JPRFM-2026-037-A — Approves the reform to the "Policy on the Classification of Risk and Contingent Assets and the Establishment of Provisions" of the Central Bank of Ecuador

FINANCIAL AND MONETARY POLICY AND REGULATION BOARD

CONSIDERING:

That, Article 226 of the Constitution of the Republic of Ecuador prescribes that 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;

That, Article 227 ibidem states that the 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 ut supra determines that the formulation of monetary, credit, exchange, and financial policies is the exclusive faculty of the Executive Function and will be implemented through the Central Bank of Ecuador;

That, on October 13, 2025, the Organic Reform Law of the Organic Monetary and Financial Code was published in the Sixth Supplement of the Official Register No. 142;

That, Article 13 of the Organic Monetary and Financial Code creates the Financial and Monetary Policy and Regulation Board, part of the Executive Function, as an organ with functional, technical, and institutional autonomy, and in its decisions, responsible for the formulation of monetary, credit, financial, securities, insurance, and prepaid comprehensive health care service policy and regulation. The Financial and Monetary Policy and Regulation Board will be the highest governing body of the Central Bank of Ecuador;

That, Article 17 of the aforementioned Code, in its pertinent part, determines that:

"(...) For the fulfillment of these functions, the Board will issue regulations in matters within its competence, without altering legal provisions. The Financial and Monetary Policy and Regulation Board may issue regulations by segments, economic activities, and other criteria. It may even reform or repeal regulations from the former Monetary Policy and Regulation Board, Financial Policy and Regulation Board, or Monetary and Financial Policy and Regulation Board. All regulations and policies issued by the Financial and Monetary Policy and Regulation Board in the exercise of its functions, duties, and faculties must be backed by duly substantiated technical and legal reports (...)";

That, Article 19 of the same Code, among the specific functions of the Financial and Monetary Policy and Regulation Board in the monetary scope, establishes:

"(...) 2. Establish the policies of the Central Bank of Ecuador and supervise their implementation;
3. Monitor compliance with the functions of the Central Bank of Ecuador;
4. Formulate the policy for the operations of the Central Bank of Ecuador; (...)";

That, Article 24 ibidem provides that the acts of the Financial and Monetary Policy and Regulation Board enjoy the presumption of legality and will be expressed through resolutions that will have mandatory force, which will govern from their publication in the Official Register, or from the date of their issuance when so determined by the Board, in accordance with the matter;

That, Article 25.3 of the Organic Monetary and Financial Code establishes among the functions of the Technical Secretariat of the Financial and Monetary Policy and Regulation Board the elaboration of technical and legal reports supporting regulation proposals, technical and administrative support to the Board, and other functions assigned to it;

That, Article 26 of the Organic Monetary and Financial Code determines that the Central Bank of Ecuador is a public law legal entity, part of the Executive Function, of indefinite duration, with institutional, administrative, budgetary, and technical autonomy, which will be governed by the Constitution of the Republic, the aforementioned Code, its statute, regulations issued by its governing body, internal regulations, and other applicable laws regarding the matter;

That, in the Codification of Resolutions of Governance of the Monetary Policy and Regulation Board and of the Central Bank of Ecuador, Title II "Government Policies of the Central Bank of Ecuador", Chapter I "Government of the Central Bank of Ecuador", Section 8 "Presentation and Preparation of Financial Statements, Chart of Accounts and Methodology for the Distribution of Assets and Liabilities of the Four Systems for Measuring the Backing Rule", Subsection 4, the regulation on "Classification of Risk and Contingent Assets and Establishment of Provisions" was issued;

That, General Provision Twenty-Ninth ibidem states: "In existing legislation where mention is made, indistinctly, of the Monetary and Financial Policy and Regulation Board, the Monetary Policy and Regulation Board; or, the Financial Policy and Regulation Board, replace and understand as 'Financial and Monetary Policy and Regulation Board'";

That, the second paragraph of General Provision Thirteenth of the Organic Law of Economic Efficiency and Job Generation contains the exception established regarding financial contracts with which the claims of the Ministry of Economy and Finance and public financial entities were unified, to which, due to their own nature, for their accounting and financial registration and management, International Financial Reporting Standards will not apply. The Central Bank of Ecuador will register new operations at amortized cost calculated with the nominal rate at which the respective financial contracts were celebrated;

That, General Provision First of the Organic Reform Law of the Organic Monetary and Financial Code determines that members of the Financial and Monetary Policy and Regulation Board, sworn in on September 16, 2025, by the National Assembly, will continue to exercise their functions for the periods they were designated and will maintain their labor continuity and acquired rights;

