JPRF-F-2021-004 — Methodology for Calculating Maximum Effective Active Interest Rates

Financial Policy and Regulation Board
Resolution No. JPRF-F-2021-004
THE FINANCIAL POLICY AND REGULATION BOARD
CONSIDERING:
That, Article 226 of the Constitution of the Republic of Ecuador provides: “The 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, decentralization, concentration, coordination, participation, planning, transparency, and evaluation.”; That, according to Article 302 number 4 of the Constitution of the Republic, monetary, credit, exchange, and financial policies shall have, among others, the ultimate objective of achieving “economic stability”, which is also one of the objectives of economic policy, in accordance with the constitutional precept inserted in Article 284 number 7; That, the first paragraph of Article 308 of the Supreme Norm stipulates that financial activities are a service of public order and shall have the fundamental purpose of “preserving deposits and meeting financing requirements for the achievement of the country's development objectives”. In concordance, Article 309 of the Constitution of the Republic stipulates that the norms of the national financial system shall be responsible for “preserving its security, stability, transparency, and solidity.”; That, Article 5 of the Organic Monetary and Financial Code provides that the formulation of policies and regulations in matters of monetary, credit, exchange, financial, as well as insurance and securities, is an exclusive faculty of the Executive Function, and ratifies that the objectives of public policy in these matters are those determined in Articles 284 and 302 of the Constitution of the Republic; That, Article 13 of the Organic Monetary and Financial Code creates the Financial Policy and Regulation Board as part of the Executive Function, responsible for the formulation of credit, financial, securities, insurance, and prepaid comprehensive health care services policy and regulation; That, Article 14 number 2 of the Organic Monetary and Financial Code, regarding the scope of action of the Financial Policy and Regulation Board, mandates: “2. Issue the regulations that allow maintaining the integrity, solidity, sustainability, and stability of the national financial system, securities, insurance, and prepaid comprehensive health care services, in accordance with what is provided in Article 309 of the Constitution of the Republic of Ecuador; That, Article 130 of the Organic Monetary and Financial Code, 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. (…).”

Resolution No. JPRF-F-2021-004

---

Faculty that harmonizes with what is provided in Article 14.1, number 7, letter b) of the same legal body; That, the Fifty-Fourth Transitional Provision added to the Organic Monetary and Financial Code by the Organic Law Reforming the Organic Monetary and Financial Code for the Defense of Dollarization, prescribes: “Transitory Regime of Resolutions of the Codification of the Monetary and Financial Policy Board. The resolutions contained in the Codification of Monetary, Financial, Securities, and Insurance Resolutions of the Monetary and Financial Policy Board and the norms issued by the control bodies, shall remain in force until the Monetary Policy Board and the Financial Policy and Regulation Board resolve what corresponds, within the scope of their competencies.”; That, Article 1 of SECTION I “NORMS THAT REGULATE INTEREST RATES”, 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, stipulates: “The maximum active interest rates for each of the credit portfolio segments of the entities of the national financial system shall be established monthly by the Financial Policy and Regulation Board, as a product of the Methodology for Calculating Maximum Active Interest Rates that incorporates at least, the funding cost, the credit risk costs, the operational costs, and the capital cost. The maximum active interest rates will be reviewed with a monthly periodicity and the calculations will be carried out by the Central Bank of Ecuador”; That, Article 1 of Chapter XI “NORMS THAT REGULATE THE SEGMENTATION OF THE CREDIT PORTFOLIO OF THE ENTITIES OF THE NATIONAL FINANCIAL SYSTEM”, of Title II “NATIONAL FINANCIAL SYSTEM”, of Book I “MONETARY AND FINANCIAL SYSTEM” of the aforementioned Codification, determines the credit segments of the national financial system; That, the Technical Secretary of the Financial Policy and Regulation Board through memorandum No. JPRF-SETEC-2021-0003-M of December 11, 2021, sent to the President of the JPRF, the technical and legal analyses regarding the methodology designed by the Central Bank of Ecuador for the calculation of maximum effective active interest rates for the national financial system, contained in reports No. JPRF-CT-2021-0002 and No. JPRF-CJ-2021-0003; That, the Financial Policy and Regulation Board, in an extraordinary session held by technological means, convened on December 11, 2021, on December 13, 2021, fully accepted the recommendations contained in the “Methodology for the Calculation of Maximum Effective Active Interest Rates”, sent via letter No. BCE-BCE-2021-1129-OF of December 8, 2021, by the General Manager of the Central Bank of Ecuador; and, In exercise of its functions,

Resolution No. JPRF-F-2021-004

---

RESOLVES:
ARTICLE 1.- Substitute Section I “Norms that regulate 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:
“SECTION I.- NORMS THAT REGULATE INTEREST RATES:
Art. 1.- The maximum active interest rates for each of the credit portfolio segments of the entities of the national financial system shall be established by the Financial Policy and Regulation Board, with a semi-annual periodicity and validity.
Exceptionally and for duly justified causes, the maximum rates may be reviewed within their validity period.
Art. 2.- Accepting the recommendations of the “Methodology for the Calculation of Maximum Effective Active Interest Rates” of the Central Bank of Ecuador, it is established that the maximum effective active interest rates in force, referred to in Article 1 of this section, shall be the following:

1. For Productive Credit, the following maximum effective active rates are established:
   a. Corporate Productive: 8.86% b. Business Productive: 9.89%
   c. SME Productive: 11.26%
2. For Microcredit, the following maximum effective active rates are established:
   a. Retail Microcredit: 28.23% b. Simple Accumulation Microcredit: 24.89%
   c. Extended Accumulation Microcredit: 22.05%
3. For Real Estate Credit, the following maximum effective active rate is established: 10.40%
4. For Social and Public Interest Housing Credit, the following maximum effective active rates are established:
   a. Social Interest Housing: 4.99% b. Public Interest Housing: 4.99%
5. For Consumer Credit, the maximum effective active rate is established: 16.77%
6. For Educational Credit, the following maximum effective active rate is established: 9.50%
   a. Social Educational, maximum effective active rate: 7.50%
7. For Public Investment Credit, the maximum effective active rate is established: 9.33%”
   ARTICLE 2.- Substitute Article 10 of Subsection II “Mandatory Compliance Interest Rates”, 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:
   “Art. 10.- The interest rates referred to in Articles 8 and 9 of this Chapter shall govern for monthly and semi-annual periods, respectively; and, shall be published on the website of the Central Bank of Ecuador and/or by any other means defined by the Financial Policy and Regulation Board. In the event that the rates referred to in the preceding articles are not determined for the following period, the last rates published by the Central Bank of Ecuador shall govern.”
   ARTICLE 3.- Add to Subsection I: “Reference Interest Rates”, 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, the following article:
   “Art. 7.1.- The short-term reference active interest rate for the Corporate Productive segment, shall correspond to the weighted average by amount of the effective interest rates agreed upon in credit operations with an original state, granted by Large and Medium Private Banks, considering the four weeks preceding the last complete week of each month. The calculation shall be carried out based on the information delivered by the Superintendence of Banks to the Central Bank of Ecuador, considering the following criteria: operations with A rating (A1, A2, or A3); and, operations with a term up to 365 days.”
   ARTICLE 4.- Add to 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 the following General Provisions:
   “EIGHTH. - The maximum interest rates for active operations shall apply to credit operations granted or readjusted by financial entities starting from January 1, 2022.”
   “NINTH. - The Central Bank of Ecuador, for statistical purposes, shall publish on its website the respective Technical Note summarizing the methodology for maximum interest rates for active operations of the national financial system.”
   ARTICLE 5.- Repeal the following:
   a) The Third, Fourth, and Fifth General Provisions of the Resolution of the Monetary and Financial Policy Board No. 603, promulgated in Official Register No. 1174 of October 15, 2020, contained in Chapter IX1 “NORMS THAT REGULATE THE SEGMENTATION OF THE CREDIT PORTFOLIO OF THE ENTITIES OF THE NATIONAL FINANCIAL SYSTEM”, of Title II “NATIONAL FINANCIAL SYSTEM”, of Book I “MONETARY AND FINANCIAL SYSTEM” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions of the former Monetary and Financial Policy Board. 1 Note: Chapter renumbered by article 2 of Resolution of the Monetary and Financial Policy Board No. 647, published in Official Register 415 of March 22, 2021.

Resolution No. JPRF-F-2021-004
_______________________ b) The First and Second Transitional Provisions of the Resolution of the Monetary and Financial Policy Board No. 676, published in Official Register 537 of September 14, 2021, contained in Chapter IX2 “NORMS THAT REGULATE THE SEGMENTATION OF THE CREDIT PORTFOLIO OF THE ENTITIES OF THE NATIONAL FINANCIAL SYSTEM”, of Title II “NATIONAL FINANCIAL SYSTEM”, of Book I “MONETARY AND FINANCIAL SYSTEM” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions of the former Monetary and Financial Policy Board. c) The Third Transitional Provision of the Resolution of the Monetary and Financial Policy Board No. 603-2020-F of September 29, 2020, published in the Official Register Special Edition No. 1174 of October 15, 2020, contained in Chapter IX “NORMS THAT REGULATE THE SEGMENTATION OF THE CREDIT PORTFOLIO OF THE ENTITIES OF THE NATIONAL FINANCIAL SYSTEM”, of Title II “NATIONAL FINANCIAL SYSTEM”, of Book I “MONETARY AND FINANCIAL SYSTEM” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions of the former Monetary and Financial Policy Board. TRANSITORY PROVISION. - Until the website of the Financial Policy and Regulation Board is enabled, the publications that this collegiate body is required to carry out in accordance with the law, shall be carried out through the website of the Central Bank of Ecuador, the Superintendence of Banks, and the Superintendence of Popular and Solidarity Economy. FINAL PROVISION. - This resolution shall enter into force starting from January 1, 2022, without prejudice to its publication in the Official Register. COMMUNICATE. - Given in the Metropolitan District of Quito, on December 13, 2021. THE PRESIDENT, Mgs. María Paulina Vela Zambrano The preceding resolution 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 13, 2021.- I CERTIFY. TECHNICAL SECRETARY Dr. Nelly Arias Zavala 2 Note: Chapter renumbered by article 2 of Resolution of the Monetary and Financial Policy Board No. 647, published in Official Register 415 of March 22, 2021.