JPRF-F-2025-0141 — Reforms to the Methodology for Identifying Systemically Important Financial Entities in the Popular and Solidarity Sector and Establishment of Additional Primary Technical Equity Requirements for Systemic Risk

Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Government Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | Resolution No. JPRF-F-2025-0141 THE FINANCIAL POLICY AND REGULATION BOARD CONSIDERING: That Article 82 of the Constitution of the Republic of Ecuador establishes the right to legal security, which is based on respect for the Supreme Norm and the existence of prior, clear, public norms applied by competent authorities; That Article 132, number 6, of the Magna Carta grants control and regulatory bodies the authority to issue norms of a general nature in matters within their competence, without altering or innovating legal provisions; That Article 226 of the Supreme Norm provides that State institutions 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 284 ibidem prescribes as an objective of economic policy the following: “7. Maintain economic stability, understood as the maximum level of sustainable production and employment over time.”; That Article 303 of the Constitution stipulates that the formulation of monetary, credit, exchange, and financial policies is the exclusive faculty of the Executive Branch; That Article 308 of the Magna Carta determines that financial activities are a service of public order and may be exercised, with prior authorization from the State, in accordance with the law, and have the fundamental purpose of preserving deposits and meeting financing requirements for the achievement of the country's development; That Article 309 of the Fundamental Norm provides that the National Financial System is composed of the public, private, and popular and solidarity sectors, which intermediated public resources. Each of these sectors will be responsible for preserving their safety, stability, transparency, and solidity; That Article 311 of the Supreme Law establishes that the popular and solidarity financial sector will be composed of savings and credit cooperatives, associative or solidarity entities, communal banks and savings banks. Initiatives for services in the popular and solidarity financial sector will receive differentiated and preferential treatment from the State, insofar as they promote the development of the popular and solidarity economy; That Article 13 of the Organic Monetary and Financial Code, Book I, reformed by the Organic Law Reforming the Organic Monetary and Financial Code, published in the Official Register No. 443 of May 3, 2021, created the Financial Policy and Regulation Board, part of the Executive Branch, as a public law legal entity, responsible for the formulation of credit, financial, securities, insurance, and prepaid comprehensive health care services policy and regulation; That Article 14, number 2, of the aforementioned normative body grants the Board the competence of “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;’; That number 3 of Article 14.1 of the aforementioned Organic Code determines as a function of the Financial Policy and Regulation Board to issue macroprudential regulations within the scope of its competence; That number 7 of the aforementioned Article 14.1 establishes that the Policy Board has the attribution to: “7. Issue the prudential regulatory framework to which financial entities, securities, insurance, and prepaid comprehensive health care services must be subject, a framework that must be coherent, not give rise to regulatory arbitrage, and cover, at least, the following: (…) b. Establish the interest rate system, as provided in Article 130 of this Code, 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, technical equity, and risk weightings of assets, their composition, method of calculation, and modifications;” That Article 150 of the mentioned legal body prescribes that entities of the national financial system will be subject to the regulation issued by the Financial Policy and Regulation Board; That Article 151 of the referred normative body provides that the regulation must recognize the nature and particular characteristics of each of the sectors of the national financial system. It also states that the regulation may be differentiated by sector, by segment, by activity, among others; That Article 160 of the aforementioned Organic Code stipulates that the national financial system is integrated by the public financial sector, the private financial sector, and the popular and solidarity sector; That Article 163 of the referred normative body determines that among the entities that make up the popular and solidarity financial sector are savings and credit cooperatives, central savings banks, associative or solidarity entities, communal banks and savings banks, and mutual savings and credit associations for housing; That the third paragraph of Article 190 of the cited Organic Code determines: “Each superintendency, both the Banking Superintendency and the Popular and Solidarity Economy Superintendency, may establish an additional requirement to the primary technical equity for the following concepts, per institution or segment as appropriate: an increase between 0.5 and 2.5 percentage points, for counter-cyclical effect; and; an increase between 1.0 and 3.5 percentage points, if the financial institution or financial group is classified in a situation of systemic risk cause, through the methodology for that effect issued by the Financial Policy and Regulation Board, prior report from the respective superintendency.”; That Article 444 of the mentioned normative body signals that popular and solidarity financial entities are subject to the regulation of the Financial Policy and Regulation Board and the control of the Popular and Solidarity Economy Superintendency, who in the policies they issue will keep in mind the nature and characteristics proper to the solidarity financial sector; That Article 144 of the aforementioned Law stipulates that the regulation of the popular and solidarity financial sector will be under the charge of the Financial Policy and Regulation Board; That Article 145 of said Organic Law provides that “regulations will be issued in a differentiated manner both for the persons and organizations that make up the Popular and Solidarity Economy, as well as the Popular and Solidarity Financial Sector and will refer to the protection, promotion and incentives, functioning and control of the economic activities of the persons and organizations to which this Law refers, in coherence with the regulations issued by other State institutions in order to protect the rights of users and consumers.”; That the Fifty-Fourth Transitory Provision 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 will maintain their validity until the Monetary Policy Board and the Financial Policy and Regulation Board resolve what corresponds, within the scope of their competencies.”;

