Resolution 130/2007

RESOLUTION OF THE BOARD OF DIRECTORS NO. 130/2007 SUBJECT: MONETARY OPERATIONS MANAGEMENT - APPROVES MODIFICATIONS TO THE OPEN MARKET OPERATIONS REGULATION.

HAVING SEEN:
Law No. 1670 of October 31, 1995, of the Central Bank of Bolivia, and its modifications.
The Statute of the Central Bank of Bolivia, approved by Board of Directors Resolution No. 128/2005 of October 21, 2005, and its modification approved by Board of Directors Resolution No. 031/2006 of April 18, 2006.
The Board of Directors Resolution No. 037/2002 of April 16, 2002, which approves the Internal Personnel Regulation.
The Open Market Operations (OMA) Regulation, approved by Board of Directors Resolution No. 127/2003 of November 11, 2003, and the modifications approved by Board of Directors Resolutions No. 017/2004, No. 070/2005, No. 108/2007, of February 10, 2004, May 24, 2005, and August 21, 2007, respectively. The Technical Report from the Monetary Operations Management GOM-SOMA No. 011/2007 of October 5, 2007. The Report from the Legal Affairs Management SANO 262/2007 of October 11, 2007.

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 for this purpose.

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

That Article 87 of Law No. 1670 establishes that the BCB, within the scope of its functions as monetary authority and payments system authority, and in its capacity as financial agent of the government, may carry out, under the conditions determined by its Board of Directors, the deposit, custody, registration, administration, transaction, clearing, and settlement of securities issued, guaranteed, or administered by the BCB and by the General Treasury of the Nation.

That Article 1 of Board of Directors Resolution No. 108/2007 of August 21, 2007, authorizes the sale of public securities issued by the BCB to natural and legal persons, with the exception of financial entities with a license of operation granted by the Superintendence of Banks and Financial Entities or by the Superintendence of Pensions, Securities, and Insurance.

That Article 9 subsection c) of the Internal Personnel Regulation establishes that public servants of the BCB are subject to the following incompatibilities: carrying out business or drafting private contracts associated with the performance of their tasks in public service.

That the Technical Report from the Monetary Operations Management recommends the BCB Board of Directors approve the Market Makers mechanism for the sale of public securities to natural and legal persons.

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

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

Article 1.- Modify Article 12 of the Open Market Operations Regulation, which was modified by Board of Directors Resolution 108/2007 of August 21, 2007, in the following terms:

SAYS:
Article 12 (Operational Mechanisms).
OMAs may be carried out through public auction, BCB cash desk, direct sale to natural or legal persons, or other mechanisms authorized by the BCB Board of Directors.

I. Public Auction. It is a competitive mechanism for the allocation of securities, issued by the BCB or the TGN, to authorized institutions. Allocation in auction may be carried out in the following modalities:

a) Explicit Proposals. In this case, the COMA will allocate the securities to the best proposals (in descending order of prices, or ascending in terms of rates) made by the agents participating in the auction.
At the time of making the allocation, the COMA may reject bids with prices lower or rates higher than their reference levels.
If in the margin there is equality of prices, discount rates, or yields between bids, the securities will be allocated by the pro-rata system when applicable.
If in the margin the quantity demanded in a single bid were higher than the available supply remainder, only said remainder will be allocated.

b) Adhesion Proposals. In this case, the COMA will define the maximum offer, which cannot exceed 50% of the total amount in each currency and term, and will allocate the securities to the demanding entities at the average price or rate obtained in the modality described in subsection a) of this Article. If the total demand for a security in this modality were higher than the available supply, the COMA will carry out the allocation by pro-rata, up to the limit of the available amount. The amount requested under this modality by each participating entity must not exceed US$ 1,000,000 for securities in foreign currency and Bs 1,000,000 for securities in national currency, in each term. These amounts may be modified by the COMA. The COMA will not carry out allocation of securities under this second modality if there were no allocations in the first modality, as it would not be possible to determine an average allocation price or rate.

c) Under other modalities defined by the COMA with the approval of the Monetary and Exchange Policy Committee.

II. Cash Desk. It is a mechanism through which the GOM carries out purchase, sale, or repurchase operations with public securities issued by the TGN or the BCB, which are approved by the COMA, with authorized institutions. In the cash desk, economic agents also have the possibility to redeem operations or transactions with securities in advance, under the conditions determined by the COMA.

III. Direct Sale to Natural and Legal Persons. It is a mechanism for the direct placement of securities to natural and legal persons, except for financial entities with a license of operation granted by the Superintendence of Banks and Financial Entities or by the Superintendence of Pensions, Securities, and Insurance. The characteristics of the securities, the prices, the quantities offered, the minimum and maximum amounts to be placed, as well as the channels and requirements to carry out these sales, will be determined by the COMA.
The cost for Registry Maintenance at the Entity of Deposits of Securities of Bolivia S.A. of the dematerialized securities placed through this mechanism will be assumed by the BCB.

IV. Other Mechanisms. The BCB Board of Directors may authorize the execution of OMAs with mechanisms different from public auction, cash desk operations, and direct sale.

