Ecuador's National Assembly is reviewing a proposal from the government for a new monetary and financial code that some economists believe could hurt the profits of private-sector banks, the Wall Street Journal reports.

Ecuador's National Assembly is reviewing a proposal from the government for a new monetary and financial code that some economists believe could hurt the profits of private sector banks, the Wall Street Journal reports.

The WSJ said that critics were especially concerned about a proposal to create a regulatory body with powers to determine how private financial institutions should handle their liquidity.

The proposed bill was sent to the National Assembly on Wednesday and will be voted on within 30 days.

It is believed that the assembly will likely approve the bill, as President Rafael Correa's ruling Alianza Pais party holds 100 of the 137 seats.

The bill would create a board composed of government ministers with the power to establish minimum liquidity requirements, as well as the size of loans and the amount of credit that should be sent to each sector. It will also be responsible for the regulation of external borrowing limits and the conditions and limits on the holdings of foreign assets by banks.

Critics have said officials could use their powers to manage private bank liquidity to meet government objectives, but without assuming the risks of administering the bank. As a result, officials could potentially manipulate private financial institutions to bring them in line with the government's economic policies, leaving shareholders to bear the brunt of any decisions made, according to the report.

The minister for economic policies, Patricio Rivera, reportedly said the new regulations are necessary for job creation and to support economic growth. He also reportedly said that there would be severe sanctions for breaking the new code.

Banks in Ecuador have faced increasingly tougher regulations since President Correa took office in 2007.

According to economists, as a result of tougher regulation since President Correa took office in 2007, the banking sector's profits have been severely dented. According to official data, net profit for all private banks operating in Ecuador was $268 million in 2013, down 15 per cent from the previous year.

Meanwhile, data from the Private Banking Association of Ecuador shows that in 2013 banks had return on equity of 10.15 per cent, compared to 12.79 per cent in 2012, and 18.91 per cent in 2011.