Resolution JPRFM‑2026‑009‑M | March 6, 2026

The Financial and Monetary Policy and Regulation Board issued Resolution JPRFM‑2026‑009‑M, through which a new regulatory framework is incorporated that enables the Central Bank of Ecuador (BCE) to provide the Fiscal and Financial Agency service for the execution of commodity hedging operations of national public companies.

This regulation is particularly relevant due to the clarifications it introduces regarding the legal nature of hedging operations, its compatibility with the financing prohibitions applicable to the BCE, and the allocation of risks between the parties.

1. Hedging operations do not constitute prohibited financing

One of the most relevant aspects of the resolution is found in its recitals, where the Board expressly clarifies that:

Commodity hedging operations:

• Are risk management instruments, intended to mitigate international price volatility.
• Do not constitute financing, investment, or equity participation operations by the Central Bank of Ecuador.

This clarification is key, since the Organic Monetary and Financial Code prohibits the BCE from granting direct or indirect financing to the public sector and issuing guarantees for its operations.

The regulation makes it clear that hedging does not violate said prohibitions, to the extent that the BCE acts exclusively as an agent and not as a financier.

2. The BCE does not assume financial or market risk

The resolution clearly establishes that, in hedging operations:

The BCE:

• Does not assume the economic position of the operations.
• Does not assume market risk, credit risk, or financial obligations derived from the contracted instruments.
• Provides a service of means and not of result.

Consequently:

• All risk, cost, or expense, direct or indirect, is fully assumed by the ordering public company.
• Obligations to international counterparties correspond exclusively to said public entity.

This design protects the BCE's balance sheet and reinforces its technical-operational role, avoiding any assimilation into financial intermediation activities.

3. Role of the BCE as a fiscal and financial agent

The regulations incorporate a new subsection in the BCE's operational policies, formalizing the Fiscal and Financial Agency Service for Commodity Hedging, under the following rules:

The BCE:

• Executes the contracting, execution, and settlement of financial derivatives in international markets.
• Acts only according to express instructions from the requesting public entity.
• May establish operational and contractual conditions necessary for the management of the operation, within the mandate received.

This scheme reinforces the idea that the BCE does not decide or design the hedging strategy, but rather executes it for and on behalf of the public company.

4. Guarantees, margins, and collaterals: exclusive responsibility of the public company

A particularly relevant point for legal and contractual analysis is that relating to guarantees and margin calls:

The resolution establishes that:

If the hedging operation requires margins, collaterals, or guarantees, these must be:

• Liquid, sufficient, and constituted by the national public company.

The BCE is not authorized to issue guarantees on commodity hedging operations.

Consequently:

• The BCE does not guarantee compliance with counterparties.
• Nor does it assume any credit exposure derived from the financial instruments used.

This point is consistent with the legal prohibition against the BCE issuing guarantees and prevents hedging operations from being interpreted as indirect mechanisms of state financial support.

5. Practical implications

From a legal and regulatory perspective, this resolution:

• Provides legal certainty to hedging operations carried out by public companies.
• Precisely delimits the scope of the BCE's mandate, avoiding risks of challenges for disguised financing.
• Reinforces the need for:
  • Proper contractual structuring.
  • Robust management of guarantees and collaterals by public entities.
  • Internal risk control systems independent of the BCE

Final comment

Resolution JPRFM‑2026‑009‑M constitutes an important advance in the regulation of commodity risk mitigation mechanisms, while preserving the financial neutrality of the Central Bank of Ecuador. Its correct implementation will require solid legal and financial support, especially in the structuring of hedging contracts and guarantee schemes.

This document does not constitute legal opinion; it is for general information purposes only. Should you have any questions or require specific advice, please contact us at the following addresses: