Ecuador Finance Reform Targets Interest-On-Interest In Debt Refinancing
Ecuador's National Assembly is moving toward second-debate language on a financial reform that targets interest-on-interest treatment in certain debt refinancings.
The reform is expected to be ready in August. The Economic Regime Commission is analyzing the bill for second debate.
Core Issue
The proposal focuses on cases where refinancing can turn interest, late fees, and collection costs into new capital.
One example described a USD 10,000 debt where interest, arrears, collection fees, and other values reached USD 4,000, turning the new capital into USD 14,000.
Market-Access Change
The same financial-code reform includes a change to who can act as intermediaries in the securities market.
At present, that role belongs to brokerage houses. The reform proposes adding financial-system entities, including banks.
One market representative warned that regulators do not have infrastructure to supervise the activity of 500 new institutions.
Timing
The report for second debate is expected in late August or early September.
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