Politicians of all parties want more loans and at lower interest rates. In order to achieve this, they often propose measures that discourage rather than encourage financial intermediation in the economy.

In the Assembly, these days they proposed an increase in taxes on banks, recalling what José Ortega y Gasset said in the Revolt of the Masses (1930): “In riots caused by scarcity, the popular masses usually ask for bread, and the funds they usually use to destroy bakeries . It may serve as a symbol of the behavior which, on a wider and more subtle scale, the current masses are using against the civilization that feeds them.”

The bank warns of the impact on the marketing of new corporate tax credits proposed by the bill

Credit is one of humanity’s great advances, allowing the savings of some to be channeled towards entrepreneurs who want to solve problems or satisfy the desires of others and profit in the process. Modern finance, whose origins can be traced back to Renaissance Florence, allowed savings to have greater return potential, gave those who did not inherit money access to capital from others for entrepreneurship, and created an entire financial services industry that was more dynamic where there was more freedom for their development.

They say that the banks have too much profit and therefore it is fair and necessary to increase taxes. But if that is true, why is there no investment in that sector? Didn’t the foreign banks realize that they could make big returns here? No, it turned out that banking is not among the most profitable sectors of the economy and foreign banks know of other destinations with a more attractive regulatory framework for their investments.

How to finance the ‘war’ and the rest?

A special contribution of up to 35% for banking and 1% for assets of one million dollars are among the options of the Civil Revolution to not raise the VAT to 15%

According to the November 2023 Semanal Analysis report, the return on equity (ROE) of the banking sector (12.3%) is slightly above the Ecuadorian average (11.9%). Banking is the tenth most profitable sector, with the first and second most profitable sectors having ROE that is triple and double that of banking (administrative services 35% and mining 24%). Although they are not the most profitable, it is the sector that pays the most taxes: in 2023, they participate with 16% of the total amount collected.

Savings is the starting point of economic development and it is a necessary ingredient that there are many entrepreneurs who are willing to risk their own and/or other people’s capital in order to profit by effectively solving the needs and wants of others. Banking plays a key role in development by connecting those with capital to those with entrepreneurial ideas.

If the authorities allow it, this dollarized economy could compete with other star financial centers if it adopts a similar regulatory framework: territorial taxation that is equal to or lower than the financial centers with which we intend to compete, removal of obstacles to the flow of capital (for example, abolition of FDI ) and the abolition of interest rate controls and other regulations that discourage investment and innovation. The internationalization of the financial system would expose domestic banks to competition with foreign banks and would result in a greater supply of loans and better services. (OR)