Resolution JPRM-2022-016-G — Approve the Audited Financial Statements of the Central Bank of Ecuador as of December 31, 2021

RESOLUTION No. JPRM-2022-016-G THE MONETARY AND FINANCIAL POLICY BOARD

CONSIDERING:

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

That, Article 227 ibidem states that Public Administration constitutes a service to the community 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 faculty of the Executive Function and shall be implemented through the Central Bank of Ecuador;

That, Article 30 of the Organic Monetary and Financial Code states: “The net results of the Central Bank of Ecuador shall be determined based on the financial statements prepared in accordance with internationally recognized accounting standards applicable to the institution, which must have the opinion of an independent external auditor. (…)”;

That, Article 31 of the aforementioned norm provides: “The Monetary and Financial Policy Board shall review and approve the annual financial statements provided they comply with the accounting policies and procedures of the Central Bank of Ecuador, which must be based on internationally recognized accounting standards (…)”;

That, Article 33 ibidem prescribes: “Within the general balance sheet of the Central Bank of Ecuador, the following systems are created:

First System: On the liability side of this System, national monetary species minted by the Central Bank of Ecuador that are in circulation, Central Bank Titles (TBC) referred to in Article 126 of this Code, any other direct obligations with the public, and deposits from other deposit societies, which include: private banks, mutualist banks, savings and credit cooperatives, public banks with demand deposits, shall be recorded. These liabilities must be covered one hundred percent by the assets of the international reserve.

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Second System: On the liability side of this System, deposits from other financial entities including the National Financial Corporation B.P., the Bank of the Ecuadorian Social Security Institute, other public sector financial entities, and financial intermediaries that do not capture demand deposits from the public shall be recorded. These liabilities shall be covered with the residual reserve assets once the First System is covered and must be equivalent to one hundred percent of the liabilities in this system.

Third System: On the liability side of this System, deposits of the Non-Financial Public Sector (NFPS), duly authorized private legal entities, in the Central Bank of Ecuador, and transfers through the Payment System pending settlement, as well as the external debt specific to the Central Bank of Ecuador, shall be recorded. These liabilities must be covered one hundred percent by the assets of the international reserve, once the second system has been fully covered.

Fourth System: Records the remaining accounts of the assets and liabilities of the Central Bank of Ecuador, including equity and results accounts. Once the Third System is covered, its remainder shall be added to the assets covering this System.

The liabilities of a system of lower precedence cannot be honored with the assets of the preceding ones. The Monetary and Financial Policy Board shall determine and publish the methodology for the distribution of assets and liabilities of each of the systems. The publication of the general balance sheet of the Central Bank of Ecuador, classified into the four systems, shall be carried out on a monthly basis.”;

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

That, numeral 17 of Article 47.6 supra, regarding the functions of the Monetary and Financial Policy Board, establishes: “(…) 17. Review and approve the annual financial statements of the Central Bank of Ecuador (…)”;

That, the Fifty-First Transitory Provision of the Organic Monetary and Financial Code provides: “(…) the Monetary and Financial Policy Board shall adopt all necessary measures to ensure the full preparation and publication of its financial statements, policies, and accounting procedures in accordance with the adaptation of IFRS in all that is applicable to the nature of the Central Bank of Ecuador, for the closing of the financial year ending December 31, 2021, at the latest. (…)”;

That, by Resolution No. JPRM-2022-006-G, of February 11, 2022, the Monetary and Financial Policy Board issued the “Norm for the Contracting of External Auditors of the Central Bank of Ecuador”;

That, by Resolution No. JPRM-2022-012-G, of March 28, 2022, the Monetary and Financial Policy Board resolved to reform the “Norm for the Contracting of External Auditors of the Central Bank of Ecuador” issued by Resolution No. JPRM-2022-006-G, of February 11, 2022;

That, by Resolution No. JPRM-2022-014-G, of April 11, 2022, the Monetary and Financial Policy Board appointed the company KRESTON AUDIT SERVICES ECUADOR CIA. LTDA. to perform the external audit of the Central Bank of Ecuador for the economic years 2021, 2022, and 2023;

That, the company KRESTON AUDIT SERVICES ECUADOR CIA. LTDA., through letter No. KE-BC-2022-015, of June 10, 2022, issued the opinion on the reasonableness of the financial statements, for the period from January 1 to December 31, 2021, with their respective notes;

That, Article 9 of Resolution No. JPRM-2021-006-A, of December 17, 2021, which contains the “Regulation of the Audit Committee of the Central Bank of Ecuador”, in its pertinent part, as a function of the Audit Committee regarding financial statements, establishes “d) Review the financial statements of the Central Bank of Ecuador, prior to their presentation to the approving body”;

That, as recorded in meeting minutes No. 006-2022, of June 13, 2022, the Audit Committee reviewed the opinion on the reasonableness of the financial statements of the Central Bank of Ecuador issued by the external audit firm, for the period from January 1 to December 31, 2021, with their respective notes; and determined the following: “We consider that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. The firm KRESTON has issued its final report without qualifications. (…)”;

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That, the Monetary and Financial Policy Board, in an ordinary session by virtual modality, on June 17, 2022, reviewed the pronouncement of the Audit Committee related to the opinion on the reasonableness of the financial statements of the Central Bank of Ecuador, for the period from January 1 to December 31, 2021, with their respective notes; likewise, it reviewed the request for approval of the financial statements and the resolution proposals sent via memorandum No. BCE-BCE-2022-0133-M and its addendum contained in memorandum No. BCE-BCE-2022-0134-M, both dated June 14, 2022, issued by the General Manager of the Central Bank of Ecuador to the President of the Monetary and Financial Policy Board; and, the legal report No. BCE-CGJ-080-2022, of June 13, 2022; and,

In exercise of its functions and in accordance with Article 47.7 of the Organic Monetary and Financial Code, the Monetary and Financial Policy Board:

RESOLVES

Article 1.- Approve the Audited Financial Statements of the Central Bank of Ecuador, as of December 31, 2021.

Article 2.- Order the Central Bank of Ecuador to publish the audited and approved financial statements, as of December 31, 2021, as well as the notes to said financial statements and the opinion issued by the external auditor, on the institutional website.

FINAL PROVISION.- This resolution shall enter into force from its issuance, without prejudice to its publication in the Official Register.

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

COMMUNICATE.- Given in the Metropolitan District of Quito, on June 17, 2022.

THE PRESIDENT Dr. TATIANA MARIBEL RODRÍGUEZ CERÓN

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The foregoing resolution was signed by Doctor Tatiana Maribel Rodríguez Cerón - President of the Monetary and Financial Policy Board, in the Metropolitan District of Quito, on June 17, 2022.- I CERTIFY.

ADMINISTRATIVE SECRETARY Attorney MARÍA ALEXANDRA GUERRERO DEL POZO