Central Bank of Ecuador

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Central Bank of Ecuador
Banco Central del Ecuador (
USD (December 2022)
Websitewww.bce.fin.ec
1Previously Ecuadorian sucre (ECS) until March 2000.

The Central Bank of Ecuador (Spanish: Banco Central del Ecuador; BCE) is the central bank of the country, and an institution of the Executive Function, which has institutional, administrative, financial, and technical autonomy. It is in charge of executing the monetary policy established by the Monetary Policy and Regulation Board of Ecuador, which has been the institution's highest governing body since October 2021.

Between 1927 and 2000, the Central Bank was in charge of issuing

legal currency
on January 9, 2000.

Since 2000, the Central Bank's objectives are to strengthen

macroeconomic
statistics and guarantees the availability of banknotes and coins in the country.

On February 4, 1976, the Central Bank adopted the Golden Sun of the La Tolita culture from the northern coastal region of Ecuador as its logo. The Golden Sun is a mask with a headdress that represents a mixture between a star and an animal. It has 48 rays in the form of serpents.

History

First building of the Central Bank of Ecuador, current Numismatic Museum

Background

In the first three decades of the twentieth century, the Ecuadorian economic and financial system was characterized by constant macroeconomic, financial and monetary problems, such as the lack of control of monetary issuance and private banking activities.

The situation was aggravated even more by the international context of World War I and the inflationary and deflationary problems that led to the Great Depression of 1929.

Additionally, in the first five years of the 1920s international demand for

cacao, Ecuador's main export at the time, declined significantly. This was accompanied by pest problems with the crop
, leading to economic crisis and political instability.

Foundation

The economic and political crisis led to the revolt of young army officers on July 9, 1925, known as the July Revolution, which occurred in the midst of growing social discontent.

Luis Napoleon Dillon, Minister of Finance at the time and one of the main figures of the revolution, is considered the first to promote the creation of an Ecuadorian central bank. His objective was to establish an institution or organization for issuing currency, making financial transfers, and depositing and discounting for the state.

Dillon's proposal did not succeed, although the "Law of the Ecuadorian Central Bank" was approved on October 9, 1925. On January 10 of the following year the bank's first board of directors resigned, including Dillon.

In spite of this, the idea matured through the leadership of President

Edwin Kemmerer, a researcher, economist, and finance professor at Princeton University
, to advise on the adoption of an extensive set of modernizing economic measures, among them the creation of a central bank.

On February 11, 1927, a commission led by Kemmerer presented the Central Bank Organic Law to the government for their consideration, and advised that the institution should be given a 50-year authorization to issue money, apply fixed-rate rediscounting, become a depository for the government and associated banks, manage the foreign exchange market and act as the government's fiscal agent.

The creation of the central bank was in response to the need for reforms to strengthen and organize the country's financial and monetary system, considering the difficulties of the time such as unsupported issuance of currency, price increases, speculation, and credit and payment imbalances.

The bill was approved by Ayora on March 4, 1927, and published in Official Register No. 283 on March 12. The preparation of the new central bank operation was in charge of an Organizing Commission appointed by Ayora. On June 3, the statutes were approved, after overcoming several operational difficulties between the Central Fund and the new institution. On June 4 the first board of directors was formed, led by Neptalí Bonifaz as president.

Finally, on August 10, 1927, the central bank opened in the building of the Compañía de Crédito Agrícola e Industrial, on the corner of García Moreno and Bolívar streets, in the

Historic Center of Quito. On August 25, the BCE's main branch was inaugurated in the city of Guayaquil. Later, on November 23, the bank moved to a new building acquired from Banco Pichincha, located at the intersection of Garcia Moreno and Sucre streets, where it remained until 1968. Currently, this building is the Numismatic Museum of the Central Bank of Ecuador [es]. On June 7, 1928, the bank began operations in Cuenca
.

Since 1968, the bank's Quito headquarters has been located at the corner of Avenida 10 de Agosto and Briceño. In Guayaquil, it is located in the Edificio Ex Suizo, and in Cuenca, at Calle Larga and Huayna Cápac.

Early years

Stabilizing and unifying the currency were the bank's initial objectives. To achieve these, the bank established a

fine gold per sucre, equal to one fifth of the U.S. dollar's gold value at the time. This convertibility
corresponded with the world economic crisis and the Great Depression.

From then on, the traditional policy of deficit spending and credit to the national government from the bank resumed, as it was between 1915 and 1925.

Internal reforms

Price instability driven by fiscal spending and expansionary monetary policy led another consultant, Mexican politician and monetary policy figure Manuel Gómez Morín, to reform the Central Bank Law and related monetary regulations. On December 30, 1937, a new Organic Law of the Central Bank of Ecuador came into effect, and the bank's highest governing body became the board of directors.

In Gómez Morín's view, the monetary authority should channel credit to the economic sectors considered critical to development. Together with Guayaquil banker Víctor Emilio Estrada, he advised assigning the central bank a central role in determining the types of loans offered by private banks to productive sectors by modifying the discount rate. Nevertheless, there were numerous difficulties in implementing the recommendations given by the Gómez Morín Commission.

