Annual Report 2007

Legal Reserve – In accordance with the General Law for Financial
System Institutions of Ecuador at least 10% of annual income must
be allocated to a legal reserve until it reaches 50% of share capital.
Retained Earnings – Based on the Resolutions Codification of the
Ecuadorian Superintendency of Banks and Insurance and the Banking
Board, the Superintendency of Banks and Insurance may require
the Bank to not distribute entire or partial earnings to stockholders,
but oblige such to be used to form a special reserve for an immediate
capital increase. At December 31, 2007, the Superintendency
has placed no restrictions on the use of retained earnings.
Externally Imposed Capital Requirements – In accordance with
the General Law for Financial System Institutions of Ecuador and
the Resolutions Codification of the Ecuadorian Superintendency
of Banks and Insurance and the Banking Board, the Bank must
maintain a 9% ratio between technical capital and the total of the
amount weighted for risk of assets and contingencies. Furthermore,
the technical capital may not be less than 4% of total assets
plus contingencies.
At December 31, 2007 and 2006, the Bank complied with the requirements
of the Regulatory Entity.
19. Net interest income
Included within “net interest income” are interest income and expenses:
Dec 31, 2007 Dec 31, 2006
(in thousands of U.S. dollars)
Interest and similar income
Interest income from cash and
short-term funds
Interest income from available-
11,286 9,229
for-sale financial instruments
Interest income from loans and
716 341
advances to customers 22,737 12,387
Other interest income 1 –
Total 34,740 21,957
Interest and similar expenses
Interest expenses from liabilities
2,741 1,864
to banks
Interest expenses from liabilities to
1,218 566
international financial institutions
Interest expenses from
3,150 3,344
subordinated debt
Interest expenses from
904 102
debt securities 2,351 422
Other interest expenses 10,364 6,298
Total 24,376 15,659
20. Allowance for impairment losses on loans and advances
Risk provisioning is reflected in the income statement as follows:
Dec 31, 2007 Dec 31, 2006
(in thousands of U.S. dollars)
Increase in impairment allowance
(Note 7) 5,145 2,865
Release of impairment allowance (1,600) (268)
Recovery of written-off loans
Other provisions on loans and
(451) (211)
advances – 62
Total 3,094 2,448
The increase of impairment charge comprises the following
entries:
Dec 31, 2007 Dec 31, 2006
(in thousands of U.S. dollars)
Allowance for impairment on
loans and advances to customers
Specific impairment
Allowance for individually
– 122
insignificant impaired loans
Allowance for collectively
2,812 861
assessed loans 2,333 1,882
Total 5,145 2,865
21. Net fee and commission income
A summary of net fee and commission income is as follows:
Dec 31, 2007 Dec 31, 2006
(in thousands of U.S. dollars)
Fee and commission income
Payment transfers and transactions 28 10
Account maintenance fee 43 –
Fees for guarantees 7 1
Other fee and commission income 247 9
Total 325 20
Fee and commission expenses
Other fees to others 42 27
Other fees to banks 25 30
Other fee and commission expenses 93 110
Total 160 167
Net fee and commission income 165 (147)
The item “other fee income” refers to transactions carried out on
behalf of third parties, e.g. Western Union. “Other fee expenses”
consists primarily of fee expenses related to bank expenses.
22. Operating expenses
A summary of operating expenses is as follows:
F i n a n c i a l S tat e m e n t s
Dec 31, 2007 Dec 31, 2006
(in thousands of U.S. dollars)
Personal expenses
Salary expenses 4,536 3,002
Social security expenses 672 401
Other personnel expenses 1,851 1,002
Total 7,059 4,405