The new entity will be the Bank for Economic Development of Ecuador BP

The National Government is in the process of merging the National Financial Corporation (CFN) and BanEcuador, as approved under in the Organic Law for Economic Development and Fiscal Sustainability.

The law, passed last November in part as a consequence of the Covid-19 pandemic, argued that the merger would help the government provide the necessary capital to grant loans with better conditions, especially to the productive agricultural sectors.

In the decree (number 406) signed by President Guillermo Lasso, there are ten articles laid out to operationalize the merger within a year from its publication this week in the Official Registry.

There are also nine defining elements in the decree ordering the merger:

1. That the name of the new entity will be Banco de Fomento Economico del Ecuador BP
2. This bank will be governed by the Monetary and Financial Organic Code, the rules of the Financial Policy and Regulation Board and the control agencies.
3. Its main headquarters will be in Guayaquil, with branches, agencies, offices, non-bank correspondents and distribution channels that it requires for its management and corporate purpose in any part of the country.
4. Its purpose will be to provide credit, savings and investment financial services, under the criteria of financial intermediation of public and private resources. It will serve the segments of microcredit, small and medium-sized companies in the field of production, especially agribusiness, commerce, exporters and services. In addition, for projects that improve national competitiveness.
5. The financial activities that it will carry out are: first-tier banking, second-tier banking (financing to private financial sector entities), financing investment projects with guarantees, credits in current accounts, constituting demand and term deposits in financial entities. From the country and abroad, it will make investments in fixed and variable income instruments of the local stock market, bills of exchange, drafts, promissory notes, invoices and other documents; negotiate documents resulting from foreign trade operations, acquire, keep and dispose of forward contracts, purchase or sale options and futures; make investments in the capital of a financial services entity or ancillary to it to convert them into its subsidiary or affiliates. It will also carry out other activities determined by law,
6. The capital subscribed and paid for the operation and activities of Banco de Fomento Economico del Ecuador BP will be the one resulting from the union of the subscribed and paid capital of the CFN and BanEcuador at the time of its merger, as well as that constituted in the future with contributions from the Ministry of Economy and Finance.
7. The patrimony will be constituted by the subscribed and paid capital, the constitution of non-redistributable reserves and other patrimonial contributions such as the assets of the CFN and BanEcuador.
8. Its administrative structure will be made up of a board of directors that will issue the bank’s management policies, the control of its execution and the other attributions of article 375 of the Monetary and Financial Organic Code. This board of directors will be made up of: a delegate of the President of the Republic, who will chair it and have a casting vote; the Minister of Economy and Finance, the Minister of Production, Foreign Trade, Investments and Fisheries, the Minister of Agriculture and Livestock; and the Minister of Economic and Social Inclusion. Ministers may also delegate other people permanently.

The bank will also have a general manager appointed by the board, in which he will participate, but without vote. His responsibilities will be established in the creation of the statutes of the BP Economic Development Bank

9. The functions of the board of directors will be those established in article 375 of the Monetary and Financial Organic Code.

Since the decree ordering the merger of the CFN with BanEcuador to create the Bank for Economic Development of Ecuador was signed, both entities and their owners are responsible for the implementation of the union. When this concludes, the directory of the new entity, will be define the commercial name of the bank.

During the year of the merger process, the leading entities must work with the Ministry of Labor to evaluate and select among the personnel of both institutions, those who will remain in the new entity.