The Central Bank of Venezuela (BCV) published October 12th the regulations on the constitution of bank reserves in the Resolution No. 18-10-01. The document establishes the elements that compose the minimum reserve that financial institutions in general, and microfinance and development banks in particular, must keep deposited in the BCV. The measure will enter into force October 22nd.

The main provisions of the resolution are:

• Minimum reserve requirement. Banking institutions must maintain a minimum reserve deposited in the BCV. This number results from the sum of 31% of the total operations accounted for as of September 28th, 2018 (“net obligation reserve base”); 31% of the total amount of the assignment of participation rights on securities as of September 28th, 2018 (“assigned investment reserve base”); and 40% of the amount that results from the increase produced in net obligations and assigned investments with respect to their reserve bases (“marginal balance”).

• Reserve position. The banking institutions’ reserve positions are calculated by the BCV with the information that banks provide to the Central Bank on a weekly basis. Those institutions that do not maintain their reserve position must pay the BCV an annual interest rate to be defined for the amount not covered. The penalty increases as non-compliance with the rule continues.

• Exceptions. The main exceptions to the legal reserve are those obligations of the institutions derived from credits obtained from the BCV and those that originate in operations with other banks.

• Microfinance and development banks. Institutions that encourage and promote microfinance activities with public and private support must maintain a minimum reserve of 12% of the total amount of the reserve base of net obligations, the reserve base of ceded investments and the marginal balance.

Special additional reserve. The special additional reserve established September 3rd remains in force, which implies the retention of 100% of the banks’ liquid assets by the BCV, used for investment and loans.