve account in the BCB must constitute their entire legal reserve in an account opened for this purpose (transfer current account) in a banking financial entity that has a current and reserve account in the BCB, as established in Articles 8 and 11 of this Regulation. The banking financial entity receiving these funds must deposit them, daily and in full, into the current and reserve account it maintains in the BCB. Likewise, it must send daily to the BCB, within the same timeframes mentioned in Article 14, information on the deposits captured by the non-bank financial entity and the amounts deposited in the transfer current accounts.

The Monetary and Exchange Policy Committee will define the minimum amount of legal reserve applicable to maintain reserve accounts in the BCB.

Non-bank financial entities that have maintained during the last six months an average required legal reserve above the minimum amount will continue to maintain their reserve accounts in the BCB. Non-bank financial entities that have not maintained that minimum average level in the last six months must close their reserve accounts in the BCB within 30 days following notification by the BCB Financial Entities Management, and fulfill their reserve obligation in a transfer current account.

The BCB Monetary Operations Management will include in the bidding for banking correspondent services, the commission corresponding to the administration of transfer current account services, which must be homologated to other financial entities providing this service. The banking financial entity receiving transfer accounts may not charge additional commissions for this concept to non-bank financial entities.

SHOULD SAY: “Article 20 (Transfer Accounts for Non-Bank Financial Entities). Non-bank financial entities that do not have a reserve account in the BCB must constitute their entire legal reserve in an account opened for this purpose (transfer account) in a banking financial entity that has a current and reserve account in the BCB, as established in Articles 8 and 11 of this Regulation. The banking financial entity receiving these funds must deposit them, daily and in full, into the current and reserve account it maintains in the BCB. Likewise, it must send daily to the BCB, within the same timeframes mentioned in Article 14, information on the deposits captured by the non-bank financial entity and the amounts deposited in the transfer accounts. Every banking entity that participates in the RAL Fund is obligated to open or maintain transfer accounts for non-bank entities that so request.

The Monetary and Exchange Policy Committee will define the minimum amount of legal reserve applicable to maintain reserve accounts in the BCB.

Non-bank financial entities that have maintained during the last six months an average required legal reserve above the minimum amount will continue to maintain their reserve accounts in the BCB. Non-bank financial entities that have not maintained that minimum average level in the last six months must close their reserve accounts in the BCB within 30 days following notification by the BCB Financial Entities Management, and fulfill their reserve obligation in a transfer account.

The BCB Board of Directors will set the amount of the annual commission for the transfer account to be paid by the BCB to banking entities that administer this service. These banking entities may not charge additional commissions for this service to non-bank financial entities.”

Article 6.- Modify the third paragraph of Article 22 of the Consolidated Text of the Legal Reserve Regulation, as follows:

Article 22 (Frequency of Transfers to/from Reserve in Securities).

SAYS: At the end of the required legal reserve period, the movement of funds will be attended based on requests from financial entities, only on the following business day and subsequent days and during the hours established by the General Management of the BCB through an express circular.

SHOULD SAY: “At the end of the required legal reserve period, the movement of funds will be attended based on requests from financial entities, only on the following business day or subsequent day as established by the General Management of the BCB and during the hours determined by it through an express circular.”

Article 7.- Modify the first paragraph of Article 24 of the Consolidated Text of the Legal Reserve Regulation, as follows:

Article 24 (Constitution of the RAL Fund).

SAYS: The RAL Fund will be constituted with the resources deposited for the fulfillment of legal reserve in securities, according to the fund movement carried out by financial entities in accordance with the preceding Article 22. The RAL Fund will be accounted for in restricted accounts within the BCB balance sheet.

SHOULD SAY: “The RAL Fund will be constituted with the resources deposited for the fulfillment of legal reserve in securities in accordance with the preceding Article 21. The RAL Fund will be accounted for in restricted accounts within the BCB balance sheet.”

Article 8.- Modify the fifth paragraph of Article 28 of the Consolidated Text of the Legal Reserve Regulation, as follows:

Article 28 (Liquidity Loan Tranches).

SAYS: Upon maturity of the loans granted both in the first tranche and in the second, the BCB will automatically debit the amount lent, its interests, and surcharges linked to the functioning of the payment system, from the current and reserve account that financial entities maintain in the BCB. In case of insufficient funds in said account, the guarantee of securities from the RAL Fund will be enforced.

SHOULD SAY: “Upon maturity of the loans granted both in the first tranche and in the second, the BCB will automatically debit the amount lent, its interests, and surcharges linked to said loans, from the current and reserve account that financial entities maintain in the BCB. In case of insufficient funds in said account, the guarantee of securities from the RAL Fund will be enforced.”

Article 9.- The modifications indicated will enter into force starting from December 1, 2001.

Article 10.- The Presidency and the General Management are charged with the execution and compliance of this Resolution.

La Paz, November 13, 2001

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Juan Antonio Morales A.

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Armando Pinell S. Juan Medinaceli V.

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_________________ Armando Méndez M. Roberto Camacho S.

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Javier Comboni S.