Banking in Ecuador
Banking in Ecuador is an essential topic for anyone considering becoming a resident of this fine nation. The topic really focuses on two central themes: How to set up a bank account and where to set up a bank account? Two apparently simple central questions, encased in a complex history and almost daily changes in policy. While this is not intended to be a definitive analysis of all banking options in Ecuador, this brief report does hope to offer a basic understanding of the process and a glimpse at the history, which has led to today’s banking policy and our corresponding bank ratings.
While a scholarly analysis of Ecuador and its bank policy history could easily take us back 100+ years, for our purposes, we do not have to look any further back in history than 1998. During that fateful year, Ecuador suffered a bank and currency crisis. The net result was the full closure of approximately 70% of the nation’s banks, the previous Ecuadorian currency (the Sucre) collapsed (replaced by the USA dollar) and economic activity instantly decreased by a whopping 8%! In short, it was dark economic days for the country of Ecuador.
Out of the rubble of that collapse arose an economically wiser Ecuador, with a current President possessing a Master of Science degree in Economics, from the University of Illinois, and a revitalized banking system eschewing the fiscal rigidities and institutional weakness that plagued the banking system of Ecuador, prior to its 1998 collapse. With these changes has come the odd, perhaps somewhat contradictory, pairing of policies, which simultaneously promote an increasingly open and active banking system, while securing tighter regulations and fiscal management. The end result has created, at once, benefits and new challenges, for those seeking to establish a bank account in Ecuador.
For a newly arrived Expat, opening a bank account in Ecuador, up until 5 years ago, was as easy as walking into a local bank, flashing your passport and making the deposit. Today, while still a relatively simple process, it has become a bit more time consuming and complex endeavor.
The first notable distinction is savings account vs. checking account. Both used to be a breeze to open, without even being a permanent resident of Ecuador. Today, a checking account can only be opened, if you have already achieved permanent residency status or have purchased property and/or made a monetary investment in Ecuador. For someone looking to establish temporary residency, or maybe just wanting to have a second bank account in a different part of the world, Ecuador only offers the savings account route.
Until a year ago, opening a savings account was almost as easy as the old “flash a passport” option. Only difference was you had to have a letter of recommendation, from someone either a citizen or permanent resident, who could vouch for you as a “person of character”. You can still use a passport today, but that letter of reference has grown to two letters of reference – one personal and one from a commercial entity. Additionally, you now need to show proof of residence, even if only a temporary residence. Said proof required comes by way of a local utility bill, with your name on it. Now, we are talking about having to go through the challenge of establishing a utility connection and receiving your first billing statement. Lastly, and this is not just for USA citizens, a bank letter of reference is required, showing current balance, as an indicator of the legitimate source from which funds will be transferred into the Ecuadorian bank.
What about if you want to open a checking account? To the preceding documentation, you will either need to present an Escritura Publica (real estate deed of title), proof of investment in the amount of $25,000 or more (can be a bank CD, deposited in an Ecuadorian bank), or proof that you have capitalized a business enterprise in the amount of $25,000 or more. Alternatively, you can show proof of permanent residency, for example under a Pensioners Visa (Retirement Visa), which shows that you have already been approved to permanently reside in Ecuador. I know this may be hard to believe, but this whole process sounds more complicated in the written text, than as it practically applies in the real world.
Still, there one last twist. Some banks make this process infinitely easier than others. Determining which is which, becomes critical. Fortunately, some of the financially soundest banks, also facilitate deposits more readily.
Another realistic factor to consider, if you are a citizen of the USA, banks tend to analyze your circumstances more rigidly. There is, at least currently, no favoritism or dual policy perspectives, but it would be unfair not to point out the “special scrutiny” that USA citizens receive. That special “thanks” belongs squarely on the lap of your good ol’ Uncle Sam, which has been pushing bank legislation and client account reporting reforms, which are an absolute nightmare for foreign banks serving USA citizens.
Still, regardless of national origin, if you follow the step.by-step procedures, preferably selecting a more cooperative banking institution, obtaining a savings account is readily viable and, even, a checking account is quite attainable. In fact, with 1998 still freshly in the minds of many, perhaps the greatest consideration of all is selecting a financially stable banking institution. Below is our list of preferred banks, for your consideration.