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Government Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | That Article 15 of the 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 who act in exercise of a public power by delegation of the State and their dependents, controlled or contractors.”; That with Office No. SEPS-SGD-IGT-2024-30998-F of November 12, 2024, the Popular and Solidarity Economy Superintendency issued Technical Report No. SEPS-INR-DNR-2024-0389, which details the proposed methodology for calculating the systemic importance index for entities of the popular and solidarity financial sector, in accordance with what is provided in Article 190 of the Organic Monetary and Financial Code, Book I; That with Office No. SEPS-SGD-IGT-2024-32202-OF, the Popular and Solidarity Economy Superintendency presented Report No. SEPS-INR-DNR-2024-0409 of November 22, 2024, which corresponds to a scope carried out on the methodology for the identification of entities of the popular and solidarity financial sector with systemic importance, after technical meetings held to review the methodology presented according to the previous consideration; That with Office No. SEPS-SEP-2025-00018-O of February 6, 2025, the Popular and Solidarity Economy Superintendency referred Office No. SEPS-SGD-2025-03244-OF and its annexes which includes, among others, Technical Report No. SEPS-INR-DNR-2025-003 of January 30, 2025, regarding the final version of the “Methodology for the Identification of Systemically Important Financial Entities of the Popular and Solidarity Sector under the control of the Popular and Solidarity Economy Superintendency”; That the Technical Secretary of the Financial Policy and Regulation Board, through Memorandum No. JPRF-ST-2025-0013-M of March 17, 2025, sends to the President of the Board Technical Report No. JPRF-CTSF-2025-005 and Legal Report No. JPRF-CJF-2025-005, both of March 17, 2025, as well as the respective draft resolution; That the Financial Policy and Regulation Board, in an extraordinary session held by technological means, convened on March 17, 2025 and carried out through video conference on March 19, 2025, learned of Memorandum No. JPRF-ST-2025-0013-M of March 17, 2025, issued by the Technical Secretary of the Board; as well as Technical Report No. JPRF-CTSF-2025-005 and Legal Report No. JPRF-CJF-2025-005, issued by the Technical Coordination of Financial System Policy and Regulation and by the Legal Coordination of Financial Policy and Norms, and the corresponding draft resolution; That the Financial Policy and Regulation Board, in an extraordinary session held by technological means, convened on March 17, 2025 and carried out through video conference on March 19, 2025, learned of and approved the following Resolution; and, In exercise of its functions, RESOLVES: ARTICLE FIRST.- Incorporate a Subsection III “Methodology for the identification of systemically important financial entities of the popular and solidarity sector and establishment of additional primary technical equity requirement for systemic risk” immediately after Subsection II “Technical Equity and Risk-Weighted Assets”, Section VI “Solvency Norm, Technical Equity, and Risk-Weighted Assets and Contingent Assets for Savings and Credit Cooperatives, Central Savings Banks, and Mutual Savings and Credit Associations for Housing”, Chapter XXXVI “Popular and Solidarity Financial Sector”, Title II “National Financial System”, Book I “Monetary and Financial System”.