Third reform and Monetary Board

After the end of

Federal Reserve System of the United States. The Harvard University
consultant proposed replacing the Organic Law of the Central Bank with the Monetary Regime Law and the International Exchange Law, which came into effect on March 12, 1948.

Under the new law, the bank's highest governing body became the Monetary Board, in which the Government also participated, as a sign of its co-responsibility in the design of monetary policy. The Board also had the power to devalue the currency and execute counter-cyclical policies. In addition, the Central Bank was authorized to grant loans to the State and the productive sector, as well as to promote an accounting system that allowed it to assume the new functions. The ultimate goal of the entity was to achieve price stability and the preservation of a solvent financial situation.

Impact of the Latin American debt crisis

For more than three decades, this monetary regime successfully faced multiple shocks. However, the severity of the Latin American external debt crisis of the 1980s and 1990s led the country to reorganize its public finances. On May 7, 1992, the Monetary Regime and State Bank Law was approved, enabling the BCE to intervene in the financial system through open market operations. In addition, the Monetary Board was replaced by a Board of Directors of the BCE led by an assigned president, differentiating the path between government influence and BCE autonomy.

Subsequently, in the 1998 Constitution, the BCE's technical autonomy was enshrined, which gave it a leading role in the management of the 1999 banking crisis, that ended with the sucre as the national currency and the implementation of dollarization, which led to changes in the main functions of the BCE once it ceased to issue the sucre.

A decade later, in the 2008 Constitution, the BCE's autonomy was eliminated, turning it into an institution dependent on the central government. During this period, the bank made loans to the Executive.

The BCE recovered its technical autonomy on April 22, 2021, with the approval of the Organic Reformatory Law to the Organic Monetary and Financial Code for the Defense of the Dollarization, reforms that were approved by the National Assembly on April 22, 2021, and published in the Supplement to the Official Registry No. 443 of May 3 of that year.

Among the first actions taken by the institution under the new legal framework was the agreement reached between the BCE and the Ministry of Economy and Finance (MEF), signed on June 30, 2021, whereby the BCE would return to the MEF the shares it held in public banks (Corporación Financiera Nacional (CFN), BanEcuador and Corporación Nacional de Finanzas Populares (Conafips)). Those shares were received on May 18, 2017, as dation in payment for the resources delivered at the time to the Government in office. The MEF has agreed to deliver US$2.378 million to the BCE by 2035.

Leadership

Central Bank of Ecuador in Quito

As established by the current Organic Monetary and Financial Code, the highest governing body of the BCE is the Monetary Policy and Regulation Board, which is responsible of formulating monetary policy and observing its implementation by the BCE, in order to preserve the integrity and sustainability of the monetary system of dollarization and the Ecuadorian financial system.

The members of this new body were elected and sworn in by the National Assembly on October 12, 2021. The current members of the Monetary Policy and Regulation Board are: Tatiana Rodríguez Cerón, Paulina Garzón Alvear and Wilson Pérez Oviedo.

Presidents and general managers

Verónica Artola, the bank's general manager from 2017 to 2021

Mission and vision

Once Ecuador adopted the

dollarization
system on January 9, 2000, which implied that it stopped issuing a national currency, the functions of the BCE were modified by the Organic Statute issued through Executive Decree No. 1589 of June 13, 2001.

After the latest modifications introduced by the Reformatory Organic Law to the Organic Monetary and Financial Code of May 2021, and the reforms to the Organic Statute of Organizational Management by Processes of the BCE issued by the former Monetary and Financial Policy and Regulation Board on September 8, 2021, the mission and vision of the BCE are:

Mission: To guarantee monetary stability, dollarization, the provision of safe and efficient means of payment, and the generation of macroeconomic studies and statistics to contribute to the welfare of society and the economic and financial stability of the country.

Vision: To be an institution of high technical capacity, a reference in digital transformation and recognized for its integrity, transparency and service vocation.

Functions

The main functions assigned to the BCE in Article 36 of the Organic Monetary and Financial Code as amended in 2021 by means of the Organic Reformatory Law to the Organic Monetary and Financial Code for the Defense of Dollarization are:

Services

Certifications

One of the main goals of the BCE is fighting corruption by promoting transparency in institutional management. For this reason, in November 2020, the BCE obtained ISO 37001 certification for the implementation of an anti-bribery management system (ABMS), for the purpose of prohibiting, preventing, detecting, and punishing acts of bribery.[33]

The ABMS operates through three BCE departments:

  • The Division of Processes, Quality, and Innovation, which oversees
    external audits
    ;
  • The Division of Operational Risks, which evaluates the likelihood of bribery; and
  • The Division of Compliance, which receives and manages complaints.

ISO 37001 certification strengthens organizational culture and enables process-based management for continuous improvement, elaboration of procedures, mitigation, and contingency plans. This system takes into consideration the risks faced by the BCE due to its size and complexity. The bank renewed its ISO certification in 2022.

