Resolution No. JPRF-F-2023-077 Amending Chapter I on Financial Entity Authorization and Chapter XLVII on Indirect Ownership Determination

Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Government Management Platform. Yellow Block, 5th Floor | 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 legal norms applied by competent authorities; That, Article 84 of the aforementioned Constitution orders that: "The National Assembly and any body with normative power shall have the obligation to formally and materially adapt laws and other legal norms to the rights provided for in the Constitution (...)"; That, Article 226 of the Ecuadorian Magna Carta prescribes that State institutions, their agencies, dependencies, public servants, and persons acting by virtue of a state power shall exercise only the competencies and faculties attributed to them in the Constitution and the law, having the duty to coordinate actions for the fulfillment of their purposes and to make effective the enjoyment and exercise of the rights recognized in the Constitution; That, Article 227 of the Fundamental Norm establishes that public administration constitutes a service to the community that is governed by the principles of effectiveness, efficiency, quality, hierarchy, decentralization, coordination, participation, planning, transparency, and evaluation; That, Article 425 of the aforementioned norm establishes the hierarchy in the application of norms, determining that the order of their application is as follows: the Constitution; international treaties and conventions; organic laws; ordinary laws; regional norms and district ordinances; decrees and regulations; ordinances; agreements and resolutions; and other acts and decisions of the public powers of the Republic; That, Article 13 of the Organic Monetary and Financial Code, Book I, reformed following the promulgation of the Organic Law Reforming the Organic Monetary and Financial Code for the Defense of Dollarization, 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, determines that, within the scope of the Financial Policy and Regulation Board, it corresponds to formulate credit and financial policies, as well as to issue regulations that allow maintaining the integrity, solidity, sustainability, and stability of the national financial system in accordance with what is provided in Article 309 of the Constitution of the Republic of Ecuador; establishing that, for the fulfillment of these functions, it will issue norms in matters within its competence, without being able to alter legal provisions; That, the Organic Monetary and Financial Code, Book I, in its article 14.1, establishes that, for the performance of its functions, the Financial Policy and Regulation Board must comply with certain duties and exercise
certain faculties; among which are those determined in its numbers 1, 7, and 27, which are: to regulate the creation, constitution, organization, activities, operation, and liquidation of financial entities; to issue the prudential regulatory framework for all financial entities; and, to exercise the other functions, duties, and faculties assigned to it by the aforementioned Code and the law;

---

Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Government Management Platform. Yellow Block, 5th Floor | Postal Code: 170507 | Quito - Ecuador | That, Article 150 of the aforementioned Organic Code prescribes that entities of the national financial system have the obligation to adjust to the regulation issued by the Financial Policy and Regulation Board; That Article 169 of the Organic Monetary and Financial Code, Book I, reformed following the promulgation of the Organic Law for Economic Development and Fiscal Sustainability, prescribes that: "For entities of the national financial system, persons with influential patrimonial ownership are considered to be natural or legal persons who possess, directly or indirectly, 25% or more of the subscribed and paid capital or social capital."; That, General Provision Twenty-Ninth of the Organic Monetary and Financial Code, Book I, determines that: "In existing legislation where mention is made of the 'Monetary and Financial Policy and Regulation Board', replace it with 'Financial Policy and Regulation Board'; That, Transitory Provision Fiftieth-Fourth of the Organic Monetary and Financial Code, Book I, prescribes: "Transitory Regime of Resolutions of the Codification of the Monetary and Financial Policy and Regulation Board. 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 control bodies will maintain their validity until the Monetary Policy and Regulation Board and the Financial Policy and Regulation Board resolve what corresponds, within the scope of their competencies."; That, the Acting Technical Secretary of the Financial Policy and Regulation Board, through Memorandum No. JPRF-ST-2023-0066-M of August 29, 2023, and in extension with Memorandum No. JPRF-ST-2023-0072-M of September 15, 2023, signed by the Technical Secretary of this Board, submit to the President of the Board the following reports:
i) Technical Report No. JPRF-CTSF-2023-013 of August 28, 2023, and Technical Report No. JPRF-CTSF-2023-015 of September 15, 2023 issued by the Technical Coordination of Financial System Policy and Regulation, which states that, based on the analysis of the reports submitted to this Board, as well as the review of Sentence No. 110-21-IN/22 and the related norm, it is pertinent to update the various norms of the Codification of Monetary, Financial, Securities, and Insurance Resolutions regarding the determination of influential patrimonial ownership, in order to harmonize secondary legislation with reforms to the Organic Monetary and Financial Code, Book I; and, ii) Legal Report No. JPRF-CJF-2023-0034 of August 28, 2023, issued by the Legal Coordination of Financial Policy and Norms, which concludes that the Organic Law for Economic Development and Fiscal Sustainability, published in the Third Supplement of the Official Register No. 587 of November 29, 2021, in its article 194, reformed article 169 of the Organic Monetary and Financial Code, Book I, determining that the percentage of subscribed and paid capital or social capital of persons with influential patrimonial ownership is twenty-five (25) percent or more; and therefore it corresponds to the Financial Policy and Regulation Board to adapt the content of the corresponding secondary norm to the current text of said article 169 of the Organic Monetary and Financial Code, Book I, in concordance with what is established in articles 82 and 84 of the Constitution of the Republic of Ecuador and with what is prescribed in the penultimate paragraph of article 14 of the aforementioned Organic Code. Likewise, that the Financial Policy and Regulation Board, as responsible for the formulation of policy and regulation for the financial sector, has legal competence and faculty to: (a) regulate the creation, constitution, organization, activities, operation, and liquidation of financial entities; (b) issue the prudential regulatory framework for all financial entities; and, (c) exercise the other functions, duties, and faculties assigned to it by the Organic Monetary and Financial Code and the law; in accordance with what is provided in article 14.1, numbers 1, 7, and 27 of the Organic Monetary and Financial Code, Book I;

---

Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Government Management Platform. Yellow Block, 5th Floor | Postal Code: 170507 | Quito - Ecuador | That, the Financial Policy and Regulation Board, in an ordinary session held by technological means, convened on September 15, 2023, and carried out via video conference on September 19, 2023, reviewed Memoranda No. JPRF-ST-2023-0066-M of August 29, 2023, and No. Memorandum No. JPRF-ST-2023-0072-M of September 15, 2023, issued by the Acting Technical Secretary and the Technical Secretary of the Board; as well as the aforementioned reports from the Technical Coordination of Financial System Policy and Regulation and the Legal Coordination of Financial Policy and Norms, in addition to the corresponding draft resolution; That, the Financial Policy and Regulation Board, in an ordinary session held by technological means, convened on September 15, 2023, and carried out via video conference on September 19, 2023, reviewed and approved the following Resolution; and, In exercise of its functions, RESOLVES:
ARTICLE FIRST.- Substitute the text of number 9 of article 1 of Chapter I "Constitution, Organization, and Issuance of Authorization for the Exercise of Financial Activities and Operating Permits for Entities of the Public and Private Financial Sectors", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, with the following:
"9. Persons with influential patrimonial ownership.- Persons with influential patrimonial ownership are considered to be natural or legal persons who possess, directly or indirectly, 25% or more of the subscribed and paid capital or social capital."
ARTICLE SECOND.- In letter i) of number 5 of article 9 of Paragraph III "Requirements for Constitution", Subsection I "On Constitution", Section IV "On the Constitution, Organization, and Issuance of Authorization for the Exercise of Financial Activities and Operating Permits for Entities of the Private Financial Sector", Chapter I "Constitution, Organization, and Issuance of Authorization for the Exercise of Financial Activities and Operating Permits for Entities of the Public and Private Financial Sectors", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, substitute the percentage "6%" with:
"25%".
ARTICLE THIRD.- In article 17 of Paragraph I "On the Requirements for the Qualification of Shareholders, Board Members, and Legal Representatives", Subsection II "On Governance and Administration", Section IV "On the Constitution, Organization, and Issuance of Authorization for the Exercise of Financial Activities and Operating Permits for Entities of the Private Financial Sector", Chapter I "Constitution, Organization, and Issuance of Authorization for the Exercise of Financial Activities and Operating Permits for Entities of the Public and Private Financial Sectors", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, substitute the percentage "6%" with: "25%".

