Resolution No. JPRF-F-2024-0102: Reforms to Section V on Risk Asset Provisions and Section XXVIII on the Popular and Solidarity Economy

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-2024-0102 THE FINANCIAL POLICY AND REGULATION BOARD CONSIDERING: That Article 132, number 6 of the Constitution of the Republic of Ecuador determines that a law will be required to: “6. Grant public control and regulation bodies the authority to issue general norms in matters within their competence, without being able to alter or innovate legal provisions.”; That Article 226 of the Magna Carta mandates that State institutions, their bodies, dependencies, and public servants acting by virtue of a state power will exercise only the competencies and faculties attributed to them in the Constitution and the law; That Article 227 ibid establishes that the Public Administration constitutes a service to the community that will be governed by the principles of effectiveness, efficiency, quality, hierarchy, coordination, participation, and among others; That Article 303 of the Fundamental Law determines that the formulation of monetary, credit, exchange, and financial policies is the exclusive faculty of the Executive Function; That Article 425 of the Constitution of the Republic determines that “The hierarchical order of application of norms will be the following: The Constitution; international treaties and conventions; organic laws; ordinary laws; regional norms and district ordinances; decrees and regulations; ordinances; agreements and resolutions; and other acts and decisions of the public powers. (…)”; That Article 309 of the Supreme Norm points out that the national financial system is composed of the public, private, and popular and solidarity sectors, which intermediated public resources, which will have specific and differentiated control norms and entities, which will be in charge of preserving their security, stability, transparency, and solidity; That Article 311 ut supra prescribes that the popular and solidarity financial sector will be composed of savings and credit cooperatives, associative or solidarity entities, communal banks and savings banks; That Article 13 of the Organic Monetary and Financial Code, Book I, reformed by the Organic Reformatory Law to the Organic Monetary and Financial Code for the Defense of Dollarization, published in the Official Register No. 443 of May 3, 2021, created the Financial Policy and Regulation Board as a legal entity of public law and responsible for the formulation of credit, financial, securities, insurance, and prepaid comprehensive health care services policy and regulation; That Article 14 of the aforementioned Code provides that it corresponds to the Financial Policy and Regulation Board, among others, to issue microprudential regulations for the national financial, securities, insurance, and prepaid comprehensive health care services sectors; That Article 14.1 ibid grants the Financial Policy and Regulation Board, among others, the following duties and faculties: “1. Regulate the creation, constitution, organization, activities, operation, and liquidation of financial entities, securities, insurance, and prepaid comprehensive health care services; (…) 27. Exercise the other functions, duties, and faculties assigned to it by this Code and the law. (…)”;

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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 74 of the aforementioned normative body prescribes that the Superintendence of the Popular and Solidarity Economy, in addition to the attributions granted by the Popular and Solidarity Economy Law, will have the functions determined in Articles 71 and 62 of the Organic Monetary and Financial Code, Book I, except for numbers 19 and 28; That Article 150 of the mentioned Organic Code establishes that entities of the national financial system will be subject to the regulation issued by the Financial Policy and Regulation Board; That Article 160 ut supra precepts that the national financial system is integrated by the public financial sector, the private financial sector, and the popular and solidary financial sector; That Article 163 of the aforementioned Organic Code and Article 78 of the Organic Law of the Popular and Solidarity Economy determine that the popular and solidary financial sector is composed of savings and credit cooperatives, associative or solidarity entities, communal banks and savings banks; That Article 444 of the Organic Monetary and Financial Code, Book I, and Article 144 of the Organic Law of the Popular and Solidarity Economy stipulate that popular and solidary financial entities are subject to the regulation of the Monetary and Financial Policy and Regulation Board; That the last paragraph of Article 54 of the Organic Law of the Popular and Solidarity Economy, reformed by the Organic Reformatory Law of Various Legal Bodies, for the Strengthening, Protection, Promotion and Promotion of Organizations of the Popular and Solidarity Economy, Artisans, Small Producers, Microenterprises and Entrepreneurship, published in the Official Register Supplement No. 311 of May 16, 2023, establishes that: “Savings and credit cooperatives are exempt from the form of surplus distribution contained in this article. They may allocate the balance of surpluses, if any, to the payment of an annual interest for contribution certificates, which will be regulated by the Financial Policy and Regulation Board in accordance with existing regulations. In everything else, they will be subject to what is provided in the Organic Monetary and Financial Code.”; That the General Regulation of the Organic Law of the Popular and Solidarity Economy, in its Article 29, number 9, determines as a function of the General Assembly to decide on the distribution of surpluses; That by Resolution No. JPRF-F-2024-096 of February 2, 2024, the Financial Policy and Regulation Board incorporated as Section XXVIII “Norm for the Application of the First Transitional Provision of the Organic Reformatory Law of Various Legal Bodies, for the Strengthening, Protection, Promotion and Promotion of Organizations of the Popular and Solidarity Economy, Artisans, Small Producers, Microenterprises and Entrepreneurship”, in Chapter XXXVI “Popular and Solidarity Financial Sector”, Title II “National Financial System” of the Codification of Monetary, Financial, Securities and Insurance Resolutions; That the Technical Secretary of the Financial Policy and Regulation Board, through Memorandum No. JPRF-ST-2024-0031-M of March 6, 2024, sends to the President of the Board the Technical Report No. JPRF-CTSF-2024-002 and Legal Report No. JPRF-CJF-2024-012, both of March 6, 2024;

