Introduction
In this monograph on the Panamanian banking system, I will present you the historical background since 1970, the year of its creation.
We will also see the evolution over the years; banking legislation that is of utmost importance for its operation.
Also the type of license that exists the general, international and of representation and that allow you to do the same. The importance of investments for the development of other economic activities carried out in Panama, such as tourism, activities with the zone free of colon, among others. Providing benefits to these activities.
Contribution to GDP is one of the most important variables which we will also analyze in this work, employment and the current situation of this sector of the national economy.
1. Historical background
The International Banking Center of Panama (CBI) was formally created in 1970 through Cabinet Decree No. 238 that reformed the Banking Regime and created the National Banking Commission as a supervisory entity. Decree No. 238 was in force until 1998 when it was replaced by Decree Law No. 9, which replaced the National Banking Commission with the Superintendency of Banks.
NEGATIVE TREND. Since its peak year, in 1982, when the International Banking Center (CBI) of Panama had 125 banks and US $ 49,000 million in assets, there has been a negative trend in this sector. In 2002, the CBI had 76 banks and US $ 32,500 million in assets, which represents worse conditions than those observed the previous year.
According to the 2002 report of the Superintendency of Banks of Panama (SIB), total assets have been reduced by 14.3% compared to 2001. 97% of this reduction is the International Private Banking, as a consequence of the reduction of external credit portfolio. In addition, the net profits of the financial sector also had a contraction of 33% compared to 2001. The SIB report indicates that the National Private Bank obtained an increase in its profits of 16.2% compared to 2001. This as a result of an increase in local credits.
According to the latest report of the Ministry of Economy and Finance (MEF), published in May 2003, the crisis in Argentina and Uruguay, the instability created by the election of Luiz Inacio Lula as president of Brazil and the political situation in Venezuela, have made Panama's financial markets acquire high volatility, contracting and increasing investment risks.
The MEF also points out other external phenomena that have had a negative impact on the CBI, among which it mentions the monetary unification in Europe, which has reduced the foreign exchange operations of certain banks in Panama; Furthermore, the consolidation of operations of international banks has caused them to withdraw from the CBI by specializing in corporate banking concentrated in New York, such as the Chase Manhattan Bank and the Bank of Tokyo. On the other hand, some financial analysts consider that the measures that the International Financial Action Group (FATF) has introduced in the CBI, has caused several firms to withdraw from the country, because they could not uphold the rules and statutes emanating from the body international.
Favorable legislation. Despite its decline in recent years, the consolidation of the CBI in Panama has been due to favorable legislation for financial development. From that account, the Banking Law, issued in 1970, created the National Banking Commission (CBN) and granted a series of advantageous provisions for banks at that time. These advantages, such as the exemption from all legal reserves, from the payment of taxes on interest accrued on foreign deposits, the non-establishment of a limit for foreign interest and installment deposits, among others, allowed the installation of international banks in the country.
This legislation was decisive for the CBI to have had a great growth, which went from some 16 institutions and close to US $ 1 billion in assets in 1970 to 116 banks and assets for US $ 47 billion in 1982. Despite this, The CBI has experienced seizures due to external factors, which have affected its development.
In 1998, with a change of laws, promoted by the FATF, the Superintendency of Banks (SIB) was created, which has full autonomy and independence and has the power to practice strict supervision, including the consolidated supervision of foreign banks.
According to Doctor Nicolás Ardito Barletta, who participated in the creation of the Banking Law of 1970 and chaired the CBN for several years, the CBI currently provides Panama with four main benefits: 1) greater liquidity to the economy as a whole and a "Shock absorber" in the event of an economic crisis, 2) a greater or more agile link with the world financial system, 3) an essential complement to the development of the country's emerging international business conglomerate, and 4) a service export business that It also generates well-paid jobs. Future expectations could be positive for the CBI, half the time Panama manages to negotiate a Free Trade Agreement with the US, because in both economies, the service sector is the main driving force behind Gross Domestic Product.
Evolution of the international banking system
Panama has model legislation that is continually updated and has concentrated valuable efforts to combat and prevent the misuse of banking services in the crime of money laundering and terrorist financing.
The strengthening of regulation, supervision, transparency and commitment against money laundering and terrorist financing have positioned Panama as a model for the region, and has earned Panama recognition of the main International Risk Rating Agencies and Organizations Credit Multilaterals.
3. Types of license
General: which allows banks to carry out local and foreign operations.
International: it allows only foreign operations, but can participate in the national interbank market.
Representation: for foreign bank offices from which they carry out the promotion of their services and visits to active and potential clients, both in Panama and in the region.
