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With its skyscrapers glinting in the intensely bright sun, the center of modern Panama City resembles a miniature Manhattan. Panama has the most modern and successful international banking center in Latin America. The International Banking Center (IBC) is made up of 93 banks – of these 49, including the two official banks – have a General License, 31 have an International License and seven a Representation License. In addition, there are 14 representative offices.

At December 31, 2010 reflected a continued dynamism in the banking supported by its strength both in financial indicators such as adequate levels of solvency. The assets of the banking center at the end of 2010 amounted to B/.71,931 million, while assets are located in the System $ 57.566 million.

Domestic credit to private sector amounts to B/.24, 337 million, showing an increase of 13.3% compared to the same period a year earlier. This dynamic is supported by a favorable trend in the lines: industry (31.9%), commerce (22.7%), construction (12.7%), mortgage (9.8%) and personal consumption (8.7%).

The loan interest rates are at an all time low, as evidenced by a report from the Superintendent of Banks of Panama. During the period 1999 to 2010, the trend in rates has been a constant low. In this period the interest rate for loans to trade one year rose from 10.5% to 7.5%, which represented a decrease of three percentage points.
In the same period, the interest rate on loans for personal consumption rose from 12.7% to 9.9%, representing a reduction of 2.8 percentage points. In the case of loans to industry, the rate increased from 10.5% to 7.6%, resulting in a drop of 2.9 percentage points.

For 2011 it is expected that the rate of the Federal Reserve System (FED acronym in English) United States remains low. By continuing to fall, also provides that the LIBOR (London InterBank Offered Rate), interbank rates and interest rates of banks remain stable. Most agencies in the United States qualified to do so have made it clear in their projections.
Banks that increased their growth during this period were: Banco General, HSBC, Global Bank, Citibank and Multibank.
The IBC has more than 18,000 employees, with a payroll that exceeds the $ 200 million a year, and an investment in fixed assets such as buildings, equipment and furniture – totaling more than U.S. $ 450 million.
The Panamanian banking system has several strengths, from the organizational point of view:

  • An economic environment that will continue to foster a positive business climate, despite the global crisis.
  • Conservative credit management policies in areas of high exposure.
  • Liquidity of its system which will continue to fuel the credit cycle.
  • An asset adequacy that remains sound and strong.

International Banking Center of Panama

Since 2008 Panama has a new Banking Law, l it gives the Superintendency of Banks more power. It focuses mainly on three aspects:

  • Increased national and international monitoring
  • Customer Protection
  • Strengthening the regulator.

Among the aspects related to monitoring points are highlighted as an extension of supervision by the Superintendency of Banks does the banking groups consolidated their operations in Panama. It also includes regulatory powers to holding companies that consolidate operations in Panama, an oversight they call "reasonable" non-banking corporation or financial that may be at risk of infection on Banking Group in Panama.

On the issue of banking consumer protection among other things, authority to settle claims up to $ 20,000 that cannot be settled between banks and consumer banks. It accelerates the process of bank resolution and ensures prompt payment to depositors under $ 10,000 through the sale of liquid assets available.

As the entity is increased independence and autonomy in administrative and budgetary management and administrative career includes the banking supervisor.

It is known as the National Banking System banks General License, including the two official banks - Banco Nacional de Panama and the Savings Bank - and the multinational Latin American Export Bank (BLADEX).
Long recognized as the most important international banking center in the region, and along with the Panama Canal, the Companies Act, the Merchant Shipping Act and Registration of Ships, the Colon Free Zone, insurance laws, reinsurance and captive insurance, capital market and stock exchange incipient but growing strongly, a modern Trust Law and, more recently, the new Panamanian Private Foundation, and the new Isthmus Railway, make Panama a true Centre of International Services . This is all part of a tradition several centuries as a route and crossroads of nations and allowing Panama to continue and develop this mission to serve the economy and world trade.

The International Banking Centre began as a result of the advantages of the previous legislation, approved in 1970. This was replaced in 1998 by a new banking law that created the Superintendence of Banks, an institution with complete autonomy, independence and ample powers to practice a strict supervision, including the consolidated supervision of the foreign banks. The law also incorporated other statutes, those of adequacy of capitals based on the average assets according to the risk, further to the guides of Basilea. The Superintendence and the Association are in the analysis and discussion phase of the eventual and programmed adoption of the new Capital Agreement of Basle II. A section of these dispositions is being incorporated to the existing regulation and the rest will be adopted slowly.

The new banking law will maintain:

  • Fundamental elements of the banking confidentiality and the identity of account holders.
  • Continue in force the Numbered Account Law. This is not an obstacle for Panama to have a series of laws, decrees, agreements and regulations for the prevention of Money laundering. Due to its strict dispositions, it serves as a model for other countries.

