Resolution JPRF-F-2023-094: Reforming Deposit Insurance Norms for Fixed Premium and Extraordinary Contribution for 2024

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-2023-094
THE FINANCIAL POLICY AND REGULATION BOARD
CONSIDERING:
That, Article 226 of the Constitution of the Republic of Ecuador determines 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 308 of the Fundamental Norm holds that financial activities are a public order service, and may be exercised, with prior authorization from the State, in accordance with the law; their fundamental purpose is to preserve deposits and meet financing requirements for the achievement of the country's development objectives; That, Article 309 of the Magna Carta mentions that the national financial system is composed of the public, private, and popular and solidary sectors, which intermediates public resources. Each of these sectors will have specific and differentiated control norms and entities, which will be responsible for preserving their safety, stability, transparency, and solidity; That, Article 13 of the Organic Monetary and Financial Code, Book I, creates the Financial Policy and Regulation Board as part of the Executive Function, responsible for the formulation of credit, financial, securities, insurance, and prepaid health care service policies and regulations; That, Article 14.1 of the aforementioned Code establishes as a function of the Financial Policy and Regulation Board the issuance of secondary regulation related to the Deposit Insurance, Liquidity Fund, and Private Insurance Fund; That, the aforementioned Article 14.1 provides that the Corporation of the Deposit Insurance, Liquidity Fund, and Private Insurance Fund, through its legal representative, may propose regulation projects for consideration by the Financial Policy and Regulation Board; That, Article 150 of the cited Code above states that entities of the national financial system are subject to the regulation issued by the Financial Policy and Regulation Board. In concordance, Article 160 stipulates that the national financial system will be integrated by the public financial sector, private financial sector, and the popular and solidary financial sector; That, General Provision Twenty-Ninth of the aforementioned Organic Code indicates that in current legislation where mention is made of the "Monetary and Financial Policy and Regulation Board," it shall be replaced by "Financial Policy and Regulation Board"; That, Transitory Provision Forty-Fourth of the aforementioned Organic Code mandates that resolutions contained in the Codification of Monetary, Financial, Securities, and Insurance Resolutions of the Monetary and Financial Policy and Regulation Board and norms issued by control bodies will maintain their validity until the Monetary Policy and Regulation Board and the Financial Policy and Regulation Board resolve what corresponds, within the scope of their competencies; That, the Financial Policy and Regulation Board with Resolution No. JPRF-F-2022-038 of September 29, 2022, reformed Subsection IV "Sources of resources of the
deposit insurance system and payment of contributions," Section I "General Norms for the Operation of the Deposit Insurance of the Private Financial Sector and the Popular and Solidary Financial Sector," Chapter XXVIII "On Deposit Insurance," Title II "National Financial System," Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions;

Resolution No. JPRF-F-2023-094

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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, with Letter No. COSEDE-COSEDE-2023-0614-LETTER of December 28, 2023, the Acting General Manager of COSEDE informed the Financial Policy and Regulation Board that Technical Reports No. CTRE-MET-2023-008 of September 19, 2023, and No. CTRE-MET-2023-015 of December 27, 2023, have a confidential character. These reports supporting its normative reform proposal were sent with Memorandum No. COSEDE-COSEDE-2023-0152-MEMORANDUM of September 20, 2023, and Letter No. COSEDE-COSEDE-2023-0613-LETTER of December 27, 2023; That, the Acting Technical Secretary of the Financial Policy and Regulation Board, through Memorandum No. JPRF-ST-2023-0120-M of December 28, 2023, forwards to the Acting President of the Board the following:
a. Reserved Technical Report No. JPRF-CTSV-2023-010 of December 28, 2023, in which it is determined that, based on the review of the technical reports presented by COSEDE through Memorandum No. COSEDE-COSEDE-2023-0152-MEMORANDUM of September 20, 2023, and via Letter No. COSEDE-COSEDE-2023-0613-LETTER of December 27, 2023, which refers to the following reform proposals: i) Review of the target level of the Deposit Insurance of the Private Financial Sector; and, ii) Review of the ordinary and extraordinary contributions made by entities of the private financial sector, the Technical Coordination of Policy and Regulation of the Securities and Insurance System of this Board, considers it appropriate to maintain the fund's target level at 17.23%, the fixed contribution at 0.06% once the fund has reached the target level, as well as, the inclusion of the extraordinary contribution when the fund's coverage is below 13%. b. Legal Report No. JPRF-CJF-2023-76 of December 28, 2023, states that the Financial Policy and Regulation Board is competent to issue secondary regulation related to the Deposit Insurance, Liquidity Fund, and Private Insurance Fund as determined in Article 14.1, number 13 of the Organic Monetary and Financial Code, Book I. For this effect, the Technical Secretariat of the Financial Policy and Regulation Board, in compliance with what is provided in number 1 of Article 25.1 of the aforementioned Code, issued the technical and legal reports that support the referred Reform Proposal to Section I "General Norms for the Operation of the Deposit Insurance of the Private Financial Sector and the Popular and Solidary Financial Sector" Chapter XXVIII "On Deposit Insurance" Title II "National Financial System" Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions. For the indicated reasons, the Reform Proposal falls within the framework of current law, so its issuance is legally viable, according to the competencies and faculties attributed to the Financial Policy and Regulation Board; That, the Financial Policy and Regulation Board, in an extraordinary reserved in-person session held on December 29, 2023, reviewed Memorandum No. JPRF-ST-2023-0120-M of December 28, 2023, issued by the Acting Technical Secretary of the Board; as well as the aforementioned reports from the Technical Coordination of Policy and Regulation of the Securities Sector and from the Legal Coordination of Policy and Financial Norms, in addition to the corresponding Draft Resolution; and, That, the Financial Policy and Regulation Board, in an extraordinary reserved in-person session held on December 29, 2023, reviewed and approved the following Resolution; and, In exercise of its functions,