4. Number of banks in the banking center of Panama
5. The banking center and its relationship with other economic activities, and its importance
The General License banks are known as the National Banking System, including the two official banks - Banco Nacional de Panamáand the Savings Bank - and the multinational Banco Latinoamericano de Exportaciones (BLADEX). Long recognized as the most important International Banking Center in the region, and together with the Panama Canal, the Corporations Law, the Merchant Marine Law and the Flag of Ships, the Colon Free Zone, Insurance laws, Reinsurance and Captive Insurers, a capital market and a nascent but growing stock market, a modern Trust Law and, more recently, the new Panamanian Private Foundation, and the new Transit Railway, make Panama a true Center of International Services.All this is part of a tradition that is several hundred years old as a route and crossroads of nations and that allows Panama to continue and develop this vocation of service to the world economy and trade.
In recent years there has been an extraordinary "boom" in the tourism sector, with the investment of millions of dollars in new tourist facilities throughout the country, both on beaches and in mountains, and also in the real estate sector, with investments that already exceed one trillion dollars, in homes, mainly apartments, in the face of the accumulated demand internally, and the demand from abroad, especially from North American retirees and retirees, from Canada, and from Europe, especially Spain and Italy of people who are looking for a second home for seasonal use, to which is now added a growing demand from Latin Americans from neighboring countries who find in Panama an ideal place to establish and invest.
CBI has the capacity to meet virtually any need and provide any service to investors interested in new areas and investment opportunities in Panama, among which the influx of foreign buyers of residences - both apartments and single-family homes for retirement or temporary use - stands out. tourism, port activity and container transshipment, industrial activities on the banks and surroundings of the Panama Canal, and high-tech businesses such as "call" and "data centers" and "warehousing" in the Technology Park of the City of knowledge.
6. Advantages and unique characteristics in Panama
The characteristic, and in some cases unique, advantages of Panama, both for banking businesses, as well as for other financial and commercial, national and international, such as the absence of a central bank and a monetary and paper money authority, and The use of the United States dollar as legal tender has contributed to protect the Panamanian CBI from the effects of the financial crises that have brought down practically all the markets and financial systems in the world, and those of the great Latin American countries; The CBI has always maintained absolute stability, and even several local banks have responded by issuing medium-term financial instruments in international markets.
International firms and analysts qualify the Panamanian CBI right now as a SAFE PARADISE. The Center's "Financial Integration" and its permanent stability have prevented periods of credit crunch in Panama from occurring and credit has always been available, even during financial crises that have affected countries in the region.
The CBI Facing the future: Currently enjoying highly satisfactory ratings from international agencies and institutions, including the International Monetary Fund, the CBI offers a reliable place and safe haven for your deposits and banking and financial operations, including the administration of assets or private banking, an activity that more and more banks are incorporating, with the incorporation of Securities Licenses, to serve an extraordinary and growing Latin American market of " High Net Worth Individuals ".
7. Contribution to GDP
In this sample graph, for 2008 financial intermediation contributed 12.5% to GDP; there was a decrease for 2009 of 10.60% and for 2010 the balance is negative of 8.40% until July of this year. Let's take into account that the year has not ended therefore, this figure may be positive for the end of the current year.
SBC balance sheet. From Panama
8. Employment generated by the Panamanian banking system
The payroll of bank workers in Panama grew 36.2% in the five-year period 2004-2009, reaching some 18,269 employees, mainly due to the development of the sector, spokesmen for the Panama Banking Association (ABP) revealed today.
An ABP report specified that in the five-year period under study the number of banks in operation went from 69 to 75, including the arrival of new entities that inaugurated their services at the International Banking Center (CBI), in Panama. The document reported that in that period there were important mergers of banks and financial companies registered in this country. Of the 4,867 jobs created from 2004 to 2009 in the CBI, 804 correspond to new sources of work in Panamanian banks. Two official entities appear in this group.
The other 3,932 new positions were opened in foreign banks, of general license and international license, established in Panama.
9. News
Total assets at the International Banking Center registered a decrease of $ 86 million in the first quarter of 2010, after having increased by $ 455 million in the last quarter of 2009 and $ 633 million in the first quarter of 2009.
In the first quarter of 2010, for the CBI, the local loan portfolio increased by $ 398 million while the foreign one decreased by $ 437 million for a net decrease of $ 39 million. In the first quarter of 2009, the CBI's total portfolio had increased by $ 1,042 million, of which $ 400 million were local loans and $ 671 million were foreign.
10. Annex
The banking system of Panama is of paramount importance in the national economy. Since thanks to its existence, the dynamism of other economic activities of great importance to the national economy is allowed, such as the operation of the Panama Canal, the colon-free zone and that are activities that depend indirectly on the national banking system.
It also produces a great advantage for the national economy since it allows the investor to obtain credits at very low interest and thus carry an investment in Panama.
The international banking system enjoys international fame and it makes use of and makes transactions throughout the Central American and South American region, being of utmost importance for this.
Bibliography
1) Panama Banking Association. http://www.asociacionbancaria.com/html/
2) Super Intendance of banks.
3) The press. http://www.prensa.com/economia/Planilla-bancaria-Panama-crecio-anos_0_2853464838.html
4) Comptroller general of the nation.
