Resolution JPRF-F-2025-0139: Reforms to Credit Risk Management Norms for Savings and Credit Cooperatives and the National Corporation of Popular and Solidarity Finance

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Resolution No. JPRF-F-2025-0139
THE FINANCIAL POLICY AND REGULATION BOARD
CONSIDERING:
That, Article 82 of the Constitution of the Republic of Ecuador recognizes that the right to legal security is based on respect for the Constitution and the existence of prior, clear, public, and applied norms by competent authorities; That, Article 309 of the Supreme Norm determines that the national financial system is composed of the public, private, and popular and solidarity sectors, which intermediated public resources. Each of these sectors will have specific and differentiated control norms and entities, which will be responsible for preserving their safety, stability, transparency, and solidity; That, Article 309 ibidem stipulates that the national financial system is composed of the public, private, and popular and solidarity sectors, which intermediated public resources; determining that each of these sectors will have specific and differentiated control norms and entities, which will be responsible for preserving their safety, stability, transparency, and solidity; That, Article 13 of the Organic Monetary and Financial Code, Book I, 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 14.1 numeral 1 of the aforementioned Code establishes as a function of the Financial Policy and Regulation Board, to regulate the creation, constitution, organization, activities, operation, and liquidation of financial entities, securities, insurance, and prepaid comprehensive health care services; That, Articles 216 and 217 of the cited Code recognize the quality of persons linked to the ownership or administration of entities of the national financial system, which includes the popular and solidarity economy sector; That, Article 255 of the aforementioned Code establishes prohibitions for entities of the national financial system, among which are those of carrying out active and contingent operations with linked persons or exceeding the quotas established in the Organic Monetary and Financial Code; That, Article 450 of the referred Code states that savings and credit cooperatives will establish a credit quota and group guarantees, to which members of the boards, management, employees who have decision-making or participation in credit and investment operations, their spouses or cohabitants, and their relatives within the fourth degree of consanguinity and second of affinity may access; That, Article 15 of the Organic Administrative Code recognizes 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 subjects of private law who act in the exercise of a public power delegated by the State and their dependents, controlled or contractors. The State will make effective the responsibility of the public servant for intentional or negligent acts or
omissions. No public servant is exempt from responsibility; That, the Technical Secretary of the Financial Policy and Regulation Board, through Memorandum No. JPRF-ST-2025-0007-M of February 20, 2025, submits to the President of the Board the Technical Report No. JPRF-CTSF-2025-003 and the Legal Report No. JPRF-CJF-2025-006, both dated February 18, 2025, as well as the respective draft resolution; That, the Financial Policy and Regulation Board, in an ordinary session held by technological means, convened on February 20, 2025, and carried out via video conference on February 24, 2025, reviewed the Memorandum JPRF-ST-2025-0007-M of February 20, 2025, issued by the Technical Secretary of the Board; as well as the Technical Report No. JPRF-CTSF-2025-003 and the Legal Report No. JPRF-CJF-2025-006, both dated February 18, 2025, issued by the Technical Coordination of Financial System Policy and Regulation and the Legal Coordination of Financial Policy and Norms, and the corresponding draft resolution; That, the Financial Policy and Regulation Board, in an ordinary session held by technological means, convened on February 20, 2025, and carried out via video conference on February 24, 2025, reviewed and approved the following Resolution; and, In exercise of its functions, RESOLVES:
ARTICLE FIRST.- In numeral 1.1.3. "Coverage of the rating for productive credit" of Article 5 of Section II "Elements of the risk asset rating and its classification", Chapter XVIII "Risk asset rating and provisioning by entities of the Public and Private Financial Sectors under the control of the Superintendency of Banks", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, substitute the text of the second paragraph with the following:

"Entities of the public and private financial sectors have the authority to rate productive credit debtors whose amount does not exceed forty thousand United States dollars (US$ 40,000.00), with the internal monitoring models provided for in numeral 1.1.4. 'Methodologies and/or internal credit rating systems for productive credit' of this chapter, or solely by delinquency in the payment of agreed installments, based on the ranges described in the following table:"

