RESOLUTION No. JPRM-2022-002-M

THE MONETARY AND REGULATORY POLICY BOARD

CONSIDERING:

That, the Constitution of the Republic of Ecuador, in its article 226, 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 that is governed by the principles of effectiveness, efficiency, quality, hierarchy, coordination, planning, among others;

That, article 302, numerals 2 and 3, of the Constitution of the Republic, provides that monetary, credit, exchange, and financial policies have as objectives, among others, to establish levels of global liquidity that guarantee adequate margins of financial security and to direct liquidity surpluses toward the investment required for the country's development;

That, article 303, first paragraph, of the Constitution of the Republic determines that the formulation of monetary, credit, exchange, and financial policies is the exclusive faculty of the Executive Branch and will be implemented through the Central Bank of Ecuador;

That, article 309 ut supra, establishes: “The national financial system is composed of the public, private, and popular and solidary sectors, which will intermediated public resources. Each of these sectors will have specific and differentiated control norms and entities, which will be responsible for preserving their security, stability, transparency, and solidity. (...)”

That, article 47.1 of the Organic Monetary and Financial Code, creates the Monetary and Monetary Policy Board, as part of the Executive Branch, responsible for the formulation of monetary policy, the highest governing body of the Central Bank of Ecuador, and determines its composition;

That, article 47.6 of the same Code, regarding the functions of the Monetary and Monetary Policy Board, among others, establishes: “1. Formulate policy in the monetary sphere and observe its application by the Central Bank of Ecuador, to preserve the integrity and sustainability of the dollarization monetary system and the

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financial system, in accordance with the provisions of this Code; (...) 26. Those others conferred by law. (...)”;

That, numeral 1 of article 53.1 of the Code ibidem states that the Central Bank of Ecuador, to achieve its objective, must “(...) 1. Collect, compile, analyze, extract, prepare and publish on the website and/or by any other means, with the periodicity determined by the Monetary and Monetary Policy Board, the following information: the figures corresponding to monetary, financial, credit and exchange indicators; the macroeconomic synthesis statistics of the country; interest rates; authorized payment systems and authorized institutions to operate; statistics of payment systems and means; and, additional information required by the Monetary and Monetary Policy Board. (...)”;

That, article 118.1 ut supra, determines the instruments to manage liquidity, among which reserve requirements are included, establishing that the Monetary and Monetary Policy Board will issue a resolution that will specify the terms and conditions for liquidity operations;

That, article 121 of the aforementioned Code, establishes: “Entities of the national financial system are obliged to maintain liquidity reserves at the Central Bank of Ecuador with respect to their assets and/or liabilities, in accordance with the regulations issued for this effect by the Monetary and Monetary Policy Board.”;

That, article 151 of the aforementioned Organic Code, states: “Regulation must recognize the nature and particular characteristics of each of the sectors of the national financial system. Regulation may be differentiated by sector, by segment, by activity, among others.”

That, article 189 of the aforementioned Code, provides that entities of the national financial system must maintain sufficient levels of high-quality liquid assets, free of liens or restrictions, that can be transformed into cash within a certain period of time without significant loss of value, in relation to their obligations and contingencies, weighted as determined by the Board;

# MONETARY AND REGULATORY POLICY BOARD

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That, article 240 of the norm referred to herein determines that: “Entities of the public and private financial sectors, as well as those of the popular and solidary financial sector, without prejudice to other reserves established by this Code, are obliged to maintain reserve requirements on deposits and collections that they have in their charge. The reserve requirement shall be maintained at the Central Bank of Ecuador. Under the protection of what is determined in the Constitution, for entities of the popular and solidary financial sector, the Monetary and Monetary Policy Board will establish differentiated reserve requirement conditions by segments. (...)”;

That, article 241 of the same normative body establishes that: “The Monetary and Monetary Policy Board will regulate differentiated reserve requirement percentages, which may be by collection structure, type of entity, among others.”;

That, the Fiftieth Transitory Provision of the aforementioned Code, prescribes: “Resolutions contained in the Codification of Monetary, Financial, Securities and Insurance Resolutions of the Monetary and Monetary Policy Board and Financial and norms issued by control bodies, will remain in force until the Monetary and Monetary Policy Board and the Monetary and Financial Policy Board resolve what corresponds, within the scope of their competencies.”;

