Resolution JPRF-F-2025-0164: Substitutes Chapter XXIX on the Liquidity Fund for Entities of the Private and Popular and Solidarity Financial Sectors

Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Management Governmental Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | Resolution No. JPRF-F-2025-0164 THE FINANCIAL POLICY AND REGULATION BOARD

CONSIDERING:

That Article 82 of the Constitution of the Republic establishes the right to legal certainty, which is based on respect for the Constitution and the existence of prior, clear, public, and applied legal norms by competent authorities;

That Article 84 of the Magna Carta provides that every body with normative power shall have the obligation to formally and materially adapt laws and other legal norms to the rights provided in the Constitution;

That Article 132, number 6 of the Constitution of the Republic of Ecuador grants public control and regulation bodies the faculty to issue norms of a general nature in matters within their competence, without being able to alter or innovate legal provisions;

That Article 141 of the same normative body provides that the Executive Function is integrated by the Presidency and Vice-Presidency of the Republic, the State Ministries, and other necessary bodies and institutions to fulfill, within the scope of their competence, the attributes of direction, planning, execution, and evaluation of national public policies and plans created to execute them;

That Article 226 of the Fundamental Norm mandates 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;

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

That Article 303 of the Magna Carta mentions 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, which is a legal entity of public law, whose organization and functioning will be established by law;

That Article 308 of the Constitution of the Republic of Ecuador prescribes that financial activities are a service of public order and may be exercised with prior authorization from the State;

That Article 309 of the Fundamental Norm indicates that the National Financial System is composed of the public, private, and popular and solidarity sectors; and each of these sectors will have specific control norms and entities, which will be responsible for preserving their security, stability, transparency, and solidity;

That Article 13 of the Organic Monetary and Financial Code, Book I, reformed by the Organic Law Reforming the Organic Monetary and Financial Code 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 and as a legal entity of public law, responsible for the formulation of credit, financial, securities, insurance, and prepaid comprehensive health care services policy and regulation;

That the Organic Law of Public Integrity, published in the Third Supplement of the Official Register No. 68 of June 26, 2025, reformed several articles of Book I of the Organic Monetary and Financial Code, among them, substituted Article 13 and created the Financial and Monetary Policy and Regulation Board, part of the Executive Function, as a legal entity of public law, responsible for the formulation of monetary, credit, financial, securities, insurance, and prepaid comprehensive health care services policy and regulation;

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Management Governmental Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | That the Tenth Transitory Provision of the Organic Law of Public Integrity mentions that, within a period of one month counted from the entry into force of this Law, the President of the Republic will remit to the National Assembly the list of candidates for the designation of the members of the Financial Policy and Regulation Board and Monetary Board;

That the second paragraph of the Fourth Transitory Provision of the Organic Law for the Strengthening of Protected Areas, published in the Fourth Supplement of the Official Register No. 80 of July 14, 2025, states that the structure and functions of the Financial Policy and Regulation Board, established in the Organic Monetary and Financial Code before June 26, 2025, will remain in effect until the designation of the members of the Financial Policy and Regulation Board and Monetary Board by the General Assembly;

That the Regulation to the Organic Law of Public Integrity, in its Fifteenth Transitory Provision, mentions that the Financial Policy and Regulation Board will guarantee during the transformation process the continuity of administrative, contractual, judicial, and extrajudicial processes; as well as of the different services, programs, projects, and processes already initiated;

That number 2 of Article 14 of the Organic Monetary and Financial Code, Book I, prior to the reform effected by the Organic Law of Public Integrity, published in the Third Supplement of the Official Register No. 68 of June 26, 2025, established that the Financial Policy and Regulation Board has competence to issue regulations that allow maintaining the integrity, solidity, sustainability, and stability of the national financial, securities, insurance, and prepaid comprehensive health care services systems;

