Resolution 117/97: Regulation for the Authorization of Banks as Accredited Financial Entities (EFA)

BOARD RESOLUTION NO. 117/97
SUBJECT: FINANCIAL SYSTEM - REGULATION FOR THE AUTHORIZATION OF BANKS AS "ACCREDITED FINANCIAL ENTITIES" (EFA)

HAVING REVIEWED:
Central Bank of Bolivia Law No. 1670 of October 31, 1995.
Bank and Financial Entities Law No. 1488 of April 14, 1993, with modifications incorporated in the Pension Law No. 1732 of November 29, 1996.
Regulation for the Authorization of Banking Financial Entities as "Intermediary Credit Institutions" (ICI's), approved by Board Resolution No. 146/93 of December 7, 1993. Report from the Financial System Management and International Affairs Management No. G.S.F. - 036/97 of February 19, 1997. Legal Advisory Report A.L. No. 010/97 of June 3, 1997.

CONSIDERING:
That it is necessary to establish evaluation guidelines to authorize Banks as Accredited Financial Entities (EFA), so that they may operate with the instruments of the ALADI Reciprocal Payments and Credits Agreement and with operations classified as open market.

THEREFORE,

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

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Article 1.- Approve the Regulation for the Authorization of Banks as "Accredited Financial Entities" (EFA) which, as an annex, forms part of this Resolution.

Article 2.- Repeal Board Resolution No. 146/93 of December 7, 1993.

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

10.VI.97
____________________ Juan Antonio Morales A.

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

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Fernando Campero P. Edgar Millares A.

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REGULATION FOR THE AUTHORIZATION OF BANKS AS "ACCREDITED FINANCIAL ENTITIES" (EFA)

Article 1 (Object).
This Regulation establishes the norms, requirements, criteria, and procedures to authorize Banks as Accredited Financial Entities (EFA). This authorization will allow Banks to operate with the instruments of the ALADI Reciprocal Payments and Credits Agreement and with operations classified as open market.

Article 2 (Definitions)
For the purposes of this Regulation, the following abbreviations and definitions will be used:
BCB: Central Bank of Bolivia.
GSF: Financial System Management of the BCB.
SBEF: Superintendence of Banks and Financial Entities.
BANK: Financial Entity with a license of operation issued by the SBEF, to operate as a Bank.
NET EQUITY: Is the Net Equity defined by Resolution of the SBEF No. 127/96 of December 20, 1996 and/or subsequent modifications.
CPCR-ALADI: ALADI Reciprocal Payments and Credits Agreement. System for compensating debtor and creditor balances of banking operations carried out between the member countries of said Organization. OPEN MARKET QUALIFIED OPERATIONS: These are Active Repo Operations, Currency Swaps, and others that will be classified subsequently by the Board of Directors of the BCB through an express resolution.

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Article 3 (Requirements).
The following requirements are established for the authorization and/or maintenance of banks as EFA:

1. Maintain the capital sufficiency required by Law.
2. Be up to date with obligations contracted with the BCB.
3. That the Bank's indebtedness with the BCB, through the instruments of the CPCR-ALADI, does not exceed one times its Net Equity.
4. That the Bank is not in a situation of non-compliance with Article 45 of the Bank and Financial Entities Law.
5. That the Bank's delinquent portfolio does not exceed 12% of its gross portfolio, nor that the net delinquent portfolio of provisions for uncollectible portfolio exceeds 8% of its gross portfolio.
6. That the Bank is not benefiting from a liquidity credit from the BCB.
7. That the Bank has not incurred fines from the SBEF for deficiencies in legal reserve requirements, for two consecutive bi-weekly periods in the last three months.
8. That recently created Banks have at least twelve months of operation.
   Banks intervened by the SBEF and the BCB, under the terms of Article 67 paragraph II of Law No. 1732, cannot be authorized as EFA while the intervention lasts.

Article 4 (Documentation).
To be authorized as an EFA, the Bank must present a written application to the GSF accompanied by the following information:

//5. B.D. No. 117/97 a) Annual report and Financial Statements of the last management period. b) External audit report corresponding to the Financial Statements of the last management period and its corresponding opinion. c) Bylaws. d) Names and powers of the officials authorized by the Bank, to carry out the operations contemplated in this Regulation.

Article 5 (Initial Authorization).
The General Management of the BCB will approve the initial authorization of the Bank as an EFA, considering the technical reports prepared by the GSF and Legal Advisory, and must inform the Board of Directors of this fact.

Article 6 (Obligations).
The obligations of the EFAs are:
a) Keep updated the information detailed in Article 3 of this Regulation. b) Provide all information that the GSF reasonably requires.

Article 7 (Supervision and Follow-up).
The GSF will permanently evaluate the behavior of the EFAs, analyzing the financial and capital conditions defined in Article 3, as well as compliance with the other requirements established in this Regulation.

Article 8 (Information from Other BCB Managements).
The Managements of International Affairs and of Currency and Credit will communicate to the GSF any relevant fact that serves the purposes of supervision and follow-up of the EFAs.

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Article 9 (Temporary Suspension).
The GSF will notify the EFA that fails to comply with the Regulation and will give it an irrevocable period of fifteen (15) calendar days to correct the non-compliance. Upon expiration of that period, it will bring the fact to the knowledge of the General Management of the BCB, which will temporarily suspend the EFA and inform in writing the suspended entity, the SBEF, and the Managements of International Affairs and of Currency and Credit of the BCB about this decision. The temporary suspension may remain for a maximum period of thirty (30) days. Upon expiration of that term, what is stipulated in Article 10 of this Regulation will be applied. If in the opinion of the GSF the causes that gave rise to the temporary suspension have been overcome, it will present a report to the General Management of the BCB on the matter, which will lift the sanction immediately, communicating such determination to the corresponding instances.

Article 10 (Indefinite Suspension).
The Presidency of the BCB may indefinitely suspend EFAs that find themselves in any of the following situations:
a) When the EFA had not regularized the situation that gave rise to the temporary suspension established in Article 9 of this Regulation. b) When the EFA has incurred three or more times in temporary suspensions during the last twelve months. c) When the external audit issues a negative opinion or abstains from issuing an opinion on the financial statements of the EFA.

Article 11 (Rehabilitation).
Whenever the GSF establishes that the EFA has satisfactorily overcome the causes that gave rise to its indefinite disqualification, it will elevate a report to the Presidency, through the General Management. The Presidency may dispose of the rehabilitation of the EFA in a period no less than ninety days, informing the corresponding instances of such determination.

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Article 12 (Definitive Suspension).
The suspension of an EFA will be definitive when the Bank enters a process of forced or voluntary liquidation.

Article 13 (Transitory Provision).
Banks that on the date are authorized by the Central Bank of Bolivia to operate as ICI (Intermediary Credit Institution), according to what is provided in the Board Resolution of the BCB 146/93 of December 7, 1993, are automatically authorized as EFA.

Article 14 (Validity).
This Regulation will enter into force on July 1, 1997.
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