Resolution No. JPRF-F-2022-052: Extension of the Extraordinary and Temporary Financial Relief Mechanism until March 31, 2023

Resolution No. JPRF-F-2022-052 THE FINANCIAL POLICY AND REGULATION BOARD CONSIDERING: That, Article 226 of the Constitution of the Republic orders that: “The institutions of the State, its agencies, dependencies, public servants, and persons acting under a state authority shall exercise only the competencies and powers 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 277 of the Magna Carta prescribes that: “For the achievement of good living, the general duties of the State shall be: 1. Guarantee the rights of persons, collectives, and nature. (…) 5. Promote the development of economic activities through a legal order and political institutions that promote, foster, and defend them through compliance with the Constitution and the law. (…)”; That, according to number 7 of Article 284 of the Supreme Norm, it is established that economic policy shall have as its objective, among others, the “maintain economic stability, understood as the maximum level of production and employment sustainable over time”; That, Article 302 ibidem, in its pertinent part, mandates that: “Monetary, credit, exchange, and financial policies shall have as objectives: (…) 2. Establish levels of global liquidity that guarantee adequate margins of financial security. 3. Orient liquidity surpluses toward the investment required for the country's development. (…)”; and that, according to Article 303 of the Constitution, the formulation of credit and financial policies is an exclusive faculty of the Executive Function; That, Article 308 ibidem prescribes that financial activities are a public order service and shall have the fundamental purpose of preserving deposits and meeting financing requirements for the achievement of the country's development objectives. In turn, the last paragraph of this article mandates that: “The regulation and control of the private financial sector shall not transfer the responsibility for banking solvency nor imply any guarantee from the State. Administrators and managers of financial institutions and those who control their capital shall be responsible for their solvency. The arbitrary or generalized freezing or retention of funds or deposits in public or private financial institutions is prohibited.”; That, Article 309 ibidem establishes that: “The national financial system is composed of the public, private, and popular and solidary sectors, which intermediates public resources. Each of these sectors shall have specific and differentiated norms and control entities, which shall be responsible for preserving their security, stability, transparency, and solidity. These entities shall be autonomous. The directors of control entities shall be administratively, civilly, and criminally responsible for their decisions.”; That, Article 5 of the Organic Code of Money and Finance, Book I, prescribes that: “The formulation of policies and regulations in matters of monetary, credit, exchange, financial, as well as insurance and securities, is an exclusive faculty of the Executive Function and has as objectives those determined in articles 284 and 302 of the Constitution of the Republic and those established in the National Development Plan.”;

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That, Article 13 of the Organic Code of Money and Finance, Book I, reformed by the Organic Reforming Law to the Organic Code of Money and Finance for the Defense of Dollarization, published in the Official Register Supplement No. 443 of May 3, 2021, 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 services policy and regulation; That, numbers 1, 2, and 3 of Article 14 of the same legal body, provide that it corresponds to the Financial Policy and Regulation Board: “1. Formulate credit, financial, including insurance policy, prepaid comprehensive health care services, and securities policies; 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; 3. Issue micro-prudential regulations for the national financial, securities, insurance, and prepaid comprehensive health care services sectors, based on proposals presented by the respective superintendencies, within their respective scopes of competence and without prejudice to their independence.”; That, Article 14 ibidem provides that, for the fulfillment of its functions, “the Financial Policy and Regulation Board shall issue norms in matters within its competence, without being able to alter legal provisions. The Financial Policy and Regulation Board may issue regulations by segments, economic activities, and other criteria.”; That, in concordance with the aforementioned provisions, Article 14.1 of the Organic Code of Money and Finance, Book I, mandates that, for the performance of its functions, the Financial Policy and Regulation Board must comply with the following duties and exercise the following faculties: “1. Regulate the creation, constitution, organization, activities, operation, and liquidation of financial, securities, insurance, and prepaid comprehensive health care services entities; (…) 7. Issue the prudential regulatory framework to which financial, securities, insurance, and prepaid comprehensive health care services entities must adhere (…) 10. Promote financial inclusion processes and the full exercise of users' financial rights; (…)”; That, General Provision Twenty-Ninth of the Organic Code of Money and Finance, Book I, provides that in current legislation where the "Financial Monetary and Regulation Board" is mentioned, it shall be replaced by "Financial Policy and Regulation Board"; That, Transitional Provision Fifty-Fourth ibidem, provides that resolutions contained in the Codification of Monetary, Financial, Securities, and Insurance Resolutions shall remain in force until the Financial Monetary Policy and Regulation Board and the Financial Policy and Regulation Board resolve what corresponds, within the scope of their competencies; That, Article 1 of the Organic Law of Humanitarian Support to Combat the Health Crisis derived from Covid-19 determines that the object of the norm is to establish necessary humanitarian support measures to face the consequences derived from the health crisis caused by COVID-19, through measures aimed at mitigating their adverse effects within the Ecuadorian territory, allowing the fostering of economic and productive reactivation of Ecuador;

