Policy for the Provision of National Fractional Currency by the Central Bank of Ecuador

MONETARY POLICY AND REGULATION BOARD

Republic of Ecuador

RESOLUTION No. JPRM-2023-003-M

THE MONETARY POLICY AND REGULATION BOARD

CONSIDERING:

That, Article 226 of the Constitution of the Republic of Ecuador prescribes that public servants and persons acting under state authority shall exercise only the competencies and powers attributed to them in the Constitution and the Law;

That, Article 227 of the same Constitution states that Public Administration constitutes a service to the community governed by principles of effectiveness, efficiency, quality, hierarchy, coordination, planning, among others;

That, numeral 1 of Article 302, as an objective of monetary, credit, exchange, and financial policies, establishes the objective of supplying the necessary means of payment so that the economic system operates efficiently;

That, the first clause of Article 303 of the Magna Carta determines that the formulation of monetary, credit, exchange, and financial policies is the exclusive faculty of the Executive Function and will be implemented through the Central Bank of Ecuador. It further states that the law will regulate the circulation of currency with liberatory power within Ecuadorian territory;

That, numerales 1 and 15 of Article 36 of the Organic Code of Monetary and Financial Affairs, as functions of the Central Bank of Ecuador, establish the function of implementing policy in the monetary sphere, to promote the sustainability of the monetary and financial system; and to determine the characteristics and manage the provision, minting, circulation, exchange, withdrawal, and demonetization of fractional currency;

That, Article 47.1 of the Organic Code of Monetary and Financial Affairs created the Monetary Policy and Regulation Board as part of the Executive Function, responsible for the formulation of monetary policy, the highest governing body of the Central Bank of Ecuador, and determined its composition;

That, Article 47.6 of the same Code, regarding the functions of the Monetary Policy and Regulation Board, among others, establishes: "1. Formulate policy in the monetary sphere and observe its application by the Central Bank of Ecuador, to preserve the integrity and sustainability of the dollarization monetary system and the

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MONETARY POLICY AND REGULATION BOARD

Republic of Ecuador

RESOLUTION No. JPRM-2022-003-M Page | 2

financial system, in accordance with the provisions of this Code; (...) 6. Monitor compliance with the functions of the Central Bank of Ecuador; 8. Formulate policy and regulate the management of physical means of payment (...) 26. Those others conferred by law (...)";

That, Article 94 of the same Code prescribes: "All transactions, monetary and financial operations, and their accounting records, carried out in the Republic of Ecuador, shall be expressed in United States dollars, in accordance with this Code.

The circulation, exchange, and withdrawal of United States dollars, as well as the minting and demonetization of national fractional metallic currency in the Republic of Ecuador, correspond exclusively to the Central Bank of Ecuador.

The Central Bank of Ecuador is the only entity authorized to provide and manage national fractional metallic currency in the Republic of Ecuador, equivalent and convertible to United States dollars, backed by Reserve assets.

The currency determined in this article is a means of payment.

The currency has liberatory power and legal tender status in the Republic of Ecuador within the framework of regulations issued by the Monetary Policy and Regulation Board. Under no circumstances shall the State oblige a natural or legal person of private law to receive currency other than the United States dollar";

That, Article 1 of Resolution No. JPRM-2022-005-M of the Monetary Policy and Regulation Board, dated February 11, 2022, establishes that the legal tender currency in the Republic of Ecuador is the United States dollar;

That, the Monetary Policy and Regulation Board, in an ordinary session held virtually on February 28, 2023, reviewed the proposal sent via memorandum No. BCE-BCE-2023-0037-M, dated February 23, 2023, by the General Manager of the Central Bank of Ecuador to the President of the Monetary Policy and Regulation Board, as well as the technical report No. BCE-SGSERV-016/DNEM-106-2023, dated February 23, 2023, and the legal report No. BCE-CGJ-013-2023, dated February 23, 2023; and,

In exercise of its functions and in accordance with Article 47.7 of the Organic Code of Monetary and Financial Affairs, resolves to issue the:

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MONETARY POLICY AND REGULATION BOARD

Republic of Ecuador

RESOLUTION No. JPRM-2022-003-M Page | 3

POLICY FOR THE PROVISION OF NATIONAL FRACTIONAL CURRENCY BY THE CENTRAL BANK OF ECUADOR

Article 1.- With the purpose of ensuring the provision of national fractional currency, the Central Bank of Ecuador may import monetary species from the Federal Reserve of the United States of America or implement minting programs in the necessary denominations.

Article 2.- The estimation of the quantity of coins required will be carried out through technical studies that consider, among others, the replacement of coins due to deterioration of their quality, the behavior of the supply and demand for fractional currency, and measures through net balances between deposits and withdrawals of fractional currency.

The Central Bank of Ecuador will calculate the replacement of the coin inventory, considering the minimum balance level of fractional currency in its vaults and the times involved in importation or minting.

Article 3.- For the start of a national fractional currency minting program, the lowest cost between importing the various denominations of fractional coins from the Federal Reserve of the United States of America and minting must be considered, guaranteeing the quality of the monetary species.

The Central Bank of Ecuador will prioritize the availability of fractional currency over its acquisition cost, when extraordinary events that have affected the supply or demand of the various species are registered.

Article 4.- National fractional currency minting programs will be based on the availability of the Federal Reserve of the United States of America to provide species to the Central Bank of Ecuador within the timeframes and conditions that allow it to maintain adequate levels of fractional coins.

GENERAL PROVISIONS

FIRST.- Prior to the start of a minting program, the General Management of the Central Bank of Ecuador will inform the Monetary Policy and Regulation Board of the specific characteristics of the minting to be carried out.

The General Management of the Central Bank of Ecuador, as part of its management reports, will communicate to the Monetary Policy and Regulation Board the quantity of national fractional currency in circulation in the country.

SECOND.- The General Management of the Central Bank of Ecuador will carry out the necessary actions to execute and comply with this resolution.

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MONETARY POLICY AND REGULATION BOARD

Republic of Ecuador

RESOLUTION No. JPRM-2022-003-M Page | 4

THIRD.- The General Management of the Central Bank of Ecuador will determine the conditions under which contracting will be carried out with experienced mints to guarantee the high quality of the species.

FINAL PROVISION.- This resolution will enter into force from the date of its signing, without prejudice to its publication in the Official Register.

The Director of Document Management and Archive of the Central Bank of Ecuador is tasked with publishing it on the institutional website.

COMMUNICATE. - Given in the Metropolitan District of Quito, on February 28, 2023.

THE PRESIDENT

(Signature) Dr. TATIANA MARIBEL RODRÍGUEZ CERÓN

The preceding resolution was signed by Doctor Tatiana Maribel Rodríguez Cerón - President of the Monetary Policy and Regulation Board, in the Metropolitan District of Quito, on February 28, 2023.- I CERTIFY.

ADMINISTRATIVE SECRETARY

(Signature) Law. MARÍA ALEXANDRA GUERRERO DEL POZO