Panama’s banking center is conservative and prudent

Prudent investment and credit policies and effective supervision are important factors in avoiding disasters in the financial system, such as the one that occurred with Silicon Valley Bank (SVB) which created uncertainty in the United States and major international markets after the bankruptcy.

This is the thought of Amauri Castillo, Superintendent of Panamanian Banks (SBP)who explained that the local banking center is conservative and cautious because it has no central bank, lender of last resort and deposit insurance.

“One of the most important elements is that we are conservative and prudent; because investment and credit policies are very conservative“, said Castillo in an interview with Nex Noticias.

Moreover, what happened with the North American bank, according to the watchdog, provides a lot of material for a deeper analysisso that both financial institutions and regulators have the ability to predict what happened.

“In the case of SVB, more than 50% of its portfolio in terms of assets was placed in United States Treasury bonds, which, looking at it that way, are among the safest in the international market. However, they were long-term bonds and before interest rates rose, these papers were worth less and less“, he detailed.

In the USA There has been much criticism of the lack of oversight demonstrated in the case of SVB, despite the fact that this bank managed a portfolio of $200 billion, larger than the portfolio of the entire Panamanian banking center.

Castillo expressed it the country has very appropriate levels, in terms of the level of indebtedness in relation to the gross domestic product (GDP) and that is important. “The country has all these elements under control,” he said.

According to Article 70 of the Law on Banksall banks with a general license and an international license, whose parent supervisor is the Supervisory Authority of Banks, must maintain capital funds in the amount of at least 8% of their total assets and off-balance sheet operations that represent unforeseen cases.

Also, must have primary capital in the amount of at least 4% of its assets and operations off-balance sheet items representing an unforeseen event, weighted according to their risks.