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Banking Regulation in Ecuador: Key Points
1. Capital Requirements
The capital requirement for banks in Ecuador is set at 10% of risk-weighted assets.
2. Types of Capital
There are three types of capital that banks in Ecuador can use:
- Common shares
- Surplus funds
- Reserves (including general provisions)
3. Supervision Entities
The oversight entity responsible for regulating and overseeing the financial sector is the Superintendency of Banks.
4. Deposit Protection
Guaranteed deposits up to US$11,270 are protected by law in Ecuador. Payments are made within 15 days after liquidation or resolution.
5. Resolution Framework
In the event of a bank’s insolvency, the Superintendency of Banks will initiate corrective measures before issuing a resolution to liquidate the bank.
6. Liquidation Process
The liquidation process involves:
- Selling assets
- Collecting debts owed to the bank
A receiver is appointed ex officio to oversee the liquidation process.
7. Priority in Payment
Creditors are paid in the following order:
- Labour (employees and debts with the Ecuadorian Social Security Institute)
- Taxes
- Debts owed by the bank to third parties for which the bank has mortgages or pledges as collateral
- Creditors in general
8. Civil Liability
Management, including directors, auditors, commissioners, shareholders, and other allegedly responsible parties may be subject to civil liability.
9. Judicial Appeal
The bank’s management may judicially appeal the resolution by the Superintendency of Banks, but cannot suspend the effects of the resolution ordering the bank’s liquidation.
10. Changes in Capital Adequacy Guidelines
No changes are expected with regard to adequate capital, although an obligation has been included for state-owned banks to contribute up to 50% of their profits to a fund for the development of the people’s and solidarity financial sector.
11. Controlling Interest
An individual or company has direct controlling interest when they own:
- 6% or more of subscribed and paid-in capital or capital stock
- Shares in an amount equal to or greater than 600 times the income tax-exempt base fraction
12. Indirect Controlling Interest
Indirect controlling interest exists if a shareholder has at least a 1% stockholding in the financial institution’s subscribed and paid-in capital, or when the stockholding is less, the subscribed and paid-in contribution is equal to or greater than one hundred times the income tax-exempt base fraction.
13. Foreign Ownership
Foreign individuals or legal persons may incorporate financial entities or establish branches or representation offices in Ecuador without any limits on investment.
14. Implications for Controlling Interest
Entities that control banks are subject to regulation and oversight by the Superintendency of Banks, which has broad regulating and oversight powers in the financial sector.