That, Chapter VI: “Monetary Policy Instruments”, of Title I: “Monetary System”, of Book I: “Monetary and Financial System”, of the Codification of Monetary, Financial, Securities and Insurance Resolutions, issued by the former Monetary and Monetary Policy Board and Financial, regulates the Monetary Policy Instruments whose analysis and treatment corresponds to this Board, except for what is related to the Domestic Liquidity Coefficient, which, as provided in article 120 of the Organic Monetary and Financial Code, corresponds to the Monetary and Financial Policy Board to regulate;

That, it is necessary to adapt the applicable regulatory norms on reserve requirements and liquidity reserves, their requirement, constitution, qualification of issuances, issuers and depositaries, with the purpose of strengthening the entities that make up the National Financial System;

That, it is the faculty of the Monetary and Monetary Policy Board to resolve on the normative contained in the Codification of Monetary, Financial, Securities and Insurance Resolutions, issued by the former Monetary and Monetary Policy Board

# RESOLUTION No. JPRM-2022-002-M

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| Public Financial Sector: | |
| :--- | :--- |
| **Assets:** | |
| a) Less than or equal to USD 1,000 million | 3.5% |
| b) Greater than USD 1,000 million | 5% |

For the calculation of total assets, the average information from the first or second semester of the immediately preceding period will be considered, as applicable.

Entities of the financial system must comply with the reserve requirement percentage, according to the schedule established in this resolution.

**Art. 2.- Collections subject to reserve requirements.** The Central Bank of Ecuador will calculate the reserve requirement for financial entities, based on the weekly average of daily balances of collections subject to reserve requirements. The detail of the accounts on which the reserve requirement will be calculated will be contained in the regulation that the Central Bank of Ecuador issues for this effect.

**Art. 3.- Period.** The aforementioned reserve requirement must be maintained on average by each entity of the public, private, and popular and solidary financial sectors, during the immediately following weekly period.

By weekly period is understood the period from Thursday to Wednesday, including non-working days.

Weekly reserve deficiencies of entities of the public, private, and popular and solidary financial sectors may be compensated by an excess position verified in the week following the deficiency.

**Art. 4.- Composition of the reserve requirement.** The reserve requirement of entities of the public, private, and popular and solidary financial sectors may be constituted as follows:

1. Entities of the Private Financial Sector and Popular and Solidary Financial Sector: Up to 100% with the United States dollar balances that financial entities have in the current accounts they maintain at the Central Bank of Ecuador; and,

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2. Entities of the Public Financial Sector:
   a. Up to 100% with the United States dollar balances that public financial entities have in the current accounts they maintain at the Central Bank of Ecuador; and,
   b. Up to 75% in instruments issued by the entity in charge of public finances, with a term of less than 360 days from their purchase, which must be obligatorily maintained in custody in the Centralized Securities Depository in charge of the Central Bank of Ecuador.

**Art. 5.- Monitoring of the reserve requirement.** At the end of the weekly period, the Central Bank of Ecuador must monitor that entities of the public, private, and popular and solidary financial sectors have composed the reserve requirement in the manner and with the instruments indicated in article 4 of this section.

**Art. 6.- Obligation to maintain liquid resources.** At all times, entities of the public, private, and popular and solidary financial sectors that maintain deposits subject to reserve requirements must maintain liquid resources in their current accounts at the Central Bank of Ecuador, in order to cover their obligations derived from their participation in the components of the National Payments System operated by the Central Bank of Ecuador.

**Art. 7.- Exception.** Entities of the public, private, and popular and solidary financial sectors that are in the process of liquidation or intensive supervision, or due to fortuitous event or force majeure duly verified, will be exempt from compliance with the obligation provided for in this section.

**Art. 8.- Calculation of reserve requirement.** For the calculation of the reserve requirement, the Central Bank of Ecuador will use the information from the daily balances that financial entities deliver to the corresponding control body. In case the financial entity subject to reserve requirement has not sent the corresponding balances for the calculation period, it will be considered for all effects that the reserve requirement that that entity must comply with is equal to 1.1 times the last reserve requirement calculated.

