In recent years, there have been an increasing number of
mergers and acquisitions involving Panamanian bank branches and
subsidiaries. This M&A activity has resulted in an increase
of regional conglomerates consolidated in Panama that include
banks as part of their business holdings.
As a result, and in an effort to safeguard the Panamanian
financial system from extraneous risk, and beyond its
regulatory purview, the Panamanian Superintendence of Banks
recently issued Resolution 007-2014 (Resolution 007), which
will enter into force on January 1 2015. This extends
regulatory oversight to all entities of a single corporate
group that includes banks and that are consolidated in Panama,
even beyond Panama's borders.
Resolution 007 extends oversight in three important areas.
First, it provides for corporate governance guidelines at the
group level, which entail a corporate governance structure that
guarantees the group's strategic functionality. Specific
measures include requiring the formation of an internal audit
committee with the responsibility of assessing, reviewing and
revising the group's internal controls and auditing
Second, Resolution 007 focuses on risk management by, inter
alia, imposing significant limitations on intra-group
transactions, both in their terms (for example, they must be
arm's-length transactions) and in the percentage of the banks'
exposure which they represent. Such measures are complemented
by modern risk controls at the group level, including proper
risk management, risk analysis systems, and the creation of
risk simulations. Interestingly, the responsibility for
compliance with such requirements is assigned to the board of
directors, who must file an annual certification with the
Superintendence of Banks to that end. Third, Resolution 007
requires the regulator's approval prior to the acquisition of
financial subsidiaries or branches.
In sum, although potentially burdensome in the short term,
Resolution 007 is another step towards ensuring the stability
of Panama's position as a regional financial centre, thus
strengthening the foundation for Panama's future economic
Jose Luis Sosa