ARTICLE SECOND.- Substitute the text of the first paragraph of numeral 1.4.1. "Coverage of the rating for microcredits" of Article 5 of Section II "Elements of the risk asset rating and its classification", Chapter XVIII "Risk asset rating and provisioning by entities of the Public and Private Financial Sectors under the control of the Superintendency of Banks", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, with the following:

"The rating will cover all microcredit operations granted by the entity of the public and private financial sectors, according to the criteria previously indicated and based on delinquency in the payment of agreed installments according to the following parameters:"

ARTICLE THIRD.- Incorporate into Article 31 of Subsection I "On the object, scope of application, and definitions", Section IV "Norm for the management of credit risk in savings and credit cooperatives and mutual savings and credit associations for housing", Chapter XXXVI "Popular and Solidarity Financial Sector", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, the definitions of "Installment" and "Persons subject to credit quota" in the following terms:

"Installment.- When a credit has been granted agreeing on its payment in periodic installments, the installment constitutes the total value due from its maturity, that is, the portion of capital and/or normal accrued interest, duly agreed with the debtor in the corresponding credit contract and/or amortization table. The same definition applies in the case of having agreed on a single payment or installment at the end of a previously agreed term upon its granting;"

"Persons subject to credit quota.- Corresponds to members of the boards, management, employees who have decision-making or participation in credit and investment operations, their spouses or cohabitants, and their relatives within the fourth degree of consanguinity and second of affinity, in accordance with what is provided in Article 450 of Book I of the Organic Monetary and Financial Code."

ARTICLE FOURTH.- Renumber the definitions of Article 31 of Subsection I "On the object, scope of application, and definitions", Section IV "Norm for the management of credit risk in savings and credit cooperatives and mutual savings and credit associations for housing", Chapter XXXVI "Popular and Solidarity Financial Sector", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, alphabetically and reflecting the respective ordering among the definitions.

ARTICLE FIFTH.- Substitute Article 33 of Subsection II "On the management of credit risk", Section IV "Norm for the management of credit risk in savings and credit cooperatives and mutual savings and credit associations for housing", Chapter XXXVI "Popular and Solidarity Financial Sector", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, with the following:

"Art. 33.- Responsibilities of the Board of Directors: The Board of Directors shall:

1. Approve credit and contingent operations with persons subject to credit quota;
2. Report to the Supervisory Board the credit and contingent operations of persons subject to credit quota, their status, and compliance with the established quota; and, linked operations;
3. Approve credit operations exceeding the limits established for administration;
4. Review the credit management report presented by the credit area;
5. Approve the Credit Manual;
6. Define debt limits based on the payment capacity of the entity's employees;
7. Review and dispose of the implementation of observations and recommendations issued by the Superintendency of Popular and Solidarity Economy;
8. Establish internal rules aimed at preventing and sanctioning conflicts of interest and ensuring information confidentiality; and,
9. Those others established in the entity's statutes."

ARTICLE SIXTH.- Substitute Article 34 of Subsection II "On the management of credit risk", Section IV "Norm for the management of credit risk in savings and credit cooperatives and mutual savings and credit associations for housing", Chapter XXXVI "Popular and Solidarity Financial Sector", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, with the following:

"Art. 34.- Responsibilities of the Comprehensive Risk Management Committee: The Comprehensive Risk Management Committee shall:

1. Approve and present to the Board of Directors the report of the risk unit or risk manager, as appropriate, regarding compliance with policies and the status of the current portfolio, which includes the situation of refinanced, restructured, written-off, quota-subject, and linked operations;
2. Approve and monitor in cooperatives of segments 1 and 2 and in mutual savings and credit associations for housing, the permanent implementation of risk monitoring models and procedures for credit portfolio placement and recovery;
3. Recommend to the Board of Directors the approval of the Credit Manual proposed by the Credit area; and,
4. Evaluate problems derived from the non-compliance with policies, processes, and procedures to recommend to the entity's administrators the corresponding measures."

