Resolution JPRFM-2025-014-M: Reforms to Chapter IV Monetary Policy Instruments Regarding Reserve Requirements

RESOLUTION No. JPRFM-2025-014-M THE BOARD OF FINANCIAL AND MONETARY POLICY AND REGULATION

CONSIDERING:

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

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

That, paragraphs 2 and 3 of Article 302 of the Constitution of the Republic provide that monetary, credit, exchange, and financial policies, among others, have as objectives to establish levels of global liquidity that guarantee adequate margins of financial security and to direct liquidity surpluses toward the investment required for the country's development;

That, the first paragraph of Article 303 of the Magna Carta determines that the formulation of monetary, credit, exchange, and financial policies is the exclusive faculty of the Executive Branch and shall be implemented through the Central Bank of Ecuador;

That, Article 309 supra establishes: "The national financial system is composed of the public, private, and popular and solidary sectors, which intermediates public resources. Each of these sectors will have specific and differentiated control norms and entities, which will be responsible for preserving their security, stability, transparency, and solidity (...)";

That, on October 13, 2025, the Organic Reform Law of the Organic Monetary and Financial Code was published in the Sixth Supplement of the Official Register No. 142;

That, Article 13 of the referred Code creates the Board of Financial and Monetary Policy and Regulation, part of the Executive Branch, as an organ with functional, technical, institutional autonomy, and in its decisions, responsible for the formulation of monetary, credit, financial, securities, insurance, and prepaid comprehensive health care service policy and regulation. The Board of Financial and Monetary Policy and Regulation shall be the highest governing body of the Central Bank of Ecuador;

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That, Article 17 of the referred Code, in its pertinent part, determines that: "(...) 9. Exercise the other functions, duties, and powers assigned to it by this Code and the law, within the scope of its management. For the fulfillment of these functions, the Board shall issue norms in matters within its competence, without altering legal provisions. The Board of Financial and Monetary Policy and Regulation may issue regulations by segments, economic activities, and other criteria. It may even reform or repeal regulations from the former Board of Monetary Policy and Regulation, the Board of Financial Policy and Regulation, or the Board of Monetary and Financial Policy and Regulation. All norms and policies issued by the Board of Financial and Monetary Policy and Regulation in the exercise of its functions, duties, and powers must be backed by duly substantiated technical and legal reports (...)";

That, Article 19 of the same Code, regarding the specific functions of the Board of Financial and Monetary Policy and Regulation in the monetary sphere, among others, establishes: "1. Formulate policy in the monetary sphere and monitor its application by the Central Bank of Ecuador, to preserve the integrity and sustainability of the dollarization monetary system and the financial system, in accordance with the provisions of this Code";

That, Article 24 supra provides that the acts of the Board of Financial and Monetary Policy and Regulation enjoy the presumption of legality and shall be expressed through resolutions that have mandatory force, which shall govern from their publication in the Official Register, or from the date of their issuance when so determined by the Board, in accordance with the subject matter;

That, Article 25.2 supra determines that the Technical Secretariat of the Board of Financial and Monetary Policy and Regulation is exercised by the Central Bank of Ecuador, and Article 25.3 establishes as its functions the preparation of technical and legal reports supporting regulation proposals, providing technical and administrative support to the Board of Financial and Monetary Policy and Regulation, and those otherwise assigned by said Board;

That, General Provision Twenty-Ninth supra states: "In current legislation where mention is made, indistinctly, of the Board of Monetary and Financial Policy and Regulation, the Board of Monetary Policy and Regulation; or, the Board of Financial Policy and Regulation, replace and understand as 'Board of Financial and Monetary Policy and Regulation'";

That, Article 118.1 supra determines the instruments to manage liquidity, among which are reserves, establishing that the Board of Financial and Monetary Policy and Regulation shall issue a resolution specifying the terms and conditions for liquidity operations;

