Note: The data are provided for informational purposes only and in some cases, the information may be incomplete, not fully accurate or out of date. For more information on how data are compiled, see "A Note About Sources." The date of the last update for each country is marked in the section "Country Indicators." We welcome updates and comments. Click here to write to us.
Ecuador
Country Indicators
Information Last Updated
February 2008
Information Compiled by
Nathalie Lozano Blanco, Consultant
Population (Millions)
13.2 [2005]
Population Density (per sq km)
48 [2005]
GNI per capita (US$)
2630 [2005]
GNI per capita (PPP US$)
4070 [2005]
Total Unemployment (% of labor force)
11 [2003]
Employment in Agriculture (% of total employment)
9 [2003]
Gross domestic saving (% of GDP)
32 [2004]
% Population under $2/day (PPP)
37 [1998]
Depth of Financial Sector (M2/GDP)
22 [2005]
Exchange rate
1 USD : 25,000 ECS, as of 15 February 2008
Percentage of population with access to banking services
Ownership structure of banks (and financial institutions if available)
1) 40 private banks: (i) 36 locally-owned banks: 35 with 100% private capital, 1 with some public funds; (ii) 4 foreign-owned.
2) Public banks: 4 (3 first-tier banks, 1 second-tier development bank). See Reportes Gerencial
Formal and Semi-Formal Sources of Microfinance
1) Commercial private banks (39% of total microcredit loans).
2) Banco Nacional de Fomento which, after a period acting only as wholesale lender, is now also offering retail banking services.
3) Savings and Credit Mutuals for Housing (0% of total microcredit loans, but with 1% in previous years' data).
4) Financial associations (2% of total microcredit loans).
5) Savings and Credit Cooperatives under the supervision of the Banking Superintendency (30% of total microcredit loans). See BID, 2006.
1) Savings and credit cooperatives under the control of the Ministry for Social Welfare.
2) NGOs, private lenders, and popular organizations that provide savings and credit services for their members. Overall, non-regulated institutions represent 29% of total microcredit loans). BID, 2006
1) Informal lenders [Chulqueros].
2) Informal savings and credit funds [Bancos Comunales, Cajas de Ahorro y Crédito, Cajas Solidarias].
3) Non-regulated cooperatives.
Wholesale Lender(s)
1) National Financial Corporation (NFC) and Banco Nacional de Fomento [BNF] are state-owned, autonomous financial institutions that provide loans, advances, discounts, and rediscounts to financial intermediary institutions.
2) There are also second-tier savings and credit cooperatives that are regulated by the Banking Superintendency. They act as a liquidity fund for their members: first-tier (primary) savings and credit cooperatives. See CFN
Definitions of microfinance or microcredit
1) Loans provided to individuals or to legal entities--or to a group of individuals with joint and several guaranty--to finance small business, where the main source of loan repayment comes from the business’ sales.
2) The maximum credit per client is less than USD 20,000. According to BID, 2006, in practice, financial institutions classify as microcredit any loan that does not exceed USD 20,000. Therefore, financial institutions tend to include consumer credit as "microcredit."
3) Credit card financing granted to microenterprises is considered microcredit. See Resolution JB-2002-457, Resolution JB-2004-722, Codification, Title IX, Ch. II, and BID, 2006.
NGO microfinance provider formalization or transformation issues
Non-regulated microfinance providers face significant challenges to becoming regulated, as they would have to comply with prudential regulation, minimum capital requirements, operational restrictions, and disclosure obligations.
Ongoing microfinance policy development status
1) Recently-elected President Correa is very interested in promoting the microfinance sector. The new Government’s programs are guided by a strong regulatory intervention policy, which has been criticized by the private financial sector’s representatives. As a result, several new regulations have been issued in the last few months (establishment of maximum tariffs for financial services -- also known as ""Ley de Justicia Financiera"" -- and more recently, establishment of interest rate caps.). According to private financial institutions, the new regulatory framework will restrict the development of the microfinance sector. See: (i) El calculo de la tasa de interes todavia no tiene una ruta clara, and (ii) Representante de banqueros cuestiona ley de justicia financiera
2) The new Government has also announced new regulations concerning foreign investment, and a new Constitution is being drafted. For a recent draft of the new proposed Constitution, see De La Economia
Safety net availability: insurance, pension, etc.
Assistance and cash benefits provided to needy persons aged 65 or older, and to persons aged 18 to 65 who are assessed as at least 70% disabled. There is a public health system and a social security system. Social security benefits include: pension, early pension, disability pension, sickness and maternity cash, medical and unemployment benefits. For a more detailed information, “Social Security Programs Throughout the World: The Americas, 2005, in Social Security Programs Throughout the World: The Americas, 2005
Recommended Reading
1) Banco Interamericano de Desarrollo- Representación en Ecuador: La Microempresa en Ecuador: perspectivas, desafíos y lineamientos de apoyo. Septiembre, 2006 BID, 2006.
2) Edmundo Ocaña - Superintendencia de Bancos y Seguros - "Cooperativas de Ahorro y Crédito-Período Septiembre de 2005 - Septiembre de 2006". Superintendencia de Bancos y Seguros
3) Article concerning the amendment to the BNF's Organic Law - September 17,2007. (El Presidente objetó parcialmente la reforma a la Ley Orgánica del Banco Nacional de Fomento).
4) USAID (2005) Microempresas y Microfinanzas en Ecuador. Resultados del Estudio de Línea de Base de 2004. Proyecto SALTO/USAID Ecuador y Development Alternatives Inc. (salto-ecuador).
5) Federal Reserve Bank of Atlanta - A Revolution in Consumer Banking in Latin America. Teresita P. Obermann, Senior Foreign Banking Analyst, Federal Reserve Bank of Atlanta. August 2006 (A Revolution in Consumer Banking: Developments in Consumer Banking in Latin America).
