SGDB N° 015/2015 - Modification to the Legal Reserve Regulation

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C.B.B. / DGD-VUC
2015 APR 29 AM 9:37

EXTERNAL CIRCULAR OF THE CENTRAL BANK OF BOLIVIA La Paz, April 28, 2015 SGDB N° 015/2015

FROM: GENERAL MANAGEMENT
FINANCIAL ENTITIES MANAGEMENT
TO: FINANCIAL INTERMEDIATION ENTITIES
SUBJECT: MODIFICATION 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. 059/2015, modified Articles 5, 6, and 17 of the Legal Reserve Regulation. A copy of the aforementioned Resolution is attached for the corresponding purposes.

Sincerely.

[Signature]
MISAEL MIRANDA VARGAS
MANAGER OF FINANCIAL ENTITIES
CENTRAL BANK OF BOLIVIA

[Signature]
CARLOS A. COLODRO LÓPEZ
GENERAL MANAGER a.i.
CENTRAL BANK OF BOLIVIA

CCL/MMV/ODQ/MCP
Att.: Board Resolution 059/2015

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

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Central Bank of Bolivia
Board of Directors
BOARD RESOLUTION NO. 059/2015

SUBJECT: ADVISORY ON ECONOMIC POLICY AND FINANCIAL ENTITIES MANAGEMENT APPROVE MODIFICATION 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 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 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, No. 164/2013 of December 5, 2013, and No. 042/2014 of April 29, 2014.

ASFI Resolution No. 687/2013 of October 16, 2013.

The Report from the Advisory on Economic Policy and Financial Entities Management BCB-APEC-SIE-INF-2015-26 of April 27, 2015.

The Report from the Legal Affairs Management BCB-GAL-SANO-INF-2015-175 of April 27, 2015.

CONSIDERING:

That the Political Constitution of the State in its Article 328 provides that the BCB is empowered, 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 legal reserves of mandatory compliance for financial intermediation entities and, for this purpose, will determine their composition, amount, method of calculation, 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 faculty of the Board of Directors to establish by absolute majority of votes, legal reserves of mandatory compliance for

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Central Bank of Bolivia
Board of Directors
//2. B.R. No. 059/2015

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 Advisory on Economic Policy and the Financial Entities Management through Report BCB-APEC-SIE-INF-2015-26 recommend the approval of the modification of Articles 5, 6, and 17 of the Legal Reserve Regulation.

That according to Report BCB-GAL-SANO-INF-2015-175, the Legal Affairs Management concludes that the proposed modification is legally appropriate, as it does not contravene the current legal framework, being the competence of the BCB Board of Directors to consider its approval by absolute majority in accordance with what is provided in Article 7 of Law No. 1670.

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, being empowered to issue norms and adopt general decisions that may be necessary for the fulfillment of the functions, competencies, and faculties assigned by Law to the Issuing Entity, as established in Articles 44 and 54 inc. i) 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 5 of the Legal Reserve Regulation as follows:

SAYS: Article 5 (Legal Reserve Rates).-

The legal reserve rates on the liabilities detailed in Article 3 of this Regulation are the following:

In MN and MNUFV:

Two percent (2%) for cash reserve

Ten percent (10%) for securities reserve

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Central Bank of Bolivia
Board of Directors
//3. B.R. No. 059/2015

In ME and MVDOL:

Thirteen point five percent (13.5%) for cash reserve.

Eight percent (8%) for securities reserve

Financial entities must constitute the legal reserve in cash, equivalent to a rate of one hundred percent (100%), on the accounts included in "Other Obligations with the public, with companies with state participation and with banks and financing entities" indicated in Article 3 of this Regulation.

SHOULD SAY:

"The legal reserve rates on the liabilities detailed in Article 3 of this Regulation are the following:

In MN and MNUFV:

Cash
Four percent (4%) for cash reserve, effective from May 11, 2015.
Six percent (6%) for cash reserve, effective from July 20, 2015.

Securities
Eight percent (8%) for securities reserve, effective from May 11, 2015.
Six percent (6%) for securities reserve, effective from July 20, 2015.

In ME and MVDOL:

Thirteen point five percent (13.5%) for cash reserve.
Eight percent (8%) for securities reserve

Financial entities must constitute the legal reserve in cash, equivalent to a rate of one hundred percent (100%), on the accounts included in "Other Obligations with the public, with companies with state participation and with banks and financing entities" indicated in Article 3 of this Regulation."

Article 2.- Modify Article 6 of the Legal Reserve Regulation as follows:

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 to the productive sector in MN and MNUFV with respect to the balance registered on September 30, 2010 up to the

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Central Bank of Bolivia
Board of Directors
//4. B.R. No. 059/2015 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	Percentage of	Percentage of
Start Date	End Date	Cash Compensation	Securities Compensation
Currently	100%	40.0%
12-May-14	25-May-14	0.0%	40.0%
26-May-14	08-Jun-14	0.0%	40.0%
09-Jun-14	22-Jun-14	0.0%	30.0%
23-Jun-14	06-Jul-14	0.0%	20.0%
07-Jul-14	20-Jul-14	0.0%	10.0%
21-Jul-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	Percentage of	Percentage of
Start Date	End Date	Cash Compensation	Securities Compensation
Currently	100%	40.0%
05-Jan-15	01-Mar-15	50.0%	40.0%
02-Mar-15	10-May-15	0.0%	40.0%
11-May-15	05-Jul-15	0.0%	30.0%
06-Jul-15	13-Sep-15	0.0%	20.0%
14-Sep-15	08-Nov-15	0.0%	10.0%
09-Nov-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.

For financial entities that obtain their operating license from ASFI after September 30, 2010, the date 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 said license.

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Central Bank of Bolivia
Board of Directors
//5. B.R. No. 059/2015

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."

SHOULD SAY:

"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 the following table and in the respective periods. In addition, the legal reserve rates in cash and securities on the liabilities detailed in Article 3 of this Regulation are set in the following table

Compensation of LR for Cooperatives and Mutuals (In percentages)

Requirement Period	Percentage of	Percentage of	Reserve Rate	Reserve Rate
Start Date	End Date	Cash Compensation	Securities Compensation	in cash	in securities
		100%	40.0%	2.0%	10.0%
05-Jan-15	01-Mar-15	50.0%	40.0%	2.0%	10.0%
02-Mar-15	10-May-15	0.0%	40.0%	2.0%	10.0%
11-May-15	05-Jul-15	0.0%	30.0%	3.0%	9.0%
06-Jul-15	13-Sep-15	0.0%	20.0%	4.0%	8.0%
14-Sep-15	08-Nov-15	0.0%	10.0%	5.0%	7.0%
09-Nov-15	Forward	0.0%	0.0%	6.0%	6.0%

Deductions for Mutuals and Cooperatives for increase in gross portfolio in MN and UFV will apply only to deposits subject to the rates of reserve in cash and in securities indicated in the previous table.

For Mutuals and Cooperatives that obtain their operating license from ASFI after September 30, 2010, the base date used for the calculation of the increase in the total gross portfolio, in MN and UFV will correspond to the last day of the month in which the entity obtained the said 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."

Article 3.- Modify Article 17 of the Legal Reserve Regulation as follows:

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Central Bank of Bolivia
Board of Directors
//6. B.R. No. 059/2015

SAYS:

Article 17 (Funds in Custody).-

Financial entities may maintain up to 5% of their legal reserve requirement in cash in national currency in Funds in Custody in any location. Any excess that financial entities maintain above this percentage will not be recognized for reserve purposes. Financial entities must maintain 40% of their legal reserve requirement in cash in foreign currency in Funds in Custody in any location. Any excess that financial entities maintain above this percentage will not be recognized for reserve purposes. The global deficiency in Funds in Custody in foreign currency cannot be compensated with excesses of reserve in BCB accounts or reserve in securities.

SHOULD SAY:

Article 17 (Funds in Custody).-

"Financial entities may maintain up to 50% of their legal reserve requirement in cash in national currency in Funds in Custody in any location. Any excess that financial entities maintain above this percentage will not be recognized for reserve purposes. Financial entities must maintain 40% of their legal reserve requirement in cash in foreign currency in Funds in Custody in any location. Any excess that financial entities maintain above this percentage will not be recognized for reserve purposes. The global deficiency in Funds in Custody in foreign currency cannot be compensated with excesses of reserve in BCB accounts or reserve in securities."

Article 4.- This partial modification of the Legal Reserve Regulation will enter into force from the date of its approval.

Article 5.- The Presidency and the General Management are charged with the execution and compliance of this Resolution.

La Paz, April 28, 2015

[Signature]
Marcelo Zabalaga Estrada

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Central Bank of Bolivia
Board of Directors
//7. B.R. No. 059/2015

[Signature]
Reynaldo Yujra Segales

[Signature]
Álvaro Rodríguez Rojas

[Signature]
Abraham Pérez Alandia

[Signature]
Ronald Polo Rivero

[Signature]
Sergio Velarde Vera