JPRF-F-2022-021 — Amends Resolution JPRF-F-2022-010 to require BANECUADOR B.P. to implement processes for all 1% annual microcredit projects under Executive Decree No. 284

Resolution No. JPRF-F-2022-021 THE FINANCIAL POLICY AND REGULATION BOARD CONSIDERING: That, Article 226 of the Constitution of the Republic of Ecuador provides: “State institutions, their agencies, dependencies, public servants, and persons acting by virtue of a state power shall exercise only the competencies and faculties attributed to them in the Constitution and the law. They shall have the duty to coordinate actions for the fulfillment of their purposes and to make effective the enjoyment and exercise of the rights recognized in the Constitution.”; That, Article 227 of the Supreme Norm orders: “Public administration constitutes a service to the community that is governed by the principles of effectiveness, efficiency, quality, hierarchy, deconcentration, decentralization, coordination, participation, planning, transparency, and evaluation.”; That, Article 14, numerals 1 and 2 of the Organic Code of Money and Finance, regarding the scope of action of the Financial Policy and Regulation Board, mandate: “1. Formulate credit, financial, including insurance, prepaid comprehensive health care services, and securities policies; 2. Issue regulations that allow maintaining the integrity, solidity, sustainability, and stability of the national financial system (…) For the fulfillment of these functions, the Financial Policy and Regulation Board shall issue norms in matters within its competence, without being able to alter legal provisions. The Financial Policy and Regulation Board may issue regulations by segments, economic activities, and other criteria.”; That, Article 14.1 ibidem, states: “For the performance of its functions, the Financial Policy and Regulation Board must comply with the following duties and exercise the following faculties: (…) 7. Issue the prudential regulatory framework to which financial entities, securities, insurance, and prepaid comprehensive health care service entities must be subject, a framework that must be coherent, not give rise to regulatory arbitrage, and cover, at least, the following: (…) b) Establish the system of maximum interest rates for active and passive operations of the national financial system and the other interest rates required by law, promoting the development of prudent credit (…)”; That, Article 130 of the Organic Code of Money and Finance, orders that: “The Financial Policy and Regulation Board shall establish the system of maximum interest rates for active and passive operations of the national financial system and the other rates required by law. Usury is prohibited. - At the request of public financial entities, the Financial Policy and Regulation Board shall establish a special maximum interest rate for social interest credits belonging to the microcredit segment”; That, the Fifty-Fourth Transitory Provision added to the Organic Code of Money and Finance by the Organic Reformatory Law to the Organic Code of Money and Finance for the Defense of Dollarization, prescribes: “Transitory regime of Resolutions of the Codification of the Monetary and Financial Policy and Regulation Board. The resolutions contained in the Codification of Monetary, Financial, Securities, and Insurance Resolutions of the Monetary and Financial Policy and Regulation Board and the norms issued by control bodies, shall remain in force 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 Twenty-Ninth General Provision of the Organic Code of Money and Finance, Book I, establishes that: “In the current legislation where reference is made to the ‘Monetary and Financial Policy and Regulation Board’, replace it with ‘Financial Policy and Regulation Board’.”; That, Article 1 of Executive Decree No. 284 of December 10, 2021, orders: “Article 1.- Declare as a national priority the granting of social interest credits belonging to the microcredit segment at 1% annual interest and up to thirty (30) years term, through public banking.”; That, Article 2 of the aforementioned Executive Decree establishes: “Order the members of BANECUADOR B.P. to resolve the authorization to its General Manager so that he may request the Financial Regulation and Policy Board to establish a maximum interest rate for social interest credits belonging to the microcredit segment at 1% annual interest and up to thirty (30) years term, in accordance with the management policies issued by BANECUADOR B.P.”; That, Article 3 ibidem, provides: “Establish a partial subsidy according to the amounts supported in technical reports and that are not covered by the 1% rate to cover the operational