EXTERNAL CIRCULAR OF THE CENTRAL BANK OF BOLIVIA

La Paz, April 29, 2014
SGDB N° 015/2014

FROM: GENERAL MANAGEMENT
FINANCIAL ENTITIES MANAGEMENT
TO: FINANCIAL INTERMEDIATION ENTITIES
SUBJECT: AMENDMENT TO THE LEGAL RESERVE REGULATION

Ladies and Gentlemen:

The Central Bank of Bolivia (BCB) notifies financial intermediation entities that the BCB Board of Directors, through Board Resolution No. 042/2014, modified Article 6 of the Legal Reserve Regulation. A copy of the aforementioned Resolution is attached for the corresponding purposes.

Sincerely.

MMV/RPR/MAAM/MGP
Adj.: Board Resolution 042/2014

Ayacucho and Mercado • Tel:(591-2) 2409090 • P.O. Box: 3118 www.bcb.gob.bo • bcb@bcb.gob.bo • La Paz-Bolivia

BOARD RESOLUTION NO. 042/2014

SUBJECT: ECONOMIC POLICY ADVISORY AND FINANCIAL ENTITIES MANAGEMENT APPROVE AMENDMENT TO THE LEGAL RESERVE REGULATION

VIEWED:

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 through Board Resolution No. 128/2005 of October 21, 2005 and its subsequent modifications.
The Legal Reserve Regulation approved through Board Resolution No. 070/2009 of June 23, 2009 and modified according to Board Resolutions No. 130/2010 of November 23, 2010, No. 007/2011 of January 18, 2011, No. 072/2011 of June 14, 2011, No. 07/2012 of January 10, 2012, No. 042/2012 of April 10, 2012, and No. 164/2013 of December 5, 2013.
ASFI Resolution No. 687/2013 of October 16, 2013.
The Report from the Economic Policy Advisory, Financial Entities Management, and Monetary Operations Management BCB-APEC-SIE-INF-2014-20 of April 28, 2014.
The Report from the Legal Affairs Management BCB-GAL-SANO-INF-2014-136 of April 29, 2014.

CONSIDERING:

That the Political Constitution of the State in its Article 328 provides that the BCB is authorized, in coordination with the economic policy determined by the Executive Branch, 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, will 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 the liquid reserves intended to cover said reserve and may delegate the custody of these deposits according to the specific regulation.
That the BCB Statute in Article 11 numeral 7) states that it is the authority of the Board to establish by absolute majority of votes, mandatory legal reserves for Financial Intermediation Entities and approve their composition, amount, calculation, characteristics, forms of administration, custody, and remuneration according to Regulation.
That the Legal Reserve Regulation aims to establish the technical and operational conditions of mandatory compliance for financial entities that are duly authorized for their operation by the Financial System Supervision Authority, regarding the constitution and form of administration of the legal reserve.
That the Economic Policy Advisory, Financial Entities Management, and Monetary Operations Management through Report BCB-APEC-SSIEE-INF-2014-20 recommend the approval of the modification of Article 6 of the Legal Reserve Regulation.
That according to Report BCB-GAL-SANO-INF-2014-136, the Legal Affairs Management concludes that the proposed modification is legally appropriate, as it does not contravene the current legal framework, and it is the competence of the BCB Board of Directors to consider its approval.
That the BCB Board of Directors, in its capacity as the highest authority of the Institution, is responsible for defining its policies, specialized normative of general application, and internal norms, and is authorized to issue norms and adopt general decisions that may be necessary for the fulfillment of the functions, competencies, and powers assigned by Law to the Issuing Entity, as established in Articles 44 and 54 item o) of Law No. 1670 and Articles 9, 11, and 24 of the BCB Statute.

THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1.- Modify Article 6 of the Legal Reserve Regulation according to the following:

IT SAYS: “(ARTICLE 6, deductions and exemptions from reserve)

From the reserve required in MN and MNUFV, Banks and Private Financial Funds may deduct the increase in the gross portfolio destined for the productive sector in MN and MNUFV with respect to the balance registered on September 30, 2010 up to the equivalent to 100% of the reserve required in cash initially, and subsequently, up to the equivalent to 40% of the reserve required in securities. For the deduction of the productive portfolio, the last information collected by the Financial System Supervision Authority will be applied.

From the reserve required in MN and MNUFV, Mutuals and Cooperatives may deduct the increase in the total gross portfolio in MN and MNUFV with respect to the balance registered on September 30, 2010 up to the equivalent to 100% of the reserve required in cash initially, and subsequently, up to the equivalent to 40% of the reserve required in securities.

These deductions will apply only to deposits subject to the reserve rate of 2% in cash and 10% in securities according to Article 5 of this Regulation.

For financial entities that obtain their operating license from the ASFI after September 30, 2010, the date that will be used for the calculation of the increase in the total gross portfolio (for Mutuals and Cooperatives) or productive (for Banks and Private Financial Funds), in MN and UFV will correspond to the last day of the month in which the entity obtained the aforementioned license.

Short-term liabilities with the exterior, contracted exclusively for foreign trade operations with exact matching between asset and liability for each operation, will be exempt from the requirement to constitute legal reserve.”

IT MUST SAY:

“From the reserve required in MN and MNUFV, Banks and Private Financial Funds may deduct the increase in the gross portfolio destined for the productive sector in MN and MNUFV with respect to the balance registered on September 30, 2010 up to the equivalent to the percentages indicated in Table 1 and in the respective periods. For the deduction of the productive portfolio, the last information collected by the Financial System Supervision Authority will be applied.

Table 1: Compensation of LR for Banks and Private Financial Funds (In percentages)

Requirement Period	Cash Compensation Percentage	Securities Compensation Percentage
Start Date	End Date
Currently		100%	40.0%
May 12, 14	May 25, 14	0.0%	40.0%
May 26, 14	June 08, 14	0.0%	40.0%
June 09, 14	June 22, 14	0.0%	30.0%
June 23, 14	July 06, 14	0.0%	20.0%
July 07, 14	July 20, 14	0.0%	10.0%
July 21, 14	Forward	0.0%	0.0%

From the reserve required in MN and MNUFV, Mutuals and Cooperatives may deduct the increase in the total gross portfolio in MN and MNUFV with respect to the balance registered on September 30, 2010 up to the equivalent to the percentages indicated in Table 2 and in the respective periods.

Table 2: Compensation of LR for Cooperatives and Mutuals (In percentages)

Requirement Period	Cash Compensation Percentage	Securities Compensation Percentage
Start Date	End Date
Currently		100%	40.0%
Jan 05, 15	Mar 01, 15	50.0%	40.0%
Mar 02, 15	May 10, 15	0.0%	40.0%
May 11, 15	July 05, 15	0.0%	30.0%
July 06, 15	Sep 13, 15	0.0%	20.0%
Sep 14, 15	Nov 08, 15	0.0%	10.0%
Nov 09, 15	Forward	0.0%	0.0%

These deductions will apply only to deposits subject to the reserve rate of 2% in cash and 10% in securities according to Article 5 of this Regulation.

Article 2.- This partial modification of the Legal Reserve Regulation will enter into force from May 12, 2014.

Article 3.- The Presidency and General Management are charged with the execution and compliance of this Resolution.

La Paz, April 29, 2014

SGDB N° 015/2014