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That, through Resolution No. JPRF-F-2022-032 of July 21, 2022, the Financial Policy and Regulation Board incorporated the “Extraordinary and Temporary Financial Relief Mechanism” into the Codification of Monetary, Financial, Securities, and Insurance Resolutions, applicable to the public and private financial sectors and the popular and solidary financial sector; in which it was established that the term for the application of said Mechanism is from July 21, 2022, to December 31, 2022. That, with Letter No. BANECUADOR-BANECUADOR-2022-0429-OF of December 8, 2022, the General Manager in charge of BANECUADOR B.P. requests the Financial Policy and Regulation Board that: “The validity period for the application of Resolution No. JPRF-F-2022-032, initially established until December 31, 2022, be extended by three more months, that is, until March 31, 2023, with the purpose of continuing to implement extraordinary obligation arrangements, and to be able to massify its benefits to the citizenry, and to reduce the non-performing portfolio and delinquency index of BANECUADOR B.P.; in consonance with the financial and social sustainability approach contemplated in our institutional mission, which is in accordance with the Government Plan of the President of the Republic.”; and attached for this effect the Technical Report s/n titled “TECHNICAL REPORT FOR REQUEST FOR EXTENSION OF TERM TO THE EXTRAORDINARY AND TEMPORARY FINANCIAL RELIEF MECHANISM ACCORDING TO RESOLUTION NO. JPRF–F-2022-032” dated November 2022, approved by the Manager of Placements and Captures (S) of BANECUADOR B.P.; That, the Technical Secretary of the Financial Policy and Regulation Board, through Memorandum No. JPRF-SETEC-2022-0089-M of December 21, 2022, sends to the President of the Board the Technical-Legal Report No. JPRF-CTCJ-2022-012 of December 21, 2022, which concludes that: (i) By virtue of the technical analysis carried out, it is concluded that, due to the levels of non-performing portfolio participation, financial institutions could still apply the Extraordinary and Temporary Financial Relief Mechanism, within the term requested by BanEcuador, which results in a greater number of debtors benefiting from the conditions provided in Resolution No. JPRF-F-2022-032, so this extension, for this one time only and attending the social and financial relief objective sought by the aforementioned Resolution, could be applied to all sectors comprising the national financial system; and (ii) the Financial Policy and Regulation Board, as responsible for the formulation of credit and financial policy and regulation, has legal competence to extend the application term of the Extraordinary and Temporary Financial Relief Mechanism applicable to the national financial system, in accordance with what is provided in Article 14.1 numbers 1, 7, and 10 of the Organic Code of Money and Finance, Book I; That, the Financial Policy and Regulation Board, in an extraordinary session convened by technological means on December 22, 2022, and carried out through video conference on December 23, 2022, learned of Memorandum No. JPRF-SETEC-2022-0089-M of December 21, 2022, issued by the Technical Secretary of the Board; as well as the aforementioned technical-legal report, in addition to the corresponding draft resolution; That, the Financial Policy and Regulation Board, in an extraordinary session convened by technological means on December 22, 2022, and carried out through video conference on December 23, 2022, learned of and approved the following Resolution; and,

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In exercise of its functions, RESOLVES: ARTICLE 1.- In Article 29 of Section VII “Extraordinary and Temporary Financial Relief Mechanism applicable to the Public and Private Financial Sectors”, of Chapter XVIII “Classification of Risk Assets and Constitution of Provisions by Entities of the Public and Private Financial Sectors under the Control of the Superintendency of Banks”, of Title II “National Financial System”, of Book I “Monetary and Financial System” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, replace the phrase “shall be in force until December 31, 2022” with the following phrase: “shall be in force until March 31, 2023”. ARTICLE 2.- Replace the text of Article 28 of Section VII “Extraordinary and Temporary Financial Relief Mechanism applicable to the Public and Private Financial Sectors”, of Chapter XVIII “Classification of Risk Assets and Constitution of Provisions by Entities of the Public and Private Financial Sectors under the Control of the Superintendency of Banks”, 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: “Art. 28.- Entities of the public and private financial sectors shall report all operations on the application of this mechanism to the Superintendency of Banks on a monthly basis and in the manner that it determines. Likewise, the control organism shall inform about the referred application to the Financial Policy and Regulation Board, with the same periodicity, including at least the detail of the following information: a) Number of refinanced and restructured operations, by entity; b) Amount of refinanced and restructured operations, by entity; and, c) Province to which each operation belongs.” ARTICLE 3.- In Article 3 of Chapter LXI “Extraordinary and Temporary Financial Relief Mechanism applicable to the Popular and Solidary 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, replace the phrase “shall be in force until December 31, 2022” with the following phrase: “shall be in force until March 31, 2023”. ARTICLE 4.- Replace the text of Article 2 of Chapter LXI “Extraordinary and Temporary Financial Relief Mechanism applicable to the Popular and Solidary 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: “Art. 2.- Entities of the popular and solidary financial sector shall report all operations on the application of this mechanism to the Superintendency of Popular and Solidary Economy on a monthly basis and in the manner that it determines. Likewise, the control organism shall inform about the referred application to the Financial Policy and Regulation Board, with the same periodicity, including at least the detail of the following information:

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a) Number of refinanced and restructured operations, by entity and segment; b) Amount of refinanced and restructured operations, by entity and segment; and, c) Province to which each operation belongs.” GENERAL PROVISIONS FIRST.- The Superintendency of Banks and the Superintendency of Popular and Solidary Economy shall communicate to the respective controlled entities the content of this Resolution. SECOND.- The Superintendency of Banks and the Superintendency of Popular and Solidary Economy shall carry out the follow-up and control of compliance with the norms established for the Extraordinary and Temporary Financial Relief Mechanism by the entities that make up the national financial system. 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 December 23, 2022. THE PRESIDENT, Mgs. María Paulina Vela Zambrano The aforementioned 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 December 23, 2022.- I CERTIFY. TECHNICAL SECRETARY Dr. Nelly Arias Zavala