Resolution of the Board of Directors No. 129/2013

RESOLUTION OF THE BOARD OF DIRECTORS NO. 129/2013

SUBJECT: ECONOMIC POLICY ADVISORY / FINANCIAL ENTITIES MANAGEMENT APPROVES THE REGULATION FOR THE ESTABLISHMENT OF COMPLEMENTARY RESERVES AS A LEGAL RESERVE FOR FINANCIAL INTERMEDIATION ENTITIES.

HAVING REVIEWED:

The Political Constitution of the State promulgated on February 7, 2009.

Law No. 1670, of October 31, 1995, of the Central Bank of Bolivia (BCB).

The BCB Statute approved by Board Resolution No. 128/2005, of October 21, 2005, and its subsequent modifications.

The Legal Reserve Regulation approved by Board Resolution No. 070/2009, of June 23, 2009, and its subsequent modifications.

The Report from the Economic Policy Advisory and the Financial Entities Management BCB-APEC-SIE-INF-2013-50 of September 17, 2013.

The Report from the Legal Affairs Management BCB-GAL-SANO-INF-2013-320 of September 17, 2013.

CONSIDERING:

That the Political Constitution of the State in its article 328 provides that the BCB, in coordination with the economic policy determined by the Executive Branch, is authorized to determine and execute monetary policy.

That Law No. 1670 in its article 7 provides that the Issuing Entity may establish mandatory legal reserves for financial intermediation entities and, for this purpose, determine their composition, amount, calculation method, characteristics, and remuneration.

That in its article 37, the aforementioned legal norm establishes that the BCB is the custodian of liquid reserves intended to cover said reserve requirement and may delegate the custody of these deposits according to specific regulations.

That the BCB Statute in article 11 numeral 7) indicates that it is the faculty of the Board to establish, by absolute majority of votes, mandatory legal reserves for Financial Intermediation Entities (FIEs) and approve their composition, amount, calculation, characteristics, forms of administration, custody, and remuneration according to Regulation.

That the Legal Reserve Regulation defines the required and constituted legal reserve.

That the Economic Policy Advisory and the Financial Entities Management through report BCB-APEC-SIE-INF-2013-50, considering that in the last month the observed annual inflation (6.08%) deviated considerably from the year-end objective (4.8%), recommends the creation of Complementary Reserves as a legal reserve for FIEs in order to control the liquidity of the financial system, preventing second-round inflationary effects.

That according to Report BCB-GAL-SANO-INF-2013-320, the proposal of the Economic Policy Advisory and the Financial Entities Management is legally appropriate as it does not contravene the current legal framework, being within the competence of the BCB Board to consider its approval.

THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1. - (Object) Approve this regulation for the establishment of Complementary Reserves as a mandatory legal reserve for Financial Intermediation Entities (FIEs).

Article 2 (Definition).

• The Complementary Reserves of FIEs are defined as the immobilized resources from the excess of legal reserve that exceed a level of liquidity considered adequate, equivalent to 4.43% of the deposits of FIEs as of September 12, 2013. The required and constituted legal reserve is defined in the Legal Reserve Regulation.

Article 3 (Characteristics). I. The Complementary Reserves of each FIE are equal to the excess reserve minus the amount of adequate liquidity.

II. The excess reserve is the difference between the constituted reserve and the required reserve in cash.

III. To define the immobilized amount, the excess reserve considered is the lower value between the daily average of the excess of the last twelve months and the observed on September 12, 2013.

IV. In the event that the adequate level is higher than the calculated excess reserve according to the procedure described in the previous point, FIEs will not be subject to Complementary Reserves.

V. The constitution of Complementary Reserves will be carried out initially with the excess in national currency (NC). If the entity cannot cover the total of its Complementary Reserves with its excess in NC, it will use its excess in foreign currency (FC) in the equivalent calculated with the buying exchange rate. The constitution of the Complementary Reserve in this case will remain in foreign currency, and through written request, entities may release it at any time, constituting the equivalent in NC at the buying exchange rate.

Likewise, FIEs may perform the inverse operation, that is, constitute Complementary Reserves in FC by releasing the corresponding ones in NC.

Article 4 (Term). The measure will be applied on Wednesday, September 18, 2013, with data available as of September 12, 2013. Complementary Reserves will have a term of 224 calendar days. The term may be revised according to the liquidity conditions of the economy.

Article 5 (Remuneration of Complementary Reserves). Complementary Reserves will be remunerated at an annual interest rate of 1.8%, payable at maturity.

Article 6 (Foreign Currency Legal Reserve). Financial entities may use their Complementary Reserves to cover up to 100% of the additional foreign currency requirement to be made in the months of December 2013 and March 2014. In this case, if FIEs need to buy foreign currency from the BCB, they may do so at the official selling exchange rate.

Article 7 (Exceptions). Complementary Reserves are exempted for all FIEs whose public deposit balance as of September 12 is less than 2% of the total deposits of the system (Bs 1,853 million).

Article 8. The Presidency and General Management are charged with the execution and compliance of this Resolution.

La Paz, September 17, 2013