Ecuador Ordered Banks To Repatriate $1.2B

Ecuador Ordered Private Banks To Repatriate Around $1.2 Billion
6-1-09

QUITO -(Dow Jones)- Ecuadorian private banks should repatriate around $1.2 billion in deposits and investment that they have abroad, President Rafael Correa said over the weekend. During his weekly radio address, Correa said that the Central Bank has established a liquidity requirement to force banks to keep at least 45% of their assets and investments in Ecuador to draw cash and boost domestic liquidity. The measure goes is into effect late Friday "The party is over for certain bankers," Correa said. "We're not going to let them keep taking our money. Now banks will have to bring back lots of money they held abroad." According Correa, the repatriated money should go into new credits to boost the economy. Previously, the nation's Minister of Economic Policy Coordination Diego Borja, has threatened to take action against private banks that are not extending credit lines to their clients and also has said that the government will not tolerate banks speculative blackmail. Ecuador's political and economic uncertainty have started to hurt the financial system, as net profits have fallen sharply so far this year. Additionally, the government has fixed interest rates and the government's banking superintendent hasn't allowed banks to charge clients for some services. According the Association of Private Banks, between December and April deposits in the financial system have fallen by around $750 million, especially due to lower oil prices and the decrease in remittances from Ecuadorians abroad. Correa, a self-proclaimed socialist, took office in 2007. After a new constitution was approved, he won a new four-year term this year and has promised to carry out more radical reforms. The President said that private banks have around $4 billion invested abroad. Ecuador will Leave From ICSID In the same weekly address, Correa said that the Andean country will pull out of the Washington-based International Center for Investment Disputes, ICSID because the Center gives companies the right to bypass Ecuadorian courts. The ICSID has been an alternative especially for oil companies seeking redress in disputes with the Ecuadorian government since the 1980s. The government has said several times that in many cases the companies have turned to the international arbitrator without being right in their complaints. The ICSID is currently handling requests for arbitration over several disputes against Ecuador by more than $12 billion. One of the cases at the ICSID is the dispute with Ecuador from U.S.-based Occidental Petroleum Corp. (OXY). The Andean country canceled Occidental's contract May 15, 2006, accusing the company of violating its terms, particularly in transferring, without proper authorization, a 40% stake to Canada's EnCana Corp. (ECA). Occidental is seeking $3.2 billion in damages for Ecuador's May 2006 decision to cancel the company's operating contract. -By Mercedes Alvaro, Dow Jones Newswires (END) Dow Jones Newswires