JPRM-2024-012-M — Reforming the Internal Audit Policy of the Central Bank of Ecuador

RESOLUTION NO. JPRM-2024-012-M THE MONETARY AND REGULATORY 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 of the same Constitution 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 aforementioned determines that the formulation of monetary, credit, exchange, and financial policies is the exclusive faculty 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 determined its composition;

That, Article 47.6 of the same Code, regarding the functions of the Monetary and Regulatory Policy Board, among others, establishes: "(…) 5. Establish the policies of the Central Bank of Ecuador and supervise their implementation; (…) 19. Appoint the Bank Auditor of the Central Bank of Ecuador (…)";

That, Article 57.3 aforementioned determines: "The Monetary and Regulatory Policy Board will appoint the Director of Bank Audit upon proposal of the Audit Committee. The Director of Bank Audit must be a person with no less than ten (10) years of professional experience in the field of auditing. The Director of Bank Audit must report administratively to the General Manager and functionally to the Audit Committee. The Director of Bank Audit will be appointed to exercise their functions for a period of five (5) years, which may be renewed only once. The Director of Bank Audit will be removed from their position by the Monetary and Regulatory Policy Board for non-compliance with their functions, following a report from the General Manager of the Central Bank of Ecuador and the Audit Committee.

RESOLUTION No. JPRM-2024-012-M Page | 2 The Monetary and Regulatory Policy Board will define the scope, terms, and conditions of the function of the Bank Audit Directorate in the Statute of the Central Bank of Ecuador, upon proposal of the Audit Committee";

That, through Resolution No. JPRM-2021-006-A, dated December 17, 2021, the Monetary and Regulatory Policy Board issued the "Regulation of the Audit Committee of the Central Bank of Ecuador", reformed through Resolution No. JPRM-2022-030-A, dated December 19, 2022;

That, through Resolution No. JPRM-2023-006-M, dated March 16, 2023, the Monetary and Regulatory Policy Board issued the "Internal Audit Policy of the Central Bank of Ecuador";

That, the Monetary and Regulatory Policy Board, in ordinary session by mixed modality, on July 10, 2024, reviewed the proposal sent via memorandum No. BCE-BCE-2024-0154-M, dated July 9, 2024, by the General Manager of the Central Bank of Ecuador to the President of the Monetary and Regulatory Policy Board, as well as the legal report No. BCE-GJ-008-2024, dated July 9, 2024; and,

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

REFORM THE INTERNAL AUDIT POLICY OF THE CENTRAL BANK OF ECUADOR CONTAINED IN RESOLUTION NO. JPRM-2023-006-M

Article 1.- Add, following Article 5 of Resolution No. JPRM-2023-006-M, dated March 16, 2023, the following:

"Article 5.1.- Requirements for the appointment of the Director of Bank Audit.- For the appointment of the Director of Bank Audit, it will be verified that applicants meet the following requirements:

1. Third-level professional degree in accounting or auditing; or, in economics and administration, with a fourth-level degree in accounting or auditing;
2. Professional experience of no less than ten (10) years in the field of auditing;
3. Have proven knowledge and experience in the application of international financial reporting standards and international auditing standards;
4. Not have a kinship relationship with members of the Monetary and Regulatory Policy Board or with the General Manager of the Central Bank of Ecuador, up to the fourth degree of consanguinity and second degree of affinity; and, not be involved in a conflict of interest as defined in the Code of Ethics of the Monetary and Regulatory Policy Board and the Central Bank of Ecuador;

