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NEWS AND BULLETINS

Ecuadorian private banking takes action against COVID-19

On March, 17th the Association of Private Banks of Ecuador (Asobanca) adopted two temporary measures to address the economic crisis that is facing the national economy. 1) Restructuring loans by deferring payment for 60 days with no surcharge for late payment at the end of the originally agreed period, and 2) Allocation of US $12 billion dollars for restructuring, renewal and adoption of new loans. These measures are aimed for microcredits, SMEs and the general public.

On March 17, the Association of Private Banks of Ecuador (Asobanca) adopted two temporary measures to address the economic crisis the national economy is undergoing. The restructuring of loans by deferring payment for 60 days, with no late fee at the end of the originally agreed period and the allocation of US $ 12 billion for restructuring, renewal and new loans. These measures are aimed for microcredits, SMEs and the general public.

Just a few days ago the national government announced the adoption of urgent economic measures, consisting in tax measures and cuts in the general state budget. In contrast, and with the objective of maintaining the economic stability of the national productive force, Asobanca ordered measures to generate liquidity, trying to preserve the economic stability of the country while the health emergency caused by COVID-19 lasts.

Debtors may request to refinance their credits or, the deferment of 60 days without late payment at the end of the originally agreed period for the collection of: personal credits, microcredits, as well as those granted to small companies. However, these measures announced by Asobanca will not be of general nature since a case-by-case analysis is required.

The announced measures do not yet have clear implementation guidelines. It is not clear who will assume the cost of refinancing the loans nor the transparency criteria that will applied to do so. In the same way, a pronouncement from the Superintendence of Banks on the applicability of the measures remains pending as well as the incorporation of similar measures in public banking.

According to Julio José Prado, president of the Association of Private Banks

“[B]anking plays a fundamental role in two aspects: maintaining dynamism in the economy and keeping the financial system operational, despite the emergency. That is why, the bank will allocate $ 12 billion, both for restructuring and renewal of existing loans, and new credit. This is possible because the bank has achieved a sustained capitalization process, which allows it to respond in complex moments like now.”

It should be noted that the financial sector remains open during the health emergency. However, private financial institutions have embraced teleworking, to the extent possible.

Disclaimer: This document is informative and does not, and is not intended to, constitute legal advice.


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