Unified Standard for Rating Agencies and Risk Rating Applicable to the Financial, Securities, and Insurance Systems

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-T-2025-0153

THE FINANCIAL POLICY AND REGULATION BOARD

CONSIDERING:

That Article 82 of the Constitution of the Republic of Ecuador prescribes that the right to legal security is based on respect for the Constitution and the existence of prior, clear, public legal norms applied by competent authorities;

That Article 84 of the constitutional body prescribes that any organ with normative power shall have the obligation to formally and materially adapt laws and other legal norms to the rights provided for in the Constitution;

That numeral 6 of Article 132 of the aforementioned Constitution grants public regulatory bodies the authority to issue norms of a general nature in matters within their competence, without altering or innovating legal provisions;

That Article 213 of the Supreme Norm defines superintendencies as technical bodies for surveillance, auditing, intervention, and control of economic activities and services provided by public and private entities, with the purpose that these activities and services comply with the legal framework and attend to the general interest. Superintendencies shall act ex officio or upon citizen request. The specific faculties of the superintendencies and the areas requiring control, auditing, and surveillance of each shall be determined in accordance with the law;

That Article 226 of the Magna Carta provides that State institutions, their bodies, 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, having the duty to coordinate necessary actions for the effective fulfillment of rights recognized in the Constitution;

That Article 227 of the Fundamental Norm determines that public administration constitutes a service to the community governed by the principles of effectiveness, efficiency, quality, hierarchy, decentralization, coordination, participation, planning, transparency, and evaluation;

That Article 308 of the aforementioned norm indicates that financial activities are a service of public order and may be exercised, with prior State authorization, in accordance with the law;

That Article 309 of the constitutional text states that the national financial system is composed of the public, private, and popular and solidary sectors. Each of these sectors shall have specific and differentiated control norms and entities, which shall be responsible for preserving their security, stability, transparency, and solidity. These entities shall be autonomous. The executives of the control entities shall be administratively, civilly, and criminally responsible for their decisions;

That Article 311 of the Fundamental Statute states that the popular and solidary financial sector shall be composed of savings and credit cooperatives, associative or solidary entities, community banks and savings boxes. Initiatives for services in the popular and solidary financial sector shall receive differentiated and preferential treatment from the State;

That the article following Article 6, which incorporates international best practices, of the Organic Monetary and Financial Code, Book I, prescribes 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 9 of the aforementioned Code prescribes that regulatory and control bodies shall have the duty to coordinate actions to fulfill their purposes and make effective the enjoyment and exercise of rights recognized in the Constitution;

That Article 13 of the Organic Monetary and Financial Code, Book I, created 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 the formulation of credit, financial, securities, insurance, and prepaid comprehensive health care service policy and regulation;

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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 Article 14, numerals 1, 2, and 3 of the aforementioned organic code, recognizes that within the scope of competencies of the Financial Policy and Regulation Board, it corresponds to: i) formulate financial, securities, and insurance policies; ii) issue regulations that allow maintaining the integrity, solidity, sustainability, and stability of the financial, securities, and insurance systems; and, iii) issue micro-prudential regulations for the national financial, securities, and insurance sectors, based on proposals presented by the respective superintendencies, within their respective scopes of competence and without prejudice to their independence;

That Article 14.1 numerals 1, 7, 9, 25, and 27 of the aforementioned Organic Monetary and Financial Code, Book I, establish that the Financial Policy and Regulation Board has, among other faculties, the following: i) regulate the creation, constitution, organization, activities, operation, and liquidation of securities entities; ii) issue the prudential regulatory framework to which securities entities must adhere; iii) issue the non-prudential regulatory framework for all securities entities, which shall include, among others, norms of transparency and information disclosure; iv) apply the provisions of said organic code and resolve cases not provided for therein, within the scope of its competence; and, v) exercise the other functions, duties, and faculties assigned by the Organic Monetary and Financial Code and the law;