That Article 14.1 of the aforementioned Organic Code prescribes that for the performance of its functions, the Policy and Regulation Board must fulfill the following duties and exercise the following faculties, among which are: "(...); 3. Evaluate risks to financial stability and issue macroprudential regulations within the scope of its competence, in consultation with the Monetary Policy and Regulation Board, without prejudice to its independence; (...); 7. Issue the prudential regulatory framework to which financial, securities, insurance, and prepaid comprehensive health care services entities must be subject, a framework that must be coherent, not give rise to regulatory arbitrage (...); (...); 9. Issue the non-prudential regulatory framework for all financial, securities, insurance, and comprehensive health care services entities (...); (...); 13. Issue secondary legislation related to the Deposit Insurance, Liquidity Fund, and Private Insurance Fund; (...); 15. a. Prevent and seek to eradicate fraudulent and prohibited practices, including money laundering and the financing of crimes such as terrorism, considering current and applicable international standards; (...); 25. Apply the provisions of this Code and resolve cases not provided for in it; (...); 27. Exercise other functions, duties, and faculties assigned to it by this Code and the law; (...)";

That Article 36 of the Organic Monetary and Financial Code, Book I, defines the functions of the Central Bank of Ecuador, as implementing policy in the monetary field, to promote the sustainability of the monetary and financial system in accordance with the provisions of this Code; and to act as fiduciary administrator of the Trusts of the Liquidity Fund of the Private and Popular and Solidarity Financial Sectors; as well as in trusts;

That Articles 59 and 60 ibidem determine that the Superintendence of Banks is a technical body of public law, whose organization and functions are determined in the Constitution of the Republic and the law, and that the purpose of the mentioned institution is to monitor, audit, intervene, control, and supervise financial activities;

That Article 62 of the aforementioned norm determines the functions of the Superintendence of Banks based on its competencies and faculties constant in the law;

That Article 74 of the Code ut supra mentions that the Superintendence of Popular and Solidarity Economy, in addition to the attributions granted by the Organic Law of Popular and Solidarity Economy, will have control acts functions;

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Management Governmental Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | That Articles 79 and 80 of the same norm determine that the Corporation of Deposit Insurance, Liquidity Fund, and Private Insurance Fund is a legal entity of public law, non-financial, with administrative and operational autonomy, and administers the i) Deposit Insurance, ii) Liquidity Fund, iii) Private Insurance Fund of the private financial sector and the popular and solidarity sector;

That Article 85 of the cited Code prescribes the functions of the Board of Directors of COSEDE, which are: i) execute the policies defined by the Monetary and Financial Policy and Regulation Board for Deposit Insurance, Liquidity Fund, and Private Insurance Fund; ii) approve extraordinary liquidity credits; iii) approve the return of contributions to the Liquidity Fund, in accordance with this Code and according to the procedure established by the Board;

That Article 143 ibidem defines financial activity as operations and services linked to financial flows or risks, carried out habitually by entities forming the financial, securities, and insurance systems. Thus, financial activities are a service of public order, regulated and controlled by the State;

That Article 150 of the Code ut supra prescribes that entities of the national financial system will be subject to the regulation issued by the Financial Policy and Regulation Board;

That Article 160 of the cited Code establishes that the national financial system is integrated by the public financial sector, the private financial sector, and the popular and solidarity financial sector;

That Article 319, of the Organic Monetary and Financial Code, mandates that the Deposit Insurance of the private and popular and solidarity financial sectors will be administered by COSEDE;

That Article 320, of the same normative body, prescribes that entities of the financial and popular and solidarity sectors are obliged to participate with contributions to the Deposit Insurance and Liquidity Fund;

That Article 324, of the invoked norm, mentions that the Corporation of Deposit Insurance, Liquidity Fund, and Private Insurance Fund will constitute the Trusts of Deposit Insurance for entities of the Private Financial Sector and for entities of the Popular and Solidarity Financial Sector;

That Article 333 of the referred code states that liquidity deficiencies of entities in the private and popular and solidarity financial sectors can be covered by the Liquidity Fund, under the following conditions, when they maintain their technical equity within the minimum levels required by Article 190 of this norm and that they have managed their liquidity in accordance with the regulations issued for this effect;

That Article 336 ibidem states that contributions to the Liquidity Fund and the periodicity of its payment by entities in the private and popular and solidarity financial sectors will be determined by the Monetary and Financial Policy and Regulation Board;

