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Ecuador's interim congress has passed a bill that creates the bank of the country's social security institute (IESS), or Banco del IESS, the congress said on its website.
The Banco del IESS bill, an initiative sent by President Rafael Correa, was passed on Monday (Apr 6) in a second debate with 41 votes in favor, six against, three blank and seven abstentions.
The bill, which was approved in a first debate in March, will be sent to Correa, who has 30 days to sign it into law or to object totally or partially.
The bill states that Banco del IESS will be a financial institution - owned by IESS - that will have technical, administrative and financial autonomy and a social and public service objective.
The new bank will provide financial services to meet needs of IESS affiliates, both active affiliates and retirees, and manage workers' contributions.
Its headquarters will be located in Quito.
Banco del IESS will invest in both fixed and variable-income instruments offered in the local market, including instruments to finance long-term projects in the private and public sectors - such as infrastructure projects - that are profitable and generate new jobs.
The new bank will also grant housing loans, unsecured and secured loans and other financial services to IESS affiliates, both active and retirees.
The aforementioned financial services - asset management and lending - are already performed by IESS, so the real difference will come in the future if Banco del IESS gets authorization to provide other services, such as the taking of deposits from the public, the research and M&A head at local investment bank Analytica Investments, Andrés Proaño, told BNamericas.
The bill states that Banco del IESS can request authorization from banking regulator SBS to provide financial services that commercial banks are allowed to provide - such as deposit accounts - under the banking law, he explained.
In any case, news that the bank will be investing in the local market certainly is good news for an economy that needs a boost, Proaño added.
Ecuador's economy is expected to show zero growth in 2009, according to the UN's Economic Commission for Latin America and the Caribbean (Eclac).
The bank's board will be comprised of four members. One member and president of the board will be the president of IESS' board, who in the case of a tie in board voting, will be the tie-breaker. A second member will be named by the IESS' board from a shortlist of three candidates proposed by Ecuador's President. A third member will represent the interests of active affiliates and the fourth the interests of retirees.
Given the board's composition, there is a potential risk of political interference in the bank, Proaño said.
IESS had an investment portfolio of US$5.65bn at end-2008.