SGDB N° 027/2017 - Legal Reserve Regulation

[Logo: Central Bank of Bolivia]

BCB-DGD-VUC
CENTRAL BANK OF BOLIVIA
PLURINATIONAL STATE OF BOLIVIA
EXTERNAL CIRCULAR
NO.
GENERAL PROCEDURE
La Paz, May 22, 2017
SGDB No. 027/2017

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

Ladies and Gentlemen:

The Central Bank of Bolivia (BCB) informs financial intermediation entities that the BCB Board of Directors approved Resolution No. 069/2017 of the Legal Reserve Regulation, applicable as of the 22nd of this month, and it is available on the BCB website www.bcb.gob.bo.

Sincerely.

[Signatures]
RONALD O. PINTO RIBERA
FINANCIAL ENTITIES MANAGER a.i.
CENTRAL BANK OF BOLIVIA

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

CCL/RPR/fcl/mug
Adj.: As indicated
C.c. Archive

Ayacucho Street corner Mercado · Telephone: (591-2) 2409090 · Fax: (591-2) 2661590 www.bcb.gob.bo · bancocentraldebolivia@bcb.gob.bo · La Paz Bolivia

[Logo: Central Bank of Bolivia]
Board of Directors

BOARD RESOLUTION NO. 069/2017

SUBJECT: ECONOMIC POLICY ADVISORY AND FINANCIAL ENTITIES MANAGEMENT APPROVES 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).

Law No. 393 of August 21, 2013 on Financial Services.

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. 107/2016 of June 14, 2016.

Board Resolution No. 214/2016 of November 15, 2016.

The Legal Reserve Regulation approved by Board Resolution No. 65/2017 of May 16, 2017.

The Report from the Economic Policy Advisory and Financial Entities Management BCB-APEC-SIE-INF-2017-37 of May 19, 2017.

The Report from the Legal Affairs Management BCB-GAL-SANO-DLBCI-INF-2017-119 of May 19, 2017.

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 and execute exchange rate policy.

That the BCB, in compliance with what is provided in article 7 of Law No. 1670, has established a Legal Reserve Regulation of mandatory compliance by the Institutions of the Financial System.

That the BCB Statute in article 11 numeral 7), states that it is the faculty of the Board to establish by absolute majority of votes, legal reserves of mandatory compliance by Financial Intermediation Entities and approve their composition,

//2. B.R. No. 069/2017

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 Supervisory Authority, regarding the constitution and form of administration of the legal reserve.

That the Economic Policy Advisory and the Financial Entities Management through Report BCB-APEC-SIE-INF-2017-37 recommend the approval of the Legal Reserve Regulation.

That according to Report BCB-GAL-SANO-DLBCI-INF-2017-119 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 two-thirds of the votes of all its members, in accordance with what is provided in paragraph o) of article 54 of Law No. 1670 concordant with numeral 29) of article 11 of the BCB Statute.

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

Article 1.- Approve the Legal Reserve Regulation, which in the annex, forms part of this Resolution.

Article 2.- The Legal Reserve Regulation will enter into force as of May 22, 2017.

Article 3.- From the entry into force of this Resolution, Board Resolution No. 65/2017 of May 16, 2017 is repealed.

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

La Paz, May 22, 2017

[Signature]
Pablo Ramos Sánchez

//3. B.R. No. 069/2017

[Signatures]
Sergio Velarde Vera
Ronald Polo Rivero
Abraham Pérez Alandia
Luis Baudoin Olea

//4. B.R. No. 069/2017

LEGAL RESERVE REGULATION
FOR FINANCIAL INTERMEDIATION ENTITIES
TITLE I
GENERALITIES

Article 1 (Scope of Application).

All Financial Intermediation Entities, authorized for their operation by the Financial System Supervisory Authority, are subject to the provisions of this Regulation.

State Financial Intermediation Entities or with majority state participation (Productive Development Bank, Public Bank and Public Development Financial Entity) will be subject to the provisions of this Regulation provided that they capture resources from the public in the Plurinational State of Bolivia.

Branches abroad authorized for their operation by the Financial System Supervisory Authority, which capture resources in the Plurinational State of Bolivia, must constitute legal reserve under the terms of this Regulation when they are exempt from reserve in the country where they operate. When abroad they are subject to a reserve requirement lower than that of this Regulation, they must constitute reserve in the amount and modality that allows covering the difference, which will be determined by the Board of Directors of the Central Bank of Bolivia.

Article 2 (Terms and Abbreviations).

