Panama Forum

panamajames
Joined 2012
Posts: 5096

5 years ago

Economical Outlook for Panama

5 years ago

Panama is recognized as one of the most important places in Latin America, due to its outstanding geographical position and competitive advantages within the region. Having a solid banking sector, with effective supervision and prudential regulation aligned with international standards and sound practices, will lead the country to maintain a leading role in the financial environment of the region.

The International Banking Center is one of the pillars of the country's economic and financial system, with a share of 7.3% of GDP. The banks represent 92% of the total of the financial sector, being the activity with the greatest amount of assets. This sector contributes 26,240 direct jobs and US $ 585 million in salaries.

Following the global financial crisis in 2008, the Basel Committee, after analyzing what happened, decided to strengthen the international financial system, demanding the combination of an adequate prudential policy guaranteed with an effective market discipline, together with the design of policies macroeconomic policies that favor international financial stability by developing the Basel III regulation, in order to mitigate the risks of what has been experienced.

To do this, among the regulations of Basel III, it established to strengthen the capitalization and liquidity of the banks, creating capital cushions, for the strengthening of the operations of the system.

Basel III and its reform package on capital and liquidity become a key element for the construction of a new, more secure and stable international financial system, with more robust capitalization and liquidity, which will largely prevent a lesser impact on the economies .

The Superintendency of Banks of Panama, since its inception, has been committed to the implementation of regulations of the Basel Committee on Banking Supervision, proof of which is that it has been mandatory since 1998 to have a solvency index of 8%.

An element to be highlighted is that Panama has maintained its status as a country with international investment grade for the last eight years, by the main risk rating agencies, this entails a great responsibility in terms of compliance with high regulatory standards.

We have developed a clear road map to comply with the Basel III regulations in due time. In recent months, important steps have been taken to make the system work in a more demanding environment under these standards.

In this sense, Panama has achieved a positive consolidation of capital adequacy due to credit risk, measured not only by the capital structure, but by more demanding weights for credit risk, based on the Basel III standardized methodology, as well as measures of leverage and counterparty risk.

With regard to the adoption of capital cushions, the Superintendency of Banks of Panama already has a provision that establishes a dynamic provision of an anti-cyclical nature, which replaced the old provisions scheme; In addition, it has developed its methodology for the identification of systemic banks, guided by the provisions of the International Bank of Payments - BIS. To date, the dynamic provision reaches US $ 1200 million, a figure that almost triples the balance recorded under the old provisions scheme (Global Minimum and General) that was US $ 443 million in the first half of 2014.

Another important regulation, in line with the Basel III roadmap, is the Agreement 2-2018 on the liquidity coverage ratio (LCR), it will be another material complement, which will strengthen the capacity of the system to react to risks of short-term liquidity.

Also, the approval of Agreement 11-2017 on derivative risk management. It introduces clear rules and parameters for sound risk management for coverage.

The capital requirement for market risk will be a complement for the equity base to measure additional risks to credit. The recent approval of Agreement 3-2018 (Market Risk) incorporates the capital requirement on financial instruments registered in the trading portfolio. These are important steps in the Panama roadmap for the implementation of Basel III.

During the second half of 2018, the regulation on capital requirements for operational risk will be approved, in addition to the regulations on Capital for Operational Risk, Securitization, Banking Book and Negotiation Portfolio; as well as Risk of Interest Rate in the Banking Book.

With this execution, the Basel III roadmap will be completed, requiring adequate capital for the three (3) main risks, based on the Basel III standardized methodology.

The international organizations have favorably seen our Basel III roadmap, due to the improvement of financial regulation. In this regard, in his recent visit to Panama, the International Monetary Fund (IMF), said that the authorities continue to promote their agenda to improve banking regulation and supervision, including the implementation of the Basel III measures.

This entity will remain vigilant so that the systemic banks maintain adequacy ratios sufficiently solid and stable under these new rules and with the best international standards, for the security and confidence of depositors and institutional investors, with the purpose of maintaining a competitive International Banking Center , which contributes significantly to the economy of the country and which is a guarantee of the stability of its economic system.

SUPERINTENDENT OF BANKS OF PANAMA.

http://laestrella.com.pa/opinion/columnistas/panama-ruta-basilea/24070379

Kovalenko & Vera Attorneys at Law in Panama

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