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Business and Economics > Finance: General

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Cover Technical Assistance Reports
Panama: Technical Assistance Report-Follow-Up on Stress Testing – Parts 2 and 3
International Monetary Fund. Monetary and Capital Markets Department
During two visits in 2023-24, the IMF mission implemented a set of recommendations made by a previous technical assistance mission in May 2022 which were aimed at improving the solvency stress model of the Superintendency of Banks, Panama (SBP). The mission also provided training on the design of a cash flow-based liquidity stress tool and another system-level liquidity stress testing methodology. During a follow-up mission, work was carried out on market risk and corporate risk, and the methodology for the liquidity stress test that was used during the 2023 Financial Sector Assessment Program (FSAP) with Panama was anchored at the SBP.
Keywords:
Panama; Superintendency of Banks Panama; systemic risk; financial stability; banking supervision and regulation; deposit-taking institutions; bank stress testing; corporate stress testing; solvency risk; liquidity risk; market risk.; cash flow; coverage ratio; IMF's Monetary; market risk Stress tool; B. Training in liquidity Stress tool; Market risk; Liquidity stress testing; Stress testing; Portfolio investment; Liquidity
Cover IMF Staff Country Reports
Panama: Financial Sector Assessment Program - Technical Note on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT)
International Monetary Fund. Monetary and Capital Markets Department
This paper explains a technical note on Anti-Money Laundering and Combating the Financing of Terrorism in Panama. Enhancing transparency of legal persons and arrangements established in Panama has been a top priority for the country and remains the subject of ongoing reforms. The continuous and large-scale outreach efforts to promote registration in the Registro Único de Beneficiarios Finales (RUBF) are commendable and need to be sustained. The continuous and large-scale outreach efforts to promote registration in the RUBF are commendable and need to be sustained. As a result of concerted efforts to ‘clean up’ the public registry, Panama currently has a large number of suspended legal persons—close to half a million—that require a path to dissolution. In the medium term, the evolving corporate landscape in Panama should be monitored closely, and risk assessments should be updated to reflect emerging business models and potential exposures to new threats and vulnerabilities. The authorities should enact legislation addressing virtual assets and virtual asset service providers that complies with Financial Action Task Force Recommendation 15 and international best practices.
Keywords:
WB staff; resident agent; staff team of the International Monetary Fund; due diligence; staff in the context; Anti-money laundering and combating the financing of terrorism (AML/CFT); Financial Sector Assessment Program; Money laundering; Fintech; Business enterprises; Caribbean; Global
Cover IMF Staff Country Reports
Panama: Financial Sector Assessment Program - Technical Note on Macroprudential Framework and Policies
International Monetary Fund. Monetary and Capital Markets Department
This paper presents a technical note on Macroprudential Framework and Policies in Panama. The institutional framework for macroprudential policy in Panama broadly meets the principles of good design, in particular for the banking sector, but needs to be further operationalized. The quality of design and implementation of macroprudential policies will ultimately depend on a number of factors, including the quality of available data. The macroprudential framework could be further improved in several areas. The report recommends to expand the macroprudential policy toolkit with tools to contain excessive leverage and systemic risks in the corporate sector. The Superintendency of Banks of Panama has made important progress on its public communication on macroprudential policy and has produced an internal draft macroprudential policy strategy document. The SBP is encouraged to continue improving the draft macroprudential policy strategy document and publish it within the planned timeframe, by end-2023. An information and data sharing mechanism has been established across supervisory agencies.
Keywords:
IMF-World Bank Financial Sector Assessment Program; Superintendencia de Bancos de Panamá; Superintendencia de Seguros y Reasseguros de Panamá; Unidad de Análisis Financiero de Panamá; Macroprudential Policy committee; Macroprudential policy; Financial sector stability; Loans; Countercyclical capital buffers; Macroprudential policy instruments; Central America; Global
Cover IMF Staff Country Reports
Panama: Financial Sector Assessment Program - Detailed Assessment of Observance and Basel Core Principles for Effective Banking Supervision
International Monetary Fund. Monetary and Capital Markets Department
This paper discusses Panama’s Basel Core Principles for Effective Banking Supervision report. The Superintendency of Banks of Panama (SBP) has made significant progress in updating its regulatory and supervisory framework. The liquidity regulations are generally comprehensive; however, the Liquidity Coverage Ratio is calculated and reported on a Level 1 basis and not L2 or group-wide. Off-site analysis occurs on a frequent basis using a comprehensive suite of indicators and data points. The SBP has implemented a framework for credit concentration risk and large exposure limits, but the framework does not apply to all material sources of concentration risk. Regulations issued by the SBP set out a comprehensive set of requirements for a bank’s Board and senior management to be responsible for preparing financial statements that adhere to international accounting standards. Banks must identify and appropriately manage the market risks they face, and the Board of Directors has primary responsibility for establishing policies and procedures to identify these risks.
Keywords:
IMF-World Bank Financial Sector Assessment Program; Board audit committee; Banco Nacional de Panama; adequacy ASSESSMENT process; vice presidency; Bank legislation; Credit risk; Market risk; Operational risk; Liquidity risk; Global
Cover IMF Staff Country Reports
Panama: Financial Sector Assessment Program - Technical Note on Financial Safety Net, Resolution, and Crisis Management
International Monetary Fund. Monetary and Capital Markets Department
This paper presents a technical note on financial safety net, resolution, and crisis management in Panama. Key institutional pillars of a financial safety net have not been established in Panama. An explicit industry-funded deposit insurance system should be established as a key element of an effective financial sector safety net in Panama. Superintendency of Banks of Panama (SBP) is the resolution authority for banks in Panama; the SBP relies on strong prudential supervision to avoid bank failures and remove weak institutions. The current approach to bank resolution has not changed since the 2012 Financial Sector Assessment Program and recent technical assistance missions. The legal framework underpinning SBP corrective actions, its overall powers and approach to handling bank insolvency has not changed since passage of the Banking Law in 2008. Panamanian authorities have undertaken a review of the current resolution framework and have determined there is need for improvement. The authorities should build upon current domestic and regional efforts, and develop their internal, interagency, and cross-border coordination and communication mechanisms for bank resolution and crisis management.
Keywords:
IMF-World Bank Financial Sector Assessment Program; Banco Nacional de Panamá; FSAP assessment's finding; staff team of the International Monetary Fund; deposit insurance system; Bank resolution framework; Bank resolution; Crisis resolution; Crisis management; Financial sector stability; Global; Central America
Cover IMF Staff Country Reports
Panama: 2024 Article IV Consultation-Press Release; and Staff Report
International Monetary Fund. Western Hemisphere Dept.
The 2024 Article IV Consultation discusses that Panama grew very rapidly in the two decades preceding Coronavirus disease 2019 but was hit very hard by the pandemic. Between 1994 and 2019, gross domestic product (GDP) per capita increased from 33 percent of US GDP per capita to 48 percent. Rapid growth was driven by an unprecedented construction and investment boom that included major construction projects, such as the enlargement of the Panama Canal and the Tocumen airport, and the expansion of the services and logistics sectors that benefited from those projects. The government aims to reduce the fiscal deficit to 2.0 percent of GDP in 2024. As budgeted spending is not consistent with this target, the government intends to meet the target by keeping public investment well below the budget, but this would require an unduly large compression of investment when unemployment is expected to increase and growth to slow down. In order to maintain room for investment, increased revenue mobilization is needed. In order to safeguard financial stability, it is essential that banks remain well capitalized and liquid. Strengthening human capital and governance will help sustain convergence. Continued implementation of the national statistical plan will improve the quality and timeliness of key macroeconomic data.
Keywords:
deficit target; CFZ import; staff appraisal; IMF staff calculation; Superintendencia de Bancos de Panama; unit of account; Inter-American Development Bank; Anti-money laundering and combating the financing of terrorism (AML/CFT); Public sector; Central America; Caribbean; Global
Cover Policy Papers
Review of the Flexible Credit Line, The Short Term Liquidity Line and the Precautionary and Liquidity Line, and Proposals for Reform
International Monetary Fund. Strategy, Policy, & Review Department
The Fund’s precautionary toolkit rests on the simple proposition that facilitating crisis prevention is far less costly than crisis resolution. Its value increases with systemic risk. Serial shocks to the global trading and financial systems pose significant and persistent headwinds for well-integrated emerging markets. An adequately funded global financial safety net (GFSN) with a suite of precautionary tools allows qualifying members to respond to balance of payments (BoP) shocks, reducing the incidence of crises and limiting contagion. The Fund is the only layer of the GFSN available to all members; other layers vary in their availability and externalities. In this context, the overarching objective of this review of the Flexible Credit Line (FCL), Short-term Liquidity Line (SLL), and Precautionary and Liquidity Line (PLL) is to ensure that the precautionary facilities toolkit (henceforth “the toolkit”) is fit for purpose for the challenges ahead.
Keywords:
Flexible Credit Line (FCL); Short-term Liquidity Line (SLL); Precautionary and Liquidity Line (PLL); Global Financial Safety Net (GFSN); PLL qualification assessment; FCL arrangement; SLL reform package; qualification assessment; FCL user; SLL access; SLL instrument; SLL Arrangements; Balance of payments need; Anti-money laundering and combating the financing of terrorism (AML/CFT); Liquidity; Debt sustainability; Global; Western Hemisphere
Cover Policy Papers
Key Trends in Implementing The Fund’s Transparency Policy
International Monetary Fund. Strategy, Policy, & Review Department
At the time of the 2005 Review of the Fund’s Transparency Policy, the Executive Board requested regular updates on trends in implementing the transparency policy. This report provides an overview of recent developments, reflecting information on documents considered by the Board in 2021 and updating the previous annual report on Key Trends. Deeper analysis of these trends is undertaken in the context of periodic reviews of the Fund’s Transparency Policy.
Keywords:
transparency Policy; country policy intention document; deletion request; publication rate; country document; Emerging and frontier financial markets; Monetary unions; COVID-19; Anti-money laundering and combating the financing of terrorism (AML/CFT); Financial Sector Assessment Program; Middle East and Central Asia; Caribbean; Sub-Saharan Africa; Europe; Asia and Pacific
Cover IMF Staff Country Reports
Panama: Technical Assistance Report-Macroprudential Policy Frameworks
International Monetary Fund. Monetary and Capital Markets Department
This technical assistance report on Panama discusses macroprudential policy frameworks. The mission assisted the Superintendency of Banks of Panama (SBP) in developing a roadmap to strengthen the macroprudential policy framework in Panama. The mission found that the SBP has adequate capacity to conduct macroprudential policy. The mission’s main recommendation is to tighten the link between policy objectives, assessments, and tools. The mission recommends preparing and publishing a macroprudential strategy document to clarify the set of indicators and tools corresponding to the policy objectives. This will help the SBP take timely actions with the policy tools tailored to emerging systemic risks. Communication should also be enhanced by making more use of the Financial Stability Report to explain policy decisions and to provide the underlying analysis. The mission also made recommendations on other aspects, such as the expansion of the policy toolkit, in particular to include borrower-based measures on the loan-to-value and debt-service-to-income ratios), which will be followed up on in the second mission.
Keywords:
Financial sector stability Financial sector policy and analysis Macroprudential policy Macroprudential policy instruments; SBP plan; policy objective; TA project; policy action; Policy evaluation; SBP's communication; Macroprudential policy; Financial sector stability; Systemic risk; Systemic risk assessment; Commercial banks; Central America
Cover IMF Working Papers
IMF’s Precautionary Lending Instruments: Have They Worked?
Giulio Lisi
The paper documents the benefits provided by IMF’s precautionary instruments (FCL and PLL) to countries in accessing international financial markets. It builds on multiple methods to show that the announcement of new FCL or PLL generally leads to a significant decline in sovereign spreads. Next, it evaluates the role of the FCL and PLL in mitigating external financial pressures, focusing on the COVID-19 pandemic as a case study. Economies which had a PLL or FCL arrangement in place during the pandemic experienced a lower increase in spreads relative to other emerging markets, even after controlling for country-specific effects and other covariates, suggesting that these arrangements help cushion external shocks. Finally, the study asks whether FCL/PLL drawdowns have an impact on financial perceptions; the analysis finds—albeit on the basis of a very small sample— no evidence of downside effects from countries drawing down on these arrangements .
Keywords:
IMF; Precautionary instruments; Event studies; Synthetic control.; PLL drawdown; precautionary lending instrument; fcl arrangement; precautionary instrument; PLL adopter; COVID-19; Emerging and frontier financial markets; Oil prices; Credit default swap; Sovereign bonds; Global