Ecuador: Financial System Stability Assessment

International Monetary Fund

No 2023/335, IMF Staff Country Reports from International Monetary Fund

Abstract: This paper discusses financial system stability assessment (FSSA) in Ecuador. Banks and credit cooperatives dominate Ecuador’s financial system. While dollarization provides an important anchor for the Ecuadorean economy, systemic liquidity risks are high due to the limited capacity of the central bank to provide liquidity. The financial sector is overall resilient to adverse macrofinancial shocks but some institutions have meaningful solvency and liquidity vulnerabilities. To preserve confidence it is key to enhance capitalization, promptly recognize loan losses, and address unviable institutions. The FSSA concluded that institutional framework for financial sector oversight is complex, uncoordinated, and prone to political intervention. Reforms are needed to enhance supervisory independence, prioritize safety and soundness; separate prudential supervision from other functions, and substantially strengthen the supervisory approach. The macroprudential framework needs further progress by developing stronger financial sector-wide analytical capacity, improving information sharing and coordination, and clarifying the roles between multiple agencies.

Keywords: B. bank solvency stress tests; liquidity fund; World Bank FSAP mission; emergency liquidity assistance facility; lender-of-last resort function; liquidity vulnerability; liquidity condition; liquidity analysis; Credit; Financial Sector Assessment Program; State-owned banks; Loans; Global; Caribbean (search for similar items in EconPapers)
Pages: 50
Date: 2023-09-21
New Economics Papers: this item is included in nep-fdg
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