TBY talks to Alberto Diamond R., Superintendent of the Superintendency of Banks of Panama, on the ins and outs of the Panamanian banking sector and its regulatory framework.

Alberto Diamond R.
Alberto Diamond R. has a degree in Accounting and is a Certified Public Accountant. He has been in his current position since 2009. He also chairs the Financial Coordination Council of the Republic of Panama. Previous positions have included President of KPMG Central America and Senior Partner at KPMG Panama. He worked in the auditing and advisory fields for over 42 years, coordinating important projects, principally in financial services.

Panama is the main banking center in Latin America. What are the benefits of investing in the Panamanian banking sector?

Panama offers various benefits for investors in the financial and banking sector. It is an open, globalized economy, and also a dollarized one. Strategically located geographically, it is hub that connects 68 destinations worldwide, and also has excellent fiber optic connectivity for data exchange. The International Banking Center (IBC) has a 40-year history, having been established in 1970. It boasts a skilled and trained banking and finance workforce. From here it is a simple matter to serve clients and financial institutions throughout Central America, the Caribbean, and the northern part of South America.

Both the Superintendency and the Banking Association are trying to attract new investors and members to the IBC. How many banks are members?

There are 91 licensed banks within the IBC. Of those 91 banks, 13 are representative offices that allow banks and financial institutions to promote and conduct business from an office in Panama, although they are not allowed to provide banking services in Panama. We also hold an international banking license, which allows banks to take their services to clients beyond Panama, to take deposits from abroad, and to extend loans to other countries. Just 28 of our members are so licensed. The remaining 50 hold a general license, which allows banks to operate in the local market and abroad, so they can perform local and international business at all times. We try to attract new members by promoting the advantages of using Panama as a base from which to perform banking and financial operations throughout Latin America, as well as the local market. Ideally, we would like to attract at least three important financial institutions to Panama by the end of 2014.

The assets of the IBC grew by 7.6% YoY in June of 2014. How would you evaluate the performance of the IBC in 2013, and of the overall economy?

The growth of the IBC has been impressive, and remains so in 2014, with a rising growth trend in evidence. Assets saw an increase of 7.6% in June 2014, and we evaluate the international and general licensed banks together. Internal credit to the private sector grew 8.7% compared to the same period in 2013. All indicators point to continued solid growth and efficiency, and the banks have strong rates of capital adequacy, making for a healthy environment. Meanwhile, the broader economy is also continuing to grow in 2014, albeit at a slower pace than in recent years.

What challenges do the 91 IBC members face this year?

Regulation poses a challenge. Capital adequacy and liquidity requirements mean that banks have to invest more capital, which stiffens competition. Furthermore, transparency, anti-money laundering initiatives, and anti-terrorism financing laws require improvements and changes to the legal framework, which will also place a burden on financial institutions. Banking is the most regulated and supervised sector in Panama, and this environment needs to be expanded to other sectors as well. Panama has an important task in terms of improving the transparency of the sector, and we are advancing in that direction.

The country has signed 19 double taxation agreements. What are your predictions for the next OECD review of the country?

We still have to get past phase II of that review, and have to consider changes to our legal framework accordingly. Last year we passed a law for the immobilization of better shares, but the timing was not right for the law to come into effect. This is one issue that the country needs to address, and the plan is to modify the law some time in the second half of this year. We have to move forward and keep making improvements to meet OECD requirements as well as Financial Action Task Force requirements for money laundering and terrorism financing.