SGDB N° 052/2012 - New Check Regulation

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28 NOV 2012 11 24 GENERAL CORRESPONDENCE

EXTERNAL CIRCULAR OF THE CENTRAL BANK OF BOLIVIA

La Paz, November 27, 2012 SGDB No. 052/2012

FROM: GENERAL MANAGEMENT FINANCIAL ENTITIES MANAGEMENT TO: FINANCIAL ENTITIES, ADMINISTRADORA DE CÁMARAS DE COMPENSACIÓN Y LIQUIDACIÓN (ACCL) S.A. SUBJECT: NEW CHECK REGULATION

Ladies and Gentlemen:

The Central Bank of Bolivia communicates that, by Board Resolution No. 188/2012 of November 6, 2012, its Board of Directors approved the New Check Regulation. The norm defines the conditions for use and acceptance of the check as a payment instrument, regulates special checks, and the requirements for their processing by Electronic Clearing Houses. A copy of the aforementioned Regulation is attached for your knowledge and compliance.

Sincerely,

Attached - As indicated CRO/MMV/MAAM/PMS/AADA

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

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BOARD RESOLUTION NO. 188/2012

SUBJECT: FINANCIAL ENTITIES MANAGEMENT – NEW CHECK REGULATION.

VIEWED:

The Political Constitution of the State approved by referendum on January 25, 2009 and promulgated on February 7, 2009.

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

Law No. 1488 of May 5, 2004 on Banks and Financial Entities and its subsequent modifications.

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

The Check Regulation approved by Board Resolution No. 081/2001 of August 14, 2001 and modified with Board Resolution No. 105/2004 of July 21, 2004.

Internal Communication from the Legal Affairs Management BCB-GAL-SANO-CI-2012-833 of October 8, 2012.

Report from the Financial Entities Management BCB-GEF-SANA-DSP-INF-2012-277 of October 26, 2012.

Report from the Legal Affairs Management BCB-GAL-SANO-INF-2012-347 of November 1, 2012.

CONSIDERING:

That the Political Constitution of the State establishes in its article 328 that it is an attribute of the BCB, in coordination with the economic policy determined by the Executive Branch, in addition to those indicated by Law, to regulate the payment system.

That pursuant to article 331 of the Political Constitution of the State, financial intermediation activities, the provision of financial services, and any other activity related to the handling, utilization, and investment of savings, are of public interest and can only be exercised with prior authorization of the State, in accordance with the Law.

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That Law No. 1670 provides in its articles 2, 3, and 30 that the BCB's objective is to procure the stability of the internal purchasing power of the national currency, for whose fulfillment it formulates policies of general application in monetary and payment system matters, being subject to its regulatory competence, all financial intermediation and financial service entities authorized by the Superintendence of Banks and Financial Entities, currently named the Financial System Supervisory Authority (ASFI).

That Law No. 1488 in its articles 4 and 154 items 4 and 6, determines that financial intermediation and auxiliary financial services activities will be carried out by financial entities authorized by the ASFI, an Institution that has as an attribute, among others, to supervise natural or legal persons who carry out auxiliary activities of financial intermediation, as well as, incorporate into its scope of competence, in accordance with the BCB, other persons or entities that carry out financial intermediation activities.

That the Legal Affairs Management, through Internal Communication BCB-GAL-SANO-CI-2012-833 of October 8, 2012, states that the Check Regulation does not provide for the obligation to retain a check when it is rejected due to the cause "rejection by written notification of non-payment."

That the Financial Entities Management through Report BCB-GEF-SANA-DSP-INF-2012-277 establishes the need to modify the current Regulation to provide greater operational security with the payment instrument and update aspects related to the tasks of the BCB as supervisor of the national payment system.

That according to Report BCB-GAL-SANO-INF-2012-347, the Legal Affairs Management establishes that the proposal for the new Check Regulation is legally appropriate.

That, the BCB Board of Directors in its capacity as the highest authority of the Institution, is responsible for defining its policies, specialized general application regulations, and internal norms, being empowered 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.- Approve the Check Regulation, in its IX chapters and 40 articles, which in the annex, forms an integral part of this Resolution.

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Article 2.- This Regulation shall enter into force from its approval.