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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 Financial Policy and Regulation Board, in an extraordinary session held by technological means, convened on March 6, 2024 and carried out through video conference on March 8, 2024, learned of Memorandum No. JPRF-ST-2024-0031-M of March 6, 2024, issued by the Technical Secretary of the Board; as well as the Technical Report No. JPRF-CTSF-2024-002 and the Legal Report No. JPRF-CJF-2024-012 of March 6, 2024, issued by the Technical Coordination of Policy and Regulation of the Financial System and by the Legal Coordination of Policy and Financial Norms, and the corresponding draft resolution; That the Financial Policy and Regulation Board, in an extraordinary session held by technological means, convened on March 6, 2024 and carried out through video conference on March 8, 2024, learned of and approved the following Resolution; and, In exercise of its functions, RESOLVES: ARTICLE FIRST.- Incorporate into Article 425 of Section XXVIII “Norm for the Application of the First Transitional Provision of the Organic Reformatory Law of Various Legal Bodies, for the Strengthening, Protection, Promotion and Promotion of Organizations of the Popular and Solidarity Economy, Artisans, Small Producers, Microenterprises and Entrepreneurship”, Chapter XXXVI “Popular and Solidarity Financial Sector”, Title II “National Financial System”, of Book I “Monetary and Financial System” of the Codification of Monetary, Financial, Securities and Insurance Resolutions, as a second paragraph the following text: “For this effect, the Superintendence of the Popular and Solidarity Economy will dictate the control norm for the accounting determination of the surpluses of the Savings and Credit Cooperatives”. ARTICLE SECOND.- Eliminate the Second Transitional Provision contained in Section V “Norms for the constitution of provisions of risk assets in Savings and Credit Cooperatives 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” of the Codification of Monetary, Financial, Securities and Insurance Resolutions; and, enumerate the other transitional provisions. ARTICLE THIRD.- Incorporate as the Fourteenth General Provision of Section V “Norms for the constitution of provisions of risk assets in Savings and Credit Cooperatives 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” of the Codification of Monetary, Financial, Securities and Insurance Resolutions, the following text: “FOURTEENTH.- Entities that constitute 100% of the required provisions may, in accordance with the provisions established by the control body:

1. Establish new agencies or branches;
2. Distribute surpluses to their members; and,
3. Acquire real estate. The Superintendence of the Popular and Solidarity Economy, for entities that constitute 100% of the required provisions, may authorize them to assume obligations on behalf of third parties.”

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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 | FINAL PROVISION.- This Resolution will enter into force from the date of its issuance; 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 March 8, 2024. THE PRESIDENT, Mgs. María Paulina Vela Zambrano The resolution above 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 March 8, 2024.- I CERTIFY. TECHNICAL SECRETARY, Mgs. Nelly Arias Zavala