**Art. 9.- Sanction for non-compliance.** In case entities of the public, private, and popular and solidary financial sectors fail to comply with the required reserve position, the Central Bank of Ecuador will sanction according to what is provided in the Organic Monetary and Financial Code and inform the respective control body about said non-compliance.

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### Art. 10.- Reprocessing.
Superintendencies may request the Central Bank of Ecuador, prior to analysis of the justifications presented by financial entities and their favorable technical pronouncement, the execution of a reprocessing in the calculation of the reserve requirement.

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## SECTION II.- LIQUIDITY RESERVES:

### SUBSECTION I.- LIQUIDITY RESERVE REQUIREMENT:

### Art. 11.- Obligation of liquidity reserves.
Private banks, housing savings and credit mutuals, savings and credit cooperatives, and central boxes must constitute and maintain liquidity reserves with respect to their collections, at the levels and assets defined in this Section.

### Art. 12.- Period.
The aforementioned financial entities must maintain average liquidity reserves, during the following biweekly period from the date the Central Bank of Ecuador establishes its requirement.

By biweekly period is understood the period of fourteen consecutive days from Thursday to Wednesday, including non-working days.

### Art. 13.- Calculation of liquidity reserves.
The Central Bank of Ecuador will calculate the liquidity reserve requirement for the financial entities referred to in this section, based on the type of collections subject to reserve requirements.

The composition of the liquidity reserves of each financial entity, for each biweek, will be calculated based on the information corresponding to each day of said period, which financial entities send to the Central Bank of Ecuador.

### Art. 14.- Publicity.
The Central Bank of Ecuador will inform financial entities of the liquidity reserve requirement corresponding to each biweek, through the website of the Central Bank of Ecuador.

### Art. 15.- Sanction for non-compliance.
In case the financial entities referred to in this section fail to comply with the provisions, composition of reserves determined and delivery of information, the Central Bank of Ecuador will sanction according to what is provided in the Organic Monetary and Financial Code and inform the respective control body about said non-compliance.

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### Art. 16.- Exception.
Entities that are in the process of liquidation or intensive supervision, or due to fortuitous event or force majeure duly verified, will be exempt from compliance with the obligation provided for in this section.

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## SUBSECTION II.- CONSTITUTION OF LIQUIDITY RESERVES:

### Art. 17.- Composition of liquidity reserves.
Financial entities must constitute their liquidity reserves with the following assets and percentages:

#### COMPOSITION OF LIQUIDITY RESERVES

| ASSETS | Private Banks | Housing Savings and Credit Mutuals | Savings and Credit Cooperatives and Central Boxes |
|---------|------------------|--------------------------------------------------|---------------------------------------------------|
| a) Titles of Public Financial Entities | Minimum 1.5% | Minimum 0.5% | - |
| b) Titles issued by the entity in charge of Public Finances | Minimum 2% | - | - |

### Art. 18.- Repurchase guarantee.
Securities issued by public financial entities, to be considered part of liquidity reserves, must have their repurchase guaranteed at any time by the issuer, at the request of the holder.

### Art. 19.- Restriction.
Securities with which financial entities constitute liquidity reserves must not be subject to any restriction.

This restriction is excepted for securities acquired through repo operations, for which the Central Bank of Ecuador will issue the respective regulation, safeguarding that there is no duplication in the accounting of liquidity reserves.

### Art. 20.- Sending of information.
Financial entities referred to in this section must send, in the periodicity and form determined by the Central Bank of Ecuador, their total liquidity positions.

# MONETARY AND REGULATORY POLICY BOARD

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Art. 21.- Reports.- The General Management of the Central Bank of Ecuador will inform the Monetary and Monetary Policy Board quarterly, on the evolution and compliance of liquidity reserves.

Art. 22.- Sending of information to control bodies.- The General Management of the Central Bank of Ecuador will send monthly to the Superintendency of Banks and the Superintendency of Popular and Solidary Economy, a report of the financial entities that do not comply with the liquidity reserve requirement and its composition.