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

La Paz, November 6, 2012

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ANNEX

CHECK REGULATION

CHAPTER I GENERAL PROVISIONS

Article 1.- (Object)

This Regulation aims to regulate the conditions of use and acceptance of the check as a payment instrument, regulate special checks, and the requirements for their processing by Electronic Clearing Houses (CEC).

Article 2.- (Scope of application)

The norms contained in this Regulation are complementary to those established in the Commercial Code and are applicable to financial intermediation entities authorized by the Financial System Supervisory Authority (ASFI) to operate with checking accounts, to the CEC, to the Central Bank of Bolivia (BCB), and to natural and legal persons who use checks.

Article 3.- (Surveillance and supervision authorities).

The surveillance and supervision authorities are the BCB and the ASFI, respectively.

Article 4.- (Check as a payment instrument)

The check is a payment instrument that represents an unconditional order to pay on demand drawn by the drawer against their funds in a checking account.

CHAPTER II ISSUANCE

Article 5.- (Issuance on forms and content)

I. Check forms may only be issued by financial intermediation entities authorized by the ASFI to operate with checking accounts. These forms must be issued for use exclusively in the currency of the respective checking account.

II. Every check form must be printed with the following content:

1. Name and address of the drawee entity. In application of the concept of "national account," the legal address of said entity will be printed.

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2. Printed number and series. In their absence, the key or identification sign or magnetic characters.

3. Space intended to be filled by the drawer with the place and date of the draft.

4. Unconditional order to pay on demand.

5. Space to be filled by the drawer with the indication of whether the check is to bearer or to the order of a specific person.

6. Two spaces to be filled by the drawer with the sum of money in numbers and in words for which the check is drawn.

7. Space for the drawer to stamp their autograph signature.

Article 6.- (Characteristics of forms and security elements)

The BCB will determine the dimensions that check forms processed by the CEC will have, as well as the specifications of magnetic characters for recognition and reading through electronic means, the space intended for these, the spaces intended for endorsements, the security elements associated with the instrument, and other characteristics that may be necessary for their adequate processing. The characteristics and security elements of the check will be communicated through an External Circular of the General Management of the BCB. Any modification of the characteristics of check forms must be approved by the BCB.

Article 7.- (Printing)

The printing of check forms will be carried out only by entities authorized by the CEC.

Article 8.- (Register of printers)

The CEC will maintain a register of authorized entities, as well as the requirements for the printing of check forms, which must be made known to the BCB.

The CEC will inform in writing the entities that issue checks of the names of the authorized entities that are registered and deregistered.

Before the printing of each new series of forms, the entities that issue checks must consult the updated register of entities authorized by the CEC.

Article 9.- (Delivery of forms)

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Financial intermediation entities authorized by the ASFI to operate with checking accounts will deliver check forms to their clients under receipt. The delivery of these forms to third parties through written instruction from the holder of the checking account entails the obligation to verify authorized signatures and to identify the third party.

Article 10.- (Register of enabled checks)

Financial intermediation entities authorized to issue checks will keep a register of the numbering of enabled checks for draft that they have delivered to their holders.

Article 11.- (Documents not considered checks)

In accordance with what is provided by article 601 of the Commercial Code, documents that are not issued by authorized banks will not be considered checks or negotiable instruments. The document issued in the form of a check in contravention of what is provided in that norm, cannot be transmitted by endorsement nor protested in case of non-payment.

CHAPTER III DRAFTING

Article 12.- (Requirements of the draft)

The drawer will fill in the blank spaces of the printed check form with the corresponding information regarding:

1. Place and date of the draft.
2. Instruction of whether it is to bearer or to the order of a specific person.
3. Amount for which the check is drawn in numbers and words.
4. Autograph signature.

Article 13.- (Available funds)

The drawer of a check will comply with what is established by article 602 of the Commercial Code regarding available funds.

Article 14.- (Responsibility of the drawer)

Responsibility for the drafting of a check will be attributable to the natural person who drafts it for themselves or on behalf of a legal entity, within the framework of what is established in civil and penal legislation, as well as in the Commercial Code. Any agreement that exempts them from this responsibility will not be valid.

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Article 15.- (Endorsement)

The endorsement of a check will be carried out in accordance with what is established by articles 522 to 529 and 531 to 538 of the Commercial Code. As determined in article 530 of the Commercial Code, checks cannot be endorsed as security.