RESOLUTION No. JPRM-2024-012-M Page | 3 5. Not be under civil interdiction, nor be the debtor subject to creditor bankruptcy proceedings; and, not be in a state of declared judicial insolvency; 6. Not have received a final conviction sentence for crimes of an economic nature and against public administration; 7. Not be a party or adherent in administrative or judicial proceedings against the Central Bank of Ecuador, nor have a family link, up to the second degree of affinity and third degree of consanguinity, with someone who is; 8. Not be in default of payment of credits and obligations established in favor of entities or organisms of the public sector, nor with private financial entities, for more than sixty (60) days; 9. Not be a contractor of the Central Bank of Ecuador; 10. Not have been declared a failed bidder or non-compliant contractor with public sector entities, as a natural person or of legal entities represented; 11. Not appear on national and international lists of persons sanctioned for crimes related to money laundering, trafficking of narcotic substances, or terrorism financing; 12. Not have been sanctioned by a competent authority, during the last fifteen (15) years, for their professional performance in the field of internal auditing; 13. Not have served, in the last two (2) years, as the holder of the position of accountant of the Central Bank of Ecuador; 14. Not have submitted altered or false documentation, without prejudice to legal actions; 15. In the last two (2) years, not have been a director, administrator, or principal official of an entity in the public and private financial sectors that has been subject to forced liquidation; or, to intensive supervision processes that have resulted in forced liquidation; and, 16. Not have been an employee of the external audit firm that is contracted or has ended its service contract in the two (2) years prior to the date of application. Nor be a relative, up to the second degree of consanguinity and first degree of affinity, of the partners of the aforementioned firm.

The compliance with the requirements determined in this article will be verified by the legal area of the Central Bank of Ecuador, at the request of the Audit Committee, sent from the Presidency of the Monetary and Regulatory Policy Board. After the corresponding validation, the qualification report will be issued, for which it is duly authorized to request the information it considers pertinent.

RESOLUTION No. JPRM-2024-012-M Page | 4 The applicant will prove compliance with the requirements by presenting the corresponding certificates, originals or certified copies; and, prior to their appointment, the sworn declaration granted before a public notary, regarding compliance with the requirements set forth in items 4, 12, 14, 15, and 16 of this article, and articles 7 and 8 of the Organic Monetary and Financial Code.

Article 5.2.- Selection Process. - The selection process for the Director of Bank Audit will be carried out in accordance with the procedure established by the Audit Committee, after which it will submit its proposal, with up to three (3) candidates, to the Monetary and Regulatory Policy Board for the respective appointment.

The Audit Committee must initiate the selection process for the Director of Bank Audit, thirty (30) days before the expiration of the period for which the incumbent was appointed, and must submit its proposal to the Monetary and Regulatory Policy Board, before the expiration of said period. In case of resignation, the Director of Bank Audit must inform the Audit Committee about their disengagement, thirty (30) days in advance, so that the selection process begins and the proposal is submitted to the Monetary and Regulatory Policy Board, within the same period.

Article 5.3.- Control and follow-up on the requirements of the Director of Bank Audit. - The Audit Committee will verify, at least annually, that the Director of Bank Audit does not fail to meet the requirements and prohibitions established in this regulation.

Article 5.4.- Prohibition of the Director of Bank Audit. - The Director of Bank Audit may not perform any other function or dignity in the Central Bank of Ecuador, nor may they perform internal audit functions or other dignity or function in another public or private institution while exercising their position, with the exception of part-time teaching."

SINGLE REFORMATORY PROVISION.- Substitute letter a) of the title "Regarding the function of the Director of Bank Audit" of Article 9 of Resolution No. JPRM-2021-006-A, which contains the Regulation of the Audit Committee of the Central Bank of Ecuador, with the following text:

"a) Propose to the Monetary and Regulatory Policy Board the candidates for the position of Director of Bank Audit, for their consideration and appointment, who must meet the requirements established in the Internal Audit Policy of the Central Bank of Ecuador".

RESOLUTION No. JPRM-2024-012-M Page | 5 FINAL PROVISION. - This resolution will enter into force from its issuance, without prejudice to its publication in the Official Register.

Its publication on the institutional website is entrusted to the General Secretariat of the Central Bank of Ecuador.

COMMUNICATE AND PUBLISH. - Given in the Metropolitan District of Quito, on July 10, 2024.

THE PRESIDENT Dr. TATIANA MARIBEL RODRÍGUEZ CERÓN

The aforementioned resolution was signed by Doctor Tatiana Maribel Rodríguez Cerón - President of the Monetary and Regulatory Policy Board, in the Metropolitan District of Quito, on July 10, 2024.- I CERTIFY.

ADMINISTRATIVE SECRETARY Attorney MARÍA ALEXANDRA GUERRERO DEL POZO