Art. 23.- Other information requirements.- The Central Bank of Ecuador may, if required, request additional information on the positions that financial entities maintain in the country and abroad.

## GENERAL PROVISIONS

FIRST.- The Monetary and Monetary Policy Board recognizes the provisions contained in Chapter VI: “Monetary Policy Instruments”, of Title I: “Monetary System”, of Book I: “Monetary and Financial System”, of the Codification of Monetary, Financial, Securities and Insurance Resolutions, issued by the former Monetary and Monetary Policy Board and Financial, as part of the monetary normative on which it corresponds to resolve, with the exception of what is established in Section II “Domestic Liquidity Coefficient”, as it is the competence of the Monetary and Financial Policy Board, as provided in article 120 of the Organic Monetary and Financial Code.

SECOND.- The General Management of the Central Bank of Ecuador will issue the necessary regulation for the implementation of what resolved in this resolution, together with the implementation dates.

## TRANSITORY PROVISIONS

FIRST.- Entities of the financial system must comply with the reserve requirement percentage, according to the schedule detailed in the following table:

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### PERCENTAGE OF RESERVE REQUIREMENT

| Type of Financial Entity / Year | 2022 | 2023 | 2024 | 2025 |
|--------------------------------|------|------|------|------|
| **Public and Private Financial Sector** | | | | |
| Assets > USD 1,000 million | 5% | 5% | 5% | 5% |
| Assets ≤ USD 1,000 million | 3.5% | 4% | 4.5% | 5% |
| **Popular and Solidary Financial Sector** | | | | |
| Savings and Credit Cooperatives Segment 1 and Central Box | 2% | 3.5% | 4.5% | 4.5% |
| Housing Savings and Credit Mutuals | 2% | 3.5% | 4.5% | 4.5% |
| Savings and Credit Cooperatives Segment 2 | - | 2% | 3% | 4% |
| Savings and Credit Cooperatives Segment 3 | - | - | 1.5% | 3% |

In the case of Savings and Credit Cooperatives of segment 3, the percentage indicated in the previous table will be calculated based on the collections registered in the last available periodic balances, according to the current regulation on the matter.

SECOND.- The Central Bank of Ecuador, within thirty (30) days, will issue the corresponding regulation and implement the calendar for the entry into force of the calculation of reserve requirements and liquidity reserves corresponding to the exercise of the year 2022, in accordance with the provisions of this resolution.

THIRD.- Entities of the private financial sector that at the time of issuance of this norm have in their reserve position financial instruments issued by the Central State, may be considered for the constitution of the reserve requirement until their maturity, without these exceeding 75% of the total reserve requirement, obligatorily maintaining them in custody in the Centralized Securities Depository in charge of the Central Bank of Ecuador.

FOURTH.- The reserve requirements and minimum liquidity reserves will remain in force for a term of thirty (30) days, while this resolution is implemented.

SINGLE REPEALING PROVISION: Chapter VI: “Monetary Policy Instruments”, of Title I: “Monetary System”, of Book I: “Monetary and Financial System”, of the Codification of Monetary, Financial, Securities and Insurance Resolutions, issued by the former Monetary and Monetary Policy Board

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and Financial is expressly repealed, with the exception of what is established in Section II “Domestic Liquidity Coefficient”, as it is the competence of the Monetary and Financial Policy Board, as provided in article 120 of the Organic Monetary and Financial Code.

FINAL PROVISION.- This resolution will enter into force from its issuance, without prejudice to its subsequent publication in the Official Register.

Entrust its publication to the institutional website of the Central Bank of Ecuador, to the Document Management and Archive Directorate.

COMMUNICATE AND PUBLISH.- Given in the Metropolitan District of Quito, on January 20, 2022.

THE PRESIDENT

TATIANA MARIBEL RODRÍGUEZ CERÓN

The preceding resolution was signed by Dr. Tatiana Maribel Rodríguez Cerón - President of the Monetary and Monetary Policy Board, in the Metropolitan District of Quito, on January 20, 2022.- I CERTIFY.

ADMINISTRATIVE SECRETARY

MARÍA ALEXANDRA GUERRERO DEL POZO