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Regulation and Oversight of Banks in Ecuador

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The regulatory framework for banks in Ecuador ensures that these financial institutions operate within a safe and stable environment. Here are some key points regarding the regulation and oversight of banks in Ecuador.

Capital Adequacy

The regulatory body oversees bank capital adequacy to ensure that banks maintain a minimum capital requirement.
This is crucial for protecting depositors’ rights and maintaining financial stability.

Undercapitalisation

If a bank becomes undercapitalized, the regulators may initiate corrective measures before liquidating the bank. Liquidation involves:

Steps in Liquidation

Selling assets
Collecting debts owed to the bank
Paying creditors in order of priority

Insolvency and Liquidation

Insolvency leads to liquidation, where the regulatory body issues a resolution ordering the liquidation of the bank and appoints a liquidator. The liquidator’s role is to oversee the entire liquidation process.

Key Responsibilities of the Liquidator

Selling assets
Collecting debts owed to the bank
Making payments as per the order of priority

Ownership Restrictions and Foreign Investment

Direct 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 that equal or exceed 600 times the income tax-exempt base fraction.

Foreign Ownership

Foreign individuals or legal persons can incorporate financial entities or establish branches in Ecuador without limits on investment, although subject to domestic rules governing foreign investment.

Legal and Regulatory Implications for Controlling Entities

The regulation and oversight bodies have broad powers in the financial sector, including:

Setting interest rates
Monitoring and auditing
Intervening in, overseeing, and supervising all financial institutions.