COUNTRY PROFILE
Total land area:................. 276,840 sq. km.
Official languages:.............. Spanish and Quechua
Administrative divisions:..... 21 provinces
Legal system:..................... Based upon Spanish code law. Among the principal
differences between code law and common law are that
precedence is not taken into account by courts (decisions
are based strictly upon the written code), and that in criminal
courts innocence, rather than guilt, must be proven.
Executive branch:............... President is chief of state and head of government. Cabinet
appointed by the president.
Legislative branch:........... Unicameral National Congress (82 seats). Twelve members
are elected nationally by popular vote to serve four-year terms;
70 members are popularly elected by province for two-year
terms.
Judicial branch:...................Supreme Court. Judges are elected by Congress.ECONOMIC PROFILE
Currency: Sucre
GDP: US$16.19 billion (1997)
Real GDP growth (at market prices): 3.3 (1997)
GDP (average annual growth rate): 3.6 (1988-1997)
GDP per capita (1990 US$): 1,356.6 (1997)
Consumer price index (average annual growth rate): 30.7% (1997)
Nonfinancial public sector fiscal balance (% of current GDP): -2.5 (1997)
Money supply (M1) (% of current GDP): 7.0 (1997)
Interest rate (weighted average): 30.3 (1997)
Current account balance: -US$0.383 billion (1997)
Trade balance: US$0.765 billion (1997)
Main exports: Oil and oil products, bananas, shrimp, coffee, cocoa.
Main imports: Raw materials, capital goods, consumer goods.
Nominal exchange rate (Sucres/US$) end of period: 4,428 (1997)
Real effective exchange rate (Index 1990=100): 75.0 (1997)BANKING INSTITUTIONS
I. Banking Supervision
1. The Superintendencia de Bancos is responsible for bank supervision.
2. In accordance with Article 178 of the Ley General de Instituciones Financieras
(LGISF), the Superintendencia is an autonomous juridical person.
3. The Superintendencia reports its activities periodically to the Banking Board.
Annually, it reports to the Congress.
4. The supervisor performs on-site and off-site supervision at its discretion.
Off-site supervision consists of examining external auditors' reports and loan
portfolio classifications.
5. There are no formal classifications for bank examinations. In general terms,
however, the supervisor follows the Basle recommendations. These
recommendations are based on CAMEL and MACRO.
6. CAMEL is the system used in bank regulations.II. Consolidated Supervision
1. Ecuador performs consolidated supervision.
2. Prior consent is required from Ecuador to open or close a branch in a foreign
country.
3. Ecuador requires prior consent of the home country to open or close a foreign
branch in Ecuador.
4. Ecuador gathers information from off-shore entities by way of exchange
agreements with the host country.III. Interest Rates
1. Interest rates on loans are determined by the market, but are influenced by the
reference rate issued periodically by the Central Bank.
2. Interest rates on deposits are determined by the market, but are influenced by the
reference rate issued periodically by the Central Bank.IV. Deposit Insurance
1. In July 1998, a law insuring depositors entered in effect. This law should be
fully implemented within two years. Until then, in cases of bank liquidation,
small investors' preference is protected by the general banking laws
2. Deposit insurance is limited by amount, currency and depositor, based on a
unit of account adjusted daily using an inflationary index.V. Trade Finance
1. The definition of trade finance is contained in Article 51 of the LGISF. This
Article defines the faculties of third party acceptances, drafts, guarantees,
domestic and international letters of credit, and any other document commonly
accepted by international rules and regulations. It also defines the lending and
borrowing to and from domestic and international financial institutions, negotiating
and discounting of documents resulting from trade finance, negotiating or
advancing funds over securities, and acceptances in foreign currencies.
2. The risk associated with trade finance vehicles is borne solely by the issuing bank.
3. There are two cases of bank liquidation: voluntary and compulsory. In the former,
the Superintendencia gives bank management a period of time to complete the
liquidation process. In the latter case, the Superintendencia assigns agents to
oversee the liquidation. Article 154 of the LGISF establishes the treatment
of compulsory liquidation with a voluntary acceptance from the part of
shareholders to dissolve the institution and to proceed with the transfer of
assets to another financial institution.
4. The banking system does not make specific provisions for treatment of trade
finance obligations.VI. Capital Adequacy
1. The minimum capital required to open a banking institution is 3 million UVC
(Unidades de Valor Constante, or Constant Value Units), equal to
US$16,936,510.91as of October 1998. This unit is an adjustment to the rate
of devaluation or revaluation of Ecuadorian currency against the U.S. dollar.
2. The minimum capital required to maintain a bank in operation is 9% of the sum
total of risk-weighted assets.
3. Capital adequacy is measured using the following categories:Subscribed capital 1 million UVC
Paid capital 100% of subscribed capital
Authorized capital 200% of paid capitalVII. Asset Quality
1. Loan portfolios are classified as follows:Loan Classification Definition % of Reserves
Normal risk Less than 30 days 0%
Potential risk 2-3 months 5%
Deficient 3-6 months 5%-40%
Doubtful recovery 6-12 months 40%-80%
Loss More than 12 months 100%
2. The minimum reserve requirements on bank assets are 50% of subscribed and
paid capital. To form this reserve, financial institutions must set aside at least
10% of their annual earnings.
3. The legal lending limit is 30% of equity with collateral and 15% of equity
without collateral.
4. Investment portfolios are not categorized. The entire portfolio is considered
available for sale.
5. Investment categories are not applied.
6. Losses are realized immediately on profit and loss statements, but gains are
deferred.VIII. Liabilities
1. Reserves are calculated as the percentage of weekly average balances on deposits
and loans.Minimum Reserve Requirements
Demand deposit 12%
Time deposit 12%, unless greater than 360 days,
in which case there is none.
Short-term borrowing none
Local currency none
Foreign currency none2. Banking institutions can offer checking accounts, savings accounts, term accounts
of not less than 30 days, guaranteed and other deposits, and credit card holder
guarantee funds in local and foreign currencies.
3. There is no limit on the amount of deposits a banking entity can accept.
4. There is no limit on the level of concentration of any type of deposit.