Panama has unique advantages for banking, financial and commercial businesses, due to the absence of a central bank, a monetary authority and paper currency. Another fundamental characteristic is the use of the North American dollar as the currency legal tender, which has contributed to strengthen the Panamanian IBC from the financial crisis.

Recent Transactions

Mayor merger agreements have been key for the financial market, and will bring new opportunities for the country.
For the period 2010 into consideration, licenses were granted to Banco Prival, S. A. or Prival Bank, S. A. (In English), Banco Internacional de Perú, S. A., Interbank, Banco La Hipotecaria, S. A., United Bank & Trust, Inc., The Bank Of Nova Scotia (Panama), S. A. Other bank license applications that were processed during this period are of capital from Guatemala, Honduras, Colombia, Venezuela, Argentina, Spain and the Principality of Andorra.
Also attended and approved the license change requests bank Banca Privada D'Andorra, S. A. (change license International Representation) and Banco Lafise Panama, S. A. (International license change to General). In turn, authorized the cancellation of licenses Banesco Universal Bank, C. A., Andorra Banc Agricol Reig, S. A., Panama Branch BNP Paribas, Societe Generale, S. A.

As a result of the reorganization of Stanford Bank (Panama), SA, through Resolution SBP No. 28-2010 of February 2, 2010 authorized the sale of 100% of its shares to the company Strategic Investors Group, Inc. Additionally, through Resolution SBP No. 78-2010 of March 31, 2010, and rose as he concluded the reorganization of the Bank. Subsequently, by resolution S.B.P. No. 92-2010 of April 21, 2010 were authorized to Stanford Bank (Panama), S. A. to change its name to the Balboa Bank & Trust Corp.

The entry of new institutions is a faithful sample of the competitiveness of the banking and recognition of safety and quality of supervision and regulation of the Panamanian banking system.
The Banking Center has experienced a dynamic in the mergers and acquisitions bank. During this period, several requests were approved mergers and acquisitions of banks, and to transfer the shares of banks and companies forming part of the bank's economic group.

Transparency and regulation

The Latin-American Federation of Banks (“Federación Latinoamericana de Bancos”) (FELABAN) has considered of main importance to make a collection of the totality of the existing legislation regarding money laundering of assets in Latin-American countries members of the Federation.
The Panama’s banking law meets the standards of leading financial centers around the world for transparency and regulation. The regulations have been made to assist the region and beyond in the areas relevant to improving the competitiveness of the domestic banking system.

The organism that has coordinated with most success the international initiatives against money laundering is the Work Group of Financial Action regarding Money Laundering (“Grupo de Trabajo de Acción Financiera sobre el Lavado de Dinero”) (GAFI).

In 1989, the increasing worry that awoke the threat of Money laundering to the international financial institutions and the banking system, moved the leaders of the Group of Seven (which include the heads of state of Germany, Canada, United Status, France, Great Britain, Italy and Japan) to establish the FATF. This new intergovernmental work group, with the capacity to set policies, was assigned the responsibility of examining techniques and tendencies of money laundering, the previous national and international action and determines additional measures against money laundering. To date, the members of the FATF are two organizations – the European Commission and the Cooperation Council of the Gulf -- and 29 countries and territories: Argentina, Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Greece, Holland, Hong Kong, Ireland, Iceland, Italy, Japan, Luxembourg, Mexico, Norwegian, New Zealand, Portugal, United Kingdom, United Status, Singapore, Spain, Sweden, Switzerland and Turkey.

In 1990, to establish a worldly structural frame of the efforts against Money laundering, the FATF issued The Forty Recommendations. Today, this collection, which included the measures, is the main international norm against Money laundering. The Forty Recommendations and the Interpretation Notes cover the criminal justice system and application of the law, the financial system and its regulation and the international cooperation. The recommendations establish principles of action and provide to the countries the flexibility to apply them according to their circumstances and particular laws. Although it is not a mandatory international convention, many countries have acquired a political compromise to fight Money laundering by means of the application of the recommendations.

Moreover, Panama has turned into one of the leading countries supporting the FATF and OECD movement to implement measures in international financial centers to cope with capital laundering and terrorist financial activities. Tighter controls have been put on banks to report all deposits and withdrawals of more than $10,000, identically as done in the United States.

Bankers’ awareness that Panama has to clean up its image is also making them more thorough about checking the credentials of new customers. The “know your customer” policy includes tighter reference requirements and origin of funds. Nevertheless, banking secrecy continues in place.

