Ecuador's National Assembly began reviewing a proposal for a new monetary and financial code on Thursday.
The Organic Monetary and Financial Code, put forward by the government of Rafeal Correa, will have to be voted on within the next 30 days.
The new code aims to increase regulation in the financial sector to prevent a re-run of the banking crisis of 1999 that saw about 70% of the country's financial institutions close and huge state bail outs for banks whilst many Ecuadorians lost their savings.
A subsequent economic crisis led to Ecuador abandoning its national currency and adopting the dollar the year after.
The preamble to the text presented to the National Assembly states that "the Code will contribute to changing power relations that have historically prevailed in Ecuador, and is a key element in the political transformation process in which national economic, financial and social institutions will aim at a new national economic model that puts humans before finance capital." It will "strengthen the production of wealth, its distribution and redistribution."
As well as a new regulatory committee, the draft bill proposes severe penalties for banks that breach the new rules including fines, the removal of directors and the revocation of licenses. Under the new code, the state will not be liable for the solvency of the private financial sector.
President Correa labeled the new law as “revolutionary” and has previously warned that he expects strong political and media opposition from vested interests “who will strenuously oppose this code."
The Wall Street Journal reported Thursday that “some economists have said [the code] could affect the earnings of private sector banks.”
The Assembly is likely to approve the new code with Correa's PAIS Alliance having 100 of the 137 seats.