Panama International Banking Center “Development and competitiveness”

junio 17, 2015 2:16 pm Publicado por 6.975 Comentarios

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The International Banking Center is the most influential in the region, always working with transparency and all regulations of law according to the principles of Basel.

Panama has a service economy with GDP of about 80% as exports with 92% of services that are mostly activities of the Panama Canal, tourism, financial services, transportation and more.

The International Banking Center was created with the first banking law in Cabinet Decree 238 of July 2, 1970. This created the National Banking Commission as regulator. In 1970 it had 21 banks with assets of $ 898 million. After rapid growth, and in 1982 it had 125 banks and assets of $ 49 billion. Over the past four decades it has been an important pillar of the economy remain between 8% and 10% of GDP. Currently, banking has evolved and is robust with 91 banks, generating 23,000 jobs, with assets of $ 108.189 million and contributing about 10% of GDP. It is worth mentioning that the political crisis of 1989 had a significant reduction in the number of banks, but regained his rhythm afterwards.

We know that Panama’s financial system is stable in terms of interest rates, price levels, financial flows, banking among others, facilitating trade.

The bank has had a great influence on the FTA as it provides flexible and abundant credit to their employers making them competitive in the region, complementing the competition that give logistics services and supply chain that develops in the country.

The banking system has levels of liquidity and solvency well above what is required by banking law. In addition, the SBP reported that ‘there are no entities that present systemic risk, involving signs of financial instability’ for the end of 2014.

The (SBN) national banking system liquidity has a January 2015 of 59.29%, nearly double the level required by the Bank Act, which is 30% for banks in general and international license.

In the past five years, the liquidity of SBN has performed as follows: 65.38%, 66.59%, 64.70%, 61.00% and 58.63%.

In turn, international standards such as the Liquidity Coverage Ratio (LCR) Basel III, introduced from January this year a minimum coverage of 60% and then 10% increase per year until it reaches 100% the first January 2019.

The objective of the CSF is to promote short-term resilience of the liquidity risk profile of banks. To this end, the LCR ensures that banks have adequate background of high-quality liquid assets (HQLA) and free of charge, which can be converted easily and immediately cash in private markets, to cover its liquidity needs in a scenario of liquidity problems 30 calendar days. The LCR will enhance the ability of the banking sector to absorb shocks arising from financial and economic stress of any kind, thereby reducing the risk of contagion from the financial sector to the real economy.

The CBI has relevance in the region, which shows the levels of competitiveness that Panama remains in the Global Competitiveness Index of the World Economic Forum (2014-2015) in Pillar: Financial Market Sophistication, in which Panama is positioned as number 22 of 144 countries.

The country showed a comparative advantage in most of the indicators evaluated. However, compared with the previous measurement indicators they lost all positions. The only indicator that improved in the evaluation is the legal rights index, which gained four positions. (See: Competitiveness Index).

All the advantages mentioned above are attributed to the soundness of the banking system, efficiency and agility of processes, access abundant credit, banking systems security, stability, good country risk rating. The country also has banks of international origin who operate directly with other countries in the region making the country more competitive.

The CBI has relevance in Latin America, and is considered the most important in the region. This is complemented by the level of monetization of the economy in which ranks first in Latin America and second by deepening rate (credit / GDP).

Panama has 51% of local assets and 49% in foreign assets, highlighting deposits and foreign credits.

Basel III refers to a set of agreements and proposals for reform of banking regulations, which were published from 16 December 2010. It was defined to strengthen the international financial system following the crisis in US subprime mortgages.

The implementation of the Basel III rules should be made by the regulator consistently adapted to the realities of the Panamanian market. Moreover, we must stress that the levels of capital and liquidity CBI are above the standards of the Superintendency of Banks.

According to Fabio Riaño, of the Banking Association of Panama, presenting ‘against Panamanian banks under Basel III’. The biggest challenges for the sector could fall on high quality assets with desired returns and contingency plans in times of crisis.

In conclusion, a strong and resilient banking system is the basis for sustainable economic growth, as banks are crucial in the process of credit intermediation between savers and investors. Banks also provide critical services to individuals, small and medium businesses, large corporations and governments who rely on these services to carry out their daily activities, both within and outside the country.

Source: Analyst National Competitiveness Center

Ernesto Chong de León, Ernesto Emilio Chong Coronado

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