Volume 5, Number 14, Page 3

Bolivian Banking Regulations

by Diego Rojas

The Bolivian financial sector is regulated by Law No. 1488, the Law of Banks and Financial Entities (“Banking Law”). The Banking Law was published on April 14, 1993. It is comprised of 169 articles and ten chapters, establishing the statutory regime with which all Bolivian financial and banking institutions must comply.

In addition to regulating standard active and passive banking operations, the Banking Law also regulates other financial activities, including financial leasing and factoring. It also regulates the activities of other types of financial institutions, such as private funds, mutual funds for savings and housing loans and savings and credit cooperatives.

Any natural person or legal entity wishing to provide banking or financial services in Bolivia must first establish legal domicile and comply with certain formalities required by law. Foreign banks may establish branches in Bolivia, provided that they comply with all legal requirements. Such branches receive the same legal treatment as local banks and are subject to the laws of the Republic of Bolivia.

The Bolivian Central Bank is a public institution regulated by both the Banking Law and Law 1670, the Law of the Central Bank, published on October 31, 1995. The Central Bank is the only monetary and currency control authority in Bolivia and establishes capital and reserve requirements for all private banks operating in that country.

The Department of Banks is the governmental body which monitors the banking sector. The Department in turn forms part of the Bolivian Financial Regulatory System. The Financial Regulatory System is comprised of the Department of Banks, The Department of Securities, the Department of Pensions and the Department of Insurance and Reinsurance. This financial system was created by Law 1732, the Pension Law, published on November 29, 1996.

The Department of Banks carries out routine inspections of the banking operations and corporate structure of all financial institutions operating in Bolivia. It has authority to impose administrative sanctions and penalties in the event of non-compliance with legal requirements.

Rulings are issued by the Department of Banks in the form of administrative resolutions. These resolutions may be appealed through an administrative process. This process ends when a final resolution is adopted by the General Department of the Financial Regulatory System. As a last recourse, the affected party may file a judicial appeal challenging the administrative ruling. In that event, the appeal may go up to the Bolivian Supreme Court, whose decision is final.

The Bolivian Code of Commerce also regulates certain activities related to banking. Chapter Seven, Book Three of the Code regulates banking contracts and other banking activities, including lending, lines of credit, bank guarantees and deposits.

Foreign currency may be purchased freely at any bank in Bolivia, including the Central Bank. There are no restrictions on the amount of foreign currency that may be exchanged or sent abroad.

Diego Rojas is with the Bolivian law firm C.R.& F. Rojas Abogados in La Paz, Bolivia.