For the purposes of this Regulation, the following terms and abbreviations are used:

BCB: Central Bank of Bolivia.
ASFI: Financial System Supervisory Authority
COMA: Open Market Operations Committee of the BCB.
BDR: Productive Development Bank
DPF: Fixed-Term Deposits.
UFV: Housing Development Unit.
MN: National currency.
ME: Foreign currency.
MNUFV: National currency with value maintenance in relation to the UFV.
MVDOL: National currency with value maintenance in relation to the US dollar.

Legal Reserve:

It is the proportion of deposits of natural and legal persons that Financial Intermediation Entities must maintain as a reserve, at the BCB or through the BCB.

//5. B.R. No. 069/2017

Required Legal Reserve:

Amount that Financial Intermediation Entities must deposit in the BCB or in Financial Intermediation Entities authorized for legal reserve purposes.

Constituted Legal Reserve:

Amount deposited by Financial Intermediation Entities in the BCB or in Financial Intermediation Entities authorized for legal reserve purposes.

Legal Reserve in Cash:

Legal reserve required and constituted in cash by Financial Intermediation Entities, which will be maintained in deposit in accounts enabled for this effect.

Legal Reserve in Securities:

Legal reserve required and constituted in cash by Financial Intermediation Entities, to be invested by the BCB or the Delegated Administrators of the RAL-MN, RAL-MNUFV, RAL-ME and RAL-MVDOL Funds in securities, values or authorized instruments.

RAL Fund:

The Liquid Assets Requirement Fund is a closed investment fund constituted solely by the resources contributed by Financial Intermediation Entities through legal reserve in securities. Each Financial Intermediation Entity will have its contribution to the RAL Fund registered individually. The RAL Fund is constituted by the following denominations: National Currency (RAL-MN Fund), National currency with value maintenance in relation to the UFV (RAL-MNUFV Fund), Foreign Currency (RAL-ME Fund) and National currency with value maintenance in relation to the US dollar (RAL-MVDOL Fund).

Fund for credits destined to the productive sector and social interest housing:

This Fund is constituted in the BCB with the resources released from the RAL-ME Fund by the application of the legal reserve rates in securities in ME and MVDOL determined in this regulation.

Delegated Administrator of the RAL-MN Fund:

Corresponds to the BCB or the Financial Intermediation Entity that acts as Delegated Administrator in the administration of the RAL-MN Fund.

//6. B.R. No. 069/2017

When it concerns a Financial Intermediation Entity other than the BCB, it will be selected based on competitive mechanisms and conditions approved by the BCB Board of Directors through an express resolution.

Delegated Administrator of the RAL-MNUFV Fund:

Corresponds to the BCB or the Financial Intermediation Entity that acts as Delegated Administrator in the administration of the RAL-MNUFV Fund.

When it concerns a Financial Intermediation Entity other than the BCB, it will be selected based on competitive mechanisms and conditions approved by the BCB Board of Directors through an express resolution.

Delegated Administrator of the RAL-ME Fund:

It is the foreign financial institution that acts as Delegated Administrator in the administration of the RAL-ME Fund, selected based on competitive mechanisms and conditions approved by the BCB Board of Directors through an express resolution.

Delegated Administrator of the RAL-MVDOL Fund:

It is the foreign financial institution that acts as Delegated Administrator in the administration of the RAL-MVDOL Fund, selected based on competitive mechanisms and conditions approved by the BCB Board of Directors through an express resolution.

Legal Reserve Requirement Period:

Period of 14 consecutive days, determined by the ASFI for the purposes of calculating the required legal reserve.

Legal Reserve Constitution Period:

Period of 14 consecutive days, lagged by 8 days in relation to the legal reserve requirement period.

Obligations Subject to Reserve (OSE):

Liabilities denominated in MN, MNUFV, MVDOL and ME, detailed in articles 3 and 4 of this Regulation. Short-term liabilities with the exterior mentioned in article 6 of this Regulation are excluded from the scope of this definition.

//7. B.R. No. 069/2017

TITLE II
LEGAL RESERVE ON DEMAND OBLIGATIONS, SAVINGS ACCOUNTS, FIXED-TERM DEPOSITS AND OTHER OBLIGATIONS

Article 3 (Demand obligations, savings accounts and fixed-term obligations subject to legal reserve).