General Participation in the Financial Services Market
No. of institutions
No. of clients
Total Assets
Deposits
Target Market
Constraints to provision of microfinance services
Banks
Commercial Banks
1) 24, as of January, 2008. See Reportes Gerencial
2) Commercial banks providing microcredit: 16 (BID, 2006).
Credit clients: 376,080. See consolidated data on banks, June, 2006
Total Assets: USD 13.9 billion; Total Loan Portfolio: USD 7.6 billion; Total Microcredit Loan Portfolio: 8.1%. See Reportes Gerencial
Provision of financial intermediary services, except for the following: (i) receiving sight deposits for less than 30 days; and (ii) providing checking account services. See GLFSI, Art. 50 (a) and (g); and Regulation of GLFSI, Art.3.
1) Collection of funds from the public and/or from its members, in order to grant loans and provide financial services.
2) Non-regulated cooperatives having assets of more than USD 10 million must become regulated coops. See DE 354, Art. 2; and Codification, Title XXIII, Chap. I, Sect. I, Art. 1.
Non-regulated Savings and Credit Cooperatives (Non-regulated Coops)
1) General Law on Cooperatives, as amended up to April 2007 (GLCoop).
2) Regulations for the General Law on Cooperatives - Decree No. 6842 of 1994, as amended up to 2001 (DS 6842).
3) Executive Decree No. 3054, issued on September 11, 2002, as amended up to February 2007 - Regulation of Non-Profit Organizations (DE 3054).
Cooperatives that provide services to their members only. GLCoop establishes a system for classifying cooperatives: production, consumer, savings and credit, and services cooperatives. See GLCoop, Arts. 1 and 63; and DS 6842, Art.15
Rendering of financial services by a cooperative to members only. If the cooperative's assets exceed USD 10 million, it must convert into a Regulated Coop.
Non-profit institutions
NGOs
1) Executive Decree No. 3054, issued on September 11, 2002, as amended up to February 2007 - Regulation of Non-Profit Organizations (DE 3054).
2) Civil Code, Book I, Title XXIX.
Private non-profit institutions
1) Ministry of Economy and Finance (for local NGOs)
2) Department of State [Ministerio de Relaciones Exteriores] (for foreign NGOs).
Non-profit associations that take deposits in order to grant loans for housing, as well as for other activities aimed at developing the well-being of the mutual's members and their families. See GLFSI, Art. 2; and Regulation of GLFSI, Art. 3(c).
Collection of funds from the public to finance construction and housing, and to promote the overall well-being of the institution's members. Mutuals are not authorized to: (i) negotiate credit instruments; (ii) negotiate foreign currencies; (iii) issue traveler's checks; (iv) buy or sell precious minerals; or (v) guarantee securities operations. See GLFSI, Arts. 2 and 51(j),(m),(t) and (v); and Regulation of GLFSI, Art. 3(b).
1) Chamber of Commerce of the district (incorporation).
2) Banking Superintendency (licensing)
1) The Banking Superintendency will verify the responsibility and solvency of the individual or legal entity owning more than 6% of the capital, prior to such acquisition.
2) The acquisition of 6% or more of the shares of a holding company must be previously approved by the Banking Superintendency. See GLFSI, Arts. 45 and 65.
1) INCORPORATION: According to the World Bank, starting a typical business in Ecuador takes approximately 65 working days for 14 procedures, and costs 29.2% of GNI per capita. See Doing Business, and Registration Requirements).
2) LICENSING: May take up to 4 months. See GLFSI, Arts. 8 to 12.
1) The Banking Superintendency will verify the responsibility and solvency of the individual or legal entity owning more than 6% of the capital, prior to such acquisition.
2) The acquisition of 6% or more of the shares of a holding company must be previously approved by the Banking Superintendency. See GLFSI, Arts. 45 and 65
1) INCORPORATION: According to the World Bank, starting a typical business in Ecuador takes approximately 65 working days for 14 procedures, and costs 29.2% of GNI per capita. See Doing Business, and Registration Requirements).
2) LICENSING: May take up to 4 months. See GLFSI, Arts. 8 to 12.
Cooperatives/Credit Unions
Regulated Savings and Credit Cooperatives (Regulated Coops)
Banking Superintendency approves the required documentation, authorizes the cooperative's by-laws and its registration before the Chamber of Commerce. See GLFSI, Title XXIII, Ch. I; and DE 354, Arts. 3,4, 5, 6, and 7.
Cooperative with the participation of at least fifty persons or legal entities. See DE 354, Art. 5.
Financial institutions, insurance companies, and social security institutions cannot be members of a cooperative. See DE 354, Art. 5.
The Banking Superintendency has 60 working days to approve or reject the application. In addition to that, registration before the Chamber of Commerce and other additional steps may take up to two months. See GLFSI, Title XXIII, Ch. I, Art. 5; and DE 354, Art. 7.
Non-regulated Savings and Credit Cooperatives (Non-regulated Coops)
1) THE FOLLOWING MAY NOT BE MEMBERS OF THE BOARD OF DIRECTORS OF A PRIVATE FINANCIAL INSTITUTION: (i) legal representatives, vice presidents, managers, and internal auditors of the financial institution; (ii) managers, attorneys, auditors, and employees of any of its affiliates or subsidiaries; (iii) directors, legal representatives, attorneys, and auditors of other financial institutions; (iv) persons having overdue loans exceeding 60 days; (v) persons having write-off obligations with any financial institution within the past five years; (vi) persons having any legal claim against the financial institution; (vii) persons having any criminal conviction; and (viii) relatives of a director, employee, or officer of the financial institution, unless previously approved by the Banking Superintendency.
2) If the financial institution is owned by a holding company, no more than 40% of the financial institution's Board of Directors may be constituted of members of the holding company’s Board of Directors.
