Resolution JPRM-2024-024-A Reforming the Regulations of the Audit Committee of the Central Bank of Ecuador

RESOLUTION No. JPRM-2024-024-A THE MONETARY POLICY AND REGULATION BOARD

CONSIDERING:

That, Article 226 of the Constitution of the Republic of Ecuador prescribes that public officials 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 principles of efficiency, quality, hierarchy, coordination, planning, among others;

That, numeral 1 of Article 302 ut supra determines that: "Monetary, credit, exchange, and financial policies shall have as objectives: 1. To supply the necessary means of payment so that the economic system operates efficiently. (...)");

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 Branch and shall be implemented through the Central Bank of Ecuador;

That, Article 47.1 of the Organic Monetary and Financial Code creates the Monetary Policy and Regulation 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, Article 47.6 of the same Code, regarding the functions of the Monetary Policy and Regulation Board, among others, establishes: "(...) 26. Those others conferred by law. (...)");

That, Article 57.2 of the aforementioned Organic Code establishes that the Monetary Policy and Regulation Board shall appoint and determine the attributes 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 shall approve the corresponding regulations;

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, is not exhausted by its compliance, and is direct";

That, by Resolution No. JPRM-2021-006-A, of December 17, 2021, the Monetary Policy and Regulation Board issued the "Regulations of the Audit Committee of the Central Bank of Ecuador," whose object is to establish the norms regulating the composition, attributes, responsibilities, and functions of the Audit Committee of the Central Bank of Ecuador, conceived as the advisory and consultation body of the Monetary Policy and Regulation 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, reformed by Resolutions No. JPRM-2022-030-A of December 19, 2022, No. JPRM-2024-012-M of July 10, 2024, and No. JPRM-2024-016 of August 26, 2024;

That, it is necessary to reform the "Regulations of the Audit Committee of the Central Bank of Ecuador" to contemplate the possibility that a member of the Monetary Policy and Regulation Board integrates the Audit Committee of the Central Bank of Ecuador;

That, the Monetary Policy and Regulation Board, in ordinary session by mixed modality, on November 18, 2024, approved the reform to the Regulations of the Audit Committee of the Central Bank of Ecuador issued by Resolution No. JPRM-2021-006-A of December 17, 2021; and,

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

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

Article 1.- Substitute Article 4 of Resolution No. JPRM-2021-006-A, of December 17, 2021, with the following text:

"Article 4.- Composition of the Audit Committee: The Audit Committee of the Central Bank of Ecuador shall be composed of three members with voice and vote, appointed by the Monetary Policy and Regulation Board, at least two (2) of whom shall have relevant experience in accounting or auditing, and one (1) of whom may be a member of the Monetary Policy and Regulation Board.

By invitation of the Audit Committee, other officials of the Monetary Policy and Regulation Board or employees of the Central Bank of Ecuador may attend Committee sessions, with voice, but without vote.

The members of the Audit Committee, other than the member of the Monetary Policy and Regulation Board, who shall be referred to as external members, may engage in activities distinct from their position, provided these are not incompatible with their appointment or imply a conflict of interest, and they cannot be employees or workers of the Central Bank of Ecuador, nor provide services of any kind to the Bank.

In the event that one or more members of the Audit Committee have a conflict of interest prior to their appointment, they must inform the Monetary Policy and Regulation Board of the fact, who shall resolve what is appropriate. In the event that the conflict of interest arises after their appointment, the other members of the Audit Committee shall inform the Monetary Policy and Regulation Board of the fact, who shall resolve what is appropriate.

Members of the Audit Committee shall not intervene in the administrative or operational decisions of the Central Bank of Ecuador."

Article 2.- Substitute Article 5 of Resolution No. JPRM-2021-006-A, of December 17, 2021, with the following text:

"Article 5.- Duration in the exercise of their functions: External members of the Audit Committee shall perform their functions for a period of four (4) years, which may be renewed once.

The member belonging to the Monetary Policy and Regulation Board shall be part of the Audit Committee while serving in that body."

Article 3.- Substitute Article 6 of Resolution No. JPRM-2021-006-A, of December 17, 2021, with the following text:

"Article 6.- Requirements to be a member of the Audit Committee: External members of the Audit Committee, prior to the appointment to the position, must meet the following requirements:

1. Third-level professional degree in economics, finance, law, administration, accounting, or auditing;
2. Relevant experience in accounting or auditing of at least ten (10) years of professional practice;
3. Experience in the application of international financial reporting standards and international auditing standards;
4. Not be subject to a conflict of interest, in accordance with what is determined in the Organic Monetary and Financial Code;
5. Not be under civil interdiction, nor be a debtor subject to creditor concourse proceedings, and not be in a state of declared judicial insolvency;
6. Not have received a final conviction for criminal offenses;
7. Not be a party to, nor adhere to, administrative or judicial processes against the Central Bank of Ecuador;
8. Not be in default on the payment of credits and obligations established in favor of entities or organisms of the public sector;
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 representing legal entities; and,
11. Not be included in national and international lists of sanctioned persons for crimes related to money laundering, drug trafficking, or terrorism financing.

The compliance with the requirements determined in this article shall be verified by the legal area of the Central Bank of Ecuador, who shall issue the corresponding qualification report, for which it is duly authorized to request information it deems pertinent. Prior to their taking office, the designated external members of the Audit Committee must present a sworn declaration granted before a public notary, in which they manifest compliance with the same."

Article 4.- Substitute Article 7 of Resolution No. JPRM-2021-006-A, of December 17, 2021, with the following text:

"Article 7.- Termination of the functions of External Members of the Committee: The functions of external members of the Audit Committee of the Central Bank shall terminate, before the period for which they were appointed, when they incur in the following causes:

1. Failure to meet one or more enabling requirements to be a member of the Committee;
2. Not attending, without justification, two (2) consecutive sessions; or three (3) sessions within the same economic year, to the sessions of the Audit Committee of the Central Bank of Ecuador;
3. Failure to comply with what is established in the Code of Ethics dictated by the Monetary Policy and Regulation Board and the Central Bank of Ecuador;
4. Incurring in a conflict of interest in the exercise of their functions;
5. By manifest negligence in the fulfillment of their assigned functions and attributes, determined by the Monetary Policy and Regulation Board;
6. At the request of two members of the Monetary Policy and Regulation Board, whose decision must be adopted unanimously;
7. By permanent incapacity for the exercise of their functions declared by a judicial authority or the competent state organism;
8. By having a final conviction for crimes punishable with deprivation of liberty; and,
9. By voluntary resignation.

Once the Monetary Policy and Regulation Board identifies that any of the external members of the Audit Committee of the Central Bank of Ecuador incurs in one of the preceding causes, within a term of five (5) days, it shall issue the corresponding resolution terminating the appointment.

In the event of termination of functions of external members of the Audit Committee of the Central Bank of Ecuador, the person who replaces them shall exercise the functions for a period of four (4) years, counted from their taking office.

In case of termination of functions due to resignation, they must remain in the position for a term of one (1) month or until they are legally replaced, whichever occurs first."

Article 5.- Substitute Article 8 of Resolution No. JPRM-2021-006-A, of December 17, 2021, with the following text:

"Article 8.- On per diems and representation expenses: The per diems and representation expenses of external members of the Audit Committee shall be covered by the Central Bank of Ecuador, within the modality and amounts permitted by Law. External members of the Committee shall not have an employment relationship with the Central Bank of Ecuador."

Article 6.- Substitute Article 10 of Resolution No. JPRM-2021-006-A, of December 17, 2021, with the following text:

"Article 10.- President.- In the event that a member of the Monetary Policy and Regulation Board is appointed as a member of the Audit Committee, this person shall act as President of the Audit Committee of the Central Bank of Ecuador. In a Committee meeting, the Substitute President shall be elected among the external members.

Otherwise, in a Committee meeting, the President and the Substitute President shall be elected among the external members."

Article 7.- Substitute Article 13 of Resolution No. JPRM-2021-006-A, of December 17, 2021, with the following text:

"Article 13.- Secretary of the Audit Committee. – The public official designated by the Monetary Policy and Regulation Board shall act as Secretary of the Committee."

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 General Secretariat of the Central Bank of Ecuador.

COMMUNICATE AND PUBLISH. - Given in the Metropolitan District of Quito, on November 18, 2024.

THE PRESIDENT Dr. TATIANA MARIBEL RODRÍGUEZ CERÓN

The aforementioned resolution was signed by Doctor Tatiana Maribel Rodríguez Cerón - President of the Monetary Policy and Regulation Board, in the Metropolitan District of Quito, on November 18, 2024.- I CERTIFY.

ADMINISTRATIVE SECRETARY Attorney MARÍA ALEXANDRA GUERRERO DEL POZO