Resolution 131/2007: Approval of the Regulation for the Sale of Public Securities Issued by the Central Bank of Bolivia through Market Makers

BOARD RESOLUTION NO. 131/2007 SUBJECT: MONETARY OPERATIONS MANAGEMENT – APPROVES REGULATION FOR THE SALE OF PUBLIC SECURITIES ISSUED BY THE CENTRAL BANK OF BOLIVIA THROUGH MARKET MAKERS

SEEN: The Law No. 1670 of October 31, 1995 of the Central Bank of Bolivia (BCB) and its modifications. The Law No. 1834 of March 31, 1998 on the Securities Market and its modifications. The Law No. 1488 of April 14, 1993 on Banks and Financial Entities. The Statute of the (BCB) approved by Board Resolution No. 128/2005 of October 21, 2005 and its modification approved by Board Resolution No. 031/2006 of April 18, 2006. The Open Market Operations Regulation approved by Board Resolution No. 127/2003 of November 11, 2003 and its modifications approved by Board Resolutions No. 017/2004 of February 10, 2004, No. 070/2005 of May 24, 2005, No. 108/2007 of August 21, 2007 and No. 130/2007 of October 16, 2007. The Technical Report from the Monetary Operations Management GOM-SOMA 011/2007 of October 4, 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 BCB to execute monetary policy and regulate the quantity of money 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 Board of the Issuing Entity to issue regulations for Open Market Operations.

That Article 87 of Law No. 1670 establishes that within the scope of its functions as the monetary authority, and in its capacity as the government's financial agent, the BCB may, under the conditions determined by its Board, deposit, custody, register, administer, transact, clear, and settle securities issued, guaranteed, or administered by the BCB and by the General Treasury of the Nation (TGN).

That Article 7 of Law No. 1834 establishes that both BCB and TGN issuances are exempt from public offering authorization by the Superintendence of Pensions, Securities and Insurance (SPVS), their own legal norms backing their issuance and public offering being sufficient.

That Law No. 1834 in its article 19 subsections a) and g) determines that Stock Agencies are empowered to carry out securities intermediation activities on behalf of third parties, as well as to make public offerings on behalf of issuers.

That article 3 numeral 2) of Law No. 1488 establishes that the issuance, discounting, or negotiation of securities and other documents representing obligations are financial intermediation activities and auxiliary services of the financial system.

That numeral 12) of article 39 of Law No. 1488 determines that banking financial entities are authorized to act as intermediaries on behalf of their clients in the subscription, placement, and purchase-sale of securities, prior to the deposit of funds.

That the last paragraph of article 39 of Law No. 1488 establishes that the activities mentioned in numeral 12) must be carried out through companies with majority ownership by the entity.

That the Open Market Operations Regulation states that these operations may be carried out through the mechanism known as Market Makers, for which it is established that the conditions of this mechanism will be defined by a specific Regulation approved by the Board of the Issuing Entity.

That the Technical Report from the Monetary Operations Management GOM-SOMA 011/2007 recommends the introduction of the mechanism for the sale of public securities issued by the BCB through Market Makers and also the approval of a specific Regulation establishing the conditions and technical aspects related to this mechanism.

That in the opinion of the Legal Affairs Management, there is no legal impediment for the Board to approve the present Regulation for the Sale of Public Securities issued by the BCB through Market Makers.

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

Article 1. Approve the Market Maker Regulation, which forms part of this Resolution as an annex.

Article 2. This Regulation shall enter into force as of October 16, 2007.

Article 3. 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

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Gustavo Blacutt Alcalá Hugo Dorado Araníbar

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Rolando Marín Ibáñez Ernesto Yánez Aguilar

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Osvaldo Nina Baltazar

ANNEX REGULATION FOR THE SALE OF PUBLIC SECURITIES ISSUED BY THE CENTRAL BANK OF BOLIVIA THROUGH MARKET MAKERS

CHAPTER I: GENERALITIES

Article 1. (Object) This Regulation aims to establish the conditions for the sale of public securities to individuals and legal entities, with the exception of financial entities with a license issued by the Superintendence of Pensions, Securities and Insurance (SPVS) or the Superintendence of Banks and Financial Entities (SBEF), through Market Makers.

Article 2. (Sale of Public Securities through Market Makers) The sale of public securities through Market Makers is a mechanism by which authorized entities receive securities from the BCB at market prices (rates), to sell them to individuals and legal entities at a higher price (lower rate) that may not exceed the limit established in Article 7 of this Regulation. This sale is the exclusive responsibility of the Market Maker.

Article 3. (Authorized Entities) All intermediaries authorized with a license from the SPVS or financial entities authorized by the SBEF, within the framework of article 39 numeral 12) of Law No. 1488, empowered to negotiate with securities registered in the Securities Market Register, may act as Market Makers.

Article 4. (Eligibility Criteria) The BCB's Open Market Operations Committee (COMA) may grant the status of Market Maker to authorized entities according to the following eligibility criteria: a) Rate Differential: Basis points of difference between the market yield rate defined in the last awarded Public Securities Auction and the yield rate to be offered to individuals and legal entities. This differential may be equal to or less than that determined in Article 7 of this Regulation. b) Coverage: Number of agencies and branches available for the sale of securities to the public nationwide.

The chosen authorized entities must coordinate with the Monetary Operations Management of the BCB all necessary operational aspects, which must be established by said Management in an Operational Guide.

//5. B.R. No. 131/2007

CHAPTER II CONDITIONS FOR THE SALE OF SECURITIES

Article 5. (Delivery of Securities from the BCB to Market Makers) Market Makers will receive public securities from the BCB for placement in the extra-bourse primary market, at the weighted average price (rate) of the last awarded auction, for each of the terms enabled for public sale. These securities will be available at the BCB every Friday (or the issuance day if there is a holiday Friday), Monday, and Tuesday.

Article 6. (Sale of Public Securities to Individuals and Legal Entities) The sale of public securities to individuals and legal entities through Market Makers shall be governed by the following conditions: a) The minimum nominal amounts for sale shall be equivalent to 2 public securities in national currency or 2 public securities in UFV. b) The maximum number of public securities for sale shall be defined by the COMA. c) Public securities will be sold in all sales agencies and branches enabled by Market Makers that have been previously defined with the BCB, every Friday (or issuance day if there is a holiday Friday), Monday, and Tuesday. d) The sale price shall be that corresponding to the yield rate for public sale (Tp) for the corresponding term and currency, which is calculated as follows: Tp = Ts − Dif Where: Dif is the rate differential (in basis points) and Ts is the weighted average rate of the last awarded auction. e) The yield rates for the sale of public securities to clients (Tp) must be displayed in a visible place in each of their enabled sales agencies and branches, specifying the type of security, term, and currency.

Article 7. (Maximum Rate Differential) The maximum rate differential (Dif) that Market Makers may apply shall not exceed 0.35% (or 35 basis points of rate) for public securities denominated in Bolivianos, and 0.30% (or 30 basis points of rate) for public securities in UFV. This rate differential must be the same for each currency, regardless of the term, branch, and amount sold.

Article 8. (Payment of Public Securities at Maturity) The payment of economic rights to holders of public securities shall be made through Market Makers, under their exclusive responsibility.

Article 9. (Loss of Market Maker Status). The sale of public securities to individuals and legal entities through Market Makers shall not be discriminatory in price, term, or branch. If any of these conditions or those determined in the Operational Guide are not met, the BCB may determine the loss of the Market Maker status.