Resolution JPRF-F-2023-093 Replacing Risk Levels with Risk Profiles for Deposit Insurance Premium Calculation

Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Management Governmental Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | Resolution No. JPRF-F-2023-093 THE FINANCIAL POLICY AND REGULATION BOARD CONSIDERING: That, Article 226 of the Constitution of the Republic provides that state institutions, their agencies, dependencies, public servants, and persons acting by virtue of a state power shall exercise only the competencies and faculties attributed to them in the Constitution and the law; That, Article 13 of the Organic Code of Money and Finance, Book I, establishes the creation of the Financial Policy and Regulation Board, part of the Executive Function, as a public law legal entity, with administrative, financial, and operational autonomy, responsible for formulating credit, financial, securities, insurance, and prepaid comprehensive health care service policy and regulation; That, the article following Article 6 of the aforementioned Organic Code determines that bodies with regulatory, normative, or control capacity shall seek to adopt international technical standards related to their area of competence as a reference framework for the issuance of regulations and the exercise of their functions, strictly adhering to the normative hierarchy established in the Constitution of the Republic of Ecuador; That, Article 14.1, number 13 of the aforementioned Code provides that it is a function of the Financial Policy and Regulation Board to issue secondary regulations related to the Deposit Insurance, Liquidity Fund, and Private Insurance Fund; That, the penultimate paragraph of Article 14.1 of said legal body refers that the Superintendent of Banks, the Superintendent of Companies, Securities and Insurance; the Superintendent of the Popular and Solidarity Economy; the President of the Monetary Policy and Regulation Board; and the Deposit Insurance Corporation through its legal representative, Liquidity Fund and Private Insurance Fund may propose regulation projects for consideration by the Financial Policy and Regulation Board with the support of respective technical reports; That, Article 326 of the aforementioned Organic Code refers that contributions to the Deposit Insurance and the periodicity of their payment by entities in the private and popular and solidary financial sectors shall be determined by the Financial Policy and Regulation Monetary Board. The contributions may be differentiated by each financial sector and entity, and shall consist of a fixed premium and a variable premium, differentiated by the entity's risk; That, the Second General Provision of the aforementioned Organic Code, Book I, determines that all functions regarding policy and regulation that existing laws on the date of promulgation of the cited Code grant to the Banking Board, the Board of Directors of the Central Bank of Ecuador, the Regulation Board of the Popular and Solidarity Financial Sector, the Regulation Board of the Securities Market, the Board of Directors of the Deposit Insurance Corporation, and the Board of Directors of the Liquidity Fund, shall be assumed by the Financial Policy and Regulation Monetary and Financial Board, except for cases expressly delegated to control bodies in this Code; That, the First Transitional Provision of the aforementioned Organic Code of Money and Finance, Book I, provides that resolutions contained in the Codification of Resolutions of the Superintendence of Banks and Insurance and the Banking Board, regulations contained in the Codification of Regulations of the Board of Directors of the Central Bank of Ecuador, regulations issued by the Regulation Board of the Popular and Solidarity Financial Sector, and norms issued by control bodies, will maintain their validity in all that does not oppose what is provided in the Organic Code of Money and Finance, until the Financial Policy and Regulation Monetary and Financial Board resolves what corresponds, according to the case;

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Management Governmental Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | That, the Twenty-Ninth General Provision of the aforementioned Organic Code, Book I, determines that in existing legislation where "Financial Policy and Regulation Monetary and Financial Board" is mentioned, it shall be replaced by "Financial Policy and Regulation Board"; That, with Reserved Resolution No. JB-2011-1931 of June 1, 2011, the former Banking Board resolved the methodology with which the Superintendence of Banks and Insurance would determine the risk level with which the Deposit Insurance Corporation COSEDE would periodically set the risk-adjusted premium that must be contributed by private financial institutions controlled by the Superintendence of Banks and Insurance; That, Resolution No. 648-2021-F of March 24, 2021, issued by the Financial Policy and Regulation Monetary and Financial Board, ordered the substitution of Chapter XXXIX "On Deposit Insurance" of the Codification of Monetary, Financial, Securities and Insurance Resolutions; That, through Office No. SB-DS-2023-0559-O of November 11, 2023 addressed to the Financial Policy and Regulation Board, the head of the Superintendence of Banks submitted the proposal for reform to Subsection IV "Sources of resources of the deposit insurance system and payment of contributions", Section I "General norms for the operation of the deposit insurance of the private financial sector and popular and solidary financial sector", Chapter XXVIII "On deposit insurance", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities and Insurance Resolutions; That, the Technical Secretariat of the Financial Policy and Regulation Board, through Memorandum No. JPRF-ST-2023-0112-M of December 19, 2023, forwards to the President of the Board the following: a. Technical Report No. JPRF-CTSF-2023-022 of December 18, 2023, in which it is determined that it is pertinent to update Subsection IV "Sources of Resources of the Deposit Insurance System and Payment of Contributions", Section I "General Norms for the Operation of the Deposit Insurance of the Private Financial Sector and the Popular and Solidary Financial Sector", Chapter XXVIII "On Deposit Insurance", Title II "National Financial System" of Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities and Insurance Resolutions, which consists of replacing the risk levels of entities in the public and private financial sectors with risk profiles determined by the control body based on the Risk-Based Supervision (SBR) methodology, which was updated by the Superintendence of Banks to strengthen its control acts according to its faculties established in Article 71 of the Organic Code of Money, Book I; and, by reason of the agreement between the control body and COSEDE to maintain the same contribution percentages for the risk-adjusted premium (PAR), with the objective of facilitating its calculation. b. Legal Report No. JPRF-CJF-2023-072 of December 18, 2023, which states that the Constitution of the Republic of Ecuador in its Article 226 enshrines the Principle of Legality, through which it is provided that state institutions, their agencies, dependencies, public servants, and persons acting by virtue of a state power shall exercise only the competencies and faculties attributed to them in the Constitution and the law. In application thereof, the Financial Policy and Regulation Board is competent to issue secondary regulations related to the Deposit Insurance, Liquidity Fund, and Private Insurance Fund as determined in Article 14.1, number 13 of the Organic Code of Money and Finance, Book I;

