The service sector constituted the largest component of the
Ecuadorian economy, accounting for almost 50 percent of the GDP in
1987. The largest parts of the service sector were wholesale and
retail trade at 29 percent, financial services at 23 percent, and
transportation and communications at 15 percent of services.
Although contributing half the nation's wealth, financial services
were inadequate, and the communication and transportation networks
The country's modern finance and banking system began in 1948
with the establishment of the Central Bank. The Law of the Monetary
System of 1961 defined the functions of the Central Bank, which
included issuing and stabilizing the national currency, providing
credit to the private sector, managing foreign-exchange reserves,
controlling import-export permits, carrying out the Monetary
Board's policies, supervising private banks, and regulating
international financial transactions. The bank also maintained a
check clearinghouse, rediscounted and made advances to commercial
banks, and published economic data.
In 1989 the structure of the banking system resembled a threetiered pyramid with the Monetary Board at the apex. The Bank
Superintendency and the Central Bank occupied the next tier and
lent funds to four state-owned financial institutions. At the
bottom came the commercial banks, savings and loan associations,
and finance companies, which operated at the local level.
The Monetary Board regulated the entire banking and credit
system, including the Central Bank. In the 1980s, the board's
eleven members included the chairman, appointed by the president of
Ecuador, and the ministers of finance and credit; agriculture and
livestock; energy and mines; and industry, commerce, integration,
and fishing. Also included were the president of the National
Planning Board, two representatives of national chamber of commerce
organizations, a representative of the commercial banks, the
general manager of the Central Bank, and the head of the Bank
Superintendency. The Monetary Board's functions included
formulating the country's economic policy; determining interest
rates; and setting Central Bank credit levels, minimum reserve
requirements, and exchange rates.
The Bank Superintendency supervised and controlled banks,
finance companies, and insurance companies. The Congress appointed
the head or superintendent from three candidates proposed by the
president. Funded by compulsory contributions from the financial
institutions under its control, the Bank Superintendency also
collected and published banking statistics.
The national government and the private banks jointly owned the
Central Bank and tasked it with carrying out the policies of the
Monetary Board and for supervising the activities of private banks.
All private banks in Ecuador were required to invest at least 5
percent of their capital and reserves in the Central Bank, and
together they owned the majority of shares in the Central Bank.
Headquartered in Quito, the Central Bank had sixteen branches in
other cities and towns in the late 1980s.
The four major government-owned financial institutions were the
National Development Bank (Banco Nacional de Fomento--BNF); the
Securities Commission-National Financial Corporation (Comisión de
Valores-Corporación Financiera Nacional--CV-CFN), more commonly
known as the National Financial Corporation (Corporación Financiera
Nacional--CFN); the Ecuadorian Housing Bank (Banco Ecuatoriano de
la Vivienda--BEV); and the Development Bank of Ecuador (Banco de
Desarrollo de Ecuador--Bede), formerly known as the Cooperatives
Bank of Ecuador. Each institution had a specialized role: the BNF
provided loans for agriculture and industry, the CFN lent capital
to industries utilizing local raw materials or making handicrafts,
the BEV promoted low-income housing, and the Bede lent funds to
local credit cooperatives, especially those in rural areas.
The thirty-one commercial banks were the most important
financial institutions in the country, attracting the major portion
of deposits and making the largest percentage of total loans in the
banking system. Only four of the commercial banks were foreign: the
United Holland Bank from the Netherlands, Citibank and the Bank of
America from the United States, and Lloyd's Bank from Britain,
formerly known as the Bank of London and South America. In 1986 the
Bank of Pichincha, Pacific Bank, Philanthropic Bank, People's Bank,
and Continental were the five largest locally owned commercial
Several other types of private financial institutions existed
in 1988. Eleven savings and loan associations, 26 finance
companies, 123 cooperative savings institutions, and 4 credit card
companies provided various forms of financing or credit. The
Ecuadorian Development Finance Company (Compañía Financiera
Ecuatoriana de Desarrollo--Cofiec) was founded in 1966 by local and
foreign commercial banks, local businessmen, several international
finance firms, and the CFN. Cofiec was an important source of funds
to private industry, both in the form of loans and in equity
Two stock exchanges operated, one each in Quito and Guayaquil.
Although the Quito exchange handled almost twice as many
transactions as the Guayaquil exchange in 1986, neither was large.
The great majority of trading occurred in government issues and
mortgage bonds, with only a small amount of trading in common
stocks or other securities. Most Ecuadorian businesses were owned
by small numbers of individuals, and few resorted to public
financing to raise capital.
Data as of 1989