Profits for Ecuador’s 24 private banks increased 39.8 percent in 2018 compared to 2017, the Association of Private Banks of Ecuador (Asobanca) reported Wednesday. The near-record profit was one of the reasons cited Thursday by the Monetary and Financial Policy and Regulation Board for revoking an increase in interest rates banks have charged credit card customers since late December.
Asobanca said the growth of profits, up $158 million from 2017, was concentrated in the country’s largest banks, with Banco Pichincha alone reporting a gain of $119.7 million. The association said the profits were due to several factors, including an improvement in the economy and an easing of government regulations. “Primarily, we are making up for several bad years suffered by the banks so this is not a windfall,” Asobanca said in a press release.
The roll-back of higher credit card interest rates followed a public outcry on talk radio programs and social media that the higher rates were unfair to consumers. Under the plan approved last year by the Monetary Regulation Board, banks were allowed to charge interest from the date of purchase on late and partial credit card payments.
“This is nothing less than highway robbery,” said Jorge Rodríguez, director of the National Anti-corruption Commission. “This is an unnecessary gift from the government to an economic sector that is already doing very well and it is an insult to bank customers.” Ecuador’s Ombudsman’s office also criticized the higher interest rates.
Julio José Prado, president of Asobanca, defended the higher rates, saying that many banks continue to struggle “following years of over-regulation and poor economic conditions.”
Larry Yumibanda, of the Guayas College of Economists, says Prado is right that many banks continue to suffer but says the new credit charges “gouged” bank customers. “Almost all the profits were made by Banco Pichincha, Banco Guayaquil, Diners Club and Produbanco,” he said. “The little banks are still hurting but the solution is not to impose unfair credit card rates.” He suggested that banks close underused branches and improve their technology. “There is waste in the system that should be eliminated.”
In its order revoking the new credit card charges, the Monetary Regulation Board ordered banks to refund charges incurred since December 28, the date the allowance went into effect.