Resolution No. JPRF-F-2022-036 — Determination of Interest Rate for Credit Operations for Redistribution of State Rural Lands to Family Farming and Solidarity Economy Sectors

Resolution No. JPRF-F-2022-036 THE FINANCIAL POLICY AND REGULATION BOARD CONSIDERING: That, Article 226 of the Constitution of the Republic of Ecuador provides: "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. They shall have the duty to coordinate actions for the fulfillment of their purposes and to make effective the enjoyment and exercise of the rights recognized in the Constitution."; That, Article 227 of the Supreme Norm orders: "Public administration constitutes a service to the community that is governed by the principles of effectiveness, efficiency, quality, hierarchy, deconcentration, decentralization, coordination, participation, planning, transparency, and evaluation."; That, according to Article 302 number 4 of the Magna Carta, monetary, credit, exchange, and financial policies shall have, among others, the ultimate objective of achieving "economic stability," which is also one of the objectives of economic policy, in accordance with the constitutional provision inserted in Article 284 number 7; That, the first clause of Article 308 of the Supreme Norm stipulates that financial activities are a matter of public order and shall have the fundamental purpose of "preserving deposits and meeting financing requirements for the achievement of the country's development objectives." In concordance, Article 309 of the Constitution of the Republic prescribes that the norms of the national financial system shall be responsible for "preserving its security, stability, transparency, and solidity."; That, Article 5 of the Organic Monetary and Financial Code, Book I, provides that the formulation of policies and regulations in matters of monetary, credit, exchange, financial, as well as insurance and securities, is the exclusive faculty of the Executive Function, and ratifies that the objectives of public policy in these matters are those determined in Articles 284 and 302 of the Fundamental Norm; That, Article 13 of the aforementioned Code creates the Financial Policy and Regulation Board as part of the Executive Function, responsible for the formulation of credit, financial, securities, insurance, and prepaid comprehensive health care services policy and regulation; That, Article 14 number 2 of the aforementioned Code, regarding the scope of action of the Financial Policy and Regulation Board, mandates: "2. Issue regulations that allow maintaining the integrity, solidity, sustainability, and stability of the national financial, securities, insurance, and prepaid comprehensive health care services systems in accordance with what is provided in Article 309 of the Constitution of the Republic of Ecuador"; That, literal b) of number 7 of Article 14.1 ibidem, establishes the following: "For the performance of its functions, the Financial Policy and Regulation Board must comply with the following duties and exercise the following faculties: (…) 7. Issue the prudential regulatory framework to which financial, securities, insurance, and prepaid comprehensive health care services entities must adhere, framework that must be coherent, not give rise to regulatory arbitrage, and cover, at least, the following: (…) b. Establish the interest rate system, as provided in Article 130 of this Code, for the active and passive operations of the national financial system and the other rates required by law, promoting the development of prudent credit: Minimum capital levels, equity, technical equity, and risk weightings of assets, their composition, method of calculation, and modifications";

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interest rates required by law, promoting the development of prudent credit: Minimum capital levels, equity, technical equity, and risk weightings of assets, their composition, method of calculation, and modifications"; That, Article 130 of the Organic Monetary and Financial Code, Book I, orders that: "The Financial Policy and Regulation Board shall establish the system of maximum interest rates for the active and passive operations of the national financial system and the other rates required by the Law. (…)."; That, the Fiftieth Transitory Provision of Article 106 of the Organic Law Reforming the Organic Monetary and Financial Code for the Defense of Dollarization, published in the Official Register Supplement No. 433 of May 3, 2021, states that: "Resolutions contained in the Codification of Monetary, Financial, Securities, and Insurance Resolutions of the Monetary and Financial Policy Board and norms issued by control bodies shall remain in force until the Monetary Policy Board and the Financial Policy and Regulation Board resolve what corresponds, within the scope of their competencies."; That, Article 10 of the Organic Law of Rural Lands and Ancestral Territories orders that: "The Monetary and Financial Policy Board, or the body acting in its place, shall determine a preferential or specific interest rate for credit operations that occur in the agricultural sector of family farming and the popular and solidarity economy. (…)." This faculty must be harmonized with what is provided in Articles 2, 8, 11, 34, and 66 of the same legal body; That, Article 8 of Subsection II "Mandatory Compliance Interest Rates", Section II "On Interest Rates", Chapter XI "Interest Rate System and Tariffs of the Central Bank of Ecuador", Title I "Monetary System", of Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, states that "The legal interest rate corresponds to the effective reference active interest rate for the corporate productive segment."; That, the Technical Secretary, Acting Substitute of the Financial Policy and Regulation Board, through memorandum No. JPRF-SETEC-2022-0062-M of August 5, 2022, submits to the President of the Board the Technical-Legal Report No. JPRF-CTCJ-2022-005 of August 5, 2022, in which it was determined that the Board enjoys technical discretion to determine a preferential or specific interest rate for credit operations that occur in the agricultural sector of family farming and the popular and solidarity economy within the framework of the regularization of possession, ownership, administration, and redistribution of rural land as a factor of production, in accordance with what is provided in Article 14.1 numbers 7 and 26 of the Organic Monetary and Financial Code, Book I, and Article 10 of the Organic Law of Rural Lands and Ancestral Territories; That, the Financial Policy and Regulation Board, in an ordinary session convened by technological means on August 5, 2022, and carried out via video conference on August 10, 2022, reviewed the memorandum No. JPRF-SETEC-2022-0062-M of August 5, 2022, issued by the Technical Secretary, Acting Substitute of the Board; as well as the Technical-Legal Report No. JPRF-CTCJ-2022-005 of August 5, 2022, issued by the Legal Coordination and Technical Coordination of the aforementioned Board, and the corresponding draft resolution; and, In exercise of its functions,

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RESOLVES: SINGLE ARTICLE.- Substitute Article 28 of Subsection IV "Interest Rates for Special Operations", Section II "On Interest Rates", of Chapter XI "Interest Rate System and Tariffs of the Central Bank of Ecuador", of Title I "Monetary System", of Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, with the following: "Art. 28.- The preferential or specific interest rate for credit operations that occur in the agricultural sector of family farming and the popular and solidarity economy within the framework of the regularization of possession, ownership, administration, and redistribution of rural land as a factor of production, in accordance with Article 10 of the Organic Law of Rural Lands and Ancestral Territories, shall be freely contracted and may not exceed the legal interest rate." FINAL PROVISION.- This Resolution shall enter into force from the present date, without prejudice to its publication in the Official Register. Publish this Resolution on the website of the Financial Policy and Regulation Board, within a maximum term of two days from its issuance. COMMUNICATE.- Given in the Metropolitan District of Quito, on August 10, 2022. 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 August 10, 2022.- I CERTIFY. ACTING TECHNICAL SECRETARY Mgs. Luis Alfredo Olivares Murillo