Article 16.- (Non-negotiable check)

The non-negotiable check is one that cannot be endorsed, except once to the drawee entity, for cash collection or to any financial intermediation entity for credit to the beneficiary's account.

The drawer may limit the negotiability of a named check by including in it the expression "non-negotiable" or "non-transferable" on the front of the check.

The beneficiary of a check may also limit such negotiability by including any of the aforementioned expressions following the endorsement.

Not negotiable are the check drawn or endorsed in favor of the drawee entity, the check for credit to account, the cashier's check, the check with receipt stub, the certified check, the BCB checking account check, and the fiscal checking account check.

Article 17.- (Loss or theft)

In case of loss or theft of checks, the account holder or beneficiary will have the obligation to notify the fact to the drawee entity by any available means of communication, which allows identifying both the person making the report and the person receiving it. This notice must be ratified in writing within the maximum period of two (2) business days following.

For the cancellation and replacement of lost or stolen checks, the procedure established by articles 727 and following of the Commercial Code must be complied with.

CHAPTER IV PRESENTATION AND PAYMENT

Article 18.- (General principle)

The payment of the check will be governed by the general principle established in article 606 of the Commercial Code.

Article 19.- (Term for presentation)

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The term for the presentation of the check will be that established by article 607 of the Commercial Code.

Article 20.- (Presentation for credit to account)

If the check is deposited for credit to an account opened in a financial intermediation entity other than the drawee entity, the date of presentation in the CEC will be considered as the date of presentation to the drawee entity for payment.

Article 21.- (Revalidation of checks)

Unless otherwise established in article 33 of this Regulation, the check not presented for payment within the legal term may be revalidated by the drawer on the same check. The revalidation will allow extending the validity period of the check for the same term of validity established for its presentation.

The revalidation of the check will be carried out on the back and must contain the expression "revalidated," the date, and the signature of the drawer.

Article 22.- (Requirements that must be met for payment)

For the payment of a check, in addition to the requirements established in article 5 of this regulation, as well as article 600 of the Commercial Code, the following requirements must be observed:

1. Validity of the check.
2. That the literal amount is equal to that in numbers. In case of divergence, what is established by article 496 of the Commercial Code will apply.
3. That the autograph signature of the drawer is equal to that registered in the drawee entity.
4. Continuity of named endorsements, if any.
5. Endorsement of the check in favor of the drawee entity.
6. Identification of the final beneficiary.

Article 23.- (Partial payment)

I. If the available funds of the drawer are not sufficient to cover the total amount of the check, the drawee entity will offer the holder a partial payment for the amount of the available resources. The holder may accept or not the partial payment.

II. If the holder accepts the partial payment of the check, they will sign a receipt for the amount collected. The drawee entity, on the back of the check, through the phrase "check partially paid for the sum of ------ due to insufficient funds" and authorized signature, will record the partial payment made. This record will have the effect of protest for the unpaid amount.

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III. This check will be returned to the holder for the legal effects that correspond and cannot be presented again for collection of the unpaid amount.

Article 24.- (Death or incapacity of the drawer)

Cases of death or incapacity of the drawer will be governed by what is established in articles 614 and 620 item 5) of the Commercial Code.

CHAPTER V REJECTION

Article 25.- (Causes for rejection)

The drawee entity will reject the payment of a check for the causes established in article 620 of the Commercial Code. In these cases, it will note the refusal of payment on the back of the check, which must contain the following texts, depending on the case:

1. "Rejected for lack of funds," when the checking account on which the check is drawn has no available funds. This cause for rejection will also be applicable when drawn on a closed checking account, in virtue of the fact that this condition determines that the funds, if any, are not available.

2. "Rejected for insufficient funds," when the checking account on which the check is drawn, having funds, are not sufficient and the partial payment is rejected by the beneficiary.

3. "Rejected for not meeting requirements of articles 600 - 601 of the Commercial Code," when the lack of compliance with one or several of the requirements and formalities described in any of these articles is evident.

4. "Rejected for alteration and doubt of authenticity," when the check is crossed out, erased, interlined, or notably altered in any of its statements or if there is any circumstance that makes its authenticity doubtful, such as the non-correspondence visible and notable of the signature registered in the drawee entity.