ARTICLE SEVENTH.- Substitute Article 35 of Subsection II "On the management of credit risk", Section IV "Norm for the management of credit risk in savings and credit cooperatives and mutual savings and credit associations for housing", Chapter XXXVI "Popular and Solidarity Financial Sector", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, with the following:

"Art. 35.- Responsibilities of the Risk Unit and Risk Manager: The Risk Unit or Risk Manager, as appropriate, shall:

1. Review and inform the Comprehensive Risk Management Committee about exposures of restructured credits, refinanced operations, written-off operations, recoveries, and those subject to judicial processes; and,
2. Inform the Comprehensive Risk Management Committee about the status of linked operations and those subject to credit quota, indicating the actions taken for the recovery of those in a matured state."

ARTICLE EIGHTH.- Substitute the text of the first paragraph of Article 44 of Subsection IV "On the rating", Section IV "Norm for the management of credit risk in savings and credit cooperatives and mutual savings and credit associations for housing", Chapter XXXVI "Popular and Solidarity Financial Sector", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, with the following:

"Rating Criteria: Entities shall rate credit and contingent operations based on delinquency and the credit segment to which they belong, according to the criteria detailed below:"

ARTICLE NINTH.- Incorporate as the last paragraph of Article 44 of Subsection IV "On the rating", Section IV "Norm for the management of credit risk in savings and credit cooperatives and mutual savings and credit associations for housing", Chapter XXXVI "Popular and Solidarity Financial Sector", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, the following text:

"Days of delinquency shall be counted from the day following the maturity of the installment of the credit operation or obligation when there is total or partial non-compliance in the payment of the agreed installment."

ARTICLE TENTH.- Incorporate into Article 86 of Subsection I "On the object, scope of application, and definitions", Section VII "Norm for the management of credit risk, risk asset rating, and provisioning in the National Corporation of Popular and Solidarity Finance and central boxes", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, the definition of "Installment" in the following terms:

"Installment.- When a credit has been granted agreeing on its payment in periodic installments, the installment constitutes the total value due from its maturity, that is, the portion of capital and/or normal accrued interest, duly agreed with the debtor in the corresponding credit contract and/or amortization table. The same definition applies in the case of having agreed on a single payment or installment at the end of a previously agreed term upon its granting;"

ARTICLE ELEVENTH.- Renumber the definitions of Article 86 of Subsection I "On the object, scope of application, and definitions", Section VII "Norm for the management of credit risk, risk asset rating, and provisioning in the National Corporation of Popular and Solidarity Finance and central boxes", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, alphabetically and reflecting the respective ordering among the definitions.

ARTICLE TWELFTH.- Substitute the text of the first paragraph of Article 94 of Paragraph I "Credit and contingent portfolio", Subsection V "On the rating", Section VII "Norm for the management of credit risk, risk asset rating, and provisioning in the National Corporation of Popular and Solidarity Finance and central boxes", Chapter XXXVI "Popular and Solidarity Financial Sector", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, with the following:

"Rating Criteria: Entities shall rate credit and contingent operations based on delinquency and the credit segment to which they belong, according to the criteria detailed below:

ARTICLE THIRTEENTH.- Incorporate as the last paragraph of Article 94 of Paragraph I "Credit and contingent portfolio", Subsection V "On the rating", Section VII "Norm for the management of credit risk, risk asset rating, and provisioning in the National Corporation of Popular and Solidarity Finance and central boxes", Chapter XXXVI "Popular and Solidarity Financial Sector", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, the following text:

"Days of delinquency shall be counted from the day following the maturity of the installment of the credit operation or obligation when there is total or partial non-compliance in the payment of the agreed installment."

GENERAL PROVISION.- The Superintendency of Popular and Solidarity Economy and the Superintendency of Banks shall notify the content of this Resolution to their controlled entities within three (3) days.
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 website of the Financial Policy and Regulation Board within a maximum of two days from its issuance.
COMMUNICATE.- Given in the Metropolitan District of Quito, on February 24, 2025.

THE PRESIDENT,
Master María Paulina Vela Zambrano
The resolution preceding 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 February 24, 2025.- I CERTIFY.
TECHNICAL SECRETARY,
Master Luis Alfredo Olivares Murillo