RESOLUTION NO. JPRM-2022-030-A

THE MONETARY AND REGULATORY POLICY BOARD

CONSIDERING:

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

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

That, the first paragraph of Article 303 of the Constitution of the Republic determines that the formulation of monetary, credit, exchange, and financial policies is the exclusive authority of the Executive Branch and will be implemented through the Central Bank of Ecuador;

That, Article 47.1 of the Organic Monetary and Financial Code created the Monetary and Regulatory Policy Board as part of the Executive Branch, responsible for the formulation of monetary policy, the highest governing body of the Central Bank of Ecuador, and determines its composition;

That, numeral 15 of Article 47.6 supra, among other functions of the Monetary and Regulatory Policy Board, determines: “15. Establish and regulate the functioning of the committees that may be necessary for the functioning of the Bank”;

That, Article 57.2 of the aforementioned Organic Code establishes that the Monetary and Regulatory Policy Board will designate and determine the powers and functions of the Audit Committee that will assist it in the oversight of financial reports, internal audit, external audit, and internal control systems; for which it will approve the corresponding regulation;

That, Article 128 of the Organic Administrative Code establishes: “Normative act of an administrative nature. It is any unilateral declaration made in the exercise of an administrative competence that produces general legal effects, which is not exhausted with its compliance and directly”;

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That, by Resolution No. JPRM-2021-006-A, of December 17, 2021, the Monetary and Regulatory Policy Board issued the “Regulation of the Audit Committee of the Central Bank of Ecuador,” whose object is to establish the norms that regulate the composition, powers, responsibilities, and functions of the Audit Committee of the Central Bank of Ecuador, conceived as the advisory and consultation body of the Monetary and Regulatory Policy Board that will assist it in the oversight of financial reports, internal audit, external audit, governance management, risk management, and internal control systems of the Central Bank of Ecuador;

That, it is necessary to reform the “Regulation of the Audit Committee of the Central Bank of Ecuador,” in order to adapt the established norms regarding the powers, responsibilities, and functions of the Audit Committee of the Central Bank of Ecuador, for a better development of its activities and results of its management;

That, the Monetary and Regulatory Policy Board, in ordinary session by virtual modality, on December 19, 2022, reviewed the proposal sent via memorandum No. BCE-BCE-2022-0260-M, of December 13, 2022, by the General Manager of the Central Bank of Ecuador to the President of the Monetary and Regulatory Policy Board; as well as, the Technical Report No. BCE-DNAIB-2022-127, of December 12, 2022; and, the Legal Report No. BCE-CGJ-0166-2022, of December 12, 2022.

In exercise of its functions and in attention to Article 47.7 of the Organic Monetary and Financial Code, the Monetary and Regulatory Policy Board resolves:

REFORM THE REGULATION OF THE AUDIT COMMITTEE OF THE CENTRAL BANK OF ECUADOR ISSUED BY RESOLUTION NO. JPRM-2021-006-A

Art. 1.- Substitute the first paragraph of Article 3 of Resolution No. JPRM-2021-006-A, of December 17, 2021, with the following text:

“Article 3.- Audit Committee: It is the advisory and consultation body of the Monetary and Regulatory Policy Board, which will assist it in the oversight of financial reports, bank audit, external audit, governance management, risk management, and internal control systems of the Central Bank of Ecuador.”

Art. 2.- Substitute Article 9 of Resolution No. JPRM-2021-006-A, of December 17, 2021, with the following text:

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"Article 9.- Functions of the Audit Committee: The Audit Committee will perform the following functions:

### Regarding the oversight of financial statements:

a) Monitor the independent external audit of the financial statements of the Central Bank of Ecuador, which includes, among others, reviewing the observations and conclusions of the bank auditor, external auditors, and findings of other control bodies; and, supervise the compliance and correction of audit findings in areas such as internal control, legal and regulatory compliance, and others;

b) Monitor the compliance of the financial statements of the Central Bank of Ecuador with applicable national and international legal and accounting standards for the Institution;

c) Perform oversight of adequate internal control systems that guarantee that financial information is reliable and timely;

d) Review the financial statements of the Central Bank of Ecuador, prior to their submission to the approval body, in order to verify that said financial statements have been reviewed by the Bank Audit and external audit, through the different reports and statements they issue;

e) Analyze and inform the Monetary and Regulatory Policy Board of relevant accounting changes that affect the financial situation of the Central Bank of Ecuador, including complex or unusual transactions; and,

f) Require, if applicable, specific reviews to the Bank Audit, regarding which the Committee will present its opinion and recommendation to the Monetary and Regulatory Policy Board on the results obtained.

