QUITO, Ecuador (PNN) - January 22, 2013 - Combined profit for Ecuador's private banks fell 21% in 2012 due to a series of measures taken by President Rafael Correa's regime.

According to the Bank Superintendency of Ecuador, 25 private banks operating in Ecuador, plus the state-run Banco del Pacifico Ecuador, posted a combined $312 million net profit in 2012, up from $395 million the previous year.

Analysts say Correa aims to increase regulations on private banks and that he will likely deepen the state's control over the sector if he wins re-election next month. This could reduce banks' loan growth, leading to a slowdown in the economy while also jeopardizing the health of the financial system.

Since taking office in 2007, Correa has tightened controls on private banks, setting interest rates and increasing the services that banks must provide to clients for free.

Last year, the Ecuadorean government took tough measures to control imports and reduce consumption. The measures included prohibitions, quotas and tariffs on imports, which affected banks, particularly their granting of consumer loans.

In May, Ecuador's National Assembly passed a law, proposed by Correa, to regulate mortgages and car loans. The legislation limits a borrower's liability in case of failure to repay a loan to the maximum amount of the appraisal of the seized property.

The government has said it expects to raise about $164 million this year from banking tax changes. This amount is expected to increase to $171 million in 2014 and $183 million in 2015.

Official data show that just 6% of last year's earnings came from foreign banks operating in Ecuador, making the Ecuadorean financial system less attractive to foreign investors because it is highly regulated and there are continuous rule changes.