Leading financial hub in Central America

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The financial sector is an important part of the Pana-manian economy and it is divided into three areas: banking services, insurance and securities. Over the last few years, due to the banking and insurance re-gionalization in Latin America, the Government has promoted open trade practices to stimulate growth.

Panama aims to become a financial as well as a logistics hub, and to this end is working hard to shed its image as a tax haven by cooperating with international institutions and signing many bilateral agreements.

Leading financial hub in Central America

Panama’s fully dollarized, free market economy with a history of low inflation, together with the International Banking Center, Stock Exchange, insurance facilities and its geographical position has attracted investors and companies from all over the world.

8% Banks contribute to Panama’s GDP and the economy is fully dollarized

Panamanian laws protect anyone who banks here and foreigners are guaranteed the same rights as local investors.

The country has no central bank or monetary authority. Banco Nacional de Panama (BNP) most closely resembles a national central bank serving as a repository for public-sector funds and as the government’s official banker and treasurer.

Panama is also a foreign exchange center partly because there are no valuation or conversion concerns. Its currency, the balboa, is equal in valuation to the U.S. dollar. Panama is the only independent country that has this exclusive right. There are no levies or restrictions on transfer of funds. They may be freely transferred in and out of the country, regardless of the purpose.

The International Banking Center

Banks contribute eight percent to Panama’s GDP and represent 83% of the financial sector. The banking system has one of the strictest banking and financial legislations in the world. It adopts internationally-accepted standards for accounting and auditing, adheres to the Basel Committee guidelines which indicate how much capital banks need to avoid risk, and uses the latest security systems.

Institutions of Panama Banking CenterThe Panama International Banking Center (IBC) with its 91 banks held assets of $97.9 billion at the end of 2013, 9.1% more compared to 2012. The majority of the banks operate with international capital.

The IBC has maintained absolute stability. Several local banks have issued medium term financial instruments in the international markets. International firms and analysts have qualified the Panamanian IBC as a “safe haven”. This stability has prevented periods of “credit crunch” in Panama and credit always has been available even during the financial crises that have affected other countries in the region.

The Banking Superintendency (Superintendencia de Bancos) is the banking sector ombudsman. Among its main duties are: watching for the stability of the banking system; supervising banks and those economic groups of which they are a part; granting and canceling banking licenses; order corrective measures concerning banks (appointment of advisors, interventions, reorganizations, compulsory liquidations, imposition of fines, etc.); as well as authorizing bank mergers.

The law establishes fixed terms for the members of the Board of Directors and the Superintendent, with specific causes for their removal and legal determination for dismissal resting with the Supreme Court of Justice.

Bank licenses

There are three types of banking license: general, which allows banks to carry out local and foreign operations and international which only allows foreign operations, but they can also participate in the national inter-banking market. Thirdly is the representation license for foreign bank offices from which they can carry out the promotion of their services and visit current and potential clients in Panama and the region.

Domestic credit increased 10.4%

There are two official types of banks, 47 with general licenses, 28 have international licenses and there are 14 representation offices. All the banks are regulated by the Banking Superintendency and their total loan portfolio must be constituted by at least 75% of credits with personal guarantees that do not exceed one percent of the equity and in loans with real guarantees that do not exceed three percent of the bank equity.

The Panama International Banking Center (IBC) was created in1970. The assets of the banking center at the end of 2013 amounted to USD 97 billion, 928 million, which represents an increase of 9.1% compared to 2012, in numbers released by the Superintendency of Banks of Panama.

Latest figures reveal that domestic credit increased 10.4%, which is consistent with the growth of the Panamanian economy, for which a positive performance of 8.5% is expected in 2015. The credit was driven by portfolios of mortgage loans (13.5 % more), consumer (13.5%) and interim construction financing (23.9 %).

Meanwhile, the quality indicators of the portfolio reflect “an improving trend”, with delinquency down to 2.4 % in 2014. Liquidity, meanwhile, remains at levels close to 60 % in the banking system.

The IBC has the capacity to attend investors’ needs and provide services for those interested in new areas and investment opportunities such as purchasing real estate, tourism, port and industrial activities, technology, call and data centers.

Opening a bank account

Foreigners can find it difficult to open a bank account in Panama due to procedures put in place to avoid money laundering. There are three types of accounts: savings, term deposits and checking accounts. Here is a list of the documents needed.

  1. A photocopy of your passport that should include your photo with personal details, signature, exit stamps and recent entries. You may be required to notarize your passports also.
  2. Second ID is also needed. You will have to submit a photocopy of the second ID.
  3. Two financial reference letters. These letters must to be made by a company which has dealt with you in the past, on their official letterhead. It should mention the clear contact details and should be made out in the name of the bank where you are applying to open a bank account. An official of the company needs to sign this letter.
  4. Two professional or commercial letters of reference that can be from lawyers, financial consultants on the respective organization’s official letterhead with all the necessary contact information. References from Panama-nians will give more weight to your application.
  5. Photocopy of your income tax returns for of last two years.
  6. Signed account applications.
  7. Statement showing your pension status or letter from employer.

The Stock Exchange

Bolsa de Valores de Panama, S.A. (the “Panama Stock Exchange” or “PSE”) began operations in 1990. It was created as an answer to the pressing need for alternative financing opportunities. The aim was to have a centralized trading system where securities supply and demand could operate freely. The PSE also promoted measures to modernize the local securities market and established a central securities depository called Central Latinoameri-cana de Valores, S.A. (“Latin Clear”). The two entities have a common holding company, Latinex Holdings Inc., which trades in the securities market, but are maintained as companies with separate operations and administrations.

The PSE is regulated by the Stock Market Superintendency (SUMEVAL).

The Panama Stock Exchange has become an increasingly important vehicle for the issuance of shares to the public for purchase, as a way to raise capital for new or existing companies.

The Panama Stock Exchange BVPSI Index is a major stock market index which tracks the performance of the 122 biggest companies listed on the Panama Stock Exchange.

The Stock Market in Panama averaged 162.56 Index points from 1992 until 2015, reaching an all-time high of 478.75 Index points in May of 2013.

Required approvals

Issuers who wish to apply for a new primary market issue must submit all legal and financial documentation, including a prospectus, payment agency contracts, brokerage contracts, and other particular documentation, in conformity with the terms and conditions set forth by SUMEVAL.

Once the application for the approval of a new issue is presented to SUMEVAL, the regulator has 30 days to authorize or reject it; either way SUMEVAL may send a note with observations to the application presented, at which time the 30 day period halts and the applicant must give an answer.

The Panama Diamond Exchange

The Panama Diamond Exchange in the Financial District of Panama City.

The Panama Diamond Exchange in the Financial District of Panama City.

The Panama Diamond Exchange was established to serve as a trading headquarters for the diamond, gemstone and jewelry sectors of Latin America and the Ca-ribbean, and to operate as gateway to the region for suppliers and buyers from around the world. It also is the first and only diamond and gemstone exchange in all of Latin America to be recognized by the World Federation of Diamond Bourses.

The ambitious development project will also have the World Jewelry Hub’s Free Trade Zone serving as the primary trading hub for South and Central America, Mexico and the Caribbean, and be the key access point to the region for buyers and suppliers from around the world.

The exchange will eliminate the use of intermediaries, therefor reducing the Latin America gem prices by 20% to 25%, making them more attractive to the international market. The Panama Diamond Exchange began operations in March 2015.

Insurance

Panama offers investors different options and advantages to establish insurance businesses. Currently the nation is preparing itself to make a major shift in its economy and it is structuring its platform to strengthen its tourism development.

The insurance sector is being offered excellent benefits and advantages, especially for the captive insurance companies (those established by a parent group or groups).

Any insurance captive company that opens operations under the present legislation will not pay taxes on insurance premiums or profits resulting from its activities.

Events

  • October 15-16, 2015
    XXX Congreso de Seguridad Bancaria CELAES – Centro de Convenciones Megápolis
  • October 29, 2015
    Día del Blanqueo de Capitales
  • January 2016
    18° OPEN BANKING GOLF TOURNAMENT 2016 – “Mexican Best Ball” Mode – Club de Golf de Panamá

Insurance Superintendency

The insurance industry is regulated by Panama Insurance and Reinsurance Superintendency. It has the following responsibilities: to strengthen the growth of the insurance industry; to inspect and investigate the commercial operations and professional practices of the persons regulated by the law; to review, process and investigate the applications made for licenses of any nature under the insurance laws; and enforce the insurance legislation.

In the first quarter of the year, total premiums in the country totaled $338 million, 5% more than in the same period last year, the increase driven by automobile insurance. Vehicle insurance is the most in demand, reporting $63 million in premiums from January to March 2015, representing an increase of 11.8% compared to the same period of 2014. The second sector reporting the most growth is health, with premiums of $57.3 million, representing an increase of 6%. The premiums for group life reported $41 million, according to the Superintendence of Insurance and Reinsurance in Panama.

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