### Regarding the function of the Bank Audit Director:

a) Propose to the Monetary and Regulatory Policy Board 3 candidates for the position of Bank Audit Director, for their consideration and appointment, who must be persons with professional experience of no less than ten (10) years in the field of audit, and must meet the same requirements to be a member of the Audit Committee;

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b) Propose to the Monetary and Regulatory Policy Board the powers, responsibilities, and functions of the Bank Audit Director, which must be part of the Organizational Management Statute by Processes of the Central Bank of Ecuador and perform a review, making recommendations for changes, if necessary;

c) In case of non-compliance with functions by the Bank Audit Director, submit to the Monetary and Regulatory Policy Board the report with the corresponding recommendations;

d) Ensure the independence and effectiveness of the Bank Audit Directorate;

e) Require the Bank Audit Directorate, at any time, specific reviews on situations that, in the opinion of the Audit Committee, are necessary or that are requested by the Monetary and Regulatory Policy Board or the Manager of the Central Bank of Ecuador;

f) Review, make suggestions, and approve the Annual Plan of the Bank Audit Directorate, by December 31 of the year prior to its execution; and, monitor its compliance guaranteeing that it addresses the main risk areas, legal provisions, and those made by the Monetary and Regulatory Policy Board;

g) Know and analyze the follow-up to the observations and recommendations of control bodies, within their competencies, as well as of the Bank Audit Directorate and external audit, regarding internal control weaknesses;

h) Monitor the compliance with the recommendations of the Bank Audit Directorate, external audit, and control bodies, within their competencies, to guarantee that appropriate measures have been taken regarding significant findings;

i) Review the annual work plan, objectives, performance measures, and management results of Bank Audit;

j) Make recommendations on bank audit projects;

k) Know the reports of the Bank Audit Director, gathering information to evaluate the work performed by the function during the execution period; and, if applicable, request the clarifications that are necessary; and,

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l) Know the progress and results of the implementation of the continuous training and knowledge update plan of the members of the Bank Audit Directorate, regarding advances in best practices and regulatory compliance.

## Regarding External Audit:

a) Know and opine regarding the terms of reference for the selection of external auditors prepared by the Central Bank of Ecuador;

b) Propose to the Monetary and Regulatory Policy Board the list of independent external auditors, with recognized international experience, previously qualified by the Superintendency of Banks;

c) Know, verify, and inform the Monetary and Regulatory Policy Board that the contracted external auditors comply with the established terms of reference, putting special emphasis on the scope and approach offered by external audit, for which effect the Internal Bank Auditor, in their capacity as contract administrator, will inform the Committee, periodically or whenever there is any novelty during the execution of the contract, guaranteeing the execution of the audit and the delivered results;

d) Know the scope and audit approach proposed by external auditors, including coordination with bank audit activity;

e) Have meetings with external auditors during the work planning phase, the presentation of audited financial statements, and the discussion of the results of recommendations made;

f) Have scheduled meetings with external auditors, to discuss any sensitive matter, within their functions;

g) Annually monitor the performance of external auditors and formulate recommendations for contracting, continuity, or termination of the contract, in accordance with applicable regulations;

h) Monitor that external audit is performed in accordance with National and International Audit Standards;

i) Know the reports of the Bank Auditor regarding the compliance with the recommendations of external audit;

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j) At the request of the General Management of the Central Bank of Ecuador, attend the reading of the reports of external auditors and control bodies;

k) Require external auditors specific reviews on situations that, in the opinion of the Audit Committee, are necessary; or, that the Monetary and Regulatory Policy Board requires;

l) Issue criteria regarding disagreements that may arise between the General Management and external auditors that are brought to its knowledge; and,

m) Request the necessary explanations to determine the reasonableness of accounting adjustments proposed by external auditors; and, bring its criteria to the knowledge of the Monetary and Regulatory Policy Board.