3) THE FOLLOWING MAY NOT BE SHAREHOLDERS OR PROMOTERS: persons or companies who have been promoters, shareholders, or controlling shareholders of any bankrupted financial institution.
4) REQUIREMENTS FOR LEGAL REPRESENTATIVES AND MEMBERS OF THE BOARD OF DIRECTORS: Must have a degree in areas related to financial system management, and must have a minimum of five years of prior experience in the financial sector. See GLFSI, Art. 34; and Codification, Title I, Ch.I, Arts. 4 and 5; Title III, Ch.I.
The Banking Superintendency conducts all relevant investigations and performs various auditing functions to confirm the information and qualities of shareholders and managers. Based on such investigation, the Superintendency issues an evaluation certificate. In particular, the Superintendency carries out a detailed audit concerning the qualities and solvency of shareholders owning 6% or more of the financial institution’s capital. Such shareholders must have a net patrimony equal to at least 1.5 times the capital that they will control in the new institution. In addition, they must prove that the funds come from legal activities. See Codification Title I, Ch. I, Art. 5, and Title III, Ch. I, Art. 1
Managers must file internal audit manuals for the Superintendency's approval. Financial institutions must also prepare policies as to: (i) election of managers and officers; (ii) granting of loans; (iii) risk management; (iv) anti-money laundering measures; and (v) financial and administrative policies. See Codification Title I, Ch. I, Art. 5; and Title XXIII, Ch. I., Sect. VI.
Unknown
Non-bank Financial Institutions
Financial Associations
1) THE FOLLOWING MAY NOT BE MEMBERS OF THE BOARD OF DIRECTORS OF A PRIVATE FINANCIAL INSTITUTION: (i) legal representatives, vice presidents, managers, and internal auditors of the financial institution; (ii) managers, attorneys, auditors, and employees of any of its affiliates or subsidiaries; (iii) directors, legal representatives, attorneys, and auditors of other financial institutions; (iv) persons having overdue loans exceeding 60 days; (v) persons having write-off obligations with any financial institution within the past five years; (vi) persons having any legal claim against the financial institution; (vii) persons having any criminal conviction; and (viii) relatives of a director, employee, or officer of the financial institution, unless previously approved by the Banking Superintendency.
2) If the financial institution is owned by a holding company, no more than 40% of the financial institution's Board of Directors may be constituted of members of the holding company’s Board of Directors.
3) THE FOLLOWING MAY NOT BE SHAREHOLDERS OR PROMOTERS: persons or companies who have been promoters, shareholders, or controlling shareholders of any bankrupted financial institution.
4) REQUIREMENTS FOR LEGAL REPRESENTATIVES AND MEMBERS OF THE BOARD OF DIRECTORS: Must have a degree in areas related to financial system management, and must have a minimum of five years of prior experience in the financial sector. See GLFSI, Art. 34; and Codification, Title I, Ch.I, Arts. 4 and 5; Title III, Ch.I.
The Banking Superintendency conducts all relevant investigations and performs various auditing functions to confirm the information and qualities of shareholders and managers. Based on such investigation, the Superintendency issues an evaluation certificate. In particular, the Superintendency carries out a detailed audit concerning the qualities and solvency of shareholders owning 6% or more of the financial institution’s capital. Such shareholders must have a net patrimony equal to at least 1.5 times the capital that they will control in the new institution. In addition, they must prove that the funds come from legal activities. See Codification Title I, Ch. I, Art. 5, and Title III, Ch. I, Art. 1
Managers must file internal audit manuals for the Superintendency's approval. Financial institutions must also prepare policies as to: (i) election of managers and officers; (ii) granting of loans; (iii) risk management; (iv) anti-money laundering measures; and (v) financial and administrative policies. See Codification Title I, Ch. I, Art. 5; and Title XXIII, Ch. I., Sect. VI.
Unknown
Cooperatives/Credit Unions
Regulated Savings and Credit Cooperatives (Regulated Coops)
1) THE FOLLOWING MAY NOT BE MEMBERS OF THE BOARD OF DIRECTORS OF A REGULATED COOPERATIVE: (i) legal representatives, vice-presidents, managers, and internal auditors of the cooperative; (ii) managers, attorneys, auditors, and employees of any of its affiliates or subsidiaries; (iii) directors, legal representatives, attorneys, and auditors of other financial institutions; (iv) persons having overdue loans exceeding 60 days; (v) persons having write-off obligations with any financial institution within the past five years; (vi) persons having any legal claim against the cooperative; (vii) persons having a criminal conviction; and (viii) relatives of a director, employee, or officer of the financial institution, unless previously approved by the Banking Superintendency.
2) If the cooperative is owned by a holding company, no more than 40% of the cooperative's Board of Directors may be constituted of members of the holding company’s Board of Directors.
3) THE FOLLOWING MAY NOT BE SHAREHOLDERS OR PROMOTERS: persons or companies who have been promoters, shareholders, or controlling shareholders of any bankrupted financial institution.
4) SPECIAL QUALIFICATION REQUIREMENTS FOR REPRESENTATIVES TO THE GENERAL MEMBER'S MEETING AND FOR MEMBERS OF THE MANAGEMENT BOARD: Must have been members of the cooperative for two years; and cannot have overdue loans exceeding 60 days with any financial institution.
5) SPECIAL QUALIFICATION REQUIREMENTS FOR THE GENERAL MANAGER: must have a degree in economics or finance; and must have a minimum of four years of prior experience as manager or director of cooperatives or other financial institutions. See GLFSI, Art. 34, Codification, Title I, Ch.I, Arts. 4 and 5; Title III, Ch.I; and DE 354, Arts. 6, 16, 26, and 37.
The Banking Superintendency conducts all relevant investigations and performs various auditing functions to confirm the information and qualities of members and managers. Based on such investigation, the Superintendency issues an evaluation certificate. See Codification Title I, Ch. I, Art. 5.