That, through Office No. T.233-SGJ-25-098, of September 5, 2025, the Constitutional President of the Republic forwarded to the President of the National Assembly the list of candidates for the designation of members of the Financial and Monetary Policy and Regulation Board, as well as the temporality of their stay within the initial period;

That, the Plenary of the National Assembly, on September 16, 2025, designated and swore in the members of the Financial and Monetary Policy and Regulation Board;

That, the Financial and Monetary Policy and Regulation Board, in ordinary session No. 019-2026, under electronic modality (asynchronous), on September 11, 2026, reviewed the resolution proposal sent via Memorandum No. BCE-BCE-2026-0390-M, of September 8, 2026, by the General Manager of the Central Bank of Ecuador to the President of the Financial and Monetary Policy and Regulation Board, as well as, Technical Report No. BCE-GR-2026-070 / BCE-GAF-2026-026, of September 8, 2026; and, Legal Report No. BCE-GJ-092-2026, of September 8, 2026; and,

In exercise of its functions and in attention to Article 24 of the Organic Monetary and Financial Code, the Financial and Monetary Policy and Regulation Board,

RESOLVES:

Article 1. - Substitute Subsection 4 "Classification of Risk and Contingent Assets and Establishment of Provisions", Section 8 "Presentation and Preparation of Financial Statements, Chart of Accounts and Methodology for the Distribution of Assets and Liabilities of the Four Systems for Measuring the Backing Rule", Chapter I "Government of the Central Bank of Ecuador", Title II "Government Policies of the Central Bank of Ecuador" of the "Codification of Resolutions of Governance of the Monetary Policy and Regulation Board and of the Central Bank of Ecuador", with the following text:

"SUBSECTION 4: POLICY FOR THE CLASSIFICATION OF RISK AND CONTINGENT ASSETS AND ESTABLISHMENT OF PROVISIONS OF THE CENTRAL BANK OF ECUADOR

PARAGRAPH I
OBJECTIVE, SCOPE, AND DEFINITIONS

Article 1.- Objective: To evaluate, under parameters of financial prudence, the quality of assets and contingents in order to determine the fair value and the level of provisions required against potential losses or impairment of financial assets and contingents to present them in the Statement of Financial Position.

Article 2.- Scope: Financial assets and contingents of the Statement of Financial Position will be evaluated, observing the guidelines indicated in this resolution.
The Risk and Contingent Asset Qualification Commission must define at least annually the detail of accounting accounts subject to the evaluation of risk and contingent asset classification, and update it when appropriate, and inform the General Management. The detail of accounting accounts must include the classification of the financial asset and the provision method where applicable.

Article 3.- Definitions: For the purposes of this policy, the following definitions will be considered:

3.1. Assets adjudicated by dation in payment.- Groups assets delivered by debtors of the Central Bank of Ecuador to fulfill the payment of obligations.

3.2. Financial assets.- Also known as financial instruments, are those that possess any of the following forms: i) cash; ii) contractual right to receive cash or another financial asset from a third party; iii) contractual right to exchange financial instruments with a third party under potentially favorable conditions; and, iv) an equity instrument of another entity.

3.3. Transaction costs.- Are incremental costs directly attributable to the purchase, issuance, sale, or disposal of a financial asset. An incremental cost is one that would not have been incurred if the Central Bank of Ecuador had not acquired, issued, sold, or disposed of the financial instrument; they include fees and commissions paid to agents, advisors, brokers, and intermediaries; and, rates established by regulatory entities and stock exchanges. Transaction costs do not include premiums or discounts on debt, financial costs, internal administration costs, or maintenance costs.

3.4. Amortized cost of a security or title.- Is the initial value of said asset minus principal repayments, plus accumulated amortization, calculated using the effective interest rate method, of any difference between the initial amount and the redemption value at maturity. Amortized cost will be applied when the financial asset was acquired under the business model of holding it or holding it to maturity, and when the contractual conditions of the financial asset give rise, at specified dates, to cash flows that are solely payments of principal and interest on the outstanding principal amount.

3.5. Historical cost.- Fair value or fair value, at the date of exchange of received assets, plus costs directly attributable to the asset.

3.6. Collectible receivables.- Groups internal credit operations granted in previous years under the regulations that authorized the Central Bank of Ecuador to generate this type of operations, accounts receivable, and loans delivered with resources from the former Pension Fund of the Central Bank of Ecuador.

3.7. Impairment.- According to the impairment approach of IFRS 9, it is not necessary for a credit-related event to occur before credit losses are recognized. An asset will be accounted for above its recoverable amount when its book value exceeds the amount that can be recovered from it, through its use or sale. If this were the case, the asset would be presented as impaired, and the standard requires the Central Bank of Ecuador to recognize an impairment loss for that asset.

3.8. Alternative price sources.- In the case of securities that do not have formal sources of freely accessible prices, the option to rescind prices through brokers of recognized local or international performance constitutes an alternative source of prices, provided that they act under conditions of independence.

3.9. Freely accessible price sources.- Are those provided through information systems available to the Central Bank of Ecuador, or others of similar characteristics that provide services in the local or international country of origin; as well as, from stock exchanges supervised and regulated by the corresponding authorities.

3.10. Default.- Also known in English as "Default". Refers to the failure to fulfill a financial obligation, according to the conditions established in the contractual clauses or equivalent document of the financial asset.

3.11. Investment instruments.- This definition includes debt instruments, precious metals (gold / silver), and any other asset traded in official markets that generates returns by price or interest defined in the transaction.

3.12. Debt-representative instruments.- Are those that represent an obligation on the part of the issuer, which have a nominal value and their capital is amortized over time. The yield of these securities is associated with an interest rate, or with a securities index that reflects the value of money over time.

3.13. Debt-representative instruments of special condition.- Are those debt-representative instruments received from transactions not related to investment or monetary policy objectives, whose characteristics such as term, interest rate, or flows do not correspond to regular market conditions, and are issued for the fulfillment of specific purposes established by law, such as capitalization or guarantee.

3.14. Negative watch lists: Communications issued by rating agencies that identify issuers or financial instruments whose credit quality is under review due to the presence of adverse events, conditions, or trends that could affect their payment capacity and lead to a downgrade. These lists constitute prospective indicators of credit deterioration and can be considered as evidence of a significant increase in credit risk within risk monitoring and evaluation processes.

3.15. Effective interest rate method.- Is the method used to calculate the amortized cost of a financial asset or a financial liability and for the allocation and recognition of interest income or interest expense in the result over the corresponding period. To calculate the effective interest rate, the Central Bank of Ecuador will estimate cash flows taking into account the contractual conditions of the financial instrument, excluding any estimate of future credit losses.

3.16. Active market.- It is present when quotation prices are obtained permanently and systematically through a stock exchange, financial intermediaries, a sectoral institution, a pricing service, or a regulatory body, and those prices reflect current market transactions that occur regularly, between parties acting in a situation of mutual independence.

3.17. Business Model.- Refers to the way in which types of financial assets are managed to achieve a concrete business objective, regarding the possession or liquidation of the asset.

3.18. Equity participations in international organizations.- Is a title that represents a participation in the capital of the issuing entity. The most common equity instruments for the Central Bank of Ecuador are shares or participations in international and multilateral organizations acquired strategically for the own operationality of central banking.

3.19. Contingent liability.- Is a possible obligation, arising from past events and whose existence must be confirmed only by the occurrence or non-occurrence of one or more future events, uncertain events not entirely under the control of the entity; or, a present obligation, arising from past events, that has not been recognized accounting because: a) it is not probable that a outflow of resources incorporating economic benefits will be required to settle it; or, b) the amount of the obligation cannot be measured with sufficient reliability.

3.20. Expected Credit Loss.- According to IFRS 9, for expected credit losses over the life of the asset, the Institution will estimate the risk that a default will occur in the financial instrument during its expected life. Twelve (12) months of expected credit losses are part of the expected credit losses over the life of the asset, and represent the cash shortfalls that will result if a default occurs in the twelve (12) months following the reporting date or shorter period if the expected life of a financial instrument is less than twelve (12) months, weighted by the probability that the default will occur. The expected credit losses over the life of the asset that an entity will incur on a financial instrument are estimated by the total expected cash flows of the instrument. The expected loss under this approach arises from the product of three components:
Expected Loss (EL) = EAD * PD * LGD a. Exposure at Default (EAD).- Is the present value of the financial asset exposed at the moment of default. b. Probability of Default (PD).- Is the possibility that a partial or total default of a debtor will occur in a given time space. It is calculated using econometric or statistical models, measuring sociodemographic, financial, macroeconomic variables, among others.
c. Loss Given Default (LGD).- Is the percentage of loss in case of default and is measured as the difference between one minus the recovery rate.