That Article 339 of the Organic Monetary and Financial Code proposes that the following conditions will be observed regarding ordinary credits, which may be granted up to the amount equivalent to the contribution that each financial entity has made to the Liquidity Fund, which will guarantee the respective operation. Access to these credits will be automatic and their interest rate will be established by the Monetary and Financial Policy and Regulation Board. The Central Bank of Ecuador, in its capacity as fiduciary administrator, will inform the corresponding control body of the execution of these operations; and regarding extraordinary credits, they may be granted to contributing financial entities, provided they maintain the minimum solvency level determined by the Monetary and Financial Policy and Regulation Board. The interest rate of these credits will be established by the Board. The Monetary and Financial Policy and Regulation Board must issue eligibility norms, in which the conditions that financial entities must meet to access this type of credit will be established;

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Management Governmental Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | That Article 344 ibidem mentions that Private Insurance Funds will be protected by the coverage determined by the Code;

That the Fifty-Fourth Transitory Provision of the aforementioned normative body establishes that resolutions contained in the Codification of Monetary, Financial, Securities, and Insurance Resolutions of the Financial Policy and Regulation Board, Securities Board of the Monetary and Financial Policy and Regulation Board, will maintain their validity until the Monetary Policy and Regulation Board and the Financial Policy and Regulation Board decide what corresponds, within the scope of their competencies;

That Articles 3, 9, and 28 of the Organic Administrative Code determine the following: "Art. 3.- Principle of effectiveness. Administrative actions are carried out based on the fulfillment of the purposes provided for each body or public entity, within the scope of their competencies." "Art. 9.- Principle of coordination. Public administrations develop their competencies in a rational and orderly manner, avoiding duplications and omissions." "Art. 28.- Principle of collaboration. Administrations will work in a coordinated, complementary manner, and providing mutual aid (...)";

That Article 15 of the Organic Administrative Code recognizes the principle of responsibility, in which it is established that the State will 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 law acting in the exercise of a public power;

That through Technical Report No. JPRF-CTSF-2025-013 of August 29, 2025, and Legal Report No. JPRF-CJF-2025-036 of August 28, 2025, the Technical Coordination of Policy and Regulation of the Financial Sector and the Legal Coordination of Policy and Financial Norms analyze and present the technical and legal arguments to issue the norm of "LIQUIDITY FUND FOR ENTITIES OF THE PRIVATE FINANCIAL SECTOR AND THE POPULAR AND SOLIDARITY FINANCIAL SECTOR" with the objective of strengthening and harmonizing the regulatory framework applicable in matters of trust and liquidity fund operation;

That the Technical Secretary of the Financial Policy and Regulation Board, through Memorandum No. JPRF-ST-2025-0054-M of August 29, 2025, sends to the President of the Board the Technical Report No. JPRF-CTSF-2025-013 of August 29, 2025, issued by the Technical Coordination of Policy and Regulation of the Financial Sector, and the Legal Report No. JPRF-CJF-2025-036 of August 28, 2025, issued by the Legal Coordination of Policy and Financial Norms, as well as the respective draft resolution;

That the Financial Policy and Regulation Board, in an ordinary session held by technological means, convened on August 29, 2025, and carried out through video conference on September 2, 2025, learned of Memorandum No. JPRF-ST-2025-0054-M of August 29, 2025, issued by the Technical Secretary of the Board; as well as the Technical Report No. JPRF-CTSF-2025-013 of August 29, 2025, issued by the Technical Coordination of Policy and Regulation of the Financial Sector, and the Legal Report No. JPRF-CJF-2025-036 of August 28, 2025, issued 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 by technological means, convened on August 29, 2025, and carried out through video conference on September 2, 2025, learned of and approved the following Resolution; and,

In exercise of its functions,

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Management Governmental Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | RESOLVES:

SINGLE ARTICLE.- Substitute the text of Chapter XXIX "Liquidity Fund for Entities of the Private Financial Sector and the 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, and incorporate the following: Liquidity Fund for Entities of the Private Financial Sector and the Popular and Solidarity Financial Sector, according to the following text:

"LIQUIDITY FUND FOR ENTITIES OF THE PRIVATE FINANCIAL SECTOR AND THE POPULAR AND SOLIDARITY FINANCIAL SECTOR

SECTION I: GENERAL NORMS FOR THE OPERATION OF THE LIQUIDITY FUND OF THE PRIVATE FINANCIAL SECTOR AND THE POPULAR AND SOLIDARITY FINANCIAL SECTOR.

