Financial Safety Advice

Government and bankers face again, once the bill for the creation of the Financial Safety Net was presented to the Committee on Legislation for the respective treatment and possible adoption. This law, drafted by the regime’s economic team, headed by Coordinating Minister for Economic Policy Pedro Paez, and discussed by the entire Government, have some questions.

The bill provides that within the framework of a new financial architecture establishment of four pillars for its operation: banking supervision and timely preventive by the Superintendency of Banks and Insurance Liquidity Fund to act as lender of last resort, the deposit insurance will be handled by a new state entity, and finally, the new bank resolution scheme that allows the orderly exit of financial institutions to become unviable. Respect to the Liquidity Fund, according to the bill, will operate through the establishment of a trust investment will be managed by the Central Bank with contributions from the same private financial institutions subject to reserve requirements. Also, contributions to be made by banks through the equivalent of not less than 3% of its deposits subject to reserve requirements, an additional annual 2.5 per thousand of its deposits subject to reserve, securities and income from interest generated object’s own operations fund and investment of its resources and, finally, the contributions made by legal persons as constituent members. Read the rest of this entry →

Your financial security is not my financial security. The “women’s feelings about financial security seem to contribute to your satisfaction as much as they do their income, and, somewhat independent of income.”

So the financial security is directly linked to life satisfaction (as the study), but I think it is different for each person and depends on what each one wants in life.

Yes, every one of us has a different relationship with money and depends on our context, from what we were taught at home about money, to how much we have and what we need.

The definition of financial security varies depending on who was asked for one will have her own home, for another one million dollars in the bank, and one more will have enough to live for today. Read the rest of this entry →

The Government has announced the creation of a financial safety net. It has taken about eight years for the Ecuador look for mechanisms to prevent or manage at a lower cost a potential banking crisis. This reform is of great value and deserves to be supported by major stakeholders and those who do say in the country. From what is known, the financial safety net would include a liquidity fund, a limited deposit insurance and bank resolution mechanisms. The liquidity fund is critical of the lack of lender of last resort. Unable to deliver U.S. dollars the central bank, the country’s payment system does not have a backup that ensures long operation, so today, if a bank medium-and large-worse if into a crisis, this could spread like wildfire into a general banking crisis.

Deposit insurance is important to provide security for small depositors, often in numbers most bank customers, thus contributing to the stability of the financial system. It is also crucial to create bank resolution instruments that allow the orderly closure of troubled banks and limit the spread to other banks. Thus, if a bank becomes insolvent, the competent authority would remove shareholders and pass the deposits and good assets, the more money deposit insurance to a healthy bank, while the bad assets would go into liquidation.

It is essential that this reform is handled today, as the economy and financial system are stable. We must learn the lesson of the past, when they had to act in the midst of a crisis. For example, some bank resolution instruments already existed in the discredited AGD Act, but were never understood or used, in large part because they were born in the heat of a systemic banking crisis. The next step will be to make the new institutions work for the reform to be implemented. Furthermore, it should raise the quality of banking supervision and provide legal security to the officials who exercise so that they can act effectively and independently. Read the rest of this entry →