banking

New bank law calls for change

The new law aims to position Panama advantageously for the future and is consistent with the Basel Accords.

The Consejo de Gabinete approved on Friday the law amending the existing banking system. The law consists of 277 articles that redefine the rules of banking in many areas.

Among the key changes approved are the expansion of the powers of review and oversight granted to the Superintendencia de Bancos de Panamá (SBP), an increase in regulations established for licensing international banks, the creation of the position of a banking supervisor, speedier and more flexible processes for compulsory bank liquidations and the institution of arbitration as a method of alternative dispute resolution between banks and their customers. "The reform has been agreed upon with the Asociación Bancaria de Panamá (ABP) and will undoubtedly enable us to develop still further the international banking center that we have in the country," said Gustavo Villa, director of economic studies of the SBP. The Panamanian banking system is recognized internationally for its efficiency, robustness and smooth functioning. Yet reform was needed, say banking officials, in order to adapt to new times and because the Basel Accords demand it. The Accords are recommendations on banking laws and regulations issued by the Basel Committee on Banking and Supervision.

"The banking business has grown not only in size---assets in the sector today amount to $68 billion, 85 percent higher than just three years ago--- but in complexity," vice president of the ABP Mario de Diego said recently. And there is a growing number of financial conglomerates in Central and South America which, for business or tax reasons or simply for the presige of being in Panama, are consolidating their operations in the country.

In fact, according to statistics from the ABP, more than two thirds of its current loan portfolio is tied to Panamanian banks (36 percent) and Latin American banks (35 percent), and all are subject to local regulators. Only 1 percent of the total are Asian banks, and 28 percent are from member countries of the Organization for Economic Cooperation and Development. None of those are regulated locally.

"That has forced us to strengthen the supervisory framework for banks that operate regionally and work in coordination with the other supervisors of the area," said Villa. Manager of the Caja de Ahorros Sergio Altamiranda gave assurances that the new law made no changes in the area of bank secrecy or the confidentiality of bank operations. Neither was the minimum amount of capital required as a condition for starting operations modified. Banks with a general operating license must have $10 million and those with international licenses $3 million.There are some adjustments with regard to sanctions. "The fines for operating without a license or authorization increased from $100,000 to $1 million," reported Amauri Castillo, secretary-general of the ABP.