That, Article 240 of the aforementioned norm determines: "Entities of the public and private financial sectors, as well as those of the popular and solidary financial sector, without prejudice to other reserves established by this Code, are obligated to maintain reserves on the deposits and captations they hold. Reserves shall be maintained at the Central Bank of Ecuador. This obligation is exempted for companies specialized in electronic deposits and payments, due to their nature not performing financial intermediation activities, and all resources of clients of these entities must be maintained deposited in accounts at the Central Bank of Ecuador or in accounts of financial entities that maintain reserves at the Central Bank, in accordance with regulations issued by the Board of Financial and Monetary Policy and Regulation. Under the authority of what is determined in the Constitution, for entities of the popular and solidary financial sector, the Board of Monetary Policy and Regulation shall establish differentiated reserve conditions by segments. Failure by the financial entity to timely cover the requested reserve constitutes a very serious offense, sanctioned by the Central Bank of Ecuador in accordance with this Code";

That, Article 241 of the same body of norms establishes: "The Board of Monetary Policy and Regulation shall regulate differentiated reserve percentages, which may be by capture structure, type of entity, among others";

That, Section 1 "RESERVE PERCENTAGE AND LIQUIDITY RESERVES OF ENTITIES OF THE PUBLIC, PRIVATE, AND POPULAR AND SOLIDARY FINANCIAL SECTORS", of Chapter IV "MONETARY POLICY INSTRUMENTS", of Title I "MONETARY SYSTEM" of the Codification of Monetary Policy Resolutions and Operations of the Central Bank of Ecuador, issued via Resolution No. JPRM-2025-006-M, of July 16, 2025, must be reformed considering the reality of the monetary and financial system, the dynamic effects of the country's economy, in order to

RESOLUTION No. JPRFM-2025-014-M Page | 4 guarantee the right to legal certainty, contributing to maintaining the stability of the monetary and financial system, and complying with the principles of legitimate trust and effective protection of rights;

That, First Transitional Provision of the Organic Reform Law of the Organic Monetary and Financial Code determines that members of the Board of Financial and Monetary Policy and Regulation, sworn in on September 16, 2025, by the National Assembly, will continue to exercise their functions for the periods they were designated and will maintain their labor continuity and acquired rights;

That, via Letter No. T.233-SGJ-25-098, of September 5, 2025, signed by the Constitutional President of the Republic, addressed to the President of the National Assembly, the list of candidates for the designation of Members of the Board of Financial and Monetary Policy and Regulation was sent; as well as, the temporality of their stay within the initial period;

That, the Plenary of the National Assembly, on September 16, 2025, designated and swore in the members of the Board of Financial and Monetary Policy and Regulation, in the persons of: Gustavo Estuardo Camacho Dávila; Silvia Daniela Moya Arteta; Roberto Javier Basantes Romero; María Isabel Camacho Cárdenas; and, Jeniffer Nathaly Rubio Abril;

That, the Board of Financial and Monetary Policy and Regulation, in Extraordinary Session No. 007-2025, in person mode, on December 3, 2025, reviewed the proposal sent via Memorandum No. BCE-BCE-2025-0296-M, of December 1, 2025, by the General Manager of the Central Bank of Ecuador to the President of the Board of Financial and Monetary Policy and Regulation; as well as, Technical Report No. BCE-GEEE-062-2025 / BCE-SEMF-088-2025, of December 1, 2025; and, Legal Report No. BCE-GJ-066-2025, of December 1, 2025; and,

In exercise of its functions and in attention to Article 24 of the Organic Monetary and Financial Code, the Board of Financial and Monetary Policy and Regulation,

RESOLVES:

Article 1. - Substitute Article 227 of Subsection 1 "RESERVE PERCENTAGE", of Section 1 "RESERVE PERCENTAGE AND LIQUIDITY RESERVES OF ENTITIES OF THE PUBLIC, PRIVATE, AND POPULAR AND SOLIDARY FINANCIAL SECTORS", of Chapter IV "MONETARY POLICY INSTRUMENTS", of Title I "MONETARY SYSTEM" of the Codification of Monetary Policy Resolutions and Operations of the Central Bank of Ecuador, issued via Resolution No. JPRM-2025-006-M, of July 16, 2025, with the following text:

"Article 227. - Reserve Percentage and Requirement: The reserve level that entities of the public, private, and popular and solidary financial sectors must maintain shall be calculated based on the weekly average of daily balances of deposits and captations of each entity, according to the following table and percentage:

Reserve Percentage by Type of Financial Entity and Asset Level FINANCIAL ENTITY RESERVE REQUIREMENT PERCENTAGE Public Financial Sector and Private Banks Assets: a) Greater than USD 1,000 million 5.0% b) Less than or equal to USD 1,000 million 4.0% Popular and Solidary Financial Sector Savings and Credit Cooperatives Segment 1 and Central Boxes 4.0% Savings and Credit Mutuals for Housing 4.0% Savings and Credit Cooperatives Segment 2 2.5% Savings and Credit Cooperatives Segment 3 1.0%".

Article 2. - Substitute Article 230 of Subsection 1 "RESERVE PERCENTAGE", of Section 1 "RESERVE PERCENTAGE AND LIQUIDITY RESERVES OF ENTITIES OF THE PUBLIC, PRIVATE, AND POPULAR AND SOLIDARY FINANCIAL SECTORS", of Chapter IV "MONETARY POLICY INSTRUMENTS", of Title I "MONETARY SYSTEM" of the Codification of Monetary Policy Resolutions and Operations of the Central Bank of Ecuador, issued via Resolution No. JPRM-2025-006-M, of July 16, 2025, with the following text:

"Article 230.- Composition of Reserves.- The reserves of private banks, the popular and solidary financial sector, and the public financial sector may be constituted as follows:

1. Private Banks and Popular and Solidary Financial Sector: a) Up to 100% with United States dollar balances that financial entities have in current accounts maintained at the Central Bank of Ecuador; and, b) Up to 45% with instruments issued by the entity in charge of public finances, whose original or remaining term is less than 360 days on the date of constitution of the reserve; said values must obligatorily be maintained in custody in the Centralized Securities Depository under the charge of the Central Bank of Ecuador.

2. Entities of the Public Financial Sector: a) Up to 100% with United States dollar balances that public financial entities have in current accounts maintained at the Central Bank of Ecuador; and, b) Up to 75% in instruments issued by the entity in charge of public finances, whose original or remaining term is less than 360 days on the date of constitution of the reserve; said values must obligatorily be maintained in custody in the Centralized Securities Depository under the charge of the Central Bank of Ecuador."

Article 3. – Substitute Transitional Provision Sixth, relative to Section 1 "RESERVE PERCENTAGE AND LIQUIDITY RESERVES OF ENTITIES OF THE PUBLIC, PRIVATE, AND POPULAR AND SOLIDARY FINANCIAL SECTORS", of Chapter IV "MONETARY POLICY INSTRUMENTS", of Title I "MONETARY SYSTEM" of the Codification of Monetary Policy Resolutions and Operations of the Central Bank of Ecuador, issued via Resolution No. JPRM-2025-006-M, of July 16, 2025, with the following:

"SIXTH.- The reserve constituted in accordance with the reforms established in this Resolution, must be complied with starting from the period between January 15 and 21, 2026, for Private Banks, Segment 1 and 2 cooperatives, central boxes, and mutuals; and, starting from the period between June 4 and 10, 2026, for Segment 3 cooperatives".

FINAL PROVISION. - This resolution shall enter into force from the present date, without prejudice to its publication in the Official Register. Its publication on the institutional website and updating of the Codification of Monetary Policy Resolutions and Operations of the Central Bank of Ecuador is entrusted to the General Secretariat.

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NOTIFY AND PUBLISH. - Given in the Metropolitan District of Quito, on December 3, 2025.

THE PRESIDENT Mgs. Gustavo Estuardo Camacho Dávila

The preceding resolution was processed and signed by Master Gustavo Estuardo Camacho Dávila, President of the Board of Financial and Monetary Policy and Regulation, in the city of Quito, on December 3, 2025.- I CERTIFY. TECHNICAL SECRETARIAT Mgs. Jennifer Mishel Carrillo Rosales