Resolution No. JPRF-F-2023-094

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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:
ARTICLE FIRST.- Substitute Article 13 of Subsection IV "Sources of resources of the deposit insurance system and payment of contributions," Section I "General Norms for the Operation of the Deposit Insurance of the Private Financial Sector and the Popular and Solidary Financial Sector," Chapter XXVIII "On Deposit Insurance," Title II "National Financial System," Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, with the following text:
"Art. 13.- Contributions to the Deposit Insurance.- Entities of the private and popular and solidary financial sectors are obligated to participate with the following contributions to the Deposit Insurance:
i) Ordinary contributions:
a. Fixed premium; and, b. PAR (risk-adjusted premium). ii) Extraordinary contributions."
ARTICLE SECOND.- Substitute the text of Article 15 of Paragraph I "Contributions by deposit insurance premiums of the private financial sector," Subsection IV "Sources of resources of the deposit insurance system and payment of contributions," Section I "General Norms for the Operation of the Deposit Insurance of the Private Financial Sector and the Popular and Solidary Financial Sector," Chapter XXVIII "On Deposit Insurance," Title II "National Financial System," Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, with the following text:
"Art. 15.- Fixed Premium.- For the year 2024, a fixed premium of 0.06% annually will be charged.
This premium percentage will be reviewed annually by the Financial Policy and Regulation Board based on the report sent by COSEDE, by October of each year, or if necessary, at any time, for extraordinary causes."
ARTICLE THIRD.- Incorporate into Article 21 of Paragraph III "Extraordinary Contributions," Subsection IV "Sources of Resources of the Deposit Insurance System and Payment of Contributions," Section I "General Norms for the Operation of the Deposit Insurance of the Private Financial Sector and the Popular and Solidary Financial Sector," Chapter XXVIII "On Deposit Insurance," Title II "National Financial System," Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, the following text:
"When the ratio between the equity of the Deposit Insurance of the Private Financial Sector and the covered deposits of said sector is below 13%, the Board of Directors of COSEDE may establish an extraordinary contribution of up to 1% of the covered deposits of the year immediately preceding the one in which said contribution is established. When it reaches or exceeds 13%, COSEDE will take the necessary actions to nullify the extraordinary contribution. Entities of the Private Financial Sector must pay the extraordinary contribution corresponding to them at the time and according to the payment mechanism defined by COSEDE."

Resolution No. JPRF-F-2023-094

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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 |
GENERAL PROVISIONS
First.- The Superintendence of Banks will notify the content of this Resolution to its controlled entities.
Second.- Cases of doubt that arise in the application of this section will be resolved by the Superintendence of Banks.
FINAL PROVISION.- This Resolution will 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 29, 2023.
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 December 29, 2023.- I CERTIFY.
ACTING TECHNICAL SECRETARY
Mgs. Marco Benítez Rojas