Financial Crime World

Banks in Ecuador: An Overview of the Legal and Regulatory Framework

Ecuador’s banking sector is governed by a comprehensive legal and regulatory framework that aims to ensure the stability and integrity of the financial system. Here are key points to understand:

Capital Adequacy Guidelines

  • Banks in Ecuador must maintain a minimum capital adequacy ratio of 10 per cent.
  • If a bank falls below this threshold, the oversight agency will order a capital increase.
  • Failure to meet the requirement within the granted term may result in mandatory liquidation.

Undercapitalisation and Insolvency

  • Institutions found to be undercapitalised may be declared in mandatory liquidation by the Superintendency of Banks.
  • A receiver will be appointed ex officio to manage their affairs.
  • In case of insolvency, all levels of supervision must be exhausted before initiating corrective measures.

Liquidation Process

  • The liquidator will request funds for guaranteed deposits and notify creditors in order of prevalence:
    • Labour
    • Taxes
    • Debts owed to third parties with mortgages or pledges as collateral
    • General creditors
  • After paying credits, any balance will be paid to shareholders and management debtors.

Civil Liability

  • Management, directors, auditors, commissioners, and shareholders may face civil liability for inappropriate management.
  • The Ecuadorian prosecutor’s office may intervene to analyse criminal liability.

Capital Adequacy Changes and Ownership Restrictions

  • Public financial sector institutions must form a fund for the development of people’s and solidarity finance, with state-owned banks contributing up to 50 per cent of their profits.
  • Individuals or companies have direct controlling interest when owning 6 per cent or more of subscribed and paid-in capital or capital stock.

Foreign Ownership

  • Foreign individuals or legal persons may incorporate financial entities or establish branches/representation offices in Ecuador without investment limits, subject to domestic rules.

Implications for Controlling Entities

  • The regulation and oversight entities have broad powers to monitor, audit, intervene, oversee, and supervise financial institutions.
  • They regulate interest rates, credit policies, and securities.