3.21. Statistical risk of valuation models.- Is that which results from the imprecision in the valuation of positions and is inherent to the use of a valuation method. This risk may come from inadequate specification of the model or its algorithms, from the adoption of inadequate assumptions, from poor quality information, or from the use of non-random data, among other aspects; such situations may lead to incorrect estimates of asset prices and even losses in trading activities based on prices thus calculated.

3.22. Fair Value.- Corresponds to the price at which an orderly transaction would take place to sell the asset or transfer the liability between market participants at the measurement date under current market conditions; that is, an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability. The best measure of the fair value of an investment instrument is given by quoted prices in an active market.

PARAGRAPH II
RESPONSIBILITIES

Article 4.- Commission Designation: The General Management of the Central Bank of Ecuador will designate a Risk and Contingent Asset Qualification Commission, integrated by officials of the highest hierarchical level of financial management, accounting management, and financial risk management, whose function will be to ensure compliance with this resolution.

Article 5.- Responsibilities for the classification of risk assets and contingent liabilities: The classification of risk assets and contingent liabilities, and the establishment of provisions of the Central Bank of Ecuador is the responsibility of the units that manage risk financial assets or contingent liabilities, and their Accounting Responsibility Centers (CRC), based on their competencies, the guidelines and periodicity established in this resolution.

Article 6.- Evaluation: The Subgerencia of Financial Risks in coordination with the Subgerencia Financial and the Direction of Accounting will prepare the evaluation report of risk and contingent asset classification and establishment of provisions, which must contain, at least, the following:
a) Detail of accounts subject to evaluation; and, b) Level of required and established provision The Risk and Contingent Asset Qualification Commission will review and recommend to the General Management the approval of the evaluation report of risk and contingent asset classification and establishment of provisions with balances cut off on March 31, June 30, September 30, and December 31, up to thirty (30) days after the end of the quarter. The General Manager of the Central Bank of Ecuador will review and approve the report, in order to implement the recommendations issued, if applicable. The Central Bank of Ecuador will present to the Financial and Monetary Policy and Regulation Board the report corresponding to December 31 or when requested.

PARAGRAPH III
MEASUREMENT OF RISK FINANCIAL ASSETS

Article 7.- Classification of financial assets: Financial assets will be recorded in the respective accounting accounts as determined in the "Policies for the Presentation and Preparation of Financial Statements" and the "Chart of Accounts of the Central Bank of Ecuador", which includes the following business models:
a) Amortized Cost; b) Fair Value with changes in Other Comprehensive Income (OCI); c) Fair Value with changes in Other Comprehensive Income with irrevocable election; d) Fair Value with changes in Results; and, e) Fair Value with changes in Results with irrevocable election

Article 8.- Financial Assets measured at Amortized Cost: The Central Bank of Ecuador will measure a financial asset according to the following detail:
a) Initial accounting record: The record will be made at the fair value of the instrument which implies the price of the transaction agreed upon by the parties, plus the transactional costs associated with the instrument. b) Subsequent measurement: Accrued interest will be recognized at least at the balance sheet close

monthly, as established in the "Policies for the Presentation and Preparation of Financial Statements". The management that administers the risk asset will estimate its impairment, considering for its estimation expected loss models in cases where the cost-benefit principles of providing the information or the basic method, defined below, are justified.

c) Reclassification: If the Central Bank of Ecuador reclassifies a financial asset from the amortized cost measurement category to the fair value through profit or loss category, its fair value will be measured at the reclassification date. Any gain or loss arising from differences between the previous amortized cost of the financial asset and the fair value will be recognized in the period's result.

If the Central Bank of Ecuador reclassifies a financial asset from the amortized cost measurement category to the fair value through other comprehensive income category, its fair value will be measured at the reclassification date. Any gain or loss arising from differences between the previous amortized cost of the financial asset and the fair value will be recognized in other comprehensive income. The effective interest rate and provisions resulting from the measurement of expected credit losses will not be adjusted as a result of the reclassification.

