Resolution JPRM-2025-009-G: Reforming Chapter II of the Regulations of the Audit Committee of the Central Bank of Ecuador

RESOLUTION No. JPRM-2025-009-G MONETARY POLICY AND REGULATION BOARD

CONSIDERING:

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

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

That, the first clause of Article 303 of the Constitution of the Republic 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;

That, Article 57.2 of the Organic Code of Monetary and Financial Law establishes that the Monetary Policy and Regulation Board will designate and determine the attributes and functions of the Audit Committee that will assist it in the monitoring of financial reports, internal audit, external audit, and internal control systems; for which it will approve the corresponding regulations;

That, the second clause of the fourth general provision of the Organic Law for the Strengthening of Protected Areas states: “The structure and functions of the Financial Policy and Regulation Board and the Monetary Policy and Regulation Board, established in the Organic Code of Monetary and Financial Law before June 26, 2025, will remain in effect until the designation of the members of the Financial and Monetary Policy and Regulation Board by the National Assembly.”;

That, Article 47.1 of the Organic Code of Monetary and Financial Law creates 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 determines its composition;

That, Article 47.6 of the same Code, regarding the functions of the Monetary Policy and Regulation Board, among others, establishes: “(…) 26. Those others conferred by law. (...)”;

That, Article 128 of the Organic Administrative Code establishes: "Normative act of an administrative nature. It is any unilateral declaration made in the exercise of an administrative competence that produces general legal effects, which is not exhausted with its compliance and directly";

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That, through Resolution No. JPRM-2025-007-G, of July 16, 2025, the Monetary Policy and Regulation Board approved the Codification of Governance Resolutions of the Monetary Policy and Regulation Board and the Central Bank of Ecuador;

That, it is necessary to reform Chapter II "Regulations of the Audit Committee of the Central Bank of Ecuador", of Title I of the Codification of Governance Resolutions of the Monetary Policy and Regulation Board and the Central Bank of Ecuador, to clarify both the functions and certain particular aspects contained in the aforementioned regulations;

That, the Monetary Policy and Regulation Board, in an ordinary session by mixed modality, on July 16, 2025, approved the reform to the Regulations of the Audit Committee of the Central Bank of Ecuador issued through Resolution No. JPRM-2021-006-A of December 17, 2021; and,

In exercise of its functions and in accordance with Article 47.7 of the Organic Code of Monetary and Financial Law, the Monetary Policy and Regulation Board resolves:

REFORM CHAPTER II "REGULATIONS OF THE AUDIT COMMITTEE OF THE CENTRAL BANK OF ECUADOR", OF TITLE I OF THE GOVERNANCE CODIFICATION OF THE MONETARY POLICY AND REGULATION BOARD AND THE CENTRAL BANK OF ECUADOR ISSUED THROUGH RESOLUTION NO. JPRM-2025-007-G, OF JULY 16, 2025

Article 1.- Incorporate at the end of Article 30 of Chapter II "Regulations of the Audit Committee of the Central Bank of Ecuador", of Title I of the Governance Codification of the Monetary Policy and Regulation Board and the Central Bank of Ecuador issued through Resolution No. JPRM-2025-007-G, of July 16, 2025, the following text:

“The Audit Committee must prepare an annual work plan that includes the necessary activities for the fulfillment of its functions.”

Article 2.- Substitute Article 31 of Chapter II "Regulations of the Audit Committee of the Central Bank of Ecuador", of Title I of the Governance Codification of the Monetary Policy and Regulation Board and the Central Bank of Ecuador issued through Resolution No. JPRM-2025-007-G, of July 16, 2025, with the following text:

“Article 31.- Composition of the Audit Committee: The Audit Committee of the Central Bank of Ecuador will be composed of three members with voice and vote, designated by the Monetary Policy and Regulation Board, at least two (2) of whom will have relevant experience in accounting or auditing, and one (1) of whom may be a member of the Monetary Policy and Regulation Board.

By invitation of the Audit Committee, other officials of the Monetary Policy and Regulation Board or employees of the Central Bank of Ecuador may attend the Committee's sessions, with voice, but without vote.

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The members of the Audit Committee, other than the member of the Monetary Policy and Regulation Board, who will be referred to as external members, may engage in activities other than those of their position, provided that these do not imply a conflict of interest in the functions they must perform in the Committee, are not incompatible with their designation, and cannot be employees or workers of the Central Bank of Ecuador, nor be providing services of any type to the Bank.

The members of the Audit Committee cannot intervene in the administrative or operational decisions of the Central Bank of Ecuador.”