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Government Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | Financiero”, of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, with the following text and articles: “SUBSECTION III: METHODOLOGY FOR THE IDENTIFICATION OF SYSTEMICALLY IMPORTANT FINANCIAL ENTITIES OF THE POPULAR AND SOLIDARITY SECTOR AND ESTABLISHMENT OF ADDITIONAL PRIMARY TECHNICAL EQUITY REQUIREMENT FOR SYSTEMIC RISK Art. 83.1.- Systemically important entities.- Those entities will be understood as those that by their characteristics could trigger a contagion effect on other participants in the financial system, generating losses of economic value or confidence, increasing uncertainty about the financial system as a whole and/or generating adverse effects in the real economy. Art. 83.2.- Objective.- Establish the methodology to identify systemically important entities in order to establish an additional primary technical equity requirement for systemic risk. Art. 83.3.- Identification Procedure.- For the identification of local systemically important entities, the Popular and Solidarity Economy Superintendency must apply the following procedure considering savings and credit cooperatives of segment 1, mutual savings and credit associations for housing, and central savings banks. Categories and indicators to establish the Systemic Importance Index (SII).- For the identification of systemically important entities, the following categories and quantitative indicators will be considered: 83.3.1. Size: measured as participation in total assets. It is calculated as the proportion of the total assets of a particular entity in relation to the total assets of the rest of the entities. 83.3.2. Interconnection: measures the financial relationship between entities that, in the event of deterioration of one of them, could impact the system given the connection in contractual obligations on which they operate within the financial system. For this purpose, the following indicators are considered: 83.3.2.1. Intra-financial assets: corresponds to investments, portfolios, and available funds that entities maintain in other entities of the national financial system, such as private banks, public banks, savings and credit cooperatives, mutual savings and credit associations for housing, and other government entities. 83.3.2.2. Intra-financial liabilities: measures the dependence of an entity on other entities of the national financial system, both for received deposits and for obligations contracted with other economic agents. 83.3.2.3. Securities in circulation: balance of securities issued and placed by legally authorized entities. 83.3.3. Substitutability: measures the impact in the event of difficulty in substituting the products and services of an entity with others in the market. For this purpose, the following indicators are considered: 83.3.3.1. Assets under custody: balance of securities and goods received from third parties for collection, in process of reimbursement, as guarantee for granted or received operations, or for any other concept, in custody, administration, or loan. 83.3.3.2. Demand and time deposits: corresponds to the balance of resources received from the public, payable within a period of less than thirty days, plus obligations derived from the collection of public resources, payable upon maturity of a period of not less than thirty days.

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Government Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | 83.3.3.3. Gross portfolio: the balance of the credit portfolio of all segments placed with natural persons or legal entities by entities without deducting the provision for uncollectible credits. 83.3.3.4. Service points: territorial presence of entities, measured through the number of service points. 83.3.4. Complexity: refers to the degree of difficulty to carry out the products and operations that characterize the activity of the entities. For this purpose, the following indicators are considered: 83.3.4.1. Total investments: balance of investments considering securities held at fair value, for sale, and until maturity. 83.3.4.2. Investments in shares and participations: balance of investments corresponding to shares, participations, and contributions. 83.3.4.3. Financial obligations: balance of financial obligations, including those with financial entities in the country, abroad, the public sector, the popular and solidarity group, and multilateral organizations. 83.3.5. Weighting of categories and indicators for the Systemic Importance Index (SII): The weighting for the categories and indicators for the identification of systemically important entities will be the following: Category (weighting) Individual Indicator Indicator Weight Size (20%) Total assets within the popular and solidarity financial sector (1) 20% Interconnection (30%) Intra-financial assets 12% Intra-financial liabilities 12% Securities in circulation 6% Substitutability (30%) Assets under custody 5% Demand and time deposits 10% Gross portfolio 8% Service points 7% Complexity (20%) Total investments (at fair value, for sale, and until maturity) 6% Investments in shares, participations, and contributions 5% Financial obligations (inter-jurisdictional and intra-financial liabilities) 9% Note (1): Savings and credit cooperatives belonging to segment 1, mutual savings and credit associations for housing, and central savings banks. 83.3.6. SII Calculation Procedure: The SII will be calculated with the average of the balances of the last 12 months of the size, interconnection, substitutability, and complexity indicators, using data with a cutoff of November 30 of each year, as follows:

1. Calculate for each month, the individual participation by entity regarding the total of entities for each of the indicators detailed in the previous number.
2. Standardize the obtained participation values by indicator, multiplying by 10,000 to express them in basis points.
3. Execute a weighted sum of the indicators of each entity according to the weightings specified in number 83.3.5.
4. Average the resulting SII values of each month to obtain a unique SII for each entity.