Art. 1.- Object.- Establish the general principles of operation of the Liquidity Fund of the Private and Popular and Solidarity Financial Sectors, as well as the faculties and responsibilities of the competent authorities and technical bodies.

Art. 2.- Constitution of the Liquidity Fund.- The Liquidity Fund, established in the Organic Monetary and Financial Code, will operate through two commercial trusts, constituted by contracts celebrated by public deed. The main purpose of the Liquidity Fund is to act as a lender of last resort for its contributors from the private financial sector (private banks) and the popular and solidarity financial sector (savings and credit cooperatives of segment 1, mutual savings and credit associations for housing, and central boxes).

The minimum content of the respective contracts is as follows: parties; antecedents; glossary of terms and definitions; constitution of the Liquidity Fund trust; financial sector involved; object of the trust; contributions to the trust and transfer of ownership; declarations on the funds of the settlors; obligations and rights of the settlors; obligations and rights of the trustee; duration term; termination of the trust; early liquidation of fiduciary rights; tax regime; and, legislation, controversies, jurisdiction, competence, domicile, and amount.

Art. 3.- Structure of commercial trusts.- In the commercial trusts that make up the Liquidity Fund, the contributing entities of the private financial sector and the contributing entities of the popular and solidarity financial sector will act obligatorily as settlors, which, in turn, will have the status of beneficiaries.

Financial entities must sign the trust contract corresponding to the moment of their constitution, or adhere subsequently through the signing of the corresponding adherence contract. In the case of entities of the popular and solidarity financial sector, certification issued by the Superintendence of Popular and Solidarity Economy accrediting their status as contributor will also be required.

Art. 4.- Fiduciary rights.- For the purposes of this norm, fiduciary rights will be understood as the set of participations derived from the status of beneficiary and that represent the proportional intervention of the assets contributed by each contributor to the respective trust.

The value of the fiduciary rights will be determined by multiplying the percentage of participation corresponding to each contributing entity by the total resources of the respective trust.

Fiduciary rights constitute risk assets and their accounting registration will be subject to the provisions established in the current prudential regulation.

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Management Governmental Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | Fiduciary rights will not be subject to restitution or assignment between the contributors of the respective trust, except and solely in the cases provided for in the Organic Monetary and Financial Code, and by the provisions contained in this chapter.

In cases where the restitution of Liquidity Fund resources is not contemplated in current regulation, the financial entity will maintain its participation in the trust and its operational participation will be suspended while the restitution of its fiduciary rights is regulated normatively.

SINGLE GENERAL PROVISION.- Entities of the private and popular and solidarity financial systems must adhere to the Liquidity Fund Trusts within a term of thirty (30) days from when COSEDE issues instructions to the Fiduciary Administrator. The competent control body will verify compliance with these deadlines.

SECTION II: ADMINISTRATION OF THE LIQUIDITY FUND AND THE TRUSTS THAT MAKE IT UP

Art. 5.- Functions of the Board of Directors of COSEDE.- In addition to the functions provided in the Organic Monetary and Financial Code, the Board of Directors of COSEDE is responsible for the following functions:

1. Approve the methodology for the calculation of contributions of the settlors of the trusts that make up the Liquidity Fund;
2. Approve the texts of the contracts of the Liquidity Fund trusts and guarantee trusts, and their modifications;
3. Review and approve the annual budget of the trusts and their reforms, presented by the Fiduciary Administrator;
4. Review and approve the annual accountability report and the audited annual financial statements of the Liquidity Fund trusts;
5. Authorize the registration of the patrimonial affectation generated by the management of the trusts that make up the respective Liquidity Fund for the fiscal year;
6. Approve loans between Liquidity Fund Trusts;
7. Approve passive operations;
8. Review the main aspects of the management of the investment portfolios of the f