Managers must file internal audit manuals for the Superintendency's approval. Financial institutions must also prepare policies as to: (i) election of managers and officers; (ii) granting of loans; (iii) risk management; (iv) anti-money laundering measures; and (v) financial and administrative policies. See Codification Title I, Ch. I, Art. 5; and Title XXIII, Ch. I., Sect. VI.
Unknown
Non-regulated Savings and Credit Cooperatives (Non-regulated Coops)
1) REQUIREMENTS FOR MANAGERS AND MEMBERS OF THE BOARD OF DIRECTORS: (i) Relatives cannot be members of the Board of Directors; (ii) Must have an occupation that is compatible with the position.
2) THE FOLLOWING MAY NOT BE MEMBERS OF THE COOPERATIVE: (i) spouses, if the spouse is already a member of another cooperative of the same type (i.e. each of them is already a member of a credit and savings cooperative); (ii) persons who have been expelled from another cooperative; (iii) persons with a criminal conviction for economic crimes such as money laundering or illicit enrichment, or who have been responsible for mismanagement in other institutions. See GLCoop, Arts. 12, 13, 14, 15, 16, 139 and 140; and DS 6842, Arts. 207 and 208.
1) The National Cooperative Directorate conducts all relevant investigations and performs various auditing functions to confirm the information filed by the petitioners. The petitioner must also file a certificate issued by a technician or promoter, certifying that the members have been duly instructed on cooperative principles. See DS 6842, Arts. 9 and 12.
Unknown
Non-profit institutions
NGOs
FOREIGN NGOs: Officers and their relatives cannot carry out for-profit activities except for those arising from the NGO's corporate purpose. See DE 3054, Art.23.
Foreign NGOs must submit a business plan containing a detailed explanation of their activities and corporate purpose. See DE 3054, Arts. 17, 18.
FOREIGN NGOs:
1) Must file a copy of the documentation proving their legal existence in the foreign country.
2) The Ministry of Foreign Relations, through the Ecuadorian Embassies and Consulates, verifies the information concerning the legality and economic solvency of the NGO. See DE 3054, Art. 18.
Deposits from the public.
Savings and Credit Mutuals for Housing
1) THE FOLLOWING ARE PROHIBITED FROM BEING DIRECTORS: (i) legal representatives, vice presidents, managers, and internal auditors of the mutual; (ii) managers, attorneys, auditors, and employees of any of its affiliates or subsidiaries; (iii) directors, legal representatives, attorneys, and auditors of other financial institutions; (iv) persons having overdue loans exceeding 60 days; (v) persons having write-off obligations with any financial institution within the past five years; (vi) persons having any legal claim against the mutual; (vii) persons having a present criminal conviction; and (viii) relatives of a director, employee, or officer of the mutual, unless previously approved by the Banking Superintendency.
2) If the mutual is owned by a holding company, no more than 40% of the institution's Board of Directors may be constituted of members of the holding company’s Board of Directors.
3) THE FOLLOWING ARE PROHIBITED FROM BEING SHAREHOLDERS OR PROMOTERS: persons or companies who have been promoters, shareholders, or controlling shareholders of any financial institution that declared bankruptcy.
4) LEGAL REPRESENTATIVE AND MEMBERS OF THE MANAGEMENT BOARD: Must have a degree in areas related to financial system management, and must have a minimum of five years of prior experience in the financial sector. See GLFSI, Art. 34; and Codification, Title I, Ch.I, Arts. 4 and 5; Title III, Ch.I.
The Banking Superintendency conducts all relevant investigations and performs various auditing functions to confirm the information and qualities of shareholders and managers. Based on such investigation, the Superintendency issues an evaluation certificate. In particular, the Superintendency carries out a detailed audit concerning the qualities and solvency of shareholders owning 6% or more of the financial institution’s capital. Such shareholders must have a net patrimony equal to at least 1.5 times the capital that they will control in the new institution. In addition, they must prove that the funds come from legal activities. See Codification Title I, Ch. I, Art. 5, and Title III, Ch. I, Art. 1.
Managers must file internal audit manuals for the Superintendency's approval. Financial institutions must also prepare policies as to: (i) election of managers and officers; (ii) granting of loans; (iii) risk management; (iv) anti-money laundering measures; and (v) financial and administrative policies. See Codification Title I, Ch. I, Art. 5; and Title XXIII, Ch. I., Sect. VI.
1) The Capital Adequacy Ratio (relation between net capital and the sum of risk-weighted and contingent assets) cannot be less than 9%. The Banking Superintendent can raise the ratio, with prior approval from the Banking Commission.
2) In addition, total net capital cannot be less than 4% of total (non-risk-weighted) assets (including contingent assets). See GLFSI, Arts. 47 and 50; and Codification, Title V, Ch. I, Sect. 1, Art. 1, and Sect. III, art.8.
TIER I and TIER II capital: (i) TIER I [Patrimonio Técnico Primario] is the sum of registered capital, reserves, non-distributed profits, revaluated equity, subordinated term debt, and losses; (ii) TIER II [Patrimonio Técnico Secundario] is the sum of convertible bonds, special reserves, and revaluation reserves, among others. See GLFSI, Art. 48, and Codification, Title V, Ch. I, Sect. 1, Art. 1, and Sect. III, art.7.
0% for maximum security assets, such as on-site deposits or loans granted to clients and not yet disbursed; 10% for security assets issued or guaranteed by the government; 20% for security assets issued or guaranteed by other financial institutions; 40% for guarantees, performance bonds; 50% for housing loans; 100% for the remaining assets (includes credit portfolio). See Codification, Title V, Ch. I, Sect. 1, Art. 1, and Sect. II, Arts. 3 and 4.
1) COMMERCIAL LOANS NOT EXCEEDING USD 25,000: Standard (0 to 1 month overdue): 1%; Watch (1 to 3 months overdue): 5%; Substandard (3 to 6 months overdue): 20%; Doubtful (6 to 9 months overdue): 50%; Loss (9 months overdue): 100%.