Financial Intermediation Entities included in article 1 of this Regulation must constitute legal reserve in cash and in securities on the liabilities registered in the accounts detailed below:

Obligations with the public and with state-participation companies on demand

• Checking account deposits
• Inactive checking accounts
• Demand deposits
• Certified checks
• Drafts and transfers payable
• Collections to be reimbursed
• Matured securities
• Checking account fiduciary deposits
• Demand fiduciary deposits

Obligations with the public and with state-participation companies for savings accounts

• Savings account deposits
• Savings account deposits closed due to inactivity
• Obligations with participants in savings plans
• Fiduciary deposits in savings accounts

Obligations with the public and with state-participation companies for fixed-term

• Fixed-term obligations
• Fixed-term obligations with account notation

Obligations with the public and with state-participation companies restricted

• Closed checking accounts
• Savings account deposits affected as collateral
• Term deposits affected as collateral
• Restricted fixed-term deposits with account notation

//8. B.R. No. 069/2017

Other payables

• Manager's checks

Obligations with banks and financing entities

• Checking account deposits of country financial entities subject to reserve
• Other demand obligations with country financial entities subject to reserve
• Demand financing from entities abroad
• Head office and branches on demand
• Banks and correspondents abroad on demand
• Savings account deposits of country financial entities subject to reserve
• Fixed-term deposits of country financial entities subject to reserve
• Fixed-term deposits of country financial entities with account notation subject to reserve
• Interbank operations
• Short-term financing from entities abroad freely available
• Short-term financing from entities abroad for foreign trade operations
• Head office and branches short-term freely available
• Head office and branches short-term for foreign trade operations

Other obligations with the public, with state-participation companies and with banks and financing entities:

• Judicial deposits
• Third-party funds for operations in the Bolsín
• Third-party funds for stock market operations
• Funds to be delivered to third parties by the placement of securities
• Mobile wallet payment account
• Prepaid card account
• Other demand obligations with the public
• Judicial withholdings
• Prepaid letters of credit collateral deposits
• Other collateral deposits
• Other restricted obligations with the public
• Obligations with banks and other financial entities subject to restricted legal reserve
• Anticipated collections from credit card clients

//9. B.R. No. 069/2017

Article 4 (Reserve applications for DPF).

The legal reserve requirements for DPF, according to terms and denominations, are established in the following table:

LEGAL RESERVE FOR DPF ACCORDING TO MATURITY TERM AND DENOMINATION*

Original Term on the DPF	NATIONAL CURRENCY AND MNUFV	FOREIGN CURRENCY AND MVDOL
	Reserve in Securities	Reserve in Cash	Reserve in Securities	Reserve in Cash
From 30 to 360 days	Reserves	Reserves	Reserves	Reserves
Greater than 360 days	No reserve	No reserve	Reserves	No reserve

*Only fixed-term deposits of 30 days or more are considered DPF.

Article 5 (Legal reserve rates).

The legal reserve rates on the liabilities detailed in article 3 of this Regulation are as follows:

In MN and MNUFV:

Cash
Six percent (6%) for cash reserve.
Securities
Five percent (5%) for securities reserve.

In ME and MVDOL:

Cash
Thirteen point five percent (13.5%) for cash reserve.
Securities
Thirty-five percent (35%) for securities reserve for DPF greater than 720 days; and forty-three percent (43%) for the rest of liabilities.

Financial Intermediation 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 state-participation companies and with banks and financing entities" indicated in article 3 of this Regulation.

Article 6 (Deductions and exemptions from reserve).

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.

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The following accounts of the IFD are exempt from the application of cash reserve (in all currencies) and securities reserve (in ME and MVDOL):

• 237.01 Short-term financing from entities abroad freely available
• 237.02 Short-term financing from entities abroad for foreign trade operations (for the part that does not maintain exact matching with active operations)
• 237.08 Head office and branches short-term freely available
• 237.09 Head office and branches short-term for foreign trade operations (for the part that does not maintain exact matching with active operations).

Article 7 (Registration).

Financial Intermediation Entities must register in the BCB, in detail, the DPF referred to in article 4 of this Regulation. Likewise, they must inform the BCB about the redemptions of the same made in a period shorter than the original.

Article 8 (Obligations between Financial Intermediation Entities).

Deposits of one Financial Intermediation Entity in other Financial Intermediation Entities will be subject to the legal reserve rules established in articles 3 and 4 of this Regulation, in case reserve had not been constituted previously.

TITLE III
CONSTITUTION OF LEGAL RESERVE IN CASH AND IN SECURITIES

Article 9 (Legal Reserve Cash Accounts).

Multiple Banks, SME Banks, the Productive Development Bank, the Public Bank and the Public Development Financial Entity will maintain in the BCB a single account called "checking and reserve account" in each of the four denominations (MN, MNUFV, MVDOL and ME).

Housing Financial Entities, Savings and Credit Cooperatives, Development Financial Institutions and Communal Financial Entities authorized by the ASFI will maintain in the BCB a single account called "reserve account" in each of the four denominations (MN, MNUFV, MVDOL and ME) and on which checks cannot be drawn. For cash withdrawal from this account at BCB counters, the procedures established by the Issuing Entity will be followed.