and financial costs and expenses, including credit risk, funding, and operational costs, required by the credit referred to in this Executive Decree, which shall be granted through BANECUADOR B.P. The request for the subsidy defined herein shall be presented by BANECUADOR B.P. to the Ministry of Economy and Finance; the latter shall approve or deny said request in accordance with the proposal made by BANECUADOR B.P. The consequent budgetary assignment shall be subject to the guidelines established by the Ministry of Economy and Finance. The Ministries of Production, Foreign Trade, Investments, and Fisheries; of Economic and Social Inclusion; and, the Ministry of Agriculture and Livestock, in cases where they have approved investment projects through which beneficiaries who may be subjects of 1% annual microcredits and up to thirty (30) years term granted by BANECUADOR B.P. are identified, shall process them directly between BANECUADOR B.P. and the corresponding ministry.”; That, through Resolution No. JPRF-F-2022-010 of January 3, 2022, the Financial Policy and Regulation Board established the special maximum interest rate for social interest credits belonging to the microcredit segment, at 1% annual; in harmony, it was added within the credit segmentation to the segment of “Social Interest Microcredit” with reference to operations granted to credit applicants in accordance with Executive Decree No. 284 of December 10, 2021, according to the financial product characterization defined by BANECUADOR B.P. or its legal successor; That, the Eighth General Provision, added to Section II, of Chapter XI, of Title I, of Book I of the cited Codification, by Resolution No. JPRF-F-2022-010 of January 3, 2022, reads verbatim:

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“EIGHTH. - For the purposes established in Executive Decree No. 284 of December 10, 2021, BANECUADOR B.P. or its legal successor must manage the necessary resources with the Ministry of Economy and Finance, in accordance with the opinion contained in Letter No. MEF-VGF-2021-0894-O of December 22, 2021, prior to the granting of the credits. In addition, it will implement the processes that allow the fulfillment of the objectives of the project “Promotion of Agricultural Investment” and will implement the risk mitigation actions contained in its internal reports, both for adequate portfolio placement and recovery. BANECUADOR B.P. or its legal successor will publish on its website indicators related to the fulfillment of the objectives of the project “Promotion of Agricultural Investment”, including those of financial inclusion.”; That, through Report No. SIDP-PRO-164 signed on January 19, 2022, approved by the Manager of Research, Development and Social Management and by the Submanager of Market Research and Product Development of BANECUADOR, the Technical Report for the signing of the Resource Transfer Agreement between the Ministry of Production, Foreign Trade, Investments, and Fisheries and BANECUADOR B.P. regarding the 1% Financial Product was issued; and, through Memorandum No. BANECUADOR-GIDG-2022-0066-MEM of January 19, 2022, the Manager of Research, Development and Social Management of BANECUADOR B.P. sent to the Manager of Legal Advice the Technical Report for the signing of the Agreement between the Ministry of Production, Foreign Trade, Investments, and Fisheries and BANECUADOR B.P. regarding the 1% Financial Product, in which it recommends that the appropriate and pertinent actions be taken for the subscription of the aforementioned Agreement, for which it attached the technical report of financial impact support prepared by the General Submanager of Corporate Services of BANECUADOR B.P.; That, through letter No. MEF-SP-2022-0068 of January 13, 2022, the Undersecretary of Budget of the Ministry of Economy and Finance issues to the Minister of Production, Foreign Trade, Investment, and Fisheries, the criterion regarding the financing of the project “Promotion of Productive Investment of Microenterprises”, with CUP: 152180000.0000.387404, which mainly indicates: “(…) this State Portfolio, together with the entities involved in the process, will analyze the mechanism that current legal regulations allow, to manage the necessary resources during budget execution and initiate the process of including the aforementioned project in the 2022 Annual Investment Plan, with the objective of complying with what is established in Executive Decree 284.” That, through letter No. SNP-SPN-2022-0059-OF of January 14, 2022, the Undersecretary of National Planning of the National Planning Secretariat issues to the Minister of Production, Foreign Trade, Investment, and Fisheries, the priority opinion for the Project “Promotion of Productive Investment of Microenterprises”; CUP: 152180000.0000.387404; Period: 2022 - 2025; Total Amount USD 96,299,789.40; That, through letter No. MPCEIP-VPI-2022-0015-O of January 18, 2022, the Ministry of Production, Foreign Trade, Investments, and Fisheries, requests the General Management of BANECUADOR B.P. to request the Financial Policy and Regulation Board to include the Investment Project “Promotion of Productive Investment of Microenterprises” within the Eighth General Provision transcribed above;