Article 9.- Financial Assets Measured at Fair Value with Changes in Other Comprehensive Income (OCI): The Central Bank of Ecuador will measure a financial asset at fair value with changes in other comprehensive income, according to the following details:

a) Initial Recognition: The recognition will be made at the fair value of the instrument, which implies the transaction price agreed upon between the parties, plus the transaction costs associated with the instrument.

b) Subsequent Measurement: When the fair value exceeds the book value, a surplus from value fluctuation will be recognized. When the fair value is lower than the book value, a deficit from value fluctuation will be recognized. In both cases, such fluctuation will affect the other comprehensive income (OCI) of the period.

c) Reclassification: If a financial asset is reclassified from the fair value through other comprehensive income measurement category to the amortized cost category, the financial asset will be reclassified to its fair value at the reclassification date. However, the accumulated surplus or deficit previously recognized in other comprehensive income will be eliminated from equity and adjusted against the fair value of the financial asset at the reclassification date. As a result, the financial asset will be measured at the reclassification date as if it had always been measured at amortized cost. This adjustment affects other comprehensive income but not the period's result; and, therefore, it is not a reclassification adjustment. The effective interest rate and the measurement of expected credit losses will not be adjusted as a result of the reclassification.

If a financial asset is reclassified from the fair value through other comprehensive income measurement category to the fair value through profit or loss category, the financial asset continues to be measured at fair value. The accumulated surplus or deficit previously recognized in other comprehensive income will be reclassified from equity to the period's result as a reclassification adjustment at the date of effect.

For investments at Fair Value with Changes in Other Comprehensive Income with irrevocable election, the same procedure established in this article will be used.

Article 10.- Financial Assets Measured at Fair Value with Changes in Profit or Loss: The Central Bank of Ecuador will measure a financial asset at fair value with changes in profit or loss, according to the following details:

a) Initial Recognition: The recognition will be made at the fair value of the instrument, which implies the transaction price agreed upon between the parties.

b) Subsequent Measurement: When the fair value exceeds the book value, a gain from value fluctuation will be recognized. When the fair value is lower than the book value, a loss from value fluctuation will be recognized. In both cases, such fluctuation will affect the period's result.

c) Reclassification: If a financial asset is reclassified from the fair value through profit or loss measurement category to the amortized cost category, its fair value at the reclassification date becomes its new gross book value.

If a financial asset is reclassified from the fair value through profit or loss measurement category to the fair value through other comprehensive income category, the financial asset continues to be measured at fair value.

For investments at Fair Value with Changes in Profit or Loss with irrevocable election, the same procedure established in this article will be used.

Article 11.- Assets Measured at Historical Cost: The Central Bank of Ecuador will measure a financial asset at historical cost according to the following details:

a) Initial Recognition: The recognition will be made at historical cost with reference to the trade date, plus costs associated with the asset.

b) Subsequent Measurement: Its historical cost with reference to its trade (initial recognition) will be maintained; however, control will be kept over the compliance with the conditions of the financial instrument, as well as its accounting effects.

The calculation of impairment must be estimated considering the technical and economic applicability of its determination, considering for its estimation expected loss models in cases where the cost-benefit principles of providing the information or the basic method, defined below, are justified.

PARAGRAPH IV
VALUATION METHODS FOR DIFFERENT ASSETS

Article 12.- Scope of Application: The Central Bank of Ecuador will use valuation methods that prioritize the use of external data, which will be used for cases of measurement where the estimation of fair value is required.

The market price for investment instruments traded in centralized trading mechanisms must be the price defined in the valuation methodology according to the type of instrument, which must be applied at least with a monthly periodicity.

To calculate the fair value, the following must be considered:

12.1. The value obtained must faithfully reflect the prices and rates current in the markets, liquidity conditions and market depth, and other relevant variables.

12.2. Market prices may be obtained by valuation methods own or contracted with a specialized provider, or a price supplied by an alternative price source.

12.3. If transactions for an investment instrument do not have sufficient frequency or trade very small volumes in relation to the operations that the Central Bank of Ecuador maintains, market quotes or recent transaction prices may not be a good indicator of fair value, or may not be available for consultation. In such cases, the Central Bank of Ecuador may calculate the fair value using price estimation models.

12.4. The prices and rates used cannot correspond to quotes issued by internal management (front-office) or external manager who directly trades the securities of the Central Bank of Ecuador.

12.5. The responsibility for ensuring permanently a correct valuation of the investment portfolio to its fair value must always fall on sub-processes independent of internal management (front-office).

12.6. The valuation methods and procedures adopted must be previously defined by the Sub-Department of Financial Risks, and will be applied consistently by the management that administers the asset.

12.7. Each measurement performed must be sufficiently documented and clearly identified. From the information maintained about this method, it must be easily derived whether it was valued at market prices, or through a model, the origin of the data, the hypotheses used, and the degree of reliability of the estimates, when it comes to the application of a valuation model.