Article 3.- Incorporate as numeral 12 of Article 33 of Chapter II "Regulations of the Audit Committee of the Central Bank of Ecuador", of Title I of the Governance Codification of the Monetary Policy and Regulation Board and the Central Bank of Ecuador issued through Resolution No. JPRM-2025-007-G, of July 16, 2025, the following text:

“12. Declare that they are aware of the prohibitions and limitations regarding multiple employment and receiving additional remuneration or per diems when holding the status of public servant, contained in the Organic Law of Public Service and its General Regulations.”

Article 4.- Substitute Article 35 of Chapter II "Regulations of the Audit Committee of the Central Bank of Ecuador", of Title I of the Governance Codification of the Monetary Policy and Regulation Board and the Central Bank of Ecuador issued through Resolution No. JPRM-2025-007-G, of July 16, 2025, with the following text:

“Article 35.- Regarding the remuneration of external members: The remuneration of the external members of the Audit Committee will be covered by the Central Bank of Ecuador, within the modality and amounts permitted by Law. The external members of the Committee will not have an employment relationship with the Central Bank of Ecuador.”

Article 5.- Substitute Article 36 of Chapter II "Regulations of the Audit Committee of the Central Bank of Ecuador", of Title I of the Governance Codification of the Monetary Policy and Regulation Board and the Central Bank of Ecuador issued through Resolution No. JPRM-2025-007-G, of July 16, 2025, with the following text:

“Article 36.- Functions of the Audit Committee: The Audit Committee will perform the following functions, which will be executed based on internal reports from the administrative units of the Central Bank of Ecuador and especially from the Banking Audit Directorate, the content of which is the responsibility of the issuers:

9.1 Functions related to Financial Statements: a) Monitor the compliance of the Central Bank of Ecuador's financial statements with the Organic Code of Monetary and Financial Law, national and international accounting standards applicable to the Institution in accordance with the provisions made by the Monetary Policy and Regulation Board. For this purpose, review the findings and observations on the matter made by external audit and banking audit;

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b) Monitor the financial statements of the Central Bank of Ecuador, prior to their presentation and approval by the Monetary Policy and Regulation Board, in order to verify that said financial statements have been reviewed by the Banking Audit and external audit, through the different reports and statements they have issued;

c) Analyze and report to the Monetary Policy and Regulation Board the results of the review of observations, reports, and meetings held with external and banking auditors regarding the financial statements and highlight, if applicable, complex, special, or unusual transactions that may have been known; and,

d) Request, if applicable, specific reviews from the Banking Audit, on which the Committee will present its opinion and recommendation to the Monetary Policy and Regulation Board regarding the results obtained;

9.2 Functions related to the Banking Audit Directorate: a) Propose to the Monetary Policy and Regulation Board the candidates for the position of Director of Banking Audit, for their consideration and designation, who must meet the requirements established in the Internal Audit Policy of the Central Bank of Ecuador;

b) Propose to the Monetary Policy and Regulation Board the attributes, responsibilities, and functions of the Director of Banking Audit, which must be part of the Organizational Management Statute by Processes; as well as, the Internal Audit Policy of the Central Bank of Ecuador and carry out reviews and recommendations in case of changes, if necessary;

c) In case of non-compliance with functions by the Director of Banking Audit, present to the Monetary Policy and Regulation Board the report with the corresponding recommendations;

d) Ensure the independence and monitor the effectiveness of the Banking Audit Directorate;

e) Request from the Banking Audit Directorate, at any time, specific reviews on situations that, in the opinion of the Audit Committee, are necessary or that are requested by the Monetary Policy and Regulation Board or the Manager of the Central Bank of Ecuador;

f) Review, make suggestions, and approve the Annual Plan of the Banking Audit Directorate, by December 31 of the year prior to its execution. Ensure that the plan addresses the main areas of governance, risks, and control with prioritization criteria, considering the compliance with institutional objectives, control priorities, the availability of financial and technological resources; as well as, the competence and

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efficiency of human resources. If considered, review the scope and procedures applied in specific reviews, with the purpose of issuing recommendations within international best practices;

g) Monitor the compliance with the recommendations of the Banking Audit Directorate, external audit, control bodies, or others, to observe that appropriate and timely measures have been taken, particularly in significant findings;

h) Review the observations, supervise the compliance and remediation of findings from external auditors, banking audit, as well as the findings, observations, and recommendations of other control bodies, peer bodies, or international organizations on topics related to the financial situation of the Central Bank of Ecuador;

i) Review quarterly the progress and compliance of the annual work plan, if applicable, request the necessary clarifications or learn about adjustments to it;

j) Know, suggest, and approve reforms to the Annual Plan of the Banking Audit Directorate;

k) Review, make suggestions, and approve the strategic plan of the Banking Audit Directorate as well as projects and initiatives aligned with it;

l) Know the annual report of the Director of Banking Audit which will include the compliance with objectives, performance measures, and the results of the Banking Audit management, if applicable, request the necessary clarifications;

m) Know the progress and results of the Quality Assurance and Improvement Program and the action plans defined to address the recommendations and improvement opportunities identified, at the request of the Committee members and/or through the report of the Banking Auditor; and,

n) Review the performance evaluation of the Director of Banking Audit, their qualifications, and competencies. Regarding the results, make the corresponding recommendations.

9.3 Functions related to External Audit: a) Know and opine regarding the terms of reference for the selection of external auditors prepared by the Central Bank of Ecuador;

b) Propose to the Monetary Policy and Regulation Board the list of independent external auditors, with recognized international experience in accordance with the requirements established in the External Auditor Hiring Standard of the Central Bank of Ecuador;

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c) Know, verify, and inform the Monetary Policy and Regulation Board that the contracted external auditors comply with the stipulated terms of reference, placing special emphasis on the scope and approach offered by the external audit, for which purpose the Internal Banking Auditor, in their capacity as contract administrator, will inform the Committee, periodically or whenever there is any novelty during the execution of the contract, guaranteeing the execution of the audit and the delivered results;

d) Know the scope and audit approach proposed by external auditors, including coordination with the banking audit activity;

e) Have meetings with external auditors during the work planning phase, the presentation of audited financial statements, and the discussion of the results of recommendations made;

f) Have scheduled meetings with external auditors, to discuss any sensitive matter, within the scope of their functions;

g) Monitor annually the performance of external auditors and formulate recommendations for hiring, continuity, or termination of the contract, in accordance with applicable regulations;

h) Monitor that external audit is carried out in accordance with National and International Audit Standards;

i) Know the reports of the Banking Auditor on the compliance with the recommendations of external audit;

j) At the request of the General Management of the Central Bank of Ecuador, attend the reading of the reports of external auditors and control bodies;

k) Request specific reviews from external auditors on situations that, in the opinion of the Audit Committee, are necessary; or, that the Monetary Policy and Regulation Board requires;

l) Issue criteria regarding disagreements that may arise between the General Management and external auditors that are brought to its knowledge; and,

m) Request the necessary explanations to determine the reasonableness of the accounting adjustments proposed by external auditors; and, bring its criteria to the knowledge of the Monetary Policy and Regulation Board.

9.4 Functions related to Governance Management:

a) Know and advise on the governance processes and best practices of the Central Bank of Ecuador;

b) Know and make recommendations for the continuous strengthening of management and administration of processes, risks, and internal control, through the Monetary Policy and Regulation Board;

c) Know and follow up on the observations and conclusions of the banking auditor, external auditors, and the findings of any competent public institution, related to compliance and regulation topics;

d) Monitor exposure to significant risks and control problems, including fraud risks, governance problems, and other matters necessary or requested by the Monetary Policy and Regulation Board;

9.5 Functions related to the Internal Control System and Risk Management:

a) Know, advise, and recommend on processes and best practices for integrated risk management and the Internal Control System of the Central Bank of Ecuador; and,

b) Bring to the knowledge of the Monetary Policy and Regulation Board relevant topics related to internal control deficiencies.

9.6 Functions related to the Monetary Policy and Regulation Board:

a) Report to the Board, at least twice a year, on the development and fulfillment of its functions;

b) Present to the Board the corresponding report, when circumstances of significant importance related to the financial statements and operations inherent to the nature of the Central Bank of Ecuador, internal control, governance, and risk management are detected; and,

c) Bring to the knowledge and consideration of the Monetary Policy and Regulation Board the relevant observations and improvement proposals within the framework of its attributes.

In order to attend to its functions, the Audit Committee, with the knowledge of the General Manager, may request information regarding the compliance with institutional policies, legal and regulatory provisions, management reports from the various administrative units; as well as, any information it considers necessary and pertinent.”

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

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Its publication on the institutional website is entrusted to the General Secretariat of the Central Bank of Ecuador.

COMMUNICATE AND PUBLISH. - Given in the Metropolitan District of Quito D.M., on July 16, 2025.

THE PRESIDENT Dr. TATIANA MARIBEL RODRÍGUEZ CERÓN

The preceding resolution was signed by Dr. Tatiana Maribel Rodríguez Cerón - President of the Monetary Policy and Regulation Board, in the Metropolitan District of Quito D.M., on July 16, 2025.- I CERTIFY.

ADMINISTRATIVE SECRETARY Att. MARÍA ALEXANDRA GUERRERO DEL POZO