Private bankers optimistic about health of Ecuador banking system; say that deposits are increasing

Ecuador’s Association of Private Banks believe the condition of the country’s banks is improving.

Banks report an increase of deposits.

Julio José Prado, executive director of the private banking association, says the trend of net withdrawals from banks has reversed and that more deposits are being made. In recent months, government opponents have warned of declining bank reserves and said a run on the banks was a possibility.

During 2015, bank deposits declined by more than 5 percent.

“We are getting more good news these days and it is confirming the health of the system,” Prado said. “We are beginning to see increased economic activity and believe it is a signal that the economy is turning around. We expect a recovery in the second half of 2016,” he said.

Prado said his optimism is based on several factors, including the government’s recent payments of debts to companies and individuals.”This leads to increased liquidity in the banking system, which means we can relax restrictions on loans,” he said. He added: “We see equilibrium returning to the banking system.”

Prado said he sees more willingness from the government to form public-private partnerships with banks to improve the economy.

He also says he hopes to see a relaxation of government rules related to banking relationships with foreign banks. “We need more flexibility to work with international institutions and we are in discussions with government officials about this,” Prado said. “Restrictive rules might work when the economy is healthy, when oil prices are high, for example, but they are a burden to the system when the economy is poor.”