Financial Crime World

Panama’s Banking System: A Resilient Response to Global Challenges

Introduction

In recent years, Panama’s financial institution security measures have been put to the test. However, the country’s banking system has shown remarkable resilience and adaptability in the face of global challenges.

Resilience in the Face of Economic Downturns

Despite facing significant economic downturns, including a 17.8% GDP contraction in 2020 due to the COVID-19 pandemic, Panama’s banks have maintained high liquidity and capital ratios. This is a testament to borrowers’ strong payment culture and the banks’ effective management of their portfolios.

Delinquency Ratio and Non-Performing Loans

According to the Superintendency of Banks of Panama (SBP), as of June 2022, the country’s banking system recorded a delinquency ratio of 4.4%, with non-performing loans at levels similar to pre-pandemic times.

Challenges Ahead

The SBP has expressed concerns about potential future challenges, including increasing inflationary pressures and geopolitical tensions, as well as the termination of government-backed financial relief measures. These factors may lead to an increase in loan losses and non-performing assets.

Improving Compliance with International Norms and Regulations

Panama has made significant efforts to improve its compliance with international norms and regulations, particularly with respect to tax matters. The country has implemented various laws and regulations aimed at preventing money laundering, financing terrorism, and promoting transparency.

  • Law 23 of 2015: Establishes measures to prevent money laundering and financing of terrorism.
  • Law 52 of 2016: Requires all Panamanian companies to maintain accounting records.
  • Law 70 of 2019: Modifies the Panamanian Criminal Code to include tax evasion as a crime.
  • Law 129 of 2020: Creates an ultimate beneficial owner registry.

Removing Panama from “Grey” or “Black” Lists

The government of Panama has designated being removed from “grey” or “black” lists as a priority. Achieving this would alleviate pressure on local financial institutions from their correspondent banks and promote economic growth.

Exploring Fintech and Blockchain Technologies

In addition to these measures, the country is also exploring the development of fintech and blockchain technologies. The National Assembly approved Project Law No. 697, which aims to make Panama compatible with the digital economy and regulate crypto assets. However, the project law was partially vetoed by President Laurentino Cortizo, and it has not yet become a law.

Conclusion

In conclusion, Panama’s banking system has shown remarkable resilience in the face of global challenges. The country’s financial institution security measures have been effective in maintaining high liquidity and capital ratios despite significant economic downturns. However, potential future challenges may require further adaptation and innovation to ensure continued growth and stability.