12.8. The Central Bank of Ecuador will manage the implementation of adequately structured and automated systems, which present conditions of reliability and integrity of the process and the information.

12.9. Before acquiring a new type of investment instrument, the Central Bank of Ecuador must evaluate if it has a mechanism for identifying and measuring risks that allow it to capture the material sources of risk of the instrument; additionally, it must be evaluated if for that instrument there is a reliable source to calculate its fair value or, in its absence, if there is the capacity to develop a price estimation model; otherwise, it must abstain from investing in such instruments.

Article 13.- Statistical Models: For cases where it is necessary to develop statistical valuation models, the models must incorporate all risk factors that market participants would consider to establish a market price and be coherent with accepted economic methodologies for establishing prices of investment instruments.

Regardless of the method used, modeling must always maximize the use of market information, taking into account the following criteria, in order of preference: i) if prices are available in liquid markets at the time of calculation for similar instruments in terms of tenor, currencies, interest or discount rates, credit risk, prepayment risk, and guarantees, such prices will be used making all pertinent adjustments; or, ii) if there are no public quotes from liquid and deep markets for similar instruments, the fair value will be estimated from reference prices, interpolations, extrapolations, or through a statistical or mathematical model.

Article 14.- Minimum Risk Factors to Consider in the Development of Valuation Models:
The following risk factors will be considered, at least:

14.1. Credit Risk.- Associated with the premium or discount required on the reference rate, which may be a spread estimated from a given curve, a yield index, or a financial indicator agreed upon and stated on the face of the respective title, in compensation for the expected loss from the debtor's failure to pay. The mentioned spread must be obtained from market quotes for transactions of instruments from issuers with similar credit risk ratings.

14.2. Volatilities.- Corresponds to market volatilities related to the financial asset, object of measurement, and must be obtained using adequate techniques of general acceptance.

14.3. Correlations.- Corresponds to the correlations that exist between the financial assets objects of valuation, as well as with the variables considered relevant.

14.4. Yield Curves.- For the calculation of yield curves, when required, recognized technical value methodologies must be used and carried out based on transactions of different tenors made in active markets of risk-free instruments. In case there is not enough information to calculate the yield curve, yield curves available in the market may be used, to which extrapolation techniques will be applied to value the instrument.

14.5. Price Vectors.- Historical price vectors of similar instruments may be used as input for statistical models, for the estimation of the behavior of market variables.

14.6. Market Liquidity.- Corresponds to the effect of changes in market liquidity on the value of financial assets.

14.7. Other Risk Factors.- Price determination models generally decompose instruments into their elementary risk factors, such as interest rate, currencies or indices, and macroeconomic variables. The Central Bank of Ecuador must ensure that the calculation of the risk factors used in valuation models are sufficiently robust.

Article 15.- Statistical Risk of Valuation Models: The Central Bank of Ecuador must ensure that valuation models apply levels of confidence and statistical tests in accordance with good prudential financial practices, to mitigate the statistical risk of valuation models.

Article 16.- Periodic Evaluation and Calibration of Models: The Central Bank of Ecuador must evaluate and calibrate its models, at least every two (2) years, using observable prices for the same instrument or for similar instruments, to the extent that such information is available.

Additionally, models must be calibrated when relevant changes occur in market conditions or new products are introduced, or when significant discrepancies are found as a result of monitoring the model's results. This periodic calibration and evaluation must be documented.

PARAGRAPH V
ESTIMATES AND CONSTITUTION OF PROVISIONS

Article 17.- Scope of Application: The estimation of provisions, and verification of impairment applies to assets that are registered and subsequently measured at amortized cost or historical cost. Two measurement methods will be considered for this effect:

a) Basic Method b) Advanced Method

The provision of an asset will be made based on its nature and the estimation of expected loss under the advanced method, or under the basic method for cases that do not warrant the extensive development of a model; for which reasonable and supportable information available without disproportionate cost or effort will be considered. The Commission for the Evaluation of Risk Asset and Contingent Liability Qualification will prepare technical guidelines for the selection of the appropriate provision estimation method, based on the analysis carried out by the management that administers the risk financial asset or contingent liability.

Article 18.- Measurement Bases for the Basic Method: The Central Bank of Ecuador will constitute provisions based on the loss risk that financial assets may cause considering their delinquency.

