JPRF-F-2025-0144 — Reforms to the General Rules for the Operation of the Deposit Insurance System for the Private Financial Sector and the Popular and Solidarity Financial Sector

| Postal Code: 170507 | Quito - Ecuador |
THE FINANCIAL POLICY AND REGULATION BOARD
CONSIDERING:
That, Article 82 of the Constitution of the Republic of Ecuador prescribes that the right to legal security is based on respect for the Constitution and on the existence of prior, clear, public, and applied norms by competent authorities; That, number 6 of Article 132 of the aforementioned Constitution grants public regulatory bodies the authority to issue norms of a general nature in matters within their competence, without being able to alter or innovate legal provisions; That, Article 226 of the Magna Carta prescribes that State institutions, their bodies, 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; having the duty to coordinate the necessary actions for the effective fulfillment of the rights recognized in the Constitution; That, Article 227 of the Supreme Norm establishes that the 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, among the objectives of the Organic Code of Monetary and Financial matters are those of ensuring that the exercise of financial, securities, and insurance activities is consistent and integrated; as well as, ensuring the sustainability of the national financial system and the insurance and securities regimes and guaranteeing the fulfillment of the obligations of each of the sectors and entities that make them up, in accordance with what is established in numbers 2 and 4 of Article 3 of the aforementioned organic code, in Book I; That, Article 13 of the Organic Code of Monetary and Financial, Book I, created the Financial Policy and Regulation Board, part of the Executive Function, as a public law legal entity, with administrative, financial, and operational autonomy, responsible for the formulation of credit, financial, securities, insurance, and prepaid comprehensive health care services policy and regulation; That, Article 14 ibidem, in numbers 1 and 2, provides that it corresponds to the Financial Policy and Regulation Board within its scope of competence to formulate insurance policies; and, issue the regulations that allow maintaining the integrity, solidity, sustainability, and stability of the insurance system; That, Article 14.1 of the same Organic Code, Book I, in numbers 8, 13, 17, and 27, establishes that, for the performance of its functions, the Financial Policy and Regulation Board must know about the reports that, within its competencies, the Deposit Insurance Corporation, Liquidity Fund, and Private Insurance Fund, on the state of the national financial system and the securities, insurance, and prepaid comprehensive health care services system; issue secondary regulation related to Deposit Insurance, Liquidity Fund, and Private Insurance Fund; dictate the norms
that regulate insurance and reinsurance; and, exercise the other functions, duties, and faculties that the Organic Code of Monetary and Financial and the law assign to it, respectively; That, the penultimate paragraph of Article 14.1 ibidem provides that the Superintendent of Banks, the Superintendent of Companies, Securities, and Insurance, the Superintendent of Popular and Solidarity Economy, the President of the Monetary Policy and Regulation Board, and the Deposit Insurance Corporation, Liquidity Fund, and Insurance Fund, through its legal representative, may propose regulation projects for consideration by the Financial Policy and Regulation Board with the backing of the respective technical reports;

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| Postal Code: 170507 | Quito - Ecuador |
That, numbers 1 and 2 of Article 25.1 ibidem prescribe, as functions of the Technical Secretariat of the Financial Policy and Regulation Board, the elaboration of technical and legal reports that support the regulation proposals that the Financial Policy and Regulation Board will issue; and, perform the analysis of the impacts of the application of regulation proposals, as well as of the approved regulations, respectively; That, Article 79 of the Organic Code of Monetary and Financial, Book I, states that the Deposit Insurance Corporation, Liquidity Fund, and Private Insurance Fund is a public law legal entity, non-financial, with administrative and operational autonomy; and that numbers 1, 4, and 9 of Article 80 ibidem determine that, among the functions of said Corporation are to administer the Deposit Insurance of the private and popular and solidarity financial sectors and the resources that constitute it; pay deposit insurances, and, present to the Monetary and Financial Policy and Regulation Board regulation proposals related to deposit insurance, respectively; That, Article 319 of the Organic Code of Monetary and Financial, Book I, determines that the Deposit Insurance of the private and popular and solidarity financial sectors, will be administered by the Deposit Insurance Corporation, Liquidity Fund, and Private Insurance Fund; That, Article 321 of the aforementioned organic code, provides that the resources of the Deposit Insurance will be managed through independent trusts administered by the Central Bank of Ecuador, whose constituent will be the Deposit Insurance Corporation, Liquidity Fund, and Private Insurance Fund; That, Article 322 ibidem prescribes that, the Deposit Insurance will protect in a limited way the deposits made in the entities of the private and popular and solidarity financial sectors authorized by the respective control bodies, in the form of checking accounts, savings accounts, fixed-term deposits, or other legally accepted modalities, in accordance with the conditions that this Code establishes for the payment of the insurance; That, Article 324 of the aforementioned organic code establishes that the Deposit Insurance Corporation, Liquidity Fund, and Private Insurance Fund will constitute two independent trusts, in the Central Bank of Ecuador, with the resources contributed by the entities of each sector. The first will be the Deposit Insurance Trust of the entities of the Private Financial Sector; and, the second, will be the Deposit Insurance Trust of the entities of the Popular and Solidarity Financial Sector; That, Article 326 of the Organic Code of Monetary and Financial, Book I, provides that the contributions to the Deposit Insurance and the periodicity of its payment by the entities of the private and popular and solidarity financial sectors, will be determined by the Monetary and Financial Policy and Regulation Board; That, Article 327 ut supra prescribes that “the resources of the Deposit Insurance must
be invested observing the principles of security, liquidity, diversification, and profitability, subject to the investment policies approved by the Monetary and Financial Policy and Regulation Board.”; That, General Provision Twenty-Ninth of the Organic Code of Monetary and Financial, Book I, added by the Organic Law Reforming the Organic Code of Monetary and Financial for the Defense of Dollarization, provides that in the current legislation in which mention is made to the “Monetary and Financial Policy and Regulation Board” it is replaced by “Financial Policy and Regulation Board”; That, Transitory Provision Fifty-Fourth of the aforementioned Code, prescribes that “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 the control bodies, will maintain their validity until the Monetary Policy and Regulation Board and the Financial Policy and Regulation Board decide what corresponds, within their scope of competencies.”;

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| Postal Code: 170507 | Quito - Ecuador |
That, Article 15 of the Organic Administrative Code, with reference to the principle of responsibility, provides that the State will respond for damages as a consequence of the lack or deficiency in the provision of public services or the actions or omissions of its public servants or the subjects of private rights who act in exercise of a public power by delegation of the State and its dependents, controlled or contractors, being the State who will make effective the responsibility of the public servant for intentional or negligent acts or omissions, stating that no public servant is exempt from responsibility; That, the Deposit Insurance Corporation, Liquidity Fund, and Private Insurance Fund (COSEDE) through Letters No. COSEDE-COSEDE-2025-0025-LETTER and No. COSEDE-COSEDE-2025-0026-LETTER submitted to the Financial Policy and Regulation Board the Reserved Report No. CGCF-2024-001 of January 21, 2025, which contains the proposal for reform to the deposit insurance investment policy contained in Subsection V “Investment Policies of the Deposit Insurance Resources”, Section I “General Rules for the Operation of the Deposit Insurance System for the Private Financial Sector and the Popular and Solidarity Financial Sector”, Chapter XXVIII “On Deposit Insurance”, Title II “National Financial System”, Book I “Monetary and Financial System” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, for consideration by this Board; That, the Financial Policy and Regulation Board on February 4, 2025, requested from COSEDE the update of Reserved Report No. CGCF-2024-001 of January 21, 2025, with a cutoff to December 2024, related to the proposal for reform to the deposit insurance investment policy; a requirement that was attended with the submission of Reserved Report No. CGCF-2025-002 of February 4, 2025. That, the Technical Secretary of the Financial Policy and Regulation Board, through Memorandum No. JPRF-ST-2025-0015-M of March 19, 2025, submits to the President of the Board the Technical Reserved Report No. JPRF-ST-2025-001 of March 19, 2025, issued by the Technical Coordination of Policy and Regulation of the Financial System and the Technical Coordination of Policy and Regulation of the Securities and Insurance System of this Board, and the Legal Report No. JPRF-CJF-2025-008 of March 19, 2025, issued by the Legal Coordination of Financial Policy and Norms of this Board, as well as the respective draft resolution; That, the Financial Policy and Regulation Board, in an extraordinary reserved in-person session held on March 21, 2025, knew of Memorandum No. JPRF-ST-2025-0015-M of March 19, 2025, issued by the Technical Secretary of the Board; as well as the aforementioned Technical Reserved Report No. JPRF-ST-2025-001 and Legal Report No. JPRF-CJF-2025-008, in addition to the corresponding draft resolution; That, the Financial Policy and Regulation Board, in an extraordinary reserved in-person session held on March 21, 2025,
knew and approved the following Resolution; and, In exercise of its functions, RESOLVES:
ARTICLE FIRST.- Substitute Subsection V “Investment Policies of the Deposit Insurance Resources”, Section I “General Rules for the Operation of the Deposit Insurance System for the Private Financial Sector and the Popular and Solidarity Financial Sector”, Chapter XXVIII “On Deposit Insurance”, Title II “National Financial System”, Book I “Monetary and Financial System” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions with the following text:

“SUBSECTION V: INVESTMENT POLICIES OF THE DEPOSIT INSURANCE RESOURCES Art. 30.- Definitions.- For the purpose of applying what is established in this policy, the following definitions will be considered:

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| Postal Code: 170507 | Quito - Ecuador |
1. Multilateral Organization: financial institution constituted through treaties between sovereign states with the main objective of promoting economic cooperation, financial intermediation, provision of financing for development, monetary stability, or multilateral financial assistance.
2. Supranational Organization: entity constituted through international treaties, endowed with express competence on sovereign financial considerations, to which member States have ceded the faculty to adopt decisions and issue regulations with binding character in economic or financial matters, which prevail over national regulations in the areas of their competence.
Art. 31.- Object.- The object of these policies is to establish the criteria, limits, and responsibilities in the administration of the Deposit Insurance resources, in compliance with the principles of security, liquidity, diversification, and profitability as provided in Article 327 of the Organic Code of Monetary and Financial.
The resources will be administered through commercial trusts named “Deposit Insurance Trust of the Entities of the Private Financial Sector” and “Deposit Insurance Trust of the Entities of the Popular and Solidarity Financial Sector.”
PARAGRAPH I: SECURITY
Art. 32.- Permitted issuers.- Investments are permitted in the following issuers:
1. Sovereign governments
2. Central Banks
3. Multilateral Organizations
4. Supranational Organizations
COSEDE must consider among the permitted issuers those that guarantee legal and/or judicial mechanisms that prevent judicial actions that affect the investments of the Deposit Insurance.
Art. 33.- Sovereign risk rating.- When it comes to sovereign governments and central banks, the countries must have a minimum rating of “AA” for the country, granted by the international risk agencies Standard & Poor's, Fitch Ratings, or Moody's Investors Service.
In case one of the countries maintains two or more sovereign risk ratings from international risk agencies, the most conservative rating will be considered.
Supranational and multilateral organizations are exempt from the rating requirement.
Art. 34.- Evaluation of financial intermediaries and securities custodians.- Only financial intermediaries and securities custodians that have been rated by the Central Bank of Ecuador for the administration of International Reserves may participate in the administration of deposit insurance funds abroad. The execution mechanism for investment operations must be payment against delivery. Art. 35.- Duration.- The maximum duration of the portfolio will be three hundred sixty (360) days. PARAGRAPH II: LIQUIDITY Art. 36.- Minimum liquidity.- The respective Deposit Insurance trusts must maintain a minimum liquidity that will vary over time based on the risk level of the contributing entities, according to the mechanism defined by the Board of Directors of COSEDE.

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| Postal Code: 170507 | Quito - Ecuador |
Art. 37.- Instruments.- The investment instruments of the Deposit Insurance resources that are authorized are exclusively fixed-income securities.
Art. 38.- Markets.- Purchase or sale operations in primary and secondary markets are authorized.
Art. 39.- Currencies.- Investments will be made exclusively in instruments represented in United States dollars.
Art. 40.- Maximum term.- The maximum term for investments will be five hundred forty (540) days.
The maximum term for investments in non-prepayable fixed-term deposits will be ninety-one (91) days.
Art. 41.- Treatment of excesses over permitted limits.- If by reason of the payment of the Deposit Insurance the limits mentioned above are exceeded, COSEDE must generate corrective measures within a maximum period of ninety (90) days; if the excesses cannot be corrected within the stated period, it must be communicated in a timely manner to the Financial Policy and Regulation Board so that this collegiate body, knowing the reasons that generated such a situation, can decide on the extension of the deadline. PARAGRAPH III: DIVERSIFICATION Art. 42.- Portfolio concentration.- The portfolio concentration, by issuer, measured through the Herfindahl-Hirschman Index (HHI), must be maintained at all times up to 2,500, corresponding to a moderate concentration. PARAGRAPH IV: PROFITABILITY Art. 43.- Profitability.- Once the principles of security, liquidity, and diversification established in this policy have been applied, investment decisions must be made seeking adequate levels of portfolio profitability. PARAGRAPH V: INVESTMENT OF RESOURCES WITHIN EXCLUSION AND TRANSFER OF ASSETS AND LIABILITIES PROCESSES Art. 44.- Investment policies.- The investment of the Deposit Insurance resources, within exclusion and transfer of assets and liabilities processes, will be carried out in compliance with the security, liquidity, diversification, and profitability policies, insofar as applicable, provided in this norm. Art. 45.- Investments from ETAP processes.- Investments arising from Exclusion and Transfer of Assets and Liabilities (ETAP) processes will be administered as an independent portfolio within the corresponding Deposit Insurance trust. Art. 46.- Instruments.- The investment instruments within Exclusion and Transfer of Assets and Liabilities processes that are authorized are exclusively deposit certificates or investment certificates issued by entities from the private and popular and solidarity financial sectors. Art. 47.- Grace period.- The maximum grace period for investments made within Exclusion and Transfer of Assets and Liabilities processes will be up to two (2) years. This period will apply exclusively to the payment of capital. COSEDE will determine the specific grace period for each investment, based on the methodology approved by the Board of Directors for this purpose. Art. 48.- Term.- The maximum term for investments will be up to twenty (20) years. To determine the specific term of each investment, COSEDE will apply the methodology approved by the Board of Directors.

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas Financial Management Governmental Platform. Red Block, 8th floor
| Postal Code: 170507 | Quito - Ecuador |
Art. 49.- Interest Rate.- The interest rate to be applied to investments made within processes of Exclusion and Transfer of Assets and Liabilities corresponds to the weighted average interest rate of the returns of the Deposit Insurance System portfolio on the date of instrumenting the operation, plus a margin determined by the COSEDE according to the methodology approved by the Board of Directors. Art. 50.- Duration.- In the case of the investment portfolio arising from processes of exclusion and transfer of assets and liabilities, duration shall not be calculated. Art. 51.- Amortization of principal and interest.- Once the grace period granted has been fulfilled, the financial entity shall make the payment of interest and the amortization of principal as agreed in the respective investment instrument. Art. 52.- Pre-cancellation of the investment.- The fiduciary administrator, when executing the investments instructed by the COSEDE, must include a pre-cancellation clause, without the same being subject to penalty in case this option is exercised and the return generated up to the date is recognized. Art. 53.- Investment limits.- The maximum percentage of investment in a single financial entity shall be 25% calculated on the value of the investment portfolio of the Deposit Insurance System of the corresponding sector, excluding those arising from processes of exclusion and transfer of assets and liabilities. The treatment of excesses beyond the limits mentioned above shall be carried out in accordance with what is stated in article 41 of paragraph II “Liquidity” of this regulation. Art. 54.- Profitability.- The calculation of the weighted average return of the Deposit Insurance System portfolio shall include the return of the portfolio of investments made within processes of exclusion and transfer of assets and liabilities. TRANSITIONAL PROVISIONS FIRST.- The COSEDE must design and execute a disinvestment plan in coordination with public banking and the Ministry of Economy and Finance (MEF), in order to progressively reduce the exposure of the investment portfolio in the public financial sector and in titles issued by the MEF. During the disinvestment process, the COSEDE may make investments in the MEF and in public banking, provided that such investments do not increase the exposure with the issuers considered as a whole. The disinvestment plan must contemplate a progressive scheme for the reduction of investments in the public financial sector and in titles issued by the MEF, prioritizing the liquidity and security of the portfolio. The COSEDE must sign the disinvestment agreements by September 30, 2025. SECOND.- During the disinvestment period, and while there are investments in issuers of the local market, the fiduciary administrator, when executing primary market investments instructed by the COSEDE, must include a pre-cancellation or repurchase clause, depending on the nature of the financial instrument; without the same being subject to
penalty in case this option is exercised. This mechanism shall apply exclusively to those investments contemplated within the disinvestment process, so that the liquidation of these assets is carried out in an orderly manner without affecting the stability of the portfolio or its liquidity. THIRD.- To guarantee the adequate transition towards compliance with what is provided in Art. 40, a maximum term of three (3) years is established counted from the entry into force of this resolution, during which existing investments issued by the body in charge of public finances that exceed the limit of five hundred forty (540) days may be maintained until their maturity, provided that they do not exceed the originally agreed term.

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas Financial Management Governmental Platform. Red Block, 8th floor
| Postal Code: 170507 | Quito - Ecuador |
During this transitional period, the investment of resources in instruments with terms exceeding five hundred forty (540) days established in Art. 40 shall not be permitted.”
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 Regulation and Supervision Board within a maximum term of two days from its issuance.
NOTIFIED.- Given in the Metropolitan District of Quito, on March 21, 2025.
THE PRESIDENT,
Mgs. María Paulina Vela Zambrano
The aforementioned Resolution was processed and signed by Magister María Paulina Vela Zambrano, President of the Financial Regulation and Supervision Board, in the Metropolitan District of Quito, on March 21, 2025.- I CERTIFY.
TECHNICAL SECRETARY,
Mgs. Luis Alfredo Olivares Murillo