Banco de Guayaquil: Rated the #1 most financially sound bank for 2012, by Bank Watch Ratings S.A., Banco de Guayaquil is one of the most venerable banks in Ecuador. One of only two powerhouse Ecuadorian banks still around today, which survived the 1998 banking crisis, Banco de Guayaquil now enjoys more than 700,000 clients and has the second largest account base in all of Ecuador. The bank has made a strong local community push in recent years and continues to operate one of the healthiest credit line banking operations in Ecuador.
If there are any questions surrounding Banco de Guaayquil’s future, they may only lie in that much of the bank’s recent financial success occurred while Guillermo Lasso was at the helm of this fine institution. Guillermo Lasso subsequently stepped down to become the leading opposition party Presidential candidate, suffering a landslide electoral loss to current President Rafael Correa, during the 2013 elections. Can Banco de Guayaquil continue on the path to progress clearly laid out by Guillermo Lasso? Only time will tell. For now, it is hard to argue with the facts – this is currently the best run banking operation in Ecuador. The only dark cloud, behind the silver lining, is that Banco de Guayaquil probably ranks second worst, in terms of being “client friendly”, when opening a new bank account, for a foreign depositor.
Banco Bolivariano: A fast rising star, Banco Bolivariano has moved up the charts quickly, to become the #3 rated bank for financial stability, as illustrated by the Bank Watch Ratings Report of 2012. The bank boasts a client base of almost 500,000 and at a 52.08% mark, the highest liquidity rate of any Ecuadorian bank. If there was one bank to watch for the future, this bank would be it. A very modern, progressive bank, with a strong emphasis on client services, Banco Bolivariano ranks as one of the top 2 banks for client cooperation, in terms of opening up new accounts for foreign depositors. Instead of creating obstacles, this is a bank that will work with you to find solutions.
ProduBanco: Coming in at #5 in the Bank Watch Rating Survey of 2012, ProduBanco is also a fast rising star in Ecuador’s banking sector. Choosing an “ease of convenience” approach, ProduBanco has teamed up to have a strong presence in many of Ecuador’s major supermarket chains across the country. Easy access, a strong client services mentality and a ranking of #2 for the lowest bad debt portfolio has propelled ProduBanco into a top 5 bank in Ecuador. With almost 500,000 current clients and perhaps the most cooperative and client friendly new account services approach, the bank’s future continues to look very bright.
Banco de Pichincha: Too big too overlook, but certainly we would never claim “too big to fail”, Banco de Pichincha is the granddaddy of venerable Ecuadorian banks. A literal “institution”, Banco de Pichincha arguably came out of the 1998 banking crisis in the best condition of any bank in Ecuador. Boasting a whopping current 2.1 million client base, it easily dwarfs the next largest competitor by a 3:1 margin. Considered a staid and conservative institution, perhaps one could argue too much so, in the modern banking era.
While certainly retaining its existing loyal client base, the pace of growth at Pichincha has slowed dramatically over the years. In fact, in the last 3 years, it has gone from a consistent top 3 bank in the Bank Watch Ratings, down to its lowliest showing in recent memory – the #7 spot, for 2012. Recent deterioration has shown in almost all bank stability categories. Is this a temporary glitch or a trend of things to come? Hard to say at present. It is a situation which bear watching.
Still, as one of the healthiest bank institutions in the country and, certainly, the largest, it would be impossible to keep Banco de Pichincha off our recommended list. Still, one remaining caution, as the most conservative bank, we find it the least friendly towards opening new foreign accounts and find its criteria to be the most rigid. If patience is your forte and you like being part of the largest banking institution, with, arguably, the richest history, than Banco de Pichincha might be just right for you.
In the end, Ecuador’s volatile banking history, much like its politics, has come a long way, finally reaching a degree of stabilization and modernity, which would have been unimaginable just a little over a decade ago. The future looks promising and with opening a new bank account being fairly easy, even if not the absolute breeze of 5 years ago, anyone looking at permanent residency in Ecuador should be comforted by the progress made and the current direction of Ecuadorian bank policy. I almost hate to say it…but…really…you can bank on it.