2) CONSUMER LOANS: Standard (0 to 15 days overdue): 1%; Watch (15 to 45 days overdue): 5%; Substandard (45 to 90 days overdue): 20%; Doubtful (90 to 120 days overdue): 50%; Loss (120 days overdue): 100%.
3) HOUSING LOANS: Standard (0 to 3 months overdue): 1%; Watch (3 to 9 months overdue): 5%; Substandard (9 to 12 months overdue): 20%; Doubtful (12 to 24 months overdue): 50%; Loss (24 months overdue): 100%.
4) MICROCREDIT LOANS: Standard (0 to 5 days overdue): 1%; Watch (5 to 30 days overdue): 5%; Substandard (30 to 60 days overdue): 20%; Doubtful (60 to 90 days overdue): 50%; Loss (90 days overdue): 100%. See Codification of GLFSI, Title IX, Ch. I, Sects. I and II, Ch. II, Sects. I, II, and III.
1) LEGAL RESERVE: Must set aside at least 10% of annual profits until total reserve reaches at least 50% of paid-up capital.
2) SPECIAL RESERVE FOR FUTURE CAPITALIZATIONS: Banking Superintendent has full authority to order that an additional percentage of the financial institution's dividends be set aside to constitute a reserve for short-term capitalization, in order to guarantee the stability and sustainability of the financial system.
3) LIQUIDITY FUND: Financial institutions must contribute 1% of demand deposits to a Fund managed by National Finance Corporation. The purpose of this Liquidity Fund is to solve temporary liquidity problems of the financial institutions. See GLFSI, Art. 40; Regulation of GLFSI, Art.14; and Codification of GLFSI, Title IV, Ch. III, Sect. I, Art. 1, and Title X, Ch. VII.
1) The Capital Adequacy Ratio (relation between net capital and the sum of risk-weighted and contingent assets) cannot be less than 9%. The Banking Superintendent can raise the ratio, with prior approval from the Banking Commission.
2) In addition, total net capital cannot be less than 4% of total (non-risk-weighted) assets (including contingent assets). See GLFSI, Arts. 47 and 50; and Codification, Title V, Ch. I, Sect. 1, Art. 1, and Sect. III, art.8.
TIER I and TIER II capital: (i) TIER I [Patrimonio Técnico Primario] is the sum of registered capital, reserves, non-distributed profits, revaluated equity, subordinated term debt, and losses; (ii) TIER II [Patrimonio Técnico Secundario] is the sum of convertible bonds, special reserves, and revaluation reserves, among others. See GLFSI, Art. 48, and Codification, Title V, Ch. I, Sect. 1, Art. 1, and Sect. III, art.7.
0% for maximum security assets, such as on-site deposits or loans granted to clients and not yet disbursed; 10% for security assets issued or guaranteed by the government; 20% for security assets issued or guaranteed by other financial institutions; 40% for guarantees, performance bonds; 50% for housing loans; 100% for the remaining assets (includes credit portfolio). See Codification, Title V, Ch. I, Sect. 1, Art. 1, and Sect. II, Arts. 3 and 4.
1) COMMERCIAL LOANS NOT EXCEEDING USD 25,000: Standard (0 to 1 month overdue): 1%; Watch (1 to 3 months overdue): 5%; Substandard (3 to 6 months overdue): 20%; Doubtful (6 to 9 months overdue): 50%; Loss (9 months overdue): 100%.
2) CONSUMER LOANS: Standard (0 to 15 days overdue): 1%; Watch (15 to 45 days overdue): 5%; Substandard (45 to 90 days overdue): 20%; Doubtful (90 to 120 days overdue): 50%; Loss (120 days overdue): 100%.
3) HOUSING LOANS: Standard (0 to 3 months overdue): 1%; Watch (3 to 9 months overdue): 5%; Substandard (9 to 12 months overdue): 20%; Doubtful (12 to 24 months overdue): 50%; Loss (24 months overdue): 100%.
4) MICROCREDIT LOANS: Standard (0 to 5 days overdue): 1%; Watch (5 to 30 days overdue): 5%; Substandard (30 to 60 days overdue): 20%; Doubtful (60 to 90 days overdue): 50%; Loss (90 days overdue): 100%. See Codification of GLFSI, Title IX, Ch. I, Sects. I and II, Ch. II, Sects. I, II, and III.
1) LEGAL RESERVE: Must set aside at least 10% of annual profits until total reserve reaches at least 50% of paid-up capital.
2) SPECIAL RESERVE FOR FUTURE CAPITALIZATIONS: Banking Superintendent has full authority to order that an additional percentage of the financial institution's dividends be set aside to constitute a reserve for short-term capitalization, in order to guarantee the stability and sustainability of the financial system.
3) LIQUIDITY FUND: Financial institutions must contribute 1% of demand deposits to a Fund managed by National Finance Corporation. The purpose of this Liquidity Fund is to solve temporary liquidity problems of the financial institutions. See GLFSI, Art. 40; Regulation of GLFSI, Art.14; and Codification of GLFSI, Title IV, Ch. III, Sect. I, Art. 1, and Title X, Ch. VII.
Cooperatives/Credit Unions
Regulated Savings and Credit Cooperatives (Regulated Coops)
1) Must maintain at all times a Capital Adequacy Ratio (relation between its net capital and the sum of its risk-weighted and contingent assets) of 12%.
2) In addition, total net capital cannot be less than 4% of total (non-risk-weighted) assets (including contingent assets). See GLFSI, Arts. 47 and 50; DE, Art. 41; and Codification, Title V, Ch. I, Sect. 1, Art. 1, and Sect. III, art.8.