That Article 9 of the Organic Monetary and Financial Code, Book II, in its numerals 1, 4, 6, and 20, state that within the attributions held by the Financial Policy and Regulation Board regarding the securities market, are: (i) regulate the general functioning of the securities market; (ii) issue the necessary resolutions for the application of the Securities Market Law; (iii) regulate the creation and functioning of rating agencies, as well as the services they provide; and, (iv) ensure the observance and compliance with regulations relative to the securities market, respectively;

That Articles 150 and 151 of the aforementioned Code, Book I, establish that entities of the national financial system shall be subject to the regulation issued by the Monetary and Financial Policy Board and that said regulation must recognize the nature and particular characteristics of each of the sectors of the national financial system;

That Article 237 of Book I, Article 177 of Book II, and Article 32 of Book III of the Organic Monetary and Financial Code determine that risk rating agencies shall rate the solvency and capacity of entities of the national financial system, securities, and insurance systems to manage risks with third parties and fulfill their obligations with the public. These ratings shall be based on minimum parameters that include a uniform risk rating scale by financial sectors, in accordance with the norms issued by this regulatory body;

That General Provision Twenty-Ninth of the Organic Monetary and Financial Code, Book I, prescribes: "In the current legislation where reference is made to the 'Monetary and Financial Policy Board', replace it with 'Financial Policy and Regulation Board';"

That Transitory Provision Fiftieth-Fourth of the previously mentioned Code determines the transitory regime of resolutions of the Codification of the Monetary and Financial Policy Board, establishing 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 and Financial Policy Board and the Financial Policy and Regulation Board resolve what corresponds, within the scope of their competencies."

That General Provision Nineteenth of the Organic Monetary and Financial Code, Book II, "Securities Market Law," prescribes: "Replace in all current norms the denomination National Securities Council or C.N.V. by Monetary and Financial Policy Board or FINANCIAL POLICY AND REGULATION MONETARY BOARD in the same way in all current norms replace the denomination Superintendency of Companies by Superintendency of Companies, Securities, and Insurance, without modifying their nature or functions."

That Article 15 of the Organic Administrative Code, with reference to the principle of responsibility, provides that the State shall respond for damages as a consequence of the lack or deficiency in the provision of public services or the actions or omissions of its public servants or subjects of private rights acting in the exercise of a public power by delegation of the State and its dependents, controlled entities, or contractors, with the State making effective the responsibility of the public servant for acts or omissions involving intent or negligence, stating that no public servant is exempt from responsibility;

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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 Article 25.1, numeral 1, of the Organic Monetary and Financial Code, Book I, prescribes within the functions of the Technical Secretariat of this Board, the elaboration of technical and legal reports that support the regulation proposals to be issued by the Financial Policy and Regulation Board;

That the Technical Secretary of the Financial Policy and Regulation Board, through Memorandum No. JPRF-ST-2025-0029-M of April 24, 2025, submitted to the President of the Board the Technical Report No. JPRF-ST-2025-002 of April 24, 2025, issued by the Technical Secretariat of this regulatory body; as well as the Legal Report No. JPRF-CJF-2025-015 of April 24, 2025, issued by the Legal Coordination of Financial Policy and Norms of this Board, as well as the respective draft resolution;

That the Financial Policy and Regulation Board, in Ordinary Session No. 008/2025 of April 28, 2025, reviewed the Memorandum No. JPRF-ST-2025-0029-M of April 24, 2025, issued by the Technical Secretary of the Board; as well as the aforementioned Technical Report No. JPRF-ST-2025-002 and Legal Report No. JPRF-CJF-2025-015, in addition to the corresponding draft resolution;

That in point two of the agenda of the Ordinary Session No. 008/2025 of the Financial Policy and Regulation Board, held on April 28, 2025, the proposal for the "Unified Standard for Rating Agencies and Risk Rating Applicable to the Financial, Securities, and Insurance Systems" was treated; the Members of the Financial Policy and Regulation Board resolved not to treat the mentioned point, so that the Technical Secretariat of the Institution carries out technical commissions with the control bodies in order to make the pertinent adjustments to the norm proposal;

