Polibio Cordoba: Overview of activities undertaken by the Central Bank of
Ecuador
Speech by Mr Polibio Cordoba, President of the Board of Directors of the Central Bank of Ecuador,
held on 17 February at the inauguration of the 2005 BIS Central Bank Legal Experts' Meeting, Quito,
17-18 February 2005.
* * *
Ladies and gentlemen
It is an honour for the Central Bank of Ecuador (BCE) to host the Central Bank Legal Experts' Meeting
organised by the Bank for International Settlements (BIS) and its Representative Office for the
Americas.
The role of the BIS as one of the most important centres in the world for monetary and financial
cooperation between central banks is fulfilled precisely through forums like this one, promoting
high-level legal discussion and research on key economic topics.
For this reason the government of Ecuador and the central bank are particularly pleased that Quito
has been chosen as the location for such an important event, with participants including legal experts
from Europe and America as well as renowned international speakers representing the Federal
Reserve Bank of New York, the European Central Bank, Euroclear Bank and the Hague Conference
on Private International Law.
The main objective of the meeting will be to analyse the use of collateral and complementary
guarantees in central bank operations as well as rights associated with guarantees in the hands of
intermediaries and possible conflicts between national laws. At the same time, the meeting represents
an ideal setting in which to exchange views and opinions on this topic and to reconcile views with
respect to the application of international standards which make central bank operations more viable
and secure.
In this regard, it is very important to the BCE to emphasise its functions and role as from the year
2000; it was then that the country adopted the dollar as its official currency. This meant that the money
supply became an endogenous variable; that is, a value determined by each line of the balance of
payments (trade in goods and services, and net capital inflows). However, this renunciation of the
money issuance function also significantly restricted the central bank's ability to act as a provider of
liquidity assistance to the financial system via money markets and as lender of last resort, despite
ongoing problems relating to economic liquidity, systemic risk and competitiveness.
For this reason, the BCE's focus has now shifted more towards economic tasks, resulting in greater
emphasis on functions such as establishing guidelines and carrying out activities linked to financial
and credit policy, aimed at improving conditions for access to financing by the manufacturing sector,
strengthening the solvency of public and private financial intermediaries and stabilising and deepening
the payment system in accordance with constitutional provisions.
In this context, the BCE works to ensure the stability of the economy and the prevailing monetary
regime via monitoring and analysis of developments in public finances, which, in the short, medium
and long term, help maintain the financial sustainability of the state.
With regard to the subject matter of the meeting, the BCE is somewhat restricted when it comes to
using collateral, since, with the official dollarisation of the economy, its role as lender of last resort is
very limited. Without prejudice to this, it should be highlighted that commercial trustee accounts were
and still are the most important collateral for the BCE, having been used successfully in the past,
including in complex situations and during bankruptcy proceedings for financial institutions, thus
guaranteeing the interests of the BCE and the state.
On the other hand, repurchase operations, one of the typical central bank strategies for recycling
liquidity, are another important tool which is used in the same way as in other countries. I am sure
these aspects will be addressed in detail as part of this event.
In addition to participating in the meeting itself, you will also have the opportunity to enjoy the historical
and cultural wealth of Quito, a UNESCO World Heritage Site. The city, together with the BCE,
welcomes you and wishes you every success with this event.
Thank you.
BIS Review 15/2005