In brief

On September 17, 2020, the Central Bank of Venezuela issued a Notice that allowed the liberation of 30 trillion Bolivars weekly from the legal reserve1 (“Notice”). The discount from the legal reserve will apply as of 18 September 2020.

Discount from the legal reserve. The Notice will discount an amount equivalent to thirty trillion Bolivars from the total requirements of the legal reserve. The discount will be distributed to each banking institution using the guidelines established in the Notice.

 

Calculation of the discount. For calculating the discount, “n” will mean the number of banking institutions in the system, and “i” will be the index that identifies each bank (i.g. for the bank 1, the subindex “i” = 1 will be used). The following formulas will be used:

  1. DETi,t : Deficit of theoretical reserve of bank “i” for the week “t”.  
  2. Ctacei,t: Balance in the bank's current account “i” in the last work day of the week “t”, affected by the maturity of capital of all inter banking operations in one business day, agreed upon through the Electronic System of Transfer of Funds for Interbanking Loans (SET) the following business day.  
  3. REi,t: Requirement of reserve of bank “i”, calculated through the net obligations subject to the reserve on the week “t”, for which the valid discounts from 1 April 2020 onward will be considered, excluding those derived from exchange interventions.
  1. DETn,t : Deficit of theoretical reserve of banking system for the week “t”.  
  2. Ctacen,t: Balance in checking account of the banking system in the last work day of the week “t”.  
  3. REn,t: Requirement of reserve of banking system, calculated through the net obligations subject to the reserve on the week “t”, for which the valid discounts from 1 April 2020 onward will be considered, excluding those derived from exchange interventions.
  1. %DETi: Average deficit of the theoretical reserve of bank “i” in terms of its reserve requirement considering the weeks “t”: to 08/14; 08/21; 08/28 and 09/04.
  1. %DETn: Average deficit of the theoretical reserve of banking system in terms of its reserve requirement considering the weeks “t”: to 08/14; 08/21; 08/28 and 09/04.
  1. Desci: amount of the discount of the reserve requirements for each bank “i”.  
  2. t*: 09/04/2020.  
  3. MUI: Sole amount of incentive for the system of 30 trillion Bolivars.  
  4. Ω = 4: tolerance factor measured in number of times the average deficit of theoretical reserve of the banking system, or maximum limit under which the distribution of the discount will be carried out between banking institutions.

3. Validity of the discounts of legal reserve requirements.

The discounts of the legal reserve requirements established in the Notice are fixed and will be valid until 17 September 2021.