Panama Bank Accounts: The Liquidity of the Banking System

[Gomez Tomiczek]

Panama Accounts: Despite Pandemic Restrictions the Liquidity of Panamanian Banking System Remains

The risk rating agency Fitch Ratings expects a reduction in the profitability of banks in Panama for this year as well as next year as a consequence of the current situation caused by COVID-19. However, the agency states in its latest report that liquidity levels are adequate and deposits have increased.

The contraction of the economy, business losses due to no sales this year, rising unemployment and lower credit growth will put pressure on the profitability of the banking system in Panama due to lower business volumes and increased spending on provisions. Banks have offered relief to their customers while their costs remain. The latest available data from Panama's Superintendency of Banks, which is from the end of June, already reflects this trend.

In The Midst Of The Crisis, Deposits Have Continued To Grow.

A new report from Panama's Superintendency of Banks (SBP) reveals a higher growth in deposits of Panamanian and foreign private banks, and a lower credit impulse. This behavior is interpreted as a sign of confidence in the Panamanian banking system. These factors favor the liquidity conditions of Panamanian banks. Deposits continue to be the main source of financing for Panamanian banks and support the financial stability of the marketplace.

In turn, the SBP highlights that Panamanian banks comply in more than "double" the regulatory requirements in terms of liquidity, which allows them to face the maturities in the short and medium term. "Deposits are safe because the assets are healthy", says Gustavo Villa, general secretary of the SBP.

Panama's international banking center is composed of 75 institutions. The main banks in Panama with their respective ratings according to the risk rating agency Fitch are

• Banco General (BBB+ / June 2020)
• Banesco (Panama) (BBB+ / May 2020)
• Banco Nacional de Panamá (BBB / April 2020)
• BLADEX - Banco Latinoamericano de Comercio Exterior  (BBB / June 2020)
• Multibank, Inc. (BBB- / May 2020)
• Global Bank (BBB- / June 2020)
• Credicorp Bank (BBB- / June 2020)
• MMG Bank Corporation (BBB- / June 2020)
• Banistmo (BBB- / June 2020)
• BAC International (BBB- / May 2020)
• Bancolombia (Panama) (BBB- / June 2020).

A gradual consolidation process among the smaller banks is expected. Smaller banks in Panama will find it more difficult to cope with a competitive market and absorb increased compliance costs associated with anti-money laundering standards, while profitability is under pressure from the pandemic.

Edited September 10, 2020 by Gomez Tomiczek