Delinquency will be considered from the due date of dividends or balances of the referred accounts or financial contracts, according to the thresholds defined below:

Categories Days of Delinquency
A From 0 to 30
B From 31 to 60
C From 61 to 120
D From 121 to 180
E More than 180

For this type of assets, the value of provisions will consider the rating granted and the percentages established in the following table:

Category Provision
A From 0% to 0.50%
B From 0.51% to 6%
C From 6.01% to 20%
D From 20.01% to 60%
E From 60.01% to 100%

Article 19.- Measurement Bases for the Advanced Method: Expected credit losses recognized as provision for losses depend on the degree of impairment of the risk financial asset since initial recognition.

Two types of measurement will be considered: twelve (12) month expected credit losses and lifetime expected credit losses, which delimit the following three stages:

a) Stage 1: Operations without evidence of impairment, considering the measurement of expected losses for twelve months. b) Stage 2: Operations with significant increase in credit risk, considering the measurement of expected losses for the entire remaining life of the instrument. c) Stage 3: Operations with materialization of impairment, considering the measurement of expected losses for the entire remaining life of the instrument.

A financial instrument moves from stage 1 to stage 2 when there is a significant increase in credit risk; and, moves to stage 3 when impairment is materialized.

Article 20.- Periodicity: The management that administers the risk asset will estimate the constitution of provisions at least quarterly or when significant changes in impairment are detected.

When performing the subsequent evaluation of a financial instrument, it must be analyzed whether the credit risk of said instruments has not increased significantly since initial recognition.

To perform this evaluation, the Central Bank of Ecuador will compare the risk of default occurring on a financial instrument at the evaluation date with that of the initial recognition date and will consider reasonable and supportable information available without disproportionate cost or effort, which is indicative of increases in credit risk or impairment since initial recognition.

Article 21.- Evidence of Impairment: Objective evidence that an instrument representing debt has increased credit risk or suffered impairment includes, among others, the following:

a) Significant financial difficulties of the issuer implying a deterioration in credit rating by at least one transition category of the issuer or the specific instrument. b) Interruption of quotes or vectors for the investment instrument due to reasons of default associated with the issuer. c) Events known through official channels that evidence that the issuer presents financial difficulties. d) Renegotiation or refinancing of the contractual conditions of the instrument due to legal or economic factors linked to the issuer. e) Breaches of the contract, regarding the timely payment of principal and interest, whether partial or total when it is for a time greater than five (5) days and less than or equal to ninety (90) days, unless the operational and fortuitous reasons that caused it are justified. The reference of delinquency days will be used whenever there is no specific model for the type of instrument being analyzed. f) Existing or predicted adverse changes in the business, economic or financial conditions that are expected to cause a significant change in the borrower's ability to meet its debt obligations. g) Evidence that the issuer will enter a process of forced restructuring or bankruptcy. h) Reduction of more than 5%, in the price of the title according to what is referred to in the price vector published on official price platforms, between the most recent date and the previously evaluated date by the BCE, provided that this variation does not derive from the valuation of the underlying asset linked to the instrument representing debt or to the risk-free rate. i) Breach of contractual clauses of the financial instrument. j) Suspension or cancellation of regulatory licenses or authorizations that affect the continuity of the issuer's business. k) Adverse opinion or with significant qualifications issued by the external auditor. l) Inclusion of the issuer in negative watch lists by rating agencies. m) State or regulatory intervention that limits the payment capacity.

Article 22.- Evidence of Materialization of Impairment: The evidence of materialization of impairment of an instrument representing debt includes, among others, the following:

a) Official declaration that the issuer will enter a process of forced restructuring or bankruptcy, or voluntarily by the issuer itself. b) Failure to pay principal or interest for a time greater than 90 calendar days. c) Forced sale of assets or significant reduction of social capital. d) State or regulatory intervention that restricts integral payment or operation capacity. e) When the probability of compliance with the contractual conditions of the counterparty is remote or null. f) When the collateral guarantees of the counterparty are compromised in a judicial process.

Regardless of the provision method applied, for assets classified under this category, the Central Bank of Ecuador will constitute a provision for impairment of one hundred percent (100%) of its book value at the date of evaluation.

Article 23.- Recognition: The Central Bank of Ecuador will recognize in the period's result, as a gain or loss for impairment, the amount of expected credit losses or their reversals, so the value correction must be adjusted at least quarterly.

For the management of resources and recognition of provisions, the following will be considered:

a) In the case that the result of the measurement implies the constitution of greater provisions, the management that administers the risk asset will process the obtaining of budgetary resources. b) In case that the result of the measurement implies the decrease of provisions, these will not be affected to income accounts for reversal, until the close of the corresponding fiscal year.

