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TOPIC 22 THE FINANCIAL SYSTEM IN ECUADOR - Coggle Diagram
TOPIC 22 THE FINANCIAL SYSTEM IN ECUADOR
VOCABULARY
Financial Capital: Sum of money that is placed in an institution for
interests or returns.
Financial System: Set of institutions that channel the money saved
towards loans.
Currency: a system of money in general use in a particular country.
Payment: the action or process of paying someone or something or
of being paid.
Brokerage houses: place where agents work in negotiating
contracts, purchases, sales and conducts a business.
Loan: a thing that is borrowed, especially a sum of money that is
expected to be paid back with interest.**
THE FINANCIAL SYSTEM IN ECUADOR
Traditionally, banks have taken over the
money from the public in exchange for an
interest. Due to the advance of commercial
operations and technology, the banking
sector has expanded to more complex
operations such as foreign currency exchange, equity investments of companies,
payments for collections, money transfers and virtual transfers.
The weight of the financial sector has been denominated as the era of financial
capital domination. Large banks have merge with financial companies, credit
cards, general insurance, brokerage houses, becoming a power of great
economic importance.
CONSTITUTION OF THE FINANCIAL SYSTEM
This system is constituted by several types of institutions, both public and private.
These are the main types of financial systems:
Private Banks They are the strongest institutions and cover
the entire national territory.
Public Banks
They manage state funds. Includes the Central
Bank, State Bank, Development Bank,
Ecuadorian Housing Bank, Pacific Bank, etc.
Mutualists Financial institutions that offer mortgage loans
for construction or home purchase.
Savings and Credit
Cooperatives
They are smaller institutions that offer small
amount loans.
GEOGRAPHICAL LOCATION
Before the crisis of 1999, the financial centers were located in Guayaquil, today
they have moved mostly to Quito. The public banks remained unchanged. The
ones that grew were the cooperatives.
LAST YEARS
At the end of the first decade of the
21st century, the Pichincha Bank is
the most powerful institution in the
country with the largest asset
deposits and assets. They are
followed by the Guayaquil Bank,
Produbanco and Pacific Bank. As for cooperatives, the geographical distribution
is more homogeneous in the provinces, both coastal and mountain. However,
there is some more concentration in the Pichincha.
As a result of the crisis of 1999, the mutualistic and the financial societies, which
in the past were numerous, have diminished.
CONTROL OF THE FINANCIAL SYSTEM
Between the year 1999 and 2000, the guarantee system for public deposits in
financial institutions was very incipient. For this reason, when the financial crisis
occurred in Ecuador and the credit was given to private banks, through public
institutions, the State had to pay a good part of the money that the citizens had
deposited in the banks, whose directors did not take responsibility for it. For this
reason, the State's control system over the financial system has been
strengthened.
After the bad experience of the Deposit Guarantee Agency (AGD), the Financial
Liquidity Fund has been created, whose objective is to provide extraordinary
loans when financial institutions need it. On the other hand, the Deposit
Insurance Corporation has the mission of protecting the deposits of the public in
private financial institutions. With these new institutions we seek to create a
safety net for the financial system and depositors or clients.