Panama´s Stock Exchange
Banking Center

In addition, Panama is one of the most secure international offshore centers in the world. The Panama Stock Exchange is one of the fastest-growing in the region. Since beginning operations in 1990, the local securities market suffered a positive transformation that allowed the widening of the market and increased the number of intermediaries in the first decade of operations. The Market made negotiations of over US$ 2,639 millions in titles of the primary market and more than US$ 366.4 millions in the secondary market.
Law 1 of 8 July 1999 regulates the requirements to operate in the Stock Market of Panama (“Bolsa de Valores de Panamá”) (BVP), and these are established by the local National Securities Commission (“Comisión Nacional de Valores”) (CNV). The transactions of the BVP are undertaken by the intermediation of persons authorized and qualified by the CNV.

The year 2010 was a year of strong growth for the Panama Stock Exchange. The Stock Exchange of Panama, although small in terms of number of transactions and participants, showed a 61.35% percentage increase from 2009. The total value traded on the Stock Exchange of Panama was $ 2,639 million, while in 2009 ended with a total traded value of $ 1,635 million being the largest value traded since the Panama Stock Exchange began operate for 20 years.

The Stock Exchange of Panama offers investors both debt such as bonds and promissory notes and corporate actions. In the primary market, ie instruments of first issue, which at the Panama Stock Exchange could be bonds or stocks. The bonds were the undisputed stars with transactions totaling $ 539.8 million dollars in mid-December 2010, followed by Treasury notes with a turnover of $ 471 million.
In the secondary market, the market where you can buy and sell securities outstanding, the shares were the main engines with a transaction value of $ 59.2 million U.S. dollars followed by the preferred shares with a transaction value of $ 37.2 million dollars.

Investment Opportunities

There are diverse opportunities for investment capital financing, insurance and re-insurance in the financial sector.

Deposits collected from abroad have risen by 40% in the last 12 months, according to the Superintendence of Banks. The banking system has become more attractive in the context of financial crisis and regional political instability. Foreign direct investment entering Panama in the first half of 2008 reached 1,100 million dollars, an increase of 3.2% over the same period in 2007, according to preliminary figures from the General Comptroller Office.

The Republic of Panama maintains a firm commitment to fight and maintain a proactive and efficient role against money laundering and the financing of terrorism and organized crime through its different governmental bodies and in close cooperation with other jurisdictions.

Panama’s banking system has effectively achieved the following, among others factors:

  • International Standards
  • International cooperation
  • Modern legislation
  • Competitive advantages.

As a necessary complement of the above, important legislation has been passed by the Panama Legislative Assembly and sanctioned by the President and resulted in relevant Cabinet Decrees being issued by the Executive power. These regulations, listed below, are not only in effect, but has also provided assistance throughout the region and beyond.

  • Law 41 of October 2, 2000, which defines the crime of money laundering with regard to the predicate offenses: qualified fraud, illegal arms trafficking of humans, kidnapping, extortion, embezzlement, corruption of public officers, acts of terrorism, international theft, trafficking of vehicles and drug trafficking.
  • Law 42 of October 2, 2000, which establishes as "accountable persons" in the observance of due diligence for banks, trust companies, currency exchange offices, money transfer service providers, non-bank loan companies, savings and loan cooperatives, securities exchanges, securities clearing houses, securities firms, securities brokers and investment managers.
  • Law 45 of June 4, 2003, by which Chapter VII to Title XII of the Second Book of the Penal Code is added therein under the heading of Financial Crimes, fraud, illegal money transfers, concealing, deleting and counterfeiting accounting books and related documents. Disclosure of classified information, omitting or denying information, price discrimination, signing of fraudulent agreements, collecting financial means without proper authorization, among other types of crimes with their respective sanction.
  • Executive Decree No. 78 of June 5, 2003, which modifies the name of the Financial Analysis Unit (FAU) to Financial Analysis Unit for the Prevention of Money Laundering and the Financing of Terrorism and extends its duties and responsibilities to assets related to the financing of terrorism.
  • Law No. 48 of June 26, 2003, which regulates the operations of money remittance companies.
  • Law No. 50 of July 2, 2003, by which Chapter VI, denominated Terrorism, is added to Title VII of Book II of the Penal Code and sets forth other provisions, This Law defines the crimes of terrorism and the financing of terrorism, turning both into autonomous crimes in our legislation.

Decree Law No. 2 (February 22 of 2008) amending Decree Law 9 of 1998, which reforms the banking system creating the Superintendence of Banks establishing the entity’s functions and objectives regarding banking institutions and any person engaging in banking business in or from Panama. Besides it defines licensing conditions and terms which are commonly in banking activity, such as productive assets, foreign bank, Panamanian bank, banking standard-form contract, and others. It also defines functions of the Superintendence Board of Directors and the figure of the Director, administrative matters and regulation and supervision rates for the banking industries.

This proven commitment by the Republic of Panama against money laundering and financing of terrorism includes both the public and private sector, guarantees that Panama shall continue in this crucial endeavour and fully understands the importance of international coordination and cooperation.

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