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Government Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | 5. Order the entities from highest to lowest according to their SII value. 83.3.7. Accounts and values for the calculation of the Systemic Importance Index (SII): The accounts and values to be considered for the calculation of the SII are the following: 83.3.7.1. Size Indicator Accounting Account Total assets within entities of the popular and solidarity financial sector (1) Account 1 Note (1): Savings and credit cooperatives belonging to segment 1, mutual savings and credit associations for housing, and central savings banks. 83.3.7.2. Interconnection Indicator Accounting Account* Intra-financial assets Balance of assets maintained by the popular and solidarity financial subsystem, that is, investments (portfolio) and available funds in other financial entities of the national financial system, such as private banks, public banks, savings and credit cooperatives, mutual savings and credit associations for housing, and other government entities. (Accounts 11 and 13) Intra-financial liabilities Balance of liabilities maintained by the popular and solidarity financial sector, referring to values captured by concept of deposits and financial obligations with other entities, such as private banks, public banks, savings and credit cooperatives, mutual savings and credit associations for housing; and, the balance of the 100 largest depositors in the country, which includes government entities, Social Security entities, and the real sector of the national economy. (Accounts 21 and 26; and, information structures) Securities in circulation Account 27 Accounts on which the information of the indicators and internal information structures is obtained. 83.3.7.3. Substitutability Indicator Accounting Account Assets under custody Account 7401 Demand and time deposits Account 2101 Account 2103 Gross portfolio Account 14 – Account 1499 Service points Comes from internal information structure *The number of authorized and registered service points in the control body is considered.

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Government Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | 83.3.7.4. Complexity Indicator Accounting Account Total investments (at fair value, for sale, and until maturity) Account 13 Investments in shares, participations, and contributions Account 1901 Financial obligations (inter-jurisdictional and intra-financial liabilities) Account 26 83.3.8. Identification of systemic entities: Systemic entities will be those that exceed 400 basis points of the Systemic Importance Index (SII). 83.3.9. Degree of systemic importance: To determine the degree of systemic importance of each entity, each one is assigned to a specific group (bucket) according to its score in the Systemic Importance Index (SII). The limits of each group are calculated as follows: 83.3.9.1. Upper limit: Obtained by adding the highest SII obtained, plus the SII corresponding to the last entity considered as systemic. 83.3.9.2. Lower limit: Calculated as the average between the D-SIB threshold and the SII of the immediately lower entity. 83.3.9.3. Distance: Is the difference between the upper and lower limit. Determines the distance of each group. 83.3.9.4. Buckets: Corresponds to the number of groups (5) that define the degree of systemic importance and to which an additional primary technical equity requirement will subsequently be assigned. 83.3.9.5. Ranges between groups: The distance is divided by the number of buckets to obtain the size of each interval or bucket. 83.3.10. Establishment of buckets: The upper and lower limits will be established for each of the five buckets, as follows: 83.3.10.1. The upper limit of the first bucket corresponds to that established in number 83.3.9.1. The lower limit will be calculated by subtracting the upper limit minus the range in

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Government Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | 83.3.10.2. The upper limit of the second bucket corresponds to the lower limit of the first bucket plus the range. The lower limit is the lower limit of the first bucket. 83.3.10.3. The upper limit of the third bucket corresponds to the lower limit of the second bucket plus the range. The lower limit is the lower limit of the second bucket. 83.3.10.4. The upper limit of the fourth bucket corresponds to the lower limit of the third bucket plus the range. The lower limit is the lower limit of the third bucket. 83.3.10.5. The upper limit of the fifth bucket corresponds to the lower limit of the fourth bucket plus the range. The lower limit is the lower limit of the fourth bucket. 83.3.11. Additional primary technical equity requirement: The additional primary technical equity requirement will be established according to the bucket to which the entity belongs, as follows: Bucket Additional Primary Technical Equity Requirement 1 0.5% 2 1.0% 3 1.5% 4 2.0% 5 2.5% 83.3.12. Publication of results: The Popular and Solidarity Economy Superintendency will publish the results of the Systemic Importance Index (SII) and the classification of entities in buckets annually, by November 30 of each year. 83.3.13. Review of the methodology: The Financial Policy and Regulation Board may review and modify the methodology established in this Subsection III, taking into account the evolution of the financial system and the experience acquired in its application. ARTICLE SECOND.- The Popular and Solidarity Economy Superintendency is responsible for the implementation and monitoring of the provisions of this Resolution. ARTICLE THIRD.- This Resolution enters into force on the date of its publication in the Official Register.

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Government Financial Management Platform. Red Block, 8th floor | Postal Code: 170507 | Quito - Ecuador | Given in the city of Quito, on March 19, 2025.

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President of the Financial Policy and Regulation Board

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