## Regarding Governance Management and Risk Management:

a) Know and advise on the governance, risk management, and internal control processes of the Central Bank of Ecuador;

b) Annually monitor the risk profile of the Central Bank of Ecuador and make pertinent recommendations;

c) Monitor exposure to significant risks and control problems, including fraud risks, governance problems, and other matters necessary or requested by the Monetary and Regulatory Policy Board;

d) Know the organization's control framework, including information technology security and control, and make recommendations, if applicable;

e) Monitor the application of regulations related to the prevention, detection, and eradication of money laundering and the financing of crimes; and,

f) Know and follow up on the observations and conclusions of the bank auditor, external auditors, and findings of any competent public institution, related to compliance and regulation topics.

## Regarding internal control systems:

a) Know and inform the Monetary and Regulatory Policy Board about the adequate

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operation of internal control systems, understood as internal controls, the operational, administrative, process, and financial controls established to give transparency to the management of the administration;

b) Request information regarding the compliance with institutional policies and legal and regulatory provisions by the Central Bank of Ecuador;

c) Know and inform that the activities of the bodies comprising the internal control system seek the efficiency, effectiveness, and economy of control, avoiding overlaps or repetitions of actions;

d) Know and follow up on the establishment of an appropriate internal control culture within the Central Bank of Ecuador; and,

e) Know and follow up on the effectiveness of the internal control system to monitor compliance with the laws, regulations, and norms that regulate the functioning of the Central Bank of Ecuador.

Regarding the Monetary and Regulatory Policy Board:

a) Inform the Board, at least twice a year, on the development and compliance of its functions, indicating how the Committee has fulfilled its responsibilities;

b) Present to the Board the corresponding report, when circumstances of significant importance related to financial statements and operations proper to the nature of the Bank, internal control, governance, and risk management are detected; and,

c) Bring to the knowledge and consideration of the Monetary and Regulatory Policy Board the pertinent observations and improvement proposals within the framework of its powers."

Art. 3.- Eliminate letter d) of Article 14 of Resolution No. JPRM-2021-006-A, of December 17, 2021, and renumber the following letters.

Art. 4.- Substitute the first paragraph of Article 16 of Resolution No. JPRM-2021-006-A, of December 17, 2021, with the following text:

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"Article 16.- Of the sessions.- The Committee will meet ordinarily, once every three months; and, extraordinarily, when so required to address specific topics, on the day, time, place, and manner indicated in the summons."

Art. 5.- Substitute Article 17 of Resolution No. JPRM-2021-006-A, of December 17, 2021, with the following text:

"Article 17.- Quorum and Decisions.- The quorum will be formed with the attendance of two of its members, one of whom must necessarily be the President; in no case will a session be installed without the presence of the President of the Committee.

The vote of its members will be mandatory and its decisions will be adopted by simple majority. In case of a tie, the President will have the casting vote.

Votes, once emitted, cannot be modified. Votes emitted outside the time indicated in the summons, or in case of abandonment of the corresponding session, will be considered as abstentions."

Art. 6.- Following Article 21 of Resolution No. JPRM-2021-006-A, of December 17, 2021, add the following provisions:

"GENERAL PROVISION.- The Central Bank of Ecuador will provide the Audit Committee with the necessary human and material resources for its functioning, in accordance with the current legal framework."

"REPEALING PROVISION.- Section XIII: Norms that Regulate the Composition and Functioning of the Audit Committee of the Central Bank of Ecuador, of Chapter V: "General and Accounting Norms of Application in the Central Bank of Ecuador", of Title II "Of the Central Bank of Ecuador", of the Preliminary Book: "Administrative and General Provisions" of the Codification of Monetary, Financial, Securities and Insurance Resolutions, issued by the former Monetary and Regulatory Policy Board and Financial, is expressly repealed."

**FINAL PROVISION.-** This resolution will enter into force from the date of its signature, without prejudice to its publication in the Official Register.

Its publication on the institutional website is entrusted to the Document Management and Archive Directorate of the Central Bank of Ecuador.

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**COMMUNICATE.** - Given in the Metropolitan District of Quito, on December 19, 2022.

### THE PRESIDENT

*Signature*

Dr. TATIANA MARIBEL RODRÍGUEZ CERÓN

The aforementioned resolution was signed by Dr. Tatiana Maribel Rodríguez Cerón - President of the Monetary and Regulatory Policy Board, in the Metropolitan District of Quito, on December 19, 2022.- I CERTIFY.

### ADMINISTRATIVE SECRETARY

*Signature*

Att. MARÍA ALEXANDRA GUERRERO DEL POZO