JPRF-F-2022-053 — Reforming the Maximum Effective Active Interest Rates for the National Financial System for the First Semester of 2023

Resolution No. JPRF-F-2022-053
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, decentralization, coordination, participation, planning, transparency, and evaluation."; That, according to Article 302 number 4 of the Magna Carta, 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 clause of Article 308 of the Supreme Norm stipulates that financial activities are a matter 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 prescribes 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 Code of Money and Finance, Book I, provides that the formulation of policies and regulations in matters of money, credit, exchange, finance, as well as insurance and securities, is the 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 Fundamental Norm; That, Article 13 of the aforementioned 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 aforementioned Code, regarding the scope of action of the Financial Policy and Regulation Board, mandates: "2. Issue regulations that allow maintaining the integrity, solidity, sustainability, and stability of the national financial, securities, insurance, and prepaid comprehensive health care services systems in accordance with what is provided in Article 309 of the Constitution of the Republic of Ecuador"; That, letter b) of number 7 of Article 14.1 ibidem, establishes the following: "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, securities, insurance, and prepaid comprehensive health care services 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 interest rate system, as provided in Article 130 of this Code, for the active and passive operations of the national financial system and the other interest rates required by law, promoting the development of prudent credit: Minimum capital levels, technical equity, and risk weightings of assets, their composition, method of calculation, and modifications";

Resolution No. JPRF-F-2022-053

That, Article 130 of the Organic Code of Money and Finance, Book I, orders that: The Financial Policy and Regulation Board shall establish the interest rate system for the active and passive operations of the national financial system and the other interest rates required by law, which must observe what is provided in Article 14.1 number 26 of this Code. Compound interest is prohibited. (...)" Faculty that is in harmony with what is provided in Article 14.1, number 7, letter b) of the same legal body; That, by Resolution No. JPRF-F-2022-031 of June 29, 2022, the Financial Policy and Regulation Board, in accordance with what is stated in letter b), number 7, of Article 14.1 of Book I of the Organic Code of Money and Finance, established the maximum effective active interest rates that will apply to credit operations granted or readjusted by financial entities starting from July 01, 2022, which will govern for semi-annual periods; That, the first clause of Article 1 of Section I "Norms that regulate interest rates", Chapter XI "Interest Rate and Tariff System of the Central Bank of Ecuador", Title I "Monetary System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, establishes: "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."; That, the Technical Secretariat of the Financial Policy and Regulation Board, through Memorandum No. JPRF-SETEC-2022-0088-M of December 21, 2022, submits to the President of the Board the following reports:
i. Technical Report No. JPRF-CT-2022-0044 of December 21, 2022, which, through the analysis of trends in active effective rates in the market, determines the need to increase the maximum rates of the corporate productive and business credit segments, considering that, if the current maximum rates of these segments are maintained, they could be a limitation for the granting of new credits.
ii. The Legal Report No. JPRF-CJ-2022-0053 of December 21, 2022 concludes that it corresponds to the Financial Policy and Regulation Board, as responsible for the formulation of credit and financial policy and regulation, to have legal competence to establish the system of maximum interest rates for active operations of the national financial system, in accordance with what is provided in Articles 14.1 number 7 letter b) and 130 of the Organic Code of Money and Finance, Book I;
That, the Financial Policy and Regulation Board, in an ordinary session convened by technological means on December 23, 2022, and carried out through video conference on December 27, 2022, reviewed the Memorandum No. JPRF-SETEC-2022-0088-M of December 21, 2022, issued by the Technical Secretariat of the Board; as well as the Technical Report No. JPRF-CT-2022-0044 and the Legal Report No. JPRF-CJ-2022-0053 of December 21, 2022, issued by the Technical Coordination and the Legal Coordination of the aforementioned Board and the corresponding draft resolution; That, the Financial Policy and Regulation Board, in an ordinary session convened by technological means on December 23, 2022, and carried out through video conference on December 27, 2022,

Resolution No. JPRF-F-2022-053
____________________________ reviewed and approved the following Resolution; and, In exercise of its functions, RESOLVES:
ARTICLE 1.- Substitute the text of letters a. and b. of number 1 of Article 2 of 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 "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, with the following:
"a. Corporate Productive: 9.29%"
"b. Business Productive: 10.36%"
ARTICLE 2.- The values of the maximum effective active interest rates established by Resolution No. JPRF-F-2022-031 of June 29, 2022, are maintained, with the exception of the rates for the Corporate Productive and Business Productive subsegments, which must observe what is established in Article 1 of this resolution.
ARTICLE 3.- Substitute the phrase "July 01, 2022" with "January 01, 2023" from 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.
FINAL PROVISION.- This Resolution shall enter into force from the present date, without prejudice to its publication in the Official Register, and shall be published on the institutional website of the Financial Policy and Regulation Board within a maximum term of two days from its issuance.
COMMUNICATE.- Given in the Metropolitan District of Quito, on December 27, 2022.
THE PRESIDENT,
Master María Paulina Vela Zambrano
The resolution above 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 27, 2022.- I CERTIFY.
TECHNICAL SECRETARY
Dr. Nelly Arias Zavala