That through Official Letter No. JPRF-JPRF-2025-0162-O of April 28, 2025, the Financial Policy and Regulation Board requested control bodies to submit their observations and comments to the norm proposal presented in the board session, in order to obtain feedback from the control bodies prior to the technical commission to be held;

That the Superintendency of Banks, through Official Letter No. SB-IG-2025-0082-O of May 5, 2025, as well as the Superintendency of Popular and Solidary Economy, through Official Letter No. SEPS-SGD-2025-12209-OF of the same date, submitted their respective observations to the normative proposal in question;

That the Superintendency of Companies, Securities, and Insurance, through Official Letter No. SCVS-INMV-DNFCDN-2025-00036592-O of May 5, 2025, ratified the observations submitted in Official Letter No. SCVS-INMV-DNFCDN-2024-00138875-O on December 20, 2024, regarding the norm proposal in reference;

That on May 8, 2025, a technical commission was held with the Superintendency of Banks, the Superintendency of Companies, Securities, and Insurance, and the Superintendency of Popular and Solidary Economy, Master Catalina Pazos and Master Iván Velástegui, Members of the Financial Policy and Regulation Board, and the technical and legal team of this Institution, in which the norm construction process and the proposed functioning of the norm were exposed, and the observations formulated by the aforementioned control bodies were resolved;

That the Technical Secretary of the Financial Policy and Regulation Board, through Memorandum No. JPRF-ST-2025-0035-M of May 13, 2025, submits to the President of the Board the Technical Report No. JPRF-ST-2025-003, issued by the Technical Secretariat of this regulatory body, and the Legal Report No. JPRF-CJF-2025-021, issued by the Legal Coordination of Financial Policy and Norms of this Board, both dated May 13, 2025, as well as the respective draft resolution;

That the Financial Policy and Regulation Board, in an ordinary session held via technological means, convened on May 13, 2025, and carried out via video conference on May 19, 2025, reviewed the Memorandum No. JPRF-ST-2025-0035-M of May 13, 2025, issued by the Technical Secretary of the Board; as well as the aforementioned Technical Report No. JPRF-ST-2025-003 and Legal Report No. JPRF-CJF-2025-021, in addition to the corresponding draft resolution; and,

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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 |

In exercise of its functions,

RESOLVES:

SOLE ARTICLE.- Issue the "Unified Standard for Rating Agencies and Risk Rating Applicable to the Financial, Securities, and Insurance Systems." For this effect, in the Codification of Monetary, Financial, Securities, and Insurance Resolutions, create a Book V "COMMON APPLICATION NORMS FOR REGULATED SECTORS," and incorporate as Title I the following:

"TITLE I: UNIFIED STANDARD FOR RATING AGENCIES AND RISK RATING APPLICABLE TO THE FINANCIAL, SECURITIES, AND INSURANCE SYSTEMS

CHAPTER I RATING AGENCIES

SECTION I OBJECTIVE, PURPOSE, SCOPE, AND APPLICABILITY

Art. 1. Objective.- This norm aims to regulate the creation, constitution, registration, licensing, organization of activities, operation, and other aspects related to rating agencies that provide their services in the context of the exercise of financial activity.

Art. 2. Purpose of risk rating.- The purpose of risk rating is to issue an independent opinion on the capacity of rating objects to:

1. Manage their risks comprehensively;
2. Fulfill their obligations in a timely manner; and,
3. Evaluate their financial strength based on financial statements and other information deemed pertinent;

Art. 3. Scope.- The provisions of this norm apply to rating agencies and the following rating objects:

1. Public and private financial sector: Private banks and public financial entities, subsidiaries and affiliates, in the country or abroad, obliged to hire rating services;
2. Popular and solidary financial sector: Savings and credit cooperatives of segments 1, 2, and 3, central boxes, mutual savings associations for housing and the National Corporation of Popular and Solidary Finance;
3. Insurance system: Insurance companies and reinsurance companies; and,
4. Securities system: Subjects and securities determined by the Securities Market Law.

