Dollarization, private banking and financial profitability in Ecuador

Abstract

This paper aims to analyze the behavior of Ecuadorian private banking during the period 2000-2021, using aggregate information on trends in the ban-king sector and accounting data for the main banks. Based on a heterodox theoretical-historical approach, we highlight the link between the neoliberal structural reforms, the banking crisis, dollarization and the transformations of the banking sector. The results highlight the fact that the operation of the Ecuadorian banking system under formal dollarization not only recreates well-known elements of former financial fragility but also introduces new variables typical of the 21st-century banking universe that are a source of instability and hinder the financing objectives for the socio-economic development of the country.