Resolution 120/2001

RESOLUTION OF THE BOARD OF DIRECTORS NO. 120/2001 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. 049/2001 of June 5, 2001.
Board of Directors Resolution No. 113/2001 of November 13, 2001.
The Report from the Economic Policy Advisory APEC-INEP 028/01 of September 27, 2001.
The Report from the Legal Affairs Management SANO No. 031/2001 of October 8, 2001.
CONSIDERING:
That the Central Bank of Bolivia, in compliance with Law 1670, has established a legal reserve regime of mandatory compliance for institutions within the financial system. That the Economic Policy Advisory recommends modifying Articles 4, 5, 6, and 16 of the Consolidated Text of the Legal Reserve Regulation in order to incentivize greater use of the national currency. That in virtue of the powers conferred by Articles 1, 7, 37, and 54 subsections a), i), and o) of Law 1670, the Board of Directors of the BCB is authorized to modify the current regulations. THEREFORE, THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA RESOLVES:

//2. R.D. No. 120/2001
Article 1.- Modify Article 4 of the Consolidated Text of the Legal Reserve Regulation, in the following terms:
SAYS:
Article 4 (Legal Reserve Requirement for DPF).

• Financial entities included in Article 1 must constitute legal reserve on their liabilities related to the following fixed-term deposit (DPF) accounts:
  Fixed-term deposits (DPF)
• Other obligations with the public for fixed terms
• Fixed-term deposits affected as collateral
• Fixed-term deposits of domestic financial entities subject to reserve
• Short-term financing from foreign entities
• Head office and short-term branches
  The terms of the legal reserve for DPF, according to the terms and currencies of the deposits, are established in the following table:
  LEGAL RESERVE FOR DPF ACCORDING TO MATURITY TERM AND CURRENCY ORIGINAL TERM OF THE DPF NATIONAL CURRENCY FOREIGN CURRENCY AND MVDOL Reserve in Reserve in Reserve in Reserve in Securities Cash Securities Cash Up to 180 days Reserve Greater than 180 days Reserve No Reserve* Reserve Reserve Up to 360 days Greater than 360 days No Reserve* No Reserve* Reserve No Reserve* Up to 720 days Greater than 720 days No Reserve* No Reserve* No Reserve* No Reserve* *Only if the DPF has been previously registered with the BCB. //3. R.D. No. 120/2001 SHOULD SAY:
  “Article 4 (Legal Reserve Requirement for DPF).
• Financial entities included in Article 1 must constitute legal reserve on their liabilities related to the following fixed-term deposit (DPF) accounts:
  Fixed-term deposits (DPF)
• Obligations with the public for fixed terms
• Fixed-term deposits affected as collateral
• Fixed-term deposits of domestic financial entities subject to reserve
• Short-term financing from foreign entities
• Head office and short-term branches
  The terms of the legal reserve for DPF, according to the terms and currencies of the deposits, are established in the following table:
  LEGAL RESERVE FOR DPF ACCORDING TO MATURITY TERM AND CURRENCY NATIONAL CURRENCY FOREIGN CURRENCY AND MVDOL ORIGINAL TERM OF THE DPF Reserve in Reserve in Reserve in Reserve in Securities Cash Securities Cash From 30 to 60 days No Reserve* Reserve Greater than 60 days Up to 180 days No Reserve* No Reserve* Reserve Reserve Greater than 180 days No Reserve* No Reserve* Reserve Reserve Up to 360 days Greater than 360 days No Reserve* No Reserve* Reserve No Reserve* Up to 720 days Greater than 720 days No Reserve* No Reserve* No Reserve* No Reserve*

*Only fixed-term deposits of 30 days or more are considered DPF. To access the reserve exemption, there is an obligation to previously register the DPFs with the BCB.” //4. R.D. No. 120/2001

Article 2.- Modify the third and fourth paragraphs of Article 5 of the Consolidated Text of the Legal Reserve Regulation, in the following terms:
SAYS:
Article 5 (Exemptions). Third and fourth paragraphs
Fixed-term deposits in national currency, with an original maturity term greater than six months and up to one year, registered with the BCB, will be exempt from the legal reserve in cash. Fixed-term deposits in national currency, with an original maturity term greater than one year, registered with the BCB, will be exempt from the legal reserve. SHOULD SAY:
“Article 5 (Exemptions). Third and fourth paragraphs Fixed-term deposits in national currency, with an original maturity term of 30 to 60 days, registered with the BCB, will be exempt from the legal reserve in securities. Fixed-term deposits in national currency, with an original maturity term greater than sixty days, registered with the BCB, will be exempt from the legal reserve.”
Article 3.- Modify Article 6 of the Consolidated Text of the Legal Reserve Regulation, in the following terms:
SAYS:
Article 6 (Need for Registration).

• Financial entities must register with the Financial Entities Management of the BCB, in detail, all their term deposits greater than one year (in foreign currency) and superior to six months (in national currency). Only deposits constituted in those terms, which have been previously registered with the BCB, will qualify for the exemptions mentioned in Article 5.
  //5. R.D. No. 120/2001
  SHOULD SAY:
  “Article 6 (Need for Registration).

To qualify for legal reserve exemptions, financial entities must register with the Financial Entities Management of the BCB, in detail, the DPFs referred to in Article 5. Likewise, they must report on the redemptions of the same effected in a term inferior to the original term.”
Article 4.- Modify the first paragraph of Article 16 of the Consolidated Text of the Legal Reserve Regulation, in the following terms:
Article 16 (Sanctions for Early Withdrawals of DPF) – First paragraph
SAYS:
Term deposits greater than one year in foreign currency and six months in national currency, that are redeemed by the issuing entity in a term inferior to the original term, will be subject to the sanctions established by the Superintendence of Banks and Financial Entities. SHOULD SAY:
“Term deposits that are redeemed by the issuing entity in a term inferior to the original term, will be subject to the sanctions established by the Superintendence of Banks and Financial Entities.”
Article 5.- The modifications indicated will enter into force as of January 7, 2002.
Article 6.- The content of Board of Directors Resolution No. 049/2001 of June 5, 2001, is ratified, regarding the elimination of the 100% legal reserve requirement for the Public Official Checking Account account.
//6. R.D. No. 120/2001
Article 7.- The Presidency and the General Management are charged with the execution and compliance of this Resolution.

La Paz, November 29, 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.