2024-08-07 12:43:40
National Assembly Speaker Henry Kronfle described the President’s total veto as a “blow to citizens’ pockets.”
On July 10, President Daniel Noboa totally objected to a bill to reform the Law of the Bank of the Ecuadorian Social Security Institute (Biess).
The proposal, called the Reform Law to various Laws for the Stability of Social Security in Ecuador (ESSE Law), was approved by the National Assembly on June 6, 2024. According to the Executive’s veto, the reform proposal is not applicable to the management of the Bank of the Ecuadorian Social Security Institute (Biess), as it “contradicts the banking and stock market secrecy rules that apply to it as a financial institution.”
One of the reforms proposed by the bill is the publication, on the Biess website, of each and every one of the bank’s investments, specifying the destination, yield, term, amount, risk analysis, beneficiary of the investment and the proportional benefit for each active or retired member.
National Assembly Speaker Henry Kronfle described the President’s total veto as a “blow to citizens’ pockets.”
“The current administration wants to keep the money of IESS members and retirees as petty cash. Enough of this abuse!” wrote Kronfle, in a message posted on the social network X, on July 10, 2024.
What does the bill say and why was it vetoed?
Article 7 of the Biess Law currently provides that the benefits and financial returns from the investments of pension resources, as well as the profits generated by the Bank, must be delivered to the IESS to increase its funds.
The draft law proposes adding to this article that the Bank may hire an investment banking advisory firm focused on pension or social security systems. The firm may be national or international.
In addition, you may contract hedging mechanisms to cover your financial assets, with the aim of mitigating the risk of a “negative event in their investments.”
According to the presidential veto, the reform proposal does not consider the current performance of the Biess in the national market or the fulfillment of objectives, in terms of the administration of the bank’s resources, under principles of “security, opportunity, solvency and liquidity.”
Additionally, according to the objection text, the project does not take into account that it is the responsibility of the Financial Regulatory Board to issue the regulatory framework for public banking and regulate the financial activities of the national social security system.
The proposal also states that the Financial Regulatory Policy Board, the Superintendency of Banks and the Superintendency of Companies may define the different operations that allow the exercise of the bank’s financial activity, provided that they are related to investment banking.
The presidential veto states that this proposal eliminates the possibility of Biess carrying out traditional banking operations, such as loans and investments, “conditioning it to keep its product portfolio static.”
The above, says the veto, “would affect the possibility of entering new markets, credit and investment products and services for members,” since “it is required to manage the generation of these services with other levels of approval.” In addition, it emphasizes that it is not the responsibility of the Superintendency of Companies to define the operations related to investment banking carried out by the Biess.
Transparency of investments
Finally, the project proposes to include a new article in the Biess Law on ‘investment transparency’, which provides that the bank will have the obligation to make the following available to IESS members on its website or in other information systems:
The detail of monthly and annual institutional expenditure.
Information on “each and every investment of any kind”, indicating the destination, yield, term, amount, risk analysis, beneficiary of the investment and the detail of the proportional benefit for each active or retired member, as well as the institutional expense.
The various investment contracts signed by the entity, with details of the beneficiaries and the monthly or annual table of investment returns. This information must be available on the website for download.
The presidential veto considers that the publication of information on “each and every investment contradicts the principle of confidentiality and secrecy regarding the assets of financial institutions, both public and private,” stipulated in national laws. “No financial institution publishes its portfolio, even for reasons of unfair competition in the market,” the text adds.
By: PREMISES