economy

Crisis finds banking industry at a crossroads

A plan aimed at preventing a crisis in Panama’s banking sector never took shape.

Vice President Samuel Navarro has proposed creating a fund to stimulate bank lending.

la prensa

stable: Minister of Economy and Finances Héctor Alexander assured the public that the country’s banking industry remains healthy and boasts strong liquidity.1145147

Two months ago, when the government proposed a contingency plan in the event that the country’s banking sector caught the global financial bug, hopes momentarily surged.

Since then, however, that plan has not advanced far, despite signs that international credit lines will continue to grow increasingly expensive as they become scarcer. Minister of Economy and Finances Héctor Alexander acknowledged as much during a meeting with other members of the team appointed to keep close tabs on market fluctuations caused by the crisis.

“As there’s no clear problem on the table, we haven’t defined what would be the measures or figures of a potential program for support financial institutions,” said Alexander. That said, the minister emphasized that the country’s banking system remains healthy and boasts high liquidity.

Based on the sector’s robust cash flow, many banking industry sources consoled by the robust cash flow felt there were no indications that institutions would require an urgent injection of capital, leading the government to modify the contingency plan to address the country’s current conditions.

Instead, Vice President and Foreign Minister Samuel Lewis Navarro, who heads the financial crisis management team, has decided to look into creating a fund to motivate lending since most banks have placed severe restrictions on credit options in the last few months. That measure is intended to ensure a consistent momentum within the market in spite of widespread economic downturns.

Currently, the country’s banking system receives 64 percent of its resources on the local market, meaning that the remaining 36 percent must come from international sources, unstable as they may be.

In light of those concerns, Banco Nacional de Panamá recently negotiated a loan of $210 million from the Andean Development Corporation, and has also been in discussions with the International Monetary Fund for unspecified funds.

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