Structure

The highest governing body of the BCE is the Monetary Policy and Regulation Board.

The BCE has a General Management Office, a General Deputy Management Office, a Deputy Programming and Regulation Office, a Deputy Operations Office and a Deputy Services Office. Each deputy office is composed of several directorates.

Additionally, there are four general coordinating bodies: Strategic Planning and Management, Legal, Information and Communication Technologies, and Financial Administration. Each coordinating body has different directorates to fulfill its functions.

Finally, there are two zonal directorates, in the cities of Guayaquil and Cuenca, and also an office in the city of Machala for the purchase of non-monetary gold from small-scale mining.

International reserves

International reserves are the economic resources available to the country to support payments abroad that must be made by the state, companies, or individuals through financial institutions. These reserves are managed by the BCE according to the investment policy approved by the Monetary Policy and Regulation Board, and under the principles of security, liquidity
, diversification and profitability.

International reserves are mainly composed of oil and non-oil exports, deposits of coins and bills made by banks in the BCE's vaults, and disbursements received by the country from multilateral organizations.

Ecuador's international exchange reserves reached their historically highest point in March 2022, when they were at US$9,226.3 million. This level of international reserves has allowed the BCE to cover all its public and private deposits with

liquid assets
for the first time.

See also

References

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  2. ^ a b c "Cronología 1927–2002" [Chronology 1927–2002] (PDF). Central Bank of Ecuador (in Spanish). Archived (PDF) from the original on July 18, 2021. Retrieved November 16, 2023.
  3. ^ a b c d e f g h i j k l m n o p q r s t u v w x y z aa ab ac "Difusión cultural". Subgerencia de Difusión Cultural, Banco Central del Ecuador. May 22, 1986 – via Google Books.
  4. ^ – via Google Books.
  5. ^ "Exministros, exgerentes del BCE y académicos conforman el Foro de Economía y Finanzas. Realizan 11 planteamientos. – CESDE".
  6. – via HathiTrust.
  7. – via HathiTrust.
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  9. – via HathiTrust.
  10. ^ http://www.banknote.ws/COLLECTION/countries/AME/ECU/ECU0123A2.htm Banknote Museum (showing change in signature between June and October 1991)
  11. – via HathiTrust.
  12. ^ "Augusto P. de la Torre CV" (PDF). Brookings Institution. Retrieved November 13, 2023.
  13. – via HathiTrust.
  14. ^ Díaz, Valentín (March 7, 2020). "Fidel Jaramillo: 'El país está en una situación económica muy vulnerable'". El Comercio (in Spanish). Archived from the original on October 17, 2021. Retrieved November 13, 2023.
  15. ^ "Luis Jacome - Adjunct Professor - Georgetown University". LinkedIn. Retrieved November 13, 2023.
  16. – via HathiTrust.
  17. from the original on May 27, 2015. Retrieved November 13, 2023.
  18. McClatchy DC
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  19. CIA. February 2001. Archived from the original
    (PDF) on October 16, 2020. Retrieved May 22, 2020.
  20. ^ "New President to Ecuador Central Bank". Central Banking. September 14, 2001.
  21. CIA. November 2004. Archived from the original
    (PDF) on October 16, 2020. Retrieved May 22, 2020.
  22. ^ "José Cucalón, presidente del BCE - DIC. 23, 2004 - Economía - Historicos - EL UNIVERSO". www.eluniverso.com. December 23, 2004.
  23. ^ "Chiefs of State and Cabinet Members of Foreign Governments: A Directory" (PDF). November 2005. Archived from the original (PDF) on October 15, 2020. Retrieved May 22, 2020.
  24. ^ "Chiefs of State and Cabinet Members of Foreign Governments: A Directory" (PDF). November 2006. Archived from the original (PDF) on October 16, 2020. Retrieved May 22, 2020.
  25. ^ "Ecuador's central bank chief quits". Central Banking. July 24, 2008.
  26. ^ "Ecuador appoints new central bank chief". Central Banking. August 1, 2008.
  27. ^ "Ecuador picks young economist as new central bank boss". Reuters. January 16, 2013. Retrieved September 10, 2016.
  28. ^ "Perfiles de Expositores: Diego Martínez Vinueza" [Exhibitor Profiles: Diego Martínez Vinueza]. Central Bank of Ecuador (in Spanish). Archived from the original on March 31, 2022. Retrieved May 5, 2020.
  29. Government of Ecuador
    (in Spanish).
  30. ^ "Diego Martínez es designado Gerente General del Banco Central del Ecuador". www.revistalideres.ec.
  31. ^ "Madeleine Abarca es la nueva gerenta del Banco Central del Ecuador, según Fausto Herrera". El Comercio.
  32. ^ a b "Guillermo Avellán asume la Gerencia General del Banco Central del Ecuador". www.bce.fin.ec.
  33. ^ "Culture of transparency in the Central Bank of Ecuador". www.en.aenor.com. Retrieved October 31, 2023.

External links