1) CAPITAL is divided into share certificates: (i) common certificates, corresponding to contributions which may be withdrawn at any time, which are NOT considered as part of the technical capital; and (ii) restricted certificates, which are considered as part of the net capital.
2) NET CAPITAL: (i) TIER I CAPITAL [Patrimonio Técnico Primario] is the sum of registered capital, reserves, non-distributed profits, revaluated equity, subordinated term debt, and losses; (ii) TIER II CAPITAL [Patrimonio Técnico Secundario] is the sum of convertible bonds, special reserves, and revaluation reserves, among others.
3) At least 95% of the capital must be Tier I capital. See GLFSI, Art. 48; DE 354, Art. 40; and Codification, Title V, Ch. I, Sect. 1, Art. 1, and Sect. III, art.7.
0% for maximum security assets, such as on-site deposits or loans granted to clients and not yet disbursed; 10% for security assets issued or guaranteed by the government; 20% for security assets issued or guaranteed by other financial institutions; 40% for guarantees, performance bonds; 50% for housing loans; 100% for the remaining assets (includes credit portfolio). See Codification, Title V, Ch. I, Sect. 1, Art. 1, and Sect. II, Arts. 3 and 4.
1) COMMERCIAL LOANS NOT EXCEEDING USD 25,000: Standard (0 to 1 month overdue): 1%; Watch (1 to 3 months overdue): 5%; Substandard (3 to 6 months overdue): 20%; Doubtful (6 to 9 months overdue): 50%; Loss (9 months overdue): 100%.
2) CONSUMER LOANS: Standard (0 to 15 days overdue): 1%; Watch (15 to 45 days overdue): 5%; Substandard (45 to 90 days overdue): 20%; Doubtful (90 to 120 days overdue): 50%; Loss (120 days overdue): 100%.
3) HOUSING LOANS: Standard (0 to 3 months overdue): 1%; Watch (3 to 9 months overdue): 5%; Substandard (9 to 12 months overdue): 20%; Doubtful (12 to 24 months overdue): 50%; Loss (24 months overdue): 100%.
4) MICROCREDIT LOANS: Standard (0 to 5 days overdue): 1%; Watch (5 to 30 days overdue): 5%; Substandard (30 to 60 days overdue): 20%; Doubtful (60 to 90 days overdue): 50%; Loss (90 days overdue): 100%. See Codification of GLFSI, Title IX, Ch. I, Sects. I and II, Ch. II, Sects. I, II, and III.
1) LEGAL RESERVE: at least 40% of yearly profits must be set aside for a legal reserve.
2) LIQUIDITY FUND: second-tier cooperatives can constitute -- with the previous favorable opinion of the Banking Board [Junta Bancaria] -- a liquidity fund, into which all cooperatives must contribute. See DE 354, Arts. 42, 44, 56, and 57.
Non-regulated Savings and Credit Cooperatives (Non-regulated Coops)
No minimum contribution required. Members must pay at least 50% of their contribution when they become members, and the remaining 50% in the next 12 months. See GLCoop, Art. 59; and DS 6842, Art. 9.
N/A
CAPITAL is divided into share certificates corresponding to the members' contributions. See GLCoop, Art. 49, 51, and 53.
N/A
N/A
1) LEGAL RESERVE: at least 20% of annual net profits must be set aside for a legal reserve.
2) 5% of annual net profits must be set aside for an Educational Fund.
3) 5% of annual net profits must be set aside for a Social Assistance Fund. See GLCoop, Art.129; and DS 6842, Art. 56.
1) The Capital Adequacy Ratio (relation between net capital and the sum of risk-weighted and contingent assets) cannot be less than 9%.
2) In addition, total net capital cannot be less than 4% of total (non-risk-weighted) assets (including contingent assets). The Banking Superintendent can raise the ratio, with prior approval from the Banking Commission. See GLFSI, Arts. 47 and 50; and Codification, Title V, Ch. I, Sect. 1, Art. 1, and Sect. III, art.8.
1) TIER I and TIER II capital: (i) TIER I [Patrimonio Técnico Primario] is the sum of registered capital, reserves, non-distributed profits, revaluated equity, subordinated term debt, and losses; (ii) TIER II [Patrimonio Técnico Secundario] is the sum of convertible bonds, special reserves, and revaluation reserves, among others. See GLFSI, Art. 48; and Codification, Title V, Ch. I, Sect. 1, Art. 1, and Sect. III, art.7.
0% for maximum security assets, such as on-site deposits or loans granted to clients and not yet disbursed; 10% for security assets issued or guaranteed by the government; 20% for security assets issued or guaranteed by other financial institutions; 40% for guarantees, performance bonds; 50% for housing loans; 100% for the remaining assets (includes credit portfolio). See Codification, Title V, Ch. I, Sect. 1, Art. 1, and Sect. II, Arts. 3 and 4.
1) COMMERCIAL LOANS NOT EXCEEDING USD 25,000: Standard (0 to 1 month overdue): 1%; Watch (1 to 3 months overdue): 5%; Substandard (3 to 6 months overdue): 20%; Doubtful (6 to 9 months overdue): 50%; Loss (9 months overdue): 100%.
2) CONSUMER LOANS: Standard (0 to 15 days overdue): 1%; Watch (15 to 45 days overdue): 5%; Substandard (45 to 90 days overdue): 20%; Doubtful (90 to 120 days overdue): 50%; Loss (120 days overdue): 100%.
3) HOUSING LOANS: Standard (0 to 3 months overdue): 1%; Watch (3 to 9 months overdue): 5%; Substandard (9 to 12 months overdue): 20%; Doubtful (12 to 24 months overdue): 50%; Loss (24 months overdue): 100%.
4) MICROCREDIT LOANS: Standard (0 to 5 days overdue): 1%; Watch (5 to 30 days overdue): 5%; Substandard (30 to 60 days overdue): 20%; Doubtful (60 to 90 days overdue): 50%; Loss (90 days overdue): 100%. See Codification of GLFSI, Title IX, Ch. I, Sects. I and II, Ch. II, Sects. I, II, and III.