---

Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Government Management Platform. Yellow Block, 5th Floor | Postal Code: 170507 | Quito - Ecuador |
ARTICLE FOURTH.- In the last paragraph of article 18 of Paragraph I "On the Requirements for the Qualification of Shareholders, Board Members, and Legal Representatives", Subsection II "On Governance and Administration", Section IV "On the Constitution, Organization, and Issuance of Authorization for the Exercise of Financial Activities and Operating Permits for Entities of the Private Financial Sector", Chapter I "Constitution, Organization, and Issuance of Authorization for the Exercise of Financial Activities and Operating Permits for Entities of the Public and Private Financial Sectors", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, substitute the percentage "6%" with: "25%".
ARTICLE FIFTH.- In article 19 of Paragraph I "On the Requirements for the Qualification of Shareholders, Board Members, and Legal Representatives", Subsection II "On Governance and Administration", Section IV "On the Constitution, Organization, and Issuance of Authorization for the Exercise of Financial Activities and Operating Permits for Entities of the Private Financial Sector", Chapter I "Constitution, Organization, and Issuance of Authorization for the Exercise of Financial Activities and Operating Permits for Entities of the Public and Private Financial Sectors", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, substitute the percentages "6%" with: "25%".
ARTICLE SIXTH.- In article 1 of Section I "Definitions", Chapter XLVII "Norm for the Determination of Indirect Ownership as Provided in the Organic Monetary and Financial Code", Title II "National Financial System", Book I "Monetary and Financial System" of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, substitute the percentage "6%" with: "25%".
ARTICLE SEVENTH.- Substitute the text of article 2 of Section II "Criteria for Determining the Presumption of Existence of Indirect Ownership", Chapter XLVII "Norm for the Determination of Indirect Ownership as Provided in the Organic Monetary and Financial Code", 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. 2.- It will be understood that a natural or legal person exercises indirect ownership over a private sector financial entity, a foreign financial entity, or commercial companies, in the following cases:

1. If it is a shareholder of 25% or more of the capital-representative titles of a legal person and that in turn is a shareholder of 25% or more of the capital-representative titles of the entity or commercial companies in which the analysis is being performed.
2. If it is a constituent or beneficiary of commercial trust agreements that are direct shareholders of 25% or more of the capital-representative titles of the entity or commercial companies in which the analysis is being performed, or that in turn are beneficiaries or shareholders, as appropriate, of other trusts or legal persons that are shareholders of 25% or more of the capital-representative titles of the entity or commercial companies in which the analysis is being performed.
3. If the legal person maintains with the financial entity or commercial company subject to analysis, a business relationship that exceeds fifty percent (50%) of the equity of the analyzed entity or vice versa.

---

Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Financial Government Management Platform. Yellow Block, 5th Floor | Postal Code: 170507 | Quito - Ecuador |
4. If a legal person, in the aggregate of its operations with the entity or commercial companies subject to analysis, exceeds fifty percent (50%) of the equity of the analyzed entity, or if the analyzed entity or commercial companies in its operations exceed the referred equity percentage of the legal person.
5. If a legal person maintains common administrators or directors with the entity or commercial companies subject to analysis, in a proportion of forty percent (40%) or more of its officials.
6. If the shareholder of a private financial entity, their spouse, cohabitant, or relatives up to the second degree of consanguinity or first degree of affinity, hold shares representing 25% or more of the capital-representative titles of the entity or commercial companies subject to analysis.
FINAL PROVISION.- This Resolution will enter into force from the present date, without prejudice to its publication in the Official Register, and will be published on the institutional website of the Financial Policy and Regulation Board within a maximum term of two days from its issuance.
COMMUNICATE.- Given in the Metropolitan District of Quito, on September 19, 2023.
THE PRESIDENT,
Mgs. María Paulina Vela Zambrano
The aforementioned Resolution 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 September 19, 2023.- I CERTIFY.
TECHNICAL SECRETARY
Mgs. Nelly Arias Zavala