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Management Governmental Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | That, the Financial Policy and Regulation Board, in an ordinary session held by technological means, convened on December 20, 2023 and carried out via video conference on December 22, 2023, reviewed Memorandum No. JPRF-ST-2023-0112-M of December 19, 2023, issued by the Technical Secretariat of the Board, as well as the aforementioned reports from the Technical Coordination of Policy and Regulation of the Financial System and the Legal Coordination of Policy and Financial Norms of the Technical Secretariat, in addition to the corresponding draft Resolution; That, the Financial Policy and Regulation Board, in an ordinary session held by technological means, convened on December 20, 2023 and carried out via video conference on December 22, 2023, reviewed and approved the following Resolution; and, In exercise of its functions, RESOLVES: ARTICLE FIRST.- Article 16, Subsection IV "Sources of resources of the deposit insurance system and payment of contributions", Section I "General norms for the operation of the deposit insurance of the private financial sector and popular and solidary financial sector", Chapter XXVIII "On deposit insurance", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities and Insurance Resolutions, is substituted by the following text: "Art. 16.- Risk-Adjusted Premium (PAR).- For the payment of the contribution, entities of the private financial sector shall apply a risk-adjusted premium based on the risk profiles assigned by the respective control body, in accordance with the following table:

Risk Profile PAR (annual) Very Low 0.01% Low 0.02% Medium 0.03% High 0.04% Critical 0.05%

ARTICLE SECOND.- Article 28, Subsection IV "Sources of resources of the deposit insurance system and payment of contributions", Section I "General norms for the operation of the deposit insurance of the private financial sector and popular and solidary financial sector", Chapter XXVIII "On deposit insurance", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities and Insurance Resolutions, is substituted by the following text: "Art. 28.- On the notification of the risk level or profile of financial entities for the collection of the Risk-Adjusted Premium (PAR).- The updates of the risk levels carried out for the Popular and Solidary Financial Sector and of the risk profiles for the Private Financial Sector, and the methodology applied for their determination by the respective supervisors, shall be attended to minimum quarterly cut-off periods, formally notifying COSEDE by the fifteenth day of the month immediately following the close of each quarter. In the event that COSEDE does not have the update of the risk level or profile, as applicable, according to the schedule indicated above, it must apply the last reported rating. If the notification deadline falls on a holiday or weekend, it must be made before the maximum date."

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Management Governmental Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | GENERAL PROVISIONS FIRST.- The Superintendence of Banks shall notify the content of this Resolution to its controlled entities. SECOND.- Cases of doubt that arise in the application of this Resolution shall be resolved by the Superintendence of Banks. SINGLE REPEALING PROVISION.- Reserved Resolution No. JB-2011-1931 of June 1, 2011 and its annex are repealed. FINAL PROVISION.- This Resolution shall enter into force from the present date, without prejudice to its publication in the Official Register. This Resolution shall be published on the website of the Financial Policy and Regulation Board, within a maximum term of two days from its issuance. NOTIFIED.- Given in the Metropolitan District of Quito, on December 22, 2023. THE PRESIDENT, Mgs. María Paulina Vela Zambrano The resolution above was processed and signed by Master María Paulina Vela Zambrano, President of the Financial Policy and Regulation Board, in the Metropolitan District of Quito, on December 22, 2023.- I CERTIFY. TECHNICAL SECRETARIAT Mgs. Nelly Arias Zavala