//11. B.R. No. 069/2017

Multiple Banks, SME Banks, the Productive Development Bank, the Public Bank and the Public Development Financial Entity must constitute the cash reserve in the checking and reserve account and Housing Financial Entities, Savings and Credit Cooperatives, Development Financial Institutions and Communal Financial Entities must do so in the reserve account. These accounts will not be subject to any type of seizure or judicial retention by third parties.

The legal reserve in cash must be constituted: (i) in national currency, for deposits in the same currency, (ii) in national currency at the equivalent value in UFV, for deposits in MNUFV and (iii) in US dollars, for deposits in ME and MVDOL.

Article 10 (Compensation between Securities and Cash).

Excesses of legal reserve in cash can compensate for deficiencies of legal reserve in securities. Excesses of legal reserve in securities cannot compensate for deficiencies of legal reserve in cash.

Article 11 (Calculation of Legal Reserve).

All financial intermediation entities in the country included in article 1 of this Regulation will maintain daily a legal reserve of their liabilities with the public, deposited in the accounts enabled for this effect.

The required legal reserve will comprise the reserve requirements of articles 3 and 4 of this Regulation, calculated as the average of the OSE that each Financial Intermediation Entity maintains at the end of the day in the legal reserve requirement period.

The constituted reserve will be calculated as the average of the daily balances credited in the respective accounts, in the legal reserve constitution period.

Article 12 (Report of Liabilities Subject to Legal Reserve).

Financial Intermediation Entities must report daily all their liabilities subject to legal reserve, by denomination and by type of deposit through the financial information system and in accordance with what is established by ASFI norms. The report will correspond to the liabilities subject to legal reserve of the previous business day.

Cash deposits in the BCB or its correspondents will be subject to the schedules established by the BCB.

//12. B.R. No. 069/2017

Article 13 (No Compensation by Currencies).

The legal reserve in cash must be constituted in the denomination in which the deposits were captured. Compensations between denominations for the legal reserve in cash will not be allowed. The legal reserve in securities must be constituted in accordance with what is established in article 18 of this Regulation.

On the reserve constituted in MNUFV and MVDOL, the BCB will recognize in favor of Financial Intermediation Entities the differential by variation of the UFV for MNUFV and by variation of the exchange rate for MVDOL only up to the limit of the required legal reserve in cash.

Article 14 (Sanctions for Early Withdrawals of DPF).

Fixed-term deposits that maintain any exemption of reserve, under what is established in this Regulation, cannot be redeemed early. This prohibition is excepted for fixed-term deposits in ME and MVDOL that, being exempt from constituting legal reserve, are redeemed with the sole and exclusive purpose of converting them into deposits in MN.

When the issuing entity acquires its own fixed-term deposit certificates, they must be cancelled and withdrawn from accounting, and said withdrawal must be communicated to the BCB in a period not greater than 48 hours after it occurs.

Article 15 (Funds in Custody).

Financial Intermediation Entities may maintain up to 50% of their required legal reserve in cash in MN and MNUFV in Funds in Custody in any plaza. Any excess that Financial Intermediation Entities maintain above this percentage will not be recognized for reserve purposes.

Financial Intermediation Entities must maintain 40% of their required legal reserve in cash in ME and MVDOL in Funds in Custody in any plaza. Any excess that Financial Intermediation Entities maintain above this percentage will not be recognized for reserve purposes. The global deficiency in Funds in Custody in ME and MVDOL cannot be compensated with excesses of reserve in BCB accounts or reserve in securities.

Article 16 (Cash Movements of Funds in the BCB).

The BCB will charge the commission fixed in the Table of Commissions and Other Incomes, established by its Board of Directors, for cash movements of entry or exit of funds to Financial Intermediation Entities.

//13. B.R. No. 069/2017

Article 17 (Deposits in Other Currencies).

For deposits captured in other currencies, other than the Bolivian and the US dollar, the reserve must be constituted in its equivalent in US dollars, at the daily reference buy exchange rate issued by the BCB.

Article 18 (Constitution of Legal Reserve in Securities).

The legal reserve in securities must be constituted: (i) in MN, for deposits in the same currency, (ii) in MN at the equivalent value in UFV, for deposits in MNUFV and (iii) in US dollars, for deposits in ME and MVDOL.

Article 19 (Transfers to and from Legal Reserve in Securities).

Every seven days, the BCB will transfer from the legal reserve in cash of each Financial Intermediation Entity, the amounts necessary to make the corresponding transfers to the legal reserve in securities, and vice versa.

The movement in reserve accounts will be made automatically based on the reserve and deposit reports sent by Financial Intermediation Entities to the BCB.

TITLE IV
ON THE LIQUID ASSETS REQUIREMENT FUND (RAL FUND)

Article 20 (Constitution and Investment of the RAL Fund).

The R Fund