5. "Rejected by written notification of non-payment due to violence in the draft, transmission, or due to theft or loss." The drawee entity will grant the holder of the check a simple copy of the notification sent by the drawer or the beneficiary at the time of rejection and will proceed to retain the check and keep it in custody until the same is requested via judicial order. The holder may

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request in writing from the drawee entity an authenticated copy of the aforementioned notification.

6. "Rejected by date of draft subsequent to death or incapacity of the drawer." The drawee entity will present the beneficiary with the supporting documentation or a copy thereof at the time of rejection and the latter may request in writing a copy of the supporting documentation from the financial intermediation entity.

7. "Rejected by bankruptcy, creditor agreement, or cessation of payment of the drawer." The drawee entity will be responsible for documenting this cause. The holder or beneficiary may request in writing a copy of the notification received by the drawee entity.

In all these cases, the rejection must bear the date and time of presentation, with the authorized signatures for the effect and the seal of the drawee entity.

Article 26.- (Refusal of payment without just cause)

The refusal of payment made by the drawee entity without just cause and for causes that are different from those defined in items 1 to 7 of article 25 of this Regulation, will make it responsible for the damages and losses caused to the holder.

CHAPTER VI SPECIAL CHECKS

Article 27.- (Crossed check)

The crossed check may only be collected by banking entities. The crossing of a check is equivalent to an authorization of collection granted by the drawer or holder in favor of an indeterminate bank, if general, or of the expressly designated bank, if special. The general crossing can be transformed into special crossing and not vice versa. The crossing of a check will not affect its negotiability.

Article 28.- (Check for credit to account)

The drawer, the beneficiary, or the holder of a check may prevent it from being paid in cash by inserting the mention "for credit to account" or "deposit only" or another equivalent. The drawee entity may only settle the check through a accounting entry. The settlement thus made will be equivalent to payment.

Article 29.- (Cashier's check or management check)

The check issued and drawn by financial entities authorized by the ASFI against their own accounts will be named "cashier's check" or "management check" and will carry the

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preprinted inscription "non-transferable." This check will be named and may be deposited for credit to account in a financial entity other than the issuer.

Article 30.- (Certified check)

I. The certified check is one in which the drawee entity certifies the existence of available funds within the limits of the amount for which it has been drawn. The drawee entity, at the time of certifying a check, will keep this amount set aside from the account for payment to the beneficiary.

II. The certification of a check will be valid for the term established for its presentation. At the end of that term, if the certified check has not been collected, the drawee entity must restore the availability of the funds in the drawer's account in the previously set aside sum, eliminating, in turn, its inclusion in the register of certified checks of the CEC described in article 32, item IV of this Regulation.

Article 31.- (Certification of checks)

I. For the certification of a check, the drawee entity must verify that the signature of the drawer is equal to that recorded in its records.

II. The certification of a check will be given by the stamping of a seal with the legends "certified," "approved," "good for," or another equivalent and of a security seal for the certified amount. The certification must be signed by authorized representatives of the financial intermediation entity and accompanied by seals that identify them.

III. Certified checks are not negotiable. Certification cannot be extended to bearer checks.

IV. Every certified check will be entered by the drawee entity, at the time of certifying it, into the electronic register that the CEC will organize and administer for this specific effect. Upon presentation, these checks must be consulted in this register to ensure their legitimate certification.

V. The drawer must be aware of the cost of certification, which must be fixed and charged in bolivianos.

Article 32.- (Irrevocability of certified check)

The irrevocability of a certified check will be governed by what is established in article 631 of the Commercial Code.

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Article 33.- (Revalidation of certified checks)

The revalidation of the validity period of a certified check will be necessarily carried out by the drawer, for which the drawee entity must perform a new certification, applying what is established in articles 30 paragraph I and 31 paragraph IV of this Regulation.

This revalidation may be carried out only once.

Article 34.- (BCB checking account check)

The BCB checking account check will be issued by the BCB for exclusive use of the General Treasury of the Nation and financial entities that have "checking and reserve account" in the Issuing Entity. These checks will be named and non-transferable.

The BCB checking account checks issued for use by financial entities will not be compensable in the CEC.

Article 35.- (Fiscal checking account check)

I. The fiscal checking account check is that drawn by entities of the public sector against the fiscal checking accounts that they maintain in correspondent banks. It will be named and will carry the preprinted inscription "fiscal checking accou