Resolution No. JPRF-F-2024-099 — Reforming the Approval of Budgets for Public Financial Sector Entities by the Financial Policy and Regulation Board

Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Governmental Financial Management Platform. Red Block, 8th Floor
| Postal Code: 170507 | Quito - Ecuador |
Resolution No. JPRF-F-2024-099
THE FINANCIAL POLICY AND REGULATION BOARD
CONSIDERING:
That, Article 82 of the Constitution of the Republic of Ecuador establishes that the right to legal security is based on respect for the Constitution and the existence of prior, clear, public legal norms applied by competent authorities; That, Article 84 ibidem determines that every body with normative power shall have the obligation to adapt, formally and materially, laws and other legal norms to the rights provided for in the Constitution; That, number 6 of Article 132 of the Supreme Norm grants public control and regulation bodies the authority to issue norms of a general nature in matters within their competence, without being able to alter or innovate legal provisions; That, Article 226 of the Magna Carta prescribes that State institutions shall exercise only the competencies and powers attributed to them in the Constitution and the law; That, Article 309 of the Fundamental Law provides that the national financial system is composed of the public, private, and popular and solidary sectors, which intermediation public resources. Each of these sectors shall have specific and differentiated control norms and entities, which shall be responsible for preserving their security, stability, transparency, and solidity; That, Article 425 supra establishes that the hierarchical order of application of norms shall be 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. (…)”; That, Article 107 of the Organic Code of Public Planning and Public Finances provides that: “Until the General State Budget for the year in which the President or President of the Republic is sworn in is approved, the initial budget of the previous year shall apply. In the rest of the budgets of the public sector, this same norm shall apply”; That, Article 112 of the aforementioned Organic Code determines that the budgetary proformas of entities subject to this Code, which are not included in the General State Budget, shall be approved in accordance with applicable legislation; That, Article 113 of the aforementioned Code establishes that budget execution is the “phase of the budgetary cycle that comprises the set of actions aimed at the optimal use of human talent, and the material and financial resources assigned in the budget with the purpose of obtaining the goods, services, and works in the quantity, quality, and timeliness provided for therein.”; That, Article 81 of the General Regulation of the Organic Code of Public Planning and Public Finances establishes: “(…) In the case of early elections, due to the application of articles 130 or 148 of the Constitution of the Republic of Ecuador, while the General State Budget and the Quadrennial Budgetary Programming for the budgetary exercise immediately following the start of management are approved; the budget coded as of December
31 of the last approved budget shall be used, if required. The inputs for the preparation of the proforma that are in force may be updated in accordance with what is stipulated in the Organic Code of Public Planning and Public Finances. (…)”; That, Article 13 of the Organic Monetary and Financial Code, Book I, reformed by the Organic Law Reforming the Organic Monetary and Financial Code for the Defense of Dollarization, published in the Official Register Supplement No. 443 of May 3, 2021, created the Financial Policy and Regulation Board

Resolution No. JPRF-F-2024-099

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Governmental Financial Management Platform. Red Block, 8th Floor
| Postal Code: 170507 | Quito - Ecuador |
as a legal person of public law, responsible for the formulation of credit, financial, securities, insurance, and comprehensive prepaid health care service policy and regulation; That, Article 14 of the aforementioned Organic Code establishes that it corresponds to the Financial Policy and Regulation Board, among others, the following attribution: “2. Issue the regulations that allow maintaining the integrity, solidity, sustainability, and stability of the national financial, securities, insurance, and comprehensive prepaid health care service systems in accordance with what is provided in article 309 of the Constitution of the Republic of Ecuador (…)”; That, letter a) of number 14 of Article 14.1 supra prescribes that, among the duties and powers of the Financial Policy and Regulation Board, is the approval annually of the budget of the entities of the public financial sector, their reforms, as well as regulating their execution; That, Article 160 of the aforementioned normative body provides that the national financial system is integrated by the public financial sector, the private financial sector, the popular and solidary financial sector; That, Article 150 of the aforementioned Organic Code prescribes that: “Entities of the national financial system shall be subject to the regulation issued by the Monetary and Financial Policy and Regulation Board.”; That, numbers 1 and 11 of Article 375 ibidem prescribe that the functions of the board of directors of public financial entities are to dictate the entity's policies and control their execution and to internally approve the budget, prior to its submission to the Financial Policy and Regulation Board; That, numbers 2, 3, 4, and 5 of Article 378 of the aforementioned Organic Code prescribe that the functions of the General Manager of public financial entities are “1. Legally, judicially, and extrajudicially represent the entity; 2. Agree, execute, and celebrate any act, fact, agreement, contract, or legal business that leads to the fulfillment of the entity's purposes and objectives; 3. Comply and enforce board resolutions; 4. Direct the operational and administrative management of the entity”; That, the Fiftieth Fourth Transitional Provision of the Organic Monetary and Financial Code, Book I, prescribes: “Transitional 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 shall remain in force until the Monetary Policy and Regulation Board and the Financial Policy and Regulation Board decide what corresponds, within the scope of their competencies.”; That, by Resolution No. JPRF-F-2022-037 of September 29, 2022, the Financial Policy and Regulation Board reformed Section III “Of the Public Financial Sector”, Chapter XXXIII “Of the Government and
Administration of the Public Financial Sector”, Title II “National Financial System”, Book I “Monetary and Financial System” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions; That, the Technical Secretariat of the Financial Policy and Regulation Board, through Memorandum No. JPRF-ST-2024-0022-M of February 27, 2024, submits to the President of the Board the Technical Report No. JPRF-CTIFSP-2024-0003 of February 26, 2024, issued by the Technical Coordination of Policy and Regulation of Financial Inclusion and Prepaid Health Care; as well as the Legal Report No. JPRF-CJF-2024-008 of February 26, 2024, issued by the Legal Coordination of Policy and Financial Norms of this Board;

Resolution No. JPRF-F-2024-099

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Governmental Financial Management Platform. Red Block, 8th Floor
| Postal Code: 170507 | Quito - Ecuador |
That, the Financial Policy and Regulation Board, in an extraordinary session held by technological means, convened on February 28, 2024, and carried out via video conference on February 29, 2024, reviewed the Memorandum No. JPRF-ST-2024-0022-M of February 27, 2024, issued by the Technical Secretariat of the Board; as well as the aforementioned Technical Report No. JPRF-CTIFSP-2024-0003 and Legal Report No. JPRF-CJF-2024-008, in addition to the corresponding draft resolution; That, the Financial Policy and Regulation Board, in an extraordinary session held by technological means, convened on February 28, 2024, and carried out via video conference on February 29, 2024, reviewed and approved the following Resolution; and, In exercise of its functions, RESOLVES:
ARTICLE FIRST.- In Article 8 of Subsection I “Budget Management Norms for Entities of the Public Financial Sector”, Section III “Of the Public Financial Sector Capital Budget”, Chapter XXXIII “Of the Government and Administration of the Public 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 reforms are made:
1.1. The text of the first paragraph is reformed and a second and third paragraph are incorporated into the aforementioned Article 8:
“Art. 8.- Of Approval.- For the approval of the budget by the Financial Policy and Regulation Board, entities of the public financial sector must submit their internally approved budgets by October 31 of the year immediately preceding the year of its validity.
For the approval of the budgets of the Bank of the Ecuadorian Social Security Institute, it must submit to the Financial Policy and Regulation Board by November 30 of each year, its internally approved budget, corresponding to the following year.
Additionally, the following must be submitted at least:”
1.2. The text of number 1.5 is modified by the following:
“1.5 Financial sustainability indicators, calculated as of December 31 of the year immediately preceding the year of preparation of the proforma, and projected to the end of the year of the exercise corresponding to the budget to be approved; which must contain at least the following:”
1.3. The text of number 5 is substituted by the following:
“5. Favorable opinion issued by the governing body of public finances, as stipulated in article 74, number 15, of the Organic Code of Public Planning and Public Finances, regarding investment projects that allow channeling public resources for subsidies applied to the interest rate, of social interest credits.
In the case of the Development Bank of Ecuador B.P., the certification of the governing body of public finances must be presented to the Financial Policy and Regulation Board that government programs that have the participation of the public financial entity, and that require budgetary allocations, will be incorporated into the General State Budget.”

Resolution No. JPRF-F-2024-099

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Address: Av. Amazonas between Pereira and Unión Nacional de Periodistas, Governmental Financial Management Platform. Red Block, 8th Floor
| Postal Code: 170507 | Quito - Ecuador |
ARTICLE SECOND.- The text of the last paragraph of Article 11 of Subsection I “Budget Management Norms for Entities of the Public Financial Sector”, Section III “Of the Public Financial Sector Capital Budget”, Chapter XXXIII “Of the Government and Administration of the Public Financial Sector”, Title II “National Financial System”, Book I “Monetary and Financial System”, of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, is reformed by the following:
“These reforms, once approved by the Board of Directors, shall be submitted to the governing body of public finances within a term not exceeding ten (10) days, counted from the date of approval by the Board of Directors.”
ARTICLE THIRD.- In Subsection I “Budget Management Norms for Entities of the Public Financial Sector”, Section III “Of the Public Financial Sector Capital Budget”, Chapter XXXIII “Of the Government and Administration of the Public Financial Sector”, Title II “National Financial System”, Book I “Monetary and Financial System”, of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, the First, Second, and Third Transitional Provisions are repealed, and the following Single Transitional Provision is included:
“UNIQUE.- For the approval of the budgetary proformas corresponding to the year 2024, entities of the public financial sector must submit to the Financial Policy and Regulation Board, on this single occasion, by April 30, 2024, the budgets approved by the corresponding government and administration bodies.”
FINAL PROVISION.- This Resolution shall enter into force from the present date, without prejudice to its publication in the Official Register, and shall be published on the institutional website of the Financial Policy and Regulation Board within a maximum term of two days from its issuance.
NOTIFY.- Given in the Metropolitan District of Quito, on February 29, 2024.
THE PRESIDENT,
Mgs. María Paulina Vela Zambrano
The resolution above 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 29, 2024.- I CERTIFY.
TECHNICAL SECRETARY,
Mgs. Nelly Arias Zavala