The savings of Ecuadorians are mostly stored in the institutions that make up the national financial system and social security.

Daniel Noboa arrived in the United States on his international tour to manage support and investments

So, in reality, the importance of knowing the risks to which the Ecuadorian financial system (banks, savings and credit cooperatives and mutual societies) is exposed is obvious, according to the latest report carried out by the IMF in its Financial Sector Evaluation Program (PESF), presented in September 2023 .and carried out at the age of 19 (requested for its importance by former banking supervisor Ruth Arregui in 2019), indicates that its most important risks are: (i) macro-financial, being a dollarized economy, there is limited ability of the central bank to ensure liquidity to the financial system and high dependence on oil exports; and (ii) regulatory and supervisory institutional weaknesses in the sector they regulate.

Solid institutions enable their authorities to make accurate decisions, without subjecting themselves to the whims of political changes…

Solid institutions enable their authorities to make accurate decisions, without being subject to the vagaries of political, economic and/or social changes, thus they can clearly face possible crises. According to the Liberal Network of Latin America 2023, which publishes the Index of Institutional Quality, better institutions contribute to limiting the negative effects of their authorities, and are less susceptible to political pressure. In this respect, in 2023 Ecuador occupies a relatively low position, occupying the 105th place among 182 countries of the world, and in the Americas 22nd among 32.

The IMF provides observations on the liquidity, capitalization, losses and supervision of the Ecuadorian financial system

In this context, it is worrying what the IMF states in the PESF, in terms of the characterization of the Bank Supervisory Board (SB) as an institution with institutional weaknesses, mainly due to: (i) the lack of legal independence of the SB, caused by the discretionary process of dismissing directors, as well as the controversial by the procedure of their appointment; (ii) lack of administrative and financial autonomy, since the SB requires permission from the ministries of finance and labor to take over and resolve budgetary and organizational issues; (iii) that although important efforts were launched several years ago to develop and implement monitoring processes in line with best practices (with the support of the leadership of the Toronto Center, IMF, CAF, IADB and the World Bank), such the processes have returned to weaken; (iv) the law does not allow the safety and stability of the banking system to be the primary objective of the SB, since it is assigned broad statutory responsibilities, such as social security supervision, bank rehabilitation, etc.

With minimal liquidity and few funding options, the economic outlook for Daniel Noboa’s new government looks complex

Given such a reality, it is crucial that dialogue be a priority of our political actors, led by the presidents of the Republic and the National Assembly, because it is in their hands to build a sustainable consensus, clarify differences, and overcome intolerance. , honors the word, as a way to, among other things, technically strengthen institutions such as supervisory bodies that control the savings of Ecuadorians. (OR)