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That, through letter No. BANECUADOR-SGN-2022-0021-OF of January 21, 2022, the General Submanager of Business of BANECUADOR B.P., in delegation conferred by the General Manager of BANECUADOR B.P., requested the President and the members of the Financial Policy and Regulation Board, that: “proceed to incorporate as a second paragraph, within the Eighth General Provision of Section II “ON INTEREST RATES”, of Chapter XI “INTEREST RATE AND TARIFF SYSTEM OF THE CENTRAL BANK OF ECUADOR”, of Title I “MONETARY SYSTEM”, of Book I “MONETARY AND FINANCIAL SYSTEM” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, the Project: Promotion of Productive Investment of Microenterprises, in order to comply with the regulations provided in Executive Decree No. 284 of December 10, 2021.”; That, the meaning of the Eighth General Provision of Resolution No. JPRF-F-2022-010 refers to the obligation that BANECUADOR B.P. has to implement the processes that allow the fulfillment of the objectives of the investment projects that are inserted within the 1% annual microcredit program that are granted under the umbrella of Executive Decree No. 284 and adopt the risk mitigation actions contained in the internal reports, both for adequate portfolio placement and recovery, beyond that at the time of the issuance of Resolution No. JPRF-F-2022-010 of January 3, 2022, reference was made only to the project named “Promotion of Agricultural Investment”; That, the Technical Secretary of the Financial Policy and Regulation Board through memorandum No. JPRF-SETEC-2022-0016-M of February 10, 2022, sends to the President of the JPRF, the technical and legal analyses that support the pertinence of this resolution, contained in reports No. JPRF-CT-2022-0017 and No. JPRF-CJ-2022-0010 of February 10, 2022, respectively; That, the Financial Policy and Regulation Board, in ordinary session held by technological means convened on February 11, 2022 and carried out through video conference on February 14, 2022, knew and approved the text of the following resolution; and, In exercise of its functions, RESOLVES: ARTICLE ONLY. - Substitute the Eighth General Provision of Section II “On interest rates”, of Chapter XI “Interest rate and tariff system of the Central Bank of Ecuador”, of Title I “Monetary system”, of Book I of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, with the following: “EIGHTH. - For the purposes established in Executive Decree No. 284 of December 10, 2021, BANECUADOR B.P. or its legal successor must manage the necessary resources with the Ministry of Economy and Finance, in accordance with the opinion contained in Letter No. MEF-VGF-2021-0894-O of December 22, 2021, prior to the granting of the credits. In addition, it will implement the processes that allow the fulfillment of the objectives of all projects inserted into the 1% annual microcredit program that are granted under the umbrella of said Executive Decree and will implement the risk mitigation actions contained in its internal reports, both for adequate portfolio placement and recovery.

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BANECUADOR B.P. or its legal successor will publish on its website indicators related to the fulfillment of the objectives of all projects executed under the umbrella of the 1% annual microcredit program that are granted in accordance with Executive Decree No. 284, including those of financial inclusion.” FINAL PROVISION. - This resolution shall enter into force from the present date, without prejudice to its publication in the Official Register. This resolution shall be published on the institutional website of the Financial Policy and Regulation Board within a maximum term of two days from its issuance. BANECUADOR B.P. shall publish this resolution on its institutional website. COMMUNICATE. - Given in the Metropolitan District of Quito, on February 14, 2022. THE PRESIDENT, Mgs. María Paulina Vela Zambrano The resolution preceding this 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 February 14, 2022.- I CERTIFY. TECHNICAL SECRETARY Dr. Nelly Arias Zavala