JPRF-F-2024-0124 — Reforming the Standard for Strengthening Savings and Credit Cooperatives to Enhance the Patrimonial Strength of Mutual Savings and Credit Entities

Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas Governmental Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | Resolution No. JPRF-F-2024-0124 THE FINANCIAL POLICY AND REGULATION BOARD CONSIDERING: That Article 132, number 6, of the Constitution of the Republic of Ecuador grants public control and regulatory bodies the authority to issue general norms in matters within their competence, without altering or innovating legal provisions;

That Article 309 of the same Constitution stipulates that the national financial system is composed of the public, private, and popular and solidarity sectors, which intermediated public resources; determining that each of these sectors will have specific and differentiated control norms and entities, which will be responsible for preserving their safety, stability, transparency, and solidity;

That Article 13 of the Organic Code of Monetary and Financial Law, Book I, creates the Financial Policy and Regulation Board as part of the Executive Function, responsible for formulating credit, financial, securities, insurance, and prepaid comprehensive health care service policy and regulation;

That Article 14.1, numbers 7, literal b, of the aforementioned Code, enshrines the functions of the Financial Policy and Regulation Board, among which are issuing the prudential regulatory framework to which financial, securities, insurance, and prepaid comprehensive health care service entities must adhere, a framework that must be coherent and must establish the interest rate system for active and passive operations of the national financial system and other 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 163 of the cited Code recognizes that mutual savings and credit associations for housing are part of the popular and solidarity financial sector;

That Article 190 of the aforementioned Code provides that entities of the national financial system, financial groups, and popular and solidarity groups must maintain a certain level of patrimonial sufficiency, in order to adequately back their current and future operations;

That the Fifty-Fourth Provision of the Transitional Regime of Resolutions of the Codification of Resolutions of the Monetary and Financial Policy and Regulation Board establishes that resolutions contained in the Codification of Monetary, Financial, Securities, and Insurance Resolutions of the Monetary and Financial Policy and Regulation Board and norms issued by control bodies will remain in effect until the Monetary Policy and Regulation Board and the Financial Policy and Regulation Board decide what corresponds, within the scope of their competencies;

That Article 50 of the Organic Law of the Popular and Solidarity Economy states that the Non-Distributable Legal Reserve Fund is constituted by cooperatives to cover patrimonial contingencies; and that Article 78 of the same Law recognizes that savings and credit cooperatives, associative or solidarity entities, communal banks and boxes, and savings boxes integrate the Popular and Solidarity Financial Sector;

That the Technical Secretary of the Financial Policy and Regulation Board, through Memorandum No. JPRF-ST-2024-0090-M of October 21, 2024, submits to the President of the Board the Technical Report No. JPRF-CTSF-2024-010 and the Legal Report No. JPRF-CJF-2024-050, both dated October 21, 2024, as well as the respective draft resolution;

Resolution No. JPRF-F-2024-0124 Page 2 of 3

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas Governmental Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | That the Financial Policy and Regulation Board, in an ordinary session held via technological means, convened on November 13, 2024, and carried out through video conference on November 18, 2024, reviewed the Memorandum No. JPRF-ST-2024-0090-M of October 21, 2024, issued by the Technical Secretary of the Board; as well as the Technical Report No. JPRF-CTSF-2024-010 and the Legal Report No. JPRF-CJF-2024-050, both dated October 21, 2024, issued by the Technical Coordination of Policy and Regulation of the Financial System and by the Legal Coordination of Policy and Financial Norms, and the corresponding draft resolution;

That the Financial Policy and Regulation Board, in an ordinary session held via technological means, convened on November 13, 2024, and carried out through video conference on November 18, 2024, reviewed and approved the following Resolution; and,

In exercise of its functions, RESOLVES: ARTICLE FIRST.- Substitute Section II "Standard for the Strengthening of Savings and Credit Cooperatives", of Chapter XXXVI "Popular and Solidarity Financial Sector", of Title II "National Financial System", of Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, with the following text:

"SECTION II: STANDARD FOR THE STRENGTHENING OF SAVINGS AND CREDIT COOPERATIVES AND MUTUAL SAVINGS AND CREDIT ASSOCIATIONS FOR HOUSING Art. 5.- Savings and credit cooperatives, with prior approval of their respective Boards of Directors, may request from their members up to 3% of the amount of the credit disbursed in their favor, which will be destined to strengthen the Non-Distributable Legal Reserve Fund.

If deemed pertinent, the Superintendency of the Popular and Solidarity Economy, according to the analysis of the situation of each financial entity, given its degree of vulnerability to risks and the projection of its economic and financial condition, may order that, obligatorily, the financial entity allocate up to 3% of the amount of the credit disbursed in favor of its members to strengthen the Non-Distributable Legal Reserve Fund, in order to prevent a future non-compliance with the minimum solvency level.

The application of the percentage will be only in original credit operations and will not apply to novated, restructured, or refinanced operations.

The percentage destined to strengthen the Non-Distributable Legal Reserve Fund will not be considered for the calculation and reporting of effective active interest rates established by the Financial Policy and Regulation Board.

For credits with a term of less than one year, the calculation of the percentage to be allocated to the Non-Distributable Legal Reserve Fund will be up to 3% annually, calculated proportionally to the term of the credit operation. If the term is greater than one year, the calculation and collection will be made in a single instance.

This article will apply to mutual savings and credit associations for housing, only with respect to original credits granted to their members and will serve to strengthen the 'Non-Distributable Legal Reserve' account.

Resolution No. JPRF-F-2024-0124 Page 3 of 3

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas Governmental Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | FINAL PROVISIONS FIRST.- The Superintendency of the Popular and Solidarity Economy will notify the content of this Resolution to its controlled entities.

SECOND.- The Superintendency of the Popular and Solidarity Economy will adapt the content of its control norms corresponding to the provisions of this Resolution, within a term of thirty (30) days.

THIRD.- This Resolution will enter into force from the present date, without prejudice to its publication in the Official Register, and will be published on the institutional 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 November 18, 2024. THE PRESIDENT, Mgs. María Paulina Vela Zambrano The preceding Resolution 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 November 18, 2024.- I CERTIFY. TECHNICAL SECRETARY, Mgs. Luis Alfredo Olivares Murillo