SECTION II DEFINITIONS AND CONSTITUTION OF RATING AGENCIES

Art. 4. Definitions.- For the purposes of application of this norm, the following definitions shall be considered:

1. Risk Rating: An opinion issued by a company specialized in risk evaluation, based on a technical and systematic process. This evaluation comprises the analysis, valuation, and assignment of a rating to the rating object, considering factors such as solvency, financial stability, risk management, and the capacity to fulfill contracted obligations.
2. Rating Agency: The joint-stock company or limited liability company, whose main object is the rating of the risk of issuers and their securities, entities of the national financial system, insurance and reinsurance companies, in accordance with what is established in this norm. Its constitution, functioning, and operation are subject to authorization by the competent control bodies in accordance with the current legal framework.
3. Foreign Rating Agency: That company with its main domicile abroad, domiciled in Ecuador, which will exercise the activity as a rating agency in the national territory.

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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 |

4. International Rating Agency: That with its main domicile abroad, recognized for its capacity to evaluate the solvency, payment capacity of issuers and their securities, financial entities, or insurance and reinsurance companies, using rigorous standards and with a proven track record of credibility in international financial markets.
5. Conflicts of Interest: Contradiction between the interests of a rating agency, its legal representative, rating committee members, analysts, or personnel performing the evaluation, in relation to the entities and securities subject to rating and the contracting entities, generated by the existence of linkage in accordance with the Law, as well as any legal or commercial relationship that could affect the objectivity of the risk rating.
6. Technical Rigor Criteria: Methodological principles related to the use of solid quantitative and qualitative approaches that are applied systematically and exhaustively in the analysis and allow achieving depth in the evaluation of relevant factors and precision in the application of techniques aligned with international best practices in risk rating.
7. Ownership Structure: Refers to the distribution of company ownership among its shareholders, partners, and other forms of ownership. This implies identifying who are the holders of the rating agency's shares or participations, in what proportion they own said shares or participations, and the extent of the responsibility they have as shareholders or partners.
8. Suitability: Refers to the capacity, competence, and technical aptitude of a person or entity, especially in the context of risk evaluation and management, to carry out its functions adequately, efficiently, and ethically, in accordance with the standards and requirements established by regulatory authorities and sector best practices, which are qualified by the competent control body.
9. License: Administrative act by which the competent control body authorizes the functioning of a rating agency to exercise the activity of risk rating within a specific sector, by virtue of having qualified its suitability.
10. Rating Methodology: Set of rigorous and continuous criteria and procedures used by a rating agency to evaluate rating objects.
11. Rating Object: Refers to any financial entity, issuing entity and its securities, administered investment funds, insurance companies or reinsurance companies, and other subjects requiring a risk rating established by law.
12. Commercial Relationships: For the purposes of this norm, a commercial relationship shall be understood as any contractual or service provision link different from the rating process, or complementary activities authorized in current regulations. These relationships shall be managed through internal conflict mitigation policies, and in no case may influence the technical opinion of the rating committee.
13. Registry: Is the structured and systematic annotation of information regarding a rating agency in the Unified Rating Agencies System under the Superintendency of Banks, which reflects the detail of compliance with documentary requirements.
14. Unified Rating Agencies System: This system has the function of coordinating and exchanging information between control bodies through a virtual information management platform designed to consolidate, integrate, and centralize data regarding the registration and licensing of rating agencies in the national financial, securities, and insurance systems. All of this, strictly respecting the exclusive competencies and attributions of each control body, in accordance with what is established in the current legal framework.

Art. 5. Minimum capital for the constitution of rating companies.- Rating agencies that are constituted in the country must demonstrate a minimum subscribed and paid-in capital in cash in full amounting to one hundred fifty thousand United States dollars (USD 150,000.00).

Rating agencies must include in their denomination the expression "rating agency"