1) LEGAL RESERVE: Must set aside at least 10% of annual profits until total reserve reaches at least 50% of paid-up capital.
2) SPECIAL RESERVE FOR FUTURE CAPITALIZATIONS: Banking Superintendent has full authority to order that an additional percentage of the financial institution's dividends be set aside to constitute a reserve for short-term capitalization, in order to guarantee the stability and sustainability of the financial system.
3) LIQUIDITY FUND: Financial institutions must contribute 1% of demand deposits to a Fund managed by National Finance Corporation. The purpose of this Liquidity Fund is to solve temporary liquidity problems of the financial institutions. See GLFSI, Art. 40; Regulation of GLFSI, Art.14; and Codification of GLFSI, Title IV, Ch. III, Sect. I, Art. 1, and Title X, Ch. VII.
Risk Management Guidelines
Guidelines & restrictions on financial services
Guidelines & restrictions on operational rules
Guidelines & restrictions on interest rates
Concentration of risk
Connected/insider business
Banks
Commercial Banks
PERMITTED: sight and term public deposit-taking; loans; money transfers; discounting and negotiating promissory notes, letters of exchange, and any other debt instrument; buying and selling of letters of exchange and currencies; issuance and receipt of letters of credit, granting of guarantees; housing mortgage loans; investment in special purpose institutions and in treasury bills; derivative securities. Can own real estate and personal property required for its operation, which can represent up to 100% of the technical capital. PROHIBITED: granting loans guaranteed by the financial institution's own stock shares; granting loans whose purpose is the acquisition of the financial institution's own stock shares; mortgaging the financial institution's own real estate. See GLFSI, Arts. 51, 54, and 125; Regulation of GLFSI, Art.3; and Codification, Title VI, Ch. I.
1) The Banking Superintendency establishes minimum baseline hours for financial institutions. Any modification of the financial institution’s business hours requires prior notification to the Banking Superintendency. Currently, financial institutions must be open at least from 9H00 – 15H00 (9am - 3pm), Monday to Friday.
2) Financial institutions must obtain prior authorization from the Banking Superintendency to open and close branches and agencies in Ecuador and abroad. The Superintendency may authorize such opening of branches or agencies if the financial institution is fully complying with prudential regulations (capital adequacy ratio, provisioning, etc.), and after reviewing the feasibility study.
3) Bank offices must have a technological platform to ensure the interconnection of their branches and agencies with the home office.
4) Must comply with regulations concerning anti-money laundering measures (information requirements for operations exceeding USD 10,000; code of conduct for managers and employees; specific internal auditing procedures).
5) Maximum tariffs for banking services are fixed by the Banking Superintendency. Pursuant to the recent Financial Justice Law (Ley de Justicia Financiera), the commissions corresponding to 24 different types of financial operations have been fixed, including commissions for: checks, checking accounts, withdrawals, and electronic transfers, among others. The tariffs are modified on a monthly basis by the Banking Superintendency. See GLFSI, Art. 55; Codification, Title II, Ch. I and II, Title VII, Ch.I, Sect.I, Title XIII, Ch. IV, Sect. I, and Title XIV.
CREDIT INTEREST RATES: Usury interest rates are defined by the Criminal Code as those which exceed by 50% the ordinary interest rate, as certified by the Central Bank of Ecuador. See GLFSI, Art.201; and Resolution 148/2007 issued by the Central Bank.
Exposure to an individual or legal entity cannot exceed 10% of the institution’s technical capital, or 20% if the amount exceeding the 10% corresponds to loans guaranteed by national or international duly accredited banks (such guarantee must be equal to at least 140% of the guaranteed obligation). In addition, such operations cannot represent more than 200% of the single legal entity's (or natural person’s) patrimony, unless the obligations are duly guaranteed. See GLFSI, Art. 72; Regulation of GLFSI, Art. 29; and Codification, Title IX, Ch. III and Ch. VII.
Cannot provide services to those with direct or indirect ties to the institution’s management or property (including subsidiaries or controlling associations). These include: natural persons or legal entities that own (either directly or indirectly) 1% or more of the institution's paid-up capital; companies in which the legal representatives, managers, and employees own directly or indirectly more than 3% of the financial institution's capital; companies in which the spouses or relatives of the institution’s legal representatives, managers, or employees own more than 3% of the capital; spouses or relatives of the institution’s legal representatives, managers, or employees. Loans to officers, members of the Management Board, or the legal representatives must be previously approved by the Board of Directors. See GLFSI, Arts. 73, 74 and 75; GLFSI Regulations, Art. 29; and Title IX, Ch. VII.
Non-bank Financial Institutions
Financial Associations
PERMITTED: public deposit-taking with a term of more than thirty days; loans; money transfers; discounting and negotiating promissory notes, letters of exchange, and any other debt instrument; buying and selling letters of exchange and currencies; issuance and receipt of letters of credit; granting of guarantees; housing mortgage loans; investment in special purpose institutions and in treasury bills; derivative securities. Can own real estate and personal property required for its operation, which can represent up to 100% of the technical capital. Can also invest in productive projects, up to 20% of the technical capital, and for a 3 years maximum period. PROHIBITED: public deposit-taking with a term of less than thirty days; granting loans guaranteed by the financial institution's own stock shares; granting loans whose purpose is the acquisition of the financial institution's own stock shares; mortgaging the financial institution's own real estate. See GLFSI, Arts. 51, 53, 54, and 125; Regulation of GLFSI, Art. 3; and Codification, Title VI, Ch. I.
1) The Banking Superintendency establishes minimum baseline hours for financial institutions. Any modification of the financial institution’s business hours requires prior notification to the Banking Superintendency. Currently, financial institutions must be open at least from 9H00 – 15H00 (9am - 3pm), Monday to Friday.
2) Financial institutions must obtain prior authorization from the Banking Superintendency to open and close branches and agencies in Ecuador and abroad. The Superintendency may authorize such opening of branches or agencies if the financial institution is fully complying with prudential regulations (capital adequacy ratio, provisioning, etc.), and after reviewing the feasibility study.
3) Bank offices must have a technological platform to ensure the interconnection of its branches and agencies with the home office.
4) Must comply with regulations concerning anti-money laundering measures (information requirements for operations exceeding USD 10,000; code of conduct for managers and employees; specific internal auditing procedures).
5) Maximum tariffs for banking services are fixed by the Banking Superintendency. Pursuant to the recent Financial Justice Law (Ley de Justicia Financiera), the commissions corresponding to 24 different types of financial operations have been fixed, including commissions for: checks, checking accounts, withdrawals, and electronic transfers, among others. The tariffs are modified on a monthly basis by the Banking Superintendency. See GLFSI, Art. 55; Codification, Title II, Ch. I and II, Title VII, Ch.I, Sect.I, Title XIII, Ch. IV, Sect. I, and Title XIV.
CREDIT INTEREST RATES: Usury interest rates are defined by the Criminal Code as those which exceed by 50% the ordinary interest rate, as certified by the Central Bank of Ecuador. See GLFSI, Art.201; and Resolution 148/2007 issued by the Central Bank.
Exposure to an individual or legal entity cannot exceed 10% of the institution’s technical capital, or 20% if the amount exceeding the 10% corresponds to loans guaranteed by national or international duly accredited banks (such guarantee must be equal to at least 140% of the guaranteed obligation). In addition, such operations cannot represent more than 200% of the single legal entity's (or natural person’s) patrimony, unless the obligations are duly guaranteed. See GLFSI, Art. 72; Regulation of GLFSI, Art. 29; and Codification, Title IX, Ch. III and Ch. VII.
Cannot provide services to those with direct or indirect ties to the institution’s management or property (including subsidiaries or controlling associations). These include: natural persons or legal entities that own (either directly or indirectly) 1% or more of the institution's paid-up capital; companies in which the legal representatives, managers, and employees own directly or indirectly more than 3% of the financial institution's capital; companies in which the spouses or relatives of the institution’s legal representatives, managers, or employees own more than 3% of the capital; spouses or relatives of the institution’s legal representatives, managers, or employees. Loans to officers, members of the Management Board, or the legal representatives must be previously approved by the Board of Directors. See GLFSI, Arts. 73, 74 and 75; GLFSI Regulations, Art. 29; and Title IX, Ch. VII.
Cooperatives/Credit Unions
Regulated Savings and Credit Cooperatives (Regulated Coops)
PERMITTED: Receive any deposits; accept third-party obligations; issue debt; receive loans from domestic and foreign financial institutions; provide chattel and real estate loans; negotiate letters of exchange, IOUs, promissory notes, and other negotiable instruments; provide non-financial services (health services, technical assistance), if such services are financed with capital surplus. PROHIBITED: Cannot: negotiate securities; buy or sell precious minerals; guarantee the issuance of shares or obligations; negotiate documents related to international business transactions; engage in commercial lease operations; or directly provide insurance services. See GLFSI, Arts. 2(b), 51, 213, and 218; and DE 354, Arts. 45, 46, 82, and 83.
1) The Banking Superintendency establishes minimum baseline hours for financial institutions. Any modification of the financial institution’s business hours requires prior notification to the Banking Superintendency. Currently, financial institutions must be open at least from 9H00 – 15H00 (9am - 3pm), Monday to Friday.
2) Financial institutions must obtain prior authorization from the Banking Superintendency to open and close branches and agencies in Ecuador and abroad. The Superintendency may authorize such opening of branches or agencies if the financial institution is fully complying with prudential regulations (capital adequacy ratio, provisioning, etc.), and after reviewing the feasibility study.
3) Bank offices must have a technological platform to ensure the interconnection of its branches and agencies with the home office.
4) Must comply with regulations concerning anti-money laundering measures (information requirements for operations exceeding USD 10,000; code of conduct for managers and employees; specific internal auditing procedures).
5) Maximum tariffs for banking services are fixed by the Banking Superintendency. Pursuant to the recent Financial Justice Law (Ley de Justicia Financiera), the commissions corresponding to 24 different types of financial operations have been fixed, including commissions for: checks, checking accounts, withdrawals, and electronic transfers, among others. The tariffs are modified on a monthly basis by the Banking Superintendency. See GLFSI, Art. 55; Codification, Title II, Ch. I and II, Title VII, Ch.I, Sect.I, Title XIII, Ch. IV, Sect. I, and Title XIV.
CREDIT INTEREST RATES: Usury interest rates are defined by the Criminal Code as those which exceed by 50% the ordinary interest rate, as certified by the Central Bank of Ecuador. See GLFSI, Art.201; and Resolution 148/2007 issued by the Central Bank.
Exposure to an individual or legal entity cannot exceed 10% of the institution’s technical capital, or 20% if the amount exceeding the 10% corresponds to loans guaranteed by national or international duly accredited banks (such guarantee must be equal to at least 140% of the guaranteed obligation). In addition, such operations cannot represent more than 200% of the single legal entity's (or natural person’s) patrimony, unless the obligations are duly guaranteed. See GLFSI, Art. 72; Regulation of GLFSI, Art. 29; and Codification, Title IX, Ch. III and Ch. VII.
Cooperatives can establish a quota to grant loans to the Management and Supervision Board's members, managers, and employees. The total amount of the quota cannot exceed 10% of the technical capital, or 2% per individual. See GLFSI, Arts. 73, 74 and 75.
Non-regulated Savings and Credit Cooperatives (Non-regulated Coops)</
