The general manager in charge of BanEcuador, Fernando Chiang, explained -in writing- to this newspaper the scope of President Guillermo Lasso’s provision so that Executive Decree 456 is implemented from that body, with which a series of compensatory measures were created for the social sectors, especially the indigenous, who have been on an “indefinite” strike since last week. Lasso ordered the forgiveness of credits of up to $3,000 overdue as of May 31, 2022 and that a new line of credits of $100 million be generated for the agricultural and livestock sectors with special conditions.
How much is the total amount of credits of this type that are overdue?
At the national level, between irrecoverable and written-off portfolios that are over 180 days past due, we are talking about almost 27,000 credits. There are approximately 22,000 clients who are within the group of unrecoverable portfolio whose amount is around $37 million; and on the other hand there are 4,180 clients whose debts are within the category of penalized portfolio managed by the bank for an amount of about $7 million.
What is the profile of these debtors? What amounts do they have, what provinces are they from, what economic activities? Are they men or women? How many indigenous people are in this group?
A person who benefits from a process of forgiveness of their debts is because they are already in an unfavorable financial and personal situation that does not allow them to pay or meet their outstanding debts on time, even when the bank constantly offers them refinancing solutions or restructuring (arrangement of obligations), or simply declares a permanent moratorium. The forgiveness of overdue credit debts up to $3,000 covers BanEcuador clients in the 24 provinces of the country. Those with the largest number are Manabí (5,828), Guayas (4,830) and Los Ríos (4,143). In provinces with an indigenous population, they are considerably less. It is important to point out that almost 68% of these monies were allocated to the development of agricultural and livestock activities. Regarding gender, we have 12,237 men and 9,709 women, approximately.
What percentage of the bank’s total portfolio do these debts represent?
Considering the total of the bank’s portfolio, as of May 2022, which was more than $1,400 million in 320,464 operations, the percentage of participation in the operations that it is intended to support represents 9% (28,827 operations overdue and written off) and in portfolio balance is 3% ($44,112,909.06).
How will the cancellation that Lasso has proposed be implemented for these debtors? What requirements must be fulfilled?
Once Executive Decree 456 is issued in BanEcuador, we immediately set up a technical table that will prepare the respective technical and legal reports for the instrumentalization of the process, and whose results must subsequently be known and approved by the bank’s board of directors. It is worth noting that for this process it is not necessary for clients to come to our offices to carry out any paperwork.
What will be the economic impact for the bank?
BanEcuador does not foresee any risk of economic impact on its results, since the cancellation will be made to what we call “provisioned portfolio”, which is understood as an economic reserve that credit entities have with the purpose of covering or solving possible losses. that may be caused, providing protection and security to the technical heritage.
The president of the Conaie, Leonidas Iza, has said that a rule was already approved last year to condone credits of up to $10,000 and that the only thing missing was for the Executive to dictate the rules to execute it. It refers to the Organic Law for Economic Development and Fiscal Sustainability, which in its article 196 states: “Through an executive decree, it may be provided that public financial entities forgive credits or loan assets of up to $10,000 of principal, plus interest and other costs and commissions and that are considered unrecoverable. The respective executive decree will establish the other conditions for the respective remission. Such action must be reported to the Internal Revenue Service or whoever exercises those powers. Why has this not been fulfilled?
Indeed, the Organic Law for Economic Development and Fiscal Sustainability determines that for the forgiveness of credits or loan assets of up to $10,000, an executive decree is required that will establish the conditions for the respective forgiveness. And that decree is already there. It is the 456 signed on June 18 by the President of the Republic that establishes compliance with the cancellation process of all overdue debts, until May 31, 2022, of up to $ 3,000 considered irrecoverable. What the current decree does is protect the assets of the bank and its depositors. And on that decree we are governed to execute the remission.
The leader has also requested a one-year moratorium for all credits in the financial system. Is this feasible?
The moratorium is not contemplated in the decree, since there is talk of the figure of forgiveness that we are implementing. It must be taken into account that a moratorium is not necessary either because we, from BanEcuador, already have and have solutions for settlement of pending payment obligations with which we extend our clients the payment term up to ten years, and we include three years. grace and not just a year.
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How will the reduction in interest rates be implemented for credits of up to $3,000 that are in force if it is assumed that this depends on the profile of the debtors?
That is another provision that is also contemplated in Executive Decree 456. In this specific issue we are implementing technical tables to be able to comply with it and, in turn, not affect the bank’s results. This reduction in the rate of loans in force up to $3,000 is a benefit that is being given to clients who have been punctually paying their obligations due to their good credit behavior.
I would like details of that credit line of $100 million that the bank will deliver to small and medium producers by order of the president. What will be the conditions (rates and terms)? What requirements must be fulfilled? Is it specific to the indigenous sector?
This new line that is currently being implemented is called “Productive Credit”. It will be funded with $100 million that will come from BanEcuador’s own resources. It will grant loans from $5,000 to $20,000 with financing for up to 10 years, with a 5% interest rate for the client, and which is being reviewed because the intention is to implement a 4% rate subsidy that would come from any state portfolio as was done, at the time, with the “Opportunities Credit”. This must also be brought to the attention of the bank’s board of directors for its approval and respective processing.
Are the credits that have been announced the same as those already delivered since last January? Are they additional or do they correspond to the program that is underway? Or are they specific to the indigenous sector?
Although another executive decree is not necessary to increase an additional $100 million, we are doing it with the “Opportunities Credit”, which was a campaign promise of President Lasso and which today is a reality through BanEcuador. Of the first $100 million assigned for this product, almost $66 million have already been placed in all the provinces of the country, through 24,883 credit operations to date. For the other additional $ 100 million we are talking with the Ministry of Agriculture and Livestock (MAG) so that this state portfolio executes the expansion of the initial investment project. Similarly, with the Ministry of Production, Foreign Trade, Investments and Fisheries, understandings and approaches are being given so that it may request the expansion of its budget certification.
Will those who access the remission be able to request new credits?
That will depend on the analysis of credit behavior and the payment capacity of each person for the subsequent approval of a new line of credit. It is the procedure that we always carry out with each applicant. Let us remember that BanEcuador is a public bank that manages public money and, for this reason, we must be extremely careful with the resources we raise and allocate. In addition, we are subject to the current regulations that regulate this type of operation, always observing the rules of financial prudence.
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Why did you wait to reach this level of mobilizations to think about these compensation measures?
From the management that we lead in BanEcuador we have worked in the last eight months on coordinated actions to strengthen the economies of those who make up the base of the country’s pyramid. From May 24, 2021 to the present, almost $440 million in productive credits have been granted. In our product portfolio, we have lines such as the “Opportunities Credit”, the “SOS” emerging credits to solve financing in cases of natural disasters; the “With You Producer” credit aimed at small banana producers hit and affected by the war between Russia and Ukraine; the “Super Rural Woman” credit, etc. We have even made our obligation settlement conditions more flexible to help more clients refinance their debts. We understand that the enactment of Executive Decree 456 is yet another example that the Government of the Meeting led by President Lasso provides timely solutions and responses to these citizen needs based on dialogue and decision-making on public policies that, at the end of the day , benefit all Ecuadorians. (YO)
Source: Eluniverso
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