SHOULD SAY:
Article 12 (Operational Mechanisms).
OMAs may be carried out through public auction, BCB cash desk, direct sale to natural or legal persons, market makers, or other mechanisms authorized by the BCB Board of Directors.

I. Public Auction. It is a competitive mechanism for the allocation of securities, issued by the BCB or the TGN, to authorized institutions. Allocation in auction may be carried out in the following modalities:

a) Explicit Proposals. In this case, the COMA will allocate the securities to the best proposals (in descending order of prices, or ascending in terms of rates) made by the agents participating in the auction.
At the time of making the allocation, the COMA may reject bids with prices lower or rates higher than their reference levels.
If in the margin there is equality of prices, discount rates, or yields between bids, the securities will be allocated by the pro-rata system when applicable.
If in the margin the quantity demanded in a single bid were higher than the available supply remainder, only said remainder will be allocated.

b) Adhesion Proposals. In this case, the COMA will define the maximum offer, which cannot exceed 50% of the total amount in each currency and term, and will allocate the securities to the demanding entities at the average price or rate obtained in the modality described in subsection a) of this Article. If the total demand for a security in this modality were higher than the available supply, the COMA will carry out the allocation by pro-rata, up to the limit of the available amount. The amount requested under this modality by each participating entity must not exceed US$ 1,000,000 for securities in foreign currency and Bs 1,000,000 for securities in national currency, in each term. These amounts may be modified by the COMA. The COMA will not carry out allocation of securities under this second modality if there were no allocations in the first modality, as it would not be possible to determine an average allocation price or rate.

c) Under other modalities defined by the COMA with the approval of the Monetary and Exchange Policy Committee.

II. Cash Desk. It is a mechanism through which the GOM carries out purchase, sale, or repurchase operations with public securities issued by the TGN or the BCB, which are approved by the COMA, with authorized institutions. In the cash desk, economic agents also have the possibility to redeem operations or transactions with securities in advance, under the conditions determined by the COMA.

III. Direct Sale to Natural and Legal Persons. It is a mechanism for the direct placement of securities to natural and legal persons, except for financial entities with a license of operation granted by the Superintendence of Banks and Financial Entities (SBEF) or by the Superintendence of Pensions, Securities, and Insurance (SPVS). The characteristics of the securities, the prices, the quantities offered, the minimum and maximum amounts to be placed, as well as the channels and requirements to carry out these sales, will be determined by the COMA.
The cost for Registry Maintenance at the Entity of Deposits of Securities of Bolivia S.A. of the dematerialized securities placed through this mechanism will be assumed by the BCB.
BCB officials may not acquire public securities under this mechanism.

IV. Sale through Market Makers. It is a mechanism through which authorized financial entities receive securities from the BCB to then sell them to natural and legal persons, with the exception of financial entities with a license of operation granted by the SBEF or by the SPVS. The conditions of this mechanism will be defined through a specific Regulation approved by the BCB Board of Directors.

V. Other Mechanisms. The BCB Board of Directors may authorize the execution of OMAs with mechanisms different from public auction, cash desk operations, direct sale, and market makers.

Article 2. Modify Article 13 of the Open Market Operations Regulation, which was modified by Board of Directors Resolution 108/2007 of August 21, 2007, in the following terms:

SAYS:
Article 13 (Types of Operations).
The types of OMAs carried out by the BCB may be the following:

I. Primary Placement of Securities. Primary placement will be carried out with securities issued by the BCB or placed by the BCB through the monetary regulation account. The placement or sale of securities will be carried out through public auction, cash desk, direct sale to natural and legal persons, or other mechanism defined by the Board, and a public call for this purpose must be carried out previously, disseminated through written, oral, or electronic communication media.
Such securities must be registered in the Securities Market Registry.

II. Operations with Securities in the Secondary Market. Operations in the secondary market can be carried out with any security issued by the TGN or the BCB, through repurchase operations, swaps, purchase, sale of securities, and others authorized by the BCB Board of Directors and by the COMA, when applicable.

SHOULD SAY:
Article 13 (Types of Operations).
The types of OMAs carried out by the BCB may be the following:

I. Primary Placement of Securities. Primary placement will be carried out with securities issued by the BCB or placed by the BCB through the monetary regulation account. The placement or sale of securities will be carried out through public auction, cash desk, direct sale to natural and legal persons, sale through market makers, or other mechanism defined by the Board, and a public call for this purpose must be carried out previously, disseminated through written, oral, or electronic communication media. Such securities must be registered in the Securities Market Registry.

II. Operations with Securities in the Secondary Market. Operations in the secondary market can be carried out with any security issued by the TGN or the BCB, through repurchase operations, swaps, purchase, sale of securities, and others authorized by the BCB Board of Directors and by the COMA, when applicable.

Article 3. The modifications established in Articles 1 and 2 of this Resolution will enter into force from October 16, 2007.

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

La Paz, October 16, 2007

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Raúl Garrón Claure

_________________________ _________________________ Gustavo Blacutt Alcalá Hugo Dorado Araníbar

_________________________ _________________________ Rolando Marín Ibáñez Ernesto Yánez Aguilar

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Osvaldo Nina Baltazar