Resolution 130/2003 Approving the New Repo Operations Regulation

BOARD RESOLUTION NO. 130/2003 SUBJECT: MONETARY OPERATIONS MANAGEMENT – APPROVES NEW REPO OPERATIONS REGULATION.

HAVING REVIEWED: The Central Bank of Bolivia Law No. 1670 of October 31, 1995. The Securities Market Law No. 1834 of March 31, 1998. The Statute of the Central Bank of Bolivia, approved by Board Resolution No. 128/2001 of December 13, 2001. The Repo Operations Regulation, approved by Board Resolution No. 129/2002 of November 5, 2002. The Open Market Operations (OMA) Regulation, approved by Board Resolution No. 127/2003 of November 11, 2003. The Technical Report from the Monetary Operations Management SOMA No. 012/2003 of September 29, 2003. The Report from the Legal Affairs Management SANO No. 199/2003 of October 31, 2003.

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 according to its monetary program, being able to issue, place, and acquire securities and carry out other open market operations, such as all repo 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 carry out, under the conditions determined by its Board, the deposit, custody, registration, administration, transaction, compensation, and settlement of securities issued, guaranteed, or administered by the BCB and the General Treasury of the Nation.

That Article 56 of Law No. 1834 establishes that securities may be dematerialized and represented by book entries, held by deposit entities.

That within the framework of the new Open Market Operations Regulation, it is necessary to issue a new Repo Operations Regulation that also contemplates operations with securities represented by book entries.

That Article 54(d) of Law No. 1670 and numeral 4) of Article 11 of the BCB Statute empower the BCB Board to issue regulations for Open Market Operations.

That the Report from the Monetary Operations Management No. 012/2003 recommends modifying the current Repo Operations Regulation so that it falls under the general framework of the new Open Market Operations Regulation.

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

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

Article 1.- Approve the Repo Operations Regulation, in its IV Chapters and 14 articles, which, as an annex, forms part of this Resolution, effective from November 11, 2003.

Article 2.- Repeal, effective from the approval of this Resolution, the Repo Operations Regulation approved by Board Resolution No. 129/2002 of November 5, 2002.

Article 3.- The Single Contracts for Participation in Repo Operations that are currently in force will maintain their validity until their expiration or until replaced by the new Contract.

Article 4.- The Presidency and the General Management are charged with the execution and compliance of this Resolution.

La Paz, November 11, 2003.

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Juan Antonio Morales A.

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Juan Medinaceli V. Enrique Ackermann A.

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José Luis Evia V. Fernando Paz B.

ANNEX REPO OPERATIONS REGULATION

CHAPTER I GENERALITIES

Article 1 (Object). –

This regulation aims to govern the Repo Operations carried out by the Central Bank of Bolivia (OR-BCB) with authorized financial entities.

Article 2 (Definition). –

An OR-BCB consists of the sale made by an agent (the seller/reportado), at a determined price (outward value) calculated on the basis of unit values, of securities issued by the BCB or the TGN, to a second agent (the buyer/reportador), with the commitment of the seller to repurchase the securities, or other equivalents, within a term and at a price (return value) predetermined on the transaction date. The repurchase date cannot be later than the maturity date of the reported security.

Article 3 (Calculation of unit return value). -

The unit return value must establish a premium in favor of the buyer, as determined by the following formula:

VUV = VUI * (1 + (TP * PL) / 360)

Where: VUV = Unit return value of the repo; VUI = Unit outward value of the repo; TP = Premium rate; and PL = Term of the repo operation in days.

Article 4 (Eligible Entities). –

Entities authorized to conduct OR-BCB, prior to compliance with what is determined in Chapter III of this Regulation, are those authorized for operation by the Superintendence of Banks and Financial Entities (SBEF) or by the Superintendence of Pensions, Securities, and Insurance (SPVS). The Open Market Operations Committee (COMA) will determine the mode of participation of these entities. In all cases, the settlement of operations must be carried out exclusively in the Current and Reserve Account that financial entities hold at the Central Bank of Bolivia, during the hours determined by the BCB.

Article 5 (Modes of OR-BCB). –

The BCB may act in OR-BCB as seller or buyer. The OR-BCB is called direct when the BCB is the buyer and reverse when it acts as the seller. OR-BCB are carried out indistinctly in any currency authorized by the COMA, and the operation may be executed in a currency different from that of the security (crossed repo).

CHAPTER II EXECUTION, REPORTS, AND CONTROL

Article 6 (COMA Attributes). – The Open Market Operations Committee (COMA) applies the quarterly guidelines approved by the BCB Board in OR-BCB. In this sense, the COMA has the following attributes:

I. Define weekly, or with the periodicity it decides, global amounts, premium rates, minimum and maximum terms, currencies, and all characteristics of OR-BCB, as well as the autonomous negotiation ranges of the Monetary Operations Management (GOM).

II. Define, authorize, and modify with the periodicity it decides:

a) the BCB and TGN securities that can be accepted in OR-BCB, b) the entities eligible to conduct OR-BCB, as well as the mode and additional participation requirements, prior to verification of compliance with what is established in Chapter III of this Regulation, c) the allocation mechanisms, competitive or not, for these operations, including their schedules and other characteristics, d) the method of calculating the unit outward value, which may consider hedging mechanisms (“haircuts”) that allow reducing the risk of loss for the BCB from fluctuations in the market price of the reported securities, e) the early redemption of OR-BCB and its mode.

Article 7 (Attributes of the Execution Body). –

The Monetary Operations Management (GOM) is the body responsible within the BCB for the execution of OR-BCB, being able to carry them out within the autonomous negotiation ranges approved by the COMA. If due to situational circumstances it is necessary to carry out operations outside the approved autonomous negotiation ranges, the GOM must obtain prior and express authorization from the President of the COMA, which must be brought to the knowledge of the COMA at its next meeting.

Article 8 (Reports to the Board). –

The Economic Policy Advisory is responsible for evaluating the behavior of OR-BCB and their impacts on the Monetary Program, and must present reports to the Board every quarter.

CHAPTER III REQUIREMENTS

Article 9 (Requirements). – The entities defined in Article 4 that wish to participate in OR-BCB must present the following documents:

I. Adhesion Contract to conduct OR-BCB, with indefinite validity, duly signed by the respective legal representatives.

II. Notarized Power of Attorney granted by the eligible financial entity in favor of its representative(s), which must include at least the following powers:

a) General powers of administration. b) Express power to sign the OR-BCB Adhesion Contract on behalf of the financial entity. c) Express power to bind and be responsible in the name of the entity for those officials whose authorized signatures are or will be registered in the General Secretariat of the BCB, for the submission of OR-BCB requests through the mechanisms approved by the COMA.

III. For the first time or when there are modifications, registration in the General Secretariat of the BCB of the authorized signatures that present the Request Forms for Participation in OR-BCB.

IV. Request Form for Participation in OR-BCB duly filled out and signed. The request may be submitted in any of the modalities approved by the COMA.

Article 10 (Additional Requirements). –

In the case of direct OR-BCB, eligible financial entities must present, when applicable, the securities duly endorsed in favor of the Issuing Entity, or in its case, comply with the procedure established by the BCB for the repo of securities represented by book entries.

In the case of reverse OR-BCB, the COMA may implement them according to the guidelines for the placement of securities determined in Articles 12 and 13 of the Open Market Operations Regulation.

CHAPTER IV OTHER PROVISIONS

Article 11 (Custody of physical securities). –

In all cases, the physical securities subject to OR-BCB, during the validity of the operations, must remain in deposit and custody with the BCB, or with another entity authorized by the Issuing Entity.

Article 12 (Certification). –

The BCB, at the request of eligible financial entities, will issue certifications of the OR-BCB carried out with the BCB by the requesting entity.

Article 13 (Sanctions for Non-Compliance). –

In addition to the consolidation of ownership in favor of the BCB of the reported security, financial entities that fail to fulfill the repurchase commitment for OR-BCB at maturity will be disqualified from participating in OMA for a period of 3 months for the first offense, 6 months for the second, and, if a third contravention occurs, the case will be submitted to the Board.

Article 14 (Regulation of other operational aspects). –

The COMA may define and implement any operational aspect not foreseen in this Regulation.

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