Article 24.- Particular Technical Considerations: Particular techniques will be applied for the following types of financial assets:

a) Financial instruments held with the entity in charge of public finances and financial entities of the public sector: They are exempt from impairment measurement, due to their credit risk being considered low, in attention to the strategic nature of the institutional relationship existing between the Central Bank of Ecuador, in its capacity as fiscal and financial agent, and the Central Government.

b) Assets adjudicated in dation in payment: If assets adjudicated in dation in payment cannot be alienated within a period of one (1) year, the Central Bank of Ecuador must constitute provisions, starting in the month immediately following the expiration of that period.

The constitution of provisions of goods received in dation in payment will be made by applying the twelfth monthly of the book value from the month following the termination of the one-year period, counted from its initial accounting registration, which is

will be made as of the date of registration of the real estate in the property registry.
When the appraisal of the received real estate determines that the book value of these assets is greater than their market value, additional provisions must be established for the difference. c) Non-monetary gold: In the event that the accounting value of a troy ounce of non-monetary gold is higher than the international market value of a troy ounce of gold on the evaluation date, the provision for the corresponding difference must be made. d) Legal contingent liabilities: The balances and characteristics of a contingent nature obligation classified as “Probable” and “Possible” must be recognized in the contingent liability accounts and disclosed in the Notes to the Financial Statements. For the determination of the provision, one hundred percent (100%) of the obligations classified as “Probable” will be estimated, as summarized in the following table:

PROBABLE (High Rating)	POSSIBLE (Medium Rating)	REMOTE (Low Rating)
There is a present obligation that probably requires an outflow of resources.	There is a possible obligation, or a present obligation that may or may not require an outflow of resources.	There is a possible obligation, or a present obligation where the possibility of an outflow of resources is considered remote.
A total provision of the contingent account is recognized.	No provision is recognized.	No provision is recognized.
Disclosure in the Notes to the Financial Statements of the Institution.	The contingent liability is recorded. Disclosure in the Notes to the Financial Statements of the Institution.	No type of information is required to be disclosed; however, periodic control must be carried out.

For the specific case of legal contingencies, the value to be provisioned must additionally evaluate lawsuits with indeterminate amounts, for which the Financial Risk Sub-Management will develop a methodology based on the historical weighted average percentage of the rest of the risk assets, and its coverage with the total provisions established. e) Contingent liabilities of letter of credit commitments: These are exempt from impairment measurement, as their credit risk is considered low, in consideration of the agreement signed between Petroecuador and the Central Bank of Ecuador, where the Central Bank of Ecuador is authorized to debit the value of the aforementioned letters of credit from Petroecuador's accounts; and, if there are insufficient funds in said account, the Central Bank of Ecuador is empowered to debit from the account of the Entity in Charge of Public Finances.”

SINGLE GENERAL PROVISION.- In cases of doubts that arise in the application of this Resolution, they will be resolved by the Commission for the Evaluation of the Qualification of Risk Assets and Contingents.
TRANSITORY PROVISIONS
FIRST.- The General Management of the Central Bank of Ecuador will designate the members of the Commission for the Evaluation of the Qualification of Risk Assets and Contingents within a term of 60 days, counted from the issuance of this Resolution.
SECOND.- The Central Bank of Ecuador, through the Commission for the Evaluation of the Qualification of Risk Assets and Contingents, will issue within a term of one hundred twenty (120) days, counted from the designation of the commission, the necessary internal regulations for the implementation of what is provided in this Resolution.
FINAL PROVISION.- This resolution will enter into force from its issuance, without prejudice to its publication in the Official Register.
The General Secretariat of the Central Bank of Ecuador is entrusted with its publication on the institutional website and the updating of the Codification of Resolutions of Governance of the Monetary and Financial Policy and Regulation Board and the Central Bank of Ecuador.
NOTIFY AND PUBLISH. - Given in the city of Quito D.M., on September 11, 2026.
THE PRESIDENT
Mgs. Gustavo Estuardo Camacho Dávila
The resolution above was processed and signed by Master Gustavo Estuardo Camacho Dávila - President of the Financial and Monetary Policy and Regulation Board, in the city of Quito D.M., on September 11, 2026.- I CERTIFY.
TECHNICAL